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ECONOMY | Staff Reporter, Singapore
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Budget 2016: What you need to know right now

Singapore has entered a new phase in its restructuring journey.

Finance Minister Heng Swee Keat delivered his first Budget in Parliament on March 24. Here are key points from Budget 2016:

  • Budget 2016 marks a new phase in economic restructuring through more targeted approaches.
  • Budget 2016 aims to drive scale and create value by build resilience in workers, enterprise, industries.
  • The budget position needs to strike balance between the rise in expenditure and accommodating to support businesses in current climate amid economic restructuring. Should the climate turn, Singapore should stand ready to respond
  • Expenditure needs will grow faster than revenues, so the government should spend only when needed. There will be a surplus of $3.4b or 0.8% of GDP in FY16.
  • The rise in expenditure is supported by increases in operating revenue and NIR contribution due to one-off factors  which are not expected to be sustained. In addition, the addition of Temasek to the NIR network will act as a greater source of revenue in the long-term.
  • In FY15, the budget recorded a deficit of $4.9 billion, or 1.2% of GDP. In FY16, total spending will rise to $5bn, 7.3% higher year-on-year.

Building a more caring society

  • We will set up a new fund call Our Singapore fund. Like the SG50 fund, it will support projects that build the spirit of resilience and promote unity and sense of being Singaporean. The fund size is $25m and will be set up by 2H16.
  • From 1 July 2016 to end-2018, business that help employees volunteer will receive 250% tax deduction.
  • Building a caring society: Businesses well-placed to run impactful programs. There is a need to boost corporate social responsibility (CSR) and promote corporate giving.
  • Provide support to households in general, by raising basic monthly cash allowance. Government pension ceiling will also be raised, which will benefit 10k pensioners.
  • Successful ageing: Seniors urged to stay active and healthy, and meaningfully engaged. Pilot community networks for seniors will be established. These will be made up of local stakeholders, including community volunteers, schools, businesses, which will be drawn together to provide coordinated support for seniors.
  • Even if they do not qualify, other seniors will continue to receive other support like elder care subsidies and GST vouchers, which comes on top of support received from their children.
  • To identify the truly needy, three criteria will be used: Lifetime wages, housing type, and household support.
  • There will be an increase in retirement support. For instance, the Civil Support Scheme will cover up to 30% of seniors. Modest but meaningful supplement to retirment incomes. Not to substitute other forms of support like personal/family savings.
  • There will also be higher payouts depending on age and income. For instance, those earning $1,000-1,600 a month will see a payout of $100 to $500. Qualifying criteria will also be simplified, and payout systems will be enhanced. Now, workers will get pay every WIS for every month worked. Workers can see quicker payouts, monthly instead of quarterly. 
  • Worker Income Supplement (WIS) scheme: Raise qualifying income saving to $2,000 per month, which will help bottom 20% income workers. It will benefit 460,000 Singaporeans.
  • New outdoor campus will be built on Coney Island, in order to foster a spirit of adventure among children, build confidence and build camarederie across schools. This is expected to be ready 2020 and cost $200m.
  • The FreshStart housing scheme: provide grant 35k to let families with kids own a flat with shorter lease. To qualify, parents need to stay employed and make sure kids attend school.
  • New measures for the young, namely KidStart and YoungStart.
  • YoungStart: New child development account for Singaporean children. Parents will automatically receive $3,000 for their kids, starting with infants born today.
  • KidStart: Focus on kids in their first 6 years, particularly for parents who need more support to help their kids get a good start in life. Expected to cost $20m. 
  • We need to find new ways to forge a caring and resilient society.

Transforming the economy through enterprise and innovation 

  • We seek to transform economy so we can continue to have the resources and opportunities for our home to be safe and our people to find fulfillment.
  • Budget 2016 seeks a new way to transform our economy through enterprise and innovation, with stronger partnerships between stakeholders.
  • Strong focus on ICT. We need more experts in varied skills like designers and prgrammers. The IDA estimates we will have 30k more positions by 2020. Major ICT corporations to partner with IDA and pioneer a new way to engage in the fast-growing ICT sector
  • With the adapt and grow initiative, laid-off workers will get help in building new careers. Wage support schemes will be expanded. Ministry of Manpower (MOM) to roll out $35m in support initiatives.
  • Enhanced employment support via adapt and grow initiative to help workers deal with retrenchments.
  • We are investing significantly into life-long learning. Education system is also changing to adapt to new job market, with polytechnics offering courses such as cybersecurity.
  • Like firms, people too are facing structural challenges. I understand it is not easy for those who are retrenched to find new skills and new jobs, but we must remain adaptable.
  • Firms need to restructure so workers have better prospects. Firms with higher productivity have higher wages. It is important to raise productivity to innovate or workers will have low wages and bad prospects.
  • This budget sets the direction by taking into account insight by businesses. We will adjust but we must start to move in new direction early.
  • Broad-based measures, including the PIC scheme, will continue to taper off in coming years.
  • Spending will depend on take-up rates. For instance, the government will allocate $300m to food manufacturing over the next 5 years. There will be greater support for firms and TACs. The government will roll out a more integrated and targeted approach across more than 20 scetors covering 80% of GDP.
  • As a whole, the government will set aside $4.5b under the industry transformation program to support enterprises and industries. This will include increased funding for SPRING, IE Singapore, and the Economic Development Board to support economic development.
  • Infrastructure development: Further $1 billion top-up to the Changi Airport development fund.
  • Jurong Innovation District: First phase to be completed in 2022.
  • Launch of Jurong Innovation District, which will create the industrial park of the future. It will focus on learning, research, and production. It has the potential to transform how we live, work, play and create.
  • Enhancement of R&D capability: $40 billion will be directed towards industry collaboration, with a top-up fund of $1.5b to enterprises.
  • Promote startups in new and existing industries. New entity called SG Innovate to help link startups with mentors, venture funding. SG Innovate will build over what has been done to expand accelerator programs to new industries.

Greater support for SMEs

  • Trade associations and chambers (TACs) will reach out to firms, particularly SMEs. SMEs will get wider funding to attract talent, develo capabiliies, and strengthen partnerships. SPRING will partner with TACs on 30 projects to reach 3,000 SMEs. The government will provide $30m over the next 5 years to support TACs.
  • National robotics programme: Solution providers will offer cheaper packages for SMEs. It can help create value added jobs in various sector such as healthcare, construction, manufacturing, logistics. The government will provide $450m in support of the national robotics programme over the next 3 years.
  • For instance, robotics technology can boost productivity, but is too expensive for most SMEs. 
  • Enterprises can transform if the entire industry also transforms. This will help firms achieve scale and drive down costs. Industry-level transformation works best if firms work together. 
  • In the coming years, IE Singapore will support more firms in their internalisation efforts. IE expects to help 35,000-45,000 companies in their internalisation.
  • We will offer automation support package for an initial period of 3 years. Currently, there are no incentives to promote automation. The government will shoulder up to 50% of the cost of qualified automation projects, with a maximum grant of $1m. Qualifying projects will also receive 100% allowance for automation equipment. Access to loans will also be improved.
  • Incentive schemes confusing for SMEs. Business grants portal to be launched in fourth quarter of 2016. Firms will not need to go from agency to agency to access incentives. Various support schemes will be reviewed and simplified.
  • Even as we provide immediate relief and support, we must press on with economic transformation. We have a narrow window. We will help firms create value & drive growth by: 1.) Maximise impact of initiatives; 2.)Targeted sector-focused approach; 3.) Deepening partnerships between government workers and industry players to identify industry challenges; and 4.) Stronger emphasis on technology adoption and innovation
  • Premature to relax property cooling measures.
  • SME working capital with loans u to $300,000 for SMEs. It will catalyze $2b of loans over 2 years. Encourage greater lending for SMEs.
  • Help heartland shops. Enhance revitalisation of shops package in HDB town centers. SPRING to strengthen capabilities of heartland businesses. 
  • Defer levy for offshore, manufacturing workers for 1 year, These measures to address near-term concerns while supporting restructuring
  • Special Employment Credit, which is due to expire this year, will be modified and extended to 2019. It will cover 340,000 workers
  • Re-employment age raised to 70.
  • This year, total spending is expected to $5 billion dollars, higher than in 2015. The transition support package that was introduced in FY13 will continue to support firms. Public sector demand for construction projects is expected to pick up the slack from depressed private demand.
  • Support for SMEs: Corporate income tax rebate from 30% of tax payable to 50% of tax payable.

Intensifying economic headwinds

  • We face near-term cyclical weaknesses as well as medium-term structural challenges
  • Technological changes are disrupting business models across all sectors. Some call the coming changes industrial revolution 4.0. All these changes pose intense challenges to our business, which will have to succeed in a more competitive environment while manpower is shrinking. The need to restructure is both urgent and critical.
  • Prospects in the labour market are mixed.
  • It is a complex transition. We expect sectors such as manufacturing to face subdued demand
    But while overall growth is subdued, our business landscape is varied. Domestic-oriented sectors such as retail, healthcare, and education remained stable
  • I’m aware that business conditions are difficult and uncertain. Workers are anxious as retrenchments has increased. Uncertainties in the global economy will create strong headwinds. Current business conditions are weakened. The pace of economic recovery is uneven.We therefore expect externally-oriented sectors to continue to experience weak demand.
  • Budget 2016 is beginning of journey towards SG100.
  • We must come together as partners to transform our economy. Potential for innovation has never been greater. Over the last decade, the government has stepped up social spending, but we must continue to build both individual and collective responsibility.
  • We must continue to strike a careful balance between what we spend today and what we save for the future. GDP growth will slow as the economy and workforce mature. We will find ourselves in a tighter fiscal position.
  • Compared to a decade ago, education spending has increased six-fold. Transport spending will grow to $5.1bn. Security: More investment in intelligence and technology. Our expenditures have grown to almost 2.5x in the past five years.
  • Invest in stronger enterprises, education and healthcare. Spending on education in FY16 is expected to hit $12.8 billion dollars.
  • This year, we start our journey for the next 50 years. Our first 50 years was an extraordinary story of overcoming challenges together. Every move was uncharted. Today, we are in a much better position than our pioneers, but we also face new challenges.

This is what analysts had to say prior to the launch of this year's budget. For post-budget insights, Singapore Business Review will hold the 2016 Budget Breakfast Briefing on Monday, March 28 at The Fullerton Hotel. 
 

 

 

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