SINGAPORE – Mr Heng Swee Keat’s maiden Budget announced on Thursday (March 24) afternoon has a singular focus: to transform companies, so they can work together and with the government, to raise productivity, automate and innovate processes, and expand overseas.

At the core of the $73.4 billion Budget are measures to give grants to companies, co-fund bank loans to companies, and to increase R&D activity.

There are also measures for the people but these are modest in comparison.

For example, $4.5 billion is set aside for the Industry Transformation Programme to support enterprises and industries. Another $4 billion is set aside for industry-focused R&D.

In contrast, new programmes for households are relatively modest. The new Silver Support Scheme that gives cash allowances to lower-income seniors will cost $320 million this year and is expected to increase as the population ages and more cross the cut off age of 65 to qualify for the allowance. The existing Workfare income supplement has been made more generous, and $770 million is to be paid out next year.

Special transfers for households this year amount to $500 million. These will be given out in the form of the GST voucher, CPF Medisave top-ups for older Singaporeans and service and conservancy rebates.

Special transfers for businesses amount to $2.2 billion. This includes $790 million under the extended Wage Credit Scheme to co-fund wage increases.

All these have to be seen within the context of an increase in social expenditure overall. Social development spending these days takes up a big chunk of the Budget – 46.7 per cent in FY 2015.

Still, individuals hoping for tax breaks will be disappointed this year, especially given that companies get a 50 per cent corporate income tax rebate this year, up from 30 per cent, subject to a cap of $20,000.

But this was is not unexpected. In last year’s Budget, taxpayers got a 50 per cent income tax rebate for their incomes earned in FY 2014, even as top earners saw a hike in their tax rates. This year, unemployment rates continue to be low and median incomes have sustained growth. Meanwhile, businesses are bracing for a global slowdown.

The bottom line: workers can fend for themselves, while the firepower from the Budget is trained on companies.

Hence the business focus of Budget 2016.

This is after all a tough fiscal year – it’s the start of a new term of government, so the state coffers are bare. It has to live within its revenue. Luckily for Singaporeans, its operating revenue is supplemented by the returns from long-term reserves. This has provided a welcome cushion for the Budget.

This year, the reserves added $14.7 billion in Net Investment Returns Contribution (NIRC) to the Budget. This was thanks to inflows from Temasek Holdings’ funds. Last year, the NIRC was $9.9 billion.

The injection of nearly $15 billion into the national coffers allows Finance Minister Heng Swee Keat to announce a Budget surplus of $3.4 billion.

Listening to Mr Heng announce his Budget while helming The Straits Times’ live blog with my colleague Ignatius Low, I was struck by two things.

The first is Mr Heng’s emphasis on partnership and the need for companies to work together and tap on each other’s networks to transform the industry.

This would mean companies setting aside traditional rivalries and competitiveness, and seeing how they can work together – perhaps co-invest in infrastructure or bring in automation equipment – that can change the way they all do businesses. Some of the Industry Transformation Programme initiatives aim to get businesses to partner each other. This will require painstaking effort by the trade associations and business and government bodies.

The labour movement made a start with this kind of industry-wide approach, when it worked sector by sector, company by company, to get cleaning and security companies to come up with a progressive wage structure for workers. The private sector will have to do something similar, to work together to transform the way they do business.

The second thing that struck me was the emphasis on supporting families at risk.

The KidStart programme will tap government and community resources to help children up to the age of six from vulnerable families get support in learning, development and health support.

The pilot programme for 1,000 children will cost more than $20 million a year or about $20,000 a child. It is thus a heavy and intensive investment. But as Mr Heng points out, research shows that a child’s early life experiences significantly influence their development.

This is a welcome initiative, and brings Singapore in line with developed countries that have such programmes. The United States’ well-known Head Start programme for example started in the 1960s and became a national programme in 1981. It supports children from low-income families up to the age of five. Once identified, children get help in learning and social interactions, get access to nutritious meals, health, dental, and mental health programmes. Social workers also work with parents on their parenting skills, and to provide housing stability and financial security.

Such upstream intervention in at-risk families has been shown to help improve children’s chances of settling down in school and doing well there.

Another programme that I cheered was the one to give second-timer families another shot at owning a Housing Board flat. This is for families who sold their first flat and then ended up having to rent again. Anecdotally, there are even stories of people who end up living at parks after foolishly selling their HDB flats.

Now if they have young children, they can get grants of up to $35,000 to buy a new two-room flat on a shorter lease that will be more affordable. Families have to show commitment to getting their lives in order, such as by staying employed.

This move helps such families get back on their feet again by giving them a chance to secure shelter over their heads. In the end it is the children who stand to benefit most, moving out of rental flat areas – some of which are plagued with drug and crime – into new HDB estates.

Even though these two programmes will not cost a great deal – likely in the tens of millions, not billions – they signal Singapore’s move to be more proactive in helping families in need.

This article was first published on March 24, 2016.
Get a copy of The Straits Times or go to straitstimes.com for more stories.

SINGAPORE – Foreign worker levy increases will be deferred for one year in the marine and process sectors due to challenging business conditions and the reduction of Work Permit holders in these sectors.

Levies will also remain unchanged for another year in manufacturing, Finance Minister Heng Swee Keat said in his Budget speech on Thursday (March 24).

The Government will proceed with levy increases in the services and construction sectors, as announced in Budget 2015.

In construction, the levy rate for Basic Tier R2 workers will be raised from $550 currently to $650 on July 1 this year, and to $700 on July 1 next year.

The minimum experience requirement for man-year entitlements (MYE)-waiver workers will be raised from two to three years from July 1 next year to encourage firms to retain their more experienced workers to support productivity.

For the services sector, levy rates for R2 workers will be raised from $300 to $450 for the basic tier, $400 to $600 for Tier 2 and $600 to $800 for Tier 3.

The levy rates for S Pass holders will also go up on July 1. The Basic Tier rate will be raised from $315 to $330, while the Tier 2 rate will be increased from $550 to $650.

This article was first published on March 24, 2016.
Get a copy of The Straits Times or go to straitstimes.com for more stories.

SINGAPORE’S Finance Minister, Heng Swee Keat, told Parliament on Thursday that it is too premature to relax property cooling measures given the price level and current market conditions.

“We will continue to monitor developments in the property market closely,” Mr Heng said in his Budget 2016 speech.

Here are some comments:

Low Hwee Chua, Head of Tax Services, Deloitte Singapore and Southeast Asia:

“As hinted by various Government officials, the Finance Minister has confirmed that it is too early to relax the current property cooling measures.”

“It is a double whammy for property developers as manpower costs will increase due to the non-deferment of the previously announced increase in foreign worker levies for the construction industry.”

Christine Li, director and head of research at Cushman & Wakefield:

“As expected, the property cooling measures are not lifted. This did not come as a surprise.”

“The residential transaction volume has been halved since the implementation of the Total Debt Servicing Ratio (TDSR) framework in 2013 and there is “frustrated demand” in the market as buyers are deterred from entering the market due to the additional buyer’s stamp duty (ABSD).”

“As a result, a pre-mature lifting of the cooling measures, particularly the ABSD, could result in buyers rushing into the market for fear that property price may rise due to increased demand.”

“Given that the only beneficiaries of the lifting of the cooling measures such as tweaking the ABSD will be property developers, Singaporeans who can afford a second property (as ABSD does not apply to first time buyers), permanent residents and foreigners, it does not serve the interest of the masses as having these measures in place will help to keep prices affordable.”

This article was first published on March 24, 2016.
Get The Business Times for more stories.

SINGAPORE – A new Jurong Innovation District (JID), envisioned as the industrial park of the future, will be built as part of the Government’s push to encourage more innovation.

The first phase of the district, which will be in Jurong West, is expected to be completed by around 2020.

Singapore’s earlier industrial estates were developed for specific industries focused mostly on production, said Finance Minister Heng Swee Keat during his Budget speech on Thursday (March 24).

But nowadays, research, innovation and production are closely intertwined, he pointed out.

The district will bring together researchers, students, innovators and businesses to develop products and services of the future. It will also create an environment to house different activities within a single next-generation industrial district.

It will be the future of innovation for enterprise, learning and living, Mr Heng added.

“Fifty years ago, we transformed Jurong from swampland into a thriving hub for the manufacturing industry that powered Singapore’s economic growth. Now, we will take another leap to create the industrial park of the future,” he said.

“This has the potential to transform how we live, work, play and create.”

JTC, the national developer of industrial infrastructure, is currently constructing Launchpad@JID, to serve as a space for entrepreneurs, researchers and students to design, prototype, and test-bed their new innovations.

JTC has also launched an Open Innovation Call to invite private sector technology owners to test-bed and develop innovative and sustainable infrastructure solutions within the district.

There are already other new types of industrial parks being built in other parts of Singapore,

JTC, for instance, is also building a creative industry cluster across the road from Singapore Institute of Technology (SIT) which will move to Punggol.

SIT, Singapore’s fifth autonomous university, was set up in May 2009 to offer more degree opportunities to polytechnic graduates. It now operates from an interim campus at Dover with satellite branches in each of the five polytechnics.

Besides the new innovation district, the Government will also try to encourage innovation by promoting start-ups in new and existing industries.

To achieve this, a new entity called SG-lnnovate will be set up, Mr Heng announced.

SG-lnnovate will match budding entrepreneurs with mentors, introduce them to venture capital firms, help them to access talent in research institutes, and open up new markets.

It will build on what has been done by the lnfocomm Investments Private Limited (llPL), and work with Spring and EDB to expand the accelerator programmes to new and emerging sectors such as smart energy, digital manufacturing, fintech, digital health and Internet-of-Things.

In addition, up to $4 billion from the Research, Innovation and Enterprise 2020 Plan will be directed to industry-research collaboration.

“Innovation is enabled and enhanced by the use of technology but innovation goes beyond that. It is fundamentally about new ways of doing things to meet the needs of people and industries better,” said Mr Heng.

“Innovation is the engine of value creation and growth. We must make innovation pervasive in our society.”

This article was first published on March 24, 2016.
Get a copy of The Straits Times or go to straitstimes.com for more stories.