Gems from the Straits Times – UOB Budget 2021 Roundtable

Last checked, only 1,600 people watched the Straits Times – UOB Budget 2021 Roundtable on YouTube.

I guess the idea of watching four men averaging 48.75 years old sit around in stuffy jackets to talk about economy and jobs is not very sexy.

Panellists
• Mr Barnabas Gan, economist at UOB 
• Professor Hoon Hian Teck, dean of Singapore Management University’s School of Economics and a Nominated MP 
• Mr Desmond Choo, an MP for Tampines GRC and assistant secretary-general of NTUC 
• Mr Douglas Foo, president of the Singapore Manufacturing Federation and vice-chairman of the Singapore Business Federation

Moderator 
• Mr Vikram Khanna, associate editor at The Straits Times

Well, I sat through the 60 minutes and found that I learnt quite a few things. Let me unpack some of these gems.

#1 Looking at Budget 2021 from the business perspective

Douglas Foo: I would humbly look at the budget as we’re now still in the middle of the pandemic. It is actually remarkably balanced.

It is able to target on the short term challenges that enterprises are facing, so it’s very focused on some of those groups that are heavily impacted, like aerospace, aviation, tourism. And it scaled back on the certain sectors that are already on the rebound. Yet at the same time, there are also initiatives helping those on the rebound to do even better, and to innovate, to transform for the challenges and opportunities going forward.

Then on the other front, it’s very forward looking and progressive, both for the enterprises and for the individuals. And at the same time, it has a whole area on the social compact, also on sustainability for the environment as well.

So within a pandemic, to be able to craft out a budget of such coverage, it is remarkable.

#2 The Job Support Scheme (JSS) is inherently expensive

Barnabas Gan: I think especially for the Job Support Scheme (JSS), we have to understand two key issues at hand. The JSS has been very effective, at least in the year 2020. A lot of jobs have been saved. But one thing that everybody will know by looking at the appendix of FY2021’s budget is that the JSS is inherently expensive.

Look at the special transfers of $25 billion, it’s just above 50% of total special transfers. It’s inherently expensive, that’s one. And as what Prof Hoon also said, there’s a balance that we have to understand. We’re here for the long haul and we have to, for lack of a better word, budget the amount of resources we have so that Singapore is well positioned to carry through. That’s the first point.

But the second point is that economics would have taught us that over-reliance on government support for the long run will actually cause companies to be less competitive when there is over reliance. Hence there is a need to slowly taper the Job Support Scheme. So, allow the economy to be on the landing board so that we can bounce off once Covid-10 ends.

But one thing about whether it’s enough or not, we must also understand that the JSS has been tweaked in the 2020. And if it’s indeed not enough, I do believe that it is not cast in stone, the 30% and the 10% JSS for 2021, I think the Government will most likely look into it as well.

Douglas Foo: And let me add from the business’ perspective. The businesses and enterprises from the Singapore Business Federation are very appreciative and grateful for the JSS in the budgets in 2020. And they are not in illusion that this is gonna be a forever thing.

Because it comes with a cost.

It either comes through a cost of higher corporate tax or whatever ways that you need to recover. That’s why when Budget 2021 was released, it was very clear that it was targeted to assist those that are heavily impacted so that they can then face those challenges.

And as the rest of the distinguished panelists have spoken, it is not cast in stone. There could be reviews going forward as well. And now, the impetus is on the enterprises and the workforce to transform going forward.

This is the exact tripartite relationship that is the signature of the economic success, the kind of foundation that has been built upon in Singapore.

#3 Singapore cannot be inward looking

Barnabas Gan: Importantly, Singapore cannot be inward looking. All the talk about innovating, about collaborating globally. Look at us. We’re a very special economy. We don’t have something that a lot of other countries have – natural resources.

But there’s one thing we do have, that is, talent.

And really, the drive to innovate, and the drive to develop deep capabilities within our industries. But the important thing is if you look at the past budgets, even in the Unity budget that first came out in 2020, there was still a need to look ahead, there was still a need to look away from Singapore so that companies could deepen capabilities as well as have presence overseas.

The crisis has taught us one lesson. Companies with online presence, that deal with e-commerce, are the ones poised to succeed.

#4 The rise of the self-employed workers: The structural issues?

Desmond Choo: I think we have to trace back to what this Covid situation has brought up – some of the structural issues with this self-employed group.

What Covid has shown is that from the social security point of view, the self-employed persons are really quite poorly provided for. Because they take all the discretionary income, they don’t have CPF contribution or quite minimal, depending on which sector you’re in, you may have some MediSave. But when it comes to a crisis, you’re actually quite under-provided for.

The second thing you see is that it actually provides quite good opportunities. When you’re in between jobs, you can fill in some of these things on a part-time basis. But in terms of your bargaining power with the platforms, you’re at a distinct disadvantage.

So with these two structural issues, I think the next step for us to take, and which we’re starting already, is that firstly, we need to look into the retirement adequacy so that for example, do we need to look into a scheme like what we’ve done for our taxi drivers. They contribute to their Medisave for their licences so that we know they’re provided for. Other than contribution from the companies hiring them, the self-employed workers themselves will also have to contribute part of their income to MediSave.

But the issue here is then your take-home income will be less. This is something we need to study on a longer term because a lot of the workers who go into this trade really do need the cash on hand. So we really need to study this. And how can Government play a role? For example, a matching scheme? I think these are some things that are possible. 

Platform workers as self-employed workers

Desmond Choo: The other thing we need to look at is the platform workers, meaning the workers who work for large platforms. Because they’re self-employed, they’re not unionized, there’s no collective strength even. So the bargaining power is very lopsided. The platforms can change terms, they can change incentive structure as and when they want and the workers are left in a lurch.

We think if we can provide a more level playing field, the self-employed people are not only going to be better provided for, it will also allow it to thrive as an essential part of the workforce. So our perspective of this needs to evolve from them just doing part-time jobs, filling in-between jobs to that this is an essential, permanent part of the workforce.

And you need to treat it in that way so that you can provide those structural support. So we’ll be quite interested to look into how we can set up associations for them, whether legislatively we need to make some changes so that they can be better protected vis-à-vis platforms.

I think there are quite a lof of overseas examples we can look at, but I think going ahead from last year to the next couple of years, I think that will be one big piece of work that the country needs to focus on.

So, can self-employed workers join NTUC?

Desmond Choo: Yes, now some of them are already part of NTUC. So you have the Grab drivers, the private hire guys, they joined us in our private hire drivers association, so they’re given some driver relief, some hardship relief, but we cannot represent them collectively. I mean, we’d love to talk to some of these platforms and companies to say, “Hey, before you change any terms, you have to get the support from the workers first.”

And I think with that, not only can these workers be protected, they can also see it as a career they can grow. Now it’s hit-and-run. I go in, I make my money, I come out.

But what about the investments in their training? What about the investments in their retirement adequacy? Those are things that are not there.

I think the Singapore workforce, small as it is, will be poorer for it, if we don’t look at it as a permanent fixture in the workforce rather as a very transient entity as it is now.

#5 Everybody’s changing and I don’t feel the same

Douglas Foo: Five years ago, we started with the Industry Transformation Map (ITM). But the ITM is also gotta transform itself because of the pandemic, right?

So through that, the enterprises are transforming, the workforce is also transforming, and the nation is also transforming. So all parts are actually moving together.

And that’s why earlier I briefly touched on the tripartism. Because that gives the sense of trust between the various stakeholders for this very difficult exercise to carry forward in this long journey.

Because none of us knows when this is going to end. The pandemic will end eventually and life will still go on, but because of the trust that we’ve built over the many, many years, I think we’re in now in a very good state. And now we’re actually in a very good position to do what the budget talked about – Emerge Stronger Together.

#6 The Prof said tripartism could be Singapore’s secret sauce

Prof Hoon: With Douglas pointing out tripartism, I just can’t help pointing out that really at some level, it’s a huge strength for the country. And tripartism has allowed us to overcome these negative shocks in clearly different ways.

If we go back to 1984, many of our panelists here were very young then. But I remember in 1984, I was finishing my honors year and the country was hit. How did we deal with it?

A big part of the measures was a 15% cut in employer CPF contribution. There was no JSS or wage credit at that time. It wasn’t the Government absorbing the wage cost, the workers accepted the wage cut.

I had the opportunity to give a talk in a foreign country. I was speaking to unionists, I was speaking to employers, I was speaking to the Government and I told them about this episode and their jaws dropped. Which country would have a union that would accept a wage cut? But the economy recovered and gradually the CPF rate was restored. Not to the original level because it was at 25%, but it kinda settled at a more optimal level of 20-20.

I hear Douglas’ deep understanding of the term “tripartism” as an employer. And I hear that tripartism now is about creating productivity growth, about creating the necessary creative destruction that we talked about.

And that might just be Singapore’s new competitive advantage moving forward.

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