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Economic Society of Singapore Budget 2023 Discussion by Prof David Lee Kuo Chuen     

Good afternoon, Ladies and Gentlemen,

First, I would like to say that ChatGPT did not generate this speech.

As an economist, my task by the chair today is to analyze the longer-term structural issues, such as technology and demographics, and assess how the current budget addresses them. In the past, I have focused on the technology aspect that affects Singapore in my budget commentaries, I have not received much media attention. Therefore, I approach today’s task with the understanding that the measures proposed in the budget must reflect the long-term strategy of the Singapore government while addressing the immediate needs of the people in a challenging economic environment. With the same mindset, I hope that I will not draw too much media attention so that I can speak freely on technology.

The 2023 budget has done well in mitigating the impact of inflation on purchasing power, providing various instruments such as CPF, Enhanced Assurance packages, tax on high-value and luxury goods, grants for HDB purchase, baby and family-related grants and leave, and using community charitable organizations to alleviate the erosion of purchasing power. The measures also reflect the successful implementation of many of the long-term strategies of the Singapore government.

However, it will be interesting to see whether the inflow of funds and the desire to keep interest rates high are still on the longer-term agenda. With low unemployment rates, there is room to implement Pillar 2 from 2025 by implementing a Domestic Top-up Tax, which will top up the effective tax rate for MNE groups in Singapore to 15 per cent. Moreover, now may be the right time to encourage more individuals to start or expand their families and to enhance the medical insurance of platform workers by making compulsory savings.

In summary, this year’s budget tackles the immediate needs of Singaporeans affected by global economic uncertainties and an inflationary environment. It aims to alleviate cost-of-living challenges, boost economic growth, enhance workers’ skills, reinforce social cohesion, and create a more robust nation. As an economist, I recognize that this budget reflects a balance between short-term needs and long-term strategies, and it has the potential to benefit Singapore’s economy and society in the long run.

The ingenious part of it can be described in Mandarin. The budget is 窘者可得脱，富贵莫关心. In English, it means that the distressed are somewhat relieved, while it is irrelevant to the rich and noble. In economics, the elasticity concept is used to the maximum with the inelastic demand of the poor, making them more sensitive to inflation. However, grants and subsidies can relieve their burden. At the same time, the rich, who have more elastic demand, can be taxed without much effect on their consumption. What is 80,000 if you are buying a 1 million dollar car? That is the advantage of having a lot of wealthy immigrants.

Since we are talking about technology, and civil servants may be using AI to prepare their speeches, I may as well ask ChatGPT what it thinks of the budget.

This is my conversation with ChatGPT after feeding in the budget information.

Q: What do you think of this Singapore budget in terms of demography and long term technology strategy?

As an AI language model, I do not have personal opinions or emotions, but I can analyze the content of the text provided.

The Singapore budget plan outlined in the text aims to secure a brighter future for Singaporeans by strengthening the social compact and building collective resilience, equipping workers with more opportunities to thrive, and supporting local enterprises, among other things.

In terms of demography, the plan provides support measures for Singaporeans of different age groups, including the elderly, children, and lower-income families. For example, it includes measures such as top-ups to MediSave accounts, child development accounts, S&CC rebates, U-Save rebates, and cash payouts to help Singaporeans cope with the increase in daily expenses due to higher inflation and GST increase.

Regarding long-term technology strategy, the budget plan highlights the importance of developing local enterprises, nurturing and sustaining innovation, and building capabilities to anchor quality investments. The plan includes measures such as expanding the scope of the National Productivity Fund to support investment promotion and introducing the Enterprise Innovation Scheme to support businesses’ innovation activities via enhanced tax deductions/allowances.

Overall, the Singapore budget plan appears to address both demography and long-term technology strategy, with a focus on supporting Singaporeans of different age groups and equipping them for a more competitive and innovative future.

Q: I have additional information for you here and take a look, what else can you say about the demographic and long term technology strategy and whether the budget helps in achieving the objectives?

From the additional information provided, it seems that the government’s long-term technology strategy is not explicitly mentioned in the budget statement. However, there are several measures aimed at building up Singapore’s resilience and capabilities, including building organizational capabilities within the public service, tapping on the capabilities of the private and people sectors in responding to crises, and reviewing industry development schemes to remain competitive in attracting and retaining investments.

Regarding demographics, there are measures aimed at enhancing the social safety net and supporting vulnerable groups, such as extending tax deductions for donations to Institutions of a Public Character (IPCs), enhancing the Corporate Volunteer Scheme, reviewing salary benchmarks and raising salary guidelines for the social service sector, and providing a $1 billion top-up to support social service agencies that deliver community care services to seniors through dollar-for-dollar donation matching.

In terms of the budget’s effectiveness in achieving its objectives, it would depend on the specific details of how the funds are allocated and implemented. However, the measures outlined in the budget statement appear to be aligned with the government’s goals of building up Singapore’s resilience, supporting vulnerable groups, and promoting sustainability.

Q: What are the possible risks that the government cannot achieve these goals with this budget?

There are several possible risks that could prevent the government from achieving its goals with this budget, including:

External factors:

Implementation challenges: The successful implementation of the measures proposed in the budget will be critical to their effectiveness in achieving the government’s goals. There may be various implementation challenges, such as bureaucratic hurdles, resistance from stakeholders, and inadequate resources or expertise.

Unforeseen developments:

Budget constraints:

Lack of public support: The success of many of the initiatives proposed in the budget will depend on the public’s willingness to participate and cooperate. If the public does not support the government’s initiatives or does not take the actions necessary to achieve the desired outcomes, the government may struggle to achieve its goals.

It is interesting to see how an AI can be politically correct with its technical algorithms and approaches to filtering, analyzing sentiments and human review. But what are my views on technology and demographic?

Conclusion

Let me quote the following two paragraphs for discussion.

“Singapore is expecting government expenditure to rise to about 19 per cent to 20 per cent of gross domestic product (GDP) between the financial years of 2026 to 2030, and possibly exceed 20 per cent by the end of the decade.

Healthcare will be a key driver of this anticipated increase in national spending, which currently stands at 18 per cent of GDP.”

Demographic Changes

According to the quoted statements, Singapore anticipates a rise in government expenditure to 19-20% of GDP between 2026-2030, possibly exceeding 20% by the end of the decade, with healthcare being a key driver of this increase. This highlights a critical issue facing Singapore’s economy – an ageing population. Encouraging more births, immigration, and technological solutions such as automation and AI may address the workforce shortage in lower-income jobs and pose social cohesion concerns.

While it may be true that some Singaporeans could potentially fund their lifestyle by selling assets or their CPF minimum sum, the psychological impact of having to downgrade cannot be underestimated. Inflation has made it difficult to maintain the same lifestyle that one has been accustomed to, especially for those who have no other assets and rely solely on their salary as income, and do not have the support of children or family members. The financial strain can be immense, and it can have a ripple effect on various aspects of one’s life, including health and well-being, relationships, and overall quality of life. As such, it is crucial for policymakers to consider the implications of inflation and demographic changes on Singaporeans and to implement measures that can help mitigate the impact and support the most vulnerable members of society. This could include targeted assistance programs, upskilling and reskilling opportunities, and initiatives to promote social cohesion and community support.

It would be ideal for Singapore to follow China’s example, where elderly people can afford to spend their time socializing, exercising, and doing jobs they enjoy. However, achieving this would require a robust economy with adequate employment opportunities, particularly for low-skilled workers. The 2023 budget aims to address immediate cost-of-living challenges, boost economic growth, enhance workers’ skills, reinforce social cohesion, and create a more robust nation. Nonetheless, Singapore must remain vigilant in addressing the structural challenges posed by demographics and other long-term issues.

The current technology strategy of Singapore appears to be on the right track, with the country investing in digital infrastructures and successful COVID strategies that have allowed for capital inflows, and maintaining high-interest rates, thereby strengthening the Singapore dollar to cushion inflation. However, it is essential to note that such capital and talent inflows may be fickle, and other countries may also have the ability and willingness to change just as quickly, such as Hong Kong and China. Singapore needs to continuously attract enterprises and talents, recognizing that it is vulnerable due to its small size and potential risks such as the drying up of capital for investments in SMEs or the relocation of technology companies.

To address these vulnerabilities, the budget includes various grant and financing schemes to assist multinational enterprises and non-profitable companies. At the back end, in using digital infrastructure to access foreign markets and bring Singapore’s young talents to the international scene. Global education, skills, second language capabilities, and international experience are critical components of this strategy. Those who have the opportunity to work overseas have done so. Those that are sticky or have no options will eventually need the experience. Additionally, sustainability is prioritized through financing SMEs to upgrade to efficient energy and to build massive green hardware infrastructure that was outlined in detail in previous budgets. The green initiatives serve as a training ground for individuals to familiarize themselves with products and acquire skills for internationalization.

However, this strategy’s success depends on the implementation, and education and research and development (R&D) are crucial factors. Singapore must ensure that its population is sufficiently aware and educated on the latest relevant technologies, including inclusive, eco-friendly and sustainable, to capitalize on the opportunities presented by digital trade agreements and soft infrastructure. Ultimately, the world is the market. With Singapore’s favourable position, the country can reach far beyond its neighbouring Asian markets and even penetrate markets as far as Africa. It is not only the 2023 budget. The other long-term strategies are already kicking in.

Yes, ChatGPT did help me to enhance my presentation language, but the opinions expressed are entirely my responsibility.

Thank you for listening, and I express my appreciation to ChatGPT!

Chairman, I have done my best and the mic goes back to you.