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Positioning S’pore to withstand international backlash against globalisation

This year’s Budget seeks to prepare Singaporeans for looming global economic uncertainty. Voters in the United States and the United Kingdom have repudiated globalisation by electing Mr Donald Trump and voting for Brexit. Singapore’s prosperity depends on an international economic system that is increasingly rejected by disillusioned voters worldwide because globalisation has failed to deliver inclusive growth.

Singapore should ensure that the negative impact of technological progress and economic restructuring are minimised on Singaporean workers.
Photo: REUTERS

Singapore should ensure that the negative impact of technological progress and economic restructuring are minimised on Singaporean workers.
Photo: REUTERS

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This year’s Budget seeks to prepare Singaporeans for looming global economic uncertainty. Voters in the United States and the United Kingdom have repudiated globalisation by electing Mr Donald Trump and voting for Brexit. Singapore’s prosperity depends on an international economic system that is increasingly rejected by disillusioned voters worldwide because globalisation has failed to deliver inclusive growth.

Restructuring the Economy While Promoting Inclusive Growth

Budget 2017 addresses the core problem of restructuring the economy for the technology-driven future by committing S$2.4 billion, over the next four years, to implement the recommendations of the Committee on the Future Economy.

Singapore faces a two-fold challenge: To stimulate technology-driven productivity growth across the entire economy, while ensuring that the resulting growth is inclusive. Unlike our earlier mass industrialisation, which uplifted the broad middle class, today’s technology-driven productivity growth increasingly complements a small set of elite workers with highly specialised skills, while making redundant a large number of moderately-skilled workers.

Although Singapore’s labour force is highly educated — with three-quarters of workers aged 25 to 39 possessing tertiary qualifications — future economy jobs will require deep knowledge backed by applied experience.

Singaporeans may find that our formal qualifications mean little in a world where vast pools of highly skilled and motivated engineering talent can be readily recruited in Bangalore, Shenzhen and Ho Chi Minh City.

Budget 2017 initiatives will help Singaporeans build meaningful applied experiences that complement our high-quality formal education. The Global Innovation Alliance programme will give students and business leaders opportunities to gain entrepreneurial experience and business networks abroad — qualities vital in a world where economies of scale mean that any enterprise that serves only Singapore is unlikely to ever become globally competitive.

When investing in Singapore’s economic future, we should adhere to two principles.

First, we should ensure that expenditure to promote economic restructuring promotes the common interest of all Singaporeans, rather than just corporate interests.

While Singapore needs vibrant and globally competitive SMEs, the interests of entrepreneurs are not always the same as that of the public. Well-intentioned plans to promote economic development may become little more than corporate welfare packages if poorly delivered. While all Singaporeans will benefit if Budget 2017 succeeds in supporting Singaporean enterprises in their efforts to digitalise, innovate and become global champions, our homegrown enterprises must retain a strong Singapore core that gives back to Singapore when they succeed.

Second, we should ensure that the negative impact of technological progress and economic restructuring are minimised on Singaporean workers. Technological disruption hits the middle class worst of all. Their education and experience make them expensive, and, hence, motivate businesses to replace them rapidly.

While the resident unemployment rate has been stable at 3 per cent even during a weaker economy, redundancies have risen sharply over the past two years, and mature professionals, managers, executives and technicians (PMETs) face particular difficulties changing careers or finding re-employment.

Budget 2017 continues SkillsFuture programmes that will support skills training, while also expanding Workforce Singapore initiatives that address structural unemployment, such as the Career Support Programme.

A Long-Term Orientation for Singapore

In a year where all thoughts are on risks to the sluggish economy, two-fifths of the Budget speech was devoted to environment and society. This emphasis reflects the need to ensure that we do not forget Singaporeans who may be marginalised by our rapid economic progress.

The relative lack of new social safety nets in Budget 2017 should be viewed in context of the significant investments made in recent years to old-age security through the Silver Support Scheme and the Pioneer Generation Package.

The one social safety net we appear reluctant to construct, however, is a comprehensive income-support system for the unemployed and underemployed. While Budget 2017 continues to generously support the broad middle class through cost-of-living-based increments to GST vouchers and U-Save rebates, there is no systematic support for income losses due to unemployment, except for the short-term assistance schemes operated by ComCare.

Singaporeans today manage without unemployment insurance because structural unemployment is low, and finding a job is not the insurmountable task it is in many other economies.

But we may need a more formal system of unemployment income support if Singapore’s unemployment rates rise to that of the developed economies — where unemployment regularly exceeds 6 per cent. As our economy matures, and as technological change continues to disrupt our enterprises, we should prepare sooner, rather than later, for this possibility.

The longest-term measure of all in Budget 2017 is the commitment to implement a carbon tax, targeted for 2019. As a small economy, Singapore’s carbon emissions will make little difference to the risks of global climate change. But a successfully-implemented carbon tax will demonstrate that Singaporeans are willing to pay the price needed to ensure that our environment and way of life can be sustainably handed down to our descendants generations from today.

ABOUT THE AUTHOR: Walter Theseira is senior lecturer of economics at SIM University’s School of Business

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