COMMITTEE OF SUPPLY DEBATE 2021:
SPEECH BY SECOND MINISTER FOR FINANCE LAWRENCE WONG
A. INTRODUCTION
A1. Mr Deputy Chairman, I thank the Members for their
questions and comments for the Ministry of Finance.
A2. The cuts by Members cover four broad areas:
a. First, fiscal sustainability and accountability;
b. Second, managing our investments and reserves, and
tax-related matters;
c. Third, supporting social and environmental outcomes;
and
d. Fourth, supporting businesses, citizens and
community, and enhancing public service capabilities.
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A3. I will speak on the first and second areas, and my
colleague, Second Minister for Finance Indranee will cover
the other two areas, and the proposal for an independent
fiscal council.
B. FISCAL SUSTAINABILITY AND ACCOUNTABILITY
B1. Mr Liang Eng Hwa and Ms Foo Mee Har raised important
points and asked how the Government ensures prudent
and effective allocation of resources, especially in such
challenging times. I want to assure both Mr Liang and Ms
Foo that we take these issues very seriously, especially on
securing good value-for-money and good outcomes for the
resources that we have.
B2. First, we continually prioritise and reallocate funds to key
areas of greater needs across the whole-of-government, so
that it is not just about additional spending, but also about
reprioritisation. As an example, in the October 2020
Ministerial Statement, DPM highlighted that MOF had re- 2
directed funding of about $8 billion from areas with reduced
spending, such as development projects that were delayed
due to COVID-19, towards funding our fight against COVID-
19. Clearly, this was something which was of priority.
B3. Second, we have joint budgeting arrangements for cross-
cutting domains, to better align priorities and reduce
duplication of resources across different agencies. Joint
budgets have been set up in the areas of jobs and skills,
vaccines and therapeutics, Smart Nation and Digital
Government, as well as in Research, Innovation and
Enterprise.
B4. Ms Foo asked how we evaluate the return on investment
for support schemes directed towards new areas of
development. As with all Government programmes, we
monitor the output and outcomes of our programmes and
schemes to ensure that their purposes are met. We also
3 review whether to scale, refine, or sunset programmes depending on their outcomes.
a. For example, for digitalisation programmes, we look at
digital adoption rate and digital readiness across the
sectors.
b. For enterprise development programmes, we monitor
the growth of benefitting companies, like revenue, to
holistically assess how well the scheme objectives are
met.
c. For R&D, we continuously seek to refine the way by
which we assess and monitor the impact of our
investments. We currently track a basket of indicators,
which include Business Expenditure on Research and
Development, the number of successful start-ups
supported by Research, Innovation and Enterprise or
RIE programmes, and the number of research projects
that are undertaken in collaboration with the industry. 4
B5. In this regard, Mr Leon Perera asked about enhancing the
economic impact of research spending. This is an area
where we share common objectives. We too, in finance,
would like to enhance the economic impact of everything
that we spend. We want to achieve an A score, not just for
effort, but for outcomes too. We want to have As in all
areas.
B6. So we continue to place a strong focus on ensuring that RIE
investments develop the capabilities needed to catalyse
economic growth. At the same time, we recognise that
some investments in basic research are essential and are
important, and they should continue to be maintained for
laying the foundations of downstream breakthroughs. The
nature of such basic research is that they may not always
have direct translational outcomes, or even if they do, the
outcomes take time to materialise and manifest
themselves. Mr Perera highlighted some examples in
America. Indeed, if you look at the American examples, or
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even in Israel, some of the basic research is done with very
little direct and immediate outcomes, because these
economic outcomes bear fruit many years later.
a. In Singapore, we have a similar example of our
biomedical sciences. We started investing in R&D, in
biomedical sciences in 2000. More than 20 years have
passed. The initial years were not easy, but we stayed
the course. We had patient capital, and today, our
investments have set the stage for the flourishing
biomedical science sector, as DPM mentioned just
now in his round-up speech. The biomedical sector in
Singapore today makes up about 4% of our GDP, and
four of the world’s top 10 drugs by global revenue are
made in Singapore.
B7. Our RIE activities have also helped to catalyse private
sector research and innovation activity, and to establish a
vibrant innovation and enterprise ecosystem.
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a. We have created high quality jobs. The number of
industry research scientists and engineers, or RSEs,
has tripled. Industry RSE, not government. Industry
RSE has tripled from about 6,500 to over 19,000, in
the 20 years from 1998 to 2018. Beyond the
immediate impact on RSEs, our RIE investments have
also indirectly contributed to good jobs in the rest of
the economy, by keeping industries and businesses
competitive globally.
b. In the same period of time, Business Expenditure on
R&D has increased by more than two-and-a-half
times, from $1.5 billion in 1998 to approximately $5.6
billion in 2018. These are the outcomes we have
achieved, and we will continually strive to do better.
B8. In response to Mr Liang’s question on accountability for
spending outcomes, we continue to strengthen governance
and accountability over the outcomes of our spending,
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including strengthening the value-for-money culture across
all government agencies.
B9. Infrastructure projects are evaluated for their worthiness
and cost-effectiveness, before Government embarks on
them. For larger projects, Ministries’ proposals and MOF’s
evaluations are further scrutinised by the Development
Projects Advisory Panel, which comprises technical experts
from the private sector and academia. Over the past five
years, these processes have led to design improvements
and generated savings of about $4 billion in total, or about
5% of the capital costs.
a. For example, MOF worked with the Land Transport
Authority (LTA) to improve the proposed design for the
Sengkang West multi-storey bus depot-cum-
dormitory, including right-sizing the space for housing
Mechanical & Electrical equipment and common
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areas, and green roof areas. These changes helped
to reduce the estimated cost by about $70 million.
B10. For day-to-day operational spending, public agencies also
proactively look out for ways to spend prudently. For
example, MOH’s Agency for Care Effectiveness evaluates
the clinical-effectiveness and cost-effectiveness of
medicines, vaccines, and medical technologies, and then
negotiates fair prices with companies. This has delivered
total cost savings of $300 million between 2016 and 2020.
B11. I also thank Mr Edward Chia for his suggestion on making
greater use of design to optimise cost effectiveness over
the life span of infrastructure projects.
B12. Indeed, the Government adopts a life-cycle cost
perspective during upfront planning and design of
infrastructure projects. This improves visibility of long-term
resourcing requirements. It also allows us to optimise the
combination of upfront costs and downstream maintenance 9
and operating costs. In this way, we avoid having projects,
be it buildings or infrastructure, that may be cheaper to build
but are expensive to maintain and operate, and in fact, on
an overall basis, end up being more expensive. By taking
this approach, we expect to bring about savings of 2% to
5% in total life-cycle costs over the long-term, which is a
significant sum given that we spend about $15 billion to $20
billion each year on capital expenditure alone.
B13. Ms Foo spoke about the need for governance and
accountability over the use of public funds, even as we were
responding to the COVID-19 situation. Indeed, when
coming up with support schemes, agencies do make full
use of a whole range of tools. They considered the
possibilities of fraud, and unintended beneficiaries upfront
in scheme designs. They deployed various monitoring
mechanism and safeguards, at pre-disbursement and post-
disbursement stages, to ensure that funds are disbursed to
the appropriate beneficiaries.
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B14. Specifically on the Jobs Support Scheme (JSS), this was
introduced at the start of the crisis when the public health
and economic situation was highly fluid, and when firms
were facing immediate cashflow issues. The priority then
was to ensure that all firms received timely support, so that
they can focus on retaining their workers and sustaining
their operations. So the JSS was implemented as a broad-
based scheme then, without the need for onerous
applications. This was especially helpful for SMEs.
B15. As the economic situation improved and with accurate data
on sectoral and firm performance, we then stepped down
our broad-based support measures and pivoted towards
more targeted, sector-specific measures.
B16. In fact, we began tapering JSS support levels from
September 2020.
a. And for sectors that managed well, we ceased JSS
support after December 2020. 11
b. In this Budget, we extended the JSS for Tier 1 sectors
like aviation and tourism by six months. And for Tier 2
sectors like land transport and retail, we extended the
JSS by three months.
c. And for sectors that remain hard-hit, we also
introduced additional targeted measures like the
SingapoRediscovers Vouchers to stimulate domestic
tourism, and extended sector-specific support like the
Aviation, Point-to-Point Support Packages and the
Arts and Culture Resilience Package.
B17. This tiered approach has enabled us to bring targeted relief
to business owners and the workers they are responsible
for.
B18. We will continue to monitor the outcomes and effectiveness
of COVID-19-related schemes.
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a. For example, MOF has published its interim
assessment of the initial effects of the Government’s
measures to reduce business costs, save jobs and
support families.
b. Preliminary data suggests that the Jobs Support
Scheme has reduced job losses in vulnerable firms,
while loan schemes have supported over 20,000 firms
in accessing loans.
C. MANAGING OUR INVESTMENTS AND RESERVES
C1. Next, let me talk about managing our investments and
reserves. Mr Perera asked about the performance of our
investment entities. We had this debate before. This
question has been raised multiple times. And I have
explained that both GIC and Temasek are long-term
investors. Their remit is to secure good sustainable returns
on a total portfolio basis over the long-term. So the relevant
performance measure for them is not the year-to-year 13
return, which can fluctuate because of market volatility, but
sustained long-term returns over and above global inflation.
C2. If you look at that measure, both GIC and Temasek have
indeed performed creditably over the long term. Their
results are published in their annual reports, and there is a
full write up, explaining their decisions, the performance
and evaluation of their performance. Take GIC as an
example. GIC, in recent years, has recognized high
uncertainty in the equity markets, as well as high valuations,
which can lead to large permanent portfolio impairment. As
a result, GIC has undertaken pre-emptive measures to
reduce portfolio risk. Nevertheless, despite reducing its risk
exposure, GIC’s returns on its portfolio, compared to a
reference portfolio comprising 65% equities and 35%
bonds, has been equal if not better than the reference
portfolio. This has been so over the 20-year rolling period.
It has also been so over a more intermediate period, like a
10-year and 5-year time frame.
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C3. So, I think if you look at the overall performance on the
broader longer term, not just year-to-year, I think both GIC
and Temasek have done creditably well in a very
challenging investment environment. Going forward, how
do we ensure that such performance continues? There is
never any guarantee in investments. All the processes are
in place:
a. For the Boards to supervise management; and
b. Between MOF and the Boards to review the
performances of these entities, in discussions with
external parties as well as investment advisory panels.
Very prominent names in the investment community
sit on these advisory panels to help us guide our two
entities.
C4. On green investments, we have explained that both GIC
and Temasek operate on a commercial basis. So their
individual investments are independent of the Government. 15
C5. Nevertheless, both entities acting on their own accord,
emphasise sustainability in their investment activities. And
that is because they recognise that good sustainability
practices are good for business, and can have a positive
impact on long-term returns. Conversely, companies with
poor sustainability practices carry business and
reputational, as well as environmental, social and
governance risks.
a. GIC and Temasek integrate sustainability
considerations holistically into their investment
processes across all asset classes, so that they
protect and enhance the long-term value of their
investments. Both entities take a strong interest in not
only understanding sustainability-related challenges,
but also the opportunities for innovation, business
growth and new investments.
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b. Both entities also support efforts by the Financial
Stability Board’s Task Force for Climate-related
Financial Disclosures (TCFD) to develop an
internationally accepted framework on climate
reporting. This provides a framework for companies to
disclose their climate-related strategies, and for
investors to incorporate climate change
considerations into long-term investment decisions.
C6. Both entities have also published comprehensive
statements on their approach to sustainability, and they will
continue to review what information can be put out in their
annual reports.
C7. In response to Mr Perera’s question about reserves
spending, let me just explain how the Government executes
the spending of reserves during economic crises.
C8. The fiscal framework in the Constitution requires the
Government to spend within its means. 17
a. So a draw on Past Reserves occurs if our revenues
and surpluses accumulated during the current term of
Government are unable to support our current
spending.
b. We have clear rules on what constitutes a draw on
Past Reserves.
C9. But where the Government obtains the cash to pay for the
expenditures is a different matter – that’s part of the
Government’s overall cashflow management, it’s an
operational issue, and is separate from the budgeting
process.
C10. For purposes of cashflow management, the Government
has a range of liquidity sources it can tap on, and this will
include tax revenues which come in at different times of the
year, funds raised outside the budget, like proceeds from
land sales. Constitutionally, these do not contribute to the
budget and do not count as government revenues, but they 18
are part of the cash flow the Government receives. It also
includes Government deposits which we can tap on for
purposes of cash flow reasons. So all of these sources of
cash flows are pooled together, and we manage cash flow
on a disciplined and integrated basis. On top of these
different sources, I have highlighted earlier in this house,
that the Government will be issuing Cash Management
Treasury Bills. This is part of the Government’s ongoing
efforts to expand our cash management toolkit.
C11. With regard to the specific question asked by Mr Leon
Perera to pay for expenditures in FY2020, the Government
was able to tap on all available sources of cash under the
toolkits which I had just described. So GIC was not put in a
position where it had to liquidate investments under time
pressure.
D. TAX-RELATED MATTERS
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D1. Finally, let me address Mr Louis Chua’s questions about the
Additional Buyer’s Stamp Duty, or ABSD, remission for
Singaporean married couples.
D2. The aim of ABSD, I think we all know, is to moderate
demand, and to ensure a stable and sustainable residential
property market.
D3. To be effective as a measure to moderate demand for
property, ABSD has to be applied consistently and to all
buyers.
D4. Only one exception is made, and namely that is for
Singaporean married couples. A Singaporean married
couple may need to change home due to changing family
needs, such as when they have children, when their
children are growing up, or when the couple needs to right-
size in their senior years. It is in this context that we have
an ABSD concession for Singaporean married couples
buying a second residential property. 20
D5. Under this concession, we allow Singaporean married
couples to claim a refund of the ABSD paid on their second
property, provided they sell their first property within six
months after the purchase of a completed property, or the
Temporary Occupation Permit date of an uncompleted
property.
D6. Singaporean married couples who are purchasing a HDB
flat or a new Executive Condominium unit are granted
upfront ABSD remission as Mr Chua highlighted. This is
because they are subject to HDB regulations which require
them to not own other residential property, or to dispose of
their existing residential property within HDB’s stipulated
timeframe. There are no such regulations for private
residential properties. And that is the reason why for such
private residential property purchases, ABSD remission is
only granted upon the sale of the first property within the
required timeline, unlike the case of HDB.
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E. CONCLUSION
E1. Mr Chairman, MOF is committed to ensuring that our overall
fiscal system is fair and progressive, achieves good value-
for-money outcomes, and importantly sustainable over the
long term.
E2. I will let Second Minister Indranee address the other
questions raised. Thank you.
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