COMMITTEE OF SUPPLY DEBATE 2021:

SPEECH BY SECOND MINISTER FOR FINANCE

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.

1

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 and Ms 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

5

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.

6

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,

7

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

8

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 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.

10

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.

12

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.

14

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.

16

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

19

D1. Finally, let me address Mr ’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.

21

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.

22