Singapore growth plan not a 'grow-at-all-costs' policy

Alvin Foo, Straits Times 28 Feb 08;

THE Government's economic expansion strategy is the right one and not a 'grow-at-all-costs' policy leading to an overheated economy as suggested by Mr Inderjit Singh (Ang Mo Kio GRC) on Monday.

Finance Minister Tharman Shanmugaratnam said yesterday that while Mr Singh's speech made for 'very entertaining listening, it was in fact Inderjit's analysis that is flawed'.

Mr Tharman said: 'The Government has not pursued a 'grow-at-all-costs policy' as (he) suggested.

'We 'went for growth' not by over-stimulating the economy with fiscal spending, but by making Singapore more competitive by building up our capabilities, keeping taxes competitive and investing in infrastructure.'

Mr Singh told Parliament on Monday that the Government's strategy of growing the economy as fast as possible in good years was partly to blame for rapidly rising costs.

Responding yesterday, Mr Tharman said that Singapore needs to capitalise on the boom years to offset the bad ones to ensure healthy long-term growth.

'We have to take advantage of the opportunities when external conditions are favourable, so that the good years can offset the down years when the global cycle turns.'

The economy was able to grow at an average of 5 per cent over the past 10 years because it had grown rapidly in the last four years by about 8 per cent on average, he noted.

Mr Tharman said Singapore should seize the economic opportunities and not turn away big investors to avoid rapid growth.

He said: 'When they are ready to invest, and we say no, they go elsewhere. If we miss them, we miss the whole cycle. And we lose not just one investment. We lose the whole cluster.'

Many MPs, including Mr Singh, Ms Jessica Tan (East Coast GRC), Mr Michael Palmer (Pasir Ris-Punggol GRC) and Ms Penny Low (Pasir Ris-Punggol GRC), have expressed concern that the Budget did not do enough for businesses facing rising costs.

Mr Tharman said although costs have increased, so has the overall demand for goods and services.

The Government's approach is to provide the conditions for companies to grow over the long term.

'We will help our companies to move up the value chain so that they are more competitive in a higher cost environment,' said Mr Tharman, who added that short-term bottlenecks affecting labour and space are being addressed.

For example, the Ministry of Manpower raised the quota for skilled foreign workers from 15 per cent to 25 per cent last month.

The Budget also contained measures to deal with the temporary shortages in office space, he said.

The Ministry of Trade and Industry has also been conducting an orderly release of industrial land which should relieve pressure on rents.

Mr Tharman also rejected suggestions from two MPs - Mr Singh and Ms Tan - to offer businesses rebates to cope with rising costs.

'Providing rebates would not solve the imbalance of supply and demand, which is the source of the problem. In fact, it might even accentuate the problem,' he said.

Mr Tharman noted that giving tax rebates on rentals may drive rents up further as they would boost demand without adding to supply in an already strong rental market.

He added: 'The real solution is to relieve the bottleneck in supply, which is what the Government has been seeking to do.'

Inderjit's analysis 'flawed', Kum Hong's 'reckless'
Christie Loh, Today Online 28 Feb 08;

AFTER two days of hearing criticisms about the Government's pursuit of economic growth at the cost of social cohesion, Finance Minister Tharman Shanmugaratnam has stepped forward with strong rebuttals.

Zooming in on points raised by two parliamentarians — Mr Inderjit Singh and Mr Siew Kum Hong — the minister sought to address what he dubbed "the most important debate" that arose during the discussion of Budget 2008: What is "the basic ethic that we want to sustain in our society"?

Is it, as Mr Singh suggested on Monday, a "growth-at-all-costs" policy that aims to expand as fast as possible in good times but inevitably leads to rising inflation and lower-income Singaporeans being worse off?

"This is plainly wrong," Mr Shanmugaratnam said yesterday. "It made for very entertaining listening, but it is in fact Inderjit's analysis that is flawed."

The minister explained that growth came about not because of the Government pumping in money to stimulate the economy, but due to measures to build up capabilities and infrastructure and to keep taxes competitive. This enables the people and businesses to take advantage of good times to offset weak years when the global economic cycle turns. Rejecting investors in the name of avoiding rapid growth would not make food more affordable or Singaporeans better off today, he said.

In fact, he said, buoyant 2007 was a good year for low-wage workers, as retrenchments sank to the lowest level since 1994.

Small businesses have also benefitted. Despite higher costs, their sales have risen due to the strong growth of Singaporeans' wages, he said.

"Our approach, therefore, is to provide the conditions for Singaporeans and our companies to succeed and to grow over the long term," said Mr Shanmugaratnam.

But he stressed that this strategy did not mean neglecting the less fortunate, contrary to the "impassioned speech" by Mr Siew, a Nominated Member of Parliament (MP).

On Tuesday, Mr Siew had said that the Government, being more concerned about not eroding the work ethic rather than caring for Singaporeans, was providing a minimal level of aid.

Mr Shanmugaratnam disagreed.

"His description does not square with the reality of the Government's interventions to support the lower-income group," he said, citing housing subsidies, Central Provident Fund top-ups, Medifund, ComCare schemes and the Workfare Income Supplement, recently introduced to cover the bottom 30 per cent of the population.

Whether the Workfare scheme needs to broadened — as some MPs have suggested — remains to be seen, as the first payments were given out just last month , said the Finance Minister.

But the basic philosophy of encouraging people to work, he stressed, cannot be shaken — which is why he said Mr Siew's "exhortation that we should ignore waste, ignore dead-weight loss, ignore disincentives to work, is reckless".

To help the poor, said Mr Shanmugaratnam, it is first necessary to expand the economy, create wealth and provide the incentive for Singaporeans to work.

"If our policies harm that, for the noblest of reasons, we will be in serious trouble, as many other countries have found," he added.