An Essay I Wrote for the Budget Essay Competition 2007 Singapore

This is an essay I wrote on the economic future of Singapore; it didn't win anything, but I'm putting it up here to invite any comments on how to improve an essay that is part-GP argumentative and part-economics! To be fair I didn't exactly do a lot of research, so I didn't quote sites; most of the information is fairly accurate at the time of writing, however...


Where Our Economic Future Lies
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Essay Summary

This essay is written to answer the question of where Singapore’s economic future lies. With the environment of the markets of today changing more rapidly than ever, it falls to the youth to constantly adapt to the situation as part of our future workforce. Consequently, we should tap into this source of talent instead of outsourcing foreign talent, as our future ultimately is in our own hands. Therefore, in order to create this “adaptable workforce”, the young will have to be trained, and the more advanced and experienced will have to be retrained in order to perform well now and in the future, while slowly shaping those which are currently working in order to prepare them for possible shifts in the job industry, with more jobs in the hospitality and tourism sector arising from the construction of the Integrated Resort.
Of course, as the government shoulders the burden of retraining its workforce, it will incur additional costs as more and more incentives are offered to undergo retraining. To solve this problem, I also propose tapping into the Integrated Resort in the future, which will function as a major source of constant revenue to the government, which, by nature, is a profitable and at the same time, highly taxable industry, and taxing the industry will benefit the country in more than just an economic sense, the crux of which is in the latter half of my essay. All in all, the essay covers which economic aspects the government should improve in order to ensure a prosperous future, as well as some side effects of these actions.

Word count: 268



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“The future is in our hands” is a phrase which is commonly quoted in today’s society. As a student currently pursuing the International Baccalaureate Diploma in Anglo-Chinese School (Independent), I believe that this statement could not be more relevant than it is in today’s context- the way that the country is run in the future is currently affected to a large extent by the actions and ideas of today’s youth. Therefore, I propose that we focus on our youths, that they may proceed successfully to be the fundamental lynchpin of the country’s economy which we can rely on, and also because sooner or later, they definitely will play a greater part in our country’s economic affairs.

Singapore is turning more and more into a hub of creative expression and expansion, as compared to the industrialization period of the 1970s and the 1980s. This slow, but constant metamorphosis of our nation has changed our focus of development from nationalism to internationalism, and it therefore also behoves us to constantly improve our interconnectivity to the rest of the world, and thereby send a message to every investor in the globe identifying Singapore as a haven for investment. This is arguably more important than our focus, say, forty years ago, when Singapore was still developing as a nation and attempting to define its own cultural identity. I believe that it is time to put the past behind us, and focus our workforce on carving lucrative and well-defined niches in market sectors that are becoming more and more relevant to the world.

The Importance of Cultivating Local Talent
As we move further and further into the modern epoch, it is vital to realise that our youth are becoming an increasingly important asset to the country, not only because of their upbringing in a technology-rich environment, which our forefathers did not undergo, but also because they have the potential to become local talent after pursuing higher education, almost as if they are a form of capital in itself. The basic precepts of economics dictate that capital exists as man made wealth that is in turn used to create goods and services for human consumption. By extension, if we are to increase our sources of revenue, the key lies in nurturing our youth.

Singapore has always relied on its resource of human capital as the wellspring for many entrepreneurial ideas that have then gone on to transform the rest of the world into what it is today. This has helped to strengthen the economy, even when it was flagging in the 1950’s following the collapse of the Japanese Occupation, and still continues to, five decades later; we therefore should not undermine the importance of the entrepreneurial factor by seeking to change this traditional method of growth.
On the other hand, in our pursuit of achieving the status of a global nation, we should also not seek to totally strip away our national identity by completely relying on outsourced foreign entrepreneurs. An example of a country which has successfully balanced its intake of foreign minds versus local talent is China, which derives much of its success locally, but also “imports” just enough foreign talent to keep it updated with the rest of the world. Consequently, the continual upgrading of our human capital should be ranked among one of our most vital objectives as a nation if we are to continue to survive and prosper.



Retaining and Spending on the Old Guard
As we progress into the future, however, it is imperative that we do not impair the capabilities of our elders by denying them opportunities for re-training; firstly, this will ensure that they continue to contribute to society in a relevant manner, and secondly, they were the ones who have shaped our country to what it is now, and should not be denied this opportunity. To ensure that senior citizens have a part in shaping Singapore, the Government could further subsidise re-training opportunities for senior citizens above, say, sixty years old, or perhaps offer re-employment opportunities for people who are reaching the age limit for retiring, and are subsequently viewed by their employers as less useful, or less productive. This will not only send a signal to the senior citizens in our country that they are wanted, increasing their confidence in Singapore being in good hands, but will also provide the twin benefit of having them master the very technologies which are shaping our world.

Spending on the Youth
With the elderly and those reaching retirement age taken care of, the Government’s attention could now be turned to the youth of Singapore, a potentially harder force to harness in shaping Singapore’s future. For one, the youth in our country are uniquely different compared to those from other countries, possessing an uncanny ability to master technology, which is the hallmark of Singapore’s shift towards the information industry, and also emerging from educational institutions being highly trained, and definitely capable of working in any sector of Singapore’s industry, the result of compulsory education in Singapore. In any case, we should realise that we already have a wide and growing pool of knowledge and talent, and by carefully nurturing and cultivating budding students through the use of increased scholarships for local universities, students will be encouraged to go to local universities after graduation, and there will be significantly less ‘brain drain’, or the departure of local talent overseas in order to pursue university degrees; rather, a ‘reverse brain drain’ is engineered, where students from overseas will instead flock to Singapore, attracted by these subsidies. This would ensure that the pool of local talent which we can draw upon will become larger and make up a greater part of Singapore’s workforce, making it more formidable. Eventually, after being trained in Singaporean universities, graduates would ideally become part of a cohesive workforce, adept and adaptable in all relevant industries.
As mentioned in the previous few paragraphs, it is of utmost importance to train our youth to be leaders, because it is the youth that will be able to understand and fully grasp how important technology is to our industry today. Without technology, Singapore would not be able to refine raw materials into processed materials, an example of which is oil and petrochemical industry, which is a highly lucrative business here. Clearly, without keeping our level of technology up to date, Singapore would not have advanced far beyond entrepot trade, and would have possibly been invaded again if our military firepower had been far inferior to what we currently possess. However, as youths today are growing more and more outspoken, wishing to have a greater role in shaping the economy, we must remember that it would be a mistake to prepare the young to lead without the experience of the old, and likewise, the old to lead without preparing the young. The transition at this point of time must therefore be achieved gradually, and not immediately, retaining the old while at the same time refining the new. As a result, by taking care of both the young and old in Singapore’s society, we show that Singapore does look after its citizens well, preparing them for any possibility in the future. This is key to understanding the dynamic nature of today’s business, where a flexible workforce is vital in quickly adapting to the global business climate, which is constantly in flux.

The Welfare of the Working Class
Having taken great care to support the non-working population in our society, we now turn our focus to the lower, middle, and upper strata of the working population. As a whole, we see that we have industrialised to the point where the service sector, such as the information sector, is seen as “the way to go” by the Government. Subsequently, the lower class of the working population is placed in a disadvantaged position when attempting to tap into this lucrative service sector due to a lack of training in this area. To resolve this issue, we could relieve the tax burden of the lower income groups, for example, by further substantially reducing the income tax for people with lower income, which has already been implemented, and by only charging Goods and Services Tax (or GST in this case) to those whose incomes are above a certain amount. Of course, by doing this, many socioeconomic problems arise, central of which is the issue on whether those in the lower income bracket really do need this measure in order to be able to break out of the vicious cycle of poverty, and afford the costs of upgrading oneself. This would have to be taken into consideration before performing this measure.
As the working population works to support those who are not in the labour force, I also propose that the retirement age for civil servants be raised by one or two years, which would allow citizens to continue contributing to the economy. This move would not only effectively raise the size of the labour force, but also reduce the amount of people the working populace would have to support. Consequently, a greater proportion of taxes would be collected (since the retirement age is increased, people would have to pay income tax for the further one or two years which they work), and consequently channelled to the Treasury where it can be used for any fiscal or monetary policies if the circumstances require it.
On the other hand, doing this would also mean that the Central Provident Fund, or CPF, would have to be withheld for a few more years. This would adversely affect people who are in desperate need of funds from their CPF account, and may result in them taking loans which they are unable to repay, if nothing is done to remedy the situation. To avoid this scenario as far as possible, I further propose that the CPF be accessible at our present retirement age of 62, while extending the retirement age at the same time, because the CPF account being released just after retirement is simply a guideline or measure that has been retained only because it has done this way ever since the CPF was set up. As more and more people from the working population approach the age of 62, Singapore’s current retiring age, they will be increasingly reliant on what they have been saving up while working in their prime, in order to maintain their standard of living. In addition to that, it must be taken into consideration that Singapore’s population is an ageing one, and that as one becomes more advanced in age, one will tend to spend a greater proportion of their disposable income on medical care and such necessities as befits the older population. Consequently, it places greater stress on the government to allow these people to withdraw early from their CPF account. Moreover, by doing this, the government is able to allow for a greater amount of investments coming from the CPF Investment Scheme, or CPFIS, to be invested over a longer period of time, benefiting the government, and ultimately the people, due to the potentially greater amount of returns. Another alternative as compared to the one proposed above is to allow people to access their CPF account at the age of 62, and to keep that window of opportunity open until a year after that person has officially retired. This would allow them to access much needed funds without taking unwanted loans, and also show that the government takes the welfare of its citizens into consideration.

The Burden on the Treasury
I also support the 1% drop in corporate taxes as proposed by the government, effectively putting Singapore on par with Hong Kong for the country with the lowest corporate tax rates. Although this move is done on the basis that Singapore needs to be more competitive in the international market, we have to realise that there will be an added strain on the Treasury’s resources when implementing all the suggestions as raised above- the extended retirement age would suggest a substantially greater CPF payout per person, while the use of funds in offering a larger arsenal of grants and scholarships would also drain a substantial amount of cash reserves, not to mention the reduction in the amount collected of GST, reducing the annual amount of revenue the government may collect. Therefore, to counter this increase in government spending, the government must source for an additional inflow of revenue.

To Ease the Financial Woes of the Government
This comes, fortunately, in the form of the newly approved Integrated Resort, or IR, which has the potential to be heavily taxed due to the very nature of its industry. Moreover, the construction of the IR also signals an anticipated increase in demand in the tourism and hospitality sector of the market, having the double effect of also ensuring that various other businesses are able to sell a greater amount of goods and services to these tourists. So, why not place a tax on the monthly operation of the IR in the form of a compulsory permit, which will need to be replaced regularly? After all, the business running the IR will have to shift some of the tax burden on consumers by increasing their prices slightly, and this would discourage locals from actually visiting the IR itself, reducing the effect of the negative externality, gambling, which the IR will have on Singaporean locals, as fewer families will be at risk of bankruptcy, ensuring the basic economic unit, the family, is consistent in contributing to the economy. On the other hand, tourists who come to Singapore with the sole purpose of going to the IR will be less affected by the extra tax burden placed on consumers, because it is a limited “export” of our country (they can only use it while they are in Singapore), and therefore less price elastic, meaning that a larger proportion of the tax burden can be effectively passed on to them. Taxing the operation of the IR is therefore recommended as a source of revenue, albeit a major one, for the treasury as it gives multiple benefits as listed above. The only major cause of concern here is that the IR will not be completed in the next few years, and subsequently, no source of revenue may be derived from it between now and when it is fully completed. Therefore, I suggest that the above ideas be phased in slowly, so that the financial strain on the Treasury will not be too great at any point in time, and this will also allow us to have substantial reserves in the case of an emergency. Taxing the operation of the IR properly will result in the costs of the ideas listed above being fully covered, as well as providing a little extra to boost reserves, ideally ensuring a stable and prosperous economic future for Singapore.