Pre Budget 2020
4 Dec 2019


REACH

https://www.straitstimes.com/singapore/next-budget-to-transform-industries-and-workforce-ensure-sustainability

Key messages from Minister Indranee’s speech:

“We must see the national Budget as a strategic financial plan to position ourselves for the future.”

“Over the past decade, Government expenditure has more than doubled. While our operating revenue has also grown, it is still outstripped by our growing spending needs."

"One main reason why we have been able to increase our social spending is the Net Investment Returns Contribution or NIRC.”

“However,  the change in our age profile and the need to spend more on healthcare, pre-school and security – all of which are recurrent spending – will require a more sustainable or recurrent source of funding. The GST increase will allow us to meet these needs.”

“All of us, you and I, feel a sense of ownership of our nation and wish to have some part to play in shaping the future of Singapore. This is the essence of the SG Together movement.”

What do you think of the Government’s strategy to transform, support and sustain Singapore?
---

Part A - Context - Reduce national income, Increasing spending expenditure
1. The current external environment (notably the US tariff trade war) - has derailed the Global Supply Chain, disrupt trade and trigger a slowdown in Global Economy.
The head-on conflict between US and China is growing more and more intense (trade war, US meddling into China's internal affair eg. HK and Uighur), US tariff trade war against France, EU, Brazil, Argentina, etc ---- will make our external environment more and more challenging - that will greatly impact the Global Economy and business environment going forward.

2. This means :-
a. It has hurt our Economy, our GDP growth has been reduced and our tax revenue collection will drop.
b. This also means our businesses profit will be affected and jobs will also be affected.
c. This will spur our Government to spend more in Budget to help the businesses, retain jobs and help those who are in need to cope.

3. This are translated into :-
a. Money collected by our Country has fallen - but demand on our spending expenditure is ever rising (eg. need to build dykes to protect rising seawater, invest in defense and security, coping with rising healthcare cost, need to invest in education and training to help our workers to cope with disruptive tech, build better housing, build transport infra etc).
b. There will be a need to draw from our budget surplus that we have accumulated (as the money we collected diminished). And hopefully we don't have to draw on our financial reserves (that will deplete our earning capacity from our Sovereign Funds).
c. When this happen, our potential long term earning potential fall - as less revenue are plough back to our Sovereign Fund to grow our money - that will help to finance our Government spendings through NIRC (Net Income Return Contribution) - and this means people will have to pay more tax to finance our ever spending national expenditure.
d. Given this context, what should we do? As it will get worst before it get better.
e. We should think of how to grow our Budget before we think of how to spend our money - given the challenging external environment.

----
Part B - We need to develop a "Blue Ocean Water Strategy" (蓝海战略）- turning a grave Economy threat into new opportunities.

(1) What is our "Blue Ocean Water Strategy" (蓝海战略）?
a. our Economy is small - given a population of a mere 5.6 million. Thus our domestic market is small and we need to develop a "Blue Water Strategy" that tap on overseas market which have a far more bigger market.
Even though Singapore has produced many good products and services, our small domestic market is not able to quickly grow our local companies into billion dollar companies unlike big Countries eg. US - producing Microsoft, facebook, google, amazon etc or China - producing Huawei, Alibaba, Tencent,Xiamoi, Oppo etc or India - producing Tata etc or Indonesia - producing many local business conglomerates of billion dollar.
The respective local R&D products can be sold to their big domestic market - and make their local companies - to become conglomerates billion dollar company overnight.
Singapore as a small Country cannot do it for our local companies - even though we have many good local products and services.

b. The total World GDP is US$80.27 trillion (US contribute US$19 trillion) - so there are US$61.27 trillion of market that we can tap when US is building walls.

c. Eg. China has a big market of 1.4 billion people.
India has a big market of 1.3 billion people.
Indonesia has a big market of 300 million people.
And there are other ASEAN market and Asia market of far bigger population, bigger market and growing income that we can tap.
eg. if a Singapore company is selling a $100 product, in Singapore of 5.6 million - the company can only earn a total revenue of $560 million.
if a Singapore company sell to China, India, Indonesia, ASEAN, Asia and other big market of say 300 million people, the company can earn a total revenue of $30 billion and become a billion dollar company.

d. Based on the above context, this is where our "Blue Ocean Water Strategy" (蓝海战略) can be derived from.
We noted that penetrating overseas market are not easy - as many Countries will want to protect their local market and their local industries.
Our "Blue Ocean Water Strategy" (蓝海战略) is to foster partnership with them - to share profit in their respective market with our products and services. This will motivate overseas partners to aggressively market our products and services to their people with big market and overcome our small domestic market.

---
(2) There are 3 strategic thrust we can achieve this by using our Budget 2020 to incentivise local companies to penetrate big overseas market :-

(I) Local R&D
R&D is the game-changer that have transformed many companies into billion dollar conglomerate.
Eg. Alibaba, Huawei, Tencent are relatively new companies - but their internal R&D have transformed them into multi-billion dollars conglomerates.
This is not to mention US companies like microsoft, facebook, google, amazon etc.
Likewise, Singapore should also tap into our large trove of local R&D to be inherited by local companies (with incentive from our Government through Budget) and actively seeking overseas partners to market our local R&D.

i. Local R&D in medical science, IT, engineering, environmental, energy etc from A*Star, NUS, NTU etc and other private R&D projects can sell our intellectual property rights to our local companies to enter into joint venture with overseas companies to share profit and co-produce, co-manufacture products and services so as to access their big market.

ii. The joint profit (mutual benefits) with overseas partners - will wear down resistance from accessing overseas market and this will help to grow our local companies into billion dollar conglomerates companies and boost our GDP.
eg. Grab have good IT apps products and have grown into billion dollars company accessing not only Singapore market, but also Indonesia, Malaysia market (and other ASEAN market).
Lazada, Carousell, Razer have grown phenomenally through eCommerce.
eg. our R&D in defense technologies have make into advanced strategic defense products like Hunter (network automated armor vehicles), Bionix, Bronco, Terrex, stealth frigates, SAR21, howizter etc --- where ST Engineering has successfully sell Bronoco (Warthog) to the British Army, Terrex to US Army etc.
eg. our medical R&D in treatment of R&D liver cancer, new cancer drug that is less harmful to kidney (alternative to chemotheraphy), luminescent probe to detect acute kidney failure, etc.
eg. many commerical and industrial products and services that I come across with good market potential.

ii. Government should incentivise local companies to partner such like minded overseas partners through IE, EDB etc, provide incentive to join such programmes, sign Memorandum of Understanding through Government dealings eg. FTA with China, India, ASEAN, etc. to achieve this.

iii. This is our 1st "Blue Ocean Water Strategy" (蓝海战略) - to grow many of our local business into billion dollars conglomerates.

---
(II) Digital Economy
i. Traditionally, our business will need to set up shops to sell their products and services - and business are conducted over the counter.

ii. To sell to overseas market, business will need to set up physical shops in overseas market.

iii. This will means there are need to station workers in physical shops as well as incur fixed overhead to pay for rent and maintaining the physical shops - and this restrain our business from growing into big business.

iv. With the advent of Digital Economy, business can rely on eCommerce, websites, apps and other digital tools to sell our products and services not only to local domestic market but also to big overseas market - with strategic tie-up with online sales platform, international logistic chain, international warehousing, frieght, shipment etc.

v. This will quickly help many local companies to grow into conglomerates like Lazada, Carousell etc. - by accessing not only domestic market but also big overseas market digitally online with lesser cost (without the needs to finance overheads like setting up shops, employ global workers, pay overhead like rental, utilities, licenses etc) - and all can be done locally in Singapore.

vi. This is our 2nd "Blue Ocean Water Strategy" (蓝海战略) - to grow many of our local business into billion dollars conglomerates.


(III) Multi-lateral FTA and Bi-lateral FTA

i. I think Singapore Government has done very well in forging and closing many multi-lateral FTA (notably CPTPP, RCEP to conclude soon in feb 2020, Singapore-EU, ASEAN, Singapore-Central Asia & Russia, Singapore-Africa, Singapore-GCC), and many bi-lateral FTA.

ii. With all these FTAs, Singapore FTA can forge new Regional Supply Chain and Global Supply Chain - to circumvent US tariff trade war that disrupt the traditional Global Supply Chain.

iii. Many local companies can latch onto all these myraids of FTAs to grow their business and penetrate the big overseas market.

iv. This is our 3rd "Blue Ocean Water Strategy" (蓝海战略) - to grow many of our local business into billion dollars conglomerates.

---
 (1) When many of our local companies grow into billion dollars conglomerates --- than our GDP grow into a more solid ground, and many local companies become a true-blue MNCs.

(2) This local MNCs in turn will create more higher value added local jobs --- and many Singaporeans and residents will have good pay jobs.

(3) In turn, Government coffer will grow as our local GDP grow into a more solid foundation and our Sovereign Funds will grow further with bigger local GDP.

(4) This will help to counter the adverse effects trigger by the US tariff trade war.
---

NIRC from Sovereign Funds is the largest Govt revenue generator - more than any of the tax collected.

---
our expenditure last year is about $80 billion.