SINGAPORE (Reuters) - A key Singapore advisory panel on Thursday proposed a 10-year strategy aimed at ensuring annual economic growth of 2-3 percent, mainly centred on trade partnerships, deepening the workforce’s tech skills and digitalising the economy.
It also recommended a review of Singapore’s tax system so that it remains pro-growth and competitive, while also “broad-based, progressive and fair” to adjust to an ageing society but it did not go into details over how that should be shaped.
“Over the next decade, our collective efforts should enable us to grow by 2-3 percent per year on average, exceeding the performance of most advanced economies,” the Committee on the Future Economy (CFE) said in its report.
In 2016, Singapore’s economy grew 1.8 percent, its lowest pace of growth since 2009, when the global financial crisis sent international trade plummeting.
Singapore has a history of conducting broad reviews of its economic strategy going back to the 1960s and 1970s, and most recently in 2010, with the government following most proposals.
The CFE, formed of some government officials, prominent CEOs and specialists in various fields, consulted 9,000 stakeholders, including trade associations, public agencies, unions, companies and students, before putting forward its proposals.
Prime Minister Lee Hsien Loong said in a letter attached to the report that the government accepted the proposed strategies and would pursue all of them. Ministers will provide a response during the 2017 budget speech, due on Feb. 20.
Asked about possible specific changes to the tax system, Finance Minister Heng Swee Keat said at a press briefing that will be addressed through a separate process, including consultations.
Economists said the government might be looking at increasing the sales tax or the income tax for the high earners, while potentially lowering the flat 17 percent corporate tax.
“Every country in the world right now wants to cut their corporate tax rate, the U.S. included,” said Michael Wan, an economist for Credit Suisse.
“I think the government does view that with some concern. It could impact Singapore’s competitiveness, re-shape global supply chains ... The government would definitely want to save some fiscal space to respond to those kind of shocks if need be.”
The report identifies the rise of the Asian middle-class and increased urbanisation as opportunities for its finance, logistics and hub services, as well for a more advanced manufacturing sector.
In terms of external policies, the government was advised to resist protectionism and strengthen trade cooperation by reducing tariffs and other barriers.
The ASEAN Economic Community and the Beijing-favoured Regional Comprehensive Economic Partnership are key avenues to pursue such policies. Another option is partnering global financial institutions on regional development projects.
Domestically, the report identified cybersecurity skills as of strategic importance for the economy and national defence. It said these could be developed in the workforce during national service training, which is mandatory for male citizens upon leaving school.
A simplified regulatory framework for venture capital funds and encouraging more private equity firms to be based in Singapore, could help spur the growth of local companies, while the government should provide more targeted assistance, the report said.
There were no proposals to further tighten foreign manpower regulations, after such measures were introduced following the 2011 elections, when popular discontent with immigration came to the spotlight.
The committee urged the government to support the development of digital capabilities such as applied data analytics by establishing joint laboratories with industry players.
CFE also recommended that the government should keep investing in new international connections such as the planned Kuala Lumpur-Singapore high speed rail, Changi Airport’s Terminal 5 and the high-tech seaport in Tuas.
Editing by Sam Holmes