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Singapore advisory panel eyes new drivers of economic growth

Singapore advisory panel eyes new drivers of economic growth

SINGAPORE: A key Singapore advisory panel last week 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.