Consideration 3: The global competitive environment will require us to continue reforming our tax structures. We will need to shift from direct to indirect taxes, with personal income tax and corporate tax rates possibly lowered further.

As the Singapore Constitution is amended 'to revise the framework for drawing more investment income from our reserves', more financial resources will made available, rendering the long-term provision of public goods more sustainable. Indeed in the 2009 Budget, the Government has, for the first time, dipped into our past reserves for $4.9 billion. The measure has received approval in principle from the President, given the severity of the downturn.

Much as we accept that the economy will continue to be more, and not less, dependent on external demand, we must still work towards enlarging our domestic demand to about 30 per cent of total aggregate demand. We should do this not so much to augment the value-add GDP contributions but more for the potential job creation of small and medium enterprises, which already contribute to about 55 per cent of our total employment.

Indeed, over recent years, we have seen increasing activity in wholesale, retail and commerce services as Singapore's resident population approaches five million. Once the economy recovers and circumstances permit, we must continue to move towards our targeted resident population. This may be unpopular but vital for the long-term stability and growth of this highly open economy.

The writer is Associate Professor of Banking & Finance, Nanyang Business School, and Associate Dean, Graduate Studies Office, Nanyang Technological University.

This article was first published in The Straits Times on January 23, 2009.