Budgets that built a nation

Budgets that built a nation
The year 1965 saw the first Budget of a newly independent Singapore. It was notable for its political tone. Then Finance Minister Lim Kim San called on Malaysian leaders to talk with their Singaporean counterparts to discuss how to work together.

Barely four months after Singapore was abruptly turfed out of the Malaysia federation, the new nation's first Finance Minister rose in Parliament on Dec 13, 1965, to deliver its inaugural Budget.

On the face of it, it was an unenviable task. Newly independent Singapore faced stiff economic challenges: despite having no natural resources and no more hinterland, it had to create jobs and better housing for its citizens, which required policies enabling trade and industrialisation.

Yet, in a speech that lasted for an hour and 20 minutes, Mr Lim Kim San revealed that Singapore was well-placed financially to face its uncertain future.

Its official foreign reserves were 15 times its external debt - "a position which is strong by any international standard", he said.

Although it had been only six years since the island obtained full self-government in 1959, this was due to "prudent budgeting and careful allocation of resources" in that time.

External debt stood at 59 million Malaya and British Borneo dollars - the currency Singapore shared with Malaya, Brunei, North Borneo Sarawak and Riau at that time - while foreign reserves were more than 15 times that, at M$914.7 million.

Fifty years later, as Singapore prepares for its Golden Jubilee Budget on Feb 23, this financial fortitude has not wavered.

The country has gone from Third World nation to First World metropolis - with per capita gross domestic product (GDP) shooting up from just $1,734 in 1966 to more than $69,000 in 2013 - and has done so without running large deficits or incurring external debts.

Its coffers bulge with decades of budget surpluses - the result of 50 years of judicious Budgets, as well as revenue from land sales and some income from investing the national reserves.

The latter two are not included in the yearly budget position presented to Parliament.

Yet ask any Singaporean what they expect in the upcoming Budget, and few will mention these economic intricacies.

Rather, many view it as a lottery of sorts where they might get goodies such as one-off cash payouts, depending on the "lucky" target group each year.

In the 1980s, taxpayers and companies cheered a series of tax cuts, while in the last decade, the Budget has been generous to low- wage workers and the needy in particular.

"The focus of the man in the street tends to be on what the Budget presents immediately, whether goodies or specific policy announcements," says former Nominated MP Laurence Lien, chairman of the Lien Foundation and previously director of governance and investment at the Finance Ministry.

Role of the Budget

But that is to ignore the big picture, as Mr Lien notes.

Over the last 50 years, the initiatives unveiled during the annual Budgets have driven Singapore's economic development and formed the cornerstone for its success in many other areas.

In the early years after Independence, most spending was earmarked for bread-and-butter issues essential to economic survival, such as job creation, and developing the infrastructure for a self-sufficient nation.

"Unemployment has always been the central economic problem of Singapore," said then Finance Minister Goh Keng Swee in his 1967 Budget speech.

He pushed for industrialisation to step up a gear from the easygoing "shoes and ships and sealing wax" phase to the deliberate selection of high-growth, labour-intensive industries such as engineering and metal fabrication.

Funds were also set aside in those early Budgets to seed the institutions Singaporeans take for granted today.

In 1972, Mr Hon Sui Sen allocated $10 million to develop Sentosa as a tourist attraction. In 1979, Mr Goh Chok Tong, standing in to deliver the Budget for Mr Hon, gave $393 million to develop Changi Airport and roads.

With manufacturing and tourism powering growth in the 1970s, the emphasis in the 1980s shifted towards upgrading the economy over the longer term.

More was spent to grow research and development, expand the services sector and raise productivity - strategies that remain relevant today.

The Budget purse was also used to keep the economy vibrant amid slowing workforce growth over the years. Baby-making incentives swelled, as finance ministers tried to get parents to have more children and to have them earlier.

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