Millennials are quickly making up a significant proportion of the adult population in Singapore. While we (I'd like to think I'm a millennial as well, thank you very much) tend to be labelled as spoilt and out-of-touch with reality, we are in the driver's seat when it comes to tackling future issues.
Finance Minister Heng Swee Keat probably knows this and that is why his blockbuster Budget 2020 has one eye on tackling near-term problems and another eye on tackling long-term concerns such as climate change and structural economic changes.
I sat down with SMU undergraduate and "strawberry generation" compatriot Kenny Chia to discuss the Budget 2020.
I've known Kenny for a while now after he interned with our research team at Maybank Kim Eng.
Indeed, his CV prior to joining us was impressive, having already picked up writing research articles for his blog, then called The Little Snowball. It has since lost the "Little", possibly because of the investment returns his research has helped create.
Our conversation on Budget 2020 seemed to underscore his general positive feelings on the financial stewardship of the sitting government, the latter being prudent in allocating and redistributing resources instead of just doling out handouts.
WHAT STANDS OUT THE MOST FOR YOU IN BUDGET 2020?
Kenny (K): As a millennial, the $8.3 billion package to support Singapore's economic transformation and growth stood out to me the most. Specifically, the Startup SG Equity and SMEs Go Digital Scheme.
The former consists of an increased investment of $300 million to catalyse private investment in Singapore-based deep-tech start-ups in key emerging sectors such as agri-food technology and advanced manufacturing.
The latter seeks to help SMEs digitalise and expand their capabilities to 23 Industry Transformation Map sectors.
WHY DOES IT STAND OUT AND HOW DO YOU THINK THOSE MEASURES CAN HELP YOU IN THE COMING YEAR?
K: It stands out because we are on the cusp of a technological revolution. In this new decade, we will most definitely witness even further disruptive innovation.
Thanks to the advent of the internet and globalisation, geographical barriers have been rendered irrelevant as local companies now have to compete with rivals globally.
In this kind of winner-takes-most-if-not-all environment, Singaporean businesses cannot afford to rest on their laurels and need to innovate (i.e. new way to do old things [Uber], or find a new way to do new things [AirBnB]) and digitalise their operations.
As we progress into this new decade, many traditional business models (e.g. department stores, cinemas, and stockbroking) from the old economy will no longer work and those who adapt fast enough will take their place.
The transition will certainly be painful but it is necessary for growth and for Singaporean businesses to remain competitive vis-a-vis global players. There is no other alternative.
There is a silver lining here though. This disruptive innovation happening within a VUCA (Volatile, Uncertain, Complex, and Ambiguous) environment provides massive opportunities for start-ups that can identify key problems and come up with economically feasible solutions.
Being small enables them to be nimble and execute quickly. With the government recognising this and willing to fund these ventures, I think there has never been a better time to be an entrepreneur in Singapore.
BASED ON THE OVERALL STANCE OF BUDGET 2020, DO YOU FEEL THAT AS MILLENNIALS, WE WILL BE BETTER OFF, FINANCIALLY SPEAKING, BY THE START OF THE NEXT FINANCIAL YEAR (I.E. MARCH 2021)?
K: I believe we will be better off financially by the start of next year. There are three reasons why:
- The postponement of the GST hike means that we pay fewer taxes on our consumption of goods and services. This translates to about $300 in annual "savings", assuming one spends about $1,200 a month.
- Based on the $1.6 billion Care and Support package, we will be eligible to get a one-off cash payout of up to $300 based on our individual assessable income.
- And since I am 26 years old, I will also get a $500 SkillsFuture credit top-up, which I can use to learn new skills like python programming or web design.
The first two points will help defray my household expenses while the last point could potentially help increase my income.
WHICH FEATURE OF THE BUDGET DID YOU PARTICULARLY LIKE AND WHY?
K: The area that got me most excited was the government's battle against climate change and more specifically, the phasing out of ICE vehicles by 2040.
The government has finally taken active steps to help Singapore transition to renewable energy transportation by providing rebates, lower taxes, and building the necessary infrastructure (i.e. the public charging points) to support EVs.
This will further propel Singapore towards a cleaner and greener, and sustainable future.
Besides the significant reduction in pollution from the ICE (internal combustion engine) vehicle emissions, there will also be a considerable reduction in noise pollution which contributes to the overall well-being of densely packed Singapore.
WHICH AREA DO YOU FEEL THE GOVERNMENT SHOULD LOOK DEEPER INTO AND WHY?
K: Personally, as a retail investor, I hope that the government can look deeper into further developing the CPF Investment Scheme (CPFIS).
Currently, I feel that the mandate on the CPFIS available investments is too restrictive (for example, the arbitrary 35 per cent stock limit, and the limited list of approved stocks and ETFs).
If financial education/mismanagement is a concern, perhaps it would be synergistic to involve/engage SGX to provide the relevant education. This could make the Singapore stock market more vibrant as well.
Millennials have most to gain from this as we have a long investment runway for compounding and higher risk tolerance. Leaving the CPF-OA funds idle earning 2.5 per cent per annum barely beats inflation over the long run.