How did Singapore build up a huge foreign reserve of US$162,173.9b in less than 5 decades of independence? The answer is that the government has always taken a balance approach of financing the present and preparing for the future.

However, this enormous figure of US$162,173.9b means nothing to the average Singaporeans living in HDB apartments who are worried about job security and meeting day to day expenses.

The average Singaporeans just don't feel rich and secure in the midst of the current recession.

This paper attempts to strike a balance between the present financial needs of the Singaporeans to cope with recession and government's duty to prepare for future.


2.1 Expansionary Policy

Economics theory states that government should adopt an expansionary policy in the event of recession. For the past few years, methods such as tax rebates, tax reduction, tax incentives, cash hand-out, CPF top up & various rebates become more or less permanent feature of the Budget, and Singaporeans expect "goodies" in every Budget.

In this case, government should continue to hand out "goodies" for the foreseeable future. Failure to do so might shake confidence of citizens and investors alike.

Cash hand-out of a few hundred bucks hardly comforts a manager who loses the $100,000 a year job. Imagine that the manager is in early 50s with 3 children studying in Australia, an aged parent in nursing home, outstanding mortgage on car and property.

Job of this level is hard to come by and income from working spouse is not enough to keep up with mortgages and daily expenses. While government assumes that people at this income bracket is able to take care of themselves financially, the reality is that most people do not have enough liquidity for unemployment period of a year or more.

It is definitely unwise to downgrade to a smaller property or liquid his investment during recession. For this group, government can throw a life-line in the form of interest-free loan or low interest loan of up to 50% his monthly salary for 2 years.

At the end of 2 years period, even if still unemployed, the property market or stock market is likely to pick up for him to make a profit on his investments and to repay the loan.

As the loan involved will likely be a huge sum during business downturn, suggested that government negotiates with local banks to provide the funds. Government will subsidy the interest payment out of the current year budget. It is important for the government to serve as guarantor.

To prevent misuse, certain conditions must be attached, for example, forced downgrade of property in the event of non-repayment after a period of 3 years from the time loan is taken.

The dream of government is to achieve a stable, consistent GDP growth and consistently low inflation rate. In reality, it doesn't work this way. For example, in the past 10 years, the GDP reaches as high as 10.1% in 2000 and as low as -2.4% in 2001. In the long run, government should set up a mechanism to achieve consistent GDP growth. Setting the mechanism involves:

Determine the target GDP growth for the long run (eg 7% per year) and break into quarterly growth.

Mechanism to kick in whenever GDP forecast for next quarter is 1% below or above target. Methods to control expansionary economy includes collect advance income tax, increase interest rates, cut down government contracts and thus reduce headcount in civil service.

In order for the mechanism to work, there should be a specific sum set aside to deal with unexpected sharp downturn. In this case, mechanism will react before companies resort to retrenchment or hundred of workers flock to MOM to complain non-payment of salary. As world economic environment becomes more competitive, government needs to react faster to pump money into or take money out of economy.

2.2 Employment and Entrepreneurship

In a recession, people seek to enter civil service and enjoy the security of employment. While increased recruitment in the civil service can reduce unemployment rate and sends a signal to stabilise fear of job loss, it may not be in the best interests of the country.

It is time government weans Singaporeans out of the mindset of "a stable and secure job with good income, good benefits and good bonus".

Instead of offering employment, civil service can offer contract for service, and encourage interested candidate to set up a company and bid for the contract. For example, instead of offering Management Support Officer position, a contract for labour service is offered.

The work done is the same, the difference being the mindset of the person doing the job. Employee thinks in term of taking annual leaves, promotion, bonus etc. A contractor thinks in term of business expansion, profits and costs etc.

By doing this, government is encouraging entrepreneurship and some businesses start out this way may expand to be a multi-billion dollars company.

Over the years, different schemes and funds had been put aside to encourage entrepreneurship. However, the different schemes and funds are administered by different governmental bodies.

A dedicated agency, preferably under ACRA, should be set up to assist entrepreneurs. This agency serves as a co-ordinator of various funding/schemes, and as advisor to entrepreneurs. For example, Ah Beng wants to offer labour service as IT support staff. He needs advice on:

Type of business to register for (eg as sole-proprietor, private limited or partnership)

Legal, taxation and accounting service and he wants it free or at low cost

Funding and a place for business

This agency serves as a one-stop centre for Ah Beng, it will review his business plan, makes recommendations, help to secure funding or subsidy, provide subsidy for legal, taxation and corporate accountant service in the first year of operation, assist in the applications for various permits/licenses.

As this agency operates under ACRA and has access to various other governmental bodies, manpower must be drawn from all different parties. In a sense, it's a form of internal transfer, the cost of setting up the agency is reduced. Additional budget should be given to ACRA for funding the new agency.

2.3 Investment Opportunities

Majority of Singaporeans are risk averse, prefer to keep their money in fixed deposit. While the inflation rate in Singapore is very low, at most 2.1% (2007), however, the interest on the fixed deposit is generally lower than inflation rate. In the long run, the savings are eroded by inflation.

The few brave folks who invest in unit trusts or structured products suffered paper loss, if not actual loss. Simply stated, we do not have the sophistication or gut to handle our investment.

On the other hand, the webpage of Temasek Holdings states "Our total shareholder return since inception 34 years ago is more than 18% compounded annually".

In this case, why not Temasek Holdings manage a fund for Singaporeans to invest in? Since average Singaporeans are not getting better returns than fixed deposit, and most mutual funds are not performing, it is much better to park the money with Temasek Holdings.

Through the sub-prime crisis, many people get to know about mortgage backed securities. HDB can also provide investment opportunity for Singaporeans by using this investment tool. The HDB concessionary interest rate is 2.6%, the debt can pass to investors at a return of 2%. Of course for the scheme to work, capital protection must be provided.

The cost to set up investment opportunities is passed on the investors who take up the scheme. Thus, government needs only to come up with the upfront money to set up and recover the money from investors later on.

2.4 Financial Education

Singaporeans are risk averse partly due to lack of financial education. As Robert Kiyosaki has so rightly pointed out in his Rich Dad's series of books, educational system does not provide sufficient financial education.

It is much easier to teach children about savings, investment through games (eg Monopoly, Rich Dad's Cash flow game). Benefits to society include lesser bankruptcy due to uncontrollable credit cards and less reliance on government to provide for retirement.

Recession is like a double edge sword. It provides opportunities for people to buy low so that they can sell high in economic boom. It also forces people to sell low the assets they bought in a boom. Financial education for adults involve more than games, it encompass:

a. formal and structured learning, such as diploma, degree and master degree courses

b. understanding of business cycle. Whenever there's a boom, recession is not far ahead.

c. controlling emotions in boom time. People tend to feel very confidence of themselves in a boom, and this leads to uncontrollable spending. They feel depressed in a recession, and curb all investment plans even when they are still working.

Financial education will teach them to hold cash position, and not to buy that car, that house in a boom. This part of financial education should be incorporated within the MoneySense program.

As the government has already make provisions for education of children and adults, no additional funding is needed for the providing financial education.

The current educational system in Singapore tends to gear towards technical expertise, ie science and maths in formal education, and skills training for adults, it is time for government to direct Singaporeans to financial planning. After all, people need to learn how to earn, save and make their money grow.

2.5 Foreign Workforce

Singapore relies on foreign workforce to achieve growth. While the highly educated foreigners holding high income job are known as "foreign talent" and are generally accepted by Singaporeans, the vast majority of the foreign workforce are just being tolerated.

Many of these are holding low paying jobs as domestic maids, construction workers, marine workers, cleaners etc. Who knows, some of them may revisit Singapore 30 years down the road in the capacity of President, Prime Minister, First Lady……

And it will be very embarrassing to hear the First Lady recounts her days as maid, working from 6 am to 11 pm, and not given enough food to eat. Or to hear the Prime Minister recounts his days as construction worker, staying in a crowded dormitory with 30 others in the room, and camping outside MOM to complain about non-payment of salary.

It is time for government to:

induct the foreign workers about life in Singapore, and the acceptable social conduct;

change Singaporeans perception of these workers;

provide some form of legal protection to the domestic maid

2.5.1 Induction of foreign workers

Many foreign workers carry along acceptable social conducts from their home countries which are totally unacceptable here. For example, bribe the police officer, spitting, littering, talking loudly onboard public transportation etc. In view of the fact that many foreign workers are on 2 years contract basis, it is important that government inducts them as soon as they arrive in Singapore. Induction can be in the form of a 15 minutes video or a pictorial booklet given to all of them showing the "good" and "bad" conduct. As long as they are aware of the "proper" behaviour, they are less likely to cause Singaporeans to call police or complain to MP.

2.5.2 Change Singaporeans perception of foreign workers

Family bonding and balance worklife is very important to Singaporeans. However, many foreign workers sacrifice both family bonding opportunities and balanced worklife in order to come here to work. It is time for us to respect the foreign workers and see them as hardworking, self-sacrificing individuals, who come here to work hard in order that their families can benefit. The media can help to reduce negative reports and "individualised" the foreign workers. After all, we all can learn from these workers' self-sacrificing spirits and can-do spirits.

2.5.3 Provide legal protection to domestic maids

Domestic maids are the least protected group of workers in the country. While the Employment of Foreign Manpower Act provides some protection to domestic maids, many clauses in the Act are vague and should be more specific, for example "First Schedule Clause 10 The Employer shall give the worker reasonable notice of her repatriation" The questions are: How long are "reasonable"? The Employment Act is very specific in this area and the clause should be applicable to all domestic maids and their employers.

While employers who abuse maids are charged in court and subjected to a fine or jail term, what do the abused maids get? Employers found guilty of abusing domestic workers in any form should be made to compensate them for up to 5 years salary.

In addition, inspectors from Minstry of Manpower (MOM) should make regular house visits to ensure compliance. Since many employers do not allow the maid to go out of the house, many maids suffer abuse in silence. The government should set aside additional budget for hiring more inspectors to make house visits at least quarterly. The foreign worker levy should be enough to pay for the salary of MOM staff.

2.6 Create aspiration for political appointments

When children are asked to write about "what do I want to be when I grow up", most will write about being a policeman, fireman, engineer, teacher etc, few want to be President, Ministers, or Member of Parliament (MP). However for the sake of country, creating aspiration for political appointments is the beginning of the most important succession plan in Singapore.

Through the education system, government can reach out to the young minds, impress upon them the need for a clean and competent government.

And to show them what is the job of a President, Ministers and MP. Emphasis must be on the character of a potential candidate. The country needs a morally clean, self-sacrificing individual who loves his/her motherland to serve in political office.

The best way to prepare for the future is to ensure there're always competent and dedicated talents around to lead the country. Part of budget for education must be set aside for this purpose.


Financing the present with a huge budget is necessary to boost confidence and to lift the country out of a recession. However, the money spent on education and investment will bear fruit only in the future. Let the future generation enjoys the abundance and may Singapore prosper forever.