Lee Hsien Loong, Singapore’s prime minister, speaks during an Economic Club of Washington discussion in Washington, D.C., U.S. (Photographer: Andrew Harrer/Bloomberg)

Singapore's Lee Sees `Large Expenditures' on Health, Housing

(Bloomberg) -- Singapore’s Prime Minister Lee Hsien Loong outlined plans to boost support on health care and public housing that he said will require “large expenditures,” putting pressure on the city state to find new sources of funding for its growing social spending.

Lee’s initiatives -- detailed in his annual National Day Rally speech on Sunday -- are aimed at providing financial reassurance to Singaporeans for years to come and to address locals’ concerns about rising living costs. The plans come at a time when governments around the world grapple with the challenge of losing voter support over rising income inequality.

“These are fundamental commitments by my government to you," he said. "They are ambitious endeavors and will require large expenditures. These schemes will stretch over 50 years and more, several generations and many general elections.”

While the economy is doing well, unemployment is relatively low and wages have increased, many Singaporeans still feel their incomes aren’t sufficient to cope with higher costs, Lee said. He cited several reasons for this, including young families spending on housing and pre-school education, medical costs for the elderly, lifestyle costs, such as travel and food, and inflation.

Higher Taxes

Lee said Singapore will require a “thriving economy and sound government finances” to fund the initiatives, which range from extending health care insurance to revamping public housing.

The plans may also require higher taxes, a broader tax base, or both, said Francis Tan, an economist at United Overseas Bank Ltd. in Singapore. The government will also have to welcome more immigration over the next decade to counter the low fertility rate, he said.

In order to avoid the strain on infrastructure and other services that an immigration boom to 2011 caused, the plans outlined by Lee suggest the government is trying to get ahead of a possible influx of foreign workers by putting necessary infrastructure in place first, Tan said.

“Probably there will be an increased shift in taxation toward the wealthy ones,” he said. “They will turn on the tap but not so quickly” on immigration, ahead of completion of those infrastructure projects over the next decade or so, said Tan.

Here are details of the plans outlined by Lee in his speech:

  • Health care: Community health assist scheme will be extended to all Singaporeans with chronic conditions regardless of income and more polyclinics will be build across Singapore to improve access
  • Elderly care: Financial support for long-term care will be extended by revamping the current ElderShield program into the CareShield Life in 2020, to cover all Singaporeans born in 1980 or later, and to increase payouts. The government will help pay for medical costs, among other initiatives, for the post-independence generation, most of whom are in their 60s
  • Housing: 99-year leases on public housing are needed to be fair to future generations, since there would be a shortage of housing if land was sold on freehold. Upgrading of public housing blocks will be extended to those built up to 1997. A new voluntary scheme will also be introduced in 20 years time to allow residents to vote on redeveloping housing estates before the 99-year lease expires
  • Water: The cost of producing clean water increased significantly over the years. Water will always be a precious and strategic resource, and a sensitive foreign policy matter for the nation. The government needs to build more desalination plants to produce clean water in Singapore
  • Electricity tariffs: Fixing electricity prices isn’t financially sustainable, not best way to help low-income families
  • Consumer goods: To help curb the price of infant milk formula, the government has set up a task team to, among other things, simplify import processes and tighten regulations for labeling. Average prices of formula milk have dropped
  • Food centers: Since many Singaporeans eat out, the government will be building more of the popular food centers. It will also nominate “hawker culture” to be included on the UNESCO’s cultural heritage list
  • Global tensions: There are no winners in a trade war, and small, open economies are vulnerable. Singapore will suffer “collateral damage.” In an uncertain global environment, ASEAN becomes more important for Singapore, especially Malaysia and Indonesia
  • Malaysia: The new government of Prime Minister Mahathir Mohamad wants to review some infrastructure projects with Singapore, including deferring the high-speed railway. Both sides have to carry out what has been agreed to, unless there’s an agreement to change the terms. Mahathir also wants to review the 1962 water agreement with Singapore, but Lee said that agreement is sacrosanct and must proceed strictly in accordance with its terms

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