Country Report Singapore March 2011

The political scene: The PAP announces a generous pre-election budget

A parliamentary election is widely expected to be held later this year, and Singapore's ruling People's Action Party (PAP) had an opportunity to woo voters on February 18th, when it announced the budget for fiscal year 2011/12 (April-March). The finance minister, Tharman Shanmugaratnam, did not disappoint the public. The budget contained a raft of policies aimed at addressing voters' complaints, from a S$3.2bn (US$2.5bn) "grow and share" package of cash grants and tax rebates to protect households from the rapidly rising cost of living, to new measures aimed at restricting the number of foreign workers in the city state. It would be wrong to describe the budget as populist-many of the measures make sound economic sense at this time of high inflation and full employment-but the financial support measures announced by the finance minister will certainly do nothing to harm the PAP's chances when Singapore goes to the polls.

An election does not have to be held until February 2012, but the prime minister, Lee Hsien Loong, is widely thought to be considering dissolving parliament by mid-2011. There have been a number of signs in recent months that an election is imminent. One was Mr Lee's decision in October 2010 to convene the Electoral Boundaries Review Committee, which in the past has published its recommendations for changes to constituency boundaries around two months before polling day. This was followed by the Elections Department's decision in late January this year to call on all voters to confirm their details on the city state's electoral roll.

The overall result of the next election is not really in any doubt: the PAP will secure another unassailable majority in parliament (the legislature), as it has at every election since 1955, when the city state was still ruled as a colony by Great Britain. Nonetheless, Mr Shanmugaratnam's budget will provide PAP candidates with new ammunition to counter accusations by opposition parties that the government has done little to support Singaporeans amid surging inflation.

The latest increases in the foreign workers' levy (which is paid by employers), following similar rises in the 2010/11 budget, will also prove politically expedient for the PAP, at a time when many voters are concerned about the growing number of migrants who are arriving in the city state and becoming permanent residents (a status that gives them rights to state-subsidised homes and other benefits). Mr Shanmugaratnam said that the monthly levy for foreign workers employed in the manufacturing sector would rise by an additional S$60 (around US$45) by July 2013, to reach a maximum of S$550 per month. Meanwhile, the monthly levies for foreign workers in the services and construction sectors are to rise by an additional S$180 (to a maximum of S$600) and S$200 (to a maximum of S$600) respectively.

© 2011 The Economist lntelligence Unit Ltd. All rights reserved
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