FISCAL PRUDENCE

Let me now turn to fiscal matters. This year is the first when Government's budget has to be approved by the Elected President. Government has always run a conservative fiscal policy. We do not spend more than what we earn. We build up budget surpluses almost every year to add to reserves. We have imposed this conservative stance on ourselves even before we formalised it with the Elected Presidency.

This prudent approach has not constrained growth nor held back any productive investments. We have built Changi Airport and the new Brani container terminal, completed the MRT, reclaimed land and built public flats, without touching the reserves. The reserves that we have built up have kept the Singapore dollar strong and inflation low. Not made flabby by fat Government subsidies, Singaporeans retain the incentive to work hard for themselves. The result has been a highly motivated workforce, strong economic growth and a sound financial system.

If the economy performs as well as we expect, and we are careful with Government expenditures, we should run a budget surplus over the next few years. Out of next year's surplus, Government will put aside $1 billion to start off Edusave. Government will also allocate money for Medifund, when the proposal is firmed up. Thereafter, we will make annual contributions to Edusave and Medifund, depending on the size of the budget surpluses each year. If there is no budget surplus, no money will be put aside.

That Government has been able to set up Medifund and Edusave shows how right its policy of fiscal prudence has been. Had we spent all the revenue collected or, worse, spent more than what we had collected, Singaporeans would be struggling to repay debt, not thinking up reasons how the reserves should be put to best use.

We should not look at the size of our reserves alone and forget about our special circumstances. First, we have no natural or physical assets; every cent of our reserves is accumulated through the sweat and toil of Singaporeans. Our reserves appear large only because other countries do not include their physical endowments such as valuable minerals, oil or gas, or even abundant land and labour, or their foreign assets held by the private sector, all of which are much larger than Singapore's. Second, we import almost everything we need. Without reserves, we would be unable to satisfy even our most basic needs in an emergency or war.

Third, just like a person in prime working life, Singapore now earns more than it spends. And, like a prudent person, Singapore saves to prepare for a secure future, and invests in assets which can be passed down to future generations. If we do not plan for the future, we will turn our children into debtors even before they are born. This has happened to the US, the richest nation on earth. It has been estimated that every American man, woman and child owes the rest of the world US$1,700, much more than the average Singaporean household earns in a month. This is a substantial burden, even for a country blessed with immense resources. In resource poor Singapore, it would be highly irresponsible for the present generation of Singaporeans to commit our children similarly.