Tiểu luận tài chính công THE CONTRIBUTION OF PUBLIC FINANCE POLICY TO SINGAPORE’S ECONOMIC DEVELOPMENT

THE CONTRIBUTION OF PUBLIC FINANCE POLICY TO SINGAPORE’S ECONOMIC DEVELOPMENT Table of Contents I Overview of Singapore economy Singapore is one of the world's fastest growing economies Its GDP per capita has risen to an incredible US $60,000, making it the sixth highest in the world based on Central Intelligence Agency figures For a country that lacks territory and natural resources, Singapore's economic ascension is nothing short of remarkable Singapore has a highly developed and successful free-market economy It is not only low in taxation but also enjoys a significantly open and corruption-free environment Singapore has based its economic development on a proactive strategy to attract FDI using its trade openness Since 2003, when the World Bank Group began publishing its ranking system, Singapore has been ranked first for ease of doing business Favorable lending to foreign investors, a simple regulatory system, tax incentives, a high-quality industrial real estate park, political stability and the absence of corruption make Singapore an attractive destination for investment According to the UNCTAD 2016 World Investment Report, Singapore is the 7th largest recipient of FDI in the world and the 3rd largest among the East and Southeast Asian countries with US50 billion The main investors are the U.S., the Netherlands, the United Kingdom and Japan Singapore has a unique position in the global economy and a pivotal role as a business epicenter in the heart of Asia The city-state has been consistently acknowledged as a global business hub – one that features developed infrastructure, political stability, open business policies, a skilled workforce, the use of English as the main working language and respect for intellectual property rights Many multinational companies have chosen to set up their bases in Singapore, next to 154,000 small and medium enterprises Business owners all over the world regard Singapore as an ideal location to grow their businesses, with many of them using the country as a springboard to tap into other emerging markets in Asia II Prominent features of Singaporean public finance policy II.1 Singapore Tax Revenue Table Overall Budget Balance Source: Singapore Budget Figure Breakdown of Government Operating Revenue in FY2016 Source: Singapore Budget2 http://www.singaporebudget.gov.sg/budget_2017/BudgetSpeech/RevenueExpenditure FY2016 Operating Revenue was S$68.7 billion The chart was mainly occupied by several sectors which are Corporate Income Tax, Personal Income Tax, Good and Services Tax and collected revenue relevant to possession of vehicle The Total Corporate Income Tax in 2016 was S$13.45 billion, made up 19.6% of total revenue The Personal Income Tax, Good and Services Tax and Revenue from owning Vehicle were S$10.48 billion (15.3%), S$10.85 billion (15.8%) and S$9.17 billion (13.3%) respectively II.1.1 Corporate and Personal Income Tax With a low headline corporate tax rate of 17%, generous tax exemptions for small-tomidsize companies, and industry-specific tax incentives, Singapore is well positioned to maintain its economic competitiveness in today’s global environment The Government of Singapore provides a comprehensive package of tax concessions and incentives to businesses whose business activities reflect the direction in which the state plans to steer economic development Table Tax Rate in YA Source: Inland Revenue Authority of Singapore3 http://www.singaporebudget.gov.sg/data/budget_2017/download/FY2017_Analysis_of_Revenue_and_Expendit ure.pdf https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/Income-Tax-Rates/ Singapore is considered a tax haven because of its low personal and corporate tax rates and other incentives for foreign investors It levies 22% on personal incomes in the highest tax range, defined as incomes above 320,000 Singapore dollars, and does not tax capital gains The city-state attracts international investment because of its strategic location as a gateway for companies planning to expand into emerging Asian economies The Inland Revenue Authority of Singapore (IRAS), a legal board of the Ministry of Finance, is responsible for collecting taxes Source: Inland Revenue Authority of Singapore4 Corporate Tax Rates https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/Income-Tax-Rates/ The corporate income tax rate in Singapore is 17% However, the effective corporate tax rate could be lowered by other IRAS incentives The Productivity and Innovation Credit (PIC) Scheme, for example, allows companies a complete corporate tax exemption if they earn 28 million Singapore dollars per year Start-up companies in Singapore can also take advantage of the zero tax exemption on their first $100,000 of income for the first three consecutive years of business To qualify for the startup tax exemption, companies must be incorporated in Singapore and have a maximum of 20 shareholders One of the startup shareholders must be an individual shareholder and hold a minimum of 10% of shares After the startup period, companies with incomes up to $300,000 are also eligible for a partial tax exemption that translates to an effective tax rate of 8.5% Source: Inland Revenue Authority of Singapore5 Industry-Specific Tax Exemptions Singapore also offers industry-specific tax exemptions for certain businesses Industries eligible for tax exemptions include foreign banks, qualifying offshore funds and global trading companies Additionally, banks are eligible for a withholding tax exemption on payments to non-resident individuals, which applies to payments made between April 1, 2011 and March 31, 2021, based on agreements that take effect between those dates Qualifying offshore funds are also exempt from tax on specified income Singapore defines specified income as dividends, gains, profits and interest from traditional investments including deposits, bonds, shares, stocks and securities Global trading companies are eligible for especial tax rates of to 10% for five to 10 years if they qualify for Singapore's Global Trader Scheme Singapore typically grants Global Trader status to companies with established track records of performance in international trade Low personal and corporate tax rates and other incentives for investors, short time to process administrative work along with other factors, Singapore attracts a lot of foreign capital pouring in the country and many big corporations choose Singapore to locate establish their regional headquarters in the Asia Pacific region such as Facebook, Unilever, Apple, II.1.2 Tax revenue relevant to possession of vehicle S$9.12 billion came from Vehicle Tax and Vehicle Quota Premium or COE Premium in FY2016 https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/Income-Tax-Rates/ There are main factors that would determine the price of a brand new car in Singapore They are the Open Market Value (OMV), the Additional Registration Fee (ARF), Excise Duty & GST, Certificate of Entitlement (COE), and local dealers’ margin (1) Open Market Value (OMV) Think of a car’s OMV as a baseline guide to the original price of the car If not for taxes, COE, ARF or other form of taxes, we could have bought the car at the OMV price The OMV prices we see are what some people in other countries are paying for the exact same car For example, a brand new Audi A4 has an OMV of about $32,000 In some European countries such as Germany, you would be able to get the car at about that price In Singapore, it currently retails at $161,000 Why is that so? Here are the other factors why (2) Additional Registration Fee (ARF) In Singapore, all cars would be subjected to the ARF The ARF is a form of tax imposed on all cars during registration The ARF is calculated based on the OMV of the vehicle Table The calculation of ARF Source: Dollars and Sense6 http://dollarsandsense.sg/no-nonsense-explanation-on-why-cars-in-singapore-are-so-expensive/ (3) Excise Duty and GST Excise Duty is a form of tax imposed on specific goods within a country For example, in Singapore, we have additional taxes on goods such as alcohol, cigarettes and petrol The Excise Duty on cars in Singapore is 20% of OMV Once the Excise Duty of 20% is added to the OMV, a further 7% GST will be tax on both the amount for the OMV and Excise Duty For example, a Mercedes E200 that has an OMV of $49,113 will incur an excise duty of $9,822 (20% of $49,113) and a GST of $4,125 (7% of $49,113 + $9,822), (4) Certificate of Entitlement (COE) Even non-car owners would know about the COE The COE is “market-driven” certificate that allows a car to be driven on Singapore road for 10 years Anyone who wishes to register a new vehicle in Singapore must first obtain a Certificate of Entitlement (COE) COE prices can increase steeply during period of high car demand, which in turn cause prices of cars to increase This method is used to limit new vehicles registered COE prices are currently between $40,000 and $50,000 Table (5) Dealers’ Margin Last but not least, the car dealers that are selling you the car would also need to cover their own overheads and earn a profit for themselves We call this dealers’ margin Dealers’ margin could range from as little as about 15% for affordable brands to as high as 50% or more for luxury car brands To calculate what the dealers’ margin is, simply sum up the OMV, ARF, Excise Duty, GST & COE SGCarmart refers to this as the “basic cost.” We then compare the basic cost against the actual sales price, with the difference being the dealers’ margin For example, a Mazda currently has a basic cost of $92,520 with a sales price of $122,888 Hence, the dealer’s margin for the car is about 33% (6) Carbon Emissions-Based Vehicle Scheme (CEVS) Carbon Emissions-Based Vehicle Scheme was introduced in 2013 to encourage people to adopt environmental-friendly cars with low carbon emissions Depending on your car’s Singapore government also increased the starting salary for senior officials (holding such positions as Permanent Secretary, Ministerial Advisors, Ministers, Prime Minister and the President) In addition to the fixed amount of money each month, their salary includes the portion paid according to economic efficiency and annual job performance This will stimulate them to strive in their career Although in Singapore education levels still play an important factor in determining starting salaries, Singaporean government has applied market standards to determine salaries for civil servants In order to attract talent from the private sector and to deter the corruption that afflicts other Asian countries, the government often relies on private sector revenue to allocate salaries for civil servants The salary level of civil workers hence has been increased significantly in accordance with the low hires and high separation rates Table The revised Civil Service salaries for the various MX pay grades in 2015 (Last two revisions were: +5% Aug 2014, +5% Feb 2012) N o Job title P ay grad e Salary scale M X9 (Sup ersca le) S$11,110 – S$15,280 / S$15,280 – S$17,370 M X10 S$7,000 – S$9,980 / S$9,980 – S$11,470 Mana ger, Assistant Director M X11 S$4,740 – S$7,115 / S$7,115 – S$8,305 Assist ant Manager, Manager M X12 S$2,945 – S$5,925 M X13 up to S$3,000 for fresh Deput y Director, Director Assist ant Director, Deputy Director Mana gement Executiv e graduates Source: Salary.sg A clean wage system Singapore practices a transparent system where salaries are fully accounted for through a clean wage set at a competitive level with no hidden perks and privileges This is in contrast to systems where salaries appear to be low but are in fact coupled with allowances, benefits and perks Such systems have come under criticism in several countries because of their nontransparent nature and difficulties in control and accountability Under Singapore’s system, the total Ministerial remuneration is made up of salaries comprising fixed and variable pay components, and medical and retirement benefits Ministers not receive perks such as housing and cars for personal use Ministers not enjoy tax exemptions and have to pay tax like all who work in Singapore (e.g income tax on all salary components earned) Policy of pay cut for Singaporean Ministers Between 2011 and 2012, Singapore's salary committee cut millions of dollars of its leaders’ salaries Therein: • Entry Level Ministers – 37% pay cut, falling to $1.1 million a year • President – 51% pay cut, falling to $1.54 million a year Speaker of Parliament – 53%, falling to $550,000 a year, and probably predicting a decline in the fancy wig industry • The cuts would be retroactive to the start of the current government's five-year term on May 21, 2011 The salary of Congress’s members and other politicians were cut by roughly 37% This has been the first time that Singaporean leaders This big move was response of such problems as 5.7% inflation rate, rising transport costs and transport breakdowns, growing resentment at the influx of foreign workers, high property prices, growing income inequality, infrastructure issues and the recognition of The People’s Action Party (PAP) that they overpaid their ministers Even though, Singapore’s Ministers remain the highest paid over the world Despite the salary cuts, all cabinet members will be entitled to a "National Bonus" of up to three months' pay if targets are met on economic growth, employment and improvement in Singaporeans' incomes Bonuses were already part of the previous pay scheme, which permitted a maximum of eight months' extra pay if economic growth exceeded 10 percent but none if growth dipped below 2.0 percent In particular, Singapore attaches high importance to assessing ministerial and public sector pay for adjustment to ensure competition with the private sector For instance, wages of ministers and senior officials were fixed equal two thirds of the income of equivalent positions in the private sector After the latest adjustment, cabinet salaries had been pegged to 2/3 of the income of the top four earners in six fields: banking, accountancy, engineering, laws, manufacturing and multinational corporations As can be seen, Singapore's civil servant treatment regime ranks top of the world, far greater than the United States (for example, Singapore’s total Ministerial salaries cost $53 million a year, most expensive in the world, based on States Times Review’s calculations in April 2017) So it can be concluded that adopting high-paying for civil servants and ensuring the salary competitiveness with private sectors have been the strategic option of Singaporean leaders over decades, therefore Singapore has been able to attract and keep the most intellectually highly able working for the government Figure Detailed data on ministerial salaries in Singapore Source: States Time Review *MR1, MR2, MR3, MR4: ministerial grade from the highest to the lowest Accordingly, the annual pay of the Prime Minister was set at a fixed ratio to the MR4 salary Flexibility in the salary structure of civil servants Singapore applied a flexible wage system from July 1988 after the 1985 economic downturn Accordingly, the wage structure of civil servants was made up of components that could be adjusted based on the performance of the economy Forms of the new flexible salary system include: - Basic salary; - Another portion of monthly income (Monthly Variable Component MVC); - 13th month bonus (Non-Pensionable Annual Allowance NPAA); - Mid-year or year-end (other annual income or Annual Variable Component AVC) With this salary system, all first salary adjustments must be made through bonuses in addition to the basic salary If there is a downward adjustment, it must not exceed the midyear or year-end bonus, other monthly income (MVC) Civil servants can also look forward to a “13th month” bonus, plus a 0.5 month at mid-year, and another variable bonus of 0.5-1 month, depending on Singapore’s economic performance for that year That works out to be around 2-3 months bonus for the whole year It is possible for high performers holding key positions in the Civil Service to receive more than the publicly announced bonus II.2.2 Impact of public sector pay to Singapore’s development The high public sector pay is the key to: Increase productivity as the salary is based on work performance, deemed potential and national economic growth as mentioned above Decrease corruption in Singapore as civil servants not dare, not want and find it unnecessary to corrupt First, Singaporean public employees not dare to corrupt for fear of two causes: severe punishment and confiscation of compulsory savings Accordingly, the Singaporean government stipulates that all civil servants must deduct part of their salaries for savings, starting with 5% of their salaries, and then increase gradually The higher their position is, the larger they have to extract This amount is only payable upon retirement In the course of work, if an individual commits a crime of corruption, even if the crime is at a low level, the offender will still be charged for the savings Second, corruption in Singapore is extremely difficult owing to strict regulations on property management for civil servants Annually, public servants and officials must declare the property of their own as well as their spouses, explain the lawful origins of the increased property As a consequence, if they are unable to explain the origins of increased assets, it will be regarded as an act of corruption Third, Singaporean civil servants are paid highly over their expectations and the general level of society, so they not need to corrupt or bribe as their material life is guaranteed In other words, civil servants in Singapore are entitled to economic incentives, which means they can support their families without corruption Accordingly, public servants sentenced to corruption in the courts will definitely lose their jobs, and if they are retired officials, they will lose their pensions and other benefits They will not receive any public sector appointment in the future Table Corruption Perceptions Index 2016 Source: Straits Times In short, public sector pay in Singapore has played a viral role for being an essential tool to ensure productivity, maintain qualified and disciplined workforce In the context that many the talents are diverted to private sectors, Singapore conversely attracts multiple brilliant people to work in public sectors Not only that, the labor force in public sectors is stimulated to work hard as they fear to lose their overpaid job These factors contribute to the economic growth of Singapore, promote social equality, enhance the ability and efficient of the government administration Also, thanks to high wage policy, Singapore government can satisfy the physical and mental demands of its people and from that, building one of the least corruption systems over the world II.3 Infrastructure Investment II.3.1 Singapore’s world-class infrastructure Singapore went from a third world developing nation to a first world metropolis in less than 50 years About 50 years ago, Infrastructure in Singapore was characterized by overcrowding in the city, poor living conditions and obsolete technology Without any natural resource except for its strategic location, the country is economically dependent on trade, capital and labour flows Foreign capital and labour has been fundamental to the economic success of Singapore To attract increasingly mobile factors of capital, information, and talent upon which the continued economic growth of Singapore depends, the government has paid particular attention to ensuring that immobile factors (that include land, housing, infrastructure, public services, labour, social and political culture) complement growth The change in the scenario for infrastructure in Singapore did not come overnight It was a result of proactive and farsighted planning by the Singapore government Singapore became a testimony to other developing nations, in terms of infrastructure being central to socioeconomic development Today, Singapore is a vibrant city and an important global business hub, with high standards of living and clean and green environment A world class infrastructure facilitates delivery of information, goods and services, fuels economic growth and assists in achieving social objectives like improved living standards and education Within a short span of less than 50 years, Singapore has established well-connected land, air and sea transport systems, world-class public utilities and waste management system as well as affordable high standard public housing Singapore’s well-developed infrastructure is a key driver of its economic growth Innovative space solutions and forward planning have allowed Singapore to adapt and grow quickly to meet the evolving needs of businesses Figure Singapore’s World-Class Infrastructure Capabilities Source: International Enterprise Singapore9 Singapore’s ability to transform infrastructure investments into productive assets for economic growth and increased prosperity, as well as its capacity to undertake sustainable urban planning, stands as an example to many developing cities and countries The city-state of Singapore has become a gateway to Asia and bridge between East and West Singapore's transformation from an underdeveloped trading post to one of the world's most advanced ports was due to the development of modern infrastructure and a rapid https://www.iesingapore.gov.sg/~/media/IE%20Singapore/Files/Publications/Brochures%20Foreign %20Companies/Urban_Solutions_for_Latam.pdf adoption of technology Singapore is well connected to the world by the way of top class airport, port and telecommunication infrastructure It may have cost the government billions of dollars, but it was investments worth taken The nice thing about the infrastructure development planned for Singapore was that it tackled not just the infrastructure solutions that facilitate good living conditions and efficient transport of people and goods; Singapore paid attention to the infrastructure improvements that help facilitate the flow of information This is the reason why Singapore is now known as a technologically–advanced country in Asia The country has been ranked by the World Economic Forum as one of the top economies in leveraging information and communications technologies to boost its country competitiveness.10 II.3.2 Efficient transportation system II.3.2.1 Land transport Over the past decade, the Singapore Government has made a concerted effort and considerable investment to expand the train and bus network across Singapore, with the goal of getting at least 85% of the population from their home to destination within an hour (“door-to-door”) This involves building new roads and subway tunnels that cut through old estates and forests, and breathes new life into other inaccessible neighbourhoods.11 Singapore's infrastructural development has been monitored and controlled by Government agencies High density satellite towns were linked to the Central Business District through expressways and a rail system Investment in rail infrastructure is one of the key points of the transport infrastructure spending plan Policymakers in Singapore paid meticulous attention to the land transport sector: the regulation of car ownership and usage, the development of a sustainable public transport sector, as well as the development of a comprehensive road and rail network The Mass Rapid Transit (MRT) system is a rail network that is the backbone of Singapore’s public transport system Officially launched in 1988, the MRT system currently comprises four main lines: North-South, East-West, North-East and Circle Additional lines12 10 https://www.guidemesingapore.com/business-guides/incorporation-guides/foreign-companyregistration/why-foreign-companies-relocate-to-singapore 11 https://krib.co/2017/10/03/will-real-estate-market-react-ahead-new-downtown-mrt-line-3-opening/ 12 Land Transport Authority (2012) Annual Report 2011/2012 Singapore: Land Transport Authority, p 25 Today, MRT network is a rapid transit network spanning across Singapore, with interconnected rail lines spanning over 170 kilometres in length and 102 stations (as of mid2017) It forms the backbone of public transport in Singapore, with trains travelling along high-density travel corridors, connecting town centres to the City.13 MRT system played an important role in improving Singapore’s competiveness in attracting higher value-added investments, especially in the financial and business sectors It also boosts investor confidence and have a multiplier effect on real estate value The MRT train system has a major benefit for real estate investors and home buyers and that is – it ignites a huge capital appreciation and potential rental yield of properties because of its convenient location to major important hubs in this tiny state.14 The Land Transport Authority (LTA) regulates and oversees the operation of the MRT system Two operators are responsible for the daily running of the MRT system: SMRT Trains Ltd (North-South, East-West and Circle lines) and SBS Transit (North-East line)15 The Singapore Land Transport Authority (LTA) has published its Land Transport Master Plan that sets out its vision for land transport in Singapore The 2008 Master Plan set out the LTA’s overall vision of a ‘people-centred land transport system’ that would be achieved through making public transport a choice mode, managing road usage and meeting the diverse needs of the people The 2013 Master Plan16 is not a major departure from this vision and builds further on these themes, updating them to be relevant to the changed environment The 2013 themes are: • More Connections – Rail will remain the backbone of the public transport system with more connections to the MRT network provided by bus, walkways and cycle routes; • Better service – This will be achieved through supply side measures, primarily an expanded and more reliable public transport network, as well as demand management approaches such as encouraging the shifting of peak travel to shoulder or off-peak periods; and Strategic Themes • Livable and Inclusive community – Ensuring that the public transport system makes Singapore a more livable city This encompasses making public transport accessible to all residents and ensuring the transport network’s impact on the natural and built environment is limited and managed effectively 13 http://landtransportguru.net/history-of-the-singapore-mrt/ 14 https://www.newlaunchonline.com.sg/the-impact-of-mrt-on-singapore-property-prices/ 15 Land Transport Authority (2013, May 17) Train operators Retrieved from http://www.lta.gov.sg/content/ltaweb/en/public-transport/mrt-and-lrt-trains/train-operators.html 16 https://www.pwc.com/sg/en/publications/assets/lta_masterplan_201311.pdf The Singapore government expects to spend more than S$20 billion over the next five years to almost double the train network in the city-state by 2030, Finance Minister Heng Swee Keat said in Feb, 2017 The enhancement of Singapore's public transport infrastructure will put eight in 10 households within a 10-minute walk of a rail station, Mr Heng said in his Singapore Government's Budget Statement for financial year 2017 in Parliament.17 II.3.2.2 Aviation and the strategic development of Changi international airport Aviation Investing in the right infrastructure ahead of time has been a key pillar in the success of Singapore's airport and port for more than three decades The need to invest in and expand Singapore's external connectivity was highlighted by the Committee on the Future Economy as a key part of the strategy to develop a vibrant and connected city of opportunity The number of air travellers and aviation-related jobs in Singapore could more than double in 20 years, according to a study by a global airline body in 2015 This would increase the industry's contribution to Singapore's gross domestic product by the same quantum to an estimated US$65 billion (S$88 billion) in 2035, said the International Air Transport Association (IATA)18 To much of the outside world, Singapore is best known as an international air and shipping hub in the global transportation network Its airport has consistently won numerous international awards in recognition of its achievements in airport, retail and cargo facilities and services Singapore has established itself as a preferred jurisdiction for businesses of all sizes to headquarter their Asian operations because of its unique advantage in geography The country is strategically located at the crossroads of the main trade and shipping routes of the world, including the major sea route between India and China Travel to most Southeast Asian countries consists of a short air flight Strategic development of international airport Changi Changi International Airport is a major air transport hub A strong national airline, liberal air policy, and bold airport infrastructure investment decisions have made Singapore a popular base for international airline companies In 2001, the airport was served by 59 airlines operating over 3,250 weekly services linking 139 cities in 50 countries It handled 28.2 million passengers and 1.5 million tones of airfreight The airport is well connected to the rest of the island via the railway system 17 http://www.businesstimes.com.sg/government-economy/singapore-budget-2017/sg-budget-2017-s20b-to-bespent-over-five-years-to-double 18 http://www.straitstimes.com/singapore/transport/aviation-could-be-worth-88b-to-economy-in-20-years-iata Changi has consistently won numerous awards for best airport (20 best airport awards in 2001) These numbers are despite its small domestic market Changi Airport has had to overcome the tremendous huddle of a lack of hinterland population to develop as the hub airport in Southeast Asia The airport has become known for its policy of investing in infrastructure capacity ahead of demand Within three years of its operation, although the first terminal showed no sign of approaching capacity, the government approved the construction of a second passenger terminal at Changi in 1984 Terminal 2, expected to double the passenger handling capacity at Changi Airport, was completed in 1990 Even as the Civil Aviation Authority of Singapore celebrated the opening of Terminal 2, it announced that plans were underway for the construction of Terminal Figure Changi Airport Source: Singapore Economic Development Board19 With the expected opening of Changi Airport Terminal in the late-2020s, Changi Airport’s passenger handling capacity will double from the current 66 mn passengers 19 https://www.singaporebusiness.com/2014/top-3-reasons-why-singapore-is-asias-aviation-hub.html annually to 135 mn, with the potential to increase to up to 155 mn through a satellite terminal connected to T5 if needed Singapore's Changi Airport has become the most important and modern hub in AsiaPacific Source: International Air Transport Association (IATA) With large area and a series of retail, service, as well as F&B stores, Changi is now not only an airport but also the second largest shopping mall in Singapore (only after VivoCity) This is due to the sustainable increase in the number of passengers arriving at Changi Airport every year Changi Airport Group (CAG) reported a record year for retail concession sales at Singapore Changi International airport in 2016, boosted by innovative retail concepts, fast growing e-commerce portal iShopChangi and successful campaigns Sales at Changi rose 5% to over S$2.3bn ($1.6bn) 20, an all-time high for the airport Travellers from China, Singapore and Indonesia were the top spenders at Changi airport, with Chinese nationals accounting for 30% of total sales in 2016 While some economists have criticized this over-provision strategy as one of the factors behind Singapore’s low total factor productivity record in the past, airport construction together with a liberal airline competition policy comprise two of the most important means utilized to influence the development of airline networks A comparative study of the five major airport hubs in Southeast Asia describes a multi-hub system in which several large hubs vie for intraregional and long haul traffic Within this system, Singapore is predominant, enjoying a commanding lead over both Kuala Lumpur and Bangkok in terms of international airline capacity An overprovision strategy is clearly inconsistent with short run efficiency considerations However investing in capacity far in advance of actual need represents a strategic move to maximize long run growth and maintain its position as the leading Southeast Asia hub airport by discouraging competition or deterring entry III How can Vietnam learn from Singapore III.1 Corporate income tax rate and vehicle tax Vietnam has many changes in tax policy, including reducing corporate income tax to 22% (2014) and 20% (2016) However, in comparison with the countries and territories, in which many FDI enterprises invest in Vietnam (such as Singapore, Hong Kong, Taiwan) The corporate tax rate is still quite high It could not only create a force for the enterprises to transfer profits to parent companies abroad through price transfer mechanism but also limit the competitiveness of Vietnam in attracting foreign investments Vietnam should reduce corporate income tax which could increase the tax revenue The tax revenue could decrease in short time by reducing tax rate, however, this reduction could increase the accumulation, increase investment, reduce tax fraud, tax evasion in many forms Vietnam needs capital for development investment, reducing the corporate income tax rate will create a dynamic and efficient business environment that will attract more foreign investment Relating to Vehicle tax, Vietnam can learn from Singapore with higher tax on vehicle According to the National Traffic Safety Committee, since 2016, traffic congestion has become more and more frequent and which are on the rise, especially in two Vietnam’s largest cities: Hanoi and Ho Chi Minh City Millions of vehicles take part in the 20 https://www.dfnionline.com/latest-news/retail/changi-retail-concession-sales-reach-record-1-6bn-2016-1601-2017/ transportation in the center of these cities daily which is not only cause the traffic congestion but also increase the amount of harmful emission to the air, worsen environmental pollution Increasing the tax on vehicles somehow would have impact on the numbers of means of communication on road and rise the tax revenue III.2 Public Sector Pay Recent data showed that Vietnam is the 113 least corrupt nation out of 175 countries, according to the 2016 Corruption Perceptions Index reported by Transparency International As a result, Vietnam has so much to learn from Singapore in implementing public sector pay Frankly speaking, Vietnam economic context still contains a myriad of weaknesses, namely low salary (the wage of public servants accounts only 25-30% of the employee’s earnings), lack of penalties for violation of asset declaration, no regulations of compulsory savings and confiscation Even Vietnam has, it is hardly to monitor as those whose income is barely sufficient for survival are the vast majority of civil servants Taking all mentioned reasons into account, the most feasible lesson that Vietnam can follow suit is paying high salary for public employees To achieve this target, firstly Vietnam needs to streamline the government machine There remains some possible measures such as implementing the contract regime, at the same time abolishing the lifelong regular staff so each public workers will be more responsible; combining several central ministries and agencies; merging provinces, districts and communes; and reducing the number of districts as well Next, there is a must in changing the structure of public sector pay in Vietnam, including fixed salary and bonuses based on personal performance and productivity Salary reform also has to clarify the relationship between wage policy and social insurance, health insurance, education and housing, electricity, water, transportation, equipment for senior experts, officials as well as leaders in the wage structure Not to be left behind, over the past few years, Vietnamese government has made several rounds of income increase for civil servants, but the increase is not enough And in fact, the government will be barely able to raise the wages any higher due to cumbersome state machine With a mammoth number of beneficiaries, the government cannot raise wages for all subject, instead it should focus budget resources on increasing the salaries of civil servants only and separate the budget spending on civil servants from people working for the Party, associations and government organizations Step by step, the Party and other unions have to be responsible for their issues, the government can only assist partially III.3 Infrastructure Investment In Vietnam, it is estimated that the middle class will double, from 16 million people in 2014 to almost 33 million people in 2020 The urbanization rate of Vietnam reached 35% in 2016 and was estimated to reach 40% by 2020 Middle class’s massive consumption is considered as a key factor leading to the need to improve infrastructure, investment and business linkages system, thereby boosting trade Bilateral trade between ASEAN and Vietnam increased 120 percent from $ 19 billion in 2006 to $ 41.3 billion in 2015 This created many opportunities for investing as well as developing ecosystems to support infrastructure development Comprehensive infrastructure development is one of Vietnam’s priorities to enhance the competitiveness of the country, especially when Vietnam is among the fastest growing economies in the world Improving infrastructure can reduce production costs, thereby further attracting foreign capital The benefit from this is tremendous when Vietnam is considered as the manufacturing hub of the region with competitive labor prices and strategic geographic location Improving transport links in the supply chain can also cut down import and export costs21 Changi Airport is an ideal model for Vietnam to learn Vietnam should invest more and improve infrastructure to increase its ability to receive aircraft as well as enhancing services to attract more passengers Tan Son Nhat Airport can adjust its air operation and international flights to attract more foreign visitors to Vietnam 21 https://baomoi.com/co-so-ha-tang-nen-tang-de-phat-trien/c/23134838.epi ... to work in public sectors Not only that, the labor force in public sectors is stimulated to work hard as they fear to lose their overpaid job These factors contribute to the economic growth of. .. positions in the Civil Service to receive more than the publicly announced bonus II.2.2 Impact of public sector pay to Singapore’s development The high public sector pay is the key to: Increase... meeting the diverse needs of the people The 2013 Master Plan16 is not a major departure from this vision and builds further on these themes, updating them to be relevant to the changed environment The