Prime Minister Lee Hsien Loong warned on Friday that Singapore cannot afford to “slow down” in its pursuit of economic growth.
Speaking at Economic Society of Singapore's annual dinner, he said that would be the greatest danger for Singapore.
“If we are content to just be above average in the league of cities, we will fail. That is the greatest danger if we tell ourselves to slow down, enjoy life today and not worry about tomorrow,” he said.
"Being near the front also means we must have a successful, growing economy. There is no other way we can achieve this. We cannot do it by spending what we have inherited from the older generation. We certainly cannot do it by pumping oil or gas from the ground," he said.
"We can only do it if our economy is prospering and creating wealth that we can invest in our city and our people, to make life better for all of us," he added.
[For full transcript of PM Lee's speech, go here]
He painted a grim picture of a Singapore with slow growth -- new investments will be fewer, good jobs will be scarcer and unemployment will be higher.
Singapore would also face a brain drain when enterprising and talented Singaporeans were lured away by more lucrative opportunities and incomes in more competitive cities. In such a scenario, the low-income workers will be hardest hit, he said.
SPEND ON PUBLIC WELFARE?
During his speech, PM Lee however acknowledged growing murmurs that Singapore’s economic success meant she could afford to focus on looking after the less well-off and spend more on public welfare.
"I respect these views. I agree fully that material goals are not everything in life. But we are not going for growth at all costs, nor have we done so... We must always maintain the balance between economic and non-economic objectives, and ensure that the fruits of growth are invested for social purposes which benefit the wider population," he said.
PM Lee also added that it is crucial that growth continues to benefit all in the next twenty years, especially when there is worldwide income inequality coupled with Singapore’s ageing population.
Responding to critics who say not enough is done for the underprivileged, PM Lee said "the reality is that we do much more than we acknowledged or get credit for."
"We have equipped people with the skills and ability to do well for themselves... Over a lifetime, a low-income household will receive more than S$500,000 from the government," he said.
"In fact, households in the lowest income quintile (20 per cent) have on average more than S$200,000 of equity in their HDB flat! This is the direct result of government policy and government grants. It is unmatched by any other country," he added.
'SCANDINAVIAN MODEL WON'T WORK'
PM Lee also said emulating countries with similar population sizes and pro-welfare policies such as Norway or Denmark would not work.
"We face a fundamental choice as a society -- do we want low taxes and targeted welfare benefits; or high taxes on all and comprehensive welfare? Singapore has chosen the first; the Scandinavians the second," he said.
Explaining that such countries are rich in natural resources, have relatively homogeneous societies and are situated in a peaceful and affluent continent that serves as their hinterland, PM Lee said these countries are willing to pay high taxes in exchange for high social protections for all.
While Singapore's personal income tax rate for the very wealthy stands at 20 per cent, those in similar tax brackets in Scandinavia pay anywhere from 40 to 57 per cent, according to data from the Ministry of Finance and Organisation for Economic Co-operation and Development (OECD).
"I do not believe that Singaporeans would be willing to pay the taxes that Scandinavians pay, or that our economy could be competitive at such heavy tax rates," said PM Lee.
For Singapore to rank among the top cities in 20 years' time and achieve social objectives, PM Lee also stressed that political support for the government was key.
"Only when citizens accept the political system as legitimate, and economic order as fair, will they give the government of the support and the mandate to run Singapore in their best interests. And only with this mandate can the government do the best for Singapore and all of us," he said.