(4) STRUCTURAL POLICIES
23. During the period under review, Singapore has continued to undertake a range of structural reforms in response to challenges posed by accelerated globalization and increased competition. The reforms, as recommended by the Economic Review Committee (ERC) in 2003, were aimed at addressing the immediate problem of competitiveness as well as the longer-run challenge of moving into high-value-added industries. The ERC, inter alia, suggested that Singapore lower direct taxation and raise the GST, promote the growth of the service sector, reform its compulsory Central Provident Fund savings scheme, divest non-strategic GLCs, foster greater labour market flexibility, and strengthen job training programmes.
24. To address the ERC's recommendations on lowering costs, the Government has lowered the corporate tax rate progressively, to 18% in 2008 (possibly reducing the value of certain tax incentives). The Government will continue to keep taxes low to attract investment, reward enterprise, and attract talent, and considers that the major taxes are at about the right levels, following the tax restructuring over the last five years. Additional aggressive tax cuts are unlikely given both the significant cuts to corporate and personal income tax rates since 2004, and the diminishing returns to lowering tax rates further, against a background of needing to support low-income groups and a rapidly aging population. Instead, supply-side reforms might need to put more emphasis on investment in education, research and development, and public services.
25. The longer-run challenge of moving Singapore into higher-value-added manufacturing and services is being addressed principally through investment in infrastructure, incentives to attract investment in the targeted areas, and through further regulatory reform. The ERC also emphasized the need to promote entrepreneurship in Singapore and to build a more vibrant business environment that encourages the growth of enterprise start-ups. In this context, a new Minister in charge entrepreneurship has been appointed to oversee the development of entrepreneurship in Singapore. For services, in particular, it was felt that Singapore has "not been as aggressive and proactive" as in manufacturing, and therefore steps had to be taken to rectify this imbalance.
26. The Government has also built upon the regulatory reform undertaken in several services sectors (telecommunications, electricity, and gas) and raised or removed foreign investment limits (for example in telecommunications, financial services, electricity). Some steps have been taken to curtail the role of GLCs, which operate in many sectors; some enterprises have been privatized during the period under review, although it is still not clear what market share they represent in the many sectors in which they operate. Moreover, after long eschewing an over-arching competition law, the Government enacted such a law in 2005.