Preparing for Competitiveness After the Pandemic
As the global coronavirus pandemic has unfolded, leaders in most countries have focused their policy responses on essential health care, business support and individual income support issues. Now that the pandemic is several months old, policymakers in some countries are also taking steps to help businesses and people prepare for the post-pandemic global economy. Singapore has approved measures to create 100,000 new jobs, apprenticeships and skills training opportunities and broaden skills development programs. Germany has approved measures to encourage electric car purchases and to support investments in the hydrogen economy, quantum technology and artificial intelligence. The European Union has approved a landmark 750 billion euro (US$860 billion) stimulus package to help pull member countries out of recession and to encourage green and digital investment.
In Washington, Congress and the White House are struggling to reach a deal on a new stimulus and relief package. The two sides are far apart on several issues, including whether to renew supplemental unemployment benefits and whether to provide additional aid to state and local governments. All this is occurring while measures to open local economies are expanding in some cities, states and countries and contracting in others.
Stimulus Measures in Singapore: Creating 100,000 Jobs, Apprenticeships and Skills Training Opportunities and Broadening Skills Development and Lifelong Learning Programs
Leaders in Singapore have approved four major supplemental budget packages since the outbreak of the pandemic. The four measures (the Unity, Resilience, Solidarity and Fortitude budgets, also called Budget 2020) emphasize individual income support, business cashflows and preparing businesses and workers for growth. Individual incomes are supported through wage support and jobs support programs. Business cashflows are supported through a variety of financing schemes (including working capital loans, trade loans and bridging loans), corporate income tax and property tax rebates and rental waivers. Industries that have been hit especially hard by the pandemic, including aviation, hotels, food, retail, arts and culture, and tourism, are receiving extra support. The four supplemental budget packages total almost 100 billion Singapore dollars (US$72 billion) or nearly 20% of Singapore’s GDP.
One priority of Budget 2020 is job creation and training. In the Fortitude budget, Singapore included a 2 billion Singapore dollar jobs and training package that will create close to 100,000 opportunities for workers affected by the coronavirus economic slowdown. Called the SGUnited Jobs and Skills Package, the measure will create approximately 40,000 public and private sector jobs, 25,000 traineeships and 30,000 skills training opportunities. (To put 100,000 new work opportunities into perspective, Singapore has a residential labor force of approximately 2.3 million citizens and permanent residents.)
Under the jobs and skills package, the public sector will create 15,000 new jobs. These will include both long-term jobs in areas like health care and early childhood education and short-term jobs relating to Covid-19, such as health care assistants and coronavirus testing staffers. Government agencies will also work with businesses to create 25,000 new jobs in the private sector. The government also intends to create about 25,000 subsidized traineeship positions. Of these, 21,000 traineeships will come through a new program for first-time job seekers and 4,000 traineeships will come through a new program for unemployed mid-career job seekers. Many of the traineeships will be in high demand and emerging technology areas in IT and engineering. Additionally, a new initiative, the SGUnited Skills program, will provide training for about 30,000 job seekers looking to upgrade their skills while looking for a job.
A second priority of Budget 2020 is preparing businesses and individuals for growth. Budget 2020 does this through a variety of targeted programs. Business growth programs include core capability grants, innovation and productivity grants, digitalization grants, financial support for promising startups, business support networks and programs to encourage entrepreneurism and developing markets and investing abroad. Growth programs for individuals include jobs, traineeship and skills programs for workers of all ages, career conversion programs for mid-career PMETs (professionals, managers, executives and technicians), overseas internship programs for university students and recent graduates and the SkillsFuture skills development and lifelong learning program.
As part of the SkillsFuture program, all Singapore citizens 25 years and older receive credits they may use for skills development and lifelong learning. More than 8,000 courses are offered. These include industry-orientated courses, such as advanced manufacturing, cybersecurity, data analytics and digital media. Courses also include generic skills, like digital literacy, productivity and communication skills.
The Singapore government has a long history of working with businesses of all sizes and workers of all ages to upgrade capabilities and competencies. Some of the programs in Budget 2020 are new and others are a continuation or expansion of existing programs. The Singapore economy has benefitted from having a variety of business and individual growth-focused policies and programs in place prior to the pandemic. While unemployment is up among citizens and permanent residents in Singapore, it is still relatively low by international standards.
Germany Approves Stimulus Measures That Include a “Future Package” to Encourage Investments in the Hydrogen Economy, Quantum Technology and Artificial Intelligence
In early June, governing parties in Germany agreed upon a 130 billion euro (US$146 billion) stimulus package to help revive Germany’s economy. The measures include temporarily cutting value-added tax from 19% to 16%, providing aid for small and medium-sized businesses, providing families with an additional 300 euros per child and doubling a government-supported rebate on electric car purchases. The package also sets up a 50 billion euro fund for addressing climate change, innovation and digitalization within the German economy. The “future package” will encourage investments in the hydrogen economy, quantum technology and artificial intelligence, among other things.
The new stimulus program follows a 1.1 trillion euro stimulus and relief package agreed upon in March. This package included a variety of measures to support businesses and individuals, including loan guarantees, subsidies and a shorter work hour program to help avoid job cuts.
European Union Leaders Reach Landmark 750 Billion Euro Deal to Reconstruct Region’s Pandemic-Stricken Economies
European Union leaders recently agreed on a stimulus package worth 750 billion euros (US$860 billion) to help pull their economies out of recession and to tighten the financial bonds holding the 27 countries together. The Next Generation EU recovery fund will distribute 390 billion euros of grants and 360 billion euros of low interest loans to EU countries. At least 30% of the funds are earmarked for green and digital investment.
EU members will need to prepare national recovery plans pledging to reform their economies and make them more resilient in order to receive their allocated share of the funds. The funds will be distributed from 2021 to 2023. Italy will likely be the biggest beneficiary of the stimulus plan and expects to receive about 82 billion euros in grants and about 12 billion euros in loans. Greece expects to receive about 19 billion euros in grants and about 12.5 billion euros in loans.
The recovery package will be financed by joint EU debt issuance, with repayments being made out of the EU budget, to which Germany is the largest contributor. The EU already has a small presence in the bond markets. Given the size of the recovery package, the EU will become one of Europe’s biggest bond issuers under the agreement. This represents a major step toward further economic integration within the EU.
Congress Debates Additional Stimulus and Relief Measures
As of the date of this newsletter (August 3), Congress and the White House were struggling to reach a deal on a new stimulus and relief package. The two sides were far apart on several major issues, including whether to renew supplemental unemployment benefits at the $600 per week level. Democrats have wanted to renew them at this level until early 2021. Republicans have resisted, proposing to cut the benefit to $200 per week until September and then to calibrate them to replace 70% of lost wages to encourage people to return to work. The $600 supplemental benefit expired July 31.
Republicans and Democrats are also divided over additional aid to state and local governments. The Democrats have proposed $900 billion in additional aid. The Republican proposal calls for none. Both parties are supporting sending a new round of checks worth up to $1,200 to individuals and possibly extending a federal moratorium on evictions for people who cannot pay their rent. The standoff continues while a new surge of coronavirus infections has emerged in some states in recent weeks.
If you would like to learn more about stimulus and economic competitiveness measures in the United States, Singapore, Germany, the European Union and additional countries, please contact me directly.