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*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.

*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.

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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:

1. Increase productivity as the salary is based on work performance, deemed potential

and national economic growth as mentioned above.

2. Decrease corruption in Singapore as civil servants do not dare, do not want and find it

unnecessary to corrupt.

First, Singaporean public employees do 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 do 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 6. 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 4. 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



9 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 5 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

1. 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.

2. 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 3.



Figure 5. Changi Airport



Source: Singapore Economic Development Board19

With the expected opening of Changi Airport Terminal 5 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 do 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



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*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.

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