CPF's Restoration

The CPF’s restoration is an eventual and expected move and from a human resource perspective, it is a necessary adjustment since the restoration is one of the few ways to compensate the workers who have contributed to the revival and growth of the economy. Human capital, as a major part of the factors of production must be incentivized when the economy turns good.



Any hikes in cost necessarily will mean a hit in the bottom line for companies but this restoration should not be looked upon as increasing costs. It was lowered in phases owing to economic situations. Since 1999, in response to the economic downturn caused by the Asian economic crisis, the employer contribution rate was lowered to 10 percent. When the economy showed signs of picking up in 2000, this rate was increased by 6 percentage points to 16 percent in 2001. However, it was lowered again to 13 percent in 2003. The current 14.5% contribution by employers and the subsequent move upwards should therefore not be seen as a hit on the bottom line. The workers have shared risks and pains of wage cut and restraints and even retrenchments.



What is perceptibly lost with the increase in CPF on the left side of equation is compensated by the slew of incentives on the right side of the economic growth equation- $5.5 billion for productivity investments and assistance to companies. An allocation of $2.5 billion over the next five years to build a “first-class” continuing education and training system for adults will mean that companies can tap these fiscal stimuli to help transform their companies to achieve higher productivity with better human capital resources. With these fiscal stimuli and budget, maximum production and productivity can be achieved. Such restructuring based on productivity gains and sharpening competencies in the human capital is very much work in progress but we hope a dumb-bell shaped mode will surface soon and that will take Singapore to another level of sustainable long term growth.