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Singapore Budget: Is the Government Finally Listening?

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Singapore, the wealthy Southeast Asia city-state, whose government has faced growing resentment over a widening wealth gap and rising cost of living, announced a slew of measures in its latest budget to appease its disgruntled citizens.

The government's 2013 budget, which placed greater emphasis on wealth redistribution than in previous years, included measures such as cash transfers for lower income citizens and raising taxes for owners of high-end residential properties and luxury cars, together with making it more difficult to hire foreign workers.

(Read More: Singapore Firms Hit by Foreign Labor Laws)

These latest measures seem to have gone down well with citizens, who just 10 days ago gathered in a rare protest against swelling costs driven by an influx of foreigners.

"The measures may seem small but they're signaling that they're going to start taking from the rich to give to the poor, the progressive property taxes and car registration fees for example…I am satisfied with it (budget)," Jean Chua, a 36-year-old Singaporean national, told CNBC on Tuesday.

Income disparity in Singapore, as measured by the Gini coefficient, has been on the rise, increasing to 0.487 in 2012 from 0.473 in 2011. The index ranges from 0 to 1, where 0 represents perfect equality and 1 indicates perfect inequality.

Twenty-nine-year-old Singaporean, Teo Thomas, who works at an international consulting firm, is also pleased with the government's steps to support lower income citizens, saying that policymakers are finally "listening to the public."

(Read More: Youth Turning Their Backs on 'Singapore Dream')

"They are listening due to the recent by-election in which the [opposition] Workers' Party won, and the general negative public sentiment. Unfortunately, that is how politics works," Teo told CNBC.

The budget also outlined fresh measures to raise domestic productivity through enhancing the country's Workfare Training Support scheme - which encourages low wage workers to upgrade their skills through training - while curbing the influx of foreign workers, who have been seen as putting a strain on infrastructure, while raising costs.

Foreigners currently make up around 40 percent of the island's 5.3 million population and according to a recent government forecast this share could go up to 50 percent by 2030, which led to an outcry.

An increasingly vocal population, said country watchers, could have led the government to announce populist measures such as allotting S$3 billion ($2.4 billion) to improving the quality of the country's pre-school education system over five years.

(Read More: Singapore's High Cost of Living Comes at a Cost)

"The budget does introduce populist measures in terms of the (tax) rebate, generally it looks like quite a favorable budget for local consumers," said Rob Aspin, head of equity investment strategy, Standard Chartered.

However, some experts noted while the budget does look more pro-citizen on the surface the government has not dramatically shifted its stance, which is being traditionally pro-business.

"It's a more distributive budget – it was balanced between corporate and individual stakeholders, they had quite a bit for both sides. The ones asking for help such as the lower income groups and SMEs got most of their wish list," said Selena Ling, head of treasury research and strategy at OCBC Bank, referring to the 3-year transitional support scheme to help corporates cope with the labor market restructuring.

"The fiscal surplus situation last year was better than what was projected so they had room to do more," she added. For fiscal 2012/13, the overall budget surplus is expected to come in at S$3.9 billion - higher than initial estimates - providing scope for the government to step up spending.

(Read More: Singapore: A Wealthy Nation That Can't Afford to Retire)

"Whether it's pro citizen or pro-business – ultimately it's still very much focused on restructuring the economy to increase productivity," said Michael Wan, economist at Credit Suisse.

Contact Asia Economy

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