Budget Support
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48. In addition Singapore will need budget support to mitigate the budgetary effects of the rundown, to enable her to meet the recurrent costs of expanded internal security forces and such other armed forces as may be considered appropriate (on which there is room for a wide difference of opinion), and to finance such public works expenditure as may be required to check rising unemployment. Assistance of these types provides a ready means
for providing or maintaining employment in the public sector though, unless
the expansion of the economy can be promoted in the longer term on a viable basis, this merely postpones the problem. Budget support aid rising to some £15 million a year by 1970-71 is likely to be required since it is highly unlikely that development measures can begin to have much effect on the budget before then. What will be needed after 1970-71 will depend upon the effectiveness of any measures which can be taken to develop the economy. Some increase nay well be necessary, and it would be wise at this stage to think in terms of an upper limit of perhaps £20 million a year followed by a steady tapering over a period of perhaps ten years. This sum would indeed need to be increased if other mitigating action proved ineffective. All our experience of budget support operations elsewhere strongly suggest that once this type of aid is provided it is extremely difficult to withdraw it at all
rapidly.
Development Aid
49. The measures described above are palliatives designed to alleviate severe economic problems during a period in which major structural changes in the economy will be needed. Development of manufacturing industry, possibly ship repairing, and the exploitation of her position as an entrepot and processing centre offer the major hopes for a solid base to the Singapore
economy. It must be emphasised however, that the prospects for this are highly uncertain. Unless export markets can be assured productive investment
will not be possible.
50. Very crude preliminary calculations suggest that a total capital investment of the order of £160 million would be needed to provide employ-
ment for all those made redundant by the withdrawal, The situation is complicated by the fact that a fair proportion (about 10,000) of those at present employed in the base are not nationals of Singapore. To the extent that the Singapore Government requires them to leave when they become redundant the problem in Singapore will be reduced but there will obviously be a cost and possibly political problems involved in resettling them
elsewhere.
51. If the right conditions could be created domestic and foreign private capital could be expected to provide some of the finance needed. The Singapore Government would have to raise substantial public investment perhaps £100 million mainly from external sources. As indicated above,
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