http://www.wp.sg/wordpress/2009/02/budget-speech-2009-low-thia-khiang/#more-552
Speaker Sir, I welcome the initiatives of Budget 2009 to help viable businesses stay afloat and Singaporean workers stay employed. I also welcome the decision for not using CPF as a tool to cut employers’ cost in this downturn.
The Resilience Package of $20.5 billion, though unprecedented in scale in the history of modern Singapore, is not an unusual fiscal response. All over the developed world, economic stimulus plans put forth by the respective governments run into hundreds of billions of dollars, providing tax cuts for individuals and businesses, relief for people who have lost their jobs or homes, and money for infrastructure projects to stimulate domestic demand.
What is unusual of our Resilience Package is that the Government will be using our past reserves to fund 2 main components of the package, the Jobs Credit Scheme and Special Risk-Sharing Initiative.
Use of Past Reserves
The Government has made the case to the President and the Council of the Presidential Advisers to draw down $4.9 billion of our past reserves to fund the Jobs Credit Scheme and Special Risk-Sharing Initiative.
Past reserves are a strategic asset meant for use in times of need, especially when the Government faces financial constraints due to unprecedented circumstances which require the Government to respond in the interest of the nation.
Hence, I am surprised that the Government has chosen to set a precedent in asking the president for approval for a draw-down of our past reserves when it has enough savings from the current term of government to fund the entire Resilience Package and the resulting budget deficit which the Finance Minister has estimated at $8.7 billion or 3.5% of our GDP.
The Finance Minister in his Budget Speech on 22 January 2009 said that
“The Government has sufficient savings built up during this term of government to fund the measures we are taking and the resulting budget deficit. Nevertheless, we have decided instead to fund the two extraordinary measures within the Resilience Package from our past reserves.”
I would like to know why the Government is using the reserves to fund the Resilience Package when it has more than enough money in the current reserves to do so. What is wrong with waiting till new initiatives are needed and the current reserves are insufficient to fund them before asking for the use of past reserves?
Past reserves are supposed to be protected by a two-key system. The Government holds one key while the President holds the second key but the speed at which this two-key system can unlock the past reserves is too fast for comfort.
I would like to know when was the request for the $4.9 billion draw-down made? How long did it take the President to give the in-principle approval? Does the President or the Council of Presidential Advisers know for certain what the Government intends to do with its substantial current reserves before allowing it to draw down on past reserves?
The Finance Minister has also stated that this draw-down on reserves is to pre-empt the severe consequences that this economic crisis could have for our economy and society. Can a pre-emptive spending rationale be a compelling reason for the President to unlock the reserves?
The unlocking of our reserves, as witnessed by this House in the past 3 to 4 months, is fast becoming like a non-event. Surely Singaporeans deserve to know the full rationale of the draw-down by the Government despite having a healthy kitty.
Jobs Credit
Next, I would like to touch on the Jobs Credit scheme that is designed to encourage employers to keep their workers on their payroll.
The National Wages Council has recommended that companies may implement a wage freeze or wage cut to remain competitive. In addition, workers are already being asked to accept lower bonuses, no-pay leave and shorter work-week. There is also the flexi-wages scheme which the Government has been promoting under the tripartite system for years to enable employers to cut wages of workers during downturn.
All these measures are designed to help employers cut costs. The Jobs Credit scheme pays employers a cash grant incentive of 12% of the first $2,500 of the wages of each employee who is on the CPF payroll. The cash grant is payable every quarter beginning March 2009. The scheme seeks to reduce the costs of employing Singaporean workers for businesses during the crisis.
The question is, how effective would cash grant of 12% of wages be in times of such uncertainties? When confronted with declining sales and demand, the most logical thing to do for most businesses, especially SMEs, is to cut wages and bonuses. If sales eventually cannot sustain the overhead cost, I doubt a 12% cash grant on wages will help to prevent retrenchment.
Sir, between waiting 3 months for a $900 cash rebate from the Government versus saving $7500 immediately by retrenching a worker, which choice does the Government think a struggling employer will make?
On the other hand, the Jobs Credit scheme will indirectly favour big companies which may be still profitable and have no intention to retrench workers. The Straits Times article on Budget 2009 published on 24 January reported that Sheng Siong Supermarkets will receive $567,000 a month or $6.8 million a year in cash grant under this scheme. I am sure NTUC Fairprice, with a staff strength of 6,000 and a no-retrenchment policy, will benefit even more. Are we using our reserves to increase the profits of profitable companies in this downturn?
To save jobs for Singaporeans, the Government must put in place policies that put Singaporeans first at all times. Opening up the economy here to cheaper foreign labour without first taking good care of our own people will make Singaporeans the first to go in a recession. Isn’t Jobs Credit designed to make Singaporean workers more affordable so that employers will have an incentive to keep them instead of foreigners on their payroll?
In the longer term, the Government should contemplate to devise some schemes which will make Singaporean workers more competitive on the job market and incentivize the employers to employ Singaporean workers. The current system of foreign workers quota works when the economic cycle is long with a tight labour market but could be a problem if the future economic trend is one with shorter cycles of ups and downs.
Sir, I understand that SMEs account for 6 out of every 10 Singaporean jobs as mentioned by the Finance Minister in his Budget Speech. Many SMEs experience cash-flow difficulties beyond what the Jobs Credit scheme may help. If we were to conduct a poll for SMEs to vote which they would prefer, Jobs Credit or Credit Facility, I believe SMEs will choose the latter.
Helping SMEs & Special Risk-Sharing Initiative
Apart from enhancing the SME loan schemes in November 2008 by increasing the government’s share of risk to 80% and introducing a Bridging Loan Programme for working capital loans with the Government taking 50% of the risk, there is no new measure in this Budget to help SMEs secure the much needed credit facility to survive in a shrinking economy.
The Finance Minister has said that it is too early to assess the effectiveness of the enhancements made to the SME loan schemes last November but time is of essence in this economic down turn. Some businesses may not have enough resources to wait long for the banks to get back to them on their loan applications.
Under the Special Risk-Sharing Initiative announced in Budget 2009, the Government will increase its share of risk on the Bridging Loan Programme from 50% last November to 80% now. Can we infer from this increase that the banks are still not lending enough?
Sir, if the Government can see the need and urgency to increase its share of risk for the Bridging Loan Programme in a short span of 2 months just to stir the banks from its credit slumber, think about the stress and anxiety SMEs must have endured trying to secure credit lines since the collapse of Lehman Brothers in September 2008.
I urge the Government to work fast with the banks to free up the credit market. It was reported in the Straits Times that bank lending fell for second consecutive time in December 2008.
This is a fast shrinking economy. It is natural for banks to worry about lending money to companies with weak business models or plans. Then again, would any bank believe a rosy business plan in this economic climate? This is why the Government must come in to resolve the issue. When more SMEs fail, more Singaporeans will be out of job. It is a loss-loss situation for all.
Sir, if the banks are still not lending in the coming months, what other measures are there in place to keep credit flowing for SMEs? I believe this is a time for Singapore to get innovative and perhaps even bold in dealing with the credit crunch. The Government must take the lead to unfreeze the credit market if all the prodding on banks yields no tangible results.
Continue on next page....
Speaker Sir, I welcome the initiatives of Budget 2009 to help viable businesses stay afloat and Singaporean workers stay employed. I also welcome the decision for not using CPF as a tool to cut employers’ cost in this downturn.
The Resilience Package of $20.5 billion, though unprecedented in scale in the history of modern Singapore, is not an unusual fiscal response. All over the developed world, economic stimulus plans put forth by the respective governments run into hundreds of billions of dollars, providing tax cuts for individuals and businesses, relief for people who have lost their jobs or homes, and money for infrastructure projects to stimulate domestic demand.
What is unusual of our Resilience Package is that the Government will be using our past reserves to fund 2 main components of the package, the Jobs Credit Scheme and Special Risk-Sharing Initiative.
Use of Past Reserves
The Government has made the case to the President and the Council of the Presidential Advisers to draw down $4.9 billion of our past reserves to fund the Jobs Credit Scheme and Special Risk-Sharing Initiative.
Past reserves are a strategic asset meant for use in times of need, especially when the Government faces financial constraints due to unprecedented circumstances which require the Government to respond in the interest of the nation.
Hence, I am surprised that the Government has chosen to set a precedent in asking the president for approval for a draw-down of our past reserves when it has enough savings from the current term of government to fund the entire Resilience Package and the resulting budget deficit which the Finance Minister has estimated at $8.7 billion or 3.5% of our GDP.
The Finance Minister in his Budget Speech on 22 January 2009 said that
“The Government has sufficient savings built up during this term of government to fund the measures we are taking and the resulting budget deficit. Nevertheless, we have decided instead to fund the two extraordinary measures within the Resilience Package from our past reserves.”
I would like to know why the Government is using the reserves to fund the Resilience Package when it has more than enough money in the current reserves to do so. What is wrong with waiting till new initiatives are needed and the current reserves are insufficient to fund them before asking for the use of past reserves?
Past reserves are supposed to be protected by a two-key system. The Government holds one key while the President holds the second key but the speed at which this two-key system can unlock the past reserves is too fast for comfort.
I would like to know when was the request for the $4.9 billion draw-down made? How long did it take the President to give the in-principle approval? Does the President or the Council of Presidential Advisers know for certain what the Government intends to do with its substantial current reserves before allowing it to draw down on past reserves?
The Finance Minister has also stated that this draw-down on reserves is to pre-empt the severe consequences that this economic crisis could have for our economy and society. Can a pre-emptive spending rationale be a compelling reason for the President to unlock the reserves?
The unlocking of our reserves, as witnessed by this House in the past 3 to 4 months, is fast becoming like a non-event. Surely Singaporeans deserve to know the full rationale of the draw-down by the Government despite having a healthy kitty.
Jobs Credit
Next, I would like to touch on the Jobs Credit scheme that is designed to encourage employers to keep their workers on their payroll.
The National Wages Council has recommended that companies may implement a wage freeze or wage cut to remain competitive. In addition, workers are already being asked to accept lower bonuses, no-pay leave and shorter work-week. There is also the flexi-wages scheme which the Government has been promoting under the tripartite system for years to enable employers to cut wages of workers during downturn.
All these measures are designed to help employers cut costs. The Jobs Credit scheme pays employers a cash grant incentive of 12% of the first $2,500 of the wages of each employee who is on the CPF payroll. The cash grant is payable every quarter beginning March 2009. The scheme seeks to reduce the costs of employing Singaporean workers for businesses during the crisis.
The question is, how effective would cash grant of 12% of wages be in times of such uncertainties? When confronted with declining sales and demand, the most logical thing to do for most businesses, especially SMEs, is to cut wages and bonuses. If sales eventually cannot sustain the overhead cost, I doubt a 12% cash grant on wages will help to prevent retrenchment.
Sir, between waiting 3 months for a $900 cash rebate from the Government versus saving $7500 immediately by retrenching a worker, which choice does the Government think a struggling employer will make?
On the other hand, the Jobs Credit scheme will indirectly favour big companies which may be still profitable and have no intention to retrench workers. The Straits Times article on Budget 2009 published on 24 January reported that Sheng Siong Supermarkets will receive $567,000 a month or $6.8 million a year in cash grant under this scheme. I am sure NTUC Fairprice, with a staff strength of 6,000 and a no-retrenchment policy, will benefit even more. Are we using our reserves to increase the profits of profitable companies in this downturn?
To save jobs for Singaporeans, the Government must put in place policies that put Singaporeans first at all times. Opening up the economy here to cheaper foreign labour without first taking good care of our own people will make Singaporeans the first to go in a recession. Isn’t Jobs Credit designed to make Singaporean workers more affordable so that employers will have an incentive to keep them instead of foreigners on their payroll?
In the longer term, the Government should contemplate to devise some schemes which will make Singaporean workers more competitive on the job market and incentivize the employers to employ Singaporean workers. The current system of foreign workers quota works when the economic cycle is long with a tight labour market but could be a problem if the future economic trend is one with shorter cycles of ups and downs.
Sir, I understand that SMEs account for 6 out of every 10 Singaporean jobs as mentioned by the Finance Minister in his Budget Speech. Many SMEs experience cash-flow difficulties beyond what the Jobs Credit scheme may help. If we were to conduct a poll for SMEs to vote which they would prefer, Jobs Credit or Credit Facility, I believe SMEs will choose the latter.
Helping SMEs & Special Risk-Sharing Initiative
Apart from enhancing the SME loan schemes in November 2008 by increasing the government’s share of risk to 80% and introducing a Bridging Loan Programme for working capital loans with the Government taking 50% of the risk, there is no new measure in this Budget to help SMEs secure the much needed credit facility to survive in a shrinking economy.
The Finance Minister has said that it is too early to assess the effectiveness of the enhancements made to the SME loan schemes last November but time is of essence in this economic down turn. Some businesses may not have enough resources to wait long for the banks to get back to them on their loan applications.
Under the Special Risk-Sharing Initiative announced in Budget 2009, the Government will increase its share of risk on the Bridging Loan Programme from 50% last November to 80% now. Can we infer from this increase that the banks are still not lending enough?
Sir, if the Government can see the need and urgency to increase its share of risk for the Bridging Loan Programme in a short span of 2 months just to stir the banks from its credit slumber, think about the stress and anxiety SMEs must have endured trying to secure credit lines since the collapse of Lehman Brothers in September 2008.
I urge the Government to work fast with the banks to free up the credit market. It was reported in the Straits Times that bank lending fell for second consecutive time in December 2008.
This is a fast shrinking economy. It is natural for banks to worry about lending money to companies with weak business models or plans. Then again, would any bank believe a rosy business plan in this economic climate? This is why the Government must come in to resolve the issue. When more SMEs fail, more Singaporeans will be out of job. It is a loss-loss situation for all.
Sir, if the banks are still not lending in the coming months, what other measures are there in place to keep credit flowing for SMEs? I believe this is a time for Singapore to get innovative and perhaps even bold in dealing with the credit crunch. The Government must take the lead to unfreeze the credit market if all the prodding on banks yields no tangible results.
Continue on next page....
