Tharman Shanmugaratnam
Singapore
“EDB conducts regular reviews to GIP to ensure its effectiveness in attracting only top-tier business leaders who are interested to drive the growth of their businesses and investments from Singapore.”
“MAS may vary the size of the additional capital requirement imposed on the bank and take other regulatory actions depending on the outcome of ongoing reviews. MAS requires all retail banks in Singapore to ensure that their mission critical systems supporting digital banking are resilient.”
“This question will be answered in the reply to Dr Tan Wu Meng's Parliamentary Question filed for tomorrow's Sitting. [Please refer to "Probe into Recent Disruptions of DBS' Digital Bank and Physical ATM Services and Preventive Measures Implemented", Official Report, 5 July 2023, Vol 95, Issue 107, Written Answers to Questions for Oral Ans…”
“Borrowing from the banks is one of the ways in which MAS carries out MMOs to soak up such excess liquidity. Like other central banks, MAS does this daily through an auction system, enabling MAS to withdraw liquidity through the Primary Dealers that submit the most competitive prices.”
“To mitigate consumer over-indebtedness, the Monetary Authority of Singapore (MAS) requires financial institutions (FIs) to implement a range of safeguards when extending mortgage loans and unsecured credit.”
“The Monetary Authority of Singapore imposes on external asset managers the same stringent regulatory standards for anti-money laundering and countering the financing of terrorism that it imposes on banks.”
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“5 billion is a very expensive way of saving, let us say, 100,000 jobs, he said, or $45,000 for each job saved, is really missing the point. The Jobs Credit is a macro-economic injection to support the Singapore economy, but designed in a way that preserves the interests of all Singaporean workers – by supporting their jobs, their wages and keeping their full CPF contribution intact. The benefit is not just felt by those who would otherwise have been retrenched, but by all Singaporean workers. Ms Denise Phua and Ms Cham Hui Fong asked for the Jobs Credit to be tilted more in favour of lower income or older workers. We should keep the Jobs Credit Scheme as simple as possible. It has only one slant – it provides more credit to the employer for workers with median wages or below. But it applies to all firms equally. We have other schemes that provide further support for lower income and older workers – the Workfare Income Supplement (WIS) scheme and the restructured CPF contribution rates that were implemented with Workfare. And as I have just explained, the design of the Jobs Credit Scheme in effect gives older workers an advantage because the employer gets the full 12% of their wages despite having a CPF contribution rate that is much lower than for younger workers. Let me just very quickly address an issue which Mr Inderjit Singh raised about the Obama Administration's earlier proposal. I think some time in January, they mooted a proposal for a Jobs Tax Credit Scheme, which they subsequently dropped. Dr Amy Khor touched on this yesterday as well. This was a different proposal.”
“If the workers are kept, the Jobs Credit will continue to be earned. But the Jobs Credit, once a business earns them, is a resource that they can deploy flexibly. We should not introduce rules to circumscribe how the businesses use the funds. The flexibility of the Scheme is, in fact, its key advantage because it allows businesses to use the funds where they are most needed to help them survive and grow. Businesses can use it in many ways. For example, they can use the money to: (i) avoid wage cuts for their workers; (ii) invest in training their people; (iii) hire new workers. As Dr Loo Choon Yong told us, this is how Raffles Medical intends to use the Jobs Credit; (iv) pass on the savings to consumers so that they can improve their sales; (v) pay suppliers on time – which will in turn help these suppliers keep their workers; and (vi) keep it as working capital or as a buffer against a decline in revenue, so that they can avoid having to cut jobs down the road. We have to let the businesses decide depending on their own circumstances. Whichever way the businesses spend the Jobs Credit – either directly on their workers, or to keep up payments to their suppliers, or through other ways to support the business – the money will have a multiplier effect on the economy and go towards supporting jobs. As Mrs Josephine Teo said, there are two priorities that matter most for the vast majority of workers – saving jobs and minimising the impact of the recession on wages. The Jobs Credit will make a real difference to all Singaporean workers on both fronts – jobs and wages. As Minister Lim Swee Say explained yesterday, it also protects their full CPF contribution. So to say as Mr Siew Kum Hong did, that $4.”
“The Jobs Credit is a large fiscal intervention in the economy. It is first and foremost a large fiscal intervention in the economy. At $4.5 billion, it is almost 2% of GDP, which means that the Jobs Credit alone is larger than the total fiscal injections made by most of the other countries that are tackling this crisis. The Jobs Credit alone is a larger fiscal intervention – more Government money being put in the economy than what most other countries are doing for their entire fiscal packages. The Jobs Credit is also equivalent to a 50% reduction in total corporate taxes. For the SMEs, because their effective corporate tax rate is actually well below 17%, in fact 8 to 10% typically, receiving the Jobs Credit effectively means the profitable SMEs are paying zero taxes for this year; and for the unprofitable SMEs, they get their credit anyway. What we are essentially doing is injecting $4.5 billion into the economy, in a way that will not only have a significant multiplier effect but will help preserve the interest of Singapore workers. We are quite realistic about this. It will not be possible to avoid retrenchments and an increase in retrenchments in this recession. The Jobs Credit and SPUR cannot prevent an increase in retrenchments this year. But this significant injection – 2% of GDP or 50% of total corporate taxes paid – being put into the economy and given in a way that is tied to Singaporean jobs, will make a difference to the pace and scale of job losses. How will businesses use the Jobs Credit, and how does it help Singaporeans? The Jobs Credit is earned through employing Singaporean workers. This means that if the workers are retrenched, the businesses would not benefit further Jobs Credit for those workers.”
“For a worker earning $2,500 or less, the Jobs Credit would effectively mean a CPF employer's contribution cut of 12%, from 14.5% down to a mere 2.5%. That is the effective impact of the Jobs Credit for the low income workers - for anyone below $2,500 in wages. So, that is the first advantage - it gives more to the low and middle income workers. Secondly, the Jobs Credit has much greater simplicity. Unlike CPF contributions, which are tiered by age and wage, the Jobs Credit gives the employers the full 12% of wages for all workers on the CPF payroll. Thirdly, for the same reason, the Jobs Credit also provides older workers in particular with much greater support in terms of their employability, compared to if the Government had instead paid for the employer's CPF contribution. This is because the employer contribution rates for workers aged 50 and above are below 12%. For older workers in the lower-income group, especially, it is well below 12%. For example, for a worker between 55 and 60, and earning $900, the employer's contribution rate is 5.3%. This means that if we chose the approach of the Government paying for the employer's CPF rate, the Government putting money directly into an employee's account, the employer would receive only 5.3%. With the Jobs Credit, on the other hand, the employer receives the full 12% of the older worker's wage. This provides a better incentive for employers to retain and hire older Singaporeans. By doing this outside the CPF contributions scheme, we are also making clear that this is a temporary scheme to address the crisis, and can be lifted once the global economy picks up and business confidence is restored. Mr Low Thia Khiang and Mr Siew Kum Hong had in particular questioned the effectiveness of the Jobs Credit.”
“Our labour MPs and union leaders have also strongly endorsed the Jobs Credit. They call it a pro-worker move, because it provides the best chance of securing employment and the feedback that they are getting from the employers has also been positive. Dr Lim Wee Kiak had asked why we had provided the Jobs Credit to companies instead of giving it to the employees directly, in other words by co-paying the employers' CPF contribution. Let me explain this issue. We are giving a Jobs Credit to the employer directly. This means the employer pays the CPF, and the Government provides a cash grant to the employer through the Jobs Credit after the employer has paid CPF. In substance, the Jobs Credit is equivalent to the Government paying the employer's CPF contribution. As I explained in the Budget Speech, the 12% Jobs Credit has the same impact for the employer as the alternative approach which would be for the Government to cut the employer's CPF contribution rate by 9%, and the Government then top up the employee's CPF account. Same impact. Both approaches keep workers' wages and CPF intact. There is absolutely no difference for the workers' CPF accounts. Both approaches help employers with their wage costs. For the employer, in cash terms, the amount of relief is the same, which he is then able to use wherever needed. However, the Jobs Credit approach has some important advantages: first, it provides greater benefit for lower and middle income workers' employability. The Jobs Credit of 12% up to $2,500, which is the median wage (the 50th percentile), is structured to give employers more incentive to retain lower income workers - which is where the threat of retrenchment is also higher on average.”
“Dr Lam Pin Min was just talking about assistive technologies for the aged and the disabled. I asked Mr Khaw Boon Wan, and he agrees that more has to be done by the Government working together with industry to develop these technologies. Mr Lim Boon Heng's Committee for the Aged is in fact looking at this. They have a sub-committee on the Silver Industry. I agree, too, with Dr Faishal that we should consider how we can be even bolder in our incentives, given the challenges that our start-ups and growth enterprises face in the difficult environment that we will see in the few years ahead. This is therefore our approach – broad-based assistance for all companies, but additional support for those that are looking forward and are most likely to take Singapore through to the next upturn. Jobs Credit: A key fiscal intervention The key support that we are providing to all companies, within the broad-based measures, is the Jobs Credit. Almost all MPs have expressed their strong support for the Scheme as a way of reducing job losses in the recession. Mr Low Thia Khiang and Mr Siew Kum Hong were the only ones who disagreed. Mr Low in particular felt that the Jobs Credit should not be given to profitable companies. Both he and Mr Siew felt that the 12% grant on wages will not help to prevent retrenchment. Their views are not shared by the vast majority of our businesses, especially our SMEs. Many have given feedback that the Jobs Credit would make a difference to what may otherwise have had to be a significant plan for retrenchment in this recession. The companies that are still profitable and preparing for growth are also thinking of hiring more workers. As Dr Ong Seh Hong said, this is why we must give the Jobs Credit now to profitable companies.”
“These are the company's own projections. The second example – and these are fairly typical examples – we chose a loss-making company. This is a real estate agency that is expecting losses this year. It will get a total of $97,000 this year, which it estimates will allow it to reduce its projected losses by 40%. So, that is how the broad-based measures work for the profitable companies as well as companies that may be viable but are making losses this year. On top of these measures, however, we are providing further incentive for companies that are investing for the future, whichever the sector of business they are in. We have allowed companies to accelerate write-downs of investments. We have made quite significant enhancements – we are more than doubling the capital allowance that the company gets in the first year after an investment – so the company can write off 75% in the first instance, up from 33% currently. In the case of service enterprises which are refurbishing their outlets, we are giving a 100% write-off in the first instance. We had also just enhanced our R&D tax incentives last year, which makes Singapore now one of the most attractive places for companies big and small to invest in innovation. This is on top of the many schemes that the Government has to support start-ups, which includes grants, risk capital and generous tax allowances. This way, we do not just preserve the status quo of our economy but we also give more support for the most dynamic and forward-looking companies. As both Mr Zaqy Mohamad and Dr Muhammad Faishal Ibrahim have emphasised, we have to do more to foster a business culture that promotes innovation, even in the recession. We need this in every sector.”
“We would like to identify viable firms those that are most likely to keep their workers through the crisis and grow employment thereafter. We would like to identify viable firms and focus our support on them. However, there is no workable way to sift out such businesses under current circumstances. Even good businesses can make losses in the recession and, indeed, many are making losses in the recession. So, we cannot, for example, look at companies that are paying corporate tax to identify the viable and strong businesses, because even good companies can make losses in a recession and may not be paying corporate tax. The best approach therefore is to go for simplicity and provide broad-based support to all businesses, regardless of whether they are profitable or loss-making, through the Jobs Credit, SPUR and the tax measures that we are introducing, such as property tax rebate and the loss carry-back scheme. Our approach, therefore, is to provide support to all businesses, including the stronger players because that is how we best enhance our chances of recovery. But we will also help loss-making enterprises so that those with viable businesses will be helped through their short-term cashflow difficulties and have a chance to turn around their businesses. The impact of the Jobs Credit and property tax rebates alone can be significant. We have looked at many real examples. We have sat down with the companies and actually looked at their projections for the year, following the measures that we have introduced. I will just give two quick examples, both small companies with about 15 to 20 staff. The first is in the packaging business. It will get Jobs Credit and property tax rebates totalling about $70,000 this year, which will increase its profits by about 10% this year.”
“When we come out of this crisis, Singaporeans will continue to have good jobs, and enjoy good income growth for the years ahead. In each of these areas – preserving jobs for Singaporeans, providing direct help for households, and preparing for the future – we have chosen our measures to achieve maximum impact on the economy. In other words, we have chosen fiscal injections that have the best economic multiplier. For the first and key objective of helping businesses so that they can help preserve jobs, we have taken a broad-based approach. Our aim is to help businesses in all sectors, both small and large companies, so that we maximise the support we provide for Singaporeans' employment. Ideally, we should not be giving equal support to all businesses. Some MPs have argued that we should be giving less support to the profitable businesses, and more support to the weaker ones. This would not be the right approach. If we do this, we will only be weakening the ability of the business sector to create employment, not just now but in the future, and we will be weakening the strength of the recovery in the economy. Every crisis is an opportunity for the re-allocation of resources from weaker players to the stronger ones. It is an opportunity for the business sector to be restructured in favour of companies with the most viable business models, the most sustainable cost structures or products, which are growing in favour in the market place. We should allow this re-allocation and not hold it back. It may even mean the movement of jobs from weaker players, who are unable to sustain their jobs, to the stronger ones. That is how we emerge fitter as an economy, and better prepare for growth when the recovery in the global economy comes.”
“It is important for us to focus our resources on the key objectives, and design our policies such that the best multiplier for the economy can be achieved. This means that some areas have to get less. If you want your key objectives to be achieved, they have to be forceful. This means that other objectives, the secondary objectives, have to get less. Trying to be as comprehensive as possible will dilute the impact of the Package, and those who need it the most, both amongst businesses and households, would get less. Ultimately, the Resilience Package is about Singaporeans – helping our people now, and securing the future for Singapore. We have shaped the Budget to focus on three key objectives, aimed at helping Singaporeans where it matters most. First, jobs for Singaporeans. This is the first and key objective and it is about helping businesses so that they can preserve jobs to the maximum extent possible in this recession. The largest part of the Package, therefore, comprises support for businesses through the Jobs Credit and SPUR, through the many tax measures, through the SRI to sustain bank lending to companies, and through our Government spending initiatives, which will create demand for our businesses. We are also creating jobs through substantially expanded Government hiring of 18,000 jobs. That is the first objective. Ultimately, it is about jobs for Singaporeans, working primarily through support for the business sector. Second objective – direct help for households. We are helping households directly, with something for everyone, but more for the lower and middle-income groups. Third objective – confidence in the future. We are preparing for recovery and to emerge more competitive for our next phase of growth.”
“I am sure Mr Inderjit Singh does not expect us to take in all of his proposals, but I use this to illustrate the point. With a basic deficit of 6% of GDP in FY2009, we believe that this is the right Budget for the times. To do more along the lines of some of the proposals, including some of the meritorious proposals, that have been raised in this House, would mean having to do less of some of the measures that we are implementing in this Budget. And that is the fundamental point in the design of any Budget. Our Package is a large intervention in one year. It already factors in a continuing decline in the global economy this year. We predicted growth of -2% to -5% for 2009 before this Budget, and that is still our projection for the year. Some MPs have asked for an off-budget package this year, even before this Resilience Package has been passed. Having just debated and not yet passed the Resilience Package, we should not be thinking of further measures in the near future. Of course, the Government will track events closely and, depending on how things develop, we are ready and able to do more over the course of the recession. Our mindset should be for a long campaign and not a quick downturn to be cured overnight. So, that is the first theme – have we sized the Budget right? Is this the right impact, especially the right impact for this year? And it is. Second, are we focused on the right objectives? Are we directing resources for maximum effect? The key decisions we have had to make in this Package are which objectives to focus on and where to put the most resources, so that we get the maximum bang for the buck.”
“We have designed our Package so that the measures could be rolled out quickly – in 2009 itself – to achieve broad-based impact across the economy. In particular, the Jobs Credit was designed to put money in the hands of all businesses quickly, and to be simple to administer. We had, in fact, considered giving a rental credit in combination with the Jobs Credit. But it would have slowed implementation, because a rental credit would have required declarations by companies and subsequent verifications. It is much speedier to implement the Jobs Credit, and at very low administrative cost, because it is based on readily available CPF data. We therefore decided to do away with the rental credit and increase the Jobs Credit to 12% of wages – so that the total impact and benefit to businesses would be roughly the same as if we gave both credits, but delivered much faster. Likewise, for GST Credits and the WIS Special Payment, both are given out in the form of cash and put money quickly into the hands of every Singaporean. The first cash payments will be made in March this year. So, when Members consider the other measures that they wanted the Government to have taken in this Budget, we first have to bear in mind that this is already a very large Budget, much larger, in fact, than most other countries are putting in place. Some of the suggestions proposed by the MPs do have merit. But we cannot implement every meritorious proposal without carefully considering what we are able to afford. For instance, if I were to take all of Mr Inderjit Singh's proposals, it would have cost an additional $5 billion. This is a ballpark estimate but probably not far off. It would increase our deficit by more than 50%, from $8.7 billion to about $14 billion.”
“The package we are implementing is large, timely and front-loaded so as to have a significant impact this year. The basic deficit of 6% of GDP is a major injection of Government money into the economy. On top of this, the Special Risk-Sharing Initiative (SRI) will help sustain bank lending to our companies. The quantum of loans that we are extending is not included in the basic deficit of 6% of GDP. It is on top of that. Our Resilience Package and the fiscal deficit resulting from it are, in fact, very large compared to most other countries. In the US, the Obama administration is seeking to get an $885 billion package approved by the Senate. However, in its current form, less than 30% of the package will be implemented within the first year. By some estimates, not much more than 20%. Its impact is therefore estimated at 1.8% of GDP for 2009. Germany's package amounts to 1.25% of GDP in 2009 and another 0.5% of GDP next year (in 2010). China's package of over four trillion yuan will be spread over a few years, and is therefore estimated to be about 2% to 3% of GDP for this year. The UK's £20 billion fiscal package amounts to 1% of GDP in 2009. Taiwan's NT$500 billion economic stimulus package, equivalent to about 4% of its GDP but implemented over four years, translates to about 1% of GDP each year. The deficit we will run is not just large compared to others. What we are doing is also different from that in most other countries, because they will have to borrow to fund their deficits. Their taxpayers will have to bear the burden in future. Singapore does not have to borrow. As Prof. Koo Tsai Kee, Mr Gautam Banerjee, Mr Ong Ah Heng and Mr Christopher de Souza and others have all emphasised, this is our key advantage in Singapore.”
“Mr Speaker, Sir, I thank all the MPs who have offered their views and ideas in what has been a very stimulating debate, and most of all for supporting this Budget. I have listened to every speech; in the one instance which I missed, which is Ms Irene Ng's speech, I read it afterwards. Members raised many issues and I would not be able to address all of them in this speech. This is the customary practice each year. Many Members have raised issues which rightfully belong to the Committee of Supply's debate and they will be taken up there. With regard to MOF, some issues like Government efficiency (which was raised by Mr Baey Yam Keng) and environment-related tax issues (which Mr Edwin Khew raised) will be taken up during the COS. There were many issues raised but they are all ultimately about whether this is the right Budget for the times. In particular, whether the Budget is of the right size to address the crisis; second, whether it is directed at the right objectives and whether we have designed the measures right, for maximum impact, and they will therefore be effective in helping Singapore through the crisis; and third, whether the Government is making the right move in tapping on past reserves to fund part of the Package. I will respond to the various issues raised in the debate, under these three broad themes. First, is this the right size? All governments are now focused on fiscal policy interventions to try to support their economies. It is a severe recession, and we are seeing continuing momentum of the decline, week by week literally. So, there is a consensus internationally now that fiscal responses have to be larger than in normal cyclical downturns, and further, that they must be focused on speedy implementation so that a real impact can be felt in 2009.”
“Qioptiq’s good labour relations have helped it ride through the ups and downs of the business. Every worker on the production line is trained in at least two different jobs. This way, when demand for products changes, as it does, they can be quickly re-deployed to different production lines. Even in the current economic climate, Qioptiq did well enough to pay good year-end bonuses, in fact just yesterday. Qioptiq is like many of our other companies, a description of how Singapore works – flexible, always learning, always improving as a team, so that we move up together. This global crisis will see a reshuffling of the deck. Some countries will move up, while others falter and fall behind. We will do everything we need to ensure that Singapore emerges stronger and more competitive, and we open up space against the rest of the field. Mr Speaker, I beg to move. [Applause.] (10) A nanometre is one-millionth of a millimetre.”
“But our real strength is in our flexibility, our ability to shift policy gears when required, and the way our people and companies respond to changes in the world by learning something new. Qioptiq Singapore has a factory in Jurong with 900 employees. It competes globally in the market for the highest specification optical products. When they first began production in 1975, things were a little simpler. Their key competitive advantage over competitors in the West was that Singaporeans could use wooden chopsticks to handle delicate lenses without damaging them. Thirty-four years later, its production lines require the most advanced optics technology as well as the most experienced craftsmen and engineers. Qioptiq succeeds because it keeps developing its people: locals who have grown their expertise with the firm, many of whom have been with the firm since its inception or early days, and bringing in foreigners who add to the expertise of the firm. Tom Chan is one of those who has been with them since the early days. I had the chance to meet him because I opened their new plant in Jurong in October last year. He started off as an apprentice in the company, armed with a Trade Certificate in Fitting from Pasir Panjang Vocational Institute (PPVI). He is now a Plano Production Manager. I did not understand what it meant, so I asked more questions. He is overseeing 60 workers, in one of the most exacting tasks within the business – producing plano prisms, where the standards of precision (or the standards of smoothness and flatness of the lenses) are measured in nanometres(10), measured in millionths of a millimetre. That is Tom Chan, started off with a PPVI Certificate, now a Senior Engineer-equivalent overseeing 60 people in the most high-precision tasks.”
“) (9) Lifelong Learning Endowment Fund ($100 million), Medical Endowment Fund ($100 million), ElderCare Fund ($100 million), National Research Fund ($400 million), CPF Deferment and Voluntary Deferment Bonus ($450 million), LIFElong Income (LIFE) Bonus ($260 million). *Cols. 1367-1368. CONCLUSION Singapore is tied to the fortunes of global markets. We are hit when the global economy goes down, and we move back up when it recovers. But being a global city works well for Singapore. Even including 2008, when our economy fell, we grew by about 7% per annum in the last five years. This is faster than the other Asian Newly Industrialising Economies (NIEs) (Hong Kong, South Korea, Taiwan), and well above growth in other countries with similar income levels. And it is also a strategy that has kept unemployment at amongst the lowest rates in the world. There is no reason why we cannot sustain this superior performance once the global economy recovers from this recession. Singapore has fundamentals that are going for it. Investors trust us. They see advantage in our tripartite system, our open and cosmopolitan society, and a Government that they know will work with businesses and Singaporeans to keep our economy competitive and our society cohesive. Our schools and tertiary institutions prepare Singaporeans well for opportunities at all levels requiring different skills. Our public housing policies give Singaporeans an asset that can appreciate over the long term. And the CPF gives them assurance that their retirement monies are safe and earn a guaranteed return, unlike many elsewhere who have seen the value of their pension plans fall in the crisis. These are fundamentals which will continue to set us apart.”
“Budget position The Resilience Package will result in a large deficit in our Budget position for both FY2008 and FY2009. As some of the measures of the Resilience Package will be implemented in March 2009, the overall position for FY2008 will now show an increased deficit of $2.2 billion or 0.8% of GDP. For FY2009, we expect the Basic Balance to be in deficit of 6.0% of GDP. The Basic Balance excludes transfers to endowment and trust funds as well as the contributions from Net Investment Returns. This is much larger than the deficit in the Basic Balance for the previous year(8) – difference of more than 5% of GDP – which means that we are imparting a large fiscal boost to the economy this year. (8) The Basic Balance for FY2008 was in deficit by $1.1 billion or 0.4% of GDP, before taking into account measures taken in Budget 2009 (which are to be implemented in March 2009). In total, we are making transfers to endowment and trust funds, including pre-committed transfers, of $1.4 billion in FY2009(9). Contributions from Net Investment Returns will be significantly higher in FY2009, at $7.7 billion, following the changes to the Constitution to effect the revised framework on spending from investment returns. (This compares with a Net Investment Income Contribution of $3.7 billion in FY2008, which was itself significantly higher than the average over the previous five years.) Our revised Overall Budget Balance for FY2009 will therefore be a deficit of $8.7 billion which is 3.5% of GDP. (Details are in Annex E*.”
“We had earlier sought the President’s approval in October 2008, when the Government moved to guarantee all bank deposits in Singapore, for that guarantee to be backed by past reserves. However, that remains a potential draw, and the probability of an actual government payout, and hence an actual draw on past reserves, remains low. Need for prudent fiscal rules It is only by practising fiscal prudence in normal times that we are able, in rare circumstances like today’s crisis, to draw on our past reserves. By consistently accumulating savings over the years, we are able to respond in a major crisis with the confidence that we are not storing up problems further down the road. We must ensure therefore that we keep to the practice in normal times of running a balanced budget over the course of a government’s term of office. We should also continue to avoid waste in government spending, and make sure we derive value in every use of taxpayers’ dollars. When we have large surpluses, as we did in FY2007, we make sure we save some for rainy days. Further, the Government must only draw on past reserves in exceptional circumstances, and be able to satisfy the President of why it is critical to do so. The present situation clearly justifies a draw on past reserves. The current global financial and economic crisis is the type of severe contingency that our reserves have been accumulated for. The two major measures that will be funded from past reserves are of a temporary nature, and will not be built into ongoing government programmes. We must therefore stay committed to our practice of prudence and living within our means. It is how we will safeguard and enhance our reserves as a key strategic asset of Singapore.”
“Tapping on past reserves now gives us the resources that we need to deal decisively with the current economic crisis and also ensures that we have all the resources we need to respond to the considerable uncertainties that lie ahead. It will allow us full flexibility to respond as the situation requires, and to pre-empt the severe consequences that this crisis could have for our economy and our society. The total cost to the Budget of the two extraordinary measures that we will fund from past reserves – namely, the Jobs Credit, and the Special Risk-Sharing Initiative for bank lending(7) – will amount to $4.9 billion (comprising $1.1 billion in FY2008 and $3.8 billion in FY2009). *Cols. 1361-1366. (6) Post-Secondary Education Accounts. (7) The new Bridging Loan Programme, new Loan Insurance Scheme and new Trade Credit Insurance Programme. The Government has made the case to the President and the Council of Presidential Advisers (CPA) for this cost of $4.9 billion to be funded from the past reserves, on grounds that the circumstances we face are exceptional, and the extraordinary measures that the Government is undertaking are temporary and will not be built into longer-term government programmes. The President has given his in-principle approval for this draw of $4.9 billion from past reserves. The President’s assent to the Supply Bill will be obtained after Parliament has passed the Bill. This is the first time we have sought the President’s approval for an actual draw on past reserves since the Constitutional framework for protection of reserves was instituted in 1991.”
“In some instances, the new borrowings have also put at risk the governments’ sovereign credit ratings – especially as the new debts come on top of substantial previous borrowings used to fund past deficits. Spain, Greece, Portugal and Russia have just seen recent downgrades in their credit ratings, while Taiwan has been "placed on negative outlook". In the UK, the bond markets have recently pushed up the government’s borrowing costs because of concerns over its increased borrowings to fund its response to the crisis. Unlike most countries, we do not borrow to fund the government budget. Our borrowings in the Singapore Government Securities market serve only to develop our capital markets and to provide a safe investment vehicle for the CPF Board. We will likewise not have to borrow to fund our response to the crisis. We will not have to burden either current or future generations with the need to repay our spending in the Resilience Package. Judicious use of past reserves to fund extraordinary measures The Government has sufficient savings built up during this term of government to fund the measures we are taking and the resultant budget deficit. Nevertheless, we have decided instead to fund the two extraordinary measures within the Resilience Package from our past reserves. We have built up substantial reserves for Singapore, well in excess of our liabilities. They are a valuable asset for us in responding to this unprecedented crisis. In view of the extraordinary circumstances, which require a commensurate response, the Government has sought the President’s approval to draw on past reserves to fund these two measures now, rather than wait till we exhaust the savings of the current government.”
“In the current downturn, the GST has also given us the revenue to provide additional benefits to Singapore households, and especially for our low and middle income families. The new NIR framework has also strengthened our resources. The Constitutional amendments, which we made last October, allow us to tap on more of the returns from the investment of our reserves. We now have an enhanced and steady stream of income which enables us to keep building for the future even in difficult years. We are pressing ahead with improvements in education, enhancing our competitiveness through innovation and R&D, and reinvigorating our infrastructure. No need to borrow The GST and NIR have therefore given us a stable revenue base that allows us to respond to this crisis both with significant immediate relief to households and businesses as well as to reduce taxes for the long term and make investments in Singapore’s future. However, the Resilience Package also contains temporary extraordinary measures which are not part of a normal countercyclical Budget – the Jobs Credit for all businesses and the Special Risk-Sharing Initiative on bank lending. These extraordinary measures will add to our deficit this year and should be separately funded. There are two ways of doing so – either by borrowing or by relying on our accumulated savings. Other governments are having to finance the major packages they are undertaking in this crisis by borrowing. They will have to raise revenues later in order to repay the borrowings. The markets are already making estimates of the amount of future tax increases or spending cuts that they will need to make in order to repay borrowings.”
“The Resilience Package aims first and foremost to save jobs, to the maximum extent possible in the recession. It will also provide direct support for Singaporeans, on top of the measures to help keep their jobs. It will strengthen our workers’ skills and capabilities and the competitiveness of our businesses, so that we are ready to seize opportunities in the recovery. Further, the Package allows us to press ahead with investments in a first-class infrastructure for a global city that will be known for its liveability, and the best possible upbringing for the young and care for the old. Prudent fiscal policies have given us critical resources Singapore’s advantage in this global crisis is that we have the resources to respond to the immediate needs of our businesses and households, while not compromising our focus on long-term initiatives. We can address our short-term needs without crowding out the long-term investments needed for our future. We have the resources to do this because we have for many years rigorously adhered to a prudent fiscal policy, spending within our means, maintaining a stable base of revenues, and building up a nest egg of reserves for contingencies. We have restructured our revenues over the last two years by raising the GST and amending the framework for spending out of Net Investment Returns (NIR). The GST has allowed us to put in place major social supports. It has enabled the Government to introduce Workfare, which provides a top-up to the wages of lower income workers on a continual basis. It also allows us to move ahead with significantly higher healthcare expenditures, including increased support for the low income and better care for the aged.”
“We will be spending about $200 million to get this project launched over the next two years and will be among the first in the world to implement such a system nation-wide. We are doing more to help those who fall ill in old age. We are building new community hospitals and boosting capabilities in treating chronic diseases such as stroke, heart and kidney failure, and other age-related conditions such as dementia. We are also enhancing the capabilities for long-term care, including rehabilitation, home care and palliative services after patients have been discharged from hospitals. This will help support family members and caregivers. We will spend $500 million over the next five years on these measures to improve long-term care for elderly Singaporeans. SINGAPORE’S FISCAL ADVANTAGE Mr Speaker, Sir, if I can now move on to our fiscal strategy and how we are going to finance this Budget. This is not a normal Budget. It is a not even a normal countercyclical Budget. The economic decline that we are seeing globally is the most severe and widespread that has been seen in the last 60 years. It has yet to bottom out. There remains considerable uncertainty as to when the major economies will recover, and no assurance that 2010 will be better than 2009. Singapore, highly exposed to the world, is going through the most serious downturn that we have experienced since independence. The Resilience Package, totalling $20.5 billion, is the largest the Government has undertaken in response to an economic downturn. It includes extraordinary measures to prevent a more severe loss of jobs and lasting damage to our economy. Depending on how deep and long the recession turns out to be, we are prepared to do more.”
“6 billion this year, and about the same amount in each of the next three years to support marriage and parenthood – with initiatives such as government-paid maternity leave, and infant-care and childcare subsidies. We are also going to be investing significantly more in education and health. Enhancing school education We are upgrading both the hardware and software of the education system. We are providing better facilities for an all-round education in every school and accelerating some projects like the roll-out of indoor sports halls. More importantly, MOE is enhancing both the size and quality of the teaching force and bringing in many others into our schools to collaborate with teachers in providing better attention for every child. Looking at recurrent spending alone, ie, leaving aside capital expenditure, we intend to spend an average of $9,200 per student in our schools each year over the next five years – or an increase of about 60% compared to the previous five years. Expanding healthcare capacity We are committed to a substantial expansion of the healthcare sector. Over the next five years, we will invest $4 billion in healthcare infrastructure, which will include the redevelopment of older hospitals, medical centres and a new hospital in the west, as well as seeing through existing projects like the Khoo Teck Puat Hospital in the north. MOH is also developing an electronic health records system accessible to authorised medical practitioners at our hospitals and polyclinics, and eventually extending to the community care sector. It will allow for more effective treatment of patients who may receive a spectrum of healthcare services from different providers.”
“Investing in energy-efficient technology will reap cost savings for companies and households in the long run. However, the upfront investments sometimes deter the private sector from making investments that are cost-saving over the long term. The Government will therefore provide incentives where necessary to encourage companies and individuals to invest in economically viable technologies. The Government itself will spearhead investments in improved energy efficiency for our own buildings. In total, we plan to spend $1 billion over the next five years on sustainable development initiatives. The funds will support programmes such as energy efficiency for industry and households, green transport, clean energy and the greening of our living spaces. In so doing, we hope to catalyse the growth of a vibrant cluster of firms with expertise and capabilities in these areas, complementing our R&D efforts. Already we have a base of global alternative energy companies, including the big boys like Neste Oil, who are locating their operations in Singapore. New players are also sprouting up. Like JOil, which has developed elite and high yielding Jatropha seedlings using locally developed plant genetics technology. Set up last year, it has now secured a multi-million dollar partnership with Tata Chemicals to market the seedlings in India and East Africa as an economical and sustainable starting source for the production of bio-diesel. Best place for families The best home for Singaporeans must be the best place to start families, to help them nurture their young and to look after their old. We will be spending $1.”
“In addition to Marina Bay, we will invest in new regional commercial nodes such as Jurong Lake District, the new Kallang Riverside and Paya Lebar Central. We will also rejuvenate our public housing neighbourhoods including enlivening the public spaces within our estates and pushing ahead with the ABC Waters programme. We are linking together all parts of the island through a comprehensive road and rail network. And we will spend more to maintain and upgrade the plumbing of the city – the basic amenities such as our drainage and sewerage network. Sustainable development The Government has over the last year been developing our sustainable development blueprint for Singapore. MEWR and MND will be discussing our thinking and plans in greater detail at the COS. Sustainable development is not new to Singapore. We have always had to work within the constraints of being a city state with no natural resources and a high population density. Over the years we have developed expertise in areas such as urban planning, water and waste management and green technologies. Organisations like the World Bank and the Asian Development Bank are now working with us to share our expertise with other countries. However we will have to invest more in sustainable development in the coming years to provide Singaporeans with a high quality living environment while our economy continues to grow. To achieve both these objectives, a high quality living environment and economic growth, we need to optimise the use of key resources such as land, energy and water. There is also an economic imperative for sustainable development. We need to ensure that our use of scarce resources such as water and energy is efficient so that we can reduce costs and our susceptibility to global energy shocks.”
“– Fourth, we will spend more on our education and health infrastructure. Expanding and accelerating infrastructure spending We will increase public sector construction spending significantly in 2009. We will proceed with contracts worth $18 billion to $20 billion this year, significantly higher than the $15 billion contracted in 2008 and $6 billion in 2007. The significant ramp-up in spending this year reflects plans that the Government had already formulated such as for MRT and road networks, which we are proceeding with despite the crisis. We are also bringing forward $1.3 billion of government projects to 2009, that would otherwise have taken place later. We had previously deferred some of these projects to avoid exacerbating the over-heating construction sector and to avoid adding pressure to construction costs for the economy. Others are projects which had been due over the next two-three years that we have decided to bring forward. The projects will comprise smaller infrastructural contracts worth up to $50 million each, which can be taken up by our small and medium-sized contractors. This segment of the industry is already seeing significant softening in demand. The projects we brought forward are wide-ranging – from HDB lift upgrading to building of park connectors and upgrading of military facilities. The Government will continue to monitor construction capacity closely in order to adjust the pace of public sector construction projects. Developing suburban nodes We will continue to develop both a distinctive business hub in the centre of the city and new suburban hubs that will de-centralise economic activity and create jobs closer to home.”
“We will likewise increase funding to the CCC-Comcare Fund to $7 million a year, for the next two years. The SHGs and grassroots organisations are best placed to provide assistance on a flexible basis to families who require urgent and temporary assistance. Fourth, I will provide greater tax incentive for social enterprises – Companies Limited by Guarantee (CLG), set up by individuals to serve a core social objective. Social entrepreneurs are now making a mark, and we should encourage them to grow and add a new dimension to our social sector. One example is Barista Express Café which provides supportive employment to help former psychiatric patients re-integrate into society. I will extend the tax exemptions for start-ups to Companies Limited by Guarantee from YA2010. (Details are in Annex D.) In total, we will be providing direct support to households and community groups amounting to $2.6 billion in 2009. This is on top of the help that Singaporean households will get from our jobs initiatives – the Jobs Credit, the WIS Special Payment and SPUR. These measures should help our families see through the crisis this year. They also seek to bolster the community support networks that remain at the core of Singapore’s collective approach to helping the less fortunate in our society. BUILDING A HOME FOR THE FUTURE The Resilience Package provides a further boost to investments in making Singapore an extremely liveable global city and the best home for Singaporeans. We are pushing ahead in four areas: – First, we will expand and accelerate public sector infrastructure spending. – Second, we will develop suburban nodes and rejuvenate our neighbourhoods. – Third, we will push ahead on sustainable development.”
“I will add $100 million each to the ElderCare Fund and Medifund this year. Financial assistance for students We will also do more to ensure students from families in need continue to have every encouragement. MOE will enhance the financial assistance schemes for students in our schools, and introduce a Short-Term Study Assistance Scheme (SSAS) for students in our ITEs, polytechnics and autonomous universities. This will help students whose families face financial difficulties during the economic downturn. These enhancements will cost an additional $20 million a year. Details will be announced at MOE’s COS. Support for charitable giving and the community We will introduce several measures to support enhanced community initiatives at this time. First, to encourage greater charitable giving this year, I will increase the tax deduction for donations made in 2009 to Institutions of Public Character (IPCs) and other approved institutions from 200% to 250%. This amounts to a significant Government contribution each time an individual or corporation makes a contribution. (Details are in Annex D*.) Second, we will provide an additional $15 million to support government-funded voluntary welfare organisations (VWOs), bringing the total to about $220 million for the year. We will be extending the Jobs Credit that I announced earlier to VWOs as well, as they too employ workers. Further, as a longer-term measure, we will put more resources in training social workers, so as to strengthen the capacity of the VWO sector and achieve a better reach to families at risk. Third, funding to Self-Help Groups (SHG) will be increased to a total of $9 million a year for the next two years.”
“Increase in Additional CPF Housing Grant On top of these measures that all households will receive, the Resilience Package will provide enhanced benefits to specific groups. We will ensure that public housing remains affordable to first-time home buyers. The Government has decided to increase and broaden the Additional CPF Housing Grant (AHG) for first-time home-buyers. We will increase the maximum AHG quantum from $30,000 to $40,000. At the same time, we will raise the household income ceiling from $4,000 to $5,000. Another 2,700 first-time home-buyers will benefit from the enhanced AHG every year, bringing the number of beneficiaries of the AHG scheme to 8,000 yearly. The enhancements will more than double the estimated cost of the AHG scheme to approximately $150 million per year. Targeted measures for vulnerable We will enhance funding for the most vulnerable groups. The Government will increase the Public Assistance (PA) rate for single-person households by $30 from $330 to $360, taking into account the increase in cost of living over the last year and the possible difficulties that those in the extended family and the community may have in supporting PA recipients at this time. For Government pensioners, the Government has also decided to increase the Singapore Allowance by $20 per month to $240. At the same time, we will top up the Public Transport Fund, to bring it to $10 million and ensure that it is sufficient to fund public transport vouchers for all low-income households who need help. Further, we will provide more resources towards ensuring that healthcare remains affordable for low-income Singaporeans. The ElderCare Fund and Medifund have been well-utilised in helping needy patients.”
“Currently, those who own higher value homes or secondary residences have to pay income tax on the Net Annual Value of their residential property. I have decided to remove this tax on Net Annual Value with effect from Year of Assessment 2010. (Details in Annex D*.) All households will benefit The benefits that households will receive as a result of these measures will be on top of what was previously committed for 2009 such as U-Save rebates. Taking all the measures together, Singaporean households will receive substantial benefits from the Government this year. Low-income households and those with elderly family members will get the most benefits. A retired couple in their 60s who live in a three-room HDB flat, together with their working daughter with relatively low-income, can expect to receive about $4,500 in benefits in 2009. However, the Resilience Package will provide significant benefits for the middle class too. For example, take a family of four living in a five-room HDB flat with working parents earning $4,500 and $3,000 a month and two teenage children. They fall within the upper-middle income group in Singapore. They will receive $2,200 in total in 2009. This will include about $800 in GST Credits and $270 in personal income tax rebates, $800 in PSEA(6) Top-Ups and $330 in U-Save, S&CC and property tax rebates. Most households will in fact be receiving benefits this year that exceed what they would have gained if the Government had instead cut the GST by 2%. Keeping the GST unchanged has afforded substantial benefits for households, but more importantly, the distribution of benefits favours low and middle-income households. This is the right strategy for the times.”
“To help households with their immediate needs, the additional GST Credits will be paid out on 1st March 2009. This additional payout will cost the Government $580 million. As before, more GST Credits will be given to the low-income and the elderly. For example, a Singaporean retiree (aged 60 or above) living in a four-room HDB flat, will get an additional $400, or a total of $800 in GST Credits and Senior Citizens’ Bonuses in 2009. S&CC and rental rebates I will also provide an additional one month of Service and Conservancy Charges (S&CC) rebates for those in one to three-room HDB flats, who will therefore receive a total of 3 to 4.5 months for this year. Those in larger flats will receive a total of one to two months of rebates. Further, I will provide an additional one month of rental rebate for eligible households in public rental flats. In total, they will get three to four months of rental rebates this year. Tax assistance to households To help households which pay income tax, I will give a personal income tax rebate of 20% for tax residents for Year of Assessment 2009. This will provide immediate reduction in their tax payable for last year’s income. The rebate will be capped at $2,000. This will cost the Government $457 million. We also want to help taxpayers who may have lost their jobs. Individual tax residents who have lost their jobs in 2008 or who lose their jobs in 2009 will be able to pay their personal income taxes this year in installments of up to 24 months, up from 12 months. This will help ease their cash burden. I will also provide a 40% property tax rebate for owner-occupied residential properties for 2009. These property tax rebates will cost the Government $75 million.”
“The Resilience Package will provide substantial support for Singaporeans during this downturn. SUPPORTING FAMILIES The key benefit that Singaporeans will derive from the Package will come from the measures to preserve jobs. That is the best way we can help households – to keep the breadwinners employed, so that they can provide for their families. We will complement these measures with direct assistance to all Singaporeans as well as targeted help for the most vulnerable groups. However, this cannot be a job for Government alone. Families must take care of their members, and the community must take care of families in need. Everyone must pitch in, because that is far more fundamental to keeping our social fabric strong. Especially now, during difficult times, efforts by everybody – donors, community leaders and volunteers from all walks of life – to help the needy and vulnerable, is what will tie us together and strengthen our society. The Government will encourage them on by providing additional support for their efforts to help the needy. Direct assistance to households Additional GST Credits The key problem that households faced last year was the rising cost of living, especially due to fuel and food prices. Inflation is now on a downward trend, although the absolute prices of many items remain high. However, many households this year may face reduced incomes, because of lower bonuses or wages and some pick-up in unemployment that is inevitable in the recession. I will therefore double the GST Credits that households will receive in 2009. Each household will get an additional payout of GST Credits, on top of the one that they will receive in July.”
“This will bring clusters of companies together to develop solutions for Government agencies, businesses and the public. Finally, in addition to these sums that we will spend in promoting enterprise innovation, we will continue to expand R&D funding for our universities and research institutes this year. I will also top up the National Research Fund by $400 million this year to support Singapore’s continuing push forward in R&D. Sharpening business capabilities We are providing significant support in this Budget to help companies with their cash-flow in the current difficult economic situation and to encourage them to preserve jobs as far as possible. We are providing strong incentives for those who want to take the opportunity now to make investments or undertake refurbishments in preparation for the upturn. We are also taking a further step to reduce corporate taxes to complement all our efforts to encourage enterprise and draw companies to Singapore in the coming years. At the same time, we are making a further push on innovation and R&D for enterprises small and large. Together, our efforts will sharpen our business and workforce capabilities across the board and help us emerge stronger in the recovery. Mr Speaker, with your permission I will continue later on with the measures we will implement to support Singaporean families in this downturn, and to strengthen our investments in both the social and economic infrastructure we need for our future. *Cols. 1359-1360.”
“Singapore is an emerging hub for firms in the interactive digital media arena. Two weeks ago for example, gaming peripherals company Razer launched the Razer Mamba, using advanced proprietary technologies developed out of Singapore. It is not your everyday mouse. It costs US$130 but is the fastest gaming mouse in the world. Many such examples are coming up. So we are emerging in this new space of interactive and digital media, both local companies and foreign players. To encourage the media and digital entertainment businesses to exploit intellectual property (IP) from Singapore, I will allow them to write down the cost of acquiring qualifying IP rights in two years instead of five years currently. Test-bedding ideas We will also do more to encourage test-bedding of new ideas. We will put $200 million in a Test-Bedding Fund to make Singapore a “living lab” for companies and entrepreneurs to nurture new ideas, test innovative solutions and develop future global businesses from here. The first wave of test-bedding will be based on areas where we have key strengths such as urban planning and traffic management, water management and lifestyle products and services. EDB and other agencies will invite and support private sector players to test, develop and implement new solutions in Singapore before exporting them elsewhere. Last year, we set up a Core Innovation Fund (CIF) to help private companies collaborate directly with Government agencies to develop innovative solutions for public services. We will set aside $180 million in the CIF over the next two years. In addition, the Government will take a more proactive approach in seeking collaboration with the private sector, through the use of Calls for Collaboration (CFC).”
“In the last Budget, we put in place substantially enhanced tax incentives for innovation and R&D, which makes Singapore one of the most competitive locations in Asia for corporate R&D and especially for small enterprises. So a small company, around the 80th percentile of tax-paying companies, and which would be paying an effective tax rate of around 9%, would find its taxes reduced to zero if it spends an additional $150,000 on R&D. We are complementing these tax incentives with a range of grants in this Budget to develop new capabilities and spur innovation amongst our enterprises. In total, we will commit $900 million in the next few years towards this effort. Capability development We will spend $130 million to enhance our grants and training schemes to encourage enterprises across various sectors to refresh and develop new capabilities. The Government will take a greater share of costs under SPRING’s existing capability development schemes and IE Singapore's internationalisation schemes. We will also widen the scope of activities that qualify for grants. Further details will be announced at MTI’s COS. We will add $45 million to the Maritime Cluster Fund (MCF) to support new projects that build business and manpower capabilities in the industry. We will expand our support for the media and digital entertainment industry where opportunities are growing rapidly. We will set up the $230 million Singapore Media Fusion (SMF) fund to provide grants to help local enterprises export content, applications and services to the world, as well as to build up a world-class media talent base. This will complement our plans to develop Mediapolis at One-North, which will help position Singapore as a leading media hub in Asia.”
“) Making innovation pervasive Besides helping businesses on their cash-flow and helping them to improve competitiveness by reducing taxes, we are going to make a further push forward on innovation, building up innovative capabilities. Innovation has to be pervasive in our economy, and through good times and bad. We have established a good foundation. Just recently, INSEAD ranked Singapore as Asia’s most innovative economy and fifth in the world in its new Global Innovation Index. We rate well on our legal and regulatory framework relating to intellectual property and ICT, and ease of starting businesses. But we have a lot of catching up to do in other respects, especially in securing competitiveness through unique and innovative products amongst our enterprises. We see it growing. There are more start-ups and smaller players who are making their mark by bringing innovative ideas to the market. Take local start-up Gothere.sg, for example. It was started by four Singaporeans in their 20s in April last year, who felt that there was a need to do more to help people make sense of the whole range of transport options in any part of the island and at a glance – the quickest and cheapest way to get from A to B. They wanted to provide far more detail than what Google maps have. So they developed their own maps for Singaporeans – they drove through every single road on our island to do this – complete with information on bus routes, train routes and ERP charges at different times of the day. Gothere.sg is getting more than 15,000 hits daily and is currently collaborating with the LTA to develop a user-friendly travel advisory for public transport journeys.”
“The current incentives inadvertently discourage resident corporates from having their funds managed from Singapore, as there are limits placed on their holdings in the incentivised funds. We will now remove all these limits on qualifying funds so that they can accept investments freely from resident corporates, in addition to resident individuals. This will allow our resident corporates to enjoy the full benefits of tax exemption on qualifying income derived by the funds. I will also simplify the rules for recovering input GST for the fund management industry. Further, I will make enhancements to the Financial Sector Incentive – Headquarters Services scheme and the Commodity Derivatives Traders scheme. (Details of the tax changes to promote the financial sector are in the Annex C-1.) Maintenance, Repair and Overhaul (MRO) Singapore is one of the largest and most comprehensive Maintenance, Repair and Overhaul (MRO) hubs in the Asia-Pacific. We account for a quarter of the total MRO market in Asia. To further enhance our competitiveness, I will expand the scope of GST zero-rating for the industry, and help facilitate the import of qualifying aircraft components and systems. (Details of the tax changes are in Annex C-1.) Auction, exhibition and wine-trading To encourage the growth of the auction and exhibition industry, for example in art and collectibles, as well as wine trading activities, I will suspend duty and GST on goods temporarily removed from Zero-GST or licensed warehouses for auctions or exhibitions. (These and other related measures are summarised in Annex C-1.”
“That is the current scheme. I will grant an accelerated capital allowance for equipment acquired this year as well as in 2010. Such investments can be written down within two years with 75% of the write-down taking place in the first year. Many of our service sector establishments also intend to use the period of the downturn to refit their business premises, in preparation for the recovery. Our restaurants, our retail outfits, many of them hope to spruce up – sometimes major renovations – in preparation for the next phase of growth. I will accelerate the writing down of renovation and refurbishment expenses to help these businesses. They will be allowed to write down these expenses fully within one year, from the current three years. This concession likewise applies to expenses incurred this year and the next. (Claimable in YA2010 and YA2011) Simplify our tax framework for corporate amalgamations Downturns are typically a time of opportunity for companies to merge, acquire or restructure. We will simplify our tax framework to make it easier for companies to restructure and rationalise. This will significantly lower the tax burden when a company acquires another and takes over all its assets and liabilities. Fund management Globally, the fund management business has contracted over the last year. It is a reflection of both the reduction in value of assets, as well as the fact that there have been little fresh inflows and some withdrawals. It is a global phenomenon. But it is a matter of time before it recovers - especially in Asia where wealth will be on an upward trajectory over the next 15 to 20 years. I will significantly enhance our tax incentives for fund management to reinforce our position as a leading Asian hub in the business.”
“They are a leading supplier of power systems and are actively engaged in our aerospace, energy and marine industries here. Rolls-Royce, which already has 1,300 employees in Singapore, intends to continue recruiting in 2009. It is also broadening the depth and range of both its operations and R&D work in Singapore. Likewise for Procter and Gamble (P&G). They have a regional HQ and R&D operations in Singapore, and also their first Asian perfume plant here. They are big in the beauty care business, globally. P&G expects continued growth in their business in Asia and is not letting up on recruitment in Singapore this year. Although nothing is recession proof, P&G calls its products “recession resistant” – people still want to look good in bad times. CIT cut from 18% to 17% for YA2010 We will take a further step to sharpen our competitiveness. I have decided this year to reduce the corporate income tax from 18% to 17% effective from YA2010. This will cost us $400 million to $500 million a year over the medium term. It is a signal of the Government’s continued and future commitment to being the best hub for enterprises, small and large, from all over the world. In particular, together with the changes we have made to the Partial Tax Exemption scheme over the last two years, our effective corporate tax rates are now lower than in any competing destination for small and medium-sized enterprises, and amongst the lowest for large enterprises. Encouraging investment in equipment and business renovation I will complement this cut in corporate taxes with an accelerated capital allowance regime to encourage investments. Currently, businesses can write down the costs incurred for acquisition of plant and machinery on a 3-year straight-line basis.”
“Third, a 20% concession in port dues will be granted to all harbour craft engaged in commercial activities. This will help to lower the business cost of port service providers. This is in addition to the increased rebates on aircraft landing fees which were announced in December. (Details are in Annex C-2*.) Further extension of the government fee freeze As a further short-term measure to help businesses, the Government will freeze government fees and charges with immediate effect, to the end of 2009. Like the fee freeze in 2008, it will be applied to all government-provided services (including all licence fees). Sharpening competitiveness and capabilities for innovation Reducing taxes to encourage investments The Resilience Package will provide further incentive for both local and foreign businesses to strengthen their operations here and make investments for the future. More companies are expected to shift to Asia where markets are expected to grow most rapidly. We will do more to anchor them in Singapore, investing in high-value production operations as well as coordinating their base of Asian activities from here. By lowering taxes and providing added incentives for them to invest in human capital and infrastructure, we will ensure that Singapore remains a compelling destination. Singapore still preferred location for MNCs 2009 is going to be a challenging year for attracting foreign investments. Globally, investments are down – not just foreign direct investments but investments within economies are down. However, EDB is confident of bringing in more than $10 billion of new Fixed Asset Investments (FAI). Many of the large global companies are in fact continuing to grow their investments in Singapore in the downturn. Rolls-Royce is an example.”
“With these temporary changes, the companies will be able to make the best use of all their sources of funds to meet business financing needs in Singapore at this time of credit tightness. All foreign incomes which have been earned before today will be exempted from tax when they are remitted, with immediate effect for one year. Transport-related taxes To provide further help to businesses on their cash-flow, I will grant rebates and concessions on transport-related taxes and fees. First, a 30% road tax rebate for goods vehicles, buses and taxis for one year. The rebate will take effect on 1st July 2009 and will yield savings of about $40 million for businesses. In addition, I will waive the special (diesel) tax for un-hired taxis for one year which will yield savings of about $6 million. MOT will work with the taxi operators and the taxi operator associations to have the savings passed on to taxi drivers. Second, I will extend the special tax exemption for Compressed Natural Gas (CNG) vehicles for two years till 31st December 2011. However, from January 2012, a CNG unit duty will be introduced at $0.20 per kg. With this further two-year extension of tax exemption, CNG vehicle owners would have time to adjust to the changes. The CNG duty rate of $0.20 per kg will be significantly below the equivalent duty that we currently levy on petrol(5). We will study the appropriate long-term CNG duty rate, which should be benchmarked against the prevailing petrol duty rate, taking into account the relative impact that these two fuels have on the environment. (The measures are summarised in the Annex C-1.) *Cols. 1319-1336; 1337-1358. [5] The CNG rate equivalent to $0.41 per litre of petrol would have been $0.53 per kg.”
“The Government will also extend the period for developers with qualifying certificates to dispose of all residential units in their developments, from two to four years, and allow developers to rent out unsold residential units during this period. In addition, we will allow the reassignment of Government sale sites and private land owned by foreign developers. Loss carry-back More of our businesses will make losses in the recession. To help them with their cash-flow, I will enhance the current loss carry-back relief system for this year and the next (YA2009 and YA2010). This enhanced system allows them to get a cash refund on taxes that they had paid in previous years. I will raise the cap on losses that can be claimed against past taxable income to $200,000 from $100,000 currently. I will also allow businesses to claim losses against their preceding three years of taxable income, instead of just the immediate preceding year under the current scheme. In addition, IRAS will allow provisional claims for the tax refund to be based on estimated losses (instead of waiting for the finalisation of their chargeable income and tax assessments). This will allow businesses to obtain their refunds much earlier – by six to 18 months in most cases. Foreign-Sourced Income Exemption Over the years, many of our companies have internationalised their operations and earned a growing proportion of their income overseas. To help these companies, I will temporarily expand the scope of the Foreign-Sourced Income Exemption scheme which was introduced in 2003 to cover all foreign-sourced income, including interest earnings. I will also temporarily lift the conditions that are currently required for foreign-sourced income to be exempted from tax when remitted to Singapore.”
“Property market measures I will provide a 40% property tax rebate for industrial and commercial properties for 2009. This will cost the Government about $800 million. The Government strongly urges landlords to pass on the benefits of this rebate to their tenants. Landlords should also consider further adjustments of rentals and more flexible leasing arrangements and payment terms, in light of the severe downturn in demand faced by their tenants. JTC, HDB and SLA will play their part by providing a 15% rental rebate to their tenants and land lessees, which exceeds the savings due to the property tax rebate. The rental rebate will also be extended to stallholders who are paying market rents in markets and food centres managed by NEA. IRAS will also be bringing forward its property tax assessments for 2009, in view of the change in market conditions. The assessed Annual Values of properties went up last year, in line with actual market rentals. Most property owners have therefore seen increased tax bills. IRAS’s move to accelerate assessments for this year will help property owners in addition to the savings they will be getting from the property tax rebate. I will also defer property tax for land which is approved for development. This will help developers which intend to hold back their developments that they had originally planned. The deferral will be for up to two years from today (until 21st January 2011), or the TOP date of the development, whichever is earlier. (Details are in Annex C-1*.) This measure will cost the Government $290 million per year for 2009 and 2010. To give further flexibility to developers to phase out their projects, the Government will allow a one-year extension of the project completion period for private residential projects.”
“Take healthcare for example, where our Singapore players have developed a strong reputation for top quality and reliable services, across a full spectrum of healthcare. The Asian healthcare market, valued at about US$240 billion last year, is expected to grow by up to 10% this year despite the global slowdown. AsiaMedic Limited, a locally-listed company which provides diagnostic imaging and specialist medical services, announced plans just this week to manage a diagnostic imaging centre in Abu Dhabi. Our larger players too are growing. Thomson Medical Centre (TMC) took a stake in a hospital in Vietnam last year. Likewise, Raffles Medical Group is still growing and sees a unique window of opportunity in this crisis to expand into other Asian markets. There are examples in other sectors. Singapore’s education is expanding abroad – from pre-school to tertiary providers, and offering a range of products such as software aimed at bilingual language learning. Singapore’s fashion brands too have taken off, and are still growing in the recession. Local brand Raoul, which started out in 2002, has over 30 stores around the region and in the Middle East and is now making its presence felt in London. Others like alldressedup are seeing their creations in stores and magazine covers around the world. We must also use this opportunity to enhance Singapore’s attractiveness to global firms. The multinationals are reassessing where they should put their investments around the world. We will give them more reasons to be in Singapore and to grow their operations here. Easing business cash-flow I will lighten the tax burden of businesses in the coming year.”
“The tax measures and grants that we will provide, together with the Jobs Credit and the substantial subsidies for training, will give companies significant support in this crisis. What we can do is to help sound companies weather this storm and sharpen their competitiveness. What we will not be able to do however, is to save companies that are inefficient or whose products have lost relevance or appeal in the marketplace. The speed of the decline in trade and economic activity in the last few months has understandably taken most companies by surprise. However businesses will soon have to reassess their strategies, in order to survive this crisis and to emerge in a better position. Even after the global economy recovers, the markets will not return to where they were before the crisis. The major measures we are undertaking in this Budget therefore are not aimed at preserving the status quo. How well companies are able to benefit from the Government’s support will depend on how they themselves review their business models, restructure, and put effort into improving their products and exploring new market opportunities. As with all previous crises, there will be opportunities for the entrepreneurial and the innovative. Many of our businesses are in fact beginning to look at new opportunities, even in the midst of recession. The emergence of the Asian middle-classes remains the big story for at least the next 10 to 15 years. China, India and regional economies like Vietnam are slowing down in the crisis but are widely expected to come back up. India, even today, has a booming domestic consumption market. Our companies have the skills and the Singapore brand to help them in these rapidly growing markets.”
“This will encourage banks to continue making adequate loan impairment provisions and bolster their financial strength to underpin continued lending in the downturn. Government providing unprecedented support; banks should play their part The programmes under the SRI will be in operation for a year but with possible extension for another year if the situation warrants. We estimate that this and the other enhancements the Government is making could lead to $11 billion of loans this year. (This includes $5.8 billion of government capital but a total of $11 billion of loans could be stimulated by these enhancements.) This is a major move by the Government. We had previously only taken on the risk of lending for secured loans to SMEs. We are now taking on substantially more risk including on loans to larger corporate players and on unsecured loans. We have to expect that there will be a cost on the government budget because not every loan will be recovered. But it is right for the Government to intervene in this fashion to help viable companies through this crisis so that they can keep jobs and prepare for the upturn. The banks have in fact fed back to us that these Government measures to share a very large portion of the risk will make a difference. The Government indeed expects that the banks will take advantage of these schemes, and play their responsible part to ensure that viable companies continue to get the funding they need to see them through the crisis. ENHANCING BUSINESS CASH-FLOW AND COMPETITIVENESS Preparing for opportunities We will complement our initiatives to preserve jobs and to catalyse bank lending with other measures to support business cash-flow and strengthen Singapore’s competitiveness. This is the third component of the Resilience Package.”
“We will also increase the Government’s share of risk on these loans from 50% to 80%. Further, the new BLP will enable banks to set their own interest rates. This will allow higher-risk borrowers to still gain access to credit, even if it is at a higher interest rate. However, with the Government taking the bulk of the risk at 80%, I am sure that the banks will be fair and price their loans reasonably. The new BLP will apply to all new loans from 1st February 2009, and will include refinancing of existing loans when they fall due. The scheme will be in operation for one year in the first instance and cater to loans of up to four years maturity. We welcome all licensed banks in Singapore to participate in the programme. Trade Financing Second, the Government will take on a significant part of the risk in trade financing. This is an important dimension for companies that already have orders. They need loans to fulfill their orders as well as insurance against the risk of their buyers defaulting on payments. The current trade financing schemes are working well but face constraints because of the limited private insurance capacity and reduced risk appetite in the industry. Mid-sized and large exporters have had difficulty obtaining loans on the scale they need. To address the situation, the Government will step in to share the risk of trade financing, including 75% for trade loans. Further details of enhanced and new loan schemes are set out in Annex B* and will be elaborated upon by MTI shortly. Besides the SRI, I will extend the tax deduction on loss provisions made pursuant to Monetary Authority of Singapore (MAS) Notice 612 for banks, as well as other equivalent MAS notices for finance companies and merchant banks, for three Years of Assessment.”
“However, we will not take over the lending business ourselves. The credit decisions are best made by the banks themselves because they are the ones who have the direct relationships with their customers and a close understanding of their businesses. The banks also have the expertise in credit assessment across a wide range of businesses that the Government does not possess. In November 2008, the Government announced enhancements to our SME loan schemes. In particular, we enhanced the Local Enterprise Finance Scheme (LEFS) and Micro Loan Programme (MLP) to increase the government share of risk to 80%. We also introduced a Bridging Loan Programme for working capital loans, with the Government taking 50% of the risk. It is too early to assess how effective these enhancements will be. However, since the introduction of these enhancements, there has been significant increase in applications by firms and approvals by the banks. We will now move to extend Government support to a broader segment of the credit market besides the SMEs. We want to help other viable companies, especially the mid-sized ones, who do not have significant internal sources of funding and need access to credit to sustain their operations. Further, the Government will for the first time, share in the risks of trade financing. We will do this under a new, Special Risk-Sharing Initiative (SRI). It will have two components. The New Bridging Loan Programme First, we will introduce a new Bridging Loan Programme (BLP), that will be substantially enhanced from the scheme introduced in November. The new BLP will cater to loans of up to $5 million (up from $500,000 currently), which will meet the working capital needs of most mid-sized firms, and also some of the larger ones.”