JOBS CREDIT SCHEME

JOBS CREDIT SCHEME:

(Extension): 1.

Mdm Ho Geok Choo asked the Minister for Finance given that it may take three years or so for the Singapore economy to register healthy growth figures, what plans does the Government have with respect to the Jobs Credit Scheme.

2.

Mr Liang Eng Hwa asked the Minister for Finance (a) whether the measures in the Resilience Package such as the Jobs Credit Scheme and the Special Risk-sharing Initiative have achieved the results intended; and (b) what factors will be taken into account when deciding whether these measures should be extended or fine-tuned.

3.

Mr Teo Siong Seng asked the Minister for Finance (a) if the Government will consider extending the Jobs Credit Scheme beyond the current year to give local enterprises support and confidence to sustain their business and to continue saving jobs in view of the uncertain economic recovery; and (b) when will the Government announce its decision to withdraw or extend the scheme so that businesses can do forward planning and budgeting for the next financial year.

The Minister for Finance (Mr Tharman Shanmugaratnam): Mr Speaker, with your

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permission, may I take Question Nos 1 to 3 together?

Mr Speaker: Yes.

Mr Tharman Shanmugaratnam: Sir, as the Prime Minister has announced on 13th October 2009, the Jobs Credit Scheme has been extended for half a year, with two more stepped-down payouts in March and June 2010. Whereas the Jobs Credit is currently calculated based on 12% of an employee’s salary (up to the first $2,500), the two additional Jobs Credit payments will be based on 6% and 3% of the salary. The Special Risk-sharing Initiative (SRI) expires in January 2010, and the Government will monitor the situation in the coming months before deciding what should follow it.

As the Prime Minister had also stated, the Government will be introducing and enhancing other measures suitable to the new phase of the economy. We want to support companies in their efforts to grow, restructure and raise productivity. The measures will take into account the proposals of the Economic Strategies Committee. They will also complement SPUR, which was introduced as a two-year programme and will be kept for the full period until end 2010.

Mr Liang Eng Hwa had asked if the Resilience Package measures such as the Jobs Credit and SRI had achieved their intended results. The Package is generally assessed as having mitigated the scale of economic decline that Singapore would have faced and helped avert major job losses. Despite the sharp fall in our GDP resulting from the global recession, unemployment went up moderately and local employment actually increased by 7,000 jobs in the same period.

The Jobs Credit Scheme, in particular, has been strongly supported by both employers and workers. A survey conducted by Ministry of Manpower from

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May to July 2009 showed that the scheme was having a positive impact in helping companies and workers cope with the downturn. About three in four (73%) companies which had earlier plans to lay off workers reported they would postpone or reduce the number of workers to be laid off, as a result of Jobs Credit.

Reducing the immediate loss of jobs has not been the only benefit of the Jobs Credit, however. Companies receive the Jobs Credits based on the number of local workers they employ but the money they receive can be used in many ways to help their business and employees. On the evidence we can gather this has included using the money to avoid wage cuts or reduce the scale of wage cuts; to invest in their people; to pass on the savings to consumers; or to pay suppliers on time. It is not possible to estimate the full impact of the scheme with any precision. But whichever way companies use the Jobs Credit, the scheme amounted to a significant fiscal injection that would have had a multiplier effect on the economy, and thereby helped support more jobs.

The Special Risk-sharing Initiative (SRI) has also proved beneficial. It has helped to stimulate bank lending to SMEs and ensure that a broader segment of companies have access to credit to sustain their operations. In the first eight months of the enhanced Government measures to share risks with banks (from February to September 2009), the 16 Participating Financial Institutions (PFIs) registered loans worth about $4.9 billion under the various SME financing schemes. This is about seven times the value of loans approved in the same period last year. SMEs especially have benefited from the SRI. More than 90% of the loans approved were granted to SMEs and these loans accounted for about 70% of the total loan quantum approved.

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Mr Liang Eng Hwa (Holland-Bukit Timah): Sir, in the recent G20 Summit, which the Finance Minister attended, the leaders cautioned against any premature withdrawal of the stimulus measures. I would like to ask the Minister what are our exit strategies for the $20.5 billion Resilience Package? Secondly, given that we are expecting slower-than-typical growth rates in the next few years, how would this exit and reduction in measures in this Package affect the momentum of recovery? Thirdly, the Prime Minister has said the extension of the $675 million Jobs Credit Scheme will be funded from the Government Budget and not from reserves. I would like to ask the Minister what our Budget position would be like in the financial year.

Mr Tharman Shanmugaratnam: Sir, it is too early to talk about the Budget position for the next fiscal year but I do not expect a significant swing away from the fiscal stimulus position that we have this year. There are a few reasons for that. First, our expenditures are going up. We are spending a lot more next year, and in the coming years, compared to the past. If you take infrastructure alone, we are spending a lot more – the Marina Coastal Expressway, the Circle Line, the Gardens by the Bay. Infrastructural spending is on the uptrend. We are also spending more on education, healthcare and continuing education and training. When you add all together, our expenditures are going up, and will be higher next year compared to this year. Our revenues will not fully compensate for that. Corporate tax revenue, in particular, can be expected to be dampened by the fact that this year was a bad year for most companies. Our tax revenues next year will reflect what happened this year as well as last year. So revenues will not go up by as much as expenditures.

Overall, I do not expect to see a major shift from the expansionary fiscal stance that we had this year, but it is too early to

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say exactly what our fiscal position will be. We will have to look at the economic situation and outlook at the time of the Budget as well as our revenue position.

We will live within our means within this term of Government. We have some savings, as I indicated in the Budget this year, and we will ensure that we live within our means.

Mdm Ho Geok Choo (West Coast): I would like to ask the Minister – would the eventual cessation of the Jobs Credit Scheme cause employers to stop making new hires? Would it also lead to less emphasis on training and productivity? How would the relevant agencies help to overcome these concerns or challenges? And related to this, how could we ensure that the mature employees, especially those 45 years and above, are efficiently, effectively and gainfully employed, and that they are not disadvantaged in anyway by this discontinuation of the scheme?

The next question is related to what the Prime Minister has announced with regard to the need for companies to restructure their operations for higher productivity. I would like to ask two questions related to this – are there any specific plans to help these companies restructure their operations? I fear the impact on our next generation if they have parents who are chronically unemployed because the economy cannot restructure fast enough to absorb the numbers and the numbers cannot be upgraded fast enough to be capable of working in the restructured economy. What plans does the Government have for this group of people?

Mr Tharman Shanmugaratnam: I would like to thank the Member for her questions. To relate them to the previous question, the key issue is not merely the size of fiscal deficit that we run in the next fiscal year but the type of measures

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that we put into place. What we do is as important as how much we do. And as the Prime Minister has indicated, we are making a shift from broad-based relief type measures towards measures that are targeted specifically at restructuring and enhancing productivity and preparing for growth over the medium to longer term. We are making that shift. This means measures that all companies can enjoy if they are putting into place productivity-enhancing measures or increasing their innovative capacity, as well as measures that some companies will enjoy more than others because they are the ones that are growing the fastest, are investing more and are likely to lead the economy, not just out of recession, but for growth over the next five years. So we will be more discriminating and more targeted.

This does not mean aiming to help companies create only high-end jobs. This means improving our workers' capabilities up and down the line, from the simplest jobs to the most complex jobs. Every worker can improve and every job can yield higher productivity and therefore, higher pay. So whether it is a mature worker or a younger worker, we have to address this across the board. The Economic Strategies Committee is looking at this very comprehensively. Minister Gan Kim Yong heads the sub-committee that is spending a lot of time looking at this issue of raising skills, productivity and therefore wages, up and down the line to preserve employment for everyone in our workforce.

Mr Teo Siong Seng (Nominated Member): Sir, with the extension of the Jobs Credit Scheme, does it mean the Government is more confident of a full economic recovery ahead? Will we likely see a U-shaped recovery or a W-shaped recovery that the Minister mentioned a few months ago?

Mr Tharman Shanmugaratnam: I think the most that can be said is that we are

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past the worst. And in particular, we are past a stage in the world economy when there was a tremendous psychological fear that the bottom would fall apart. So we are not in a stage of unending decline. The banks, at least the larger ones, are now in a position where no one expects them to fail but there are still problems ahead because the global financial system is still fragile and the underlying problems have not been resolved. The fear of big failures has receded but fear over the extent of the economic recovery and about the banks' ability to shed bad assets and to start lending again remains. Confidence has not returned to normal and we, for that matter, seasoned observers all over the world, do not expect the next year or two to be very pretty.