SUPPLEMENTARY SUPPLY (FY 2008) BILL (CONT'D)

But that alone is not sufficient. If we were to compare to the recessions in 1997, 2001, 2002, 2003, our training infrastructure was not so well developed. But this time round, we have the Employability and Employment Institute which is meant to train workers and to help them find jobs, as well as to help those who are already employed to continue to reskill, upskill and keep their jobs.

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Our unions and companies are also better placed now as we have a clear process on how to deal with excess manpower partly because of the tripartite guidelines on managing excess manpower that were reached by the tripartite parties.

Our message to companies is clear. Retrenchments must be the last resort. So, when companies approach us, we would first ask them to look at the alternatives and we then sit down and work out with them on how to cut their costs without having to retrench workers. So, we explore various options such as rescheduling working hours, shorter work weeks, temporary layoffs, or non renewal of the foreign workers employment contracts. We also expect companies to cut other costs as well such as unnecessary travels, entertainment, replacement of cars, to name a few. Also, when top executives take the leadership in pay cuts and show that they too are prepared to sacrifice, such as the case of Chartered Semiconductor where the senior managers took up to about 20% pay cuts, it is a lot easier for workers to accept cost-cutting measures, as well as even to accept retrenchments if this is necessary. We also remind companies that wage cost is but one component of the total cost of production, so they need to see things in perspective and examine other costs as well. We have a Japanese company that cut their costs by invoking more kaizen activities, which are really small directed teams aimed at improving productivity which utilise the workers in core groups. And this particular company also leverages more on their just-in-time production so that they do not have to incur huge storage and inventory costs.

Companies and workers have reaped tangible benefits from our cooperative approach in facing the downturn. For example, by working closely with Hitachi

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Chemicals, we helped them to cut costs and save at least $3.5 million. These cost-cutting measures were achieved through a shorter work week, non-renewal of the contracts of 55 foreign workers, 10% cut in the pay of the senior managers and placing the workers on the SPUR programme.

Mr Speaker, Sir, let me now touch on the Jobs Credit Scheme which is the centerpiece of this year’s Budget. It is, in my view, an excellent scheme, and is frankly much more than I had expected out of this Budget. The Jobs Credit Scheme serves two purposes. It aims to make Singaporeans more attractive to employ and retain, and it also protects our CPF. No matter what help the Government provides, nothing can replace the certainty, stability and security that a regular, monthly income provides to workers and their families and that can come only from having a job. Once workers are out of a job, it would be a lot harder to get them into one. And the whole family suffers too especially if the worker is the sole breadwinner. Hence, the focus in this Budget on helping companies to stay afloat and to incentivise them to keep their workers is absolutely crucial. So, in my view, yes, the Jobs Credit Scheme is pro-company because it helps to defray part of a company’s wage cost for one year. But, to me, helping companies is not an end in itself, it is only the means for this Jobs Credit Scheme. The ultimate objective of the Jobs Credit Scheme is saving jobs and it is therefore a very pro-worker move. By taking on part of the cost to employers for keeping excess workers, the Government helps to reduce the pressure on companies to retrench workers. So I do not agree that the Jobs Credit Scheme is pro-business. It is truly pro-worker and the union leaders whom we have spoken to, discussed with, are very highly reassured by the Jobs Credit Scheme.

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Sir, I must really congratulate the Government and the Finance Minister for coming up with the Jobs Credit Scheme. It is indeed an innovative scheme. And I note there are similar schemes in Canada and Australia but they apply in a very limited aspect to workers with certain disabilities or only to workers who find it difficult to continue in employment or to get employment because of their low skill levels or low education levels. We have also spoken to some electronic companies to gauge their feedback as to what is their sense about the Jobs Credit Scheme. One electronics company which produces hard disk drive data storage peripherals told us that in this global downturn when pressure to cut costs from their HQ is high, the Jobs Credit Scheme would give the Singapore plant an edge over their other plants overseas. This company employs 2,500 workers, of which 1,750 are production workers and 750 are office staff.

Let me just quote the Human Resources Manager of the company who talked about the Jobs Credit Scheme. He said, "Yes, it does help. We have been under tremendous pressure from HQ to trim headcount, especially for the directs group (meaning the production operators) which is very volume dependent, and have been struggling with all ways to try to hang on to our 200-300 excess headcount as it is quite a tough situation for them to lose their jobs now. The Jobs Credit Scheme is a very good move for our Singapore site as our sister sites in Thailand, China and the Philippines have all begun resources actions or are seriously considering them. This may not be a long-term solution but it helps to delay the actions at our site."

Sir, the Jobs Credit Scheme, viewed from the perspective of this MNC that I have just mentioned, gives Singapore a certain comparative advantage especially when global companies decide where to

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trim their workforces. We may not be able to save 100% of the jobs that are currently on the line as this is really not realistic to expect of the Jobs Credit Scheme. A case in point is Chartered Semiconductor which is affected by a double whammy. The semiconductor business was already not doing well even before the global financial crisis struck in September, and of course the crisis made their situation worse. They had seen a significant decline in orders and little prospect of turning around over the next few months to help keep the workers even with a 12% cut in payroll. After working with the union on various other alternatives, the company then decided to retrench as a last resort. But there are other companies struggling with cashflow problems where the Jobs Credit will provide good relief. Most of these companies want to keep their skilled and experienced workers but this can be quite painful for them if they are bleeding at the same time.

The Jobs Credit Scheme is also clearly pro-Singaporean workers. I think this is the point raised by Mr Inderjit Singh on the need for the Budget to be more pro-Singaporean. The Jobs Credit Scheme is clearly pro-Singaporean workers because it favours companies that employ a significant number of Singaporean workers. Let me cite to Members the example of Fujitec Corporation Singapore Ltd where they employ about 760 workers, 76% of whom are Singaporeans. With the Jobs Credit Scheme, Fujitec will be able to save $125,000 a month which comes to about $1.5 million a year. Now, even for Fujitec, this is a very significant amount because as Mr Sugumaran N. Pillai, the Regional Director of the company, said that they are also facing intense cost pressures, and therefore the Job Credits Scheme which helps them to save $125,000 a month – because they employ a significant number of Singaporeans – is clearly helpful.

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The second most important point about the Jobs Credit Scheme is that it helps to save us from CPF cuts as it consists about 9% of the employers' CPF contributions. This was the biggest and most important worry among our workers and our union leaders since the onset of this recession. They are worried because any cut in the CPF would affect our workers’ retirement income as well as their ability to pay for housing and medical needs. We already see MPS cases where we see families coming to us for help in paying for their HDB loan instalments. We had a big debate on CPF LIFE Scheme last year and we acknowledged that there is a need to help Singaporeans save more of their retirement income. Therefore, any further cut in the 14.5% employers’ CPF contribution rate would, in my view, be particularly painful for our workers. So our unions are very relieved that we are saved from CPF cuts because of the Jobs Credit Scheme. Indeed, I would also argue that an across-the-board cut in CPF rates would be a double whammy for our workers, many of whom are already suffering from pay cuts due to slashed overtimes, shorter work weeks or temporary layoffs. In situations where companies do not cut executive pay, any CPF cut would have a bigger impact on lower-income workers as executives are not paid overtime. Also, unlike previous recessions, our pay today is a lot more flexible, as about 30% of the total pay is now tied to a company’s performance. Hence, in a downturn when companies are not making money, performing poorly, workers’ wages would already have been adjusted downwards. I am of the view that clearly there seems to be limited scope today, compared to before, to invoke the CPF as a quick cost-cutting measure. I am not trying to pre-empt the Minister for Finance in case he comes out with any off-Budget measures, but this happens to be one of the strongest wish on our part. So I am really glad that our Government has protected workers’ CPF

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by introducing the Jobs Credit Scheme. I want to urge companies, particularly those that are non-unionised and are still dragging their feet and have not introduced the flexible wage system, to do so quickly although a recession is certainly not the best of time to introduce any flexible wage scheme because the company is not performing well and workers' wages are tied to performance of the company.

I would also like to congratulate the Government for being very fast in responding to companies and workers’ needs by allocating $600 million for the SPUR programme even before Budget Day. In fact, when I was discussing with some of our foreign trade unionists, they were quite amazed. They did not expect any government to come up with such a quick allocation. The allocation was made in December, even before this Budget announcement. And they were also quite surprised at the extent of the amount allocated to such a programme.

The SPUR programme is a very important complement to the Jobs Credit Scheme. The Jobs Credit Scheme and SPUR are two critical engines, in my view, to help companies stay afloat and continue to employ workers. In the electronics sector, for instance, about 470 workers are already attending classes under SPUR. Companies have committed to send another 2,000 workers for training. So the SPUR Programme is not just something that is good to see but not so easy to touch, but actually it is something that is very relevant, practical and doable. The cost savings for companies utilising SPUR are very significant. In the case of Delphy System Singapore Pte Ltd, which is sending 352 workers for SPUR training in batches, the savings will amount to $560,000, which is a very significant amount as this

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company supplies parts to General Motors in the US and is consequently affected by the troubles facing the automotive giant. When Delphy approached the union sometime in December last year, they were not aware of how to tap the SPUR programme to deal with their excess manpower. So we introduced them to our specialists in e2i who then helped them to develop a training programme tailored to their needs. This is the value adding of e2i which now has the capabilities which we did not have in the past to quickly assemble training programmes that are not just generic types but also can be more targeted for the needs of individual companies. So I see the refinements to SPUR – the two refinements referred to by Mr Inderjit Singh – as not an indication that our Government is not farsighted enough, but as an indication of their responsiveness. Because when you are doing training programmes, it is not possible to be able to conceive of every situation that can apply because there are different types of companies and workers with different skill sets and capabilities. So we really need to refine the programme as we move along and as these programmes are implemented on the ground, we take into account the needs of individual companies and workers.

Sir, I also welcome the increase in the WIS payment by 50%. This would be a great help to our low-income workers and is really beneficial to them. However, although the timing may not be so opportune, as a matter of principle, I would still like to ask the Government to consider excluding the overtime payments and bonuses from the computation of the income threshold of $1,500. I have raised this on a number of occasions before and the answer was that the Government would review this at the relevant time. With the increase in the WIS payment, it has become even more painful for our low-income workers who do not qualify

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simply because they are hardworking and their overtime pay puts them out of the scope of WIS.

We must not forget that even in this downturn there are still sectors that are doing well and where the workers are doing overtime. So I urge the Government to review this.

Sir, as the Health GPC chair, I am indeed very pleased that the Health Budget has been increased quite significantly. The increased Budget will be used not only on infrastructure development but $500 million will be allocated to help in dealing with the long-term care needs of our elderly Singaporeans. A rapidly ageing population will, of course, pose very serious challenges to our healthcare system and we need to be adequately prepared. Otherwise, by the time the problem hits us it will be too late. However, I was expecting the Finance Minister to announce some Medisave top-ups this year as health care costs have been going up and we have just introduced means testing. In the current climate, where people are losing their jobs or are suffering from pay cuts, a Medisave top up would have provided some relief particularly for older Singaporeans. Although health care is highly subsidised, especially for the C and B2 class wards, there are costs that individuals still have to pay and not everyone qualifies for Medifund. And now that Medisave can be used for some outpatient treatments, the Medisave savings scheme is even more important in helping Singaporeans pay for their medical care. So, Sir, this is actually one small disappointment that I have with the Budget, which I also want to register with the Minister for Finance.

Sir, aside from the measures to save jobs, the $2.6 billion set aside to help families, particularly with doubling of the GST credits, are a welcome relief particularly for our low income families. Even as we focus strongly on how to turn around the economy, we must also help

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Singaporeans to cope with the current crisis. Families will be struggling with pay cuts and job losses, not to mention the high cost of living that still affects many. We have to make sure that Singapore's social fabric remains strong, despite this recession, and we must continue to focus also on long-term issues.

The recent household income survey showed that for the first time in many years, the income gap is narrowing. This is also partly because of the huge budget surplus package last year for low income Singaporeans. Even then, the average per capita household income of the bottom docile of employed households was only $340. Now that we are in the recession, the income gap may widen again. This is a long-term issue that we need to tackle and one major contributing factor is the low pay of the low skill and unskilled jobs. One way, which the NTUC in partnership with the WDA e2i, is vigorously pursuing in order to tackle this challenge is to recreate these jobs so that with greater productivity wages can go up. But this process will take some time and there is also some inherent limits in terms of how far we can upskill some of these jobs. The Budget has provided a number of measures for low income families and the support is now more comprehensive and sustained. However, I urge the Government to continue to monitor the impact of this recession on our low income Singaporeans as many are still struggling with the high cost of living.

Sir, I am glad that the Government has taken bold and decisive steps in order to address the concerns of both companies and families. I support the use of our past reserves as I think that the situation that we are in is truly exceptional and nothing like what we have seen in past recessions. We should not wait until companies are flat on their backs or Singaporeans are truly suffering before we consider it prudent for it to use our past reserves.

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Having said that, I also understand that there are some concerns as to what constitutes exceptional circumstances, that is, where is the threshold point when we start dipping into our reserves. Some have also raised the question of whether there is really a need to dip into our past reserves, considering that we have enough surpluses to pay for the $4.9 billion needed to fund the Jobs Credit and the Special Risk-Sharing Initiative for bank lending. As these are important points, I hope to hear the Finance Minister's clarifications on them.

Perhaps the Finance Minister could also explain how the Jobs Credit of 12% of wages is derived at, as some feel that the amount could have been higher to be truly effective in helping companies stave off retrenchments. The figure of $2,500 is clear as it is pegged to the median wage but how the 12% is derived at is not so clear. It would also be useful for the Minister to clarify why companies are being reimbursed only once every quarter and not monthly as some, particularly the SMEs, are facing severe cashflow problems and may not be able to keep the workers for three months without any assistance. I also urge the Government to continue to examine all other cost of doing business in Singapore so that our companies can remain competitive and our workers can benefit from strong job creation.

In conclusion, Sir, although we are one of the first Asian economies to enter into a recession, there is a strong sense that the Government is proactive and doing everything possible to help Singaporeans and companies ride through this recession, and equally important, continue to develop our capabilities to capitalise on future growth.

The BBC this morning reported a completely different scenario in Europe

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where tensions are mounting in many countries. In France, about two million people have taken to the streets to demonstrate against what they consider as poor government-handling of the crisis. The General Secretary of the British Trades Union Congress, John Monks, summed up the general sentiments of the people when he said that anger is mounting in the European Union as there was a sense that people have been shortchanged by their governments. He stressed that it is important for governments in the EU to respond decisively and sympathetically.

In Singapore, Sir, our Government with a huge budget of $20.5 billion has indeed responded decisively and sympathetically to assist both companies and families. The NTUC and our unions will leverage on our unique tripartite relationship to fully utilise SPUR and the Jobs Credits Scheme - the twin engines - to save jobs and save our CPF. But we also need all Singaporeans to rally behind these initiatives and to do their part too to help us upturn the downturn, as we have done so, in so many recessions in the past.

With that, Sir, I support the Budget.

1.22 pm

Mr Ang Mong Seng (Hong Kah): ( In Mandarin ): [For vernacular speech, please refer to Appendix A.] Mr Speaker, Sir, this Budget can be said to be the most generous one I have come across since I became an Member of Parliament 13 years ago, and it is one that is really customising the remedy for the case. Singapore is now facing the most severe economic crisis since Independence. The Budget presented by the Government this year contains several “breakthrough” features, setting five new records.

First, the $20.5 billion Resilience Package can be said to be the largest

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budget that the Government has ever presented. Second, the $8.7 billion budget deficit is also unprecedented. Third, the $5.8 billion in enhanced Risk-Sharing Initiatives (RSI) seeks to help the SMEs seek financing, to alleviate their problem of capital shortage. Fourth is the $4.5 billion for the Jobs Credit – this is the first time that the Government makes use of the past reserves to ensure that the companies could survive and the workers will have their jobs retained. Fifth, the $2.6 billion Family Supplement Plan with increased GST rebates and bonus for the elderly, the 20% personal income tax rebate and the additional Service & Conservancy Charges and rental rebates, provide help to everybody.

I think this is a very comprehensive, pro-business and pro-people Budget that wins praises from all the people. I would like to use a very delicious traditional Lunar New Year staple – the pen cai – to describe this Budget. The pen cai contains of a lot of delicious ingredients, such as abalone, sea cucumber, fresh prawns, dried scallops, oysters, roast pork and fish. They are visible and edible; everybody can enjoy it. My residents have given me feedback that they would like to compliment the Finance Minister for giving us a warm and happy Lunar New Year. Thank you very much, Finance Minister.

Mr Speaker, Sir, at the moment, many SMEs are affected by the global economic tsunami. They have lost a lot of overseas markets and are having problems with their cash flow. The Government has made a prompt decision to adopt a bold and resolute policy, setting aside $5.8 billion for the Special Risk-Sharing Initiative (SRI) and also raised its loan risk sharing percentage from 50% to 80%, and the loan ceiling from $500,000 to $5 million. I think, this is very timely help to the businesses so that they can survive, and the rice-bowls of their employees can

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be retained. This is really a good policy that suits the remedy to the case.

As I know, there are about 140,000 SMEs in Singapore and from what I know, about 15%, or some 20,000 of the SMEs, have the problem of cash flow shortage. They needed facilities from the banks to help them tide over this difficult period. Otherwise, in order to save costs, they may have to retrench workers, suspend their business or even close down the business. This will result in about 300,000 to 400,000 workers losing their jobs. As I have said, this programme that is launched by the Government, is very good news to the people. It gives companies new hope and new confidence. Many SMEs reflected to me that they have faced difficulties in applying for bank loans. Whenever they approached the bank, they will be asked a lot of questions such as, who are your competitors, what are your prospects, and many other particulars and information. Some of this information is just not available to the SMEs. As a result, they are turned down by the bank, and they are left without the necessary capital to carry on with their business. It is said that water from afar cannot put out the fire in front of you. The President of the Singapore Manufacturers Association is quoted as saying the banks were moving very slowly and the companies were crying for help. This was reported in the Lianhe Zaobao .

If the bank is too careful, these companies will not be able to secure financing and many of them would have to face even more severe economic crisis. It is just like an asthma patient going to a doctor. He has an attack and he went to his physician. The doctor does not give him the medicine but asks him a series of questions like: Why do you have asthma, if I give you the medicine, can you guarantee that you will recover? After your recovery, will you be more healthy than others? Why is it that you have asthma and others don't have? As the

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doctor keeps asking all sorts of questions, the patient will get more and more angry. I think even before he gets the medicine he would have died of anger.

As reported in the Lianhe Zaobao , the boss of CSS Industrial Company which employs about 50 workers, spent a few months going to more than 10 banks before he could get a loan of about $60,000. A lot of time and a lot of efforts were wasted. At this critical time, the company should be pooling its resources to seek out new markets, look for new customers, or develop some new products to boost its business rather than spending time looking for loans from the banks. I think many SMEs are facing the same problem. I suggest that the Ministry of Finance set up an independent loans committee, with representatives from SPRING Singapore, the SMEs and the trade associations as well as the banks and finance companies, to look into all the loan applications and the processing of such applications. If they can meet the basic requirements, the committee could issue them a loan certificate which is like a "loan COE". With this certificate the company can go to any bank or any Government-appointed finance company to secure the loan. You save time and also meet the needs of these SMEs, and this would also help the Government to reach its ultimate target of helping these companies.

Of course, granting loans is risky. But in whatever we do, there are always risks. Even as Members of Parliament, we face risks. But we would still have to meet our people, visit them and participate in community activities, go to coffee shops and markets to listen to their grievances and problems, and then come to Parliament to reflect their views. This is our spirit – to serve the people.

The banks should also play their part to serve their clients and the nation. In

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order to make help these SMEs survive the crisis, the banks should be more positive, they should not adopt this attitude of lending out the umbrellas when the sun is shining and taking it back when it starts to rain.

At the moment, many retail shops, department companies are also affected by the economic crisis. Their sales are seriously affected, particularly after the Lunar New Year festive season. I think for the next few months, many of these companies will be facing problems with very low sales. For this, I suggest that all the retail associations get together and organise some sales promotion activities for a period of six months, and make Singapore a shopping paradise to attract more tourists. Then, our tourist spots, food and beverages industry, transport industry as well as our retail shops will all benefit. This campaign will also let our people buy things at competitive prices, and it would stimulate our consumption market. This would be a very positive support for our retail market. But, to consume, we need more cash. I suggest that the Government consider an off-budget measure of issuing some "consumption coupons" to the people. If everyone gets $300 of coupon, then there will be a total of about $900 million. These coupons must be spent within six months. Except for the purchase of tobacco and alcohol, these coupons could be spent at the departmental shops, hawker centres and restaurants. This will breathe some life into our retail shops by giving them more business.

Finally, on behalf of my constituents, I would like to thank our Finance Minister Mr Tharman for this very bold and resolute Budget to help our people ride over this troubled time. I hope with our people working together with the Government, we would emerge even stronger after the crisis.

Majulah Singapura!

*Cols. 1575-1580.

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1.34 pm

Mr Low Thia Khiang (Hougang): Mr Speaker, Sir, I welcome the initiatives of Budget 2009 to help viable businesses stay afloat and Singaporean workers stay employed. I also welcome the decision for not using CPF as a tool to cut employers' cost in this downturn.

The Resilience Package of $20.5 billion, though unprecedented in scale in the history of modern Singapore, is not an unusual fiscal response. All over the developed world, economic stimulus plans put forth by the respective governments run into hundreds of billions of dollars, providing tax cuts for individuals and businesses, relief for people who have lost their jobs or homes, and money for infrastructure projects to stimulate domestic demand.

What is unusual of our Resilience Package is that the Government will be using our past reserves to fund two main components of the package, the Jobs Credit Scheme and Special Risk-Sharing Initiative.

The Government has made the case to the President and the Council of the Presidential Advisers to draw down $4.9 billion of our past reserves to fund the Jobs Credit Scheme and Special Risk-Sharing Initiative.

Past reserves are a strategic asset meant for use in times of need, especially when the Government faces financial constraints due to unprecedented circumstances which require the Government to respond in the interest of the nation.

Hence, I am surprised that the Government has chosen to set a precedent in asking the President for approval for a drawdown of our past reserves when it has enough savings from the current term of Government to fund

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the entire Resilience Package and the resulting budget deficit which the Finance Minister has estimated at $8.7 billion, or 3.5% of our GDP.

The Finance Minister in his Budget speech on 22nd January 2009 said that "The Government has sufficient savings built up during this term of government to fund the measures we are taking and the resulting budget deficit. Nevertheless, we have decided instead to fund the two extraordinary measures within the Resilience Package from our past reserves."

I would like to know why the Government is using the reserves to fund the Resilience Package when it has more than enough money in the current reserves to do so. What is wrong with waiting till new initiatives are needed and the current reserves are insufficient to fund them before asking for the use of the past reserves?

Past reserves are supposed to be protected by a two-key system. The Government holds one key while the President holds the second key but the speed at which this two-key system can unlock the past reserves is too fast for comfort.

I would like to know when was the request for the $4.9 billion drawdown made? How long did it take the President to give the in-principle approval? Does the President or the Council of Presidential Advisers know for certain what the Government intends to do with its substantial current reserves before allowing it to draw down on past reserves?

The Finance Minister has stated that this drawdown on reserves is to pre-empt the severe consequences that this economic crisis could have for our

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economy and society. Can a pre-emptive spending rationale be a compelling reason for the President to unlock the reserves?

The unlocking of our reserves, as witnessed by this House in the past three to four months, is fast becoming like a non-event. Surely, Singaporeans deserve to know the full rationale of the drawdown by the Government despite having a healthy kitty.

Next, I would like to touch on the Jobs Credit Scheme that is designed to encourage employers to keep their workers on their payroll.

The National Wages Council has recommended that companies may implement a wage freeze or wage cut to remain competitive. In addition, workers are already being asked to accept lower bonuses, no-pay leave and shorter work-weeks. There is also the flexi-wages scheme which the Government has been promoting under the tripartite system for years to enable employers to cut wages of workers during a downturn.

All these measures are designed to help employers cut costs. The Jobs Credit Scheme pays employers a cash grant incentive of 12% of the first $2,500 of the wages of each employee who is on the CPF payroll. The cash grant is payable every quarter beginning March 2009. The scheme seeks to reduce the costs of employing Singaporean workers for businesses during the crisis.

The question is, how effective would a cash grant of 12% of wages be in times of such uncertainties? When confronted with declining sales and demand, the most logical thing to do for most businesses, especially SMEs, is to cut wages and bonuses. If sales eventually cannot sustain the overhead costs, I

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doubt a 12% cash grant on wages will help to prevent retrenchment.

Sir, between waiting three months for a $900 cash rebate from the Government versus saving $7,500 immediately by retrenching a worker, which choice does the Government think a struggling employer will make?

On the other hand, the Jobs Credit Scheme will indirectly favour big companies which may be still profitable and have no intention to retrench workers. The Straits Times' article on Budget 2009 published on 24th January reported that Sheng Siong Supermarkets will receive $567,000 a month or $6.8 million a year in cash grant under this scheme. I am sure NTUC Fairprice, with a staff strength of about 6,000 and a no-retrenchment policy, will benefit even more. Are we using our reserves to increase the profits of profitable companies in this downturn?

To save jobs for Singaporeans, the Government must put in place policies that put Singaporeans first at all times. Opening up the economy here to cheaper foreign labour without first taking good care of our own people will make Singaporeans the first to go in a recession. Is Jobs Credit not designed to make Singaporean workers more affordable so that employers will have an incentive to keep them, instead of foreigners, on their payroll?

In the longer term, the Government should contemplate to devise some schemes which will make Singaporean workers more competitive on the job market and incentivise the employers to employ Singaporean workers. The current system of foreign workers quota works when the economic cycle is long with a tight labour market, but it could be a problem if the future economic trend is one with shorter cycles of ups and downs.

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Sir, I understand that SMEs account for six out of every 10 Singaporean jobs, as mentioned by the Finance Minister in his Budget speech. Many SMEs experience cash-flow difficulties beyond what the Jobs Credit Scheme may help. If we were to conduct a poll for SMEs to vote which they would prefer, Jobs Credit or Credit Facility, I believe SMEs will choose the latter.

Apart from enhancing the SME loan schemes in November 2008 by increasing the Government's share of risk to 80% and introducing a Bridging Loan Programme for working capital loans with the Government taking 50% of the risk, there is no new measure in this Budget to help SMEs secure the much-needed credit facility to survive in a shrinking economy.

The Finance Minister has said that it is too early to assess the effectiveness of the enhancements made to the SME loan schemes last November but time is of essence in this economic downturn. Some businesses may not have enough resources to wait long for the banks to get back to them on their loan applications, as mentioned by Mr Ang Mong Seng.

Under the Special Risk-Sharing Initiative announced in Budget 2009, the Government will increase its share of risk on the Bridging Loan Programme from 50% last November to 80% now. Can we infer from this increase that the banks are still not lending enough?

Sir, if the Government can see the need and urgency to increase its share of risk for the Bridging Loan Programme in a short span of two months, just to stir the banks from its credit slumber, think about the stress and anxiety SMEs must have endured trying to secure credit lines since the collapse of Lehman Brothers in September 2008.

I urge the Government to work fast with the banks to free up the credit

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market. It was reported in the Straits Times that bank lending fell for second consecutive time in December 2008.

This is a fast shrinking economy. It is natural for banks to worry about lending money to companies with weak business models or plans. Then, again, would any bank believe a rosy business plan in this economic climate? This is why the Government must come in to resolve the issue. When more SMEs fail, more Singaporeans will be out of a job. It is a loss-loss situation for all.

Sir, if the banks are still not lending in the coming months, what other measures are there in place to keep credit flowing for SMEs? I believe this is a time for Singapore to get innovative and, perhaps, even bold in dealing with the credit crunch. The Government must take the lead to unfreeze the credit market if all the prodding on banks yields no tangible results.

Sir, I will now move on to the budget for supporting families.

Out of $20.5 billion in the Budget, $2.6 billion or 12.7% is earmarked to support families. However, this Budget does not extend enough help to retrenched Singaporeans. The new initiative in the Budget announcement for Singaporeans who lost their jobs in 2008 or face retrenchment in 2009 is an extension to allow them to pay their income tax in 24 instalments, instead of 12. People say death and taxes are the only things certain in life. How true.

Sir, this is not a decisive pro-family Budget for an economy that is expecting retrenchment numbers to surpass the 29,000 level of the 1997 Asian Financial Crisis. Why is the Government not making more provisions in the Budget to help this group of people since it expects retrenchments to escalate after January?

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Retrenched workers have families to feed too.

The Government must be prepared to accept that schemes like Jobs Credit and SPUR may not stave off retrenchment after all. I urge the Government to look into more ways to help retrenched Singaporean workers and their families.

This economic downturn has affected almost every level of the economy. The Government asks everyone to play a role to ride out this recession. Workers are facing more than just a wage freeze, bonus cut or a wage cut. They are staring down at the prospect of no-pay leave and retrenchment. Belt tightening for workers is inevitable.

The Government should take the lead in tightening its belt wherever possible and spend generously and wisely in a focused manner to ride out the recession.

I noted that the budget for political appointments across all 14 ministries and the Prime Minister's Office is reduced by just 1% from $61.8 million in revised FY2008 to $61.4 million in FY2009 estimates. This does not square with what Minister Teo Chee Hean disclosed in this House that the MR4 salary will drop by 20% compared to 2008.

With no change in headcount at each entity, five Ministries and PMO registered 5% to 12% increase in the Political Appointment budget estimates, six Ministries remained almost unchanged, three Ministries registered a 4%, 12% and 29% drop from the revised 2008 budget.

Are we sending a mixed signal to the people? How can the Government ask Singaporeans to tighten their belts when it fails to restrain its own salaries estimates?

Expenditure estimates for all Ministries are revised upward except for one Ministry – the Ministry of National

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Development. I can understand why Health, Education, Transport, Community Development and Home Affairs are amongst the top spenders but do we really need to increase the expenditure for Defence by $644 million over FY2008? I would imagine MINDEF would be able to buy more for the same dollar in a recession. The expenditure for Defence for 2009 has grown to $11.5 billion, or 26% of total budget allocated for all the Ministries.

Sir, since the Asian Financial Crisis in 1997, we have seen shorter economic cycles of ups and downs and with each cycle, the workers were the hardest hit. The lifestyle of Singaporeans was also disrupted by the cycles in economy and on top of that, the increases in GST, in between the cycles and high food and fuel prices have contributed to increases in the cost of living. We only got a short reprieve from anxiety in 2007 and part of 2008, and we sank into a recession again.

The Government has now asked employers to think, before they retrench workers because it has schemes to help them lessen the burden of keeping Singaporeans employed. Does the Government ever wonder why Singaporean workers are so costly to keep in the first place? Are we really that uncompetitive or has our high cost of living eaten into our competitiveness?

In the 2007 Report on Wages in Singapore, it was reported that 'all occupational groups enjoyed wage gains over the past decade except for the group of cleaners, labourers and related workers whose medium gross wage was almost unchanged.' To make things worse, the wage differential between the various occupational groups relative to the lowest paid group of workers widened from a decade ago.

Sir, 10 years is a long time to get stuck at the bottom of the economic

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chain. The Work Income Supplement Scheme may have lowered the Gini coefficient slightly but we have to ask ourselves what is wrong with our policy planners that despite the emphasis on retraining and upgrading of skills, our lowest paid group of workers cannot enjoy the fruits of our economic growth for 10 long years.

I hope that when we get out of this recession this time, this group of workers will not be forgotten again.

Mr Speaker, Sir, both Japan and China have declared that they want to be the first in Asia to get out of this downturn. Being the first country in Asia to slip into recession, Singapore should work towards being among the first to get out of it too.

I urge Singaporeans to work together to ride out this economic storm. Looking beyond the gloom and doom, there is a light at the end of the tunnel. The optimistic side of me believes, this will not be a long tunnel.

Mr Yeo Guat Kwang (Aljunied): Is the hon. Member aware that, with the savings arising from the Jobs Credit Scheme and the stable prospect of the supermarket business, Sheng Siong mentioned that they will open a few more outlets in Singapore? And is the Member aware that each new outlet of such a supermarket, will create and generate new employment of 80 workers?

Mr Low Thia Khiang: Sir, this is something that is understood. The question is: how many companies, which are profitable, will still be expanding? And those who are profitable, do not need to retrench and the Jobs Credits given to them, will just add to their profits? So, how many new outlets is NTUC Fairprice adding? How many more employees does NTUC Fairprice expect to employ? Or whether NTUC is going to give out some

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of the Jobs Credits as a form of wage supplement to the workers, or just add to the profit?

Mrs Josephine Teo (Bishan-Toa Payoh): Can I have a clarification from the Member, Sir? Is the Member aware of the number of immediate job vacancies available, for example, through the e2i, the Employment and Employability Institute? Does he agree that the Jobs Credit Scheme will help reduce joblessness in Singapore and create an incentive for employers to look at Singaporeans first, to hire? Does he not agree that the best support for families is a job for the breadwinner? And so, does he not support the Government for going all out, to save jobs for our workers, including using our past reserves?

Mr Low Thia Khiang: Sir, needless to say, I support the Government's initiative to help Singaporeans stay employed. I make it clear in my speech. But, being a government, when you are spending the past reserves, you have to consider what is the effect of the expenditure, what is your target? I have no problem with the Risk-Initiative Sharing Scheme, neither do I have a problem with the SPUR Programme which, I think, does help. But my question is: does Jobs Credit Scheme necessarily achieve the target as it intended? Can we have some figures? If not, then why are we spending past reserves to do something which is not certain?

Secondly, as I mentioned in my speech, there will be some companies that will not need the Jobs Credits. They can very well keep their workers, but you are adding to their profits. On the other hand, those small companies or SMEs, with minimum number of staff and with high cost of labour, does the Jobs Credit Scheme really help them? As I mentioned in my speech, compared to waiting three months for a $900 cash rebate, to saving costs of $7,500 immediately if a worker

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with a salary of $2,500 were to be retrenched, which decision will an employer make in the downturn?

The Minister of State, Prime Minister's Office (Mr Heng Chee How): One clarification, Sir. I would like to ask the Member, when he says that the Jobs Credit Scheme is of doubtful effect, does he not also agree that when companies are facing difficulties and they have to cut pay and so on. Pay is, in fact, recognised as an important component of costs and that when the Jobs Credit comes forward to subsidise the payroll, it actually releases the pressure on the company and, therefore, reduces the risk of retrenchments and increases the security of jobs for workers.

Mr Low Thia Khiang: Sir, I agree with the principle but the Jobs Credit Scheme does not do the job of really saving the wage costs of the company. Given the current circumstances, it is not so much the costs, but the demand. When the company has no demand, no business, your credit scheme is neither here nor there, the way I look at it. As what I compared, $900 in savings as compared to savings of $7,500 in three months for companies who retrench a worker. How does it work? I do not think it works.

Ms Jessica Tan Soon Neo: Sir, is the Member aware that Jobs Credit is, actually targeted at Singaporeans. So, organisations – large and small – that hire Singaporeans benefit from that and Singaporeans benefit. And the other point I like the Member to know is, I have spoken to small companies and they have actually said this is an immediate relief for me to actually keep the capability. You are right – they are facing demand challenges. It is tough, but at the same time, having that relief, enables them to tide over and be able to keep the capabilities they would otherwise have

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not been able to keep because the demand is down. So, yes, it does not solve the entire demand problem, it does not solve the cost problem, but it definitely helps supplement some of it. If the company is really viable, and it is interested in keeping the capability.

Mr Low Thia Khiang: Sir, it does somewhat help certain companies. But my question really is, how effective is it? Why do you need to spend the reserves for something which, to me, is not really effective? I have spoken to some companies as well. They would rather have credit facilities that ease the cash flow going on to the business to keep the employees, rather than having Jobs Credits because at the end of the day, it does not really save money. Yes, it is for Singaporeans, I know. But when you are talking about using the past reserves and expanding Government expenditure, I believe it is prudent for us to look at what we want to achieve, whether the money is well-spent, to achieve the result, or is it something else.

Mrs Josephine Teo: Sir, I would like to ask the Member. Is he saying that because the Jobs Credit Scheme has not proven its effectiveness, it is better for us not to have the Jobs Credit Scheme and forget all about it?

Mr Low Thia Khiang: Yes, I believe that with the SPUR and other assistance schemes with the credit facility, I think we should be able to keep those viable businesses afloat. We could have used the Jobs Credit Scheme, to help those who are retrenched. I think it is a direct help. Whatever scheme that you have now, be it Jobs Credit or tripartite guidelines – you have read the papers – there are retrenchments. We cannot stave off retrenchments.

Mdm Halimah Yacob: Just want to seek clarification from the Member. Whether Member is in fact, saying that it

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is better to help workers after they are retrenched, instead of having the Jobs Credit Scheme which is meant to help them before they are retrenched. Because I have heard the Member saying that it is better to help them after they are retrenched, but the Jobs Credit is meant to help them before they are retrenched.

Second point, Member may not have heard my speech, where I also mentioned about a company, an MNC which compared our position with other companies, and whether the Member agrees that that particular company said that because of Jobs Credit, they would be able to save at least 200 to 300 workers.

Mr Low Thia Khiang: Sir, of course, it is good to pre-empt retrenchment and to help companies not to retrench. But how much does Jobs Credit help? Yes, to some companies, it may be helpful but eventually the effect is limited. It may help companies to keep some workers but some will still be retrenched. If there is no business, there is no demand.

Mr Heng Chee How: Clarification, Sir. The Member has said because the Jobs Credit Scheme, in his view, is not going to able to save every job, so it is not worth having. He said that in reply to the clarification from Mrs Josephine Teo. So I would like to ask the Member if companies were to get the credit that they want, is there any guarantee that they will not retrench? There is no guarantee. Therefore, is he also saying to forget about the Risk-Sharing Scheme? Nothing except those that can guarantee you that there will be no retrenchments. Forget about all the other programmes, which we all know are aimed at helping companies survive longer.

Mr Low Thia Khiang: What I am saying is that you have to be targeted and to be sure what will really help. I am not saying that you should not help at all. I am

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doubtful about your Jobs Credit Scheme. How much will it help companies and whether it is justifiable to spend the past reserves to help companies in this way? Eventually, of course, we could say that Singaporeans will benefit because they can stay employed, but the figure is something that is not certain. So, can we make better use of the limited financial resources we have, by helping workers that are retrenched or other schemes that will be more effective in helping companies to stay afloat?

The Minister, Prime Minister's Office (Mr Lim Swee Say): Mr Speaker, Sir, I just want to seek the final clarification from Mr Low Thia Khiang. Am I right to say that if the Workers' Party is in power today, if the Workers' Party is the Government, in this crisis, the Workers' Party, under the leadership of Mr Low Thia Khiang, would not implement the Jobs Credit Scheme. And that between implementing the Jobs Credit Scheme versus having Singaporean workers to take the 9% CPF cut, the Workers' Party would implement a 9% CPF cut rather than to introduce the $4.5 billion Jobs Credit Scheme, to save jobs. I would like to seek that clarification from Mr Low.

Mr Low Thia Khiang: Sir, I thought I made it clear in my speech that I welcome that CPF is not used in this downturn as a tool to cut employers' costs. If the Workers' Party is the government, I would rather use the money, if there is a need to save employers' costs, to pay directly to the CPF accounts of the members for companies which are in difficulty, rather than a Jobs Credit Scheme that give companies, regardless whether they are profitable or not, the payment.

Secondly, I also doubt whether it is effective in helping companies cut wages.

Mr Lim Swee Say: If the choice is between implementing a $4.5 billion Jobs Credit versus a 9% cut in CPF – it is

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either you introduce a Jobs Credit or you take the CPF cut – if that is the situation, which option would the Workers' Party go for?

Mr Low Thia Khiang: Our position is that we would never cut the CPF. But the question is whether or not, must it be Jobs Credit? Could it be other forms to help employers to cut costs? There may be other forms but, to me, Jobs Credit, as it is, I do not think is effective.

2.01 pm

Mrs Josephine Teo: Thank you, Mr Speaker, Sir. I ask myself what exactly is this Budget debate about. Is it about being more pro-business or pro-worker? Is it about CPF cut versus Jobs Credit? Is it about cutting the corporate tax by 1% versus 2%? Is it a debate about the use of past reserves? Sir, I would just like to share that for the vast majority of our workers, they really have two priorities and they want to see this Budget centred around saving jobs because the best support for the family is a job. And they also want to see us finding ways to minimise the impact on wages. In this House, we should not be debating who is getting a bigger slice of the pie. To the workers, it would be much more useful and productive if we focus our minds and apply all of our energies to saving jobs by keeping businesses going.

Sir, on the point of the CPF cut versus the Jobs Credit Scheme, I would just like to take the opportunity to remind the House that CPF is used by hundreds of thousands of Singaporeans to pay mortgages, support medical bills, etc. Our resident workforce is 1.8 million people. Even with rising unemployment, most Singaporeans remain at work. Let us also not forget that there are, at this point in time, 21,000 workers on shorter work-week, temporary layoffs, who are already

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taking some forms of wage cuts. Any reduction in the CPF rates right now, throws thousands of such families into immediate hardship. Their cash outlay to service mortgage repayments will have to go up and this will, in turn, hurt their ability to spend. At this point in time when we most want to simulate or keep consumption levels on an even keel, we can least afford to impact the consumption ability of our Singaporeans. Compared to a CPF cut, the Jobs Credit Scheme avoids these problems, does not create the same difficulties and the bluntness that the CPF cut would create. Looking at it from the employers' standpoint, it gives more flexibility for them to move around. A CPF cut would have been blunt. For some companies, a 9% rate cut would have been too much. For some other companies, a 9% cut would be too little. So, where do we find the right level? There is also an argument being put forward that Singaporeans are aware of the severity of the downturn, so they will be willing to accept the CPF cut. I do not agree with that. I think if we implemented the CPF cut, many families would be turned topsy-turvy, and this is the last thing we want to do at this point in time. Just to also point out that the savings for long-term retirement needs will be slowed down if we did anything to the CPF rates, and unless we have no other means, I think the CPF should not be tampered with. Also, given that this could be a very long-drawn downturn, cutting CPF now for the vast majority of Singaporeans who remain in jobs, would be a painful mistake.

Sir, I turn my attention now to the Jobs Credit Scheme which, when we have discussed with the employers and the union leaders, is clearly a better alternative. And I was worried to hear the Member Mr Low suggest that because its effectiveness is not guaranteed, it is better for us to do away with it. I would like to place on record categorically in this House that the labour movement, our

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union leaders and all our workers support the Jobs Credit Scheme and do not want to see it being done away with. In fact, we fully applaud the Government for being willing to tap into our reserves to help the workers in such a difficult situation.

Sir, I would also add that even with the Jobs Credit Scheme, there is no escaping the need to cut costs. In some cases, I think, it is realistic for us to expect that even wage costs have to be trimmed further. But the merit of the Jobs Credit Scheme is that it allows different companies to have different levels of flexibility. The companies must assess if they can avoid wage adjustments. The answer would be "yes" for some companies. For some other companies, the answer would be "no, we still have to make further adjustments". I think the Jobs Credit Scheme gives them this ability to manage at the individual company level and we must support it. It is also true that not all job losses will be avoided, that I agree with completely. But I would like to point out that the Jobs Credit Scheme directly incentivises the employers of Singaporeans to rethink before letting go of their workers. We are asking them to weigh the pros and cons of keeping the worker. And to every individual worker, this stop-pause-to-think time frame can make a critical difference to the worker, and we must not diminish its importance to the worker.

The most important task at hand, I think, Sir, is that we want to tilt the balance in favour of keeping the Singapore worker in his job. And for the companies that are still hiring, we want to tilt the balance in favour of them hiring Singapore workers. Sir, I asked the Member a question – whether he knew the number of immediate vacancies available in the jobs bank of the e2i. He did not respond to my question. I would like to share with him that right now, there are 11,000 immediate vacancies.

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So, they are available to our job seekers whether they are retrenched or not.

Sir, I think with the Jobs Credit in place, what we are really telling employers also, of all these 11,000 immediate vacancies, is that if you choose to hire a Singaporean, there is a 12% wage advantage immediately because he is eligible for a jobs credit. I think that that serves as a powerful incentive for the companies to think about in their hiring decisions.

Sir, I mentioned earlier that although some wage cuts may still be necessary, I would also like to point out that for low-wage workers, the Workfare Income Supplement Special Payment in cash, helps to cushion the cuts. As my colleague, Mdm Halimah has pointed out, the SPUR funding would further help the companies through taking up absentee payroll thereby reducing their wage bills further. So the important thing is, in this crisis, we must tilt the balance in favour of the Singapore worker; give the companies reasons to keep and hire Singapore workers.

Sir, a company's participation in SPUR gives its workers the motivation to support the company through the downturn. Although it was launched only two months ago, there are nearly 200 companies and 10,000 workers committed to SPUR already. The faster the momentum builds up, the more we can tilt the balance in favour of our Singapore workers.

Union leaders that I have spoken to did not begrudge the fact that the Jobs Credit Scheme puts cash into the hands of employers. They took the view that it was far better to help as many Singaporeans as possible keep their jobs, than to give them cash handouts, which could at best provide temporary relief. In fact, many showed me the thumbs-up to indicate their approval of the Budget measures.

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Some $5.1 billion would be needed to fund the Jobs for Singapore programme in the Budget. This is one-quarter of the entire Budget. Such a strong dose of support for Singapore workers deserves our full-hearted support. Although I was initially concerned about the need to dip into our past reserves for the first time, I have no doubt now that it will be money well spent.

Sir, at the same time, union leaders hope to see more businesses responding positively and energetically to upturning the downturn. Their sentiments could be summed up as follows: "The labour movement stands ready to do our part to help Singapore be the most pro-business economy in the world. What about our employers? Are you ready to do your part to help Singapore be the most pro-worker nation in the world?"

Sir, in Mandarin, please.

( In Mandarin ): [For vernacular speech, please refer to Appendix A.] Mr Speaker, Sir, in these very difficult times, the union leaders have seen very clearly the Government is taking resolute action to help the people tide over this crisis. We want to be a pro-business labour movement that helps the companies to survive. However, our workers need to see management taking leadership and making positive moves to overcome this crisis. Employees also want to know how they can contribute business turnaround, thereby saving their own jobs. Employers should demonstrate how they look after the welfare of the workers. Only then can Singapore be the most pro-worker nation in the world.

*Col. 1581-1582.

( In English ):

Not only will workers do their part to tilt the balance in their own favour, we

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call on business leaders to do their part to improve their prospects in this downturn.

Yesterday morning, a group of 45 retrenched garment workers were at e2i undergoing training to help them get a new job. They belonged to the same garment manufacturer that notified all its workers that they would be retrenched. The course was conducted in Mandarin, just 11 days after the workers were retrenched. And it took 11 days, only because there was a Chinese New Year break. It could have been faster. We expect to run more of such courses because more retrenchments in the garment industry are in the pipeline. In the last two months alone, some 700 workers have been retrenched, which is about 70% of the workforce of the three companies involved.

But, Sir, although the garment manufacturing industry is under siege, not all garment manufacturers have given up. Mr Patrick Lee, Chairman of Sing Lun Garments told me recently that he did not have plans to retrench any workers in Singapore. That might perhaps be very reassuring to Mr Low, because he told me that the Jobs Credit Scheme will help him very directly and so he does not want to consider any retrenchments right now. In fact, he is working actively with customers to use the US-FTA provisions that we have, by providing more competitive value to them. At the same time, he plans to adopt other measures to adapt and respond to the crisis, such as implementing Lean Manufacturing in a bid to reduce costs.

I asked Mr Patrick Lee, "How is it that you can avoid the fate that other garment manufacturers cannot?" Mr Lee told me that while orders had declined sharply, there were still opportunities. For example, Singapore companies have a strong track record of delivering products with consistent quality. Our strength in the areas of social compliance have

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established our reputation as reliable suppliers. This puts our companies in good stead with buyers seeking to reduce the number of suppliers in order to reduce their procurement overheads. If Sing Lun could still be in the streamlined list of suppliers, the company could sustain its operations through the downturn and be ready for the rebound when it comes.

Mr Lee further pointed out that the ability to finance working capital was potentially the advantage of Singapore companies. In the current credit crunch, reducing the cost of inventory was a key concern of businesses. This was also where Singapore businesses could differentiate themselves from the competition. With the Special Risk-Sharing Initiative provided by the Government in its Budget, Mr Lee was hopeful that Singapore businesses could weather this downturn better than companies elsewhere.

There are examples like Mr Lee who does not believe that there is zero demand. In fact, his point is that there are lots of demand. We have to go out and get them for ourselves.

Mr Lee's positive orientation cheered me greatly. Mr Lee is doing all that he can to tilt the balance in his company's favour. His example is also reassuring to our workers because they want to know that the management is also doing everything they can to keep the businesses going. If Mr Lee succeeds, and I have every confidence to believe that he will, the balance will also be tilted to Singapore workers' favour, together with all the job credits and SPUR programme that we have put in place. Sir, our workers do not mind being asked to make all these adjustments because they can see when their bosses are doing it too and not giving up. Otherwise, they will wonder whether their efforts will be worth the while.

Sir, in recent weeks, we have been warned that the current global economic

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recession will surpass all previous recessions in terms of scale, depth and impact. The newspapers headlines scream "the worst is yet to come". I believe these claims. I believe that we will see more business failures and as a result, more job losses. I believe that things will get worse before they can get better. The road ahead will indeed be bumpy.

And I also believe that Singapore is uniquely positioned to overcome these challenges. This is not blind faith. My confidence is derived from the sensible responses from union leaders and workers to the Budget. Even those who are retrenched, when we take them to the e2i, have kept their spirits up. They have chosen to look at the bright side of things. My confidence is based on the many business leaders who have shared with me on what they are going to do to keep their businesses going and how they intend to reposition themselves for longer-term competitiveness.

Sir, in conclusion, it is probably true that for the global economy, the worst is yet to come. But for all of us in Singapore, we have every reason to believe that the best is yet to be.

Sir, I support the Budget.

2.17 pm

Mr Matthias Yao Chih (MacPherson): Mr Speaker, Sir, I support this Budget wholeheartedly. Just six months ago, while we were celebrating National Day, we were looking forward to a growth rate for the whole year of 2008 of between 4% and 5%. The collapse of Lehman Brothers in September changed the growth story, not just for the US or Singapore, but for the whole world.

Fearful for their own survival, banks stopped lending to each other. Credit was

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cut. Manufacturers could not borrow working capital for their production. Consumers feeling poorer because their property values had fallen or perhaps, they were facing foreclosures, bought less. Both supply and demand fell. Trade financing also dried up. Importers also could not get letters of credit (LC). Even if a LC was produced, whether you are accepted by the other side depended on which bank was the issuer. So orders and transactions could not be completed. World trade plunged as a result. Two weeks ago, Lloyd's List reported that they now have so many ships going empty that they will carry containers for free – just pay the bunker charges. So by December last year, our non-oil domestic exports to the US contracted by 24% compared to a year before. Exports to the EU fell by 34%. Overall, total NODEX was down 21%. When demand falls, production slows. Our manufacturing output in December fell 13.5%. The electronics sector was most affected. Output there plunged by 35% year-on-year. Many jobs were shed in these past few months and many more retrenchments are threatened in the coming months.

The near-term outlook remains poor. It will be a while more before the large international banks can get out of the holes that they have dug for themselves and regain their ability to be the sources of liquidity and confidence for commerce and trade. Meanwhile, the stark truth is that nothing we can do in Singapore can change the global situation. We just have to wait out the crisis.

But we must do it actively, not passively. That is why I applaud the Budget for its solutions to the problems we face. The crisis today is not due to price competition so a wage cut or CPF cut is not the solution. Nor is it due to technological change. So industry restructuring and anticipatory retraining of

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workers for redeployment, later is not a priority. Stimulating domestic demand will not increase production of intermediate goods made for export. We can buy more potato chips but who wants to buy more computer chips? The problem is due to a breakdown between the world of credit and finance on one side, and the world of manufacturing, services and trade on the other side. We have the capacity to manufacture, export and provide services.

Our industries are competitive. Our workers are productive, skilled and relevant to the world economy. Up to August last year, we were doing quite well. Unfortunately, the world economy has frozen up and this is the new challenge that requires a new approach. In an unprecedented move, the Finance Minister is asking for $4.9 billion to be taken from the reserves to help fund the Resilience Package. Mr Tharman has explained in detail how the funds will be used and how the entire Budget will work for the benefit of Singaporeans. Within the Budget, $4.5 billion will be used to fund the Jobs Credit Scheme. It will subsidise payrolls so that employers will not have to cut jobs to lower overhead costs. Without releasing a part of the reserves for this, a Jobs Credit Scheme of this size will not have been possible. The President has given in-principle approval for the drawdown. I support the use of the reserves in the way proposed. The priority now must be to save jobs so as to minimise the number of families thrown into hardship.

But more importantly, Sir, the Jobs Credit Scheme, while itself is a short-term temporary provision, will have a much longer-term positive impact for Singaporeans. It is not merely money spent away. It will help our companies survive this crisis together with their current workforce, so that their workers will be the first to benefit when recovery comes. When their employers pick up the pace, get back into business and expand into

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the gaps left by competitors that have collapsed elsewhere, our workers will be right there as part of the new growth and not be left out of it. The Jobs Credit Scheme conserves our national reserves in a different form. We can think of it as converting the financial capital reserves that we have accumulated into human capital reserves to survive the crisis. By using the financial reserves to save jobs, we are keeping intact as much of the knowledge and skills, experience and networks in the companies, instead of letting them dissipate only to have to acquire and rebuild them all over again when the upturn comes.

Through the various training programmes, we will invest in our workers higher skills and better knowledge, to be done during companies' slack time. As many as possible of our workers will be able to stay where they are, add to what they already know and are good at and thus enhance their own value in the economy. This is an investment of the reserves in our workers, not consumption that will quickly fizzle out. It ensures that the energy that is in our workers and in our companies will not be disbursed and lost. That energy stored will stand ready to push our economy back into top gear quickly in the recovery. All our workers will benefit from this strategy of conserve and regrow, especially the older workers. As individuals and as an economy, we will be worse off with a strategy of "let go and then rebuild."

Look at this from another angle. Countries who have reserves will likely be pressed to use the reserves to provide its social safety net for the citizens. Indeed, some Singaporeans may hold the view that the Finance Minister is spending so much money and yet the social safety net does not seem to get any bigger. The problem with that approach is that by the time a social safety net gets so big that it has to be funded from reserves rather than current revenues, Singaporeans will

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already be falling down in large numbers. The reserves should be used to provide safety but not in this way.

Let me use an analogy. For construction workers working on top of tall buildings, we do not just spread a safety net near the ground to catch them should anyone fall. We equip each one with safety belts and harnesses and have them hooked up to anchor points at where they work so that they can work safely and comfortably, even though they are a long way from the ground. It is better to provide a safety harness for every worker than just a safety net to catch the ones who happen to fall.

This Budget, Sir, provides a social safety harness. It gives our workers greater security to continue working in their companies and protect their families from income loss. So even as the employers are going through precarious times, their workers can weather the storm with some sense of stability. This approach is far better than catching people in a net, only after they have fallen and then trying to put them back on their feet again. Of course, the Finance Minister did not forget those who will need extra help. Help will be given to those who need it. The schemes that MCYS, WDA and the CDCs operate will be flexible and responsive. The officers in the Ministries and departments will put in greater efforts to assist the social sector. The volunteer groups, the charitable bodies are already mobilising to make available additional support. Many helping hands are there extended, ready to help. Elsewhere in the world, governments, legislatures, central banks and transnational institutions are working hard to arrest the downturn and get the world economy up again. There will be pain but once the causes of the problems are resolved, we will see brighter days.

For us here, the Finance Minister has made the Budget provisions. Our

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employers and our banks must now do their part. We can turn this crisis into opportunity, convert our stored reserves into new energy and position Singaporeans for the next era of growth. We have the ideals, the means and the will to achieve it and we can achieve it.

Sir, I support the Budget.

2.28 pm

Dr Ahmad Mohd Magad (Pasir Ris-Punggol): Mr Speaker, Sir, this year's Budget is indeed an exceptional one for extraordinary times. The world is said to be facing the worst recession since the Great Depression, and for Singapore too, this is likely to be the worst recession in our short history.

Consistent with this anticipation, I am delighted that the measures introduced are primarily aimed at keeping the economic engine turning, with saving jobs being the key priority. Particularly of significance is the fact that the help measures were announced before the Lunar New Year to allow companies sufficient time to rethink their people strategies in favour of retention rather than separation.

Sir, the Jobs Credit Scheme has been hailed as innovative to lower wage costs of residents. In this gloomy economic outlook, it certainly provides a sense of confidence to both employers and employees. However, Sir, I am afraid it may be short-lived. Apart from labour-intensive companies with thousands of employees that will be the primary beneficiaries of the Scheme, I feel that it can, otherwise, only go as far as cushioning the blow for most SMEs, and also the knowledge and technology driven sectors which carry quite a bit more high-income earners. Ultimately, it boils down

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to cash flow of the employers. With the current situation of low external demand, employers will have to watch their cash flows to ensure their very own survivability. With this downturn anticipated to a prolonged one, I believe this measure cannot hold workers till the end of the crisis. It has to be coupled with additional measures to get companies to hold on to their workers over a longer period.

Sir, I would suggest the tripartite partners come together jointly to bear this burden of helping workers keep their jobs. If the economy gets worse at the six-month point from now, I feel that the credit to employers need to be increased. This should not be a direct credit but tied to some form of compulsory upgrading programme for the workers which could come in the form of an absentee payroll subsidy of up to 60% with the same $2,500 cap as imposed for the current scheme. The subsidy has to be attractive enough to encourage companies to retain and invest in their workers for better times ahead if their business outlook continues to remain bleak in six months' time. A similar like scheme, Sir, is being implemented successfully in Germany recently.

Relative to the Jobs Credit Scheme, I would also like to ask whether the credit extended to companies under this Scheme is taxable. For it to have maximum effect, I think there should not be any tax imposed on the credit. Otherwise, there will be another case of giving from one pocket and taking it back from another.

Sir, I would like to also suggest that some form of targeted financial assistance for the retrenched and unemployed be acceded. However, to prevent us from becoming a welfare state, this help must be temporary and targeted towards those who have clearly been trying to look for jobs and have attended a certain number of upgrading and skills training courses but yet fail to secure a job – not due to a

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lack of trying but because of the adverse economic conditions.

I also applaud the meaningful SPUR programme which again benefits both employees and employers. Considering again that this might be a prolonged downturn, I would like to ask the Minister for Manpower to consider extending SPUR to support longer term absentee payroll for full-time certificated skills programme subject to a certain cap. From the business side, subsidies given for SPUR are only applicable to courses offered by Continuing Education and Training (CET) Centres. I suggest that the Government extend this to all Approved Training Organisations (ATOs) so that there is a level playing field. Otherwise, I fear ATOs may be out of business because of the unfair competition as individuals and companies will seek only the courses offered by CET centres and not the ATOs.

Sir, allow me to also echo some of the sentiments from the business community and particularly from the Singapore Manufacturers Federation, which I am declaring that I am one of its Council members. The reduction in corporate income tax (CIT) from 18% to 17% is welcomed but its effective Year of Assessment (YA) 2010 does not provide benefit to businesses that could use the much needed relief in the current year.

If making it effective for Year of Assessment 2009 is not possible, a deferred tax payment arrangement should be considered for companies to ease their cash flows. Companies with cash flow problems should also be allowed to pay their taxes in instalments without any penalties.

While the 40% property tax rebate is welcoming, Sir, I feel that the Government should assist in influencing landlords and particularly large ones such as Ascendas and Mapletree to pass on the full 40% savings to their tenants in order

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for the impact of the savings to flow down to companies and businesses.

At my Meet-the-People sessions, I am seeing an increased number of cash-strapped home owners who cannot take up bank loans due to their adverse credit positions. This will surely worsen during the economic crisis. I would like to know if HDB will extend its subsidised loans to such people even if they have taken two bites of the cherry for these loans. Will the HDB also consider waiving the levy for affected families who want to downgrade their flats due to huge loan arrears?

I would also like to know how long the Community Development Councils (CDCs) take to process financial cases on average and whether this will be done more speedily in tough times when people are in greater and more urgent need of assistance. Although there are other interim assistance schemes such as ComCare, I feel that the CDCs must step in quickly for people in dire need of longer term assistance.

A severe and prolonged downturn will inevitably cause some people more stress and I suspect there will be an increase in the number of people needing psychological help. I would like to suggest that the People's Association ramp up on training for our grassroots leaders as a first line of assistance before referring such residents to professional counsellors. I believe this is critical as grassroots leaders should be equipped with skills not just to spot families in trouble and people in distress but they need to also know how to render initial assistance to such cases.

I would also like to touch on the importance of solidarity in facing this crisis. I think it is important that Singaporeans do not get carried away in negative thinking even during tough times. Having an outlet to vent one's frustrations can be cathartic, but, as

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elaborated by my colleague Jessica earlier on, too much negativity may kill our spirit to overcome this challenge. It is imperative that we focus on positive thinking and take proactive and constructive measures to get over this crisis together as a nation.

This is a good time as any for us to evaluate our values and priorities. While I acknowledge that as a small thriving cosmopolitan city, Singapore needs to focus on economic issues, I worry that in chasing the dollar, some of us may start to lose sight of our core values and priorities in life. During these tough times, it is important for families not to spend beyond their means as enjoying the company of loved ones can be done through simple and low-cost ways, not necessarily by budget-busting ones.

On that note, Sir, I support the Budget.

Sir, allow me to just say a few words in Malay.

( In Malay ): [For vernacular speech, please refer to Appendix A.] The economic downturn now is one of the worst faced in the world and Singapore. The Singaporean community must understand its effects on workers and society, and be ready to face this challenge.

In a crisis, several possibilities can happen. The most obvious one is retrenchments. To mitigate this effect, the Government introduced several schemes to help employers and affected workers. One of these schemes is the SPUR Scheme that encourages workers and the unemployed to upgrade their skills through training schemes. I hope the whole society, including the Malay community, will support this Scheme wholeheartedly,

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as skills upgrading is important not only for the present but also for the future.

Many other side effects can also happen during hard times. Even with less spending income, some still refuse to change their lifestyles and continue their high costs of living, even though it is outside their means. This is not the time to change furniture or go for holidays using instalment schemes. This is also not the time to change to a new car, even though COE prices are low, because if you cannot afford it, monthly payments for a car will burden your families.

I hope that our Malay families will be more careful before they overspend. Try to find ways to save, even through small gestures like buying fewer cigarettes. At the same time, such actions can bring about positive changes to their health.

For those who are sick, continue getting treatments because, if not, deteriorating health will make the situation worse. If you cannot afford to pay the hospital bills, find ways and try to get help from the hospitals, Malay organisations, national bodies or by meeting your own Members of Parliament. In addition, it is important for Malay organisations to take note of the present national schemes, so that they can help Malay families more efficiently.

With that, I support the Budget presented by the Minister for Finance.

*Cols. 1583-1584.

2.40 pm

Dr Ong Seh Hong (Marine Parade): ( In Mandarin ): [For vernacular speech, please refer to Appendix A.] Mr Speaker, Sir, a few days ago, at a temple dinner, I met an old man who is a leader of the Chinese community, a successful businessman. He told me a personal story. One day, the old man after eating a bowl of fish-ball noodles costing $2.50, his grandson came

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home. Out of concern, the old man asked, "Grandson, would you like a bowl of fish-ball noodles." The grandson replied, "No. I have gone out with grandmother, and we had abalone noodles. For the three of us, we spent $42." Jokingly, the old man said, "Where do you have money to have such an expensive meal?" The grandson said, "It's grandmother's money." The grandfather said, "Grandmother's money, but she is not working. All her money came from your grandfather who had been working very hard all these years."

With deep feelings, the old man told me, "For people of our generation, all we wanted was simply to fill our stomachs. But now the young people are different. What they eat, where they live, for everything they want the best." Then I asked him, "Did you tell your grandchildren the virtues of living a thrifty and simple life?" The grandfather said, "Yes, but then they said, 'Grandpa, those were the days when the policemen wore short pants.' In other words, they are saying my thinking is out of date. It is obsolete."

Mr Speaker, Sir, the story reminded me of a debate we had last year on education when I told the House that students nowadays were not willing to eat sweet potatoes and drink tap water, even during special training days. What makes me worried is whether our young people are willing to take hardship. This year, we will be drawing down on our reserves for the Budget. To put it in simple language, "We are using grandpa's money – public funds." I think we are going through an exceptional period and facing the most severe crisis since Independence, and that is why the Government is adopting these very unusual measures to meet the challenges. I support the Government's measures. But I hope that Singaporeans will, in terms of their mindset and lifestyle, make necessary adjustments to lower their expectations and demands.

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I read in the Lianhe Zaobao this morning that many workers are receiving training to acquire new skills. But there are still some people who continue to show a lack of a sense of crisis and will to change. For example, there was a worker who had worked in the textile industry for many years. She is receiving training now. But she indicated that she was not willing to be a cleaner. She wanted to have a job in the packaging industry. Mr Speaker, Sir, I am not saying that every retrenched worker must be a cleaner. But I want to reflect that many Singaporeans are biased and are still very choosy, in terms of jobs.

Sir, we must maintain our perseverance and the survival spirit. This is the spirit of the Budget this year. The English term "Resilience Package" is good. The real meaning is preseverance and ability to bounce back in difficulty. But, unfortunately Chinese translation calls this a zhenxing or "stimulus" package, losing the meaning of "resilience".

Mr Speaker, Sir, like the grandfather, I hope that my children and my grandchildren, in future, and all Singaporeans will continue to afford abalone noodles, and I am sure our days would be better and better. But, my bigger wish is that the abalone noodle enjoyed by my children and grandchildren will be the result of their own hard work, and not be dependent on my money or the grandfather's money. We know that flowers will not bloom for 100 days. There are always ups and downs in life. So I hope that when days are not so good, they will able to endure hardship. They will know how to eat sweet potatoes and drink tap water, yet continue to live comfortably. Then, when the economy is good, we can survive and do better.

During this crisis, let us review our life goals. Have we not over-emphasised materialistic life and forgotten about other aspects of life? Is our spiritual life full and

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meaningful? This economic crisis originated from the sub-prime crisis in US, but fundamentally, it resulted from the excessive spending of Americans, who are in the habit of spending tomorrow's money for today's consumption – buying houses, buying cars which they cannot really afford. The American society is like that. How about the Singapore society?

Let me give some simple statistics. From 2000 to 2008, the population of Singapore increased by 15%, but the number of credit cards issued had doubled to more than five million cards. The roll-over debts of credit cards had increased from $1.7 billion to $3.3 billion.

Sir, are we not following the footsteps of Americans and becoming a society with excessive consumption? I hope that we will take this as an alarm bell and let us understand our situation. I am not against improvement in the material life. I am against the blind pursuit of materialistic welfare. We must realise that leading a simple life is a virtue. I hope that Singaporeans will cherish family life, friendship and lead a more meaningful and wholesome life.

After talking about this philosophy, I would like to address some remarks on the specific measures of the Budget. Although the Jobs Credit Scheme has been announced, we still hear retrenchment by certain companies. We understand why people are beginning to worry as to whether our Jobs Credit Scheme can really protect jobs. I am glad to note that many MPs – especially our labour MPs, our colleagues from the labour movement – have clarified and explained that the meaning of the Jobs Credit, which is really to allow companies to change their thinking and to prevent, or at least reduce retrenchment, and jobs can thereby be saved. Perhaps, our Union leaders and our Government could work

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harder to give the assurance to Singaporeans, so that they will understand how the Jobs Credit will assist the companies to protect and preserve jobs and, indirectly, protect the rice-bowls of the workers. We should help Singaporeans understand that the companies which are profitable will create more jobs to the benefit of Singaporeans. I would like to urge the companies to actually pass on the benefits to the workers, after receiving the Jobs Credit.

Sir, Jobs Credit is different from the reduction of CPF contributions. It will affect the workers' income and their ability to service their housing loans. Nonetheless, I am still of the opinion that this Jobs Credit Scheme, like the reduction of CPF contributions, is a one-size-fits-all rough measure by the Minister for Finance. What we are facing now is not just a loss of competitiveness, but a serious global reduction in demand. Using Jobs Credit is a partial measure which will provide some help to the employers to reduce cost. I hope that we do not just depend on the Jobs Credit Scheme alone, we must look at the whole picture of the Budget. This Budget is not just about Jobs Credit, it contains many other measures, eg, helping the SMEs to obtain more financing from the bank, reducing the property tax and corporate tax for the SMEs, etc. There are many other measures to help reduce cost. This is what the whole Budget is all about! So, let us look at the whole picture of the Budget – the comprehensive measures adopted to solve our problems.

Sir, my other concern is the use of our reserves. I am a conservative in this respect. In this economic crisis, even Warren Buffet could not escape from the shrinkage of his assets. What I am concerned with is that our reserves have also been seriously affected. Last year, we amended the Constitution to allow us to use the returns from the Net Investment Returns (NIR), so this includes

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the returns from long-term investments. Now, we are going to use part of the principal amount of the reserves. Will our reserves not be seriously affected? I would like to ask the Minister for Finance: how long and how many more years before our reserves will be restored to its original value? For that, we must give an assurance to our people that we are not slaughtering the goose that lays the golden eggs.

Sir, let me finally urge our people and the Government to have an "ox-like" resilience – working hard and helping one another, during this year of the Ox. With one heart, together, we will ride out this crisis.

Sir, I support the Budget.

*Cols. 1585-1590.

2.52 pm

Mr Low Thia Khiang: Mr Speaker, Sir, please allow me to speak in Mandarin.

( In Mandarin ): [For vernacular speech, please refer to Appendix A.] Just now, Mr Ong said that he supported the drawing down of the reserves. I would like to ask him whether he knows that the Government has the financial capacity to pay for the expenses from its own surpluses instead of drawing down on the past reserves? However, the Government has chosen to draw down from the past reserves. Just now, Mr Ong told us an episode of abalone noodles. I would like to ask him if he has enough of his own savings to pay for the abalone noodles, would he use his grandfather's savings for that?

*Cols. 1591-1592.

Dr Ong Seh Hong: ( In Mandarin ): [For vernacular speech, please refer to Appendix A.] Mr Speaker, Sir, I know that our Government is now facing a very extraordinary situation that we have to draw down from the reserves. I know that the Government has surpluses, but yet,

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they have decided to draw down on the reserves because this package that the Government is introducing is very different from the traditional Budget. It is a once-off means. Of course, if you just want to draw the reserves to buy abalone noodles, then I would not agree. But, if we can keep the rice-bowls of our workers so that they would not have to resort to eating coarse food, I think, we should at least give them one decent meal.

*Cols. 1593-1594.

2.54 pm

Mr Gautam Banerjee (Nominated Member): Mr Speaker, Sir, I rise in support of the Budget.

This year's Budget was delivered early in response to the parlous state of the world economy and the need for the Government to spring into action and batten down the hatches of Singapore's own economy. I think there had been a suggestion that it would be an expansionary Budget. However, "expansion" in the current situation is the word of an irrepressible optimist. Keeping the economy afloat was really as much as any realist could have hoped for. And I believe, by and large, the measures that were announced will go a long way in doing just that.

The Budget focus, therefore, quite correctly, was on preserving jobs. There is no use talking about stimulating an economy plagued by rising unemployment. But a secondary and no less important focus, was on freeing up the credit log-jam and getting banks to start lending again. Only in this way can the economy stand a chance of early recovery and getting back on its feet.

But the prospect of a rosier future also was not ignored. Attention was also paid to ensuring that the economy not only weathered the storm, but also emerged from it stronger than it went in. In other

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words, the Budget kept its eye on "building for the future". In this context, there is no doubt that Singapore has a significant advantage over most of the developed nations in that the Budget measures will all be funded out of the Government's own. We will not, like many, have to resort to increased borrowing, or even worse, printing money as some countries have had to resort to. A degree in rocket science will not be needed for one to realise how this sort of behaviour can end up in a stagflationary spiral. Singapore is therefore in an ideal position to rebound quicker than most, and take advantage of the distressed state of the other slower moving, less agile economies of the world.

I turn now to my thoughts on some of the more detailed aspects of the Budget proposals.

The Jobs Credit Scheme represents innovative, bold and "out of the box" thinking by the Government in the wake of an unprecedented economic crisis. It also shows how concerned the Government is about job losses and that it is prepared to take radical, expensive and untested measures to keep Singaporeans employed during this period of uncertainty. The Scheme will certainly provide temporary cash flow relief to all companies, particularly those companies that employ large numbers of lower paid staff. But the Scheme is not without its critics, as we have heard today in this House. It was pointed out that because it is across the board and is a blunt and expensive tool, the number of jobs saved will be disproportionate to the cost of the Scheme.

In my opinion, this is a negative and overly critical way of looking at the Scheme. Because we are in a crisis of extraordinary proportions, we need measures which are extraordinary. We

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must also be prepared to take some calculated risks. By devising this Scheme which is simple, transparent, easy to implement and provides a measure of relief to every employer, the Government now has every right to expect all employers to behave responsibly and in a caring manner when dealing with their employees during this crisis.

The three-way partnership between the Government, employers and employees is critical during this crisis. With the Jobs Credit Scheme, the Government has put its money where its mouth is and thrown down the gauntlet to employers and employees alike to play their part in preserving jobs in Singapore. Because the Scheme is new, untested and expensive, we have to monitor its effectiveness and impact on saving jobs while being realistic of what it can and cannot achieve.

I would request the Ministries of Finance and Manpower to provide periodic updates on what impact the Scheme is having on preserving jobs, given the quantum of funds being used out of our reserves to fund this Scheme. These updates would be helpful to assess whether the Scheme is achieving its objectives and whether it should be continued beyond the initial year.

The credit crisis is a global phenomenon and Singapore has not been spared its dire consequences of stifling and choking businesses, both large and small. In fact, because we are an international financial centre with the presence of many foreign banks, the impact of the global credit crisis has hit our local businesses quicker and deeper than many other countries. Local branches of some foreign banks whose head office balance sheets have been savaged by toxic assets have not only stopped additional lending to their most loyal and sound business partners but, in some cases, have cut credit facilities under

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head office instructions to prop up their balance sheets back home.

This has put additional pressure on our local businesses and our local banks. For local businesses, it is the worst possible time to start new banking relationships and for our local banks, who have already got to deal with their existing customers current and additional funding needs, taking on new customers with whom they have no relationship or track record is perhaps too much to ask. But this is precisely the problem we need to fix and fix quickly because liquidity is all about timing; if businesses are unable to gain access to cash to pay their short-term expenses, they can go under almost overnight.

The Government has recognised this problem for some time now and has introduced co-sharing initiatives such as the Bridging Loan Programme under which the Government shared up to 50% of the loan with a bank. The loan limit then was S$500,000 which clearly showed that the aim was the smaller end of the business scale. However, in recognition of the pervasive and persistent nature of the problem, the stakes have been raised in the Budget through the Special Risk Sharing Incentive (SRI) which increases the Government's risk share to 80% and the loan limit to $5 million. The SRI has also been extended to trade financing, which will be much appreciated by businesses.

But will these initiatives be enough to get credit flowing again to the arteries and veins of all businesses, not just SMEs, that operate in and from Singapore and are so critical to our economy? I have some reservations.

Firstly, the amount and reach of the SRI is limited and is aimed at smaller businesses. Even if the $5.8 billion is fully utilised, it will not meet the requirements of businesses, particularly if we are to

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replace the credit being withdrawn by the branches of foreign banks.

The Government initiatives to help companies have been targeted at smaller businesses, which in itself is no bad thing but larger businesses, including MNC subsidiaries operating in Singapore, are also facing acute problems with refinancing, arranging letters of credit and working capital financing. These companies have a deep impact on our economy and their continued presence is vital to Singapore because they provide direct employment to many Singaporeans, support our manufacturing and services sector and are big contributors to our GDP.

Take, for example, the many companies in the marine sector such as the large oil rig owners and operators. These companies were attracted to Singapore not only because of our excellent business headquarter infrastructure, access to capital, general ease of doing business but also because Singapore is the leading centre for the construction of offshore oil rigs and other marine equipment. These companies place large and lucrative contracts to our local shipyards which obviously need to be financed. Credit must continue to flow to these companies which are vital to our economy. Many of these businesses are encountering obstacles and difficulties because of this unprecedented crisis and the hardened attitude towards lending and risk appetite being adopted by the banks. The Government needs to give a lending hand to these companies as well.

Governments around the world are trying to solve the credit crisis in different ways depending on their resources, political will and the environment in which they operate. What is clear is that it is not business as usual and radical steps are required. Given our agility and nimbleness, we could show real leadership to come up with solutions that work.

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It is in this spirit that I would like to put forward a proposal for the Government’s consideration. I believe the situation is serious enough for the Government to set up a Credit and Capital Funding and Oversight Board (CCFOB) with its own full-time employees. The CCFOB’s charter will be three-fold.

**** Firstly, it will ensure that the various schemes and initiatives that have been put in place including SRI announced during the Budget Statement, actually work and credit starts flowing back again.

The CCFOB will be a dedicated "one stop" organisation that will carry out many of the pro-active steps which Minister Lim Hng Kiang referred to in his recent media briefing session on the SRI. For example, the CCFOB will look at business loan applications that are rejected by banks and if the grounds for rejection are not valid, it will revive the loan application on behalf of the applicant. With the added weight of the CCFOB, hopefully, one of the participating banks will provide the credit.

**** Secondly, take pro-active measures to breathe life into our capital markets which have all but dried up primarily because of the lack of credit as well as negative sentiment and poor risk appetite.

**** I believe every crisis presents opportunities and I believe one such opportunity during this global crisis is for Singapore to develop its capital markets even further by using its deep fiscal pocket in a smart and innovative way. Let me elaborate. For some years now, we have been developing Singapore as a capital market not only for local businesses but also for companies from around the region. We have been quite successful in attracting foreign companies to raise capital in Singapore through initial public offerings, bond issues, etc. For

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example, there are nearly a hundred Chinese companies listed on our local exchanges. However, we face intense competition from other regional capital markets, such as Hong Kong and Shanghai, and have to constantly re-invent ourselves. This crisis gives us an opportunity to gain competitive advantage over rival capital markets by leveraging Singapore‘s strong fiscal position.

The global credit crisis has meant that all capital markets have come to a grinding halt with hardly any IPO activity. This is not because there is a dearth of companies with good business models and growth prospects but the totally irrational and negative sentiment towards acceptance of any form of risk and reluctance of banks and financial institutions to provide capital and underwrite share and bond issues.

This is where the CCFOB can play an important role by becoming an underwriter of last resort for IPOs that meet all the listing criteria for our capital markets but are being held back because of the credit crisis. This will generate life in our local capital markets and will help to attract good quality businesses from around the region to Singapore. It will also differentiate us from other capital markets.

Thirdly, play the role of an "honest broker" with influence and clout. We need an "honest broker" with influence and clout who can work with banks and financial institutions on the one hand and businesses, both small and large, local and foreign, on the other. I believe this is the vital missing link because presently there is no one organisation which is independent and of standing with a clear mandate to help businesses with their liquidity problems.

The CCFOB can be "this honest broker with clout" that individuals and companies can turn to when they are frustrated in

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their attempts to obtain financing from banks and other financial institutions.

In today’s environment, we have to change our mindset that if a company has a credit problem, then there is something wrong with the company. Today, companies are facing credit problems, by and large, because there is something wrong with the financial system and we need to fix the financial system and fix it fast. Hence the need for an organisation like the CCFOB.

While my proposal stops short of the Government taking the loan-granting process in-house, commercial lending decisions and the related infrastructure still remain with banks, it institutionalises some of the proactive steps required to stimulate lending within a dedicated unit – the CCFOB.

The CCFOB should have full-time resources, some seconded from Government agencies while others would be recruited from the ready pool of ex-bankers and financial advisers. The job opportunities it will create, I am sure, will be welcome.

How long should the CCFOB be around for? I would say initially a two-year period. Whether it should continue beyond two years will depend on its effectiveness and market conditions.

For those who say that this is "over the top", I would quote the Nobel prize winning economist Paul Krugman. And I quote, "for now the important thing is to loosen up credit by any means at hand without getting tied up in ideological knots. Nothing could be worse than failing to do what’s necessary out of fear that acting to save the financial system is somewhat 'socialist'."

The Government continued to show its interest in fostering the fund

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management industry by targeting most of the significant changes in the financial services arena on enhancing existing fund management incentives. There were really three changes. Two gave rise to sighs of relief, and one to sighs of disbelief. The relief came primarily from the new measures announced for dealing with Goods and Services Tax (GST) as it applied to approved onshore funds. Although the onshore fund scheme was an excellent initiative, it was hamstrung by the fact that the fund’s local service providers were compelled to charge it GST, which funds were, for various reasons, finding it difficult or impossible to recover. An onshore fund was therefore not operating on a level playing field with its offshore counterparts who did not face a GST charge in the first place. This is being remedied by the announcement that a substantial portion of the GST charged on prescribed services could be recovered automatically. It remains to be seen what "substantial" may mean, but it is hoped that it will be in excess of 90%.

The other good change was to now see limited partnerships as collective investment vehicles in their own right. This will significantly tidy up the information retrieval exercise for determining whether funds or their investors qualify for incentives. It also recognises the existence of one of the most commonly used forms of fund vehicle.

The real surprise was the move to allow almost free access for Singapore investors to the incentive scheme. Hitherto, the scheme had been very much aimed at bringing in foreign funds and ensuring that no (or restricted amounts of) Singapore money found its way in. However, under the new Enhanced Tier Scheme, the previous limits of 30% or 50% (in some cases) Singapore investor limit will be lifted. The minimum fund size to qualify for the Enhanced Tier is small, at $50 million (which is really subsistence

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level for a manager), although further qualifying conditions have yet to be announced.

There is no doubt that the growth of the fund management industry is high up in the list of the Government’s agenda. The measures so far have not only met with a high degree of success but they also show the Government’s ability to listen to market feedback and act on it quickly and decisively. It is this sort of agility and speed to market of new ideas, that will allow Singapore to leap ahead of its rivals in this area, and it is something to be roundly applauded.

In the run-up to the Budget Speech, there had been calls on the Finance Minister to enhance the loss carryback relief scheme to allow businesses to monetise current year tax losses and get back some of the tax paid in earlier (profitable) years. The current scheme allowing carryback of $100,000 of qualifying deductions which translated (at most) to $18,000 in tax terms would hardly be sufficient to sustain ailing businesses. The following enhancements have been proposed:

Allowing carryback to three years of assessment immediately preceding the year of assessment in which the capital allowances or trade losses were incurred.

The losses carried back are to be set off, firstly, against the third year of assessment, followed by the second year of assessment, and then the year of assessment immediately preceding the year of assessment in which the capital allowances were granted or the trade losses were incurred.

Increasing the limit of aggregate qualifying deductions carried back from $100,000 to $200,000 (effectively giving a maximum refund of $40,000 when

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applying the Year of Assessment (YA) 2006 corporate tax rate of 20 %).

While businesses will be glad that the losses can be carried back for a longer period, one wonders if the limit should not have been increased even further. The maximum possible relief now is $40,000 compared to $18,000 previously.

For a few years now, a certain amount of a company’s chargeable income is exempted from tax. Under the current scheme, the loss carryback would have to be set off before the exemption amount. If the enhancement of the loss carryback is to help businesses which are making losses in this recession with their cash flow, the set off should be after the exemption amount. Otherwise, we will have one incentive cannibalising another. Hopefully, the IRAS will look into this matter and change the current practice.

Sir, in conclusion, one cannot argue with the main thrust of this Budget, which was aimed at short-term survival for businesses and jobs while also trying to build for the future. There were certain areas that could have been given more attention, most notably the outpouring of our much needed foreign talent who probably felt quite hard done by. However, in a crisis of this magnitude, it is accepted that it is not possible to solve all problems at once. We shall see over the next few months the extent to which the measures announced have been successful. In particular, a very close watch needs to be kept on whether the tight credit situation is easing for businesses; otherwise, more radical steps, including the proposals that I have set out, need to be taken soon rather than later.

One thing in my mind is for sure. We will need "off budget" measures to supplement, modify and tweak policies, both existing and those introduced in this Budget, and we need to do this swiftly

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and decisively throughout the coming months. Singapore’s ability to pay for initiatives out of its own pocket certainly gives it a first mover advantage and will stand us in good stead when the storm has passed over, as it inevitably will.

Mr Speaker, Sir, thank you for allowing me to participate in the debate on the Budget speech.

Mr Speaker: Order. I propose to take the break now. I suspend the Sitting and will take the Chair again at 3.35 pm.

Sitting accordingly suspended

at 3.15 pm until 3.35 pm.

Sitting resumed at 3.35 pm

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[Mr Speaker in the Chair]: