PUBLIC SECTOR RATES AND CHARGES

With these principles in mind, we have tailored our policies to fit our economic recovery. Last year, the uncertainties of the stock market crash prompted the Government to move cautiously in adjusting the concessions granted on Government rates and statutory charges in 1985 and 1986. Fortunately, a world recession did not materialize. Our economy recovered and enjoyed above average growth. We cannot sustain a growth rate of over 10% in the long term. The Government has made the necessary policy adjustments. We will continue to act circumspectly, and give full consideration to the effect of new policies on our international competitiveness.

Long-term CPF Rate Adjustment

We have increased CPF contributions incrementally towards the long term contribution rate of 40%. We have also announced that the employer's CPF contribution rate will be raised by up to 4% and the employee's contribution rate reduced by up to 2% in 1989, subject to the economic performance of the first quarter of 1989. By giving early notice of the adjustment, the Government hopes that both employers and employees would take the higher CPF rates into account when negotiating their wage settlements.

Foreign Worker Levy

The robust growth last year and the tight labour market saw a strong inflow of foreign workers. In manufacturing, more jobs went to foreign workers than to locals. To dampen the demand for foreign workers and to prevent them from growing beyond what is necessary to maintain a buffer, the foreign worker levy was increased to $220 with effect from 1st January 1989, and to $250 per month with effect from 1st July 1989. The maximum dependency ratio for foreign workers has also been reduced from 50% to 40%.

Skills Development Fund

With the shift in Skills Development Fund focus to worker training since May 1987, there has been a marked increase in the training of rank-and-file workers. SDF will continue to invest in worker training so that we will be able to keep up with the rapidly changing skill requirements to meet technological changes. Based on current SDF levy collections, there are sufficient funds to meet projected SDF disbursements this year. Therefore, it will not be necessary to increase the SDF contributions in 1989.