COMPANIES WITH PROBLEMS IN REGIONAL PROJECTS (Assistance)

Mr Tay Beng Chuan asked the Minister for Trade and Industry how the Government can assist companies which have invested heavily in the region in response to the regionalisation drive and which are now facing cash flow or implementation problems in their regional projects because of the current financial turmoil.

Mr Lee Yock Suan: Mr Speaker, Sir, some Singapore companies with regional investments are adversely affected by the regional financial crisis. The problems are difficult to overcome as they are dependent on how the banking and financial systems of the host countries are sorted out. Nevertheless, my Ministry will try to assist companies, where feasible.

We will continue to support eligible companies with financing under the Regionalisation Finance Scheme. It helps local companies by providing low cost loans for investment in fixed assets, such as buildings and equipment.

The Local Enterprise Finance Scheme (LEFS) is designed primarily for the Singapore operations of local small and medium-sized enterprises. Depending on a company's regional project, its financing needs and associated risks, it may be feasible to extend some financial assistance under LEFS. The lending decisions are made by the participating banks with the Government sharing part of the risk. My Ministry is examining the LEFS to broaden its scope.

We will continue to monitor the regional developments closely and review what else can and should be done. Ultimately, companies have to accept that there are risks involved in any investment decision, whether locally or abroad.

Mr Low Thia Khiang (Hougang): Sir, when the Government encouraged companies to go regional, at that point in time did it foresee the possible problems that we face today? Secondly, when these companies were encouraged by the Government to go regional, were they forewarned of the possible tighter credit in the face of a situation like this?

Mr Lee Yock Suan: The answer to the first question is obviously no. I think nobody foresaw it, not even the big banks which lent so much money and are now facing problems collecting their loans. As to the second part, we have told companies, "Please go regional. It is necessary for us to make use of resources in the region and to tap the markets", and many have done so, but they must go in with their eyes open and they have to use their own resources.

Mr Low Thia Khiang: Even if the companies went in with their eyes open, and the Government claims to have a helicopter view and could foresee what is going to happen today when it encouraged companies to go regional, I wonder whether the Government would provide a more sympathetic solution to companies which have already gone into the regionalisation process. They are caught in the currency turmoil, their credit is tighter, and the whole investment could just drain off.

Mr Lee Yock Suan: The Government is very sympathetic to these companies. But when it comes to public funds, we have to be very careful. So there is no question about bailing out companies that are not feasible. But where it is feasible, we will see where we can help out. As explained, we are looking at the LEFS to see whether we can broaden the scheme. For example, if they have good collateral here, maybe the banks will be willing to lend them the money with the Government sharing part of the risk, and they themselves can then lend to their own subsidiaries.

Mr S. Iswaran (West Coast): The Minister just mentioned a little bit about how we intend to broaden the scope of the LEFS. Are there any other areas we are looking at?

Mr Lee Yock Suan: The details of this will be announced in the Budget speech. So maybe the Member can wait.