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Slowdown could stretch to 2009; Singaporeans should be prepared, says PM Lee

It was, by all accounts, a stellar first quarter economic performance by Singapore - job creation was at a high while flash growth estimates of 7.2 per cent beat expectations.

However, rather than set the stage for another year of expansion, the Prime Minister yesterday delivered the Government’s most bearish outlook thus far.

Despite the “good” first quarter expansion, Mr Lee Hsien Loong did not once hint at exceeding the full-year growth forecast of 4 to 6 per cent. Instead, he warned Singaporeans to “prepare ourselves” for a slowdown that “may last until next year”.

Speaking at the May Day Rally yesterday, he reiterated the impact of a double whammy of economic uncertainty and rising costs of living on the Republic, points he had raised in his May Day message a day earlier.

“So far, Singapore has been all right. But looking forward, a lot will depend on the US and global economy,” he said (see sidebar).

While the construction, marine engineering and port sectors “would be okay”, he said, other sectors such as finance, tourism and information technology could be “seriously affected” by the impending recession in the United States.

“It will not be even but there will be impact,” said the Prime Minister. “This is one major uncertainty affecting our economy.”

Urging employers and workers to ensure that “any built-in wage increases are sustainable”, Mr Lee said: “If the companies are still doing well, reward the workers with higher variable bonuses. Keep it flexible; just in case things turn wrong, you don’t have to disappoint the workers and take back something which has already been given.”

On its part, the Government has been “focused” on the welfare of low-wage workers, said Mr Lee, who revealed that the National Trades Union Congress (NTUC) central committee were “very seized” by the plight of such workers in a recent closed door, “no-holds-barred” dialogue.

“For two hours, we spoke about nothing else except low-income workers,” said Mr Lee, adding that there are “no shortcuts” - for example, legislating minimum wage or “shutting out” imported labour - to a common problem facing countries around the world.

While challenges lie ahead, Mr Lee was confident of Singapore’s approach: Building tripartite relationships, educating and training Singaporeans, helping industries innovate and assisting needy Singaporeans through a social safety net. “Our approach is working, so we must persevere,” he added.

On top of the Workfare Income Supplement scheme and the one-off Growth Dividends, the Government, and the NTUC, have been investing in continuing education and training, including efforts in job recreation, skills upgrading and getting contract workers on board the Central Provident Fund system.

As inflation sets in and prices of daily necessities surge, NTUC has also given out discount vouchers to low-income households, said Mr Lee, adding that the Government would continue to work on helping this group of Singaporeans “patiently”.

Stressing that it was vital that the Government not only “do more but do it right”, he added: “Don’t go for wayang (for show) and grandstanding, issuing statements but not being accountable for results. Show the results.”

Many unionists admitted to Today that workers were “very concerned” about how the Singapore economy would fare in the months ahead.

Still, Mr Jeffery Fung, 40, a member of the Singapore Airport Terminal Services Workers Union, said it was comforting to know that measures were in place to mitigate the impact of the impending economic slowdown.

Mr Mariappan, a 54-year-old technical

engineer with Jurong Shipyard, felt that unions ought to lobby harder for workers to get a pay rise, in order to cope with the rising cost of living. Still, the vice-chairman of the Shipbuilding and Marine Engineering Employees’ Union conceded: “It would be more difficult given the slowdown, but if the company is doing well, why not?”

Mr Lee, however, stressed that the challenge of helping low-wage earners must be seen in its proper context, as the “majority of Singaporeans are doing well”.

Said the Prime Minister: “Household

incomes have increased across the board. The unemployment rate is very low … and the employment rate is at a record high. We’ve never had so many Singaporeans working ever before, in spite of all the foreign workers here.”

He added: “In fact, I would say this: We have the foreign workers here, and that’s why our economy has grown, that’s why the companies are here. That’s why Singaporeans have jobs in such big numbers.”

Dwelling on some Singaporeans’ resistance towards the influx of foreign workers in the Mandarin portion of his speech, Mr Lee stressed that the country was facing a manpower shortage, and “not that we have too many workers”. For instance, the two integrated resorts are expected to create an

additional 20,000 jobs.

Citing measures such as the foreign worker levy and limits on the proportion of foreign workers companies can hire, Mr Lee said he hoped that Singaporeans would “look at the contributions of foreign workers objectively”.

He added: “They are not here to steal our jobs but to help us enlarge the economic pie.”

Source : Today - 2 May 2008

Prime Minister Lee Hsien Loong has cautioned Singaporeans to be prepared for a slowing economy in the next few quarters.

Speaking in Malay, Mandarin and English at the May Day Rally, Mr Lee told workers that Singapore’s economy may have done well so far in 2008, but developments in the US economy may still have an impact on the country.

Mr Lee gave the stark reminder when he joined more than 1,500 workers at Labour Day celebrations.

Mr Lee said the US sub-prime crisis has spread through its banking system and beyond. While the immediate danger is over, there is still the ripple effect.

He painted three scenarios of how the US economy might affect Singapore.

The first scenario is a mild recession but with growth at the end of the year.

Second, if the US problems persist, it’ll slow Singapore’s growth as well, even going into 2009.

The third scenario is a severe US downturn which most analysts agree is unlikely to happen.

Mr Lee believes the first two scenarios are more likely.

“For this year, we can still achieve a 4-6 percent growth which MTI (Ministry of Trade and Industry) has projected. But remember, the 4-6 percent (growth) is for the whole year. The first quarter was good, (but for the) second, third and fourth quarters, prepare for a slowdown (which) may last into next year. This is one major uncertainty affecting our economy,” said the prime minister.

“Employers and workers have to bear this in mind when you negotiate your CAs (collective agreements) this year. You have to ensure that any built-in wage increases are sustainable and if the companies are still doing well, reward the workers with higher variable bonuses, and keep it flexible,” he added.

Another concern is the rising cost of living.

Mr Lee said the government had just given out the first instalment of Growth Dividends to some 2.4 million Singaporeans. The second payment is due in October.

Overall, each household can expect some S$5,000 to cope with the rising costs.

On the issue of foreign labour, PM Lee said foreign workers are willing to work longer hours to keep the airport, factories and hotels open 24 hours a day throughout the year. That gives Singapore a more competitive edge, he said, adding that keeping foreign workers away is not the answer.

“It’s because we have the foreign workers here, that’s why our economy has grown, that’s why the employers, …companies are here, and that’s why Singaporeans have jobs. You send away the foreign workers,… a few hundred thousand (of them), Singaporeans (won’t) go into those jobs, the companies will close or leave. I think the Singaporeans unemployment will go up, and hardship will go up,” said PM Lee.

For those who have difficulty finding jobs, Mr Lee said there are many schemes to help them get employed. For example, the Workfare Income Supplement gave out S$300 million this year, benefiting some 300,000 low-wage workers.

More jobs are also on the horizon, with some 10,000 available at the Marina Bay Integrated Resort. - CNA /ls

Source : Channel NewsAsia - 1 May 2008

He is confident Singapore will be able to weather uncertain global outlook

Singapore is sailing into choppier waters amid uncertainty in the global economy, but Prime Minister Lee Hsien Loong is confident of Singapore’s economic prospects.

In his annual May Day message, Mr Lee sketched out the uncertain outlook due to the financial crisis in the United States.

But he maintained: ‘However the US financial problems play out, I am confident of our ability to cope…our economic fundamentals are sound and we are in a strong position.’

Buoyant industries such as tourism, construction and marine engineering will buffer Singapore from the effects of a US recession, he said.

The economy is still on track to grow by 4 per cent to 6 per cent this year. The job market is also expected to be full of jobs chasing workers.

‘In both manufacturing and services, many vacancies are waiting to be filled,’ the Prime Minister said.

Latest job figures released yesterday buttress this point.

They show that a record 68,400 jobs were added to the economy in the first three months of the year, exceeding the 62,500 jobs created in the previous quarter and 49,400 in the same quarter last year.

Still, despite the job boom, the unemployment rate climbed from 1.7 per cent in December to 2 per cent in March.

HSBC Bank economist Robert Prior-Wandesforde attributed this phenomenon to an expanding pool of job seekers, possibly a result of more foreigners seeking jobs here.

In his speech, Mr Lee also urged workers and employers to aim for ’sustainable’ wage changes this year, in anticipation of a year ahead that will be ‘much more challenging’ than 2007 had been.

‘Realistic settlements will address the concerns of workers, and yet allow companies to respond quickly to sudden changes in the economic environment,’ he said.

For now, the economy is still doing well although ‘dark storm clouds have gathered’.

Pointing to the sub-prime mortgage loan crisis in the United States, Mr Lee said: ‘We must watch closely how the situation in the US unfolds, and be ready to respond if things take a turn for the worse.’

Addressing the hot issue of rising inflation, Mr Lee said Singapore cannot shield itself completely from this worldwide phenomenon.

But the strong Singapore dollar has helped to maintain the purchasing power of workers’ salaries, he noted.

The Prime Minister also assured the people about the food situation here.

Singapore has enough supplies of food, notably rice, and ‘we can buy what we need from many sources’, he said.

Also, help will be given to those struggling to cope with the higher cost of living.

Relief measures from the Government total $3 billion, ranging in form from tax rebates and Medisave top-ups to the GST offset package and Growth Dividends given to every Singaporean from the last Budget surplus.

The first payout of the Growth Dividends was yesterday, with a second due on Oct 1.

Noting that Singapore’s strength is the strong cooperation among unions, employers and the Government, Mr Lee said this enabled them to take a ‘rational approach’ and act in Singapore’s collective best interest.

PM Lee added: ‘The external turbulence will put our solidarity under stress.

‘But we must not end up arguing among ourselves, or, worse, quarrelling over how to divide what we have, or else we will all be worse off.’

Source : Straits Times - 1 May 2008

Last year was a good year for Singapore and its workers. The economy grew robustly, many jobs were created and workers enjoyed good wage settlements. In unionised companies, bonuses were the highest since 1990. The mood was upbeat.

This year will be much more challenging. Our economy is still doing well, but dark storm clouds have gathered. The sub-prime mortgage loans crisis in the United States has become a much broader problem. A US recession has probably already started. The question is how long, and how severe, the downturn will be.

The US government has acted boldly to stabilise the economy. They hope growth will be back on track by the second half of this year. But there is a possibility that the financial problems will worsen, and push the US economy into deeper trouble. Then Europe and Japan would be more seriously affected, and the impact on Asia and Singapore much more severe. This is one big uncertainty that we must be prepared for.

Our first priority is to keep the economy competitive and growing. This means continually upgrading and diversifying the economy. We are strengthening our ties with the vibrant Asian economies and tapping new areas of growth. Industries like tourism, construction and marine engineering continue to do well, and will buffer us from the effects of a US recession. We still expect to grow by 4-6 per cent this year. But we must watch closely how the situation in the US unfolds, and be ready to respond if things take a turn for the worse. We have the resources and the ability to do so.

With continued growth this year, the labour market will remain tight. In both manufacturing and services, many vacancies are waiting to be filled. As major projects like the integrated resorts come on stream, many more jobs will be created, from front-line operations to supervisory and managerial positions.

In this environment, the vast majority of workers with useful skills and qualifications will have no difficulties getting a job. They should take advantage of the many opportunities for continuous education and training to refresh their skills and knowledge.

But older, low-wage workers remain vulnerable. They are less nimble in learning new skills and need more structured training. The Government is doing all it can to help them. We are working with the NTUC to help older workers upgrade their skills, become more employable and do better for themselves. Through the Workfare Income Supplement, we are rewarding those who make the effort by topping up their takehome pay and CPF savings.

Another major issue is the rising cost of living. Like other countries, Singapore is affected by higher global inflation. We cannot insulate ourselves completely from worldwide price increases. However, the policy of the Monetary Authority of Singapore to keep the Singapore dollar strong has moderated the impact of imported inflation.

Singaporeans are understandably concerned by the recent sharp increases in food prices, including essentials like rice. We need not worry about a food shortage, because we have adequate supplies and can buy what we need from many sources. At the same time, we can and will directly assist those who are adversely affected by the higher cost of living. This is why this year’s Budget included the Growth Dividends, personal income tax rebates, Medisave top-ups and many other relief measures, targeted especially at lower- and middle-income Singaporeans. Together with measures such as the GST offset package, the Government will be giving out more than $3 billion to Singaporeans this year.

Low-wage workers have already received their Workfare Income Supplements. On April 30, all Singaporeans received their first payout of Growth Dividends. A second payout will come on Oct 1. Altogether, a low-income family living in a three-room HDB flat can expect benefits of around $5,000 this year, far larger than the increase in their cost of living due to higher inflation. Middle-income families will also enjoy benefits that will offset the increased cost of living.

I hope that workers and employers will take into account these important factors in their wage settlements this year. They should aim for sustainable wage adjustments, and put increases into variable bonuses as far as possible to make our wage structure more flexible. Realistic settlements will address the concerns of workers, and yet allow companies to respond quickly to sudden changes in the economic environment.

Singapore’s great strength in tackling these challenges is the strong tripartite cooperation we have built up over the years. Because of the mutual trust among tripartite partners, we are able to take a rational approach.

We must do our best to consolidate and strengthen this partnership. The external turbulence will put our solidarity under stress. But we must not end up arguing among ourselves or, worse, quarrelling over how to divide what we have, or else we will all be worse off.

NO FOOD SHORTAGE

Singaporeans are understandably concerned by the recent sharp increases in food prices, including essentials like rice. We need not worry about a food shortage, because we have adequate supplies and can buy what we need from many sources.

Source : Straits Times - 1 May 2008

It has to avoid populist pressures as well as prevent others from anticipating its moves

If you are looking for Government of Singapore Investment Corp (GIC) to publish its returns annually and give details of its every move, think again.

That is because there are good reasons that the fund should not be too transparent, said Minister Mentor Lee Kuan Yew, who is also GIC’s chairman, in a Bloomberg TV interview on Tuesday.

‘There have always been these calls for transparency and we have been careful about it. There are reasons why we do not think we should be too transparent,’ said Mr Lee.

Firstly, GIC has to guard its portfolio and strategy - otherwise others will anticipate its moves.

‘No company likes to have its moves anticipated. If you make your moves very clear, people can predict what you will do next, and forestall you or pre-empt you,’ he said.

Secondly, being too transparent may raise people’s expectations for the Government to spend GIC’s returns.

‘You raise expectations of your own people, and they say: ‘Let’s spend it. We’ve made 8 per cent last year - why are we keeping 4 per cent? Let’s spend 6 per cent instead of 4 per cent.’ And so on,’ said Mr Lee.

‘These are populist pressures which we have to buffer.’

In order to avoid such pressures, GIC also chose to disclose its profits and losses over a five-year or 10-year period, rather than year by year as publicly listed companies are required to do.

Mr Lee said: ‘If we do it year by year, we will have our ups and downs. Well, if you have good profits, people will say: ‘Let’s spend.’ If you have bad profits, we can’t spend this year, they will say: ‘Oh, it will hurt.”

‘A government has to take the risk and say: ‘This is as far as we can go.”

Mr Lee said GIC is being built up ‘for the future for all kinds of contingencies, like a major worldwide recession or depression’.

The Government has also laid out guidelines on the spending decisions of GIC.

‘We will not spend the capital. We will spend half of our earnings, taken on a five-year basis, not year by year,’ Mr Lee said.

His comments come amid calls for more transparency by sovereign wealth funds (SWFs) globally. The SWFs have mushroomed in their scale to hold a total of US$3.5trillion (S$4.8 trillion) last year, according to US research firm Global Insight.

The massive size of SWFs and their investments that include stakes in national icons such as US banking giant Citi have sparked fear among governments across the world that the SWFs’ motives may not be entirely commercial.

In Singapore, there have also been calls for GIC to disclose more information about its investment activities, like Temasek Holdings, the other Singapore investment fund, has already done.

Temasek has been releasing an annual report with its total shareholder returns as well as details of its portfolio and some major investments over the past few years.

Still, the GIC may take some steps to lift the veil on its investment activities.

Prime Minister Lee Hsien Loong told the media in January on the sidelines of the World Economic Forum in Davos that GIC had previously been ‘much more circumspect about disclosure’.

‘But going forward we’ve decided to (do) more,’ he said.

Source : Straits Times - 1 May 2008