Published February 4, 2009

Calls to fine-tune Budget proposals

Suggestions on freeing up lending, corporate rescues and saving jobs

By CHUANG PECK MING

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(SINGAPORE) While agreeing with the government's emphasis on cutting costs and saving jobs, the initial tone of the debate on the Budget Statement suggested that Members of Parliament were in favour of some fine-tuning.

Madam Halimah: The Jobs Credit protects jobs and protects the CPF

While virtually all MPs that spoke - more than 20 of them - agreed on the need to salvage jobs, quite a few questioned if the Budget measures went far enough or were sufficiently targeted to do the job.

MPs linked to the labour movement were especially thankful for the $4.5 billion Jobs Credit scheme, because it did away with the need to cut the Central Provident Fund (CPF) contribution rate. The Jobs Credit is equivalent to a nine percentage-point CPF cut.

'The Jobs Credit is more than I expected,' said Halimah Yacob (Jurong), who is a deputy secretary-general of the National Trades Union Congress. 'It protects jobs and protects the CPF.'

But opposition MP Low Thia Khiang remarked: 'If sales eventually cannot sustain the overhead cost, I doubt a 12 per cent cash grant on wages (from Jobs Credit) will help to prevent retrenchment,' Mr Low said.

Questions on the scheme were not raised just by the Opposition.

To Nominated MP Siew Kum Hong, Jobs Credit provides only a temporary relief for businesses and makes employers 'a little bit more reluctant to lay off locals'.

But it is still only a 'band-aid' at best, though a 'very expensive' one, he said. 'At $4.5 billion, I would expect more.'

Even PAP MP Lim Wee Kiak (Sembawang) was unsure. 'How effective is the Jobs Credit scheme in saving jobs?' he said. 'Will it be money well spent or will it be water pouring into sand?'

His fellow MP Jessica Tan (East Coast), who is Microsoft's Singapore managing director, found Jobs Credit 'very thoughtful, direct and simple', and said many companies were 'very impressed' with it. But she, like Lee Bee Wah (Ang Mo Kio), felt not enough is done for the jobless.

Ms Tan also conceded that eventually, the problem is demand.

Indeed, calling for a more aggressive 'Survival Budget', Inderjit Singh (Ang Mo Kio) said the government should focus more on demand, cost issues and cash flow for companies and households.

'It appears to me that the most effective way to stimulate local demand would be to temporarily cut GST by two percentage points,' said Mr Singh, who is also an entrepreneur.

He urged the government to take a more active or direct role in lending to businesses, in view of the credit crunch and reluctance of banks to lend money.

'In our early days, when the banking system did not work in Singapore, we had a development bank to help finance companies,' Mr Singh recalled. 'Today, our financial system also doesn't seem to work. We may have to go back to the basics again.'

With corporate rescue a reality globally, he felt Singapore could likewise set up a 'Corporate Rescue Task Force' to help the government decide which companies are worth saving.

Such a rescue package would involve both direct investments and lending, with allowance for stakeholders to earn back their ownership.

NMP Gautam Banerjee, who is executive chairman of accounting giant PricewaterhouseCoopers, while agreeing with the focus on preserving jobs, said it is 'no less important' to pay attention to 'freeing up the credit logjam' and getting banks to start lending again.

He found the $5.8 billion Special Risk-sharing Incentive (SRI), which raises the government risk sharing for loans to 80 per cent and the loan cap to $5 million, 'limited'.

'Even if the $5.8 billion is fully utilised, it will not meet the requirements of businesses, particularly if we are to replace the credit being withdrawn by the branches of foreign banks,' Mr Banerjee.

Noting the SRI covers only smaller businesses, he added: '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, he said, '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'.