Sunday, November 30, 2008

SINGAPORE : Focus is to keep jobs

PM Lee was on the last day of his tour of Latin America, which started last weekend in Lima, Peru.

SANTIAGO - The economic crisis Singapore is facing is different from what it has battled before, said Prime Minister Lee Hsien Loong, but the focus of its response is the same: To keep people in jobs.

The current crisis is a global one, unlike the 1995 recession, which encompassed the region, and the 1985 downturn, which was due mainly to Singapore's costs running out of whack vis-a-vis other developing economies.

But, as was the case before, Singapore will aim its ammunition at making sure its people are employable and the economy remains competitive.

'Because if you are not working, and if your company is not competitive, then there is no way you can come back up and stand on your feet again,' said PM Lee.

'That has to be the emphasis. And it has been. Each time.'

The Government will help workers get new skills and ensure that businesses can continue to operate, by cutting costs and ensuring that they have access to credit.

More help will be extended to the lower-income group, but the middle income will not be neglected in the coming Budget either, he said.

PM Lee was asked on Friday about Singapore's response to the crisis, which originated with the property market in the United States and has since infected all economies. Singapore is already in recession, with unemployment expected to rise as the economy slows down next year.

He was on the last day of his tour of Latin America, which started last weekend in Lima, Peru, where he joined other leaders for the Asia-Pacific Economic Conference summit. He made stops in Sao Paolo and Brasilia in Brazil as well.

Singapore has announced a $2.9 billion package that includes the Government giving stipends to workers who re-skill themselves, and taking on more of the risks that banks shoulder when they lend money to businesses.

Asked how Singaporeans were responding to the crisis, he said those who had been through a recession would take it in their stride.

But, he added, it would be the first recession for young Singaporeans, who could either be nervous about having to get through the storm, or who might take a more laid-back 'I haven't felt the raindrops yet' attitude.

Mr Lee noted how Singaporeans had swallowed the medicine that was doled out in 1985. Among other things, they accepted a drastic 15 percentage point cut in the employers' share of CPF as a way for businesses to lower costs.

He recalled then-Prime Minister Lee Kuan Yew giving a 'lecture' during the 1985 National Day Rally speech, with charts and slides to show how Singapore's cost structure was out of line compared to countries like Taiwan and Hong Kong.

It was 'a long explanation on why we've got to take the medicine', he said.

'No goodies, not one. People listened carefully. They understood this. The medicine worked.'

This time, there was 'a bit more sugar coating'' on the pill, with assistance for families, he pointed out.

Those who had been through a downturn will take it in their stride, but for young Singaporeans, they could react in two ways - nervousness at having to go through a storm or 'I haven't felt the raindrops yet."

'But we should not lose sight of the over-riding priority which is jobs, business costs, employability and competitiveness,' said Mr Lee

He declined to say what was in the coming Budget, but ruled out cuts in the CPF in 'the immediate term', as there were other ways to reduce business cost.

Cutting the CPF rate would give too pessimistic a signal, he said. 'If everybody takes fright and shrinks back, it will make the situation gloomier.'

The PM also noted that the current crisis was different in another way - it does not depend on immediate measures but the state of the American economy.

Also, it will take time to get economies back to growth, due to imbalances which had built up over the past five to seven years between the United States, which has run up huge budget deficits, and Asia, with burgeoning surpluses.

'We can't go back to where we were before, which is, Asians lend money to Americans... Americans borrow money to spend,' said Mr Lee. 'So how do we get savings and consumption back in balance?'

With the American consumer cutting back, someone else - whether the Chinese or the Indians - has to pick up the slack. The whole world would need to adjust to the new situation forced upon it by the crisis, he said.

Singapore can expect several years of slow growth, he said, but 'it is not the end of the world'.

'It will pass. We will come back out. Asia is dynamic with opportunities and we must still be with Asia. During this downturn, we must do all we can to prepare ourselves for that, to emerge in that position.'

Focus is to keep jobs Straits Times