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Singapore Budget -- What the markets are looking for

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  • Reuters
    SINGAPORE, Feb 28 (Reuters) - The Singapore government will release its budget for the year to March 31, 2004 on Friday at 2:30 p.m. (0630 GMT). The budget is
    Message 1 of 62 , Feb 27 11:08 PM
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      SINGAPORE, Feb 28 (Reuters) - The Singapore government will release
      its budget for the year to March 31, 2004 on Friday at 2:30 p.m.
      (0630 GMT).
      The budget is expected to concentrate on longer term economic
      restructuring for Singapore in the face of strong competitive
      pressures from the rise of China and the global economic slowdown.

      But analysts also expect a number of short-term measures directed at
      reducing business costs in Singapore.

      Following are some of the areas which will be closely watched and the
      measures that may be included in the budget.

      BUDGET OUTCOME

      - The budget is expected to produce an unprecedented third
      consecutive deficit.

      Analysts said the 2003/04 deficit could reach 2.8 percent of GDP,
      with estimates for the deficit outcome in 2002/03 ranging between 0.5
      and 1.5 percent. In 2001/02 the deficit was about one percent of GDP.
      Singapore's nominal GDP in 2002 was S$155.7 billion ($89.8 billion).

      - Total government expenditure is expected to exceed S$28 billion
      ($16.2 billion).

      - The government is expected to maintain its growth forecast of two
      to five percent for calendar 2003.

      LABOUR MARKET

      - A freeze on compulsory contributions for the government-run pension
      plan, called the Central Provident Fund, at the current level of 36
      percent for the next two years.

      - A lower salary ceiling for mandatory contributions to S$5,000 from
      S$6,000 per month.

      HELP FOR WORKERS

      - Incentives for retraining and reskilling workers.

      - The government may introduce other assistance measures to help the
      unemployed., particularly older workers but direct welfare payments
      are unlikely.

      - Enhancements to child relief scheme.

      TAXATION - The government is committed to reduce the corporate and
      personal income tax rate to 20 percent by 2005 from the current level
      of 22 percent. Most analysts expect a partial move toward the target
      rate in the forthcoming budget.

      - Exemptions for foreign sourced corporate income from taxation.

      - Exemptions for interest income earned on all bank deposits, debt
      securities and other interest bearing instruments.

      - Cuts in the withholding tax rate from the current 15 percent on
      interest and royalty payments.

      - Higher excise duties on tobacco and alcohol products.

      - Tax incentives for investments in the life sciences industry and
      for the provision of healthcare services.

      - Tax incentives for the financial services sector, in particular
      wealth and risk management activities.

      - Incentives to promote small business start-ups.

      - Property tax rebates.

      - Changes to the levy on domestic maids.

      - Tax cuts for world class performers, sportsmen and entertainers.

      - Investment Allowances on new tourist projects.

      - Tax deduction of mortgage interest and insurance premium on owner-
      occupied property.

      - Abolition of estate duty.

      ($1=1.733 Singapore Dollar)

      --------------------------------------------------------------------------------

      From: Far Eastern Economic Review
      Date: Tue Feb 18, 2003 8:56 am
      Subject: No Roar: Singapore retreats to the familiar with economic blueprint


      20 February 2003
      Far Eastern Economic Review

      (Copyright (c) 2003, Dow Jones & Company, Inc.)

      FACED WITH fiercely competitive China, an up-and-coming India and
      other challenges, Singapore decided it had to do something. In
      December 2001, it formed the Economic Review Committee. Led by Deputy
      Prime Minister Lee Hsien Loong, the committee was charged with
      deciding how to keep Singapore growing at a healthy clip. Last week,
      it was finally ready to shake Singapore out of its angst over the
      future. The only trouble is that its recommendations turn out to be
      as exciting as watching traffic on the Pan-Island Expressway.

      Very quickly, the reaction has been that there is little new in the
      recommendations. Rather, they stick to the tried and true, making
      some allowances to reflect voguish industries. The main thrust in the
      immediate future is to lower the cost of doing business. To this end,
      the committee recommends that income and corporate taxes be cut, and
      that a rise is postponed in employer contributions to the Central
      Provident Fund, the state-run retirement fund. All sensible stuff --
      yet something you'd expect to take less than a year to figure out.
      Cutting costs is something Singapore does well, after all. To be
      fair, Mr. Lee reportedly explained it this way: "If the stones look
      like they are in the same place, it's because we have put them back
      very carefully."
      And that statement perhaps sums it up: Having surveyed the future,
      the committee retreated to the safety of the familiar, making sure to
      leave all the stones in their proper places. Thus, for example,
      Singapore should expand its export market for services and higher
      value-added goods; and in case private companies are too timid, the
      committee suggests that the government's Temasek Holdings should lead
      by investing in new industries. If it was microchips yesterday, today
      it's maybe DNA chips.

      Indeed, we wonder if the calculus involved in investment decisions
      isn't the nub of the issue facing Singapore. Take for starters the
      CPF and its effect on capital allocation. Many in the private sector
      had hoped for an overhaul of the fund, which admittedly has made
      Singaporeans extremely thrifty savers. The trouble is that much of
      workers' very substantial savings are invested through the
      centralized decision-making auspices of the CPF. Arguably, more
      diversification in capital distribution would better serve the
      economy, especially in funding the entrepreneurs that many hope would
      take the economy in new directions. Then again, Singapore reveals
      something about its attitude towards this class of businesses by the
      committee's proposal that "the government designate a minister to be
      responsible for driving initiatives to develop a more entrepreneurial
      Singapore." Ouch.

      Paused at a crossroads, the question is whether the old virtue of
      frugality -- along with a little tinkering with a dated economic
      paradigm -- is enough to carry Singapore forward comfortably, or
      whether prudence in fact dictates a derring-do to loosen constraints
      that hold back a multitude of risk-takers. For now, the city
      apparently has decided to stick with the Confucian ethos. We wonder
      if Singapore wouldn't do better if it changed its mind.
    • SDP
      Any one these days can promise the havens and the earth......but delivering on the promise is another thing altogether. Some examples of unfulfilled
      Message 62 of 62 , Mar 8, 2003
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        Any one these days can promise the havens and the earth......but delivering on the promise is another thing altogether.

        Some examples of unfulfilled promises....;

        JUDGE MY GOVT BY ITS RESULTS: PM Goh Chok Tong

        The Rhetoric

        "The price of a good government is $34 million a year - just $11 per
        Singaporean a year - or the cost of five plates of char kway teow per
        citizen."
        - Straits Times, July 1, 2000

        "A million dollars for a minister seems a lot when compared with the
        salary of a worker. But $34 million for all the ministers and
        political office-holders is a tiny drop when compared with the
        increase in GDP that a good government can produce..."
        - PM Goh Chok Tong, Straits Times, July 1, 2000


        The Reality

        The Singapore economy contracted by 2% in 2001 (Singapore Department
        of Statistics). Singapore has undergone two recessions in three
        years - 1998 and 2001. December 2001 figures show that 101,800
        persons are unemployed.
        ------------------------------------------------------------------------

        SIZE DOES MATTER

        The Rhetoric

        "GLCs added only 12.9% to the Singapore economy, says BG Yeo. Smaller
        companies need not worry about being edged out."
        - Straits Times, February 24, 2001

        "...there is a perception that GLCs dominate our economy...This is
        not correct."
        - MTI Minister George Yeo, Straits Times, Feb 24 2001

        The Reality

        "The government external economy constituted more than 50% of the
        total external economy in 1998. If one takes into account the GLC-
        owned external economy, then the government share balloons to some
        60%. Foreign MNCs accounted for 29% whereas the local private sector
        (excluding GLCs) owned 11%. It is therefore clear that if the
        government and GLCs fail to secure a good return on their external
        economy, the performance of the economy overall would be adversely
        affected."
        - Morgan Stanley report "Singapore's Investment Abroad 1997-1998"

        "GLCs have evolved into major economic institutions that account for
        over 60 percent of Singapore's GDP."
        - US Embassy in Singapore economic report Sept 2000

        "GLCs estimated contribution to GDP in 1998 of 12.9 per cent was not
        insignificant."
        - Singapore Department of Statistics, March 2001

        --------------------------------------------------------

        LABOUR CHIEF WANTS TO LOWER YOUR WAGES

        The Rhetoric

        "A worker in Singapore will cost $1000 per month or more, but there
        is a bountiful stream of workers in China who will gladly work for
        $100 per month ... that is why we should lower our wage costs."
        - Labour chief Lim Boon Heng, Straits Times, June 17 2002

        The Reality

        "Singapore ninth most expensive city in the world."
        - Economic Intelligence Unit, Jan 2001

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        A tale of two salaries

        The Rhetoric

        "This stingy government of ours is paying me only RM16,000 a month to
        do two jobs."
        - Malaysia's Prime Minister and Finance Minister Dr Mahathir Mohamad,
        Straits Times, 25 Nov, 2002

        "A million dollars for a minister seems a lot when compared with the
        salary of a worker. But $34 million for all the ministers and
        political office-holders is a tiny drop compared with the increase in
        GDP that a good government can produce."
        - PM Goh Chok Tong, Straits Times, July 1, 2000

        The Reality

        "Malaysia's economy expanded by by 5.6 per cent in the third quarter."
        - Straits Times, Nov 28, 2002

        "Singapore may face its second recession in two years."
        - Straits Times, Nov 19, 2002

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        FATHER & SON ON JBJ

        The Rhetoric

        "If you are Singaporean, you should stay on and fight and argue your
        case and persuade more people to believe you and one day change the
        policy, not opt out and leave because no policy is set in stone
        forever."
        - DPM Lee Hsien Loong praising J.B. Jeyaratnam as an example of
        a "stayer", Straits Times, Oct 3 2002.

        The Reality

        "Look, Jeyaretnam can't win the infighting. I'll tell you why. WE are
        in charge. Every government ministry and department is under our
        control...I will make him crawl on his bended knees, and beg for
        mercy."
        - Lee Kuan Yew on JB Jeyaratnam, 1981, as related by ex-President
        Devan Nair in this article

        During a 1986 inquiry into whether he had violated the Parliamentary
        Privilege Act by questioning the integrity of judges, Jeyaretnam
        asked Lee, "So you think I have to be destroyed?" Lee
        replied, "Politically, yes."

        --------------------------------------------------------------

        ONE FAMILY?

        The Rhetoric

        "We all are one family."
        - PM Goh Chok Tong, August 9, 2001

        The Reality

        Between 1998 and 1999, the average household monthly income of the
        poorest 10 percent of the population decreased by nearly 50 percent
        from $258 to $133. In the same period, the incomes of the richest 10
        percent increased by 2.6 percent from $15,053 to $15,451.

        The following year, the average household income of the poorest 10
        percent fell by another 54 percent from $133 a month to $61. In the
        same period, the incomes of the richest 10 percent increased by
        another 8.8 percent.

        ---------------------------------------------------------

        CHU MEI-FENG AND LEE KUAN YEW

        The Rhetoric

        "I believe we've got a responsible press. They are not ashamed of
        what they are doing.."
        - Mr Lee Kuan Yew on the press in Singapore.

        The Reality

        "Mediacorp TV has been fined $10,000 for airing "sexually suggestive
        and offensive" footage from the sex-scandal video of Taiwanese
        legislator Chu Mei-feng."
        - Straits Times, Feb 23 2002

        "Our dear opposition "rebel" Chee gets sued for defamation for asking
        about the 10-billion dollar loan, is denied the right to speak up in
        support of the Malays in the tudung issue, and gets only a few
        minutes to speak on TV. Instead the current Miss World Wh*** Chu Mei
        Feng got a whole half-hour slot on Channel U on Friday to highlight
        her arrival in Singapore AND WAS GIVEN THE RIGHT TO PERFORM on stage.
        What a joke Sillypore has turned out to be."
        - A (pissed-off) forumner on the Internet

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