Asia One - Sat, Feb 07, 2009
2009 will test the mettle, the strength of character, of
Singaporeans. The PM and Finance Minister have described this
worldwide financial crisis that has reached us. This is the first
time that all banking systems in all countries are concurrently
facing a credit crunch. They have lost confidence in themselves, in
their fellow banks and other financial institutions, and even in
their customers. US and EU banks have been brought down by complex
derivative securities, now called "toxic assets" because they may
be worthless.
In 9 months, we will know how President Obama's economic and
financial plans are doing. We will have an indication of when
America's economy will bottom out and start to grow again. With
luck, it could be by the end of 2009 or in early 2010. However,
many leading American economists contend that spending this huge
sum of money, they may still not succeed in kick-starting the
economy. Some argue that prices in the mortgaged housing sector
must hit bottom and recover before confidence will return. When
they do, banks and financial institutions worldwide will be more
confident.
The outcome of America's economic and financial policies will
affect the EU, China and Japan, because the US is their major
export market. By the end of the year, we will know where the US
economy is heading. The "Resilience Package" may have to be
updated.
Our external trade is more than three times our GDP. Therefore,
the level of international trade is a decisive factor for our
economy. Indeed, in this globalised economy, no country - not the
US nor the EU, nor Japan, nor Singapore - can single-handedly
decide its economic performance.
Big countries like China and India can still make substantial 6
to 8% growth despite this meltdown. They have giant domestic
markets and can spend to meet their large infrastructural needs.
But China's GDP is only one-quarter, and India's less than
one-tenth that of America's. We may get some spin-offs from their
growth, but they cannot lift us like a US recovery.
Singaporeans and their government are not in panic. We have got
the wherewithal to survive this recession, even if it goes on for
several years. We knew such a recession must come from time to
time. It is in the nature of the free markets of the western world
that our economy is plugged into. People and systems tend to be
carried away by exuberance. Investors get greedy and rush in to
buy, believing that prices will only go up. When prices collapse,
investors find they have lost huge sums. Despair and depression
then set in.
Everyone in the world is poorer. US$7 trillion has been wiped
off the world's stock markets. According to a BBC report from
Davos, the world's assets (stocks, properties, pensions, gold,
jewellery, etc) have lost 40% of their value. Rupert Murdoch
speaking at Davos said personal wealth in the world has fallen by
US$50 trillion. Forbes estimated that in Hong Kong, the 40 richest
billionaires and millionaires have lost half their combined wealth.
Property values have gone down in every country, so have profits
for companies and wages for workers. In Singapore, our SGX market
capitalisation lost half of its value last year. Properties at the
high end, residential and commercial have gone down. However, HDB
prices have held up because many are downgrading from private
condominiums to purchase HDB flats.
Everyone's wealth has shrunk as our assets have lost value. But
if you have not borrowed excessively to buy assets and have
sufficient cash to service your loans, you can hold on to your
investments until the market turns up and prices recover.
Singaporeans need not despair or be depressed. We will have to
endure some hardship. But nobody will be destitute, depending on
soup kitchens or begging in the streets. Everyone has a home, 95%
of Singaporeans are home-owners. They will receive U-save rebates
and S&C subsidies, GST credits, Workfare Income Supplements and
other forms of assistance. Most importantly, the government has
launched the Jobs Credit Scheme to save jobs for Singaporeans by
giving employers a maximum grant of $300 per month for each
Singaporean worker. These measures will help Singaporeans meet
their basic living expenses and defray their utility bills and
conservancy charges. Support is tilted towards the lower income
families in the two and three-room flats, and also the
middle-income in four and five-room flats.
Some professionals have written to the newspapers that we are
ignoring those in the private condominiums and landed properties.
The government has not overlooked them. They are getting income tax
and property rebates, and GST credits. But it is right that the low
income groups should get more help, as they are in greater
need.
Ministers and senior civil servants are taking pay cuts of up to
20% as the economy has slowed down substantially. Middle and
lower-ranking public officers would also receive lower salaries,
but with smaller reductions. It is to share the belt tightening
that other Singaporeans have to bear in this difficult period.
Most of what we consume is imported. We do not grow our food,
nor manufacture the goods we buy. Whatever we do, retailers will
find customers more cautious, because they are preparing for what
could be a longish period of negative or little growth. Retailers,
like other companies, will get up to $300 per month for each
Singaporean employee through the Jobs Credit Scheme, and should
also benefit from the 40% property tax rebate, which is the least
that landlords should pass on to tenants. Along Orchard Road and
many other shopping centres, tents have been put up next to
shopping malls for the mall tenants and others to sell their wares
to passers-by at lower prices. The market will adjust. This
experience will be remembered by everyone, especially by all those
who were born after 1971. After 1971 and the oil crisis which
caused oil prices to quadruple, our economy has grown steadily year
after year. So this generation may believe that Singapore and
Singaporeans will automatically go up the escalator every year.
This is not so.
In testing times, we must have the guts to face our problems,
maintain solidarity and work together, learn new skills and
knowledge through the SPUR programme that the government has
launched. We will overcome our present difficulties and emerge
stronger from the experience. We will get fresh investments again,
higher value investments that will employ more workers who are
better-skilled and more knowledgeable. Our standing with investors
worldwide is high. They know we are restructuring and that we will
pay for our workers to be trained by them, and by other institutes,
under the SPUR programme to match the skilled workers that they
need. We should take this opportunity to go for training and
upgrade ourselves for these higher value-added jobs.
Singapore's security, stability, reliability and good labour
relations are well known. Whatever your job, you are better off in
Singapore than if you are in a similar job in any other Asian
country, including China and India. The only country where job for
job, you can be better off, is in Japan. The Japanese have huge
reserves, top class infrastructure and a highly skilled,
industrious and knowledgeable workforce.
Do not be discouraged by the present hard times. I am confident
the younger generation of Singaporeans have the grit, stamina and
resourcefulness to bounce back.
My generation of Singaporeans will never forget the 1960s and
early '70s when we had only $100 million in our reserves. We faced
separation from our then economic hinterland, Malaysia, and
"Konfrontasi" and no trade with Indonesia. That generation kept
their nerve and were determined to succeed. Your parents' and
grandparents' generations had hard lives in shanty huts with no
running water or modern w.c, not knowing what the future could
bring. They simply concentrated on hard work and built the
foundation for the Singapore of the 21st century.
We will go through with restructuring our economy. And retrain
and educate our workers to higher levels of skills and knowledge.
When recovery comes in the US and EU as it must, we will be ready
for a higher level of economic activity.
Your generation can take Singapore forward to become one of
Asia's most vibrant and beautiful cities. We will have a
spectacular marina in the Central Business District; the island
will have many beautiful streams and water bodies; our housing
estates will be clad in exuberant foliage and ringed by gardens,
recreational and sporting facilities. This is not a pie in the sky.
It will be realised in the next 5 to 10 years, even with the
current financial crisis.
The success of Singapore came from the hard work, resourcefulness
and ingenuity of your forefathers and their leaders. You are the
descendants of these lion-hearted pioneers. You have it in you to
succeed. Joining you are hardworking and talented new emigrants
from Asean, India and China. Together we can make the grade.
SPEECH BY MINISTER MENTOR LEE KUAN YEW AT THE TANJONG PAGAR
CHINESE NEW YEAR DINNER AT HENDERSON SECONDARY SCHOOL, 6 FEBRUARY
2009
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