Singapore Govt can now draw on more returns from investing Singapore’s reserves

Singapore Govt can now draw on more returns from investing Singapore’s reserves

By May Wong,

SINGAPORE: The government can now tap into the capital gains from Singapore’s invested national reserves for its spending. This follows a unanimous vote in Parliament on Tuesday to amend the Constitution.

Before this, the government can only use the interest and dividend income from investing the national reserves for its spending.

The government wants to tap on the capital gains so that its income can keep pace with rising expenditure in the near future. It expects to spend three per cent more of the country’s gross domestic product annually in five years’ time.

Research and development projects will be one area where the extra funds will go into, to allow Singapore to stand out from other countries. More money is also needed to fund areas like medical care for an aging population.

75 MPs - all those present at the House - voted yes to support the changes to the Constitution.

A division was called, to make sure that the amendments are supported by at least two-thirds of elected MPs.

Nearly 10 MPs spoke to voice their concerns such as helping older Singaporeans and being careful with spending the reserves.

Wee Siew Kim, MP for Ang Mo Kio GRC, said: “I hope that we also slay another sacred cow by rebuilding the safety net for Singaporeans of this age group that had been handed the short end of the stick in this current financial climate.”

Lee Bee Wah, MP for Ang Mo Kio GRC, said: “We should also not be ebullient when crystal-balling into future prospects and earnings.”

Dr Ong Seh Hong, MP for Marine Parade GRC, asked: “Can we ensure future profligate governments will not attempt to change the Constitution to draw more from our reserves?”

Finance Minister Tharman Shanmugaratnam acknowledged the concerns and assured the House that the government will err on the conservative side when projecting expected rates of returns under the new framework.

Mr Tharman said: “Ultimately, it’s a system that relies on robust governance. It sets in place in the Constitution, checks and balances…..I believe - and the government believes - this system will work more objectively than alternative systems and better ensure that we preserve our reserves, that we spend prudently and wisely.”

Mr Tharman admitted the system may not be perfect. But the key is having the right people in the government and on the boards of Singapore’s central bank and the Government Investment Corporation to make educated and informed judgements.

On why the government does not borrow money instead of drawing on the reserves, Mr Tharman explained it is critical to not damage Singapore’s sovereign credit rating, especially during rough times.

He added that it is best not to exploit situations where you borrow cheaply and hope to earn more in the returns.

Mr Tharman said: “We’ve got strong reserves, it keeps our credit ratings strong. (This is) good not just for the government, but very importantly, more importantly, for our businesses, our banks, (it) lowers the cost of borrowing.

“And that way too, we generate sustained income over the long term, which will benefit both current and future generations, ensure that when we spend more, we spend on the basis on what we can afford, and we keep that spirit of self-reliance and living by our wits that Josephine and many others spoke about. That way, we make sure that Singapore continues to be built to search for excellence and built to last.”

- CNA/ir

Source : Channel NewsAsia - 22 Oct 2008

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Singapore Property sub-sales net $95m profits

Singapore Property sub-sales net $95m profits

Third-quarter showing still strong but market will soften soon: Experts

By Fiona Chan, Property Reporter

The biggest profits that sub-sellers made were of more than $1 million each for units at The Sail @ Marina Bay (pictured), St Regis Residences and Cairnhill Residences. The Sail @ Marina Bay had the largest number of sub-sales in the third quarter.

PRIVATE home prices may have slid in the third quarter but the sub-sale market was still going strong.

Ninety-six per cent of owners who resold an uncompleted home between July and last month pocketed profits from the deals, according to new data by property consultancy Savills Singapore.

These transactions, officially known as sub-sales, occur when you buy a home and resell it before it is built. They are used as a proxy for property speculation because the owner resells the home without ever living in it.

Only 12 sub-sale transactions out of the 306 that Savills analysed in the quarter incurred a loss, amounting to just under $1 million of red ink. The rest made a total of $95.1 million in gains, Savills said.

This continues the trend in the first half of the year, when 97 per cent of such deals turned in profits. But the profits seen in the third quarter were considerably narrower as home prices started softening more quickly.

Profitable sub-sellers made an average of $323,420 in the third quarter, but this was skewed upwards by a single large deal: a whopping $6.7 million profit from the sale of a 63rd-storey penthouse at The Sail @ Marina Bay.

Excluding this sale, the average gain was $301,784 - almost 40 per cent lower than the average gain in the first half of the year. It works out to an average profit for each seller of about 30 per cent over the purchase price.

Still, ‘to be able to achieve such gains in a year when the property market has gone into a standstill is highly commendable’, said Mr Ku Swee Yong, director of business development and marketing at Savills Singapore.

But in case would-be speculators become tempted by these gains, other consultants noted that the bulk of these deals probably occurred before the Sept 14 collapse of United States investment bank Lehman Brothers, which caused the financial crisis to take a sudden turn for the worse.

‘The real estate market typically lags behind the stock market by six months or more, so we will probably start to see the real effect early next year,’ said Mr Nicholas Mak, director of research and consultancy at Knight Frank.

‘These profitable sub-sale transactions took place before the market hit the skids. It is extremely risky to go and speculate in the market right now.’

Most sellers who made a profit in the third quarter had originally bought their units in the last two years and benefited from the sharp run-up in prices in the period, said Mr Ku. While values have weakened somewhat this year, they are still generally higher than in 2006.

Sellers who held on to their units for a longer time before reselling them in the third quarter made more gains, Savills’ data showed. Even those who had bought a unit as late as this year and offloaded it in the third quarter made an average gain of $98,600.

If they had sold the unit in the first half of the year, however, they would probably have doubled their gain.

The biggest profits of more than $1 million each were for units at The Sail @ Marina Bay, St Regis Residences and Cairnhill Residences.

On the flip side, sub-sale losses for the quarter averaged $76,820 for each loss-making deal. A unit at Watermark Robertson Quay chalked up the biggest loss of $207,552, while units at Soleil @ Sinaran, 8 @ Mt Sophia and One Amber were also sold at losses of more than $100,000 each.

All the losses were for units that had been bought last year or this year, according to Savills’ data. Sub-sellers who had bought their units at the peak of property fever, between June and September last year, bled the most.

‘In any case, there are always desperate sale cases even during good times,’ Mr Ku noted.

The Sail @ Marina Bay had the largest number of sub-sales in the quarter - 19 - with each deal netting its seller an average profit of $1.1 million. There was one loss, of $62,890, for a second-floor unit.

Other projects with more than 10 sub-sales included Parc Emily in Dhoby Ghaut, Park Infinia at Wee Nam, Riveredge in Tanjong Rhu and The Esta in Marine Parade.

But the profits were not just confined to developments in the prime districts.

At Casa Merah in Tanah Merah, 10 sub-sales yielded an average profit of $100,351, while Atrium Residences in Geylang saw four sub-sales with an average gain of $54,556.

Source : Straits Times - 22 Oct 2008

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Help for Singaporeans to cope with downturn

Help for Singaporeans to cope with downturn

Measures are being readied to cut business costs and ease people’s burden, says PM Lee

By Zakir Hussain

BUSINESSES, families and workers will soon receive help from the Government to help them ride out the recession.

Prime Minister Lee Hsien Loong yesterday said the Government is preparing measures to help cut business costs, lighten households’ burden, especially the low-income, and help workers cope with the downturn.

‘By Budget next year, in February, the situation will be clearer and then we can decide what we will do,’ Mr Lee told Parliament yesterday.

He did not elaborate on what form the measures will take, but during previous downturns, the Government has given direct cash handouts and tax rebates.

Although Mr Lee warned the next one or two years will be difficult, he is confident Singapore can deal with the fallout on the economy brought on by the global financial crisis.

‘We have the resources to do this and we have the resilience to see ourselves through,’ he said.

Also, he does not foresee the need to draw on past reserves in this recession, barring ‘exceptional contingencies’.

Mr Lee was speaking in support of the amendment to the Constitution to let the Government draw on more returns from investing the reserves.

Now, it can spend up to 50 per cent of net investment income (NII) from the reserves, that is, interest and dividends. With the change, it can spend up to 50 per cent of net investment returns (NIR) - long-term expected real returns that include capital gains.

With the new rule, total returns from the reserves will form 3 per cent to 3.5 per cent of Gross Domestic Product, which was $243 billion last year. This yields $7.3 billion to $8.5 billion, or one-fifth of total revenue.

Over two days, 19 members of the House, including Mr Lee, spoke on the change, which was later passed by Parliament. All 75 elected MPs present gave it the nod, including the two opposition MPs, Mr Chiam See Tong (Potong Pasir) and Mr Low Thia Khiang (Hougang).

The debate brought to a close a change Mr Lee mooted in 2006, when economic growth was 8.2 per cent and stock markets were rising.

Yesterday, amid a global slump, Mr Lee stressed that the new formula was meant for both feast and famine, with the aim of stabilising spending from one year to the next.

‘We didn’t time the constitutional amendment to deal with this downturn, it was not designed for this downturn,’ he said. ‘But the amendment will put in place the right spending rule for this and future downturns as well as boom years.’

He said the change also reaffirmed the importance of protecting the reserves and of the presidential safeguards on today’s reserves, which were accumulated over more than 30 years.

He noted the Government of Singapore Investment Corporation (GIC), set up in 1981 to manage the growing reserves, and Temasek Holdings had generated sustainable returns.

The reserves of at least $600 billion are managed mainly by both agencies and the Monetary Authority of Singapore.

The need to protect these returns led to the creation of the Elected President (EP) in 1991 and the locking up of the principal sum of past reserves, which can be used only with the EP’s consent.

However, 100 per cent of NII was also available for spending then. It was the reason for the late president Ong Teng Cheong, in office then, favouring amending the Constitution to lock up 50 per cent of NII, Mr Lee said.

The Government studied the idea, and implemented a 50-50 split in 2001.

‘MPs naturally wanted more social spending, and these are pressures which are understandable and which we have to take precautions to protect ourselves against,’ he said, and added, ‘fifty per cent has a certain neatness, an intuitively acceptable feel to it’.

The new formula is an effort to further improve the system, Mr Lee said.

He thanked MPs like Dr Ong Seh Hong (Marine Parade GRC) for cautioning that the reserves are not a limitless resource to pay for everything.

‘If you think we’re doing this because we’re just wanting more money…that’s the mindset against which this whole scheme is designed to protect,’ he said.

After the changes are gazetted, the Government will present a policy paper to Parliament outlining the technical procedures and definition of terms to be used in the new spending rule.

This will enable them to be reviewed and if necessary changed after some years, said Finance Minister Tharman Shanmugaratnam.

Source : Straits Times - 22 Oct 2008

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Singapore future is in intellectual capitalism

Singapore future is in intellectual capitalism

It is set to ride the next technology wave but lacks originality: physicist

By CHEN HUIFEN

SMART toilets that monitor your health through the waste substances from your body. Mass customisation of the clothes that you wear. A super rice strain that can be grown in any environment. These scenarios are not that far off in the future envisioned by renowned physicist and author Michio Kaku.

Dr Kaku: Singapore needs to breed a pool of highly imaginative people
Using such examples to illustrate that the future belongs to what he calls ‘intellectual capitalism’, he said that Singapore ‘has got it right’ by investing in its people.

‘Intellectual capitalism does not mean Bill Gates,’ explained Dr Kaku. ‘Intellectual capitalism means movies, writing books, telling a joke, drawing a picture, things that robots cannot do. Common sense, basically.’

Through building a strong foundation in education, he foresees that Singapore will be able to benefit in the transition from commodity capitalism - underlined by food produce and natural resources - to intellectual capitalism. Already, its students regularly beat Americans in mathematics and science. And the republic is looking at emerging technologies - nanotechnology, biotechnology, artificial intelligence - which he predicts will be key to the future economy.

‘These are the technologies of the future that will energise the job market,’ he said.

Dr Kaku made those comments during a media briefing that followed his keynote address at the newly opened Fusionopolis yesterday morning. The guest speaker, who is also a professor of physics at City College New York, painted a future world driven by solar-hydrogen energy, in which objects can be moved by sheer thought; cars be driven by machines; and colonoscopy replaced by a camera in a pill.

While Singapore stands in good stead to ride the next technology wave, it lacks originality. If it wants to compete on the same level as the US, it will need to breed a pool of people who are highly imaginative and nourish them, he said.

He also gave the audience an idea of the employment landscape. Jobs of the future will be those that require common sense and analysis. These include leaders, scientists, artists, writers and any occupation where unique situations or encounters are prevalent.

Contrary to what many had thought, robots will not take away jobs from people because they do not have common sense and are lacking in pattern recognition.

‘Everybody says garbage men are going to be out of jobs very soon - robots will be collecting garbage,’ he said. ‘Wrong. Our most advanced robots cannot recognise garbage. Every piece of garbage is different. How do you recognise it?’

On the flip side, jobs that are repetitive will be on the losing end as they can be replaced by machines. The Internet may also make low-level brokers and middlemen redundant if they cannot value add.

For businesses to survive, Dr Kaku said that the ‘trick is not to be first’ so that they can avoid making all the major mistakes, ‘but not to be last’.

For instance, solar power has been touted to be next generation energy source for decades, but did not seem plausible until recent years when prices of solar cells started falling. Yet if investors only start looking at it 10 years from now, it would have been too late for them to ride the wave.

‘The trick is to come in after the first,’ he added. ‘That’s the whole trick. How do you do that? By knowing what the science is.’

Source : Business Times - 22 Oct 2008

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Singapore URA rejects sole bid for Mohd Sultan office site

Singapore URA rejects sole bid for Mohd Sultan office site

By ARTHUR SIM

THE Urban Redevelopment Authority has rejected the sole bid - submitted by RSP Architects Planners & Engineers - for a transitional office site in Mohamed Sultan Road, as the price offered was too low. The tender for the site closed a week ago, with RSP bidding $4.65 million.

Based on the 66,482 sq ft site and maximum permissible gross floor area (GFA) of 99,727.5 sq ft, RSP’s bid equated to $46.67 per sq ft per plot ratio (psf ppr).

Only one other transitional office site, at Aljunied, has drawn a lower bid - of $38.37 psf ppr in January. This site was also not awarded.

DTZ senior research director Chua Chor Hoon said: ‘URA’s decision not to award is expected because of the very low and lone bid. The low bid reflects the poor sentiment in the office sector, which is facing weakening demand and substantial supply in the pipeline.’

According to DTZ, island-wide average office occupancy eased 0.6 of a percentage point in the third quarter of this year to 96.3 per cent on a quarter-on-quarter basis.

The average office rent also peaked in Q3, with no rental growth during the quarter, DTZ noted.

On the need for alternative office space, Ms Chua said: ‘Transitional office sites are like Executive Condominiums. They have a part to play only during certain stages of a property cycle, when office rents and residential prices rise too much and become out of reach for some occupiers. Now the office sector is weakening and the concern is about falling rents and prices, transitional office sites would not be relevant.’

The rejection of RSP’s bid does not bode well for the future of transitional office sites.

‘The sale of transitional office sites, which started last year, was a novel idea but has less relevance today,’ said Cushman & Wakefield managing director Donald Han. ‘The operating environment has changed from one that is of a supply crunch to one of sustainable demand - all within the past 18 months. That being said, for demand to sustain, business costs, such as occupancy costs, should be kept affordable to ensure the viability of businesses.’

Asked to comment, a URA spokesman said yesterday: ‘There is an ongoing tender for another transitional office sale site in Mountbatten Road, which closes on Nov 18. The government will be evaluating the market response to recent tenders and the demand for transitional office sites as part of the process of planning the next Government Land Sales programme.’

Source : Business Times - 22 Oct 2008

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Construction demand set to fall: Singapore Mah

Construction demand set to fall: Singapore Mah

Govt may inject public projects that have been deferred if need arises, but care over timing essential

By UMA SHANKARI

THE construction sector here must be prepared to face tough and challenging times ahead as demand is expected to decline, said Minister for National Development Mah Bow Tan yesterday.

Mr Mah: ‘Progress payments of projects have remained prompt and stable’
‘The construction sector will also not be spared the turmoil of the financial markets and weakening economic climate,’ said Mr Mah, who was speaking at the Singapore Contractors Association Limited (Scal) anniversary dinner last night. ‘While the domestic construction demand this year is estimated to reach between $27 billion and $32 billion, it is expected to decline as we go forward.’

Mr Mah also said that industry regulator Building & Construction Authority (BCA) has been monitoring the industry situation closely. ‘From the feedback BCA has gathered from developers, contractors and professionals in recent weeks, we have not seen any disruption or slowing down of work progress due to the crisis so far,’ he said. ‘Progress payments of projects have remained prompt and stable.’

Mr Mah’s assurances come as the industry has been hit by negative news, with several projects being pushed back due to high construction costs and a resources squeeze.

In view of the expected economic downturn, there have been suggestions that the government should inject some $4.7 billion worth of public projects that had been deferred earlier to ease demand. Such measures have been adopted in previous economic crises.

In response to this, Mr Mah said that the government will certainly do that if the need arises. However, the timing must be considered carefully, he said: ‘Doing so now, when the availability of skilled manpower, equipment and other resources is still constrained, will not help. It will only drive the already high construction costs up.’

Mr Mah also called on builders to exercise greater prudence in managing their financial resources and watch out against over-extending themselves on business risks. At the same time, they should also redouble their efforts to improve their productivity and upgrade their capabilities, so as to be better placed to leapfrog competitors and exploit future growth opportunities, he said. In particular, a greater emphasis on manpower development is needed, he said.

Source : Business Times - 22 Oct 2008

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Credit agencies turn glum on 2 Singapore Reits

Credit agencies turn glum on 2 Singapore Reits

By EMILYN YAP

CREDIT rating agencies have turned more pessimistic on two real estate investment trusts (Reits) in Singapore: Frasers Commercial Trust (FCT) and MacarthurCook Industrial Reit (MI-Reit).

Standard & Poor’s (S&P) Ratings Services yesterday changed its CreditWatch status on BB-rated FCT from positive to developing. The revision arose from concerns over FCT’s debt of $70 million, which will be due on Nov 22.

‘FCT has yet to finalise its refinancing plans to the level of certainty we expected,’ said S&P credit analyst Wee Khim Loy.

FCT owes $70 million to the Commonwealth Bank of Australia, due next month. In addition, it owes the bank $400 million and $150 million, which will fall due in July and December 2009 respectively.

According to S&P, FCT has said it is making progress in obtaining firm commitment from a consortium of banks to refinance the debts. This is helped by the financial flexibility and satisfactory credit profile of Frasers Centrepoint Ltd (which owns 18.27 per cent of FCT) and Fraser and Neave Ltd (which owns Frasers Centrepoint).

S&P expects FCT to have firm committed refinancing arrangements ready by Oct 31. Otherwise, FCT’s rating may be placed on CreditWatch negative or lowered.

Separately, Moody’s Investors Service yesterday placed MI-Reit’s Baa3 corporate family rating on review for a possible downgrade.

With ‘dramatically changed market conditions’, MI-Reit is ‘likely to retain much greater asset and tenant concentration than is consistent with a Baa3 rating’, said Moody’s lead analyst for the trust, Kathleen Lee.

The review also recognised refinancing risks facing MI-Reit. The trust has 91 per cent of its total debt or $201 million falling due next April, which is not covered by available committed facilities.

Nonetheless, Moody’s noted that MI-Reit’s credit metrics still have reasonable headroom against its bank loan covenants. Its revenue stream is also supported by a relatively long- lease maturity profile, mitigating the effects of low asset diversification and moderate tenant concentration.

Moody’s review will focus on MI-Reit’s progress in securing committed financing for debt maturing in April next year. It will also consider management’s strategy in improving the asset portfolio and revenue streams in the next 1-2 years.

Source : Business Times - 22 Oct 2008

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Local banks get reprieve from auditor rule

Local banks get reprieve from auditor rule

MAS allows them to appoint same audit firm beyond 5 years

By SIOW LI SEN

(SINGAPORE) The Monetary Authority of Singapore (MAS) has given a small concession to the three local banks.

‘In these trying times, we would think that the banks would welcome not having to cope with the additional burden of dealing with a change of their auditors. To change the auditors, they would have to divert a fair amount of resources in helping the auditors get up a steep learning curve.’

- Winston Ngan,
head of financial services, Ernst & Young LLP

Amid the financial crisis, they can reappoint the same audit firm beyond five years to have some degree of audit continuity.

Currently, DBS Group Holdings, United Overseas Bank (UOB) and OCBC Bank are not allowed to appoint the same audit firm for more than five consecutive years, except with the approval of MAS.

‘Banks are devoting a substantial amount of time and resources towards heightened vigilance during this period of unprecedented stress in the global financial markets,’ MAS said.

Temporarily suspending the requirement for the three local banks to change their audit firms after five years will minimise the disruption that could arise when appointing a new audit firm. ‘MAS believes the banks would benefit from some degree of audit continuity during these challenging times,’ it said.

UOB will benefit immediately from the suspension as current auditor Ernst & Young is in its fifth year.

DBS’s auditor PricewaterhouseCoopers (PwC) took over only a year ago while KPMG has been auditing OCBC since 2006.

Not surprisingly, the auditors applauded the suspension.

Ernest Kan, vice-president of the Institute of Certified Public Accountants in Singapore, said the rotation has improved governance of the banks.

‘It has made the whole governance process more rigorous,’ he said, although he understands the suspension was given because the banks ‘have bigger things to tackle’.

‘The suspension of the auditors rotation rule for the three local banks is a sensible move by MAS to help banks tackle the challenges in the midst of the global financial and capital market turmoil,’ said Winston Ngan, head of financial services, Ernst & Young LLP.

‘In these trying times, we would think that the banks would welcome not having to cope with the additional burden of dealing with a change of their auditors. To change the auditors, they would have to divert a fair amount of resources in helping the auditors get up a steep learning curve,’ he said.

‘From the incoming auditors’ standpoint, it would also be a challenge to understand the banks’ complex business and deal with additional issues brought about by this financial turmoil,’ Mr Ngan added.

Danny Teoh, managing partner, KPMG LLP, also found the move sensible.

‘At the end of the day, the auditors still need to do a good job as the banks can change auditors if they want and MAS approves auditors’ reappointment every year,’ he said.

The rule of mandatory rotation came in the aftermath of the Enron scandal, the biggest US bankruptcy which was blamed on the cosy relationship between the company and its auditor, Andersen.

But Singapore was the only major financial centre to impose the rule on the banks, while in other countries the auditors fought for a less stringent requirement of changing only the audit partner, said Mr Kan.

At the time, some observers noted that a change of auditors was no bad thing for the local banks, which all employed the same firm: PwC. MAS said to avoid concentration risk, no single audit firm would be allowed to undertake the audit of all the local banks at any one time.

Source : Business Times - 22 Oct 2008

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Move afoot to help SMEs get loans easily

Move afoot to help SMEs get loans easily

Interest rates may be lowered and govt may offer bigger guarantees to banks

By ARTHUR SIM

(SINGAPORE) A bailout plan of sorts is in the works with the Singapore government in talks with banks to offer loans to small and medium-sized enterprises (SMEs) on easier terms.

The plan may not be on the same scale as the one unfolding in the United States but it is likely that, through Spring Singapore, it will make credit more freely available to SMEs by bearing a bigger share of the risk of default on loans.

Interest rates on these loans are also likely to be lower than the current 6.25 per cent offered by banks.

To give an idea of how much money is involved, it was reported that for the 12 months ended March 31, 2004, SMEs had borrowed $750 million, up 32 per cent from the previous 12 months. That was the year Sars struck.

Loans to SMEs through Spring Singapore schemes such as the Local Enterprise Finance Scheme (Lefs) and the Loan Insurance Scheme (LIS) have been around for a while.

However, in times of an economic downturn, the government has taken extra measures to support local business.

During the Sars-related downturn, the government enhanced the loan scheme by bearing a larger quantum of the loan guarantee - up to 80 per cent from 50 per cent previously. This reverted back to 50 per cent in 2005.

Interest rates were also lowered by about one per cent from around 6 per cent for short-term loans and about 250 basis points higher for longer-term loans.

OCBC Bank says it is already onboard with the new scheme. Tan Chor Sen, head of emerging business, enterprise banking at OCBC Bank said: ‘We will work with Spring Singapore to offer SMEs easier access to funds at more competitive rates.’

OCBC Bank also revealed that between 2005 and 2007, it had made available more than $300 million to SMEs under Lefs and by way of micro loans, making it the financial institution that participated most actively in the scheme.

The Ministry of Trade and Industry and Spring Singapore would not say what the latest plans are, but a check with banks reveals that a few banks could be involved. Koh Han Nee, head of product and cross selling at UOB Commercial Banking, said: ‘The bank will continue to work closely with Spring Singapore regardless of the current global financial crisis.’

A DBS spokesman said: ‘DBS Enterprise Banking constantly reviews the banking needs of SMEs and will customise solutions for them through various business cycles.’

Some will also be cautious. A Maybank spokesman said: ‘Applications for our credit facilities will continue to be evaluated in a prudent manner.’

Sources say that an announcement on the enhanced loan scheme could soon be made.

Speaking in Parliament on Monday, Trade and Industry Minister Lim Hng Kiang had said that loans to SMEs under the Lefs, LIS and Microloan programmes had grown 55 per cent in the first eight months of 2008, compared to the same period last year.

And in the light of a potential global recession, more assistance is timely.

Lawrence Leow, president of the Association of Small and Medium Enterprises (ASME), said that he had raised the issue on enhancing Lefs with Spring Singapore.

Mr Leow added that a major concern with ASME’s 5,000 members is that with markets especially volatile, ‘it is difficult for them to figure out how long the downturn will be’.

Apart from financial assistance, he also said that relevant government agencies could help by keeping business costs down. ‘Many SMEs are worried that rentals will keep going up,’ he added.

SMEs are firms with under $15 million in fixed-asset investment with less than 200 workers each.

Currently, there are about 130,000 SMEs that give jobs to 60 per cent of Singapore’s 2.75 million-strong workforce.

Source : Business Times - 22 Oct 2008

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