Another 20% tax rebate this year

Another 20% tax rebate this year

Instead of a cut in personal income tax rates, a one-off sum capped at $2,000 will be given

THE experts expected a cut in personal income tax rates, but the Government has opted instead for a one-off 20 per cent rebate for tax residents.
The rebate - a mirror of one granted in last year’s Budget - will be capped at $2,000 for the 2009 year of assessment.

It is aimed at providing ‘immediate reduction in tax payable on last year’s income’, said Finance Minister Tharman Shanmugaratnam.

Imposing a cap will ensure that the rebate is targeted at middle-income earners instead of those in the top rung. The scheme will cost the Government $457 million.

The measure caught out many tax experts, who were expecting a cut in tax rates.

Ms Wu Soo Mee, director of human capital and tax services at Ernst and Young, said: ‘We are quite surprised because we thought they’d do away with the cap.

‘The cap means someone who is earning a level of income such that the tax liability is above $2,000 will not get any more than $2,000. The tax rebate is actually benefiting people at the lower income level.’

A Singaporean earning about $140,000 a year and married with two children will reap the maximum $2,000 rebate, say tax experts.

Those earning above that amount will get progressively less rebate in percentage terms.

Tax experts were also ‘hoping’ for the top-tier personal income tax rate to drop from 20 to 18 per cent, in line with the cut in corporate tax rate.

‘I can understand why (it did not happen). The top tax rate is by definition for the higher earning individuals while the Budget was clearly a generous one aimed at the grassroots,’ said Mr James Clemence, partner at PwC International Assignment Services.

‘To drop from 20 per cent to 18 per cent is quite a big amount and it affects a relatively small amount of the population.’

Ms Wu pointed out: ‘Cutting the tax rate is a very permanent measure - but giving tax rebates is something that you can update or get rid of from year to year. It’s as and when you require it.’

Mr Clemence also said he found it ’slightly surprising’ that ‘there were not more measures for white-collar workers’, such as removing the bottom tax band or expanding the zero-rate tax band.

‘Tax payers who earn up to $20,000 a year are exempt from paying tax. We were hoping this bracket would go up to $35,000 or $40,000,’ he said.

Mr Ooi Boon Jin, executive director of KPMG Tax Services, called the tax rebate ‘bittersweet’.

‘In such an extraordinary economic situation, one would expect a higher rebate since the same rebate was given last year,’ he said.

But footballer Aleksandar Duric, who became a Singapore citizen in late 2007, beamed at the prospect of getting more than $1,000 back in tax rebates.

Mr Duric, who would only reveal he earns ‘more than $60,000 a year’, said: ‘People should be happy, because any money that comes back is good. It’s a nice present for the new year.’

Source : Straits Times - 23 Jan 2009

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Bigger grant for first-time HDB home buyers

Bigger grant for first-time HDB home buyers

By Jessica Cheam

FIRST-TIME home buyers were given a leg up on the property ladder yesterday with the expansion of a grant designed to help financially struggling home hunters.
Another 2,700 first-timers will qualify for the additional CPF housing grant every year, due to changes announced by Finance Minister Tharman Shanmugaratnam.

In a rare move, the Government has lifted the income ceiling for first-time home buyers qualifying for the additional grant - from $4,000 a month previously to $5,000 now.

At the same time, the grant’s maximum amount has been raised from $30,000 to $40,000.

This comes about 18 months after the additional housing grant was raised from $20,000 to $30,000 in August 2007.

Then, the eligibility criterion was also lifted to $4,000 from $3,000.

Mr Tharman said the total number of households benefiting from HDB’s additional housing grant scheme will now be boosted to 8,000 annually.

The enhanced scheme, which aims to ensure that public housing remains affordable to first-timers, will double the estimated cost of the scheme to about $150 million per year, he said.

Market watchers observed that the additional housing grant - typically aimed at the low-income group - is now being extended to the lower middle-income group.

PropNex chief executive Mohamed Ismail said this departure was a ‘positive move’ as HDB prices have risen about 30 per cent in the last two years.

‘With prices going up, monthly mortgages are also rising. In this difficult time, the grants will really help first-timers who want to buy a home, and start a family,’ said Mr Ismail.

Mr Samuel Ng, 43, head of the Marine Parade Family Service Centre, said the latest HDB initiative will address some newlyweds’ concerns during this crisis.

In particular, the move seems to address the ’sandwich class’ or what he calls, the ‘middle poor’.

‘For the really low-income, there is already a support network in place for them. But the low- to mid-income families often find themselves squeezed, and find that there are fewer social initiatives that cater to them.’

Housing, Mr Ng pointed out, is crucial to starting a family. This is one of the priorities for the Government.

Mr Tharman said yesterday that the Government will spend $1.6 billion this year - and the same in each of the next three years - to support marriage and parenthood.

These include initiatives such as government-paid maternity leave, infant-care and childcare subsidies.

Ms Y.L. Huang, a 25-year-old teacher, welcomed the news as her income combined with her fiance’s exceeds the $4,000 mark for the housing grant.

‘Knowing we now qualify for a bigger housing grant makes buying a new home a bit easier,’ she said.

Source : Straits Times - 23 Jan 2009

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15% rental rebate

15% rental rebate

FOUR government agencies are taking the lead in passing on savings from the property tax cut to their industrial and commercial tenants.
More than 36,000 businesses renting hawker stalls, factories, offices or land from the Housing Board, JTC Corporation, Singapore Land Authority (SLA) and the National Environment Agency (NEA) will get a 15 per cent rent rebate from Jan 1 to Dec 31 this year.

This year, some tenants will enjoy rebates ranging from about $150 to as much as $24,000, depending on the size of the property.

It will cost the four statutory boards a total of $311.6 million in lost rental revenue, but it is good news for Pasir Ris shoe-shop owner Jeffrey Kam.

Mr Kam, 43, was going to fire one of his five employees in a bid to keep a lid on costs, but he can now keep the worker and ’see how it goes’.

‘This means lower expenses, more discounts for customers and faster clearing of existing stock,’ said Mr Kam, who pays $4,000 in rent.

‘It will help cash flow. We are happier.’

Business at his shop at Loyang Point has fallen by about 30 per cent in the past six months. Revenue began decreasing right after he renewed his rental lease at 12.5 per cent higher than the year before, in August last year.

The rebates will benefit 7,700 JTC customers who rent land, factories and offices, another 5,300 stallholders who operate in NEA-managed markets or hawker centres, and 2,600 businesses that rent from the SLA, say the organisations.

According to the HDB, its rebates will go to 8,700 commercial and 12,000 industrial tenants and 360 industrial-land lessees. This translates into a rebate of between $31 and $960 per month for cooked-food stallholders. Market stallholders will get $12 to $467 off their rents per month.

Rebates for those renting from the HDB will range from $400 for a shop tenant to $300 for an industrial unit and up to $2,100 for an industrial-land lessee.

LIM WEI CHEAN, JESSICA LIM

Source : Straits Times - 22 Jan 2009

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Rebates, flexibility to ease Singapore property pains

Rebates, flexibility to ease Singapore property pains

Annual value to be assessed earlier and is hoped will reflect weaker rental scene

By KALPANA RASHIWALA

THE government yesterday announced a 40 per cent property tax rebate for industrial and commercial properties as well as owner-occupied residential properties, but not for rented residential properties.

A new hope: Measures include allowing a one-year extension of the project completion period for private residential projects
It also promised an earlier assessment of Annual Values of properties this year.

KPMG executive director (tax services) Leonard Ong said: ‘Hopefully, they will reduce Annual Values to reflect the current weaker rental market.’

Property tax is calculated as a percentage of the Annual Value of a property.

Finance Minister Tharman Shanmugaratnam in his Budget statement also announced several other property market measures aimed at providing greater flexibility for developers to stage the construction and sale of their projects, particularly residential, in accordance with market conditions and to ease their cashflow situations.

‘This will also help ease current supply-demand imbalance in the market,’ says DTZ executive director Ong Choon Fah.

Colliers International director Tay Huey Ying noted that the property sector measures are ‘aimed more at keeping supply at bay rather than boosting demand’.

The measures include allowing a one-year extension of the project completion period (PCP) for private residential projects on sites sold by the government (without developers having to pay an extension premium) as well as for private residential projects undertaken by foreign housing developers with Qualifying Certificates (QCs), a category that covers effectively all listed developers.

In both instances, if any units have been sold in the project, the PCP extension is only up to the date of delivery of vacant possession for sold units as stipulated in the sale & purchase agreement signed between the developer and buyers.

In addition, the government is extending the period for developers with QCs to dispose of all residential units in their projects, from two years currently to four years from the date that the project is issued with Temporary Occupation Permit. This is in view of the weak residential market and will allow developers more time to sell their housing projects.

In addition, the same developers will be allowed to rent out unsold private homes for a maximum of four years (from the date of TOP or date of application, whichever is later).

This is aimed at giving developers greater flexibility in managing the unsold units in their projects and to minimise their cost of holding on to these units.

Mr Tharman also announced a property tax deferral of up to two years for all land (not just residential) approved for development. However, this is not an exemption as developers will have to pay back the deferred tax later.

KPMG’s Mr Ong said that the deferral that developers will enjoy effectively works out to 0.5 per cent of the estimated freehold market value of the land.

Colliers’ Ms Tay lamented that the latest measure is viewed as less desirable compared with previous downturn budgets, where property tax exemptions were granted for land under development.

The government is also allowing a reassignment of government sale sites and private residential land owned by QC holders.

Applications must be made by Jan 21, 2010.

Only one reassignment will be allowed for each site and the transaction must not be of a speculative nature, that is, the seller is not supposed to profit from the transaction.

In granting the 40 per cent property tax rebate for industrial and commercial properties this year - which will cost the government $800 million - the government strongly urged landlords to pass on the benefits to their tenants.

‘Landlords should also consider further adjustments of rentals and more flexible leasing arrangements and payment terms, in light of the severe downturn in demand faced by their tenants,’ Mr Tharman added.

JTC Corp, the Housing & Development Board and Singapore Land Authority will provide a 15 per cent rental rebate to their tenants and land lessees, exceeding the savings from the property tax rebate.

The rent rebate will also be extended to stallholders paying market rents in markets and food centres managed by National Environment Agency.

Another piece of good news from the Minister is that the Inland Revenue Authority of Singapore will bring forward its property tax assessments for 2009, in view of the change in market conditions.

‘The assessed Annual Values of properties went up last year, in line with actual market rentals. Most property owners have therefore seen increased tax bills. IRAS’s move to accelerate assessments for this year will help property owners in addition to the savings they will be getting from the property tax rebate,’ Mr Tharman said.

Source : Business Times - 22 Jan 2009

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Off-budget measures on the way?

Off-budget measures on the way?

The Budget may not go far enough, given the one to two-year time-frames allowed for initiatives to bear fruit

By OWI KEK HEAN
GUEST COMMENTATOR

FACED with what looks like the worst recession in years, many Singaporeans hoped that Budget 2009 would deliver bold measures to revive an economy wrung dry by a liquidity crunch and gripped by fear.

Unlike in the Asian Economic Crisis of 1997-98, when economies in Europe and the US were stable, this time there is no oasis of calm. Economies worldwide are lacking liquidity and each day brings fresh challenges.

Budget 2009 is largely in line with what KPMG hoped for in its wish-list - and contains a few notable ‘firsts’.

Chief among these is the move to tap the national reserves for the first time. A much debated option in previous years, it has now been deployed to help Singapore weather what is shaping up as the perfect economic storm.

Still, it is uncertain whether the Budget will go far enough, given the one to two-year time-frames allowed for certain initiatives to bear fruit. Perhaps the government is adopting a wait-and-see approach, as there are no quick fixes to the economic problems that Singapore faces. More off-budget measures can be expected in the coming months.

The underlying theme of this year’s Budget is keeping viable businesses alive to preserve jobs.

The Bridging Loan Programme will go a long way towards helping businesses obtain the funds they need to stay afloat in these turbulent times.

It seeks to achieve this by tackling the key issue faced by many companies - access to liquidity. By helping businesses enhance cash flow, it should help more Singaporeans keep their jobs.

According to Spring Singapore, small and medium enterprises (SMEs) make up 95 per cent of Singapore’s total number of enterprises and contribute to 45 per cent of gross domestic product. SMEs also employ 60 per cent of the work force.

The Bridging Loan Programme, therefore, makes a lot of sense. It will benefit many companies, especially local enterprises, and by extension, will help keep people employed.

The proposed corporate tax rate cut of one per cent is in line with what we expected. It is significant, but may not help cash-strapped companies in the short term because it will not take effect until Year of Assessment 2010.

Nevertheless, it is in line with the global trend of falling corporate tax rates and will help make Singapore a more attractive destination for foreign investment. In turn, it is hoped, this will create more jobs.

As seen from the table on this page, the one per cent cut in the corporate tax rate would appear to benefit bigger companies more, as they will enjoy a bigger percentage reduction in their tax rate.

However, it must be pointed out that SMEs enjoy a much lower effective tax rate than bigger companies, due to the effect of partial tax exemption on normal chargeable income of up to $300,000.

The Jobs Credit scheme seeks to keep employers afloat by helping to defray staff costs. This is an effective way to preserve jobs, rather than, say, offering a tax rebate or reducing the employer’s CPF contribution.

A tax rebate might not have found its way directly to employees. And a reduction in the employer’s CPF contribution could have had an adverse effect on the financial position of employees. Cutting the employer’s CPF contribution directly, while beneficial to businesses, could have wreaked havoc on the many Singaporeans who service their monthly home loan repayments through CPF contributions.

At the same time, the effect of the Jobs Credit programme is similar to a corporate tax rebate or a cut in the employer’s CPF contribution.

Clearly, saving jobs is a core theme in facing up to this recession. Moves to protect the viability of businesses and help them stay liquid will, in turn, keep Singaporeans employed and help the economy as a whole weather this recession.

The writer is head of tax services at KPMG in Singapore

Source : Business Times - 22 Jan 2009

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$900m to boost innovation, fund more R&D

$900m to boost innovation, fund more R&D

This includes $200m in test-bedding fund to nurture new ideas

By AMIT ROY CHOUDHURY

BUILDING on last year’s enhanced tax incentives for innovation and research and development, the government has announced a range of grants to develop new capabilities.

The future is here: The test-bedding fund will make S’pore a ‘living lab’ for companies and entrepreneurs to test new solutions and develop future global businesses
Delivering the 2009 Budget, Finance Minister Tharman Shanmugaratnam said the government will spend $900 million over the next few years to foster innovation.

‘We will spend $130 million to enhance grants and training schemes to encourage enterprises in various sectors to refresh and develop new capabilities to capture growth opportunities in the recovery,’ he said.

The government will also take a greater share of costs under Spring Singapore’s capability development schemes and International Enterprise (IE) Singapore’s internationalisation schemes. ‘We will also widen the scope of activities that qualify for grants,’ Mr Tharman said.

He also announced a $45 million addition to the Maritime Cluster Fund to support new projects that build business and manpower capabilities in the industry.

With Singapore already a regional media and digital entertainment hub, the government announced a $230 million Singapore Media Fusion fund to provide grants to help local enterprises export content, applications and services, as well as to build up a media talent base.

‘This will complement our plans to develop Mediapolis at One-North, which will help position Singapore as a leading media hub in Asia,’ Mr Tharman said.

To encourage media and digital entertainment businesses to exploit intellectual property (IP) from Singapore, he will allow them to write down the cost of acquiring qualifying IP rights in two years instead of five years currently.

The government will encourage the test-bedding of new ideas, Mr Tharman said. ‘We will put $200 million in a test-bedding fund to make Singapore a ‘living lab’ for companies and entrepreneurs to nurture new ideas, test innovative solutions and develop future global businesses.’

The Economic Development Board (EDB) and other agencies will invite and support private sector players to test, develop and implement new solutions here before exporting them elsewhere, the minister said.

The government has also set aside $180 million over the next two years for a Core Innovation Fund set up last year to help private companies collaborate with government agencies to develop innovative solutions for public services.

‘The government will take a more proactive approach in seeking collaboration with the private sector, through the use of Calls for Collaboration (CFC),’ Mr Tharman said. ‘This will bring clusters of companies together to develop solutions for government agencies, businesses and the public.’

Besides the money the government will spend to promote enterprise innovation, it will continue to expand R&D funding for Singapore universities and research institutes this year.

‘I will also top up the National Research Fund by $400 million this year to support Singapore’s continuing push forward in R&D,’ Mr Tharman said.

A Ministry of Finance spokeswoman told BT last night that the $900 million includes all spending under different headings for the next three years. ‘The cashflow (for the projects) extending beyond three years is excluded,’ she added.

——————————————————————————–

WHAT THEY SAY

‘The Government’s latest Special Risk-Sharing Initiative is definitely a positive move. UOB, as a dominant player in the SME market, welcomes the initiative and we look forward to helping more SME customers overcome the challenges they may face during these tough times.’
- United Overseas Bank spokesperson

‘The Government has answered the cries of the SMEs. With these initiatives, it gives SMEs greater hope and confidence in pulling through this crisis.’
- Amy Ang, tax director, Ernst & Young

‘We are encouraged by the Government’s announcement of its new Special Risk-Sharing Initiative which follows on from the enhancements to loan schemes announced in November.’
- Ian Macdonald, president of Hong Leong Finance

Source : Business Times - 22 Jan 2009

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$4.5b cash grant to help preserve jobs

$4.5b cash grant to help preserve jobs

Temporary Jobs Credit scheme gives employers money to lower cost of employing S’poreans

By CHUANG PECK MING

THE government is doing the unthinkable by resorting to the one resource it has plenty of to save jobs - cash.

Worker friendly: All employers except local and foreign government organisations are eligible for Jobs Credit - they do not have to apply
In an unprecedented move, it will give employers a whopping $4.5 billion under a temporary Jobs Credit scheme to help keep Singaporeans working.

The scheme is the main plank of a $5.1 billion employment rescue package that also includes more support for skills upgrading and more wage top-ups for low-income workers.

‘Jobs Credit will provide every employer with a cash grant to reduce the cost of employing Singaporeans during the crisis,’ Finance Minister Tharman Shanmugaratnam said in his Budget statement.

The payout is pegged at 12 per cent of the first $2,500 of the wages of each employee on the Central Provident Fund (CPF) payroll. It will be handed out in four quarterly payments, with each payment based on workers with the employer at the time. ‘This will, therefore, provide an incentive for employers to retain local workers,’ Mr Tharman said.

An employer will get $900 a quarter, starting end-March, for each worker on $2,500 a month or more. For lower-paid workers, earning say, $1,000, the employer will get $360 a quarter.

For each payout, the employer will receive jobs credits for employees on the CPF payroll at the start of the quarter in which the payment is made. Wages paid to these employees in the previous quarter will be used to calculate the cash credit the employer will receive.

Wages paid in October-December 2008 will be used to calculate the first payout to employers.

All employers except local and foreign government organisations are eligible for Jobs Credit - they do not have to apply. The Inland Revenue Authority of Singapore, which will administer the scheme, will make the first payment by March 31. The scheme will benefit about 120,000 employers.

‘This is not intended to be - and must not be - a permanent scheme to subsidise employment,’ Mr Tharman said. ‘It is a temporary scheme to help companies through an exceptional downturn.’

Jobs Credit is pegged to Singapore’s median wage, which will give companies ’special incentive’ to retain low and middle-income workers - more than a CPF rate cut would have achieved.

Mr Tharman said that the Jobs Credit of 12 per cent of wages is equivalent to a nine percentage point CPF cut, which the government considered, but rejected.

‘The fundamental problem in this recession is not that of wage competitiveness but that of a slump in global demand,’ he said. ‘There is no need for an across-the-board cut in wages at this time.’

Mr Tharman said that Jobs Credit is also better than giving a corporate tax rebate because it helps all companies, including small and mid-size companies that pay a lower tax.

‘This broad-based approach is important because SMEs account for six of 10 Singaporean jobs,’ he said. ‘Jobs Credit will add to the resilience of companies that are still viable, but have been caught by the severity of the crisis and would otherwise be forced by cash-flow difficulties to shed workers.’

Reactions to the Jobs Credit scheme were generally favourable.

‘It addresses directly, and in a meaningful way, the cost of a major input to doing business in Singapore - wages,’ said Ajit Prabhu, tax partner at Deloitte Singapore & South-east Asia. ‘This proposal is unexpected, but sure to be received very favourably.’

Lawrence Leow, president of the Association of Small and Medium Enterprises, said: ‘We can’t ask for more. The government is putting cash in our hands. And at this moment, cash is king.’

UOB economist Chow Penn Nee said: ‘Jobs Credit has to be the highlight of the Budget. It will account for the lion’s share of the special transfers this fiscal year. It is substantial and will definitely aid job preservation.’

Jonas Ang, senior HR director at Kelly Services, said: ‘It’s not a permanent fix, but it will work for the time being.’

However, the scheme covers only Singaporean workers. And Standard Chartered Bank economist Alvin Liew is worried that companies may axe foreign employees, leading to higher unemployment overall.

David Leong, managing director of PeopleWorldwide Consulting, wonders whether companies already saddled with redundant workers can wait three months for the cash grant. But he conceded that Jobs Credit is a more focused short-term tool than a CPF cut, which might be harder to reverse in future.

Citigroup economist Kit Wei Zheng said that workers would have borne ‘the burden’ of saving their jobs through a CPF cut, whereas Jobs Credit has put the burden on the government.

CIMB-GK economist Song Seng Wun said that Jobs Credit is a well-calibrated measure, but he feels the government could have done more.

——————————————————————————–

‘The proposed Jobs Credit of 12% of the first S$2,500 of the wages of each employee on the CPF payroll is a significant measure to reduce wage costs and help employers keep jobs. The proposal addresses directly, and in a meaningful way, the cost of a major input to doing business in S’pore - wages.’
- Ajit Prabhu, tax partner,
Deloitte Singapore & South-east Asia

‘A welcome move to encourage companies to keep their employees and stave off further job losses.’
- Russell Aubrey, head of tax,
Ernst & Young, on the Jobs Credit scheme

‘This scheme (Jobs Credit) should benefit the entire spectrum of businesses, from SMEs to MNCs, and go a long way in assisting companies retain jobs. SICCI feels that it is an ingeniously crafted scheme that has handled the burden of wage costs, without having to resort to a cut in the employer’s contribution to CPF. This is a win-win equation for both employees and employers.’
- The Singapore Indian Chamber of Commerce & Industry

‘It’s heartening that our government is totally committed to saving jobs; this is demonstrated by the introduction of the Jobs Credit scheme, which will cost S$4.5 billion.’
- Choo Eng Chuan, tax services partner,
Ernst & Young

‘The creation of 18,000 jobs in the public service and government-supported sectors is a step in the right direction. This will certainly help alleviate some of the rising unemployment problem that Singapore is facing now. This is an opportune time for the government to take advantage of the wealth of talent available now to boost the strength and quality of its ranks.’
- Jonas Ang, senior HR director (Asia-Pacific),
Kelly Services

‘Foreign MNCs may lay off workers due to head office decisions - unemployment in S’pore may be an issue notwithstanding the 18,000 new jobs to be created in the public sector.’
- Roy Varghese (right), director of financial
planning practice at ipac Singapore

‘Further expansion of training subsidies will enable employers to transform their employees to be a stronger workforce in the upturn.’
- Grahame Wright, partner, human capital,
Ernst & Young

Source : Business Times - 22 Jan 2009

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Foreign patients target in 2012 a challenge: Khaw

Foreign patients target in 2012 a challenge: Khaw
This comes after S’pore reported 15% drop in medical tourists in 2007

By JAMIE LEE

AS THE recession bites, Singapore’s target of a million foreign patients in four years’ time is losing its shine.

‘Given the severe global economic downturn, it will be a challenge to meet the earlier target of one million foreign patients by 2012,’ Health Minister Khaw Boon Wan told Parliament yesterday. ‘Our hospitals will have to work harder to attract these patients, and we may take a longer time to realise this numerical target.’

There was a 15 per cent drop in the number of medical tourists to 348,000 in 2007 from 410,000 a year earlier, measured by Singapore Tourism Board surveys, Mr Khaw said. Last year’s numbers are not yet available, he said.

He expressed surprise at the drop in 2007 numbers because hospitals reported higher patient admissions and patient-days than in 2006. ‘STB is re-examining its survey methodology,’ he said.

But Singapore’s aim to be a regional medical centre remains unchanged. This will be achieved by offering a high standard of care - ‘a natural outcome’ of efforts to provide Singaporeans with quality health care, Mr Khaw said.

‘As we do not subsidise foreigners, the volume of foreign patients will naturally be affected by the state of the regional economy,’ he said.

While plans to expand hospital capacity and specialist manpower are on track, Mr Khaw said that some private investors may adjust their timing to cater to ’shareholders’ priorities’.

Separately, ministers from the Ministry of Trade and Industry gave updates yesterday on the numbers of start-ups in Singapore and the number of households in arrears with utility bills.

Minister of State Lee Yi Shyan said that the number of start-ups has risen to 36,000 today - from 27,000 in 2002. Start-ups - defined as businesses employing at least one employee and less than five years old - hire more than 300,000 workers and generate more than $166 billion of turnover.

Senior Minister of State S Iswaran said that as at November 2008, there were 3,099 household utility accounts - or 0.28 per cent of all accounts - in arrears of more than three months.

Source : Business Times - 22 Jan 2009

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Obama to lay out financial plan in weeks-WASHINGTON

Obama to lay out financial plan in weeks-WASHINGTON

(WASHINGTON) US President Barack Obama will lay out a comprehensive plan in the next few weeks to attack the worst financial crisis since the Great Depression, Timothy Geithner, his nominee to head the US Treasury, said on Wednesday.

‘We’ve seen the costs, in terms of uncertainty created by tentative signals not followed up by clear actions.’
- Timothy Geithner, US President Barack Obama’s nominee to head the US Treasury
At a Senate confirmation hearing at which he apologised for a lapse in paying more than US$34,000 in taxes earlier this decade, Mr Geithner sketched out a multi- pronged approach to stabilise housing, strengthen banks and support consumer credit to help the economy break free of a year- long recession.

Mr Geithner, who in his current job as president of the New York Federal Reserve Bank has been a key participant in government efforts to prop up financial markets, declined to provide specifics, saying details had yet to be worked out.

‘We’ve seen the costs, in terms of uncertainty created by tentative signals not followed up by clear actions,’ Mr Geithner told the Senate Finance Committee.

He said the new administration was reviewing a ‘broad range of proposals,’ including the option of setting up a government-run ‘bad bank’ to take toxic assets off banks’ books. The United States took a similar approach to resolve the savings and loan crisis of the late 1980s and early 1990s.

He said the retooling of the government’s US$700 billion financial rescue programme would tackle the housing crisis and involve ‘much more substantial direct support to credit markets’ so lending can resume to small businesses, car buyers, college students and real estate markets.

Mr Geithner faced sharp questioning over his failure to pay about US$34,000 in self-employment taxes when he worked for the International Monetary Fund earlier this decade, and issued a public apology.

‘These were careless mistakes. They were avoidable mistakes. But they were unintentional,’ Mr Geithner said. ‘I want to apologise to the committee for putting you in the position of having to spend so much time on these issues.’

Mr Geithner paid back taxes and interest for 2003 and 2004 after an Internal Revenue Service audit. While he made the same tax error in 2001 and 2002, he did not pay back taxes for those years until after Mr Obama expressed interest in nominating him.

‘It strains credulity to think that it didn’t immediately occur to you that you had that liability for the whole time that you were at the IMF,’ Senator Jon Kyl of Arizona, the No 2 Republican in the Senate, told Mr Geithner.

Despite the flap over his taxes, which was seen as particularly problematic since the IRS is part of the Treasury Department, Mr Geithner was expected to win Senate approval.

‘You’re going to be confirmed,’ Republican Senator Pat Roberts of Kansas predicted.

The committee scheduled a vote on his nomination for 10 am (1500 GMT) yesterday, which could put Mr Geithner on track to win the needed backing of the full Senate by the end of the week.

Mr Geithner told lawmakers, many of whom are upset at how the government’s financial rescue programme has been run, that the Obama administration would require banks receiving government money to document increased lending.

‘We have to fundamentally reform this programme to ensure that there is enough credit available to support recovery,’ said Mr Geithner, who played a central role in the government’s decisions to organise an orderly sale of failing investment bank Bear Stearns and to shield insurer American International Group from collapse.

Asked about government support for the car sector, which has received funds from the programme, he said the administration was in the process of assembling restructuring and manufacturing experts to study labour contracts and come up with changes to the programme that would strengthen the industry. — Reuters

Source : Channel NewsAsia - 22 Jan 2009

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AIG looks to sell chunk of AIA

AIG looks to sell chunk of AIA

Group aims to raise US$20b to repay govt loan: report

By GENEVIEVE CUA

(SINGAPORE) Troubled insurer AIG has taken the first steps to sell off its Asian life insurance operations - which it has described as its ‘crown jewels’.

The Financial Times reported that the group aims to raise US$20 billion through the sale to help repay a US$60 billion loan from the US government to save it from bankruptcy.

FT said sales memorandum for AIA with limited information has been sent to some potential bidders. First round bids are expected towards the end of next month. The prospective bidders reportedly include China Life, HSBC, Prudential plc, US-based Prudential Financial, and German insurer Allianz.

AIG will sell off a minority stake, which according to FT will be up to 49 per cent. An AIA spokesperson in Hong Kong said: ‘AIG remains focused on inviting strategic investor(s) to take a minority interest in AIA. The divestment is being conducted in a smart, disciplined and competitive process.

‘There is no intention to sell AIA on a piecemeal basis. We are tracking our timetable. AIG will choose investors with the best strategic fit for AIA as we anticipate working closely with future partners to continue to grow the business.’

FT’s report, however, said AIG would be willing to look at offers for the entire business, and not just for a minority stake. It also said any interested bidder will have to prove it can finance the acquisition.

The sale is taking place in an extremely challenging environment when credit has almost dried up and potential bidders’ balance sheets are also strained. The issue of valuation is a challenge as well, as life insurance is a long term business where interest rate and investment return assumptions are key.

AIG teetered on the brink of insolvency last September due to rising losses from guarantees it extended on mortgage derivatives. The news shocked scores of Singapore policyholders who thronged the office here to cancel policies.

AIG first secured a US$85 billion loan from US government in September. The rescue package was restructured in November to total about US$150 billion, giving AIG a lower interest rate and more time to repay a US$60 billion loan.

Hong Kong executives had earlier reassured policyholders here that the Asian life insurance business would not be sold. That was before the immensity of AIG’s losses came to light.

The AIA group in Asia has over 20 million policyholders, 200,000 agents and about 20,000 employees in 15 markets. The group reported operating income of US$2 billion in 2007.

Source : Channel NewsAsia - 22 Jan 2009

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