Tan Kin Lian / Columnist
Introduction
Singapore’s economy is in recession. It will get worse and may take one or two years to recover.
Senior Minister Goh Chok Tong has advised people to continue spending, to keep the economy growing and avoid the downturn getting worse. (See here) Many people do not agree with this call. They are afraid of losing their jobs. They prefer to save more, in case the need they money in the future. The reduced domestic spending is now being felt in many sectors of the economy.
I wish to suggest two measures to overcome the fear and stabilise the economy – relief loan and cut in GST.
I suggest that the Government introduce a new scheme, to provide a relief loan to Singaporeans who are retrenched or face a reduction in earnings due to a shorter work week.
The relief loan is to be provided by a Government agency and is subject to certain conditions. Interest rate shall be charged at 2.5% per annum. The amount of the loan shall be for the loss or reduction in earnings, and shall be available for a period of up to 24 months.
Certain measures can be implemented to prevent abuse, and ensure that the relief loan is used for the right purpose. The loan has to be repaid at a future date, when the borrower is able to find a better paying job, e.g. when the economy recovers. If not paid, it can be deducted against the CPF savings payable at age 55.
The existence of this relief loan will give comfort to the working people that they can continue nearly as usual, and do not need to cut down their spending drastically at this time. It will support the suggestion made by Senior Minister to keep the economy going.
Those employed will have the comfort that if they should be retrenched at a later date, they have access to a relief loan that carries a modest rate of interest. They do not have to borrow from credit cards at 24% interest or from loan sharks at higher interest rate.
The relief loan should also be available to workers who agree to work on a shorter work week (e.g. 3 or 4 days a week) for a proportionate reduction in wages. They can get a relief loan for the difference. This will encourage businesses (facing a drop in demand) to keep their workers on a shorter work week, instead of retrenching the excess workers.
The relief loan is similar to unemployment benefit that is available in many advanced countries. In this case, it is a loan that is required to be repaid in the future.
The Governor of California, Arnold Schwarzenegger, has introduced a simple and effective scheme to cope with the budget deficit of the state. He asked all state employees to take 2 days of unpaid leave each month. This should reduce the expenses by about 10%. This is better than to retrench 10% of the state employees to achieve the same results.
It is not just cutting wages by 10%. The employees get two additional days of free time to spend on other activities. For employees who have been working long hours, this will be a welcome break.
I hope that the employers in Singapore can adopt the same approach. Perhaps the Government can take a lead.
Reduce GST to 3%
There is a need to increase domestic spending and personal consumption, to offset the drop in external demand.
A temporary reduction in GST to 3% will help to stimulate spending. Many people will consider spending now, and enjoy a 4% reduction in prices, due to a reduced GST. Other people will still be cautious and save the money, but a big reduction (of 4% in GST) may spur others to spend now.
If money is given to people to spend, it is likely that many people will use the money to pay off their debts or save for the future. The actual impact on domestic spending is reduced. This was the case of the stimulus package in the USA a few months ago.
A reduction in GST is likely to produce a positive impact on the economy. With people continuing to spend, more people will keep their jobs and the economy will carry on nearly as much as before. There will still be a contraction in demand, but the impact will be minimised.
I agree with the call by SM Goh Chok Tong for people to continue to spend normally, so that the economy will not suffer such a severe decline. I believe that a reduction in GST is likely to encourage people to achieve this desired outcome.
Conclusion
This economic downturn is global in nature. It is the most severe in 70 years. Singapore is likely to face a larger impact from this downturn, due to the structure of our economy. We need to have “out of the box” measures to overcome the challenges.
I hope that my suggestions can be considered.
Tan Kin Lian will be speaking at Speakers’ Corner this Saturday, 27 December, at 5pm. This will be the last gathering on the issue of structured products until further notice.
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I just think that Government should stop giving Singaporeans false hopes and start helping us financially. What they giving us in whatever offset packages are never enough to cover Singaporeans for the near future……
Has our government tried to follow only the beneficial concepts of the “First Emperor of Qin” who was well-known as “Shihuangdi” to the Chinese? At least “Shihuangdi” didn’t allow the untalented foreigners to migrate to
China for jobs or to be PRs as to cause all average peoples of the Han to be second-class citizens as we average Singaporeans are now treated by our own government. Whether his people were wealthy or poor he raised heavy taxes just to fulfil his dreams of constructing “The Great Wall of China” to keep all the foreign invaders from trying to invade China. Our government refuses to hear from us because we are an ordinary Singapore citizen who is incompetent in politics. We would like to add two excerpts in the next paragraphs from the history of China’s most famous emperors to prove why our government will not be successful in its rule for another decade if it doesn’t solve the problems of continuous unemployment and reduce prices of most usable things in time and if it still listens to its several selfish government advisors similar to Shihuangdi’s so-called highly-talented political advisors Lisi, Weiliao, Wangjian, Mengtian and many more who refused to accept the verbal protests of their own average citizens in the streets during their time. History can repeat itself. PAP can never last for another decade for sure. Do we think Shihuangdi was just a simple-minded emperor? His political concepts of controlling and benefiting China was marvellous despite cruelty but our government’s political concepts are indeed worse than his because all average and below average salaried and unemployed capable Singaporeans are forced to be second-class citizens and most of them are stranded in the middle of a dangerous bridge where both ends are on fire. Please refer to the two excerpts below to why PAP will collapse very soon:
1)About Shihuangdi
The emperor Shi Huangdi(259-210BC), whose family name is Ying and first name is Zheng, is one of the most famous kings in Chinese history. He is also the emperor who created the first feudalism country made up of several peoples.
The times when Shi Huangdi was born was the end of the period of the Warring States in Chinese history. It was the times that wars broke out quite often. His father was named Zichu—the grandson of the emperor Chin Shaodi and also the son of the prince Chin’an’guo. Zichu was sent to the country Zhao as a hostage. At that time, a businessman called Lubuwei saw the special situation of Zichu, so he helped him a lot to make him back to his native country. Lubuwei also provided Zichu with a beauty called Zhaoji to be his wife. Before long she got a son, it is the right person called Yingzheng-the emperor Shi Huangdi.
When Zichu got back to the country Chin, he became the emperor of Chin. He was called the emperor Zhuang Xiangdi and he made Yingzheng to be the prince. The emperor Chinzhuangxiang died in 247 BC and Yingzheng became the emperor who was only 13 years old at that time. In 238 BC he held a coronation and after that time he became the real emperor who could control the whole country. He defeated the army which wanted to overset him and sent his mother into prison. The next year he made the Premier Lubuwei to be a civilian. With the help of Lisi, Weiliao, Wangjian, Mengtian and so on, he chose the right time to attack other countries. The war lasted 10 years from 230-221BC. He annihilated the countries–Han, Zhao, Yan, Wei, Chu and Qi and brought the Warring States which lasted about 100 years to an end. He made himself to be the emperor of the first fuedalism country made up of several peoples in Chinese history.
After he made all parts of China to be a whole country, he called himself “Shi Huangdi”. To make his power more stronger, he made a lot of policies, including consolidating characters, coin and metrology, putting the rule of province and country into use, dividing the whole country into 36 provinces, making country under the control of province and so on. He created several important officials who were under the control of the emperor. All the officials was chosen by the emperor. It was Shi Huangdi who was in charge of the power of the army and politics. From then on during about 2000 years, the results of innovation made a great effect of the feudalism system of China.
2)The First Emperor’s Treatment of his People:
The First Emperor trusted his own judgment, never consulting others, and hence his errors went uncorrected. The Second Emperor carried on in the same manner, never reforming, compounding his misfortune through violence and cruelty. . .
At that time the world was not without men of deep insight and an understanding of change. The reason they did not dare exert their loyalty and correct the errors of the ruler was that Qin’s customs forbade the mentioning of inauspicious matters. Before their words of loyal advice were even out of their mouths, they would have been condemned to execution. This insured that the men of the empire would incline their ears to listen, stand in an attitude of solemn attention, but clamp their mouths shut and never speak out. Therefore when the three rulers strayed from the Way, the loyal ministers did not dare remonstrate, and the men of wisdom did not dare offer counsel. The empire was already in rebellion, but the ruler was never informed of the villainy—how pitiful!. . .
In case I have exceed 500 words by adding the two excerpts:
1)About Shihuangdi
The emperor Shi Huangdi(259-210BC), whose family name is Ying and first name is Zheng, is one of the most famous kings in Chinese history. He is also the emperor who created the first feudalism country made up of several peoples.
The times when Shi Huangdi was born was the end of the period of the Warring States in Chinese history. It was the times that wars broke out quite often. His father was named Zichu—the grandson of the emperor Chin Shaodi and also the son of the prince Chin’an’guo. Zichu was sent to the country Zhao as a hostage. At that time, a businessman called Lubuwei saw the special situation of Zichu, so he helped him a lot to make him back to his native country. Lubuwei also provided Zichu with a beauty called Zhaoji to be his wife. Before long she got a son, it is the right person called Yingzheng-the emperor Shi Huangdi.
When Zichu got back to the country Chin, he became the emperor of Chin. He was called the emperor Zhuang Xiangdi and he made Yingzheng to be the prince. The emperor Chinzhuangxiang died in 247 BC and Yingzheng became the emperor who was only 13 years old at that time. In 238 BC he held a coronation and after that time he became the real emperor who could control the whole country. He defeated the army which wanted to overset him and sent his mother into prison. The next year he made the Premier Lubuwei to be a civilian. With the help of Lisi, Weiliao, Wangjian, Mengtian and so on, he chose the right time to attack other countries. The war lasted 10 years from 230-221BC. He annihilated the countries–Han, Zhao, Yan, Wei, Chu and Qi and brought the Warring States which lasted about 100 years to an end. He made himself to be the emperor of the first fuedalism country made up of several peoples in Chinese history.
After he made all parts of China to be a whole country, he called himself “Shi Huangdi”. To make his power more stronger, he made a lot of policies, including consolidating characters, coin and metrology, putting the rule of province and country into use, dividing the whole country into 36 provinces, making country under the control of province and so on. He created several important officials who were under the control of the emperor. All the officials was chosen by the emperor. It was Shi Huangdi who was in charge of the power of the army and politics. From then on during about 2000 years, the results of innovation made a great effect of the feudalism system of China.
2)The First Emperor’s Treatment of his People:
The First Emperor trusted his own judgment, never consulting others, and hence his errors went uncorrected. The Second Emperor carried on in the same manner, never reforming, compounding his misfortune through violence and cruelty. . .
At that time the world was not without men of deep insight and an understanding of change. The reason they did not dare exert their loyalty and correct the errors of the ruler was that Qin’s customs forbade the mentioning of inauspicious matters. Before their words of loyal advice were even out of their mouths, they would have been condemned to execution. This insured that the men of the empire would incline their ears to listen, stand in an attitude of solemn attention, but clamp their mouths shut and never speak out. Therefore when the three rulers strayed from the Way, the loyal ministers did not dare remonstrate, and the men of wisdom did not dare offer counsel. The empire was already in rebellion, but the ruler was never informed of the villainy—how pitiful!. . .