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Interesting view points raised -
Singapore's 2009 Budget was BOLD in that it tested new boundaries and showed a recognition of the magnitude of the current crisis. I think we have enough newspaper articles lauding the Budget and its details so I wont bother to reproduce them here - but after listening and watching him present the Budget on TV, I felt the Minister was try to do too much. I think it would have been better just to have a special crisis Budget and then a normal budget which includes all our restructuring strategies. I think the newspapers and commentaries are too positive.....all Budgets with handouts are good its just the quantum of the goodness. I didnt feel that there was an appreciation of the magnitude of the problem as no sacred cows other than dipping into the reserves was slaughtered or tested. The use of $4.9bn in past reserves is good but what was missing to me and to give Singaporeans more comfort during this crisis was how much is this of our total reserves - if its say only 10% then I am comforted that we have more bullets if the criris is prolonged. Back to the Budget details. I did send the Minister my wish list some weeks ago. He has addressed three of my wishes in some form: a) the property tax rebate of 40% and encouraging landlords to pass this back to tenants What happens if Landlords dont do this ? - what is the Govt going to do then.....I wanted them to force landlords to pass at least half of the rebate back to tenants if not they would not be able to enjoy the rebate. b) relieveing cost pressures to companies through the cash grant of up to $300 per worker per month payable three months in arrears. This is not enough to save the electronics or other industries - it can buy time but when your revenue collapses because there is no demand and a huge build up of inventory, this measure which could lead to a cost saving of 5-10% is not enough. So some relief but it just delays the jobs cuts probably to the middle of 2009. c) $5.8bn to encouraging more lending to cash strapped SMEs and an increase in risk sharing by the Govt in bridge loan risk sharing from 50% to 80%. This is good but I am skeptical if the banks will lend despite this increase in protection as their own balance sheets are being damaged. They may not have enough tier 1 capital to continue lending if NPLs rise to more than 10%. My wish here was for the Govt to invest direcltly in our SMEs via a convertible bond structure and keep them alive. This would save the SMEs and jobs, I think its better to get GIC and Temasek to put some of their money into our SMEs rather than put a large part in banks like CitiGroup, UBS, Barclays, Standard Chartered etc. I wont talk much about the GST rebates and tax rebates because they are one off items and probably need to be extended as the crisis according to our own Prime Minister will last a few years. I still believe that a cut in the GST (a sacred cow) is needed. The increase from 5% to 7% wasnt needed. It was put in place at a time when the economy was booming without any expectation that the fundamentals would reverse so fast. We should at least reverse it to 5% if not 3% until the economy rebounds or as some have argued have an exemption on essential items like food, trasnport and utilities. I dont mean to pour cold water on the Budget euphoria but I dont think its enough and we are still looking at significant job layoffs this year - although delayed by a few months. The only silver lining is that the Minister did allude to supplemental Budgets if the need arises. This probably signals that the Government is keeping some bullets if the crisis takes a turn for the worse. |
Market Commentary By:
Kevin Scully