MINISTERIAL STATEMENT IN PARLIAMENT
24 APR 2003

BATTLEFRONT 2 - THE ECONOMY
The second battlefront is the economy. The Government is working with the Singapore Business Federation and business chambers to encourage businesses to adopt business continuity plans, so that they can continue to operate even if their staff fall ill. Special attention has been placed on essential services, such as utilities, to ensure uninterrupted services.

At the industry level, firms in the tourism trade are working with STB to devise ways to bring tourists back when the SARS situation stabilises.

It is also important that investors and analysts understand the true situation in Singapore, and what we are doing to get things under control. Our policy is full and transparent disclosure, so that there is no doubt of the true picture and people can trust our statements. The Ministry of Foreign Affairs has been briefing the heads of foreign missions here, while EDB is in contact with the MNCs as well as their corporate headquarters, to keep them updated on the situation.

Impact of SARS on the Economy
At the beginning of the year, Singapore's economic outlook was mainly clouded by the impending Iraq War and its impact on oil prices. The war in Iraq has now ended, and oil prices have fallen, lifting some of these uncertainties. However, SARS is now putting a strain on our economy and creates a new and greater uncertainty for us.

The tourism and transport-related industries, such as hotel, restaurant, retail, airline, cruise, travel agent and taxi services, have been most severely hit. Air travel has been reduced sharply. Tourist arrivals have fallen by 61 per cent in the first 13 days of April and are expected to fall sharply for the second quarter of 2003. A number of events, conferences and conventions scheduled in April and May this year have been cancelled or postponed. China, our fastest growing source of tourist arrivals before the outbreak, has banned organised travel to Singapore, Malaysia and Thailand. Arrivals from Japan, South Korea and Hong Kong have declined sharply.

So far, the manufacturing sector has not been affected. But if the SARS situation deteriorates in the region or the major industrial countries, it will affect our export markets and important trading partners. It could shake global confidence, and disrupt production and new investments. Then the impact on us will be broader-based, and more severe.

We cannot predict how exactly the situation will unfold, but MTI has lowered the GDP growth forecast for this year to 0.5 to 2.5 per cent. This is on the assumption that the outbreak does not spread worldwide and become a global pandemic. The unemployment rate is expected to increase beyond the 4.2 per cent in December 02. While we will try to preserve as many jobs as possible, we have to expect more retrenchments this year, especially in the tourism and transport-related sectors.

Relief Measures
The Government recognises the economic hardship brought about by SARS. To help alleviate the immediate problems, we announced on 17 April a relief package worth $230 million. These measures were targeted at the sectors most affected by the SARS outbreak, namely, the tourism and transport-related sectors. The measures will not fully offset the impact on these businesses, but they will help them to tide over the difficult period and save jobs, wherever possible.

Home Quarantine Allowance Scheme
There is another group who need help. People have been placed under Home Quarantine Orders (HQOs), have so far not been given them any allowance or assistance. We have left it to employers to work out their own arrangements, for instance by putting employees on HQOs on medical leave. As the HQO cases were initially dispersed and the number manageable, this did not pose any problem.

However, the closure of the Pasir Panjang Wholesale Centre and the imposition of HQOs on about 2,400 stallholders and workers at the Centre showed that HQOs may need to be imposed on large numbers when a business establishment is ordered to shut. Furthermore, if the Government can mitigate the financial burden of the HQOs on the quarantined persons, it will reduce the incentive for people to breach the HQO in order to continue working. Also people will be more willing to be identified and quarantined when they are traced as the contacts of a SARS case.

The Government will therefore implement a Home Quarantine Order Allowance Scheme, to be administered by the CDCs. Under the scheme, the Government will pay an allowance to self-employed persons who are served HQOs, to make up part of his income. It will also give the allowance to establishments whose employees have been affected by HQOs. This will defray part of their manpower costs for the duration of the HQO. It will be especially helpful to smaller businesses, which may otherwise be unable to survive.

For a small business establishment, i.e. one with fewer than 50 full-time workers, the assistance will be more generous. If the whole establishment is ordered to shut for a period on account of SARS, then the firm will receive this ex-gratia payment for all its employees, including those who are not on HQOs. The cut off of 50 full-time workers covers more than 90% of business establishments.

For self-employed persons, the allowance will be a flat rate of $70 per day, for the duration of the HQO. For employees, the allowance will be his daily salary, up to a maximum of $70 per day. The allowance will be paid to the employer. We will leave it to the employers to make their own financial arrangements with their employees. However, newly arrived work-pass holders who are required to undergo a 10-day quarantine will not be eligible for the HQO Allowance. The allowance is also payable to all persons previously or currently on HQO.

Through the HQO Allowance Scheme, the Government will be bearing a good part of the wage cost of the businesses affected. MOF will provide full details of this scheme later.

Specific Issues
Let me now address specific economic issues raised by the MPs.

Rental rebates: Mr Gan Kim Yong asked about rental rebates for HDB commercial tenants. All HDB commercial tenants are already enjoying a 20 per cent rental rebate that lasts until 31 Dec 2003. These tenants include operators of student care centres, tuition centres, child-care centres and kindergartens. Some are also receiving additional rebate of up to 20 per cent to bring their rents down to the prevailing market rent. In addition, HDB will pass on to its tenants the full savings from the recently-announced property tax rebates. HDB will monitor the situation closely and will consider providing additional assistance to its commercial tenants if necessary.

Giro instalments for property tax: Mr Chiam See Tong asked whether property tax could be paid by instalments. Taxpayers have been able to pay their annual property tax in 12 interest-free monthly instalments since 1989, provided they do it via GIRO. More than 50 per cent of taxpayers are already taking advantage of GIRO to pay their property tax in monthly instalments, and the Government encourages more to do so.

Indebtedness of Singaporeans households: Madam Ho Geok Choo asked about the indebtedness of households. A study by the Department of Statistics showed that household financial liabilities have increased from 118 per cent of personal disposable income in 1995 to 174 per cent in 2000. If the economic downturn continues, it could lower disposable income and further increase the ratio of household financial liabilities to income.

However, we have to view this ratio in perspective. First, 72 per cent of the liabilities are in the form of housing loans. This reflects the high housing ownership in Singapore - 92 per cent compared to 60 to 70 per cent in OECD countries.

Second, residential property assets, even after accounting for the weak property prices, stood at $343 billion in 2001. Compared to housing mortgage loans of $106 billion, households still own about $237 billion of net housing assets - a huge amount. If we include other household wealth, such as bank savings and shares, the total net wealth of households represents 670 per cent of disposable income, comparable to OECD countries.

Furthermore, most households service their housing loans through their CPF savings and contributions. So long as they keep their jobs, the impact is manageable. This is why the Ministry of Manpower (MOM) is trying its best to minimise job losses, through enhanced training grants, skills upgrading and other measures.

Retail Sector: Ms Olivia Lum asked about measures to help the retail sector. Domestic consumption has been affected as the initial fear of SARS has kept consumers away from all crowded places, including retail shops and restaurants. However, not all retail outlets are equally badly affected. Those in HDB estates fared better than those in the CBD area and those that cater primarily to tourists. The property tax rebates are intended to help such establishments, and I strongly urge property owners to pass on the rebates to tenants. HDB itself will be doing so. These retail outlets can also send their workers for training and make use of the absentee payroll scheme for MOM and STB approved courses.