Businesses cheer PM Lee's assurance on economy
By Wong Siew Ying, Channel NewsAsia | Posted: 03 November 2009 2230 hrs

	Photos  of

SINGAPORE: Businesses have cheered the assurance by Prime Minister Lee Hsien Loong that Singapore will not dip into recession again next year.

But there are concerns that recovery may be weak and companies are hoping the government will not withdraw its stimulus measures too quickly.

Orchard Road is stringing up the Christmas decor. But manufacturers are not cheering because they have not seen a rush of orders like in previous years.

The Singapore Chinese Chamber of Commerce and Industry (SCCCI), for one, said it is not certain if the economic recovery will be strong or sustained. It hopes that some government measures to help companies will stay for a while.

SCCCI president, Teo Siong Seng, said: "The government has announced that the Jobs Credit scheme will be reduced and will stop by the middle of next year. I think that most of my members have accepted it because handouts cannot be forever.

"On government guaranteed loans, we feel that that should continue. I think the SPUR programme has been very successful. That has actually held back some employers from retrenching workers.

"Even though by the end of next year this programme may end, we hope maybe a modified form of SPUR can replace it so that employers can continue to upgrade and train their staff."

The modified programme could feature reduced subsidies or cost sharing between the government and companies.

The SCCCI also hopes that the authorities can relax rules to allow companies to hire more foreign workers to meet the rise in orders in the manufacturing sector, going forward.

Mr Teo said the opening of Singapore's two integrated resorts next year and an expected influx of tourists, for instance, would see demand for more foreign workers in the services industries.

But Mr Teo said that companies too must play a part, such as exploring opportunities in non-traditional markets, like Africa and Latin America.

Economists believe that companies should remain cautious until consumer demand picks up. Another risk is the weakening US dollar which could make it difficult for exporters to accurately project their costs.

Vishnu Varathan, regional economist at Forecast, said: "It doesn't do any service to exporters or manufacturers because (if) they can't pin down the costs, they can't do proper projections.

"We also have the asset flow risk, so the stock of assets are now trying to get out of US dollars and they are going to chase wherever they can find returns, and one of those places is the emerging market space and Asia is looking particularly well-footed. And that will explain some of the asset bubble risks that are being talked about now."

Experts said it will also be challenging to coordinate exit strategies among the various economies. That is because they are at different stages of recovery and there may be less political will among some economies to do so, as they have a different mandate.

Observers said recovery next year may not be smooth. They expect pharmaceutical companies to scale back output, while other components in the manufacturing and the services industries will have to pick up the slack.

- CNA/ir