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SINGAPORE : The prospects are looking up for Singapore this year.
And if it stays that way, workers could be enjoying a 1 to 2 percent increase in their employer's CPF contribution rate, as indicated by Prime Minister Lee Hsien Loong in his New Year's Eve speech.
While many, including unions, are upbeat about the move, analysts say it could hit some businesses.
The retail sector has probably seen better days.
And the year 2006 was not one of them, according to market watchers.
Sales did not rise in tandem with economic growth.
And retailers who have not done well will count among those who will feel the heat of the suggested CPF restoration.
Song Seng Wun, Regional Economist, CIMB-GK Research, said, "Not everybody has ride along that growth and now, with the government saying that your labour may cost more because you are paying more for CPF, will be an added burden because in this environment, what we are seeing is wage cost is going up quite steadily and you are also seeing rentals going up as well, be it in big fancy malls that have opened up or be it office space...that has gone up as well."
A way around this is to allow companies more flexibility in hiring foreign workers, as well as encouraging them to recruit older Singaporeans.
Mr Song says the business environment will get more challenging but Singapore's investment in science and research is likely to pay off.
He said, "Beyond the next couple of years, as we continue to put more R&D into especially the chemical and manufacturing sectors, perhaps we will see value added contribution from these sectors come back to sustained GDP levels of 5 to 6 percent, compared to previously where we were talking about long term growth of Singapore at 3 to 5 percent."
The construction industry is also expected to create more jobs and expand between 3 and 5 percent this year.
Analysts add that the construction sector is finally in the black for the first time after five years.
The outlook seems bright this year, but analysts say issues like the bird flu, terrorism and volatile oil prices will remain a thorn in the side.
And on top of that, a weakening US economy could also affect exports in the region. - CNA/ms
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