Reactions on possibility of upping employer CPF contributions mixed
By Dominique Loh, Channel NewsAsia | Posted: 03 January 2007 1811 hrs

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SINGAPORE: There have been mixed reactions from Singaporeans over the possibility of the government increasing the employers' Central Provident Fund contribution rate.

In his 2007 New Year message, Prime Minister Lee Hsien Loong said the government is studying the idea of increasing employers' CPF rate by 1 to 2 percentage points.

From the man on the street to economists, there are doubts whether it's the best thing to do.

However, experts and economists say it's probably the best time for the government to make a CPF adjustment.

The economy had outperformed expectations in 2006, with growth hitting 7.7 percent, and a record number of jobs created in the first nine months.

Prime Minister Lee, in his New Year message, has said 2007 will likely be another good year for Singapore.

"Over the last few years, we've seen a major turn around in the Singapore economy, partly because the global environment proved to be extremely resilient. The economic restructuring committee, through various efforts, has found new niches in Singapore, integrated resorts, education. Singapore is going to be one of the key wealth management centres around the world," said Jimmy Koh, Vice President, Economics-Treasury Research, United Overseas Bank.

This, some say, has created new buzz and optimism about Singapore's future, prompting suggestions to increase employers' CPF contribution.

Some analysts believe the fact that the government is talking about adjusting the employer's CPF contribution is sending a strong signal about the health of Singapore's economy, that it's out of the woods and well enough to support such a move.

But the question remains - what will the rate be if there is an adjustment?

"Given the way they have functioned, I guess it's probably going to be well within that 1-2 percent mark, probably 1.5 percent. A technique here is more of working through with market expectations and the market somehow, since we're pricing one percent, then you have to do one percent, if the market is comfortable with 1.5 then do 1.5 percent," said Mr Koh.

Singaporeans will have to wait till February to find out if the employers' CPF contribution rate adjustment will be made. - CNA /dt