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SINGAPORE: Prime Minister Lee Hsien Loong said the country cannot simply stimulate demand during this time of crisis by raising government spending.
While that may be what other countries are doing to stem the downturn, Mr Lee said it cannot work for Singapore because of its small economy.
Mr Lee made the point during a dialogue session with business leaders in Sao Paulo, Brazil on Monday.
PM Lee said Singapore is watching what other governments are doing around the world to deal with the financial crisis. And he noted that each government is adapting and improvising as they go along because the current economic slump is unprecedented.
When asked what strategies Singapore has to deal with the problem, the prime minister outlined several measures in place, including helping the low income and ramping up training to help Singaporeans secure jobs.
Mr Lee said: "In a big economy, you can boost consumption. The government gives money, people spend it and it's spent within the economy. Most of it stays in, a little bit of it leaks out. You get a multiplier and the economic activity goes up.
"In Singapore, if people spend money, most of the money goes overseas because we are so open and most of the demand is abroad. Most of the money we spend is spent on things which come from abroad, so it's not possible for us to pump- prime the economy in the same way that other governments do.
"But there are other things we can do, (such as) reducing costs and helping citizens directly."
PM Lee also explained the thinking behind the government's recent move to support an additional S$2.3 billion in loans to help local firms gain access to credit.
He said: "In a downturn, in an uncertain period, all banks become more cautious because they have to be. And when they become more cautious, the small companies, the SMEs have the greatest difficulties.
"Therefore, we have had schemes which co-share the risk of banks lending to small companies. The government takes on a significant part of the risk and the banks make the evaluation so that the banks don't just make loans and pass the problem to the government.
Mr Lee hinted at more help for businesses in areas such as rental and wage costs, to be announced at the upcoming Budget which has been brought forward to January.
However, the key message behind the initiatives is to show Singaporeans they are not alone in coping with the downturn.
The prime minister said: "I think one more very important thing apart from specific measures is to maintain confidence and make sure people know that they are not in this alone, the government is helping them.
"... they have to work together to deal with the problem and they also have to make maximum efforts because you cannot just sit there and wait and be carried along to have the problem solved. You have to make your own effort and that's the political responsibility of the government."
Mr Lee's bilateral visit to Brazil is also an attempt at further diversifying Singapore's economic linkages. Although Brazil is Singapore's second largest trading partner in Latin America, both sides said there is more room for growth.
Mr Lee is now in Brasilia, where he will meet Brazil President Luiz Inacio Lula Da Silva. Both sides are expected to sign separate agreements on Wednesday in the areas of air services, science and technology, as well as trade and investment. - CNA/vm
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