<TABLE border=0 cellSpacing=0 cellPadding=0 width=452><TBODY><TR vAlign=top><TD>SUCKING SPORNS DRY IS THE NAME OF THE PAPEE TRAITORS' GAME!
Special Focus
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Published February 23, 2010
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>BUDGET 2010: BIG PICTURE
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Govt expects Budget deficit of $3 billion
Amount manageable due to sufficient current reserves, says Tharman
By OH BOON PING
THE Singapore government expects to incur an overall Budget deficit of around $3 billion for the financial year 2010 - up slightly from the $2.9 billion for last year.
<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD>
</TD></TR><TR class=caption><TD>Ups and downs: Mr Tharman says that the prospects for this year are good, but it is important to be watchful for risks </TD></TR></TBODY></TABLE>Delivering the Budget Statement in Parliament on Monday, Finance Minister Tharman Shanmugaratnam said that this represents 1.1 per cent of Singapore's forecast GDP this year, but it 'is a manageable deficit as we have sufficient current reserves to fund it'.
The basic deficit - the balance of operating revenues and expenditures before factoring the net investment returns contribution and the top-ups to endowment and trust funds - is estimated at $7.2 billion for FY2010 - or 2.6 per cent of GDP.
However, this was still slightly smaller than the 3.3 per cent basic deficit projection for last year.
'That is a very conservative estimate,' said CIMB economist Song Seng Wun.
'I suspect that the final outcome will be a one per cent surplus rather than a one per cent deficit, on account of the stronger good and services tax (GST) collection and perhaps stronger betting tax collection.'
OCBC economist Selena Ling pointed out that 'this is close to our expectations. In all likelihood, if we do have an election in the next 12 months, then a Budget deficit is not unexpected'.
Plus, she says, a Budget deficit amounting to about one per cent of GDP is still considered prudent, 'certainly nowhere near those levels seen in Spain or Portugal'.
Last year, the overall Budget deficit stood at $2.9 billion - lower than the deficit of $8.7 billion budgeted a year ago.
The minister said that this 'better than expected performance' reflects the return of confidence to Singapore's economy.
The Singapore economy contracted by two per cent last year due to the economic downturn.
Resident unemployment reached 5 per cent in the third quarter of last year but has since fallen to 3 per cent.
Looking ahead, the minister said that the prospects for this year are good, even though it is important to watch out for possible headwinds to growth.
Specifically, he added that the path to recovery is unlikely to be smooth.
'Prospects for 2010 are good although we have to be watchful for risks. The IMF projects world growth to swing from negative territory in 2009 to 3.9 per cent this year. However, the path to recovery is unlikely to be smooth,' said Mr Tharman.
'The problems over sovereign debt in Greece could be contagious. Efforts by governments to reduce deficits so as to prevent unsustainable increases in debts, while necessary, will inhibit growth over the short term.'
Assuming no serious troubles in global finance, Singapore's economic growth is expected to be around 4.5-6.5 per cent this year.
However, there is a need to increase Singapore's productivity by 2-3 per cent a year over the next decade, as mapped out by the Economic Strategies Committee.
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RUSSELL AUBREY
Head of Tax Services, Ernst & Young Solutions LLP
'The proposed Budget measures were targeted, measured and calibrated. The Budget offers a credible strategy to reinvent Singapore in the long term by raising productivity, encouraging innovation and nurturing talent.'
KANG CHOON PIN
Tax Partner, Ernst & Young Solutions LLP
'The renewal of the existing concessions for listed Reits should preserve Singapore's status as a favourable location for listed Reits. The extension of the requirement for unlisted Reits to be listed within one month to six months is a very welcome response to industry feedback.'
AJIT PRABHU
Partner & Head, Tax Services, Deloitte Singapore & Southeast Asia
'The Minister's decision to phase out the long-standing Industrial Building Allowance (IBA) scheme was unexpected. The proposed replacement Land Intensification Allowance (LIA) Incentive, although more generous, only applies to nine specified sectors all of which are technology intensive. Scrapping the IBA scheme and replacing it with the LIA Incentive is consistent, however, with raising productivity and moving towards an advanced economy - which are among the major themes of Budget 2010.'
SINGAPORE CHINESE CHAMBER OF COMMERCE AND INDUSTRY (SCCCI)
'We note with relief that the increase in Foreign Worker Levy will be calibrated and carefully phased in so as to give companies a clear incentive to upgrade while providing them time to develop plans to re-gear and grow through productivity improvements. We continue to urge the government to exercise caution in the implementation of such increases and to monitor its adverse impact on our local SMEs and our economy closely. If necessary, the government should be more flexible and accommodating in addressing the manpower shortage in the specific industries and the need to keep the foreign workers in these industries.' SINGAPORE MANUFACTURERS' FEDERATION 'The federation welcomes the early stage financing of SMEs to support the commercialisation of R&D. A sustainable and robust platform for industry to engage in relevant innovation and R&D is a vital dimension in moving up the value chain, which is the economic goal of Singapore.'
</TD></TR></TBODY></TABLE>
Special Focus
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Published February 23, 2010
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>BUDGET 2010: BIG PICTURE
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Govt expects Budget deficit of $3 billion
Amount manageable due to sufficient current reserves, says Tharman
By OH BOON PING
THE Singapore government expects to incur an overall Budget deficit of around $3 billion for the financial year 2010 - up slightly from the $2.9 billion for last year.
<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD>
</TD></TR><TR class=caption><TD>Ups and downs: Mr Tharman says that the prospects for this year are good, but it is important to be watchful for risks </TD></TR></TBODY></TABLE>Delivering the Budget Statement in Parliament on Monday, Finance Minister Tharman Shanmugaratnam said that this represents 1.1 per cent of Singapore's forecast GDP this year, but it 'is a manageable deficit as we have sufficient current reserves to fund it'.The basic deficit - the balance of operating revenues and expenditures before factoring the net investment returns contribution and the top-ups to endowment and trust funds - is estimated at $7.2 billion for FY2010 - or 2.6 per cent of GDP.
However, this was still slightly smaller than the 3.3 per cent basic deficit projection for last year.
'That is a very conservative estimate,' said CIMB economist Song Seng Wun.
'I suspect that the final outcome will be a one per cent surplus rather than a one per cent deficit, on account of the stronger good and services tax (GST) collection and perhaps stronger betting tax collection.'
OCBC economist Selena Ling pointed out that 'this is close to our expectations. In all likelihood, if we do have an election in the next 12 months, then a Budget deficit is not unexpected'.
Plus, she says, a Budget deficit amounting to about one per cent of GDP is still considered prudent, 'certainly nowhere near those levels seen in Spain or Portugal'.
Last year, the overall Budget deficit stood at $2.9 billion - lower than the deficit of $8.7 billion budgeted a year ago.
The minister said that this 'better than expected performance' reflects the return of confidence to Singapore's economy.
The Singapore economy contracted by two per cent last year due to the economic downturn.
Resident unemployment reached 5 per cent in the third quarter of last year but has since fallen to 3 per cent.
Looking ahead, the minister said that the prospects for this year are good, even though it is important to watch out for possible headwinds to growth.
Specifically, he added that the path to recovery is unlikely to be smooth.
'Prospects for 2010 are good although we have to be watchful for risks. The IMF projects world growth to swing from negative territory in 2009 to 3.9 per cent this year. However, the path to recovery is unlikely to be smooth,' said Mr Tharman.
'The problems over sovereign debt in Greece could be contagious. Efforts by governments to reduce deficits so as to prevent unsustainable increases in debts, while necessary, will inhibit growth over the short term.'
Assuming no serious troubles in global finance, Singapore's economic growth is expected to be around 4.5-6.5 per cent this year.
However, there is a need to increase Singapore's productivity by 2-3 per cent a year over the next decade, as mapped out by the Economic Strategies Committee.
<HR align=center SIZE=1 width="50%">
RUSSELL AUBREY
Head of Tax Services, Ernst & Young Solutions LLP
'The proposed Budget measures were targeted, measured and calibrated. The Budget offers a credible strategy to reinvent Singapore in the long term by raising productivity, encouraging innovation and nurturing talent.'
KANG CHOON PIN
Tax Partner, Ernst & Young Solutions LLP
'The renewal of the existing concessions for listed Reits should preserve Singapore's status as a favourable location for listed Reits. The extension of the requirement for unlisted Reits to be listed within one month to six months is a very welcome response to industry feedback.'
AJIT PRABHU
Partner & Head, Tax Services, Deloitte Singapore & Southeast Asia
'The Minister's decision to phase out the long-standing Industrial Building Allowance (IBA) scheme was unexpected. The proposed replacement Land Intensification Allowance (LIA) Incentive, although more generous, only applies to nine specified sectors all of which are technology intensive. Scrapping the IBA scheme and replacing it with the LIA Incentive is consistent, however, with raising productivity and moving towards an advanced economy - which are among the major themes of Budget 2010.'
SINGAPORE CHINESE CHAMBER OF COMMERCE AND INDUSTRY (SCCCI)
'We note with relief that the increase in Foreign Worker Levy will be calibrated and carefully phased in so as to give companies a clear incentive to upgrade while providing them time to develop plans to re-gear and grow through productivity improvements. We continue to urge the government to exercise caution in the implementation of such increases and to monitor its adverse impact on our local SMEs and our economy closely. If necessary, the government should be more flexible and accommodating in addressing the manpower shortage in the specific industries and the need to keep the foreign workers in these industries.' SINGAPORE MANUFACTURERS' FEDERATION 'The federation welcomes the early stage financing of SMEs to support the commercialisation of R&D. A sustainable and robust platform for industry to engage in relevant innovation and R&D is a vital dimension in moving up the value chain, which is the economic goal of Singapore.'
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