Singapore Government Press Release

Media Division, Ministry of Information and The Arts,

36th Storey, PSA Building, 460 Alexandra Road, Singapore 119963.

Tel: 3757794/5

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Q1) Singapore has always prided itself as the beacon of calm in a sea of storm. But lately, our economy has become affected, and we are in a recession now. Despite our strong fundamentals, why are we still being hit?

Our economy is indeed fundamentally sound. The Government has run a budget surplus for many years, until this crisis. We have accumulated substantial reserves. Our banks are strong. Our companies have not borrowed too much money, especially from abroad.

But we are a small country, open and dependent on the outside world. We have many links with the region, especially with our nearest neighbours Malaysia and Indonesia. When the region is down, we too are affected.

Q2) What buffered us from the worst?

First, we have been prudent and frugal. While the economy prospered, we did not go for extravagant projects. We saved our money, and built up our reserves. We believed in the Malay proverb: Sediakan payong sabelum hujan. Had we borrowed and spent excessively like some other countries, we would be in deep trouble today.

Second, we have pursued sound policies. We have emphasised education to make our people productive. We have invested in infrastructure, like the port, airport, and MRT, to make Singapore a good place to do business. We have promoted self-reliance and avoided government handouts. We have built a fair and open system, and strenuously avoided corruption and nepotism. We are now benefiting from these long-term measures.

Third, even while we were doing well, we always reminded ourselves that next year perhaps things would be less rosy. So psychologically we were prepared for such a downturn.

Q3) And I am sure the people also play an important part…

Definitely. Fortunately, Singaporeans have pulled together to tackle the problem as one people. In a crisis, the Government has to come up with decisive and imaginative actions, for example cutting CPF or reducing taxes. But the people must stay as one, and work with the Government, for the policy to succeed.

Q4) While the government has announced a string of cost cutting measures to boost the economy, should the government have reacted earlier?

This is a difficult question. We can only cut the CPF once. If we act too early, we may not be able to judge how events will develop, and so how much we need to cut. If we act too late, many workers may have lost their jobs by the time the cuts take effect.

At the Budget in February, we already saw the dark clouds gathering. But we still hoped that the problem could be averted. Also our economy had not yet been seriously affected. It was still growing. So we decided to focus on long term priorities, especially education, infrastructure and defence, and to watch carefully to see how things developed.

By June, the situation had worsened. Our economy had slowed down. President Suharto of Indonesia had resigned after the riots in May. So we implemented a $2 bn off-budget package.

Q5) Did the Government expect to follow up with more measures after the $2bn off-budget package?

It was not meant as the final package. Had we cut CPF in June, I don’t think workers were ready then to accept it. But since June, as events have unfolded in Indonesia and Malaysia, Singaporeans could see for ourselves that we were in a grave situation. What we had earlier hoped to avoid had unfortunately happened.

Union and grassroots leaders did a lot of work. They explained to workers why we had to cut wages to save jobs. They reassured them that the Government would help lower income Singaporeans and households with mortgages. They helped to develop the consensus necessary for more drastic steps.

So by November, when the Committee on Singapore’s Competitiveness recommended a $10 bn cost reduction package, we were ready to act.

Q6) Are you confident the measures would be enough to save jobs and maintain Singapore’s competitiveness?

The measures will definitely improve our competitiveness significantly, and save many jobs. But whether the measures will be enough is more difficult to say. It depends on external events, which are not completely within our control.

We know of some companies which were about to retrench their workers, but changed their minds after the cost reduction package. Unfortunately there will still be some retrenchments, but fewer than if we had not acted.

Q7) How did the government come to decide on this figure?

It is a matter of judgement. A 15% cut in wage costs is quite large. It is more than the reduction in the last recession. In 1986, we cut wage costs by 12%, and it lifted us out of the recession very quickly.

This time, the problem is more serious. So we decided to cut wage costs by more – 15%. Fortunately, after the last recession we built up the flexi-wage scheme. So we can spread the cuts between CPF contribution and flexi-wage bonuses.

Q8) But if more is needed, will the government follow-up in the next budget?

If the situation changes, we must course adjust our policies. But we need some time to evaluate the impact of the measures. Next February will be too soon to tell. So I do not expect any significant additional initiatives in the budget.

Q9) There have been views expressed pressing the Government to draw more on the reserves to lighten the burden on workers, especially lower income workers. Why was this not done?

The Government did indeed take steps to help lower income Singaporeans. For example, it extended the rebates for the GST and for utilities charges for two years. With the cost reduction measures, our budget will be in deficit, which means we are spending part of our reserves.

But it would be a grave mistake to think first of using our reserves. We have to accept smaller bonuses, less CPF. But we are still much better off, compared to how life was in Singapore not many years ago, and also compared to people in many other countries.

At Hari Raya, Muslim families may need to spend a little more thriftily. Perhaps you don’t need new sets of curtains, sofa covers or new carpets. The womenfolk may make cakes themselves instead of buying them. Children may get smaller green packets of money. But we are not desperate or starving.

If in this situation we refuse to tighten our belts, our reserves will soon be gone. Worse, we would be seen to be a people unable to take hardship, who have gone soft after too many years of affluence.

Q10) So if the situation worsens, into say a global recession, I presume the Government will have to draw down further on the reserves?

If the whole world goes into a protracted recession, then of course we will have to spend more of our reserves. But we must always do so reluctantly, as a last resort. Let us do our best to solve the problem by our own efforts.

Q11) In your view, how have the Malays fared in the economic crisis? Are you concerned that 1 in 5 of those retrenched are Malays and that about 70% of Malay workers have only secondary school education or lower?

It is a national problem, which affects all of us. But I am concerned that Malay workers tend to be less well educated. When companies retrench, they do not consider the race of their workers, but their contribution. Older, unskilled workers are most vulnerable, and will find it hardest to find new jobs. Many of them will be Malay workers.

Q12) What can and should we do about this?

The long term solution is to improve Malay education levels. These have improved steadily over the years, especially at primary and secondary levels. But we need to continue working hard at this problem. We must especially focus on mathematics and science, which are basic requirements for most jobs.

I am particularly encouraged that mathematics results of Malay pupils have been improving. It shows that they do have potential. They can do better, if they and their parents and teachers make the extra effort.

Q13) What about the short term? What can we do?

The immediate solution is to get Malay workers to participate in training and retraining programmes. This is critical. There are many programmes available. NTUC has a Skills Redevelopment Programme (SRP) which has been quite successful. Recently, MUIS, Mendaki and AMP also embarked on ‘Projek Cerah’. This is a collaborative effort to help Muslim families whose members are affected by retrenchments.

Many Malay workers have done this successfully. For example, I know of four Malay women who were retrenched from unskilled jobs in a consumer electronics factory last year. They were middle aged, with families and children to look after. But they attended courses, studied hard, took exams, and passed. Now they work in a hi-tech wafer fab plant as semi-skilled workers. I hope they will continue to train and upgrade in their new jobs. If these Malay women can do it, so can others.

Q14) There is an increasing trend amongst the Malays, especially those above 40 years old, to just sit back and enjoy life. Even if they want to earn more income, they prefer to take on a second job, than to upgrade their skills. What’s your advice for these Malay workers?

There must be a change in mindset. At 40 years old, you are still young. You have many more productive years left in your career. Make full use of them. Attend the courses available. It will benefit you later.

One newspaper report on Project Cerah quoted a Malay worker who said that as head of household, he needed to look after his family. In other words, he did not have time to go for training. But heads of households need to take a longer view. Do this while you still have jobs. Don’t wait until you become unemployed, and your families suffer.

Q15) Singapore is stepping up efforts to bring in more foreign talent to give us the competitive edge. Some Malays are concerned that being a minority in Singapore, they will be deprived of jobs which have become so scarce lately. Should we be worried?

I don’t think we should worry about this. We are looking for people who bring skills and experiences that we do not have. They will help us build world class banks, factories, and businesses. This will create many jobs for Singaporeans, including Malay Singaporeans. As the Prime Minister explained, if we want a world class football team, we must attract outstanding players from all over the world.

At the lower end, foreign workers fill jobs that Singaporeans will not do, like construction work. Without foreign workers, it will take much longer and cost much more to build HDB flats, MRT lines, and schools. Many factories cannot find enough Singaporean workers with the right skills. We must allow them to top up with foreign workers. Otherwise they may just close down or move elsewhere. This will not benefit Singaporeans.

 Q16) Another impact of developments in neighbouring countries is on our racial harmony. For example, after the anti-Chinese riots in Indonesia in May, there was some discomfort in relations between Chinese and Malay Singaporeans. Are you concerned that such external developments might affect our racial harmony?

What you describe is true. The different communities saw events from different perspectives. Berita Harian downplayed the ethnic dimension of the riots. But the Chinese papers highlighted it.

It is probably unavoidable that such sentiments will continue to exist in a multi-racial society. Whether it is ethnic cleansing in Bosnia, tensions in the Punjab in India, or anti-Chinese riots in Indonesia, the external events will pull different races in different directions.

We must try our best not to let external events affect our own ethnic relations. These are events happening in a different country, with different problems. They are not our quarrels.

Our key principles are multi-racialism, equal opportunity and meritocracy. The minority communities should never be insecure about their place in Singapore society. The majority Chinese community must always make them feel at ease. We are fellow Singaporeans. We are all co-owners of Singapore, our common home.

Q17) What is your assessment of our sense of common Singaporean identity?

I think our common identity is much stronger now. A Singaporean Chinese living in an HDB estate is quite different from a PRC Chinese living in his ancestral village. Similarly with Singaporean Indians. Modern Singaporean Malays are different from Malays in Malaysia or the Riau archipelago. They are recognisably Singaporean.

Compared with how things were before, we are more cohesive now. The pulls of ancestral lands have weakened.

Earlier this year, when we had problems with Malaysia over the CIQ, all the races supported Singapore's stand. Gradually we are becoming one people, one Singapore.

 Q18) How can the Malay community prepare ourselves for future challenges? Especially as Singapore moves into a knowledge-based economy?

We have to work smarter. We do not have natural resources like timber or oil. We depend on our people and our ingenuity to create value and wealth.

I recently visited the Bukit Batok Community Library. It was an excellent example of a knowledge-based economy. It stocked not only books and magazines, but also CDs, CD-Roms, videos, etc.. Each book had a computer chip inside it, so that users can borrow and return books using automatic equipment.

The manager was a Malay lady. After graduating from university, she joined the National Library Board as a librarian. Then she studied part time on her own, and obtained an MSc in Information Studies. Now she is running a state-of-the-art Library. She showed me around confidently. She obviously knew her job well.

It is no longer unusual to find Malay professionals like her. A few have become MPs, like Zainul Abidin Rasheed, Yaacob Ibrahim and Ahmad Magad. Others have been awarded PSC and EDB scholarships. This reflects the progress of the Malay community through their own efforts. We must get more Malays to succeed as these professionals have done, and to participate in the knowledge economy.

Q19) Finally, what lessons have we learnt as a nation from the current economic crisis?

First, the crisis reminds us of our vulnerability as a small country. This problem is far from over. And even after the crisis, we must still be prepared for surprises from time to time.

Second, we may be a little red dot, but we are not helpless. By maintaining the right policies, we have done much better than other countries. We must continue to be frugal and plan ahead, to focus on education and economic development, and to pay attention to our defence.

Finally, we must unite together to secure our future. This crisis challenges our social cohesion and national resilience. The tougher the times, the more we must bond together. May the shared experience of tackling this crisis bring us closer together as one people, and help us to emerge stronger when the region recovers.

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