Extra aid for firms, workers hit by COVID-19 curbs to cost $1.2 billion
Sum to be covered by reallocation of funds; no need to draw from reserves: Lawrence Wong
By Tham Yuen-C, Senior Political Correspondent, The Straits Times, 6 Jul 2021
The additional support package to help companies and workers affected by the latest Covid-19 restrictions is expected to cost $1.2 billion, with the amount covered through the reallocation of funds, Finance Minister Lawrence Wong told Parliament yesterday.
There will be no need to draw from the reserves again, he said, noting that Singapore is already expected to draw up to $53.7 billion of it, an amount "which we are not likely to be able to put back any time soon, if at all".
Half of the $1.2 billion will be covered by funds originally earmarked for the Deep Tunnel Sewerage System and North-South Corridor projects. Singapore will instead borrow to finance these projects, under the Significant Infrastructure Government Loan Act that allows borrowing to finance long-term infrastructure.
The remaining $0.6 billion will be reallocated from development expenditure that was underutilised mainly because of project delays arising from Covid-19.
In his first ministerial statement on government spending since becoming Finance Minister in May, Mr Wong said the Government would not hesitate to use its fiscal firepower to protect lives and livelihoods, but stressed that any spending must not unfairly burden future generations.
"Our expenditure in financial year 2020 was the highest ever in the history of our country; and this unprecedented fiscal response has also led to the largest Budget deficit in Singapore's history," he said.
"Now that things are better, we should refrain from drawing further on past reserves. Instead, we will fund the support measures using resources that were approved in this year's Budget."
He pointed out that the high levels of government spending worldwide could saddle future generations with crippling debt.
While Singapore has been able to buck this trend owing to the foresight and fiscal prudence of its previous generations, it has had to draw on past reserves in two consecutive financial years, he noted.
It initially did so last year at the height of the pandemic when the economy suffered its worst recession and shrank by 5.4 per cent, and again at the start of financial year 2021 to pay for continuing Covid-19 measures.
A spike in unlinked Covid-19 community cases, with clusters fuelled by the more transmissible Delta variant of the coronavirus, forced the country into phase two (heightened alert) on May 16, with restrictions on dining in at food outlets and social gatherings.
The restrictions were eased from June 14, when the country moved into phase three (heightened alert).
Mr Wong said that Singapore is relatively well placed to deal with the pandemic now, with the economy steadily improving, strong testing and tracing capabilities, as well as a vaccination programme that is making good progress.
He said most parts of the economy continued to operate over the past two months, unlike during the circuit breaker period from April to June last year, when "literally the entire economy was shut down".
With infection numbers having been brought down, Singapore expects to open up further, with larger groups of five people allowed to dine at food outlets from next Monday, he said.
Yesterday, he also announced the extension of the Temporary Bridging Loan Programme and Enhanced Enterprise Financing Scheme - Trade Loan for an additional six months from Oct 1 to March 31 next year, to help small and medium-sized enterprises tide over cash flow problems as they prepare for the new normal.
Other support measures, announced on May 28 to help businesses and workers worst hit by the latest round of restrictions, include an extension of the Jobs Support Scheme (JSS) to food and beverage outlets, gyms and performing arts organisations, among others, which have been badly hit. They received JSS support of 50 per cent.
Rental relief was also provided for businesses, while targeted help was given to affected groups and workers such as taxi and private-hire car drivers and those who are self-employed.
JSS support will be tapered off to 10 per cent for two weeks from next Monday, as Singapore prepares to reopen its economy further.
Parliament will debate the additional support package on July 26.
$1.2 billion for additional support measures: How Singapore firms and workers will benefit
By Lim Min Zhang, The Straits Times, 6 Jul 2021
Finance Minister Lawrence Wong told Parliament yesterday that additional support measures for the recent period of heightened alert are expected to cost $1.2 billion.
Singapore tightened Covid-19 restrictions for about a month from May 16, with dining in at eateries prohibited and working from home made the default as large clusters emerged and community cases rose.
Curbs were eased from June 14 and some support measures will taper down from this month.
Here is how businesses and workers will benefit from the support measures, and how the sum will be funded.
What the $1.2 billion goes to
Wage subsidies of 50 per cent under the Jobs Support Scheme given from May 16 to July 11 for businesses in the food and beverage, sports, performing arts and arts education sectors.
The support is 30 per cent for qualifying retail outlets, cinema operators, museums, art galleries, historical sites and family entertainment centres.
The support under the scheme will be reduced to 10 per cent from July 12 to 25.
A temporary Covid-19 Recovery Grant offers up to $700 for lower-to middle-income workers significantly affected during this period until end-July. They must not already be receiving support under the Covid-19 Recovery Grant launched in January.
A driver relief fund offered eligible taxi and private-hire car drivers $750 per vehicle per month from May 16 to June 30. The amount was reduced from this month.
Hawkers in places managed by the National Environment Agency (NEA) or NEA-appointed operators also received a two-month rental waiver.
A month of rental waiver was also given for qualifying tenants of government-owned commercial properties.
How SMEs will be supported
Small and medium-sized enterprises (SMEs) will continue receiving help to access credit.
The Temporary Bridging Loan Programme and the Enhanced Enterprise Financing Scheme - Trade Loan will be extended for an additional six months, from Oct 1 to March 31 next year.
The parameters for both schemes remain unchanged, including the government risk-share of 70 per cent.
The Temporary Bridging Loan Programme is aimed at helping local companies manage their immediate cash flow needs, while the Enhanced Enterprise Financing Scheme - Trade Loan covers businesses' trade needs in areas such as inventory and stock financing.
Where the $1.2 billion will come from
About half of the $1.2 billion will come from an amount that was originally budgeted for the Deep Tunnel Sewerage System and the North-South Corridor.
This is a one-off adjustment as the Significant Infrastructure Government Loan Act (Singa) - which allows borrowing for these projects - was passed after the financial year had started.
The remaining sum will be reallocated from the under-utilisation of development expenditure, mainly due to delays in projects arising from Covid-19.
A Supplementary Supply Bill will be introduced to effect the reallocation of $1.2 billion. Past reserves will not be tapped.
Singapore's fiscal deficit is $11 billion, same as earlier estimates, no further draw on past reserves
By Grace Ho, Senior Political Correspondent, The Straits Times, 6 Jul 2021
Singapore's overall fiscal deficit for this financial year is $11 billion, the same as earlier estimates, and no further draw on past reserves is needed, said the Ministry of Finance yesterday.
It gave this interim update on the financial year 2021 in conjunction with Finance Minister Lawrence Wong's ministerial statement in Parliament, where he said that the support package to help companies and workers affected by the period of heightened alert is expected to cost $1.2 billion.
Mr Wong's statement comes ahead of a Supplementary Supply Bill to effect the reallocation of funds for the measures earlier announced on May 28, June 10 and June 18, in view of phases two and three (heightened alert).
Singapore went into phase two (heightened alert) on May 16, introducing measures to curb the spread of the more transmissible Delta variant of the coronavirus after clusters emerged at Tan Tock Seng Hospital and Changi Airport and unlinked community cases increased. These meant restrictions in indoor settings where people do not have their masks on, including at food and beverage outlets, gyms and fitness centres, as well as live arts and cultural performance venues.
The restrictions were eased from June 14, when the country moved into phase three (heightened alert).
According to the interim update, operating revenue is projected to decrease by $100 million compared with estimates presented in February this year.
This is due to revenue foregone for the waiver of rental charges, to support individuals and businesses during periods of heightened safe management measures.
Total expenditure is expected to have a net decrease of $500 million compared with earlier estimates. This is because the increase in operating expenditure for targeted support to affected individuals is offset by decreases in development expenditure mainly due to Covid-19 construction delays.
Special transfers are expected to go up by $1 billion due to measures to support businesses and individuals during periods of heightened alert, through the Jobs Support Scheme of wage subsidies and rental relief.
The capitalisation of nationally significant infrastructure under the Significant Infrastructure Government Loan Act is expected to free up an additional $600 million compared with earlier estimates.
Taken together, the revised overall fiscal deficit is $11 billion, with no net increase compared with earlier estimates and no further draw on past reserves, said the MOF.
Parliament: COVID-19 support measures
First loans in 40 years to fund infrastructure
By Tham Yuen-C, Senior Political Correspondent, The Straits Times, 6 Jul 2021
Singapore will borrow to finance two infrastructure projects for the first time in 40 years, with the money originally set aside for them to be reallocated to fund Covid-19 support measures.
Finance Minister Lawrence Wong disclosed in Parliament yesterday that the Government will capitalise about $0.6 billion in development expenditure for the Deep Tunnel Sewerage System and the North-South Corridor under the Significant Infrastructure Government Loan Act (Singa).
The money earmarked for the two projects will go towards funding part of the $1.2 billion support package to help businesses and workers during the period of heightened alert.
The other half of the $1.2 billion to fund the Covid-19 support measures will be reallocated from development expenditure that was underutilised mainly due to delays in projects arising from Covid-19.
Mr Wong said: "We expect to catch up on our development schedules as the situation stabilises. Hence, the delayed expenditure will still need to be incurred in future financial years.
He said the two projects, whose development expenditure will be capitalised from the fourth quarter of this year, meet the criteria for financing under the new law.
Singa allows the Government to borrow up to $90 billion to pay for infrastructure that will last for at least 50 years, so as to distribute fiscal responsibility more equitably across the generations of people who will benefit from the projects.
Under the law, the annual interest threshold of borrowings under Singa cannot exceed $5 billion, and each project funded under the law must be sizeable and cost at least $4 billion.
Mr Wong stressed that this would be a one-off adjustment as Singa was passed in May after the start of the 2021 financial year.
He added that in future, the amounts to be borrowed will be incorporated as part of the annual Budget Estimates. "We will not have such reallocation space in future."
Explaining the reallocation of funds for the Covid-19 packages, he said drawing on past savings is a major move reserved for exceptional circumstances. Singapore's economy shrank 5.4 per cent last year, but is now improving.
He also said that when the Reserves Protection Framework was introduced in 1991, no one could have foreseen that a pandemic of such a magnitude would hit one day. "But it is precisely this discipline of setting aside resources for rainy days that has put us in a strong fiscal position to respond decisively to the current crisis."
While Singapore had been able to tap these reserves, other governments were forced to borrow and would have to service the debts.
"They may look affordable now, but will not be so once interest rates increase to more normal levels," he said. "The day of reckoning will come, and the burden will surely fall on the young and future generations."
He noted that Singapore had already drawn on past reserves to the tune of $53.7 billion over last year and this year, and with things on a more even keel now, it made sense to fund the support measures using resources that were approved in this year's Budget.
"Let me be clear: We will not hesitate to use the full measure of our fiscal firepower to protect the lives and livelihoods of Singaporeans. But we also need to be careful about the state of our public finances and ensure they are sustainable for the future."
Temporary bridging loan, enhanced enterprise financing schemes for SMEs extended till March 2022
They will help firms with immediate cash flow needs and stock financing amid crisis
By Prisca Ang, The Straits Times, 6 Jul 2021
Small and medium-sized enterprises (SMEs) can continue to access credit to build their capabilities with the extension of two schemes, Finance Minister Lawrence Wong said yesterday.
The Temporary Bridging Loan Programme and the Enhanced Enterprise Financing Scheme - Trade Loan will be extended for an additional six months from Oct 1 to March 31 next year. They were previously extended last October for the period from April 1 to Sept 30.
"For many SMEs, access to credit is a critical lifeline to tide them through this crisis... While economic conditions have improved, such access to credit remains critical to our SMEs," Mr Wong said in a ministerial statement on the support measures for businesses and workers affected by the latest Covid-19 measures.
The Temporary Bridging Loan Programme is aimed at help-ing local companies manage their immediate cash flow needs, while the Enhanced Enterprise Financing Scheme - Trade Loan covers businesses' trade needs in areas such as inventory and stock financing.
The Government has supported more than $22 billion worth of loans to more than 25,000 enterprises through Enterprise Singapore's (ESG) financing schemes since the start of last year, said Mr Wong, adding that 99 per cent of the recipients were SMEs.
About half were in wholesale trade, construction and manufacturing, with other sectors such as services and retail also supported, ESG said in a statement.
The parameters for both schemes remain unchanged, including the Government's risk share of 70 per cent.
The Monetary Authority of Singapore (MAS) will also extend, accordingly, the MAS Singapore Dollar Facility for Enterprise Singapore Loans, which provides lower-cost funding for banks and finance companies to support their lending to local enterprises.
The facility will continue to provide Singapore dollar funding at an interest rate of 0.1 per cent per annum for a two-year tenor to eligible financial institutions to support loans made under the Temporary Bridging Loan Programme and Enterprise Financing Scheme - SME Working Capital Loan, which finances operational cash flow needs, from Oct 1 to March 31 next year, MAS said yesterday.
It added that the facility has disbursed $13.3 billion since its introduction in April last year.
Mr Wong said in his statement: "The way we have gone about providing support this round, as well as our ongoing support schemes over the years, reflect our fiscal approach in supporting Singaporeans and businesses in Singapore."
The Government has ensured a fair tax regime for all even before the pandemic, he said.
Overall income tax revenue - both corporate and personal - as a percentage of gross domestic product is around 6 per cent, about half the Organisation for Economic Cooperation and Development average of 12 per cent, he said.
Mr Wong said Singapore has a competitive tax regime for companies, especially SMEs, as they are the backbone of the economy.
He added that a global movement to change corporate tax rules will affect only a select group of global companies, and not smaller enterprises. "So, our SMEs in Singapore can continue to enjoy low taxes."
Singapore's SMEs - companies with an annual turnover of up to $100 million - make up more than 95 per cent of active companies here but contribute less than a third of the nation's corporate income tax revenue.
More than half of such companies do not pay any corporate tax.
Besides taxes, the Government recognises that SMEs are concerned about costs such as rental, labour and utilities, said Mr Wong. "We do not directly offset such costs in normal times, but instead provide a wide range of schemes to help them improve productivity and build new capabilities."
About 70 per cent of government grant disbursements to businesses from 2015 to 2019 went to SMEs.
"During times of crises, we recognise that lower-income households and SMEs face bigger challenges, and that is why we have designed our interventions to benefit them the most," said Mr Wong.
About two-thirds of the $26.7 billion paid out to date under the Jobs Support Scheme went to SMEs, as did 90 per cent of the benefits from the Year of Assessment 2020 corporate income tax rebate.
