Singapore Government Press Release
Media Division, Ministry of Information and The Arts,
MITA Building, 140 Hill Street, 2nd Storey, Singapore 179369
Tel: 837-9666

PRIME MINISTER�S MAY DAY MESSAGE, 2001

Singapore�s economy grew by a hefty 9.9 percent last year. But this year, MTI expects growth at 3.5 - 5.5 percent.

This sharp drop underscores Singapore�s dependence on the external environment. Singapore�s trade with fellow ASEAN countries forms 26 percent of our total trade, while trade with the US forms 16 percent. One industry, electronics, accounts for 55 percent of our domestic exports.

The ASEAN economies are under severe stress. Like Singapore, they are hit by the slowdown in the US economy. They have not fully recovered from the Asian financial crisis. In addition, several of them face domestic political problems. Our neighbours� difficulties affect us because we are interdependent. This interdependence is especially strong with Malaysia and Indonesia.

The region�s uncertain political and economic outlook will affect investor confidence and interest. Some companies invest in Singapore for the larger ASEAN market. Hence, while we may manage our politics and economy well, the negative assessment of the region will diminish investor interest in Singapore.

Moreover, the US economy is slowing like a train approaching a station, after travelling at a fast speed for the past decade. Share prices are down. Consumers feel poorer. The US will buy less from Singapore this year.

The global electronics industry is also on a downturn. Companies are cutting back production sharply and running down inventories.

This slowdown of the US and ASEAN economies and the electronics industry will drag down our economic growth. Fewer jobs will be created this year. Some workers will be retrenched, particularly those in the electronics industry. Our unemployment rate is likely to edge upwards.

We must brace ourselves for a leaner year ahead.

Managing Costs

The Government is keeping a close watch on developments. A full-bloom recession is unlikely. But if the slowdown becomes more severe than we expect, the Government will implement measures to help companies and workers cope, as we have done before.

It will be prudent to moderate wage increases. Companies are already facing lower orders and dwindling profits. If wages are pushed up, it will only compound the employers� problems. The companies may then have to retrench staff.

Hence, the Government will proceed cautiously on CPF restoration. A premature and excessive restoration would only cause job losses through higher labour costs.

The Government will review the economic situation in October. It will assess the prospects for growth before deciding on any CPF restoration in 2002.

Flexible Wage Structure

We had cut wages through the CPF route to combat the 1985 recession and the 1997 Asian financial crisis. It worked.

But cutting the CPF every time there is an economic slowdown is not an ideal solution. The CPF is meant to be a nest egg for workers in their old age. It should be cut only when absolutely necessary.

NTUC is right to argue for greater flexibility in our wage structure. The wage structure now has an annual variable component. But it is not sufficiently flexible as a buffer, as any adjustments can only be made at year-end.

Our economy will be more resilient if wage adjustments can be made in a more timely manner. A monthly variable component in the wage structure will allow companies to respond more quickly to any sudden downturn. When wage costs can be adjusted quickly, companies can better ride out a slowdown and job losses will be reduced.

Skills and Employability

For the long term, we must continue to upgrade and retrain our workers. Here, the Civil Service has set the lead. It has put in place a target for all civil servants to undergo at least 100 hours of training per year. The private sector should follow the Government�s example.

Older workers are most in need of skill upgrading. They are more likely than younger workers to be retrenched in bad times. They cost more and are less nimble in picking up new skills.

Unfortunately, half of older workers have only lower secondary education or less. Only 20 percent of those aged above 45 years have some form of structured training. More older workers must go for skills upgrading.

Upgrading is never-ending. The process of learning, unlearning and re-learning must be a continuous exercise. An economy does not stand still. It adjusts to market forces. Some jobs are lost but new ones are created, requiring new skills. Workers who can adjust to these changes in the economy enhance their employability.

Upgrading of skills may not bring immediate job offers or pay rises. But over the longer term, workers who keep up with re-training will do better than those who do not. Employers will at the very least recognise their positive attitude towards learning.

Conclusion

Beyond wage moderation and skills upgrading, we can best overcome whatever problems come our way if we strengthen our national cohesion. It was our national cohesion which enabled us to overcome past recessions and crises. If we are united, practical and bold, we will also pull through this lean year.

I wish everyone a Happy May Day.

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