COOL, CALM AND CONSTRUCTIVE: SINGAPORE IN A GLOBAL RECESSION

Singapore's Labour chief Lim Swee Say compared the current crisis to a long dark tunnel in which many countries may get stuck for some time because they "quarrel, argue, protest and fight". Singapore, affected no less than others, stays "cool, calm and constructive", however, and is undertaking various proactive measures to withstand the hard times.

Government to the Rescue: The Resilience Package

Singapore's government has admitted the economy may contract by as much as five per cent this year, its deepest recession since the country's independence in 1965, and announced a S$20.5 billion Resilience Package, which will be financed from the government's reserves. There are five components to this Package, aimed at helping individuals save their jobs and companies to stay afloat:

1. Securing Jobs

S$5.1 billion will be spent to save jobs. The Jobs Credit Scheme has been implemented to subsidise a company's wage bill for local workers, and the Skills Programme for Upgrading and Resilience pays part of workers' wages while they are undergoing training.

Singapore's Prime Minister Lee Hsien Loong advised to "press on with training", which could lead to a career switch for retrenched professionals. While many businesses have been badly affected by the recession, others keep growing and are in need of more labour resources, like the Health Ministry, which alone will hire up to 4,500 workers over the next two years, representing one quarter of overall public sector recruitment that hiring 18,000 people by 2011.

2. Bank Lending Stimulation

About S$5.8 billion of government capital will be assigned to stimulate bank lending. For loans of up to S$5 million, the government has increased its risk stake to 80 per cent and to 75 per cent in new risk-sharing schemes for trade loans.

3. Tax Concessions

To ensure business cash flow, some of the measures that will be taken are as follows:

• a 40 per cent tax rebate for industrial and commercial property in 2009;
• a 30 per cent road tax rebate for goods vehicles, buses and taxis for one year; and
• a reduction of the Corporate Income Tax Rate to 17 per cent from 2010.

4. Helping Families

Singapore's government will spend S$2.6 billion to help its citizens with the current economic downturn. Some of it will be used to offset a 20 per cent personal income tax rebate for tax residents and a 40 per cent property tax rebate for owner-occupied residential properties in 2009.

There are also sizable subsidies for buyers of government-built housing (HDBs): the new batch of such flats for this year is priced below their equivalent market prices to ensure affordability. For example, a four-room HDB flat can now be bought at a subsidised selling price of S$194,000 to S$227,000, whereas developing it costs the government S$330,000, taking into account land, building and other costs.

5. Infrastructure Improvement

Like many countries, Singapore is planning to boost infrastructure spending, which will not only provide jobs, but will also enhance the country's image. S$4.4 billion will be spent on the development of road, drainage and sewerage networks, as well as upgrading the health and education infrastructure.

Initiatives from the Top

The more successful Singaporeans "must take the lead in belt-tightening", said PM Lee, who urged companies to start cutting costs from the top, by reducing the salaries of senior management. The government has led by example by automatically cutting the salaries of ministers, political appointment holders and senior civil servants by 20 per cent when the economy worsened.

Singapore's Hotels: Placing Stakes on the Local Population

In the last two years, Singapore's hotels enjoyed a lucky streak as they reached the highest levels of profitability, with accommodation among the most expensive in Southeast Asia. Revenue per available room in 2007 was S$176, rising to S$199 in 2008. During the inaugural Formula One race last year, it was difficult to get a room for cheaper than S$1,000 per night.

Today, visitor arrivals to Singapore have fallen significantly, leading to a 30 per cent decrease in hotel occupancy compared to 2008. Many hotels have been forced to resort to sizable discounts.

Some of Singapore's hotels no longer rely on foreign guests alone, enticing locals instead with attractive packages dubbed "staycations" – going on a vacation without leaving the country. The offers include accommodation, food and spa treatments – an ideal arrangement for those whose idea of unwinding and relaxation boils down to a couple of days of splashing about in the sea or pool, interspersed with fine food and massages. Why spend on plane tickets and waste time travelling when you can get pampered at home?

Learning from Past Experiences

In the throes of the economic downturn, Singapore is prepared to be more flexible and correct past mistakes. Last year, Singapore's first-ever Formula One race caused a 12-day road closure around the racing circuit. This move cost many neighbourhood businesses big losses, with The Esplanade alone reporting a loss of S$750,000. This year, the number of "off-limits" days will be cut down to seven, with full road closures starting only two days before the race weekend (25 to 27 September).

Apartments: Shrinking in Size

The current economic crisis has given birth to a new trend in Singapore's private housing: capsule condos with units smaller than 500sqft in size, which was almost unheard of before 2008. With construction costs rising and the space crunch becoming more tangible, local developers are trying to make their product more affordable. While the concept of shoebox-sized studios is not entirely new to Singapore, the proliferation of such units is a new trend brought to life by the current recession.