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     FrontPage Edition: Mon 31 December 2007

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 Prime Minister's New Year Message 2008



This year, the world economy faced a number of challenges. Oil prices continued to rise, and are now close to US$100 a barrel. The US sub-prime loans crisis has uncovered deeper problems in the banking and financial system, not only in the US but also Europe. But so far Asia’s growth continues to be strong, and this has benefited us.
Singapore has enjoyed another year of robust expansion, although the fourth quarter saw slower growth. The economy grew by 7.5% for the year.
Manufacturing and services are doing well. The construction sector is especially strong. Many major projects are underway, which when completed will upgrade our infrastructure and economy. Financial services also grew vigorously, as financial institutions shifted more regional activities to Singapore.
High growth has benefited all Singaporeans. A record 172,000 jobs were created in the first three quarters of the year. Unemployment is down to 1.7%, the lowest in almost a decade. Companies are reporting bigger profits, and workers are enjoying higher bonuses and wages. Low-income workers too are earning more, unlike in some previous years.
In 2007, the Economic Development Board (EDB) drew in a record $16 billion of fixed asset investments (FAI) in manufacturing, and projects generating $3 billion of total business spending in services.
Existing investors continued to expand their operations in Singapore, like ExxonMobil which is building a second world-scale chemical complex here. We are also getting high-quality, ‘first-of-its-kind’ investments. One is by a Norwegian firm, REC, which chose Singapore against stiff competition to build the world’s largest integrated solar plant. These projects are a strong vote of confidence in Singapore and will generate many new jobs.
On the international front, we successfully hosted the 13th ASEAN Summit. This was a significant milestone in regional cooperation. The countries signed the ASEAN Charter to make ASEAN a more effective and cohesive organisation, and adopted a Blueprint to create the ASEAN Economic Community by 2015.
In this globalised world, more and more Singaporeans study and work abroad. We need to keep in touch with them, and help them to stay engaged with home both in heart and in mind.
The Overseas Singaporean Unit has been reaching out to the Singaporean diaspora around the world. Ministers, senior officials and business leaders meet up with overseas Singaporeans when they travel. In April we held the first “Singapore Day” in New York City, which attracted 6,000 Singaporeans. These efforts help to strengthen our sense of belonging and national identity.
I am cautiously optimistic on the outlook for 2008. The US may go into a recession because of the financial market problems. A US downturn would affect Asia too, but the impact on us would be offset somewhat by the strong momentum in the dynamic Asian economies.
At home, 2008 will see the realisation of several major projects. The Singapore Flyer will be up in March, and the inaugural F1 Singapore Grand Prix – the first F1 night race ever – will flag off in September.
The Marina Barrage will create a freshwater lake, buzzing with activity in the heart of the city. Work on the two Integrated Resorts is in full swing, and should be completed by 2010. As these plans progressively fall into place, we can look forward to a more exciting and vibrant city landscape.
Internationally we will continue to expand our economic space, seize opportunities all over Asia and tap new areas of growth. A more diversified economy will weather external shocks better. All things considered, we expect to grow by 4.5-6.5% in 2008.
The last four years of sustained strong growth have created some problems of success. First, there is a shortage of prime office space. The Government is releasing enough land to meet the demand for more office space over the next few years. In the interim, we are making available more transitional office sites.
Second, the construction industry faces resource constraints. To ease the pressure, the Government has deferred some of its less urgent projects. This will help to spread out the workload and moderate construction costs.
Third, the labour market is tight. We need more workers at all levels, especially those with professional skills. This is why we are upgrading and re-skilling our workers, and bringing in foreign workers to top-up the numbers. We must seize the moment and ride this wave of growth, while the winds and tides are with us.
In recent months, inflation has picked up. This has caused concern to Singaporeans, as REACH has reported.
There are several reasons for this. First, the GST rate went up to 7% in July. However, the GST Offset Package has buffered that fully for lower-income citizens, who are receiving much more in offsets than the extra GST they have to pay.
Second, IRAS has revised up the Annual Values of HDB flats. This will push up the Consumer Price Index, but in reality does not affect the 95% of HDB households who own their homes, and so do not pay any rents.
Third, prices of food and energy have increased worldwide. This affects us directly, because we are a small and open economy which imports all our food and fuel.
But we are doing what we can to lessen the burden on Singaporeans, for example by encouraging NTUC Fairprice and other supermarkets to find new sources of supply and offer house brands of basic essential items, and helping low-income families through U-Save and other rebates.
But remember that while prices have gone up, so have earnings, and generally by more than inflation. That is why shopping malls were thronged with Christmas shoppers, and tourist agencies have had a record year arranging overseas holidays for Singaporeans. So although nobody likes to see prices go up, most working Singaporeans should be able to cope, and in reality are better off despite the inflation.
Understandably, retired Singaporeans living off their savings worry the most about rising prices. The Government has not forgotten them. Whenever we have had a Progress Package, GST Offset Package, or CPF top-ups, we have given significantly more to older and lower-income Singaporeans.
With the strong economy this year, Government revenues have been buoyant. Our finances permitting, we should have something more in the FY2008 Budget to help needy and older Singaporeans.
But every citizen should also do his own part to upgrade himself.  Low-income workers should make full use of reskilling and retraining programmes offered by WDA and NTUC.  Unemployment and retrenchments may be down, but your efforts will help you to earn more in a better and more productive job, and stand you in good stead as economic conditions continue to change.

Source: Media Release 31 Dec 2007

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