Friday, January 23, 2009

Govt spends $4.4b to build a home for the future

THE government is already looking beyond the current crisis and will spend $4.4 billion to ‘build a home for the future’.

‘We should take the opportunity of this downturn to build our capabilities and infrastructure, and position Singapore for its next phase of growth,’ Finance Minister Tharman Shanmugaratnam said in yesterday’s 2009 Budget.

The government will therefore invest in linking all parts of the island through a comprehensive road and rail network, creating new suburban nodes in the process.

Mr Tharman also revealed spending of $4 billion over the next five years on health care infrastructure, which will include redeveloping older hospitals, medical centres and a new hospital in the west.

Public sector construction spending will increase significantly this year. Total contracts will amount to $18-20 billion, up from $15 billion in 2008 and $6 billion in 2007.

Citigroup economist Kit Wei Zheng said that while the infrastructure spending is not likely to create a lot of demand stimulus because of ‘high import leakage’, it will put Singapore in good stead in terms of longer-term competitiveness.

The $4.4 billion to be spent on ‘building a home for the future’ is part of the $20.5 billion Resilience Package outlined by Mr Tharman in the Budget.

Barclays economist Leong Wai Ho reckoned that the Resilience Package will deliver a positive fiscal impulse estimated at 1.5 percentage points to headline growth in 2009, with the $4.4 billion contributing roughly 0.3-0.4 percentage points.

But will it save jobs? ‘Spending to save jobs is way of cushioning the pain, which is what the government intends to do,’ said Mr Leong.

The Budget has given cheer to the construction industry. Mr Tharman said that up to $1.3 billion of government projects will involve contracts of $50 million or less, so that small and medium contractors can tender for them.

Projects brought forward will include HDB lift upgrading, park connectors and upgrading military facilities.

While the larger infrastructure projects are likely to go to the big construction firms, Lawrence Leow, president of the Association of Small and Medium Enterprises, was heartened that there will be a mix of different-size projects. ‘Most of the smaller companies do more residential projects,’ he said.

Desmond Hill, president of Singapore Contractors Association Ltd, expected a multiplier effect from the range of project sizes. ‘The whole industry works on a outsourcing basis,’ he said, adding that sub-contractors can also hope to benefit from the increase government spending.

Mr Hill was disappointed that the foreign worker levy was not addressed in the Budget, as it amounts to about $150 a month for each of the approximately 250,000 foreign workers here.

But there is no fear that the industry will be over-burdened, he said. ‘Contracts last year totalled $34 billion, so I think we should have enough resources to handle contracts this year.’

Straits Construction Co director Wong Chee Herng said that ‘quite a few private construction projects are stalled’, and he hoped that government spending will make up for this drop in demand.

The construction sector can also expect more spending in the area of sustainable development.

As part of the government’s ‘building package’, more than $1 billion will be spent on sustainable development initiatives to support energy efficiency, green transport, clean energy and greener living spaces.

Joseph Lim of the Department of Architecture at the National University of Singapore’s (NUS) School of Design and Environment said that a downturn is the perfect time to invest in sustainable development because developers are in no rush to complete projects. As Prof Lim also noted, research and development in this field takes time - ‘time to make better buildings’.

Hardware aside, Budget 2009 also addresses the nation’s software by spending $1.6 billion a year to support marriage and parenthood through initiatives such as government-paid maternity leave, and infant care and childcare subsidies. It will also provide better facilities in schools and spend up to $9,200 a year on each student - an increase of 60 per cent.

Paulin Straughan, a sociologist with NUS, said: ‘It’s good that the government is standing by its pro-family policies. For such schemes to work, the people must see there is a certain consistency and reliability.’

‘The proposed 40 per cent property tax rebate is a most welcome relief for property owners and businesses alike. If these savings are passed on to tenants, it would have an immediate effect of reducing significantly the cash flow burdens for businesses. Cheaper rents are as good as enhanced cash flow for businesses.’- Leonard Ong, executive director, KPMG

‘CapitaLand welcomes the government’s comprehensive slew of property-related budget measures to enhance the competitiveness of Singapore’s economy. For commercial properties, we intend to pass on the property tax rebates to tenants of CapitaLand’s wholly owned commercial and industrial buildings as well as the portfolio of properties owned by CapitaCommercial Trust in order to provide some relief to their business costs. Similarly for retail tenants, we will pass on the property tax rebates in full to our tenants in properties owned by CapitaLand Retail and CapitaMall Trust.’- A CapitaLand spokesman

Source: Business Times - 23 Jan 2009

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