PM Lee says govt will help mitigate rising costs of food

Channel NewsAsia 3 Feb 08;

SINGAPORE: Prime Minister Lee Hsien Loong has assured Singaporeans that the government will help mitigate the rising costs of food.

Speaking at the Teck Ghee Lunar New Year celebrations, Mr Lee said revenues have been strong and the government will be distributing help – especially to the poor and elderly – in the upcoming Budget debate.

But Singaporeans must also make necessary adjustments.

Mr Lee said: "I expect the inflation to be higher this year than last year, especially in the first half of this year. Last year, the inflation was about 2 percent. This year, it may be 5 percent, it may be even more."

Singapore is not the only country experiencing rising food prices. Prices in China and India are also going up, due to affluence and more consumption demand.

Adverse weather conditions in Australia and China are also sending food prices upwards.

Some measures that the government will undertake to ease the situation are to diversify the country's food sources and encourage consumers to switch to house brands, which are cheaper and give better value.

Lower income families can expect relief in the form of the government's Workfare Scheme, which paid out S$150 million last month, benefiting some 290,000 workers.

The Public Assistance Scheme is also being reviewed.

Mr Lee said: "Most importantly, we need to grow the economy so that incomes will go up. Last year we had a good year, so wages, bonuses went up. And NTUC did a survey and found that last year, the bonuses which workers were getting were the highest bonuses in any year since 1990 - which means nearly in 20 years, we have not had such good bonuses.

"Lots of people are working, unemployment has come right down. We had 230,000 more jobs last year and unemployment has gone down to 1.6 percent."

The prime minister added that being an open economy that imports all its food, Singapore cannot simply control the prices of food essentials as this will hurt the retailers and suppliers, resulting in shortages and queues.

And if the government subsidises these essentials, it will be costly and ineffective as the subsidies would also go to those who are not poor.

Mr Lee said while the government will help, Singaporeans must also do their part to work together to keep the country strong and competitive.- CNA/so

Inflation this year could go past 5%, says PM Lee
Govt will have something to distribute in Budget, but realism needed
Arthur Sim, Straits Times 4 Feb 08;

(SINGAPORE) Prime Minister Lee Hsien Loong cautioned yesterday that inflation in the first half of the year could be high.

Speaking at the Chinese New Year Celebrations at Teck Ghee Community Centre, Mr Lee said: 'Last year, inflation was about 2 per cent. This year, it could be 5 per cent, maybe even more. Especially in the first half (of the year), it is going to be high.'

Earlier government estimates last November had put inflation at between 4 and 5 per cent for the whole of the first quarter of 2008.

Speaking to an audience of local residents and grassroots leaders, Mr Lee said what was happening was a global phenomenon produced by increased demand, disease, adverse weather and even the diversion of crops towards fuel production.

But he added that unlike some neighbouring countries, the government would not move to control food prices. Nor would it subsidise 'essentials'.

Touching on next week's Budget, he said that while the government would have something to distribute, especially to the poor and the elderly, there is a need to be realistic. 'We cannot just distribute money and make the problem go away,' he said.

Instead, Mr Lee recommended practical measures, including diversifying the nation's food sources and buying generic house brands which are cheaper and offer 'better value'.

He added: 'Most importantly, we need to grow the economy so that incomes will go up. Last year, we had a good year, so wages, bonuses went up. And NTUC did a survey and found that last year, the bonuses which workers were getting were the highest bonuses in any year since 1990 - which means nearly in 20 years, we have not had such good bonuses.'

For its part, the government will help lower-income families through the Workfare Income Supplement scheme. To date, Mr Lee said $150 million had been paid out in Workfare to 290,000 low-income workers for the month of January alone.

The PM also revealed that the Ministry of Community Development, Youth and Sports (MCYS) is reviewing the Public Assistance Scheme.

The next few years are, however, expected to be challenging. Mr Lee said that Singapore would need to stay competitive and grow. 'Then, whether it is the Year of the Rat (2008), or the Ox (2009) or Tiger (2010), we will have the resources to deal with the challenges that come our way.'

Giving an idea of how high inflation could rise, Citigroup economist Chua Hak Bin said that 'it would not be out of the question to see inflation hit 7 per cent in February or March'.

He explained that earlier estimates did not take into account the spell of bad weather in China that will certainly put a strain on food prices imported here.

Dr Chua was, however, optimistic that the upcoming Budget will be a 'pro-people Budget' as opposed to the 'pro-business Budget' of last year.

Apart from rebates, he also expects to see the restoration of CPF cuts. Noting that the middle class is also feeling the pinch, Dr Chua also expects to see income tax cut by a percentage point this year, and perhaps followed by another cut next year.

PM: Let's tackle cost fears together
Govt will play part, including in Budget; S'poreans must also make adjustments
Li Xueying, Straits Times 4 Feb 08;

PRIME MINISTER Lee Hsien Loong assured Singaporeans yesterday that their concerns about the rising cost of living, including food prices, have been heard - and are being addressed.

But Singaporeans themselves will, at the same time, have to make adjustments, he said. One suggestion: Go for cheaper house brands.

'We can overcome this problem by working together. People making adjustments, the Government doing its part. We must stay together even during difficult periods,' said Mr Lee.

Speaking to 1,400 residents and grassroots leaders at a Chinese New Year dinner at his Teck Ghee constituency, he, however, rejected calls for the Government to control the prices of essential goods.

'Residents asked, 'Why can't the Government just control the prices?'' he recounted.

His response: Singapore is an open economy and imports all its food.

'We can't just order wholesalers and retailers to fix or reduce prices. They have to pay the overseas suppliers - who will bear the loss?'

If the Government subsidises essentials, it will be 'very expensive, and also ineffective'. As higher-income households spend more, such subsidies will benefit them more than the poor.

It is better to use the money instead to help the needy more directly, he said.

Thus, there are measures such as the Workfare Income Supplement Scheme as well as the Public Assistance Scheme, which is being reviewed.

At the same time, the Government is diversifying food sources, such as by importing frozen chicken from Brazil.

Consumers can also go for supermarket house brands, which are cheaper.

'No need to buy branded bread,' he said in Mandarin to laughter. 'Bread is bread, rice is rice.'

Most important of all is to grow the economy so wages will go up, he stressed.

Noting that 2007 was a good year, with workers receiving significant pay rises and bonuses, he quipped that government revenues 'have not been too bad either'.

Thus, Finance Minister Tharman Shanmugaratnam will distribute 'a little hongbao' in the Feb 15 Budget, especially for the needy.

'But we must be realistic,' he said. 'I read the wish list for the Budget in the newspapers, all hoping that the Government will give out exciting goodies.

'The Government will definitely help. But we cannot just distribute money and make the problem go away.

'Even with a good harvest, or during Chinese New Year, the Minister for Finance is not the cai shen ye!' he said, referring to the God of Fortune in Chinese mythology.

Inflation here hit a 25-year high in December, when the Consumer Price Index (CPI) jumped 4.4 per cent from a year ago. In particular, food prices were 5.5 per cent higher.

In a sign that the cost issue is high on the Government's agenda, four Cabinet and junior ministers - besides Mr Lee - spoke separately on it at the weekend, assuring that the Government will help.

The subject took up the bulk of Mr Lee's 20-minute speech, delivered both in English and Mandarin.

He started by noting that the Year of the Rat is beginning under 'more challenging circumstances' compared to previous years.

The financial markets are in turbulence, and the United States economy is slowing.

And the clouds will not be going away soon. In fact, Mr Lee warned that 'we must expect more uncertainties ahead'.

He expects the CPI to be high this year, especially in the first half: 'Last year, it was about 2 per cent. This year, it may be 5 per cent, it may even be more.'

Already, prices of Chinese New Year goodies such as pineapple tarts and bak kwa have increased, he noted.

But putting the grim outlook in perspective, he said that higher food prices is a global problem. Similarly afflicted are Malaysia, Indonesia and even Latin America.

On the whole, though, Singapore is in strong shape: 'We expect the economy to keep growing, though slower than last year. Whatever it is, I am confident that we can weather the storm.'

Calling on Singaporeans to stay with the Government and to keep Singapore competitive and growing, Mr Lee concluded: 'Then, whether it is the Year of the Rat or the Ox or Tiger, we will have the resources to deal with the challenges that come our way.'

Growth, not handouts, the answer
PM: Budget help for poor, but food price controls and food subsidies not on the cards
Loh Chee Kong and Sheralyn Tay, Today Online 4 Feb 08;

EVEN as shoppers feel the pinch of their dollars not going as far as they did in previous years, the Government has stepped in to reassure Singaporeans that it has heard their concerns over the rising cost of living.

In fact, this was the focus of several ministers, including the Prime Minister, at grassroots events around the island yesterday.

To help soften the pain of inflation which hit a 25-year high last year and might get worse this year, the Government "will have something to distribute, especially to help the poor and needy", in the upcoming Budget, assured Prime Minister Lee Hsien Loong yesterday.

However, Mr Lee cautioned against expecting unlimited handouts to tide Singaporeans through this difficult time.

"Government revenues have been strong. But we must be realistic — not everything can be solved by the Finance Minister becoming the God of Wealth," he said.

Measures are in the pipeline, with some already underway. For example, further efforts are being made to diversify Singapore's overseas food sources, to help contain rising costs, including the sourcing of frozen chicken supplies from Brazil and fresh fish from Chile.

And despite the growing pain of rising costs, a fresh report from the Ministry of Trade and Industry released yesterday shows that Singapore has one of the lowest rates of food inflation in the world.

The price of food in Singapore has risen 2.9 per cent from 2006 to 2007, while in Malaysia food prices have shot up 3.1 per cent and in Hong Kong by even more, by 4.5 per cent.

One surprising fact: Despite the rise in operational costs, a survey by the Department of Statistics also released yesterday showed that 75 per cent of 1,271 hawker stalls here have not increased prices.

While inflation affecting imported food prices rose to 12.1 per cent last year, the Consumer Price Index (CPI) for non-cooked sector — food sold to supermarkets, wet markets and shops — registered a 7.1-per-cent increase only.

Pointing to the difference between these two figures, Minister of State for Trade and Industry Lee Yi Shyan Lee said: "We believe that distribution channels like supermarkets and shops have absorbed the difference and not passed the entire cost increase to consumers."

Several outlets in food courts said that they were absorbing the rising costs, for the time being, to retain customer loyalty.

The CPI — which is used to measure inflation year-on-year — for food in Singapore had increased from 1.3 per cent to 1.6 per cent from 2005 to 2006, and then to 2.9 per cent last year.

The MTI expects that while the CPI is likely to be higher this year, especially in the first half, it would rise moderately in the second half.

Singaporeans would have to tighten their belts. "We had a good year last year but this year, we are celebrating Chinese New Year in somewhat more challenging circumstances," PM Lee said yesterday at a Chinese New Year dinner at Teck Ghee Community Club.

Citing the turbulent financial markets and the slowdown in the United States' economy, he said Singaporeans "have to expect more uncertainties ahead as the US problem (credit crisis arising from sub-prime mortgages) has not worked itself out and we don't know how bad it will be".

Singapore has been buffeted by external inflationary pressures — especially on food prices — driven by a myriad of factors, including rising affluence and consumption in China and India; disruption in food supplies caused by droughts and diseases; and farmers switching from growing crops for food to biofuels in face of higher costs of food transportation.

Speaking at a separate event in Keat Hong, Manpower Minister Ng Eng Hen said a supermarket's owner told him that his attempt to turn to Vietnam for cheaper sources of rice was thwarted by the fact that the Chinese had already bought all the rice stocks available.

Singaporeans should not be unduly worried, said Mr Lee.

"When we say that inflation will hit 4 to 5 per cent in the first half of 2008, it is already where we are in January, so we may not see another price hike going forward," he explained.

Still, some hawkers Today spoke to lamented that they had "no choice" but to raise prices as the costs of ingredients such as eggs and cooking oil continue to head north.

Said Mr Tan Kim Leng, who recently raised the price of his fried carrot cake from $2 to $2.50 a plate: "Even when the price of eggs rose I did not raise prices, but now all my basic ingredients cost (20 per cent) more so I have no choice."

Will the Government act to control food prices or subsidise the price of essential items? PM Lee said such a move would backfire, especially when Singapore imports all its food supplies.

Citing the chaos in countries like China and Malaysia as a result of panic buying, the Prime Minister added: "Price control is not something we can do and if you want the Government to subsidise, that's also not a good thing to do because it is very expensive and most of the food will be consumed by people who are not poor."

The most astute solution is to grow the economy and increase wages, he said.

Singaporeans generally enjoyed high pay raises and fat bonuses last year and upcoming projects such as the Formula 1 Grand Prix race and the Integrated Resorts would continue to generate economic growth.

Urging Singaporeans to band together and work with the Government in the months ahead, he said:

"We can overcome this problem. We have to stay together to keep Singapore competitive and growing."