Qn 5

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Discuss the relationship between public infrastructure development in Singapore and the institutional responses in taxation, subsidies, compensation and betterment. How did the institutions in Singapore improve their strategies of National Estate Management during the Asian Financial Crisis? Discuss how one of the improved strategies, which you have described earlier, was implemented.

The major public agencies involved in the provision of economic and social infrastructure for Singapore are Housing & Development Board (HDB), Urban Redevelopment Authority (URA), National Parks Board (Nparks), Public Works Department (PWD), Jurong Town Corporation, (JTC), Sentosa Development Corporation (SDC), Singapore Tourism Board (STB), Public Utilities Board (PUB), National Science & Technology Board (NSTB), Economic Development Board (EDB), Maritime Port Authority of Singapore (MPA), Land Transport Authority (LTA), and Infocomm Development Authority of Singapore. Most of these agencies (except those that have been corporatised) work under one of the three ministries: Ministry of National Development (MND), Ministry of Trade and Industry (MTI), and Ministry of Communications and Information Technology (MCIT).

MND is responsible for Singapore’s physical development through long-term land-use planning, public housing, public works, urban redevelopment, parks and recreation and other aspects of the physical development of Singapore. The statutory boards under MND are: HDB, URA, Nparks, and PWD (recently corporatised).

HDB is Singapore’s Public Housing Authority. It provides affordable housing to the middle-income to low-income group of people. It plans and develops new towns, upgrades and redevelops older estates to meet the needs of the population. It also provides cost-effective and efficient services in the allocation and management of HDB properties.

Urban Redevelopment Authority
URA is the national planning authority. It plans and facilitates the physical development of Singapore through the preparation of long-range, as well as more detailed, local area plans.

It plans, develops, maintains and regulates the parks and greenery provisions of Singapore.

PWD was recently corporatised to become PWD Corporation. It provides a full spectrum of development services including architecture design, engineering consultancy, project management and facilities management for building and infrastructural projects. The building projects undertaken includes airports, and those for education, health, security and recreational purposes. The infrastructural projects undertaken include bridges and roadways.

MTI facilitates the development of industry sectors with strong growth potential and fundamentals, protects Singapore's international trade interests, in particular, with a view to enhance access to global markets for our goods, services and investments, and provides a good understanding of the current state of and outlook for the Singapore economy for policy formulation and refinement. JTC, SDC, STB, PUB, TDB, NTSB, and EDB are statutory boards under MTI.

JTC was established on 1 June, 1968 as a statutory board to take over EDB’s function of developing industrial estates. It is a leading developer and manager of industrial infrastructure in Singapore and abroad. In Singapore, it has 30 industrial estates that house more than 5400 companies. In addition, JTC has set up a science park as a centre for research and development industries, launched Singapore’s first business park, redesigned factories and rejuvenated its older industrial estates to meet the changing needs of its customers.

SDC is formed by an act of Parliament in 1972 to develop, manage and promote Sentosa as a recreational development. It is also the Government's agent for the maintenance of ten other offshore islands south of Singapore.

The overall objective of STB is to attract tourism-related companies to invest in Singapore, encourage the development of new attractions and experiences, and create new opportunities for the tourism industry.

PUB is the national Water Authority and Regulator of the electricity and piped gas industries in Singapore. It is responsible for the development of the country’s water resources and operation and maintenance of the water supply system.

On 1 October, 1995, PUB’s electricity and gas undertakings were corporatised and reconstructed into 5 subsidiaries – a gas subsidiary, an electricity supply subsidiary, an electricity transmission and distribution subsidiary, and 2 generation subsidiaries – under Singapore Power Pte Ltd (SP) as the holding company. Another successor company, Tuas Power Pte Ltd was also formed to take over the development of the new Tuas Power Station.

One of NSTB’s key goals is to develop capability through promoting and strengthening Singapore’s technology infrastructure. This involves developing research capabilities in research institutions and centers, universities, polytechnics and government funded institutions, which have economic relevance and which will lead to the commercial exploitation of technology and innovation.

EDB is the leading agency in market development and economic promotion in Singapore. Together with other government agencies, it helped to promote and develop the manufacturing and services sector in Singapore from 1960s to the present day.

The EDB’s investment promotion efforts since 1961 have contributed significantly to the transformation of Singapore’s economic landscape. Essentially, the EDB plays a significant role in planning and implementing economic strategies for the development of the manufacturing and exportable services sectors. The Board’s key focus includes ensuring a conducive and competitive business environment, as well as working with the government to ensure that relevant infrastructure and key manpower capabilities are available for industry and business needs.

The MCIT is responsible for the development and promotion of Singapore as a premier info-communications and transport hub. It oversees the development and growth of the info-communication and postal industries; develops and maintains Singapore status as a major air hub and an international seaport and shipping centre; and strives to provide a world class land transport system.
The statutory boards under it are the Land Transport Authority, the Maritime and Port Authority of Singapore and the Infocomm Development Authority of Singapore.

The LTA plans, develops, implements and manages all public and private transport infrastructure and policies.

MPA was formerly known as the Port of Singapore Authority (PSA). It was formed on 2 February, 1996 through the merging of the Marine Department, the National Maritime Board and the regulatory departments of the Port of Singapore Authority. It is responsible for the planning and development of ports and also acts as the Government’s Advisor on matters relating to sea transport, marine and port services and facilities.

IDA is previously known as the Telecommunications Authority of Singapore. It was merged with the National Computer Board. It develops, promotes and regulates info-communications in Singapore. The development of infocomm-infrastructure is one of its responsibilities.

RELATIONSHIP BETWEEN PUBLIC INFRASTRUCTURE DEVELOPMENT AND INSTITUITIONAL RESPONSES IN TAXATION, SUBSIDIES, COMPENSATION, AND BETTERMENT

The machinery for taxation, subsidies, compensation and betterment has been set in place (i) to facilitate the amassing of public funds for use in public infrastructure development, (ii) to reduce production cost, (iii) to release land for public use, and (iv) to keep land values in check. Policy changes in any of these four areas will have a significant impact on public infrastructure development as will be discussed below.

Taxation is a compulsory contribution levied by the government on individuals, companies and property primarily as a source of revenue to defray public expenses and to provide services not normally provided by the private sector. The amount of tax revenue collected will determine the amount available for use in public infrastructure development. Increases in tax rates will result in increases in tax revenue.

Taxes levied in Singapore include Income Tax, Goods and Services Tax (GST), Property Tax, Betting Duties, Private Lotteries Duty, Government Tax to Utility Bills, Water Conservation Tax, and Custom Duties.

Operating expenditure in FY2000 is estimated at $16.1 billion or 9.7 per cent of GDP, an increase of $969 million or 6.4 per cent over FY99. 92 per cent of operating expenditure is for ministries’ running costs while the remaining 8 per cent is for transfer payments to members of the public and outside organisations.

Total running costs are projected to increase by 6.9 per cent to $14.8 billion because of higher manpower costs, increases in other operating expenditure, and larger grants to the statutory boards. Expenditure on Transfers is estimated at $1.3 billion, the main items being subventions to the restructured hospitals and town councils.

Manpower expenses are estimated at $3.3 billion, an increase of $323 million or 10.8 per cent. The increase is due to restoration of the salary cut imposed service-wide in 1999, partial restoration in employers’ rate of CPF contributions and normal salary increments. In addition, there is also a net increase of some 2,400 posts, mainly in MOE to cater for increased student intakes.

Other operating expenditure is expected to increase by 4.1 per cent to $8.8 billion.

Grants-in-aid to statutory boards will increase by 12.1 per cent to $2.7 billion, mainly because of larger grants to higher educational institutions and aided schools to cater to increased student intakes and restoration of salary cuts.

Development expenditure is projected at $12.9 billion or 7.8 per cent of GDP, an increase of $2.2 billion. This includes a provision of $979 million for new priority projects that may materialise in the course of FY2000. Of this, $200 million is held centrally by MOF while the remaining $779 million is allocated out to ministries based on their projected needs.

The largest share of capital grants to statutory boards (excluding public housing subsidy) goes to the LTA for extension of the MRT system, construction of the North East Line, the Bukit Panjang and Sengkang LRT systems and road construction and improvement programs. Other main recipients are educational institutions and aided schools for upgrading programs and the National Science & Technology Board for financing and administering R&D projects.

Capital expenditure for Public Housing is projected at $2.2 billion or 1.3 per cent of GDP. The bulk of the subsidy is for the HDB Upgrading Programs, development of infrastructure within HDB New Towns and financing of HDB’s bottom-line deficit.

The second largest sector is Security & Defence, which takes up $9.6 billion or 33 per cent of total Government expenditure. Of the $9.6 billion, $7.4 billion will go to MINDEF to fund defence programs. The remaining $2.2 billion will be for MHA and Civil Defence programs. MINDEF’s budget will make up 4.5 per cent of GDP, well within the ceiling of 6 per cent of GDP set for MINDEF.
Of the $2.2 billion allocated to MHA (including Civil Defence), $1.0 billion or 47 per cent will be for the Police Program while $351 million or 16 per cent will go to Civil Defence. Development expenditure will be mainly for the MHA Complex, Cantonment Complex, Civil Defence Shelters Program, redevelopment of the Gurkha Cantonment, SCDF HQ Complex and Neighbourhood Police Centres.

Economic & Infrastructural Development forms the third largest sector, taking up $5.9 billion or 20 per cent of total Government expenditure. Within the sector, MCIT has the largest share of $2.2 billion, followed by MTI with $1.9 billion. MND is allocated $584 million, but this excludes Public Housing which is funded separately. MOM will receive $171 million. The remaining $978 million allocated to this sector is used to fund all the R&D programs undertaken by ministries.

Economic development will continue to take a three-prong approach: investment in infrastructure, creation of new economic activities to achieve sustainable growth and comprehensive development of our workforce to meet the challenges of economic restructuring. Infrastructure investment is achieved mainly through projects undertaken by MCIT, MTI and MND. MCIT will spend $1.2 billion to make rail-based improvements to the land transportation system and a further $260 million to make road-based improvements. MTI will spend $780 million to develop projects on Jurong Island and a further $380 million for reclamation at Changi East, Sentosa Cove, Southern Islands and infrastructure works at Kaki Bukit and Tuas View.
EDB and TDB together will undertake the task of creating new economic activities. EDB is allocated $309 million for this purpose while TDB will receive $38 million. MOM will be responsible for the development of our workforce and is allocated a sum of $171 million.

Subsidies are negative taxes. A subsidy is a payment made either to a business or to a consumer when the business produces or the consumer buys a good or service. The effect of subsidies is to reduce the cost of production or to reduce the cost of the good. In the case of public infrastructure, subsidies are sometimes given to the producers to reduce the cost of production so that the savings can be passed to the consumers. When the cost of production is reduced, the good can be sold to consumers at a lower price. This is in keeping with the objective of public infrastructure development, which is to make such goods available to as many consumers as possible. Subsidies given directly to consumers serve the same purpose.

Subsidies to consumers come in the form of grants. To make housing more available to young couples, the government gave out grants to first-time house-buyers. Rebates are also given on HDB Service and Conservancy charges and rentals to citizens in this group staying in rented and owner-occupied HDB flats.

For utilities, rebates are given to citizens living in 1 to 4-room HDB flats to offset the utilities rates increases for the lower income households. In transportation, rebates are given in farecard prices.

Subsidies to government agencies sometimes come in the form of tax rebates. During the financial crisis, the government announced a 15 percent property tax rebate for commercial and industrial properties to help ease the cost pressures. HDB, JTC and other Government agencies owning properties passed most of this rebate to their tenants.

Subsidies to the agencies also come in the lower mortgage interest rates. For example, HDB receives two types of loans from the government: the Housing Development Loan which covers development programmes and operations; and the Mortgage Financing Loan which enables HDB to grant mortgage loans to its flat buyers.

Apart from the ‘Planning Act’ which is the principal statute in the control of land, land-use control in Singapore is executed through the Compulsory Acquisition of private lands for public sector development purposes.

In order to safeguard and make available land to meet the diversified needs of the State such as public housing, Urban Renewal and provision of infrastructural physical networks, land in Singapore can be acquired in the public interest as provided for in the land Acquisition Act with compensation at market prices to be paid for the land so acquired.

The policy of the Government is not to acquire land wherever possible for redevelopment. Maximum private investment is encouraged. For example, compulsory acquisition is carried out in areas where the government feels that the private sector is not capable of undertaking comprehensive projects in the national development such as in fragmented lots with multi-land ownerships or in cases where development by the private sector is hampered by the presence of squatters or under rent-control.

In 1966, the Land Acquisition Act provided for the payment of compensation, on Government acquisitions, at market values prevailing seven years prior to the date of the purchase notice. This serves to freeze land values to prevent land speculation in view of the implementation of a Revised Master Plan in 1966.

In order to meet the increasing demand for land for new trends in development activities, namely urban redevelopment, public housing, industrialisation and tourism, and infrastructural development, lands parceled for comprehensive development should not be hampered by obstructibility of private premises.

A betterment levy (or development charge) is payable on the grant of a permission which permitted residential development at densities, which were in excess of the proposed average residential densities prescribed in the Master Plan and residential and other developments, which required an alteration to the zoning in the Master Plan.

The underlying principle of the development charge in the form adopted in Singapore is that landowners who would benefit from a written permission which permits development over and above that envisaged in the Master Plan should contribute to the State part of the benefit derived from the written permission, to be returned to the community for infrastructure development or other forms of community development.

The system of development charge was first introduced in the 1965 Planning Ordinance. In reality, there exist other forms of taxes, which embody the principle of betterment, namely, payment of the costs of road construction, the 7-year clause of the Land Acquisition Act, property tax, estate and stamp duty. Though these are not directly related to betterment, they act as taxes on real property which aims to cream-off part of the income that could be generated from the real property. For the use of state land by private individuals and developers, they are subjected to differential premium which is a levy imposed by the Land Office when developers or lessees apply to use the state land for purposes beyond what is stated in the lease.

In 1964, a Bill incorporating measures to curb land speculation and the tightening of the planning legislation was introduced through the Planning (Amendment) Bill 1964. The Bill was introduced due to changes in the projection of population growth in Singapore. More land had to be re-zoned to cater to the growth. The change of land use pattern will have a significant impact on land values, the end result would be landowners benefiting from the increase in land values through no effort on their part. Therefore to counter the effect, a development levy was introduced on all written permits for the development of land.

On 1 September, 1966, development charge was waived on residential dwellings which fell within the Master Plan’s proposed and maximum density to encourage more private residential developments and to meet increasing demand.

Waiver of development charge was also given to hotel development during the hotel recessionary period to overcome the shortage of hotel rooms.

Prestigious commercial projects in the Golden Shoe area in the late sixties also enjoyed the waiver. This was done to encourage building activities during the period of economic uncertainty following the withdrawal of the British Forces’ bases from Singapore.

The seven-year rule is sometimes referred to as the betterment value provision. The purpose is to deny the landowner any increase in the value of the property which is due to the execution of infrastructure works at public expense.

This provision is required to take into consideration any increase likely to accrue in the value of any other land of the landowner, from the use to which the land acquired will be put. The objective of this clause is to recoup the betterment value of other land lying nearby. It reduces the burden of the compensation required to be paid by the acquiring authority for the land acquired.

There are many reasons for imposing property tax, firstly, it serves as a form of revenue to the government. Next it acts as a specific charge for services rendered to properties. In addition, it aims to regulate or controol land use and to allocate land resources efficiently. Finally, it works as a tool to effect equitable distribution of wealth and income.

Stamp Duty is a levy imposed on various kinds of instruments, both legal and commercial and not on transactions. Stamp duty is thus payable not on the transaction itself, but ratheron the instrument effecting the transfer.

This is a tax levied on the value of the deceased’s estate, regardless of the estate location. It is essentially a levy on property passing on death.

The roots of the crisis can be traced back to the huge influx of cheap foreign capital to the region in the early 1990s. With inadequate prudential supervision, regional financial institutions over-extended themselves and lent excessively to unproductive sectors and projects. This rapid build up of foreign debt was not sustainable. It created asset bubbles in the property and stock markets.

Confidence in the region’s export potential began to waver towards mid 1990s, with various exchange rate realignments. In 1992, China devalued the yuan. In 1995, the Japanese yen started depreciating against the greenback. In countries whose currencies were tightly pegged to the US dollar, exports began to lose competitiveness. Economies such as China and Latin America emerged as keen competitors. These developments coincided with a cyclical downturn in the global electronics industry and precipitated a regional export slowdown in 1996.

With the export engines stalled, investors and creditors grew nervous of the regional countries’ continued ability to service the growing foreign debt burden. Eventually, the market lost faith in the sustainability of the linked exchange rate systems adopted by regional economies.

Thailand was the first to suffer this loss of investor confidence. Speculative attacks against the baht mounted as concerns about the Thai economy grew. The breaking point came when Thailand’s foreign reserves dipped below its short-term foreign debt obligations in the middle of 1997. Without sufficient reserves to defend its currency, the Thai Government was forced to allow the baht to float on 2July 1997. The contagion effect of this de-facto devaluation of the Thai baht quickly spread to Malaysia and Indonesia as the market switched its attention to other Southeast Asian economies with similar structural weaknesses in their financial and banking systems.

The Singapore economy does not have the problems of the other countries in difficulty. Our banking system is sound. Our companies have not borrowed excessively, especially from abroad. Government finances are strong, with adequate reserves built up over many years. Nevertheless, the collapse of regional demand, and the change in the business climate has caused our economy to slow sharply, from 6.2 % in 1Q1998 to –0.7 % in 3Q 1998, resulting the state to be in recession. The GDP annual growth in 1998 also registered a low value of 0.4%.

The primary cause of Singapore’s economic slowdown is the sharp fall in external demand, especially regional demand. It is not domestic problems inherent in our own economy. This is in contrast to the 1985/86 recession where the primary cause was the loss of competitiveness of the Singapore economy, when faced with internal problems, the Singapore Government could rectify them swiftly by changing policies and making adjustments. This time, Singapore’s export competitiveness position has not been too adversely affected. The problems Singapore faced are largely outside our control. Although we cannot change the external environment or determines the course of events in the region, the Government can cushion the fallout from the regional economic slowdown on our local economy. The Government also made use of the opportunity to consolidate the nation’s strengths and further enhance our capabilities.
The institutions in Singapore improve their strategies of national estate management during the crisis based on this background.

HOW INSTITUTIONS IN SINGAPORE IMPROVE THEIR STRATEGIES OF NATIONAL ESTATE MANAGEMENT DURING THE CRISIS

The Singapore economy felt the full impact of the regional economic crisis in 1998. Budget 1998 and Off-Budget measures 1998 were implemented in response to the crisis. Other measures implemented include those recommendation made by the Committee on Singapore’s Competitiveness (CSC). The measures that served to improve Singapore’s strategies of national estate management are with regards to:
? Housing
? Utilities
? Taxation / Duty
? Land
? Land Transport
? Public Transport
? Sea and Air Transport
? Telecommunications
? Health Care
? Public Infrastructure and Building

With more than 86% of Singaporeans housed in HDB’s public flats, any strategies that promotes home ownership would be greatly appreciated by the public, this is especially true in an economic downturn. HDB improve their strategies of national estate management by introducing assistance schemes which ease the burden of homeowners to service their housing loans. The measures introduced by HDB relieved the situation for 35, 050 households, or about 5 per cent of all HDB homes. A further elaboration of what and how these schemes are implemented can be found at the concluding part of the report.

The June Off-Budget package included a 2.6% reduction in the average electricity tariff. Government also removed the 2% government tax levied on household utilities bills.

Despite the economic downturn, the government went ahead to increase water tariffs and the water conservation tax. This is to reflect the true scarcity value of water in Singapore and to make Singaporeans conscious of the vital importance of conserving water, PUB did not hold back or reduce the water tariff increases for households.

MND provided service and conservancy charges rebates providing help to see HDB residents through the tough times. One room flat owners got the biggest relief with rebates of about 75% ($170) while 3-room and 4-room flat owners will save about 50% ($230) and 25% ($150) respectively.

Taxation / Duty

FY98 Budget Statement announced the exemption of property tax for land under development. Suspension of stamp duty started on June 30 98. In addition to the 15% property tax rebate given in the FY 98 Budget Statement, an additional 40% property tax rebate on commercial and industrial properties was given in the June Off-Budget measures. This 55% per cent rebate is extended to June 30 2000. HDB and JTC in turn passed the rebates on to their tenants and lessees. Landlords in the private sector were also urged to pass on the rebates.

? Rentals
JTC reduced its posted land rentals by an average of 24 per cent for outlying areas and 40 per cent for urban and suburban areas. Rentals for flatted and standard factories came down by 20 per cent to 30 per cent. In addition for lessees paying rentals at a posted rate, there will be no rental escalation for two years in 1999 and 2000. Thereafter their rentals will be subjected to a maximum annual increase of 5.5 per cent, reduced from the present cap of 7.6 per cent. Existing JTC lessees and tenants who are paying rentals above the revised rate had their contractual rent reduced to the revised rates.

HDB also reduced rentals for industrial land lessees and rents of commercial and industrial tenancies which exceed the new posted rates through contractual rent revision or rent rebates. For commercial and industrial tenants paying above posted rates, the rebates will be subject to an overall rebate cap of 20%. For land lessees and tenants of industrial factories, workshops and commercial properties who are paying below the new posted rates, HDB continued their existing rebates until Dec 1999.

? Suspension of Land Sales
In order to stabilize the weakened property market, URA suspended sale of state land for private residential, executive condominiums and commercial development for 1998 and 1999 except for the following:

a) Sengkang site to tie in with the development of the MRT/LRT station and bus interchange in Sengkang New Town.
b) Clarke Quay MRT site to tie in with the development of the N-E MRT line.
c) Four small infill sites within the Chinatown Conservation Area.

Besides the URS, JTC also reduced the amount of land released from 80-85 ha in 1997 to 40-50 ha in 1998.

In addition, the 5 per cent per annum premium that used to be levied on developers of private residential properties for every year of their Project Completion Period (PCP) was suspended. Developers are allowed to apply for extension of PCP up to eight years without penalty. This is to allow consolidation within the property development industry as some successful tenderers may no longer be in a financial position to complete the development. Also payment of stamp duty by purchasers of uncompleted properties until TOP is also deferred.

The government did not slow down the implementation of the ERP system or gave any rebates on ERP charges. The rational being it wants to shift emphasis from ownership to usage management measures. However, the government reduced ownership charges to provide savings for motorists and reduced ownership charges to provide savings for motorists and drivers in response to the crisis. Customs duty on cars was reduced from 41% of OMV to 31% of OMV. Similarly, Customs duty for new taxis was reduced from 17% to 7% OMV from Nov 25 1998. For the 1st phase of ERP, a rebate on road tax of $200 per PCU was given. Other measures include the complete removal of excise duty on high-speed diesel. Petrol exercise duties rate was reduced from 46% to 40%. Land Transport Authority suspended the Parking Surcharge Scheme from Sept 1 1998, ALS hours was shortened on Saturday to encourage shoppers to drive into the CBD.

After discussion with the government, public transport companies passed on their savings from the wage cuts to the commuters. A 50-cents fare rebate was given and added for every 410 topped up into farecards. The concession cardholders were given a 5% discount on the value of their monthly concession stamps. These took effect from Jan 1 1999 and will be in effect for 12 months.

The Maritime and Port Authority extended a 20% port dues concession for container ships and give a similar concession for harbor craft from Jan 1 1999. Port of Singapore Authority now a corporatised entity also gave a one time 10% rebate on lift-on / lift-off charges, local container store rents, Keppel Districtpark rents, officer properties rents, commercial warehouses rents, wharf handling and local store rents at the multi-purpose terminal.

The Civil Aviation Authority of Singapore (CAAS) gave a 10% rebate on landing fees for airlines from Jan 1 1999.

Telecommunications

With effect from Jan 1 1999, Telecommunication Authority of Singapore (TAS) reduced the license fee for mobile radio-communication station.

Singapore Telecoms offered further rate reduction on its international direct dialing, subscribe trunk dialing, local leased circuit, international leased circuits and frame relay services beginning the 2nd half of 1998.

Government and restructured hospitals renewed their charges to pass on the cost reduction to Singaporeans. Emphasis was given to reducing charges from Class B2 and C patients with average reductions in hospital bills of 5% to 10%. Ministry of Health also advised Hospital Medifund Committees to be more sympathetic towards those who have been adversely affected by the economic downturn.

Government speeded up several ongoing public-sector infrastructure projects (e.g. North-East MRT line and HDB flats) as well as bring forward suitable new development projects in order to stimulate the construction industry.

Education continued to be the key focus, accounting for over 40% of the newly approved projects. Major projects brought forward include the expansion of Ministry of Education (MOE)’s primary school building program to increase the number of primary schools to be built in new and mature towns from 18 to 27. Other projects include the incorporation of IT into the Primary and Secondary schools under construction, upgrading of NUS and NTU, and enhanced computer facilities at polytechnics.

The government gave a tax allowance of up to 150% for qualifying expenditure incurred in the refurbishment of hotels to encourage hotels to upgrade during the lull period.

HDB scaled down the Main Upgrading Program from 15 to 10 precincts in 1998 and to 5 in 1999. Interim Upgrading was scaled down from 24 to 18 precincts in 1998. This was to make way for other infrastructure and education expenditure during the tough times.

The wage and CPF reductions affected many Singaporeans who have committed to mortgages especially those who planned to repay their mortgages out of their CPF contributions. For CPF members whose reduced Ordinary Account contributions was insufficient to pay their mortgages, the Government allowed them to use the balances in their Special Accounts to meet the shortfall in repayment caused by the CPF cut.

The Government also introduced a Bridging Loan Scheme for members who have depleted the savings in both their Ordinary and Special Accounts for their monthly repayments. The loan was at a concessionary rate of the CPF interest rate plus 0.1 per cent. The scheme applies to private property mortgages, as well as HDB flat owners paying HDB market interest rates.

Furthermore, HDB allowed one or more eligible working family members as joint owners, up to a maximum of four joint owners, so the combined CPF monies can be used to settle arrears and/or service the monthly loan installments. Flat owners with insufficient monthly CPF contributions to service their loans can opt for the reduced repayment scheme, which allows them to pay only 75 per cent of their normal monthly mortgage payments for the first five years. Repayments from the sixth year onwards will be computed based on the outstanding loan.

Flat owners can also reschedule their mortgage loan term up to the maximum repayment period of 30 years, subject to a 65-year age limit. Owners can also defer payment of their monthly installments for an initial period of six months. This is only available to those who not only have insufficient monthly CPF contributions, but have also exhausted their CPF savings in the Ordinary and Special Accounts.
Finally, flat owners who resumed servicing their monthly mortgage payment after a lapse will be allowed to settle their loan arrears by installments over a period of six to twelve months.

These strategies were meant to ensure Singaporeans that the promotion of home ownership would remain one of HDB’s focus areas despite the economic slowdown.