Saturday, January 31, 2009

Jobs Credit Scheme - Singapore's new approach to wage subsidy

Jan 31, 2009

Save jobs, give firms cash: How the novel scheme evolved

The $4.5 billion Jobs Credit scheme was the stunner in the slew of Budget measures unveiled last week. Sue-Ann Chia and Aaron Low find out how and why policymakers came up with the novel 'wage subsidy' plan that nobody expected

ON THE night before Budget day on Jan 22, harried Finance Ministry officials tucked into a supper of steaming porridge cooked by their colleagues.

It came with condiments on the side, from century eggs and ham to peanuts - comfort food that soothed their nerves as they rushed to put the finishing touches on the biggest-ever Budget bonanza.

One of the things they worked on late into the night was the Jobs Credit scheme, which was finalised only a week before the Budget.

Costing $4.5 billion, this is a major plank in the $20.5 billion stimulus package. It aims to save jobs by subsidising part of employers' wage bills.

It was also the most eye-popping measure, and caught analysts and businesses alike by surprise.

As Mr Poon Hong Yuen, the Ministry of Finance's (MOF) director of Budget 2009, puts it: 'They didn't think that the Singapore Government would do such a thing.'

The unlikely thing? That the Government would provide funds for companies to ride out the downturn.

What most had assumed it would provide were the usual reliefs, such as rental rebates and tax cuts. In the event, these were present, but nowhere near the scale of the Jobs Credit scheme.

The idea was so far-fetched that no one thought to ask for it in the many rounds of dialogue and feedback that the ministry held with employers, banks, economists and workers.

There were expectations of a cut in the Central Provident Fund (CPF) contribution rate, even the issuing of shopping vouchers - ideas that Mr Poon says were considered but canned.


NOT that there was a 'eureka moment' when the idea crystallised and everyone knew this was The One.

Describing when and how the idea surfaced, Mr Poon says it was more a gradual realisation that something had to be done - and fast - to help companies stay afloat as the economy began to sink in the second half of last year.

The only certainty in their minds: A fiscal injection was needed to stimulate the economy.

But they did not quite know exactly what form this should take and how to go about it.

The need for a bailout became evident to the team six months ago.

The Singapore economy was then slowing as the sub-prime crisis spread in the United States.

Worried, the MOF team started hatching plans to protect the economy. They considered all options, from a CPF cut to road tax reductions.

The solution that emerged was to give companies a shot in the arm.

'We thought we needed to put cash in the hands of companies - viable companies,' says Mr Poon. Apart from taking charge of Budget 2009, the 39-year-old is also MOF's director of economic programmes.

'But how do we do it?'

The answer, in a way, came in September last year when US banking giant Lehman Brothers collapsed, triggering a global crisis.

Singapore slid officially into recession, with two consecutive quarters of negative growth.

'It became clearer to us then that jobs were the No. 1 priority,' Mr Poon recalls.

'It also became clear to us that the economy was going to be worse than we had previously thought. So we started to focus a lot more (on) saving jobs.'

Given that the intention was to give companies money to save jobs, a CPF cut was seen as a possible option. It was discussed but dismissed.

'You want to send a cheque to the company. Mathematically, a CPF (cut) may achieve the same thing - you may free up cash for the company. But it's not the same as giving them a cheque to encourage them to keep jobs,' explains Mr Poon.

A cut to employers' CPF contribution rate is also not desirable as it erodes workers' retirement savings, adds Budget coordinator Alvin Moh, 28.

Nor did the situation warrant a cut.

'It's not as though Singapore's wages were uncompetitive globally. It's just a very temporal situation where the suddenness of the downturn hit businesses very hard,' says Mr Moh, deputy head of economics strategy at the ministry.

With this option out, the team members began looking at other approaches. Should funds be given to offset business costs such as rental, utilities, wages or a combination of all three, they wondered.


IT WAS a close tie between rental costs and wages. Utilities, which had been a consideration, was dropped pretty quickly because it did not amount to as significant a business cost as the other two items.

The team eventually decided to focus their firepower on wages.

'We zoomed into the wage component quite late in the day,' reveals Mr Poon.

'I can't say exactly when, but even a month or two before the Budget, we were still thinking of other components. In this crisis...things moved very fast and we had to get an accurate feel of what was happening on the ground.'

Focusing on wages seemed to make sense, since it is a major business cost and closely tied to jobs.

Another consideration was the ease of implementation.

'We don't have data on rentals, unlike for wage components, (where) we have very detailed data from CPF accounts. We know how much each person is paid,' Mr Poon explains.

The team does not view the Jobs Credit scheme as a wage subsidy as the money disbursed is not meant to prop up wages.

Wages were used simply as a base to calculate how much each company should get from the Government.

If the intention was to provide a wage subsidy, it would have been more logical to give it directly to workers, he explains.

So why not give the money to workers? As reactions to the Budget showed, many people think that the measures seem more pro-business than pro-worker.

Mr Poon says the idea of disbursing money directly to employees was considered. But it was discarded as such a move was not in sync with the objective of saving jobs.

'You can give it directly to workers, but how would that factor into an employer's decision on whether to retrench or not?' he says.

If such an approach had been taken, employers would not have an incentive to retain workers, as the cost savings from the offset package would not be returned to them or have an impact on their overall wage bill.

'We're not doing this because we favour employers. We're trying to save jobs for the employees, and we're trying to do it in a way that we think will be more effective,' he says.

The team even toyed with the idea of giving citizens shopping vouchers, but decided against it. Mr Poon says: 'We felt that cash that goes to employers will have a multiplier effect on the economy because they will also spend on the economy.'

The next headache was then in deciding how much to give companies.


CHARTS, tables and matrices were drawn up using various permutations, to show how much each would cost the Government.

Says Mr Poon: 'It wasn't Jobs Credit in isolation. If we give more for Jobs Credit, we have to cut somewhere else. There's no bottomless pit.'

They presented their calculations to Finance Minister Tharman Shanmugaratnam 'countless' times.

Nearer the Budget - which was brought forward from February to last Thursday - they were having full-day meetings with him almost every other day.

He gave 'valuable inputs', says Mr Poon, who describes Mr Tharman as a good listener who hears out even the most junior staff member.

'He gave us directions on what to focus on. We give him options and recommendations, but he decides,' he adds.

They settled on $4.5 billion, which covers 12 per cent of a worker's monthly salary of up to $2,500.

The sum is 'quite high', says Mr Poon. He declines to reveal the higher amounts considered.

'Of course, there were higher amounts, but those were not realistic figures. We know we could not really afford those,' he adds.

'But I think we were quite generous.'

He also explains why they decided on 12 per cent.

'We need a number that's impactful. We don't want a number that companies look at and say, 'It's a waste of my time. It won't make a bit of difference in my retrenchment or hiring decision,'' he says.

'When we did our charts and graphs, 12 per cent was almost as high as we could go in terms of affordability.'

It was capped at $2,500 of monthly wages as that is the median salary in Singapore. Half of workers here earn below that and half earn above that.

'We wanted to skew the assistance in terms of keeping jobs for the lower- and middle-income because we felt that these would be especially vulnerable,' he says.


THE billion-dollar question is: How many jobs will the one-year scheme save? Nobody seems to have the answer, even though $4.5 billion is being spent on this measure.

The Government is even dipping into past reserves to fund it.

'It's quite difficult to work out. Going forward, we're quite clear there will still be retrenchments.

'But will it have been worse without Jobs Credit? I think the answer is yes,' says Mr Poon.

'We think it will provide some relief and therefore will make some difference, but we've to be realistic that for companies that do not have orders on hand, whose business model is no longer relevant or whose products are no longer relevant, this will not help them.'

But he adds: 'If just because of this they rethink (retrenchments), then I think it's already quite an achievement.'

One thing that is clear to policymakers: the need to act fast and pre-emptively.

Mr Poon says: 'We can wait until the 60,000 or whatever number retrenchments come about, and then do something. But would that be too late?

'By that time, the momentum would have set in and the situation would have got even worse.'

More will be done if the need arises. Policymakers are not ruling out anything - even CPF cuts.

On whether Jobs Credit signals a shift in public policy towards more 'welfare-type' spending, given the move towards the Workfare Income Supplement two years ago and, more recently, giving jobless Singaporeans training allowances, Mr Poon says: 'It's really an extraordinary measure for an extraordinary downturn.

'I don't think we would do this every year or even every downturn, for that matter.',


Jan 31, 2009

Jobs Credit scheme: Killing 3 birds with one stone

By Aaron Low

IN GIVING money to companies to help them cope with the downturn, the Government is in effect killing three birds with one stone, economists and analysts tell Insight.

First, The Jobs Credit, amounting to a 12 per cent subsidy on the first $2,500 of an employee's wage, delivers cash into the hands of companies.

This is more effective than giving cash to individuals, for two reasons:

- More people are saving in anticipation that this will be a protracted recession, says Dr Randolph Tan of Nanyang Technological University (NTU). Hence, money that is given out to individuals may not have much of a multiplier effect, in the sense of generating more value in the economy. It will simply be stashed away in the individual's bank account, or under the mattress.

- The aim is to help businesses manage cash flow and hopefully forestall downsizing, business closures and retrenchments. Professor Hui Weng Tat from the Lee Kuan Yew School of Public Policy says that this will have 'the indirect effect of sustaining the consumption demand of workers who are able to keep their jobs'.

'Giving cash grants to individuals who would otherwise face a higher chance of losing their jobs could result in a higher probability of contraction of consumption demand,' he says.

'In this regard, giving money to companies would be more effective in sustaining aggregate demand.'

Second, on top of saving jobs, the scheme also puts pressure on employers to save jobs specifically for locals.

The issue of foreign talent and workers in Singapore's midst has been a touchy subject with some Singaporeans wanting the Government to do more to provide jobs for Singaporeans.

Latest figures show that the workforce has 1.057 million foreigners, or about one in three of the workforce here.

This scheme may tilt the balance towards local workers as it is skewed towards the lower-paid and local workers, says PricewaterhouseCoopers tax partner David Sandison.

He notes that a firm gets to save proportionally more by employing lower-paid workers as the subsidy is capped at $300.

There are no such savings for foreign employees. In fact, companies have to pay an additional foreign worker levy, which ranges between $50 and $450 a month, depending on how many foreigners a firm employs.

Hence, the difference in cost, after taking into account the Jobs Credit, 'may skew the decision-making towards firing of more foreigners', says Prof Hui.

Third, the scheme avoids cutting employers' Central Provident Fund (CPF) contribution rate, which some companies had been calling for.

This scheme is a 'unique' instrument that is equivalent to a 9-percentage-point cut in employers' CPF contributions, but without the pain, says NTU's Dr Tan.

Cutting CPF contribution rates would have been painful for workers because the national savings plan is not only tied to retirement financing but also medical, educational and housing needs. Many Singaporeans rely on their CPF savings to pay for their homes and medical treatment.

Dr Tan notes that before the Jan 22 Budget statement, 'it seemed that a CPF cut was the only instrument available'.

'By showing it can achieve the aim of reducing wages without actually shifting the burden to workers, the Government is putting its money where its mouth is,' he says.

Still, despite the strengths of the scheme, economists point out that it is not perfect.

NTU economics professor Tan Khee Giap says the scheme can afford to be a lot more targeted in its approach.

He argues that smaller companies should be given higher subsidies as their wage bills form a higher percentage of their total costs, as compared to larger multinational companies.

'Instead of a 12 per cent subsidy across the board, maybe it should be 15 per cent for small firms and 5 per cent for larger firms,' he says.

'If the objective is to save jobs, the scheme should target small and medium enterprises since they employ 65 per cent of the workforce.'

Indeed, Mr Poon Hong Yuen of the Ministry of Finance, who was in the thick of helping to design the system, acknowledges that the scheme could have taken a more targeted approach, except that it would have been difficult to implement.

Perhaps the biggest criticism of the $4.5 billion scheme is that when companies face the crunch, the decision to hire or fire will not be decided by savings of 12 per cent.

National University of Singapore professor Shandre Thangavelu expects the scheme to have only a 'short-run' impact on the retrenchment behaviour of employers. After a while, the layoffs will still hit.

Citigroup's head of Singapore research Chua Hak Bin says the cost of the package seems disproportionate to the benefits it would possibly yield.

'Suppose the scheme succeeds in saving 50,000 jobs, that's a cost of about $90,000 a job. That's double the median annual wage,' he says.

'The scheme looks disproportionately generous towards saving jobs versus helping those who are jobless, who get close to nothing in the Budget.'


The scheme is a 'unique' instrument that is equivalent to a 9-percentage-point cut in employers' CPF contributions, but without the pain, says NTU's Dr Tan.

Friday, January 30, 2009

Grains of truth about price rises

Jan 30, 2009

By Tion Kwa

RECENT declines in the price of food are temporary. Once we recover from the economic crisis and fuel prices rise again, food costs will spiral into higher orbits. The future is ominous; this is no time to stop worrying about food security.

And so on. All courtesy of a report this month by Chatham House, a research institution in Britain. And all of it blindingly obvious. The report's preamble, however, was meant only as a hook to more substantive sections on what governments should do to forestall another rise in food prices. Too bad that many news reports went no further than the sensational, though strictly pedestrian, preamble. If they had bothered to look into the background, they might have discovered some interesting issues over the shorter term that would affect food prices.

The food item that's most important is rice. In middle-income countries, more expensive rice will strain family budgets during already difficult times; in poorer parts, it can be a disaster. Of course, prices now are nowhere near levels where they caused riots last year. And in the foreseeable future, it's unimaginable that they would reach those highs of around US$1,000 (S$1,500) a tonne. But that doesn't mean prices will stay moderate.

The irony is that while financial-world speculation helped drive prices up last year, and then down again when wholesale deleveraging brought the cost of everything to floor level, the credit crisis once again is about to influence the price of rice. And consumers won't be happy with the outcome.

First, when rice was fetching higher and higher prices, farmers rushed to plant more of the crop. The higher price of fertiliser and pesticide - caused by the then-increasing cost of fuel - would be more than offset by higher returns after harvesting.

But when crop prices began to falter, as did fuel prices, fertiliser and crop protection costs did not fall into line immediately. Small-farm operators in the developing world then reacted by reducing their use of inputs.

Tight credit conditions didn't help either, as farmers now not only had difficulties getting loans, but also had to pay more for credit when they got it. So farmers used even less fertiliser and pesticide. As a consequence of all this, yields are expected to decline.

What often is insufficiently acknowledged is that the ability of farmers to get and pay for agricultural chemicals is crucial to the well-being of a vast number of people for whom food expense is the largest part of their budget - the poor.

For despite all the fuss about organic farming, this is really an indulgence of the rich, the privileged and those excruciatingly irritating foodies. There isn't enough manure in the world to grow enough food for every mouth that needs feeding. Nor for that matter is a tonne of horse, cow, pig or whatever dropping as efficient as a tonne of chemical fertiliser.

And neither can anything nature provide be as effective against weed, insects and infection as chemical crop protection. 'Sustainable agriculture' is great advertising, but it can't come up with enough calories for six billion people.

Agricultural chemicals are the bulwark against hunger, and ultimately against ever-higher prices. Estimates are that without chemicals to protect crops, we would need to increase the size of land under cultivation by 65-200 per cent, depending on the crop, to harvest as much food as we get now. This is particularly important to rice farmers, who are more often small cultivators in the developing world. If they can't afford chemicals, they can't produce enough of the staple on which half the world depends.

Right now, these farmers are being pinched. And if they get squeezed harder, they will plant even less. A combination of reduced yield and less planting would then put fresh pressure on prices.

Of course, prices can be mitigated by ending the export bans that some countries imposed last year. Still, restrictions have greater impact pushing up costs than their removal has on reducing prices. Moreover, there is the likelihood that demand could rise as countries like China, which had been consuming more meat, begin to bulk up on starch again as a result of the economic crisis.

Even without these considerations, supply and demand conditions have long been finely balanced. Changes to either side of the equation could vastly alter the maths. For example, a deal by the Philippines earlier this month for a million tonnes of rice from Vietnam sent prices up about 5 per cent in the latter's market.

The upshot is that farmers deserve a little more attention and assistance than they've been getting, particularly in the past four months. Otherwise, a credit and economic crisis might spark a problem even more elemental. And that, by the way, was basically the point of the Chatham House report.

[I like the points made about the use of chemical fertiliser, natural manure, organic farming, and "those irritating foodies". :-) ]

Wednesday, January 28, 2009

Daisy the cow has more milk

Jan 28, 2009

LONDON - COWS with names like Daisy, Gertrude or Buttercup produce more milk than their sisters with no names, according to a British study released on Wednesday.

Cattle who are given 'the personal touch' can produce up to 284 litres of milk a year, said experts at Newcastle University in northeast England.

'Just as people respond better to the personal touch, cows also feel happier and more relaxed if they are given a bit more one-to-one attention,' said Catherine Douglas, who conducted the research.

'By placing more importance on the individual, such as calling a cow by her name or interacting with the animal more as it grows up, we not only improve the animal's welfare and her perception of humans, but also increase milk production,' she added.

Almost half of those surveyed - 46 per cent - said the cows on their farms had individual names.

Dairy farmer Dennis Gibb from the Eachwick Red House Farm outside Newcastle said it was 'vitally important' to treat cows individually. 'They aren't just our livelihood - they're part of the family.

'We love our cows here at Eachwick and every one of them has a name. Collectively we refer to them as 'our ladies' but we know every one of them and each one has her own personality.'

The study was compiled by Newcastle University's School of Agriculture, Food and Rural Development, based on interviews with 516 dairy farmers, and published in the online journal Anthrozoos. -- AFP

Wheels of change turn slowly

Jan 28, 2009

By Nayan Chanda

INDIA'S perennial protest capital, Kolkata, recently produced yet another political movement: the 'auto bachao' or 'save the auto' campaign.

Despite echoing the cry of America's Big Three carmakers' CEOs, who successfully lobbied Congress for a bailout of their companies, Kolkata's campaigners had a rather different beneficiary in mind. The smoke-belching three-wheeler auto-rickshaws that they are attempting to 'save' could not look more different from the shiny, petrol-guzzling SUVs and sedans produced by Detroit's stricken giants.

The natures of their respective movements are also a study in contrasts. The operators of Kolkata's noisy and polluting auto-rickshaws made their point by burning state buses and disrupting traffic, while the managers of the US's auto manufacturers flew into Washington in sleek private jets to beg Congress for a bailout.

Yet beneath the vastly different battles under way to save the 'auto' lies a basic truth: Whether in Detroit or Kolkata, saving jobs, profits and political patronage trumps saving the environment.

[This is a callback to the other articles I've archived on saving jobs versus priming demand. However the situation and circumstances are different. In the politically motivated "save-the-job" scheme, the jobs are from a specific sector of industry. In Singapore's case, it is an across the board job saving scheme. So there are not specific lobbyist.]

The violent demonstrations and the pall of smoke rising from Kolkata's burning buses at the beginning of the year are a re-run of an old movie.

On the previous occasion, in July last year, the High Court had responded to public interest litigation and ordered that older model auto-rickshaws running mostly on toxic adulterated fuel would have to be replaced by Jan 1 this year by newer models running on compressed natural gas (CNG), a cleaner fuel.

[On another point, I do not see our courts (Singapore) ever ordering the govt to make policy. This is both admirable, as well as terrible. Admirable that the courts can so order the govt to do so (tho it must be said that nothing was really done) and terrible that the courts are suppose to make govt policy! That is so wrong and says how poorly the govt is working.]

Unionised auto-rickshaw operators, who had long flouted emissions regulations under the protection of the Communist Party of India (Marxist), which rules Bengal, went on the rampage, forcing the state government - which had done nothing to facilitate the transition ordered by the High Court - to plead with the court for more time.

Allowing the city's 60,000-odd auto- rickshaws to carry on polluting would exact a heavy penalty on Kolkata's environment and the health of its residents. Last year, Kolkata was declared the most polluted city in India, with the highest number of lung cancer victims and as many as 70 per cent of its denizens suffering from respiratory ailments. Victims of pollution may not know where to direct their grievances but the polluters know what levers to pull to make the government do their bidding and delay the court-ordered changeover to CNG.

American automobile companies and their lobbyists have for many years fought against the efforts of environmentalists to promote efficient engines with greater mileage. Avoiding the additional costs involved in R&D seemed a more attractive choice, and politicians, mindful of the auto workers' union campaign contributions, were willing to shield car companies from pressure to change. Ultimately, amid last year's record-high oil prices, consumers provided the decisive push, voting with their wallets for more fuel-efficient foreign cars. Facing bankruptcy, America's auto majors and their unions turned to Washington for succour.

The help has come but with strings attached. The restructuring of the US auto industry is to be overseen by a 'car czar' with expertise in 'energy efficiency, environmental protection and environmental stabilisation'. Detroit got the message: the North American International Auto Show in Detroit last week saw US carmakers abandon their usual razzmatazz of glitzy, high-performance sports cars to showcase 'green' electric and hybrid models.

Kolkata's entrepreneurs do not lack for ideas as to how both the auto and the environment might be saved.

In October last year, the West Bengal Green Energy Development Corporation and Tara International, a developer of battery-operated automobiles, submitted proposals to convert auto-rickshaws to run on batteries that could propel the vehicles for 200km on a charge of eight hours. Even the state transport minister was reportedly impressed with the demonstration.

But, as usual, political calculations prevailed over environment concerns. The government has yet to move on providing loans to auto-rickshaw operators for conversion. In anticipation of the Jan 1 deadline for the ban to take effect, several banks were ready with loans but so far they have had no takers. Short of receiving contempt of court notices, Kolkata's politicians seem reluctant to turn their backs on influential constituents, even if other, less strident, voters suffer as a result.

Whether in Detroit or Kolkata, short- term political gain will trump the graver, long-term issue of climate change until politicians and businesses are forced to the wall.

The author is director of publications at the Yale Centre for the Study of Globalisation and editor of YaleGlobal Online.

Too little caregivers in Japan

Jan 28, 2009

Govt offering slew of incentives to get people to take up nursing care

By Kwan Weng Kin

TOKYO - ALTHOUGH there are jobs galore in Japan's nursing-care business, there are few takers.

Low pay and working conditions that often stretch a caregiver's patience and stamina to the limit scare away even those who view welfare work as a personal calling.

Ironically, the global downturn that has chilled Japanese exports and sent thousands of factory workers to unemployment lines may prove to be a godsend to nursing homes.

The government hopes to entice some of these retrenched workers to become caregivers. By March, the end of the Japanese fiscal year, about 80,000 factory workers are expected to be out of work, and more could join them if the economy worsens.

Japan's nursing-care business is one of the high-growth sectors thanks to its rapidly ageing population. There are now about 1.1 million people working in the industry.

But in five years' time, it is projected that the industry will require another 300,000 to 500,000 more workers. That is because the number of elderly Japanese requiring nursing-care services will rise to six million, up 1.5 million from the present figure.

The problem is how to make a caregiver's job more attractive.

The government has set aside about 210 billion yen (S$3.6 billion) in this year's budget to increase insurance payments to nursing-care providers by an average of 3 per cent.

In theory, that should give each nursing-care worker a monthly pay hike of about 20,000 yen. Unfortunately, providers are not obliged to translate the increase in insurance payments into higher salaries.

Besides, an increase of 20,000 yen does not mean very much to the individual worker. The typical caregiver takes home about 200,000 yen a month, about 70 per cent of what the typical worker in other sectors makes.

The money is enough for a single person to get by on but much too little if he or she wants to get married and start a family. Poor salaries are said to be the chief reason one in five caregivers leaves the job after a while.

The large number of resignations means more work for the caregivers who remain, making an already back- breaking job even more unappealing to people both inside and outside the business. Chronic staff shortages also mean that care facilities are compelled to turn away clients even though there are empty beds.

Earlier this month, the Labour and Welfare Ministry set up a project team to come up with concrete measures to fill vacancies in medical-related sectors, including 26,000 jobs in the nursing-care industry alone.

For instance, employers are to receive an incentive payment of 500,000 yen to one million yen for each person they hire as a caregiver.

The government also plans to underwrite all the training costs for caregiver positions. The basic caregiving course involves about two months of lectures and practical work such as how to give a bath to an elderly person, how to feed him and so on. There are no examinations.

'Our industry is very short of people, so it is good that the government is willing to provide free training for retrenched workers so that they can become caregivers,' said Mr Shiro Kawahara, chairman of Nippon Careservice Craft Union (NCCU), which boasts nearly 54,000 members. 'We think ours is a wonderful occupation. But if vacancies are to be filled simply by people who have nowhere else to go, it merely cheapens our work.'

The government also plans to increase the size of interest-free loans to college students enrolled in nursing- care courses to help out with living and other expenses. The loans will not have to be repaid if the students agree to work for five years in an approved care facility after graduation.

Free trade agreements with Indonesia and the Philippines have meanwhile opened the way for trained caregivers from these two countries to work in Japan.

Some 200 Indonesians are currently attending classes here to enable them to communicate in Japanese, and they are scheduled to move to nursing-care facilities around the country later this month. They are given four years to obtain the necessary caregiver licence in Japanese, failing which they would be sent home.

Care providers are allowed to hire them to do simple chores, most likely at lower than market rates since they cannot function as fully as their Japanese counterparts.

Critics suspect that the scheme may be just an excuse for some nursing homes to bring in cheap foreign labour. It was not long ago that many small Japanese factories, farms and fisheries had caused a huge public outcry when it was revealed that they hired foreigners at meagre wages to do manual work on the pretext that the foreigners - most of them from Asian countries - were trainees.

The government has stressed that bringing in foreign caregivers is only to foster closer economic cooperation with the two countries and not intended to plug job vacancies.

But NCCU's Mr Kawahara said the government should first work to improve working conditions in the business. 'There are a lot of Japanese with the qualifications but who do not want to become caregivers. There are also many thousands of people without regular jobs. Working conditions should be made more attractive so that we can first get more of these people to become caregivers,' he said.

'Bringing in cheap foreign labour at this stage only stifles our attempts to improve working conditions for our members.'

Tuesday, January 27, 2009

Making the case for GST roll-back

Jan 26, 2009

By Basant K. Kapur

THE Budget proposals presented to Parliament by the Finance Minister Tharman Shanmugaratnam last week contain many positive features, such as the Jobs Credit Scheme, the enhanced Workfare Supplement and the limited drawing on past reserves. However, in one important respect, it would appear that more could have been done.

As Mr Shanmugaratnam stated, the Resilience Package is 'mainly a supply-side approach, aimed at keeping jobs'. Supply side measures have been a hallmark of fiscal policy here, the justification being that in a highly open economy like ours, the stimulation of, say, consumption demand would not be particularly effective owing to high import leakages. But the facts do not entirely bear this out.

According to the Singapore Input-Output Tables 2000 (the latest available), the import content of consumption expenditure in Singapore is only 34.1 per cent. The 'total (domestic) value-added' content is 53.7 per cent, with a further 12.2 per cent comprising import duties and 'other taxes on products'. By contrast, the import content of investment expenditure is as high as 55.9 per cent, and of exports 59.2 per cent.

Stimulation of domestic consumer demand, to the extent feasible, would thus appear to be advisable. Lowering the cost of keeping workers employed will not suffice to maintain employment if there is insufficient demand for the products of firms. So both demand and supply sides deserve attention.

[See the letter below that also argues for stimulating demand, not just saving jobs.]

More specifically, as Professor Tan Khee Giap pointed out in these pages last week, domestic demand is of particular importance to our small- and medium-sized enterprises, which account for 55 per cent of our total employment, and to the wholesale, retail and commerce services sectors.

How, then, might consumption demand have been stimulated through Budget measures? The most direct measure would have been to roll back the two percentage point increase in the Goods and Services Tax (GST) that was instituted in 2007. Many observers, myself included, had argued against this increase. This year's Budget proposal to increase GST credits and to target them at the less well-off, is not likely to provide as broad-based a stimulus to consumption as an across-the-board two percentage point reduction in the GST.

This is particularly likely to be the case if what economists term the 'real balance effect' is also taken into consideration - the fact that higher prices reduce the real value of fixed-nominal-value assets (such as bank deposits), and thereby exert a negative wealth effect on consumer spending.

Some figures in this regard are instructive. In its Macroeconomic Review of January 2003, the Monetary Authority of Singapore estimated that a 1 percentage point GST increase would increase the Consumer Price Index (CPI) by about 0.4 percentage points in the same year, and by about 0.75 percentage points in total eventually. Thus, the two percentage point GST increase can be expected to increase the CPI by about 1.5 percentage points. Another way of looking at this is to say that the GST increase has contributed to the negative real interest rates earned by fixed nominal-value-assets over the past year.

What is the size of these assets? The two key items would appear to be M3 (currency in circulation plus deposits), and CPF balances. According to MAS and CPF Board figures, these amounted to about $306 billion and $136 billion respectively in 2007. Thus, a GST-induced 1.5 percentage point increase in the CPI would generate a one-time $6.6 billion reduction in the real value of these assets - a sizeable capital loss. It imposes a welfare loss to the holders of these assets, Singaporean or foreign, and also tends to diminish the attractiveness of Singapore-dollar-denominated fixed-nominal-value assets as a 'store of value'.

To be sure, not all of these assets are held by Singaporeans, and the depressing effect on consumer demand here would be correspondingly less. However, there would certainly be a negative effect. Right now, our economy needs 'all the help it can get', and even a modest stimulus to consumption from a GST roll-back would be welcome.

An estimated tax revenue loss from a 2 percentage point GST roll-back - about $1.8 billion - is well within the Government's capabilities to absorb. In fact, the revenue loss should be less than this, since the need for enhanced GST offsets would be lessened by a roll-back, and if, as I would argue, the roll-back induces an increase in consumption spending.

[The question is, would a GST roll-back stimulate demand at all? If a DVD costs me 40 cents less, would I buy more DVDs (assuming a DVD costs $20)? If a pair of shoes costs me $2 less would I buy more shoes? The problem isn't just economics. It's also psychological. It's also about consumer behaviour.]

Finally, a brief discussion of related, longer-term issues. In a recent article in this newspaper, economists Sim Moh Siong and Kit Wei Zheng pointed out that 'consumption constitutes less than 40 per cent of Singapore's GDP - and the figure has been falling consistently'. By contrast, the figure for 'another equally open economy', Hong Kong, is over 60 per cent. This certainly increases the vulnerability of Singapore to external shock. They also suggested that one reason for Singapore's low consumption-GDP ratio is the high levels of home ownership here.

This raises further issues which are worthy of investigation. It is frequently argued that high housing prices in Singapore, including prices of HDB resale flats, are due to 'market forces'. However, as the main provider of housing properties in Singapore, the Government is certainly in a position to influence market forces. Increased supply of HDB flats would tend to reduce their prices below what they would otherwise be, and induce some substitution of HDB for private accommodation, thus reducing the prices of private properties as well.

In my view, this is a longer-term policy option which deserves careful consideration. Some decline in housing prices would not be disruptive. At the very least, over the longer term, further increases in housing prices should be significantly moderated.

The writer is Professor of Economics and Director, Singapore Centre for Applied and Policy Economics, Department of Economics, National University of Singapore.


[The wonderful thing about economics is that for every argument or position taken, you can usually find 2 or 20 opposing viewpoints arguing for a counter position. A truly great economics debate will tell you that you are right, but for the wrong reasons.

The article above raises three points.

1) The argument that stimulating demand in Singapore would not lead to unduly high leakages thru imports as imports only constitute 34% of the value of consumption. (I think this means that on average for every $1 you spend, 34 cents go overseas, 54 cents goes to the Singapore business, and 12 cents goes to the govt in the form of taxes. So his point would be that the leak is only 34% and so there is still a case to be made for stimulating demand with tax rebates or handouts.)

2) GST causes inflation, which affects the value of savings and assets, specifically, M3 and CPF. In fact, the 2% GST increase resulted in a $6.6b decrease in value of these assets. Then from this point, he jumps to the conclusion that the 2% rollback will boost consumption modestly, but in the name of giving the economy "all the help it can get", we should do it.

3) Singapore's low-consumption as a ratio of GDP is because of the high levels of home ownership, and the high prices of homes in Singapore. And this is because the govt as the main provider of homes are artificially or actively keeping the supply of homes low in order to maintain the values of homes.

I can't believe he can make such arguments. Or maybe I should. As I said, for every economic viewpoint, there are maybe 20 opposing views.

On point 1 about the import component. It is not just the import value, it is also the multiplier effect. The domestic value added content of 54% is what gets multiplied in the Singapore economy. That is for every $1 spent, only 54 cents goes to the business as salaries, wages, and profit. And this then becomes the disposable income that is used to buy other goods, of which only 54% goes into wages and salaries, etc. and so on. So a 34% leakage may be quite significant. The professor provides no comparative data on other economies' leakage.

On point 2, the "GST devalues assets and savings" argument is just a red herring with absolute no connection to the point he was trying to argue, which is that the 2% GST increase should be rolled back. Even he admits that the roll back will have a modest impact on the economy. I would argue that the impact would be negligible, not even modest. If you want to boost consumption, you need to make the people feel richer and this you do so by giving the person enough cash to affect his disposable income. GST cuts won't impart this feeling. A 2% GST increase is a lot. A 2% GST cut is nothing. This is the psychology of the consumer.

On point 3, it would be more convincing if the professor addresses these points:
a) Are property prices higher in Singapore or in Hong Kong? My impression is that HK prices are higher. So there goes his point.
b) Assuming I am mistaken (about the above), There were a backlog of unsold HDB flats above 6 - 7 years ago. It took HDB several years to clear their stock. It is not simply a matter of supply and demand. The housing market in Singapore is not as simple as capitalistic economics. Added to the mix are a whole bag of social engineering policies, as well as the CPF factor. CPF savings are a distorter of the market. It artificially boosts the prices of homes to positive and negative effects.  And without addressing this effect, his analysis is flawed at best and incomplete at worst.

This article just goes to show that even educated people are also emotional people, because I can't imagine how else he can pass off the flimsy analysis as a rationale for rolling back the GST.]

Jan 26, 2009

Better to create demand, rather than save jobs

IN THIS global recession, the Government announced the Budget statement a month earlier than usual.

The main concerns addressed included saving jobs so employees remain employable and their way of life is not much affected; providing more financial help to vulnerable groups such as the needy and the elderly; and giving more incentives in terms of tax rebate or tax reduction to companies and individuals.

On saving jobs, I have a different angle.

Why save the job of a salesman (for example) when he has no customers? Let me explain.

A salesman sells a product, say, TV sets. But if there are no customers to buy TV sets, why is the salesman needed?

I suggest we create demand rather than merely save jobs.

If more people buy TV sets (that is, demand has been created), the salesman is much needed. Then his job is saved with earnings from the sale of TV sets.

Likewise, if there is demand for goods and services, there will be a plentiful supply of jobs.

I strongly advise against giving handouts without strings attached, except to the needy and the elderly.

There are people who rely on financial assistance and handouts, even though they are strong and able.

They see no incentive to get a job since the Government has measures in place to help every citizen. They are like leeches on society because the financial assistance and handouts do not fall freely from the sky. The money comes from taxpayers.

There is a saying that applies here: 'Give a man a fish, and you have fed him for today. Teach a man to fish, and you have fed him for a lifetime.'

I hope the Government will seriously consider creating demand rather than merely saving jobs.

Jasmin Lim (Ms)

[This letter is simplistic, and looks only at the micro-picture. If the TV salesman is out of a job, he will have no income and he will cut back on his expenditure until he finds a job. This will reduce the demand for other goods and services, like shoes and clothes. If enough TV and other salesman lose their jobs, the shoes and clothes sales persons will lose their jobs and their respective businesses will close. So yes, give a man a job, and he will have disposable income to generate demand for other goods. The danger is to let jobs be lost thus creating a larger pool of unemployed who then become unemployable and become welfare recipients just looking for their daily fish.

So look at the larger picture. In this unprecedented crisis, the govt is applying unprecedented measures like saving jobs. In the past the Govt has never saved jobs for the sake of saving jobs. If your job is redundant, it is redundant, and off you go. Retrain, reskill and come back when you have a marketable skill. But with a broad-based Great depression-like economic downturn, different measures unprecedented measures are required.]

Monday, January 26, 2009

Triumph over rhetorical flourishes

Jan 25, 2009

Obama's inauguration speech was convincing precisely because he didn't aim to impress

By Janadas Devan

The expectations were too high.

Days before Mr Barack Obama's inauguration as the 44th President of the United States, the usually sober MsMichiko Kakutani of The New York Times spoke of him as the most literate statesman America has had since Abraham Lincoln. The Financial Times printed a hagiography by Mr Sam Leith, the Literary Editor of the Daily Telegraph, that assured us that Mr Obama was 'the inheritor of the oratorical and political traditions of Abraham Lincoln, Martin Luther King and Jesus Christ'.

Professor James Wood, a Harvard University literary critic, produced a detailed analysis of one of Mr Obama's speeches in The New Yorker, treating it as though it were a poem by Shakespeare or John Donne. And Ms Charlotte Higgins, The Guardian's chief arts writer, wrote a much-circulated article that argued that Mr Obama was the first Ciceronian politician since - well Cicero himself it looked like, so rhetorically superior he seemed to every other statesman over the past 2,000 years.

Look, he uses the tricolon, they cooed.

The tricolon is a series of threes. Julius Ceasar's veni, vidi, vici ('I came, I saw, I conquered') and Lincoln's 'government of the people, by the people, for the people' are examples. So is 'rice, kangkong, blachan'. The ability to produce a tricolon does not by itself guarantee the possibility of a great thought.

Oh he uses synthetons, they swooned.

Synthetons are twos - like 'Shakespeare and Donne' or 'men and women'. The ability to deploy synthetons...

Oh look, he used a lovely anaphora, said one. Did you notice that delicious epistrophe, asked another.

An anaphora is the repetition of a word or phrase at the beginning of a series of sentences: 'Mad world! Mad kings! Mad composition!' (Shakespeare). An epistrophe is the repetition of a word or phrase at the end of a series of sentences: 'There ain't any answer. There ain't going to be any answer. There never has been an answer. That's the answer.' (Gertrude Stein).

The ability to deploy anaphoras or epistrophes does not by itself... - my repetition here of certain words I had used earlier are examples of both anaphoras and epistrophes, and proves what the sentence asserts: My ability to use these rhetorical figures does not by itself mean that I am the rhetorical, let alone intellectual or spiritual, equivalent of Lincoln, King or Christ.

The expectations were too high; Mr Obama was bound to fall short; he did - or so it seemed to his legion of literary admirers. The New York Times, The Financial Times, The Guardian, CNN and whatnot had to admit there were no equivalents of Franklin Roosevelt's 'nothing to fear', John Kennedy's 'ask not' or Lincoln's 'Though passion may have strained it must not break our bonds of affection', in Mr Obama's inauguration speech.

As Ms Peggy Noonan of The Wall Street Journal observed: 'It was not an especially moving or rousing speech...There was not a sentence or thought that hit you in the chest and entered your head not to leave.'

All the same, it was a superbly crafted speech, even poetic in parts. There were allusions aplenty: To Winston Churchill - 'every so often the (presidential) oath is taken amidst gathering clouds and raging storms'; to 1 Corinthians 13 - 'We remain a young nation, but in the words of Scripture, the time has come to set aside childish things'; to Shakespeare's Richard III - 'America, in the face of our common dangers, in this winter of our hardship, let us remember...'; even to his predecessor, Mr George W. Bush - 'For those who seek to advance their aims by inducing terror...we say to you now that our spirit is stronger and cannot be broken; you cannot outlast us, and we will defeat you'.

The 2008 Nobel laureate in economics, Professor Paul Krugman, noticed an extensive lifting of something John Maynard Keynes had said during the Great Depression: 'The resources of nature and men's devices are just as fertile and productive as they were. The rate of our progress towards solving the material problems of life is not less rapid. We are as capable as before of affording for everyone a high standard of life...But today we have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand.'

Mr Obama, in what must have been a conscious echo of Keynes, proclaimed: 'Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished. But our time of standing pat, of protecting narrow interests and putting off unpleasant decisions - that time has surely passed.'

Few, apart from professors of economics or literary critics, would have noticed these allusions to Keynes or Shakespeare or the Bible. MrObama - or his speechwriters, whom he reportedly edits closely - nevertheless worked them in. It shows a degree of literary consciousness, an assiduity of craftsmanship, that is quite rare among contemporary American politicians.

Were there splendid tricolons in the speech. Yes - beginning with the first sentence: 'I stand here today humbled by the task before us, grateful for the trust you have bestowed, mindful of the sacrifices borne by our ancestors.'

Were there anaphoras? Yes - plenty, for the English language, at least since the King James Bible, knows of no more effective device to convey a sense of uplift. Thus, we got:

'For us, they packed up their few worldly possessions and travelled across oceans...For us, they toiled in sweatshops...For us, they fought and died in places like Concord and Gettysburg, Normandy and Khe Sanh.'

(That last sentence, incidentally, also packed in a couple of synthetons.)

But these rhetorical figures were not the reason why the speech was convincing. Rhetoric as such cannot produce thought. The thought comes first; the appropriate form follows.

Ms Noonan was right: There was not a sentence in the speech 'that hit you in the chest and entered your head not to leave'. But it is precisely for that reason that I felt the speech was among Mr Obama's most successful. Unlike many of his previous blockbusters, it didn't aim to impress by reaching for an ersatz 'ask not' or 'nothing to fear'.

'Everything that can be said, can be said clearly,' the philosopher Ludwig Wittgenstein said once. That happens to be an example of an anadiplosis - the repetition of a word in one phrase ('can' here) in the first word of the subsequent phrase. But Wittgenstein need not have known that (and probably didn't) in order to know that 'everything that can be said, can be said clearly'.

If Mr Obama becomes a good president, it won't be because he is a good rhetorician. Rather, it would be because he (and his team) thought things through clearly.

Sunday, January 25, 2009

Feeling half a woman

Jan 25, 2009

Am I less of a woman because I am not a mother and a wife? I sometimes feel that way

By Sumiko Tan

I always feel a bit awkward when I bump into friends with their children in tow.

I don't quite know how to behave with the kids. I tend to either overdo the 'oh what a cute/handsome/pretty

son/daughter you have' routine or swing the other way and ignore the child completely.

I was at a mall one Sunday when I was struck by a handsome little boy walking towards me. He was about eight and had brown hair and startlingly light-blue eyes.

I glanced to his side and discovered that I knew the woman who was with him. It was a friend from way back whom I'd lost touch with.

We chatted a bit, all the while with me marvelling at how cute her son was.

In this instance, he really is an exceptionally good-looking boy so I wasn't lying or exaggerating, but I wonder how much of my gushy chatter was also due to a bit of nerves.

I've realised that I don't really know how to behave around children.

As someone who has never been a mother and with the only children in my life (my niece and nephew) living in another country, I am unfamiliar with young people and so find myself acting unnaturally in their presence. I lack the instincts that parenthood brings.

To use an analogy which I hope won't offend animal-hating parents: Because I love dogs and have had so many, I'm at home with them.

Whenever I see a dog, I am drawn to it and know what to do - when to pat it and when not to, how it likes to be tickled a certain way, and I'll think nothing of flicking away the bits of eye dirt on the face of a stranger's dog.

It's a different matter with children.

No, this is not another column about feeling broody and wishing I had children. I'm so over that.

But it occurred to me that because I've never given birth - and never ever will - my life experiences have been very different from those of the majority of women who are mothers.

And because I have also never been a wife - and probably never would - I have not experienced the things that 'normal' women go through.

Am I less of a woman because of that? I sometimes feel so.

Take the friend I saw at the mall. The last time we met a decade ago, she was single, like me. In the interim, she had not only got married but had also begotten several children.

My mind boggles at how eventful her life must have been in the past 10 years - meeting her life partner, preparing to get married, setting up a home, adapting to being a wife, going through pregnancy and then coping with motherhood.

While all this is alien to me, it's what 'normal' women go through; marriage and parenthood are part of the natural circle of life.

My life, on the other hand, has been unnaturally arrested.

The cares and concerns I faced in my 30s were not that much different from those when I was in my 20s, and now that I'm in my 40s, not that much has changed either.

I'm not complaining. As I've often said, there are loads of things to cheer about in being single.

But as age beckons and maybe because I'm no longer so footloose and fancy free, I'm also beginning to wonder if I've missed out on the experiences that most women go through, and if I am less complete as a person because of it.

I feel a twinge of this when my sister regales me with tales of her children.

She has an especially good connection with her son, who's five, and was raving to me recently about how chivalrous he is.

They were out on a nature walk and the boy took it upon himself to clear the path for her; he ran ahead to lift the brambles so that she could walk along unobstructed. Ever so often he'd also stop and shout: 'Mama, are you okay?'

How sweet, I told my sister, and thought to myself that, well, that's something I'll never get to experience, the unconditional love of a boy.

It's not that I envy her - or any parent - their children, no, not at all. But in my idle moments I am curious: What would my life have been like had I been one too? More fulfilled? Less self-centred? Frazzled?

It's the same with not being a wife.

Again, it's not that I look on enviously at couples. I really don't. I'm happy with my life.

But once in a while, it hits me that maybe there's something wrong with me.

It doesn't matter how I love my single life. It doesn't matter that I have all the personal space in the world. It doesn't matter what I've achieved in my career.

It doesn't matter how I know it's better to be alone than to be alone in a marriage. It doesn't matter that I've seen how marriage isn't a binding contract or a guarantee of a happy-ever-after.

It doesn't matter how many boyfriends I've had or might have. It doesn't matter if there are men who care for my well-being.

The fact remains that I am not married, and I say this not in a self-pitying way but as an acknowledgment of a, to me, puzzling fact.

And the fact remains that no one has been mad enough about me - and I for him - for us to embark on a journey together.

The fact remains that no matter how fun singlehood is, there are nights when I lie in my nice big bed all by my lonesome self (well, actually my dog sleeps with me), and think: Is there something wrong with me? Is this all there is to life?

Why aren't I married? Am I not good enough? Am I not lovable enough? Am I not capable of loving deeply and permanently? Have I been too fussy? Do I have bad karma? Don't I deserve more? My mother was married, my sister is married, Michelle Obama is married, the woman who cleans the office pantry is married, so many 'normal' women are married, why not me?

Have I failed as a woman? Am I inadequate? Have I become nothing more than a 'singles' statistic?

But, ah well, these feelings come but mostly these feelings go. If this is meant to be the script of my life, then why bother trying to rewrite it?

It is often said that life is what you make of it, so I shall be thankful for what I have rather than what it could have, should have, would have been. The alternative could in fact have been worse.

[One thing she's right. Her problems and concerns have not changed. She's still as angsty as a teenage girl. Her protestations that she is over all that rings as "protests too much". Is she convincing us, or trying to convince herself? Can anyone be stuck in such angsty limbo and hold a job as editor?

Conspiracy theory time: What if she is the old maid, "anti-role model" the govt wants to bogeyman the rest of us (or at least the single graduate successful career woman) into getting married? What if her primary mission is to write all this angsty crap? Be the voice of insecurity of single women everywhere (or at least in Singapore)? 20 - 25 years ago, Lee Kuan Yew opened the Great Marriage Debate and focused on the single graduate woman, and here, 25 years later is the epitome of that subject writing about the lost years. Coincidence or conspiracy. As Oogway said (in Kung Fu Panda), there are no accidents. :-)]

Samy Vellu's challenger sacked

Jan 25, 2009

KUALA LUMPUR - A MAN who wanted to challenge Datuk Seri S. Samy Vellu for the president's post in the Malaysian Indian Congress (MIC) has been sacked.

The sacking of Mr M. Muthupalaniappan clears the road for Mr Samy to be elected unchallenged as president of the biggest Indian party in Malaysia for an unprecedented 11th term.

Mr Muthupalaniappan, 68, a former MIC vice-president, has 14 days to appeal against the decision. He had been the party's Negeri Sembilan chief for 16 years.

The sacking reflected Mr Samy's nervousness at facing a challenge to his leadership at a time when the MIC and himself are at their weakest after being beaten badly in last March's general election.

The party claims a membership of 600,000 from a total Indian population of about two million in Malaysia.

On Tuesday, Mr Muthupalaniappan had faced the three-man MIC disciplinary committee for issuing press statements against the interests of the party.

He had said then: 'The whole process is an eyewash and pre-empted action to stop me from contesting in the forthcoming MIC presidential election.'

Mr Samy, 72, has led the MIC since 1979, but was weakened after he lost his long-held constituency in Perak in the general election. Mr Muthupalaniappan said yesterday: 'No right-thinking person will accept him as the president of the MIC. He cannot claim to be the popular leader of the Indian community.'

Mr Samy has over the years purged the MIC of his opponents and surrounds himself with loyalists, including deputy president G. Palanivel.

Bernama, The Star/Asia News Network

[It is interesting that this article, attributed to Bernama, openly says that Samy has over the years purge the MIC of his opponents and detractors and surrounds himself with loyalist (read: cronies, sychophants, and parasites). He has led the party for 3 years and the last outing was when they kicked him out of parliament and he still has the thick skin to continue to try to lead. No succession plans. No future. No plans. ]

Saturday, January 24, 2009

Now for action all round to save jobs

Jan 24, 2009

Govt measures call for response from banks, employers and landlords

By Sue-Ann Chia

A DAY after the Government unveiled a $20.5 billion package to deal with the downturn, this message rang out to employers, banks and retail landlords: It's your turn to take the help given and do the right thing.

For employers, it means keeping workers on the payroll, now that the Government is pitching in to subsidise wage bills.

For banks, it means lending to companies, now that the Government will bear more risk of the loans defaulting.

And for landlords, it means passing savings from property tax rebates to their shop tenants.

Saving jobs was uppermost on Minister Mentor Lee Kuan Yew's mind, when asked his reaction to this year's Budget.

'The Budget is meant to save jobs,' he told reporters during a visit to the East Coast Park.

'That's the first thing we have to do because there's no better way of fighting this recession than to save jobs.'

He said there was a big question over when the downturn would end.

'We're prepared for all eventualities. It might last one year, two years, may go on to three years. We don't know, but we've got to be prepared for it,' he said.

The lower-income and those out of work or retrenched would need help to get through this rough patch, he noted. The $2.6 billion worth of measures to help them were neither over-generous nor ungenerous, he said.

A key plank of the Budget is a novel $4.5 billion Jobs Credit Scheme through which the Government will pay a portion of employers' wage bill - 12 per cent of the first $2,500 of the monthly wage of Singaporeans and permanent residents.

But the question is whether employers will, in turn, help their workers.

'With the Government doing its part, there is now a great deal of moral responsibility put onto businesses to do their part - keep jobs intact,' said political observer Gillian Koh from the Institute of Policy Studies.

Mr Koh Juan Kiat, executive director of the Singapore National Employers' Federation, said the subsidy could mean a 5 to 10 per cent cut in wage costs, which was 'quite significant'. But he felt it was too early to judge how employers will act.

The labour movement was optimistic.

In a statement, labour chief Lim Swee Say and NTUC president John De Payva said that the $20.5 billion 'resilience package' would have a significant impact on workers, companies and the economy.

'This is reflective of the Government's clear commitment and best efforts to save jobs for Singaporeans,' they added.

'It gives us tremendous assurance, encouragement and confidence to stay the path of tripartism, a unique advantage Singapore has over other nations.'

Pasir Ris-Punggol GRC MP Ahmad Magad thinks it will all boil down to companies' cash flow.

'It will undoubtedly save some jobs, especially in bigger organisations which have deeper pockets,' he said.

But for smaller companies, he added, much would depend on how much revenue they can generate.

This is where the second plank of the Budget - access to bank credit - comes in.

The Government introduced a Special Risk Sharing Initiative yesterday which will see it set aside $5.8 billion in capital to take on more risk in bank lending to companies.

Giving details yesterday, Trade and Industry Minister Lim Hng Kiang said he hoped banks would now play their part and extend credit to companies that need working capital.

[Are businesses supposed to be moral entities? I supposed being run by humans and because humans either seek to be moral or see some benefit in being moral, by extension, the business they run will have some inclination to behave morally. But really, if your business is failing and there is no hope on the horizon, do you continue to run so your employees have a job, but you are making losses each month? It still comes down to sustainability, and long term feasibility. Even if a company is profitable up to the current period, if the forecast is all bad news with no end in sight and no hope for a rebound for the company, it would make more sense to end the business.]

New KL rules could hit car dealers

Jan 24, 2009

Approved permit system being overhauled in bid to stem abuse
By Leslie Lopez

KUALA LUMPUR: Malaysia's controversial import-licensing system for luxury cars is undergoing a major shake-out that threatens to put several dozen car dealers out of business.

The turmoil in the sector, which is worth several hundred million dollars annually, is a result of new rules the government imposed this month to plug loopholes in the licensing system called Approved Permits, or APs.

The rules came about after a yet-to-be published government audit exposed serious irregularities.

The audit looked into the business practices of a small clique of well-connected Malay businessmen who received their AP allocations each year.

The audit revealed that a large number of the businessmen were hawking their import permits to mainly ethnic Chinese car dealers who dominate the country's luxury vehicle dealerships, documents reviewed by The Straits Times show.

The government audit also revealed that many of the companies involved in the AP business were poorly managed, lacked adequate funding and in some extreme cases even forged government documents when importing luxury cars.

It was not clear whether action will be taken against them.

To stem the abuses, the government has temporarily ceased the issue of new APs, ordered the AP companies to beef-up their financial position and banned the trading of these permits to car dealers.

The last measure, industry executives say, could force many Chinese car dealerships out of business.

Several Chinese-owned car dealers, who spoke on condition of anonymity, said that the new rules have disrupted imports and their purchases of APs from Malay businessmen are being questioned by the authorities.

'Car sales are already down because of the economic crisis and the new rules only make doing this business tougher,' said one owner of a luxury car dealership in the Petaling Jaya suburb outside Kuala Lumpur.

'We bear the financial risk in this business by importing the cars. But if we are also going to be investigated for using APs then there is no point staying in the trade,' griped another car dealer in KL.

All cars not assembled in Malaysia must have an AP, which are issued for free by the government to a small band of Malay licensees.

The models include limited editions of Mazdas and Toyotas, along with the Porsches and Ferraris.

Typically, the APs are then sold to car distributors for prices ranging from RM10,000 (S$4,138) to as much as RM40,000 each.

These costs, including taxes imposed by the government, are then passed on to Malaysian consumers who generally pay some of the highest prices for cars in the region.

The AP system for imported vehicles began in the mid-1970s to encourage ethnic Malay businessmen to venture into car distribution, which was dominated by foreigners and ethnic Chinese.

When the Malaysian government began national car production through Proton, the AP scheme was adapted to protect the domestic car market.

The system later morphed into a symbiotic relationship between the Malay AP beneficiaries and Chinese motor dealers.

Despite the glaring abuses to the scheme, the Malaysian government is reluctant to scrap the policy which foreign car companies have long maintained is a trade barrier that violates the spirit of the Asean Free Trade Area.

International Trade and Industry Minister Muhyiddin Yassin told reporters recently that the government, which had originally promised to scrap the AP system by next year, had decided to extend the licensing arrangement.

He did not detail reasons for the extension, but industry executives say that it is because of the strong lobby from the policy's beneficiaries, who count among them powerful interests from Umno.

[Maybe the subtle nuances of this scheme escapes me, but as I understand it, the govt issues  AP for free to Malay licensees, who then sell these AP to Chinese car dealers. This is just institutionalised corruption. What value has the Malay licensees added to the scheme? ]

Friday, January 23, 2009

Few whales survive beaching

Jan 23, 2009

SYDNEY - MORE than 40 sperm whales have died after a pod of about 50 became stranded off southern Australia, an official said on Friday as rescuers struggled to reach the survivors.

By the time the pod, which is trapped on a sandbar 150m offshore from Perkins Island on the north-west coast of the island state of Tasmania, was discovered late Thursday most had perished.

'They think that there may be seven or eight that are alive,' spokesman for Tasmanian Parks and Wildlife Services Liz Wren told AFP.

Ms Wren said rescue options would be difficult because of the massive size of the animals and the fact that the pod was accessible only by water.

'The males are as big as 18 metres, females 12 metres, weighing in between 20 and 50 tonnes,' she said.

She said while rescuers had been able to save some long-finned pilot whales after another mass stranding on a Tasmanian beach in November 'sperm whales are an entirely different kettle of fish and much more difficult.'

'And it's much harder on them when they strand because the great weight of their bodies puts more pressure on their internal organs,' she said.

Officials were now on their way to the pod to see whether any of the animals could be saved, she said.

Ms Wren said authorities were assessing how to remove the carcasses of the dead whales, which could pose a problem because they are stuck on the edge of a major navigation channel for a fishing port.

More than 150 long-finned pilot whales died, with many sustaining deep cuts after thrashing onto rocks, after beaching themselves on the remote west coast of Tasmania state in November.

Australia's southern island of Tasmania experiences about 80 per cent of whale beachings in the country, a phenomenon so far unexplained by science. -- AFP

[Ever since the Sea Shepherd started harassing Japanese whaling ships, there seems to be more reports of beach whales. 50 sperm whales is quite a big pod. Wouldn't it be ironic if it turns out that whaling somehow reduces whale beaching?]

Be grateful for the reserves

Jan 23, 2009

THE recession Budget out yesterday has a projected deficit of $8.7 billion. The current financial year winding down will show a revised, higher deficit of $2.2 billion. Of the new Budget, $4.9 billion will be drawn from the reserves to fund part of countercyclical spending, specifically to keep people employed and to help businesses survive the slump with an array of concessions. Reading between the lines, Finance Minister Tharman Shanmugaratnam's survey of the deepening global dip ('... no assurance 2010 will be better than 2009'), supplementary allocations in the course of the year could become necessary. If any satisfaction can be had from deficit financing, it is that Singapore can afford it because it has ample reserves gathered carefully over a stretch of bountiful years. These now are lean times, the worst in living memory. Singaporeans cannot begin to imagine how much worse off they would be if the Government had to borrow from future generations to pay for consumption, for the most part.

This is why it was prudent to continue making Budget allocations to invest in human capital and productive fixed assets, such as transport networks and learning institutions, so that the nation can make the most of coming growth phases. But for the next year or two, at the least, the Budget focus on saving jobs, facilitating bank lending and reducing fixed costs in business and industry is priority. The Jobs Credit plan that will defray a portion of companies' wage costs is a taxpayer subsidy to business operators. It is a smart way of averting a CPF cut in employers' contributions, which would hurt the entire nation's workers without helping business much. The Treasury has calculated the boon to employers of Jobs Credit payments as equivalent to a 9 percentage point cut in the employer CPF rate. The Government's intent to have as many workers as possible kept in employment is acute; let us hope employers prove worthy of the financial help they are getting. Companies are also having their burden lightened with reductions in state rent and corporate taxes, besides the Government shouldering more of the risk in bank lendings.

This Budget has a strong element of social responsibility to it. For the support given, companies are not to retrench workers without thought and banks are expected to lend to corporates and small businesses more willingly. As for social support for distressed families and even the middle class (via an income tax rebate), this was pretty much well rehearsed, as in previous downturns. Payments are generous. The key to navigating the recession safely is that paid employment does not collapse.

Thursday, January 22, 2009

Nicotine-free tobacco?

Jan 22, 2009

TOKYO - JAPANESE researchers said on Thursday they had identified a gene that transports nicotine through tobacco plants, a discovery that could pave the way to cigarettes free of the carcinogen.

It was already known that tobacco plants produce nicotine in their roots and carry it to their leaves, but it is the first time in the world that a transporter gene was identified, according to one of the researchers.

Experts at Kyoto University's Research Institute for Sustainable Humanosphere found the gene Nt-JAT1 transports nicotine to vacuoles, or bags accumulating water and other substances in the cells of tobacco leaves.

They confirmed yeasts with Nt-JAT1 carry nicotine in experiments performed jointly with Ghent University of Belgium, the research team said in a statement.

The finding 'raised the possibility of developing a variety of tobacco that does not store nicotine in its leaves,' said the team led by professor Kazufumi Yazaki.

'This would enable smokers to stem nicotine addiction without using anti-smoking goods,' it said, adding it would also be good for nonsmokers if tobacco smoke did not contain nicotine.

The transport gene could be used not only for the tobacco industry but also for medical and agricultural purposes, said Nobukazu Shitan, assistant professor at the Japanese institute who is in the team.

'I wonder if cigarettes containing little nicotine would sell well. But the gene could also transport compounds that could be used as medicine,' he told AFP.

Nicotine is part of a group of commonly found compounds called alkaloids.

Some alkaloids derived from plants are used to treat cancer and the gene discovery could be used to encourage plants to build up higher levels of useful alkaloids, he said.

Several other genes are also believed to be involved in carrying nicotine through tobacco plants although research on those has yet to be completed, Prof Shitan said.

The finding of the study will be published in the online version of the Proceedings of National Academy of Science this week. -- AFP

[If salt loses its saltiness, is it still salt? If tobacco loses its nicotine, is it still nicotine? if cigarettes can have a max limit for nicotine and this max limit is lowered gradually over time, can we wean a whole generation off the fag?]

Obama sets new rules

Jan 22, 2009

WASHINGTON - PRESIDENT Barack Obama's first public act in office on Wednesday was to institute new limits on lobbyists in his White House and to freeze the salaries of high-paid aides, in a nod to US economic turmoil.

Announcing the moves while attending a ceremony in the Eisenhower Executive Office Building to swear in his staff, Mr Obama said the steps 'represent a clean break from business as usual.'

The pay freeze, first reported by The Associated Press, would hold salaries at their current levels for the roughly 100 White House employees who make more than US$100,000 (S$150,000) a year.

'Families are tightening their belts, and so should Washington,' said the new president, taking office amid startlingly bad economic times that many fear will grow worse.

Those affected by the freeze include the high-profile jobs of White House chief of staff, national security adviser and press secretary. Other aides who work in relative anonymity also would fit into that group if Mr Obama follows a structure similar to the one George W. Bush set up.

Mr Obama's new lobbying rules will not only ban aides from trying to influence the administration when they leave his staff. Those already hired will also be banned from working on matters they have previously lobbied on, or to approach agencies that they once targeted.

The rules also ban lobbyists from giving gifts of any size to any member of his administration. It wasn't immediately clear whether the ban would include the traditional 'previous relationships' clause, allowing gifts from friends or associates with which an employee comes in with strong ties.

The new rules also require that anyone who leaves his administration is not allowed to try to influence former friends and colleagues for at least two years. Mr Obama is requiring all staff to attend an ethics briefing like one he said he attended last week.

Mr Obama called the rules tighter 'than under any other administration in history.' They followed pledges during his campaign to be strict about the influence of lobbyist in his White House.

'The new rules on lobbying alone, no matter how tough, are not enough to fix a broken system in Washington,' he said. 'That's why I'm also setting rules that govern not just lobbyists but all those who have been selected to serve in my administration.'

In an attempt to deliver on pledges of a transparent government, Mr Obama said he would change the way the federal government interprets the Freedom of Information Act. He said he was directing agencies that vet requests for information to err on the side of making information public - not to look for reasons to legally withhold it - an alteration to the traditional standard of evaluation.

Just because a government agency has the legal power to keep information private does not mean that it should, Mr Obama said.

Reporters and public-interest groups often make use of the law to explore how and why government decisions were made; they are often stymied as agencies claim legal exemptions to the law.

'For a long time now, there's been too much secrecy in this city,' Mr Obama said.

He said the orders he was issuing on Wednesday will not 'make government as honest and transparent as it needs to be' nor go as far as he would like.

'But these historic measures do mark the beginning of a new era of openness in our country,' Mr Obama said. 'And I will, I hope, do something to make government trustworthy in the eyes of the American people, in the days and weeks, months and years to come.' -- AP

[A step towards addressing corruption and undue influence.]

Obama's Inauguration Speech

I stand here today humbled by the task before us, grateful for the trust you have bestowed, mindful of the sacrifices borne by our ancestors. I thank President Bush for his service to our nation, as well as the generosity and cooperation he has shown throughout this transition.

Forty-four Americans have now taken the presidential oath. The words have been spoken during rising tides of prosperity and the still waters of peace.

Yet, every so often the oath is taken amidst gathering clouds and raging storms. At these moments, America has carried on not simply because of the skill or vision of those in high office, but because We the People have remained faithful to the ideals of our forbearers, and true to our founding documents.

So it has been. So it must be with this generation of Americans.

That we are in the midst of crisis is now well understood. Our nation is at war, against a far-reaching network of violence and hatred. Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age. Homes have been lost; jobs shed; businesses shuttered. Our health care is too costly; our schools fail too many; and each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet.

These are the indicators of crisis, subject to data and statistics. Less measurable but no less profound is a sapping of confidence across our land – a nagging fear that America’s decline is inevitable, and that the next generation must lower its sights.

Today I say to you that the challenges we face are real. They are serious and they are many. They will not be met easily or in a short span of time. But know this, America – they will be met.

On this day, we gather because we have chosen hope over fear, unity of purpose over conflict and discord.

On this day, we come to proclaim an end to the petty grievances and false promises, the recriminations and worn out dogmas, that for far too long have strangled our politics.

We remain a young nation, but in the words of scripture, the time has come to set aside childish things. The time has come to reaffirm our enduring spirit; to choose our better history; to carry forward that precious gift, that noble idea, passed on from generation to generation: the God-given promise that all are equal, all are free, and all deserve a chance to pursue their full measure of happiness.

In reaffirming the greatness of our nation, we understand that greatness is never a given. It must be earned. Our journey has never been one of short-cuts or settling for less. It has not been the path for the faint-hearted - for those who prefer leisure over work, or seek only the
pleasures of riches and fame. Rather, it has been the risk-takers, the doers, the makers of things - some celebrated but more often men and women obscure in their labor, who have carried us up the long, rugged path towards prosperity and freedom.

For us, they packed up their few worldly possessions and traveled across oceans in search of a new life.

For us, they toiled in sweatshops and settled the West; endured the lash of the whip and plowed the hard earth.

For us, they fought and died, in places like Concord and Gettysburg; Normandy and Khe Sahn.

Time and again these men and women struggled and sacrificed and worked till their hands were raw so that we might live a better life. They saw America as bigger than the sum of our individual ambitions; greater than all the differences of birth or wealth or faction.

This is the journey we continue today. We remain the most prosperous, powerful nation on Earth. Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished. But our time of standing pat, of protecting narrow interests and putting off unpleasant decisions – that time has surely passed. Starting today, we must pick ourselves up, dust ourselves off, and begin again the work of remaking America.

For everywhere we look, there is work to be done. The state of the economy calls for action, bold and swift, and we will act – not only to create new jobs, but to lay a new foundation for growth. We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together. We will restore science to its rightful place, and wield technology’s wonders to raise health care’s quality and lower its cost. We will harness the sun and the winds and the soil to fuel our cars and run our factories. And we will transform our schools and colleges and universities to meet the demands of a new age. All this we can do. And all this we will do.

Now, there are some who question the scale of our ambitions – who suggest that our system cannot tolerate too many big plans. Their memories are short. For they have forgotten what this country has already done; what free men and women can achieve when imagination is joined to common purpose, and necessity to courage.

What the cynics fail to understand is that the ground has shifted beneath them – that the stale political arguments that have consumed us for so long no longer apply. The question we ask today is not whether our government is too big or too small, but whether it works – whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified. Where the answer is yes, we intend to move forward. Where the answer is no, programs will end. And those of us who manage the public’s dollars will be held to account – to spend wisely, reform bad habits, and do our business in the light of day – because only then can we restore the vital trust between a people and their government.

Nor is the question before us whether the market is a force for good or ill. Its power to generate wealth and expand freedom is unmatched, but this crisis has reminded us that without a watchful eye, the market can spin out of control – and that a nation cannot prosper long when it favors only the prosperous. The success of our economy has always depended not just on the size of our Gross Domestic Product, but on the reach of our prosperity; on our
ability to extend opportunity to every willing heart – not out of charity, but because it is the surest route to our common good.

As for our common defense, we reject as false the choice between our safety and our ideals. Our Founding Fathers, faced with perils we can scarcely imagine, drafted a charter to assure the rule of law and the rights of man, a charter expanded by the blood of generations. Those ideals still light the world, and we will not give them up for expedience’s sake. And so to all other peoples and governments who are watching today, from the grandest capitals to the small village where my father was born: know that America is a friend of each nation and every man, woman, and child who seeks a future of peace and dignity, and that we are ready to lead once more.

Recall that earlier generations faced down fascism and communism not just with missiles and tanks, but with sturdy alliances and enduring convictions. They understood that our power alone cannot protect us, nor does it entitle us to do as we please. Instead, they knew that our power grows through its prudent use; our security emanates from the justness of our cause, the force of our example, the tempering qualities of humility and restraint.

We are the keepers of this legacy. Guided by these principles once more, we can meet those new threats that demand even greater effort – even greater cooperation and understanding between nations. We will begin to responsibly leave Iraq to its people, and forge a hard-earned peace in Afghanistan. With old friends and former foes, we will work tirelessly to lessen the nuclear threat, and roll back the specter of a warming planet. We will not apologize
for our way of life, nor will we waver in its defense, and for those who seek to advance their aims by inducing terror and slaughtering innocents, we say to you now that our spirit is stronger and cannot be broken; you cannot outlast us, and we will defeat you.

For we know that our patchwork heritage is a strength, not a weakness. We are a nation of Christians and Muslims, Jews and Hindus – and non-believers. We are shaped by every language and culture, drawn from every end of this Earth; and because we have tasted the bitter swill of civil war and segregation, and emerged from that dark chapter stronger and more united, we cannot help but believe that the old hatreds shall someday pass; that the lines of tribe shall soon dissolve; that as the world grows smaller, our common humanity shall reveal itself; and that America must play its role in ushering in a new era of peace.

To the Muslim world, we seek a new way forward, based on mutual interest and mutual respect. To those leaders around the globe who seek to sow conflict, or blame their society’s ills on the West – know that your people will judge you on what you can build, not what you destroy. To those who cling to power through corruption and deceit and the silencing of dissent, know that you are on the wrong side of history; but that we will extend a hand if you are willing to unclench your fist.

To the people of poor nations, we pledge to work alongside you to make your farms flourish and let clean waters flow; to nourish starved bodies and feed hungry minds. And to those nations like ours that enjoy relative plenty, we say we can no longer afford indifference to suffering outside our borders; nor can we consume the world’s resources without regard to effect. For the world has changed, and we must change with it.

As we consider the road that unfolds before us, we remember with humble gratitude those brave Americans who, at this very hour, patrol far-off deserts and distant mountains. They have something to tell us today, just as the fallen heroes who lie in Arlington whisper through the ages. We honor them not only because they are guardians of our liberty, but because they embody the spirit of service; a willingness to find meaning in something greater than
themselves. And yet, at this moment – a moment that will define a generation – it is precisely this spirit that must inhabit us all.

For as much as government can do and must do, it is ultimately the faith and determination of the American people upon which this nation relies. It is the kindness to take in a stranger when the levees break, the selflessness of workers who would rather cut their hours than see a friend lose their job which sees us through our darkest hours. It is the firefighter’s courage to storm a stairway filled with smoke, but also a parent’s willingness to nurture a child, that finally decides our fate.

Our challenges may be new. The instruments with which we meet them may be new. But those values upon which our success depends – hard work and honesty, courage and fair play, tolerance and curiosity, loyalty and patriotism – these things are old. These things are true. They have been the quiet force of progress throughout our history. What is demanded then is a return to these truths. What is required of us now is a new era of responsibility – a
recognition, on the part of every American, that we have duties to ourselves, our nation, and the world, duties that we do not grudgingly accept but rather seize gladly, firm in the knowledge that there is nothing so satisfying to the spirit, so defining of our character, than giving our all to a difficult task.

This is the price and the promise of citizenship.

This is the source of our confidence – the knowledge that God calls on us to shape an uncertain destiny.

This is the meaning of our liberty and our creed – why men and women and children of every race and every faith can join in celebration across this magnificent mall, and why a man whose father less than sixty years ago might not have been served at a local restaurant can now stand before you to take a most sacred oath.

So let us mark this day with remembrance, of who we are and how far we have traveled. In the year of America’s birth, in the coldest of months, a small band of patriots huddled by dying campfires on the shores of an icy river. The capital was abandoned. The enemy was advancing. The snow was stained with blood. At a moment when the outcome of our revolution was most in doubt, the father of our nation ordered these words be read to the people:

“Let it be told to the future world...that in the depth of winter, when
nothing but hope and virtue could survive...that the city and the country,
alarmed at one common danger, came forth to meet [it].”

America. In the face of our common dangers, in this winter of our hardship, let us remember these timeless words. With hope and virtue, let us brave once more the icy currents, and endure what storms may come. Let it be said by our children’s children that when we were tested we refused to let this journey end, that we did not turn back nor did we falter; and with eyes fixed on the horizon and God’s grace upon us, we carried forth that great gift of freedom and delivered it safely to future generations.

Wednesday, January 21, 2009

Nothing like shock therapy to jolt the economy

Jan 21, 2009

By Thomas Friedman

I WAS walking by a TV the other day and CNN was on, airing a hearing of what seemed to be a banking committee in Congress debating whether to release more bailout money. CNN didn't identify the lawmaker who was speaking. He had a bit of a Southern drawl. But I burst out laughing when he said something like: 'I remember a time when banks lent money to people. Now it's the other way around.'

Yes, kids, those were the days - when banks lent money to the people, not the people to the banks!

Many commentators have suggestions for President Barack Obama on what should be his first meeting at the White House. Here is mine: Mr Obama and his economic team should convene the 300 leading bank presidents in the East Room and the President should say to each one of them something like this:

'Ladies and gentlemen, this crisis started with you, the bankers, engaging in reckless practices, and it will only end when we clean up your mess and start afresh. The banking system is the heart of our economy. It pumps blood to our industrial muscles, and right now it's not pumping. We all know that in the past six months you've gone from one extreme to another. You've gone from lending money to anyone who could fog up a knife to now treating all potential borrowers, no matter how healthy, as bankrupt until proven innocent.

'And, therefore, you're either not lending to them or lending under such onerous terms that the economy can't get any liftoff. No amount of stimulus will work without a healthy banking system.

'So here's what we're going to do: we're going to unclog the arteries. My banking experts have analysed each of your balance sheets. You will tell us if we're right. Those of you who are insolvent, we will nationalise and shut down. We will auction off your viable assets and will hold the toxic ones in a government reconstruction fund and sell them later when the market rebounds. Those of you who are weak will be merged. And those of you who are strong will receive added capital for your balance sheets, after you write down all your remaining toxic waste. I am not going to continue rewarding the losers and dimwits amongst you with handouts.'

Without this sort of come-to-Jesus strategy, we're going to continue to just limp along. We'll never quite confront the real problem because we don't want to take the upfront pain. So the market will never clear - meaning start-ups in need of capital will be choked in their cribs and profit-making firms won't be able to grow as they should.

'Right now,' said Mr David Smick, author of The World Is Curved, 'the bankers are sitting on mountains of cash, including our bailout money, because they know their true balance sheets are a disaster - far worse than publicly stated.' The situation will likely worsen as delinquent consumer and auto loans are piled atop bad mortgages. 'Mr Obama needs to inject some truth serum into the banking discussion. No one trusts the banks, and even the bankers don't trust each other.' Bringing clarity to bank balance sheets, said Mr Smick, 'is the first step to fixing America's bank lending problem.'

Only after we bring full transparency to the bank balance sheets will we see private capital buying into banks again at scale. But have no illusions. There are still real balance sheet problems that have to be surmounted. This is not just a psychological crisis.

'I wish people would stop saying that this is a crisis of confidence,' said Mr Steven Eisman, a portfolio manager and banking expert at FrontPoint Partners. 'The loss of confidence is just a symptom of bad credit and over-leverage. The banks are not lending because they know their balance sheets are loaded with future losses and they don't have enough capital. The Tarp (Troubled Assets Relief Programme) gave them preferred equity, which is nothing more than a bridge loan. We need the government to force the banks to write down all their bad assets and then recapitalise themselves, preferably with private capital. Those banks that cannot raise sufficient capital should be seized and their deposits sold off.'

For too long the government has been taking the banks at their own words, which is one reason we keep getting surprised with demands for more bailout cash. The Treasury needs to be doing its own brutal, burn-down analysis of every major bank's balance sheet - and then acting accordingly.

In recent years, 'whenever other countries - Russia, Thailand, Indonesia, South Korea or Mexico - got themselves into an economic crisis, we lectured them about how they had to adopt 'shock therapy,' ' said editor of Foreign Policy magazine Moises Na├»¿½m. 'But now that we are the ones in crisis and in need of shock therapy, everyone is preaching gradualism.'

A stimulus package that does not also unclog the arteries of our banking system will never stimulate sufficiently. Mr Obama should take the pain early, blame it all on Mr George W. Bush and then reap the benefits down the road. Postpone the pain, postpone the recovery.