Question

Briefly describe Singapore’s new strategy for getting the economy back on track? Do you approve of this new strategy for getting the economy growing? Why or why not?

Answer 1

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Answer 2

Answer:

1. Stabilizing the property market:

Since the beginning of the economic turmoil, the market values of property and  financial assets had dropped rapidly. Both the Singapore and Hong Kong plans proposed to suspend government  land sales until the end of the ®scal year. To further reduce property supply, the Singapore plan proposed measures to permit and encourage developers to defer the completion of construction projects. On stimulating

demand, stamp duty was deferred for purchases of uncompleted properties. In addition, the Hong Kong government used demand-side strategy by raising the number of people eligible for the starter loan scheme and the home purchase scheme.

2. Stabilizing the financial sector:

The Singapore plan aimed at encouraging banks to make adequate provisions  for loan exposure to the region. The plan lifted a 3% limit on tax deduction for general provisions made by  banks and merchant banks. Stamp duty on contract notes was also suspended. The Hong Kong plan proposed  tax exemption for local interest earnings in order to encourage repatriation of offshore deposits, estimated at  HK$200 billion. This strategy would provide liquidity for the banking sector and increase the supply of Hong  Kong dollars.

3. Stimulating business activities:

Both plans proposed tax rebates to reduce business costs. The Singapore plan  proposed to add a 40% tax rebate on top of the 15% provided in the budget for commercial and industrial properties. Rental rebates were provided for tenants and leeses of government-operated industrial estates. Other  incentives included reduction and rebates of tariff and suspension of car park surcharge. The Hong Kong plan  also proposed cost reduction measures, including rate rebate and lowering diesel duty. Charges paid by importers were also reduced. The plan also aimed at helping small and medium-size businesses to obtain loans. This  strategy might have reduced the rate of bankruptcy and assist the middle-class unemployed to start their own  businesses, which was encouraged by the Hong Kong government since the unemployment rate started to  climb.