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Archive for April 14th, 2008

Govt tenders in FY 2008 projected to exceed $8b

Posted by luxuryasiahome on April 14, 2008

The government will be calling S$8 billion worth of tenders in its financial year 2008.

Of these, about S$5.8 billion will involve building and construction projects which are proceeding as planned. These include projects to improve traffic on the Central Expressway as well as the Gardens by the Bay projects which will keep the Marina Bay area development on schedule.

Other projects valued at S$3 billion have been deferred so as not to add to the tight construction capacity situation.

Another S$1.2 billion will go towards the purchase of goods and services, such as the supply of equipment, appliances and the operation of the automated toll system at the checkpoints.

Tenders in ICT projects are also expected to be worth at least an additional S$1 billion. The Infocomm Development Authority of Singapore (IDA) will announce further details on the upcoming ICT projects next month. – CNA/ir

Source : Channel NewsAsia – 14 Apr 2008

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Seletar Aerospace Park tenants hazy about future

Posted by luxuryasiahome on April 14, 2008

Some unhappy incumbent operators at Seletar Aerospace Park are grumbling about facilities being taken away and poor communication by authorities who are developing the 300-hectare aerospace park.

Better communication: Prithpal Singh, who runs EJA, says the agencies should engage tenants regularly

Several tenants who spoke to BT said they feared their days in Seletar could be numbered, as they face the prospect of being evicted from their existing facilities – but without adequate new ones being offered.

Airmark Group, a $100-million business which operates charter cargo flights out of Seletar, claims it has been operating out of two 20-feet containers with no power or electricity since its facilities were taken back to redevelop West Camp.

‘We have been at Seletar for 30 years, and it looks like we are back to the primitive past,’ said the company’s chairman Yunos Ishak. ‘We have no hangar space, no facilities, no priority. The authorities developing this place seem to have no plans for players like us.’

It’s a similar complaint from Executive Jets Asia (EJA), whose regional business jet operations is headquartered at Seletar.

Prithpal Singh, who runs EJA, said his company had been told to vacate their premises at Seletar East Camp by the end of 2009.

‘We understand the redevelopment needs,’ he said. ‘But what alternatives are there for us? Until now, we have had no indication of where we will be relocated, what kind of facilities will be given to us or how we will be relocated. And we are barely 20 months away from having to vacate this place.’

Another criticism levelled at Jurong Town Corporation and other agencies spearheading the redevelopment of Seletar was that they were turning Seletar into another ‘Loyang aviation factory area’, with players like Rolls-Royce and Pratt & Whitney being accorded priority.

Rolls-Royce has broken ground on its $320-million Trent aero engine facility at the Seletar Aerospace Park, while P&W is building its new US$30-million, 105,000-sq-ft facility at the Park. Meanwhile, ST Aero’s latest $17.3-million, two-bay hangar will give it eight wide-body, and 13 narrow-body, bays in Singapore, while Jet Aviations’ existing facility is being extended.

But when contacted, JTC Corporation, which is spearheading the redevelopment of Seletar, denied that it was neglecting existing tenants and operators.

‘Seletar is for everyone in the industry,’ said a JTC spokesperson. ‘Currently, we are redeveloping the plots which are not fronting the runway, but in the years to come, we will be in a better position to evaluate the availablity and allocation of runway-fronting land.’

She said that JTC, together with the Economic Development Board would allocate land based on need, availability and business plans presented by individual corporations.

‘We are still at the early phase of development, and this is a complex project which still has 10 years to completion in 2018,’ the JTC spokesperson added. ‘We will be offering more land and facilities to players – big, small, local and foreign – as we move forward into our second and third phases in mid-2009 and after 2011, respectively.’

She added that plans were already being studied to build a commercial complex to house smaller aviation players, including business aviation.

‘We will look into what they need,’ she added. ‘But as this is not a greenfield project, we will have to work around existing land constraints.’

Meanwhile, the existing tenants want more clear timelines in order to plan their businesses and investment needs.

“We need better communication,” Mr Singh said. ‘They (the agencies) need to engage us on a regular basis.’

Seletar Aerospace Park is a 300-ha development cluster for aerospace MRO, design and manufacturing, training and business/ general aviation, all aimed at making Seletar Airport the region’s premier business aviation hub. The existing runway – built by the British Air Force over half a century ago – is being extended to cater to bigger business jets.

Source : Business Times – 14 Apr 2008

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Be cautious in response to inflation: Stern

Posted by luxuryasiahome on April 14, 2008

Mostly commodities driven; but changing diets is a worrying trend, says economist

Policymakers should not overreact to rising inflation, which is largely commodities driven, according to eminent economist Nicholas Stern. However, there are some worrying long-term trends that could keep upward pressures on prices, he said.

Mr Stern: Reckons that Asian economies would be affected by the US sub-prime crisis because they depend on export markets. ‘But they’re not totally dependent; a lot of Asia’s dynamics are internally driven.’

Mr Stern, who holds the IG Patel Chair in economics at the London School of Economics and was formerly the World Bank’s chief economist, also said the US economy will probably head into recession this year as the sub- prime crisis unfolds. However, Europe will avoid that fate while Asia will see some moderation in growth.

‘I would be inclined not to overreact to inflation for the moment,’ said Mr Stern in an interview with BT. ‘In the short term, monetary and fiscal policies can be accommodating. You might tighten monetary policy a little bit, but you can relax fiscal policy by lowering some taxes.’

He noted that inflation – which is on a rising trend everywhere, including in Asia – is ‘largely commodity price driven. We’ve seen big increases in prices of oil and gas and wheat and rice.’

The causes of this come from both the supply and demand side, he said. On the supply side, he pointed to extended droughts in Australia, which have pushed up grain prices. Subsidies provided by the US and Europe to produce ethanol from corn – which he said were ‘a mistake’ – have also reduced grain supplies.

On the demand side, higher food consumption in the developing world, particularly in the fast growing economies of China and India, is adding to price pressures.

A worrying longer-term trend here is changes in diets, according to Mr Stern. He pointed out that as countries get richer, meat consumption goes up. ‘One hundred calories coming from meat consumes a lot more grain than 100 calories coming directly from grain,’ he said.

While there would be some supply response to higher food prices, policymakers would need to think about policies to encourage production.

‘We must also switch away as fast as we can from hydrocarbons, to bring down the prices of oil and gas and coal,’ added Mr Stern, who in 2006 produced the Stern Report, a comprehensive study on climate change commissioned by the UK government.

On the impact of the US sub-prime crisis, Mr Stern said it would depress economic activity through both lower investment and consumption – investment would decline if lending seizes up in the wake of the credit crunch, while consumption could fall following declines in asset prices which would erode wealth.

‘In the US, we probably will see recession for a few quarters,’ he said. ‘We’re probably already seeing that.’

But he added that with easy monetary and fiscal policies over the coming year or two, the recession ’shouldn’t be too long or too deep’.

Europe, including the UK, will manage to avoid recession, according to Mr Stern. ‘I think what you’ll see is small falls in house prices and decreased activity in housing markets. Over a period of three or four years, the income-to-house price ratio would rise, with some increase in money incomes and a small decline in the value of houses.’

He reckoned that Asian economies would be affected because they depend on export markets. ‘But they’re not totally dependent; a lot of Asia’s dynamics are internally driven,’ he said. The large and fast-growing Asian economies of China and India would experience a moderate slowdown, he said. ‘But if a country’s growing at 9-10 per cent and it grows at 7-8 per cent, yes that’s a slowdown, but it’s still fast growth.’

Source : Business Times – 14 Apr 2008

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Your millions will not move me

Posted by luxuryasiahome on April 14, 2008

This house dwarfed by tall condos, owners refuse to budge

ON St Francis Road lies a piece of old Singapore – an old house between two tall, modern condominiums.

The stilt-bungalow is a relic from a time when bullock carts, not cars, plied the roads, and old attap houses, not condominiums, lined the streets.

But its owners have remained deaf to the call of change, even when property developers dangle ‘millions of dollars’ and a new house elsewhere.

Property, even with the recent slowdown after a boom, is always hot stuff. Last year saw a record-breaking 14,800-plus residential units sold.

Development is relentless in Singapore and huge sums are involved.

Behind the house, a noisy crane hovers, where another condominium is going up. But to the old man of the house, Mr Gerard Clarke, 90, all the development is just noise.

‘If this (the new construction) is noisy, how about when they were building this and that,’ he said, pointing to the St Francis Court and St Francis Lodge condominiums.

Mr Clarke, a kindly, sprightly gentleman – the type who refers to women as ladies – is a retired Shell employee. Some 10 years ago, before the condominiums were built, he was approached to sell the property.

His daughter, the bungalow’s owner, Ms Louise Clarke, 53, an educational psychologist, said: ‘It was terrible. They would just come and badger and badger.’

She recalled how one property agent even turned up at their doorstep with a picture of a terrace house that they could move into.

She said she was offered ‘millions’ but she would not sell. Not while her father is alive.

She doesn’t remember how big her land is (her title deed is in a safe somewhere) but she says the house itself is about 2,500 sq ft, about the size of two five-room HDB flats.

The land area looks to be about three times the size of the house.

Recent transactions on the Urban Redevelopment Authority website showed that properties on St Francis Road and nearby St Michael’s Road sold for $500psf to more than $1000psf.

Going by those numbers, the house alone can be worth up to $2.5 million.

It’s more than just money

But for the Clarkes, it is not about money. Mr Clarke has lived in the house since 1947, when he got married. It is spacious, charming, rustic and cool – though it was cooler before the condominiums blocked out the breeze.

According to Ms Clarke, the land up to St Michael’s Road used to belong to her great-grandfather.

He divided it among three daughters (a fourth got nothing as she had moved to the US) and one of them – her grandmother – passed the land to her mother, Mr Clarke’s wife.

When Mrs Clarke died last March, she inherited it.

Walking around the house is like taking a trip back in time. You see old pictures, a battered Bible that’s older than Mr Clarke, and a wind-up clock.

Though the furniture looks old, there’s nothing from before the Japanese Occupation, except a bulky cabinet. ‘It was the only one looters couldn’t carry off,’ he said.

The floor, too, has been changed. There were big holes everywhere after the Second World War.

Maintaining an old house, estimated to be at least 90 years old, is not cheap.

Ms Clarke has had to pay for a new roof and supports under the aging floor. She wouldn’t say how much all that cost, only that it was expensive.

Among their former neighbours was one Leslie Hoffman, whom Mr Clarke remembered as a journalist.

Mr Hoffman was actually the first local editor-in-chief of The Straits Times.

One unusual problem they face is strangers wandering on their property. (Like homeowners in the good old days, the Clarkes leave their gates unlocked during the day).

‘Some of them were very rude,’ said Ms Clarke.

Despite all that, property agents will likely still have no luck with the Clarkes.

Ms Clarke said she would rather bequeath the property to a relative than sell it.

As for Mr Clarke, what use has he for money at his age?

‘I want to stay here till they have to carry me out,’ he said.

Source : New Paper – 14 Apr 2008

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Farm fun on Singapore vacations

Posted by luxuryasiahome on April 14, 2008

More farms going into agri-tainment for extra income

CITY-SLICKERS here can now go a little bit country if they want to.

And the place to do it is in Singapore’s boondocks, where farms are re-inventing themselves.

D’KRANJI FARM RESORT: Visitors can expect a spa, a seafood restaurant and a beer garden with a live band. Opens in September. — MARK CHEONG

Sure, these farms are where you can buy fresh produce – but think also hotel-style villas with terraces looking out onto fields of bananas.

Think spa, seafood restaurant and beer garden with a live band playing by night.

This is what visitors can expect from a stay at the 5ha D’Kranji Farm Resort when it opens in September in north-western Singapore.

Run by Indonesia-based HLH Agri-International, this $10-million venture is the latest and most costly instance of how farms here are marketing themselves.

ORCHIDVILLE: Orchid farm in Mandai. Its restaurant, Forrest, opened six months ago.

Termed agri-tainment, this business concept draws people to out-of-the-way farms with restaurants, cafes and farm-stay opportunities.

Smaller farms can stay viable with this new income.

To date, eight farms out of 228 here have visitor amenities like food outlets and souvenir shops, said the Agri-Food & Veterinary Authority.

NYEE PHOR FLOWER GARDEN: In Kranji. Petals and leaves Bistro is rented out for retreats and weddings. Farm stays planned

HLH hopes to attract 500,000 visitors to D’Kranji Farm Resort every year.

Bollywood Veggies in Neo Tiew Road, owned by former Netball Singapore president Ivy Singh-Lim, added the Poison Ivy bistro to its premises in 2004. A culinary school is on the cards.

The bistro brings in about $400,000 a year. The money is used to cover expenses like rent and wages.

BOLLYWOOD VEGGIES: In Neo Tiew Road. Poison Ivy bistro opened in 2004. A culinary school is on the cards.

Green Valley Farm at Bah Soon Pah Road in Sembawang opened a cafe serving finger food, made with its produce, last year.

It may also introduce farm stays, said Mr Casey Oh, one of the owners.

Over at Nyee Phoe Flower Garden in Kranji, the three-year-old Petals and Leaves Bistro is rented out for retreats and weddings. Farm stays are also planned.

Nyee Phoe Group’s business development manager, MrKenny Eng, said: ‘Why should someone come to a farm to buy something rather than go to the supermarket? It must be to experience a different lifestyle.’

This is what engineer Sentiono Tan, 43, and his family hanker for on their visits to the Kranji farms. His daughters aged four, eight and 10 are thrilled to see animals like goats there, he said.

‘It’s something different to do in our free time besides shopping. It would be nice for families if more farms had places to eat and stay.’

Agri-tainment is good for the farms here, said Mr Eng, adding that more players and public awareness will help sustain these businesses. The additional source of income will also help to cover utilities and other bills.

‘Agriculture is a tough industry in Singapore and we need more like-minded players. We need everybody to prosper,’ he said.

Mandai’s Orchidville orchid farm, for instance, has doubled its weekly visitors to 500 since its restaurant, Forrest, opened six months ago. Takings from the sale of orchids have also doubled to $5,000 every weekend.

The extra income has cushioned it against higher oil and fertiliser prices.

Its managing director, MrJoseph Phua, said the farm’s dining facilities encouraged visitors to linger.

‘That encourages them to buy more flowers. It’s a good synergy,’ he said.

He sees agri-tainment as a way of keeping a more relaxed way of life alive here, where things zip along at a hectic pace.

Ms Singh-Lim, who also heads the Kranji Countryside Association, agreed, saying that the rural atmosphere must be retained even as agri-tainment grows.

‘We are trying to make sure that this doesn’t become another Sentosa,’ she said.

Source : Straits Times – 14 Apr 2008

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Asian policy makers face inflation vs growth dilemma

Posted by luxuryasiahome on April 14, 2008

THAT banging sound across much of Asia is the stable door being slammed shut long after the galloping horse that is inflation has bolted.

Governments are resorting to everything from rice export bans to price controls to prevent an unprecedented spike in food and energy costs from metamorphosing into more generalised inflation.

Economists at Lehman Brothers count no fewer than 48 such trade and fiscal measures across Asia since the start of the year to counter what policy makers hope is a temporary shock.

Central banks are also soaking up liquidity and letting exchange rates appreciate.

Yet they are too late in many cases. Consumer prices are up by nearly 20 per cent from a year earlier in Vietnam and by more than 8 per cent in China and Indonesia. Inflation is just below a 26-year high in Singapore and rising worryingly fast in India.

If that wasn’t enough of a headache, a shocking drop on Friday in profits at General Electric Co, a bellwether of the US and global economies, has underlined the risks to growth.

In short, Asian policy makers need to be mobilising for the next war, a potential slide in export demand, as well as calling up reinforcements for the current battle against inflation.

‘The global economic and financial outlook is of grave concern. Global growth faces substantial downside risks in 2008,’ Mr Zhou Xiaochuan, governor of the People’s Bank of China, told a meeting of the International Monetary Fund and World Bank in Washington on Saturday.

SUPPLY SHOCK OR LOOSE MONEY?

Now, if the world economy does move down a gear, commodity prices should fall back too, especially as farmers are presumably planting more right now to cash in on sky-high prices. An end to Australia’s drought should also help boost global supplies.

But what if the great commodity inflation is not a temporary supply shock? Many economists, not only monetarists, believe rather that Asia is finally paying the price for years of lax monetary policy and long-undervalued exchange rates and so are importing the inflationary stimulus imparted by a declining dollar and huge US current account deficits.

‘We need to think about the fundamentals such as, say, the over-liquidity problem…which turned out to be inflationary at the end,’ Mr Fan Gang, an adviser to the People’s Bank of China, said on Sunday in Boao on the southern island of Hainan.

According to this school of thought, central banks might already have missed the chance to lean against the wind so as to prevent producers from passing on their higher input costs and workers from demanding higher wages to compensate.

‘Second-round effects are starting to kick in in a number of countries, reflecting the fact that domestic demand has been still pretty strong in many countries,’ said Mr David Burton, the director of the IMF’s Asia and Pacific department.

‘At the same time, we’re seeing producer price inflation is now rising quite rapidly across many countries in the region, and that points to a compression of profit margins and the possibility of further inflationary pressure ahead,’ Mr Burton told a news briefing in Washington.

Adding to the risks from commodity inflation are structural changes in big emerging economies such as India and China, where urbanisation is encroaching on arable land and rising incomes are fuelling demand for meat and dairy produce. Western subsidies for biofuels and global warming are also changing the food equation.

‘The risk is that this time round there are more secular drivers of inflation,’ said Mr Rob Subbaraman, chief non-Japan Asia economist at Lehman Brothers in Hong Kong.

‘If it is more secular, fiscal/trade measures could do more harm than good because the longer it goes on, the more it exacerbates the supply/demand imbalance and the greater the risk of it feeding into inflationary expectations,’ he said.

CURRENCY RESPONSE

This may already be happening, prompting middlemen to hoard rice in India and Thailand, for example, in anticipation of ever-higher prices.

‘The recent jump in rice prices in Asia, in the absence of any supply shocks, demonstrated how powerful inflation expectations could push up some prices instantaneously,’ Mr Hong Liang, Goldman Sachs’s chief China economist, said in a report last week. Some rice prices have doubled already this year.

So how should policy makers react? Subsidies and export bans merely muffle price signals, economists say, so governments would do much better to invest in rural infrastructure, such as cold storage and irrigation, and target handouts at the urban poor.

The poorest in society would be those hardest hit by a blanket tightening of monetary policy, said Glenn Maguire, Societe Generale’s chief Asian economist based in Hong Kong.

‘If food inflation has become an embedded dynamic and people have less money to spend on food, then raising interest rates to try to quell that seems a little perverse,’ he said.

The appropriate policy response, he said, would be continued currency appreciation, which would cut the cost of food imports and generally tighten monetary conditions. ‘That will be the most equitable way to handle these equity/distributional problems.’

Singapore did just that in decisive fashion on Thursday by effectively revaluing its dollar by at least 1.0 per cent.

Vietnam has widened the dong’s trading band. And China has now let the yuan rise 18 per cent against the U.S. dollar since July 2005.

Of course, stronger exchange rates will eventually take a toll on exports. Which is why Asian central bankers are facing perhaps their toughest challenge since the 1997/98 financial crisis. – REUTERS

Source : Straits Times – 14 Apr 2008

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Decision to let Sing$ strengthen ‘not a response to spike in inflation’

Posted by luxuryasiahome on April 14, 2008

Policy change not a knee-jerk reaction, but aimed at medium term, says Tharman

THE decision to let the Singapore dollar rise further was not a knee-jerk response to a recent spike in inflation, but a decision with longer-term considerations in mind, said Finance Minister Tharman Shanmugaratnam yesterday.

‘Short term, we’re not in a crisis and if we do face a very severe downturn in growth, you can’t rely on monetary policy to solve that; you’ve got to have other policy responses,’ he told reporters yesterday on the sidelines of a community event.

The Monetary Authority of Singapore (MAS) caught many by surprise last Thursday when it said it would allow for an immediate one-off jump in the Sing dollar’s value in response to a backdrop of ‘continuing cost pressures’.

Singapore manages the value of the local currency as its chief weapon against inflation. A stronger Sing dollar helps make imports, such as oil and food, cheaper. But it also makes local exports less competitive in the global marketplace.

The policy change, which was widely regarded as an aggressive move, caught most analysts by surprise.

Many expected that economic growth concerns would deter the central bank from tweaking its monetary policy so soon after it had moved to allow for a faster Sing dollar appreciation at the last scheduled review in October.

Some analysts said the move suggested that the Government may have underestimated the inflation threat and is playing catch-up.

However, Mr Tharman said yesterday that the central bank looked at price trends over the next one to three years when it decided on the policy change.

‘It’s got to keep its focus on the medium term. That’s the way the MAS does its job.’

As such, Mr Tharman said he expected little impact on inflation in the short term. MAS has projected Singapore’s inflation rate this year to come in at the upper half of the 4.5-5.5 per cent forecast range.

Mr Tharman said that the MAS’ last two policy changes were not large jumps, but discreet moves that allow a gradual appreciation of the Sing dollar.

They came as the MAS assessed that in the next few years, inflation will be a risk around the world.

‘And if it’s a risk all round the world, we have to be on guard as well,’ said Mr Tharman.

Still, he acknowledged that there are short-term risks, which the Government is watching carefully.

‘The exchange rate remains supportive of sustainable growth in the medium term, so it’s always a fine balance between paying heed to inflation and paying heed to wanting to ensure that the economy keeps growing.’

The Government last week released a better-than-expected advance estimate of 7.2 per cent gross domestic product growth in the first quarter of the year.

At this point, he said, if Singapore did not focus enough on inflation over the next one to three years, growth would ultimately be undermined.

Asked if a stronger Sing dollar would hurt export competitiveness, he said there will be some compromise in the short to medium term, but it would be mitigated by the economy’s performance in the short term, which he said was at its potential.

‘It does not make a significant dent on competitiveness over the medium to longer term,’ added Mr Tharman. The exchange rate is now about S$1.36 to the US dollar.

Source : Straits Times – 14 Apr 2008

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Decision to let Sing$ strengthen ‘not a response to spike in inflation’

Posted by luxuryasiahome on April 14, 2008

Policy change not a knee-jerk reaction, but aimed at medium term, says Tharman

THE decision to let the Singapore dollar rise further was not a knee-jerk response to a recent spike in inflation, but a decision with longer-term considerations in mind, said Finance Minister Tharman Shanmugaratnam yesterday.

‘Short term, we’re not in a crisis and if we do face a very severe downturn in growth, you can’t rely on monetary policy to solve that; you’ve got to have other policy responses,’ he told reporters yesterday on the sidelines of a community event.

The Monetary Authority of Singapore (MAS) caught many by surprise last Thursday when it said it would allow for an immediate one-off jump in the Sing dollar’s value in response to a backdrop of ‘continuing cost pressures’.

Singapore manages the value of the local currency as its chief weapon against inflation. A stronger Sing dollar helps make imports, such as oil and food, cheaper. But it also makes local exports less competitive in the global marketplace.

The policy change, which was widely regarded as an aggressive move, caught most analysts by surprise.

Many expected that economic growth concerns would deter the central bank from tweaking its monetary policy so soon after it had moved to allow for a faster Sing dollar appreciation at the last scheduled review in October.

Some analysts said the move suggested that the Government may have underestimated the inflation threat and is playing catch-up.

However, Mr Tharman said yesterday that the central bank looked at price trends over the next one to three years when it decided on the policy change.

‘It’s got to keep its focus on the medium term. That’s the way the MAS does its job.’

As such, Mr Tharman said he expected little impact on inflation in the short term. MAS has projected Singapore’s inflation rate this year to come in at the upper half of the 4.5-5.5 per cent forecast range.

Mr Tharman said that the MAS’ last two policy changes were not large jumps, but discreet moves that allow a gradual appreciation of the Sing dollar.

They came as the MAS assessed that in the next few years, inflation will be a risk around the world.

‘And if it’s a risk all round the world, we have to be on guard as well,’ said Mr Tharman.

Still, he acknowledged that there are short-term risks, which the Government is watching carefully.

‘The exchange rate remains supportive of sustainable growth in the medium term, so it’s always a fine balance between paying heed to inflation and paying heed to wanting to ensure that the economy keeps growing.’

The Government last week released a better-than-expected advance estimate of 7.2 per cent gross domestic product growth in the first quarter of the year.

At this point, he said, if Singapore did not focus enough on inflation over the next one to three years, growth would ultimately be undermined.

Asked if a stronger Sing dollar would hurt export competitiveness, he said there will be some compromise in the short to medium term, but it would be mitigated by the economy’s performance in the short term, which he said was at its potential.

‘It does not make a significant dent on competitiveness over the medium to longer term,’ added Mr Tharman. The exchange rate is now about S$1.36 to the US dollar.

Source : Straits Times – 14 Apr 2008

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Decision to let Sing$ strengthen ‘not a response to spike in inflation’

Posted by luxuryasiahome on April 14, 2008

Policy change not a knee-jerk reaction, but aimed at medium term, says Tharman

THE decision to let the Singapore dollar rise further was not a knee-jerk response to a recent spike in inflation, but a decision with longer-term considerations in mind, said Finance Minister Tharman Shanmugaratnam yesterday.

‘Short term, we’re not in a crisis and if we do face a very severe downturn in growth, you can’t rely on monetary policy to solve that; you’ve got to have other policy responses,’ he told reporters yesterday on the sidelines of a community event.

The Monetary Authority of Singapore (MAS) caught many by surprise last Thursday when it said it would allow for an immediate one-off jump in the Sing dollar’s value in response to a backdrop of ‘continuing cost pressures’.

Singapore manages the value of the local currency as its chief weapon against inflation. A stronger Sing dollar helps make imports, such as oil and food, cheaper. But it also makes local exports less competitive in the global marketplace.

The policy change, which was widely regarded as an aggressive move, caught most analysts by surprise.

Many expected that economic growth concerns would deter the central bank from tweaking its monetary policy so soon after it had moved to allow for a faster Sing dollar appreciation at the last scheduled review in October.

Some analysts said the move suggested that the Government may have underestimated the inflation threat and is playing catch-up.

However, Mr Tharman said yesterday that the central bank looked at price trends over the next one to three years when it decided on the policy change.

‘It’s got to keep its focus on the medium term. That’s the way the MAS does its job.’

As such, Mr Tharman said he expected little impact on inflation in the short term. MAS has projected Singapore’s inflation rate this year to come in at the upper half of the 4.5-5.5 per cent forecast range.

Mr Tharman said that the MAS’ last two policy changes were not large jumps, but discreet moves that allow a gradual appreciation of the Sing dollar.

They came as the MAS assessed that in the next few years, inflation will be a risk around the world.

‘And if it’s a risk all round the world, we have to be on guard as well,’ said Mr Tharman.

Still, he acknowledged that there are short-term risks, which the Government is watching carefully.

‘The exchange rate remains supportive of sustainable growth in the medium term, so it’s always a fine balance between paying heed to inflation and paying heed to wanting to ensure that the economy keeps growing.’

The Government last week released a better-than-expected advance estimate of 7.2 per cent gross domestic product growth in the first quarter of the year.

At this point, he said, if Singapore did not focus enough on inflation over the next one to three years, growth would ultimately be undermined.

Asked if a stronger Sing dollar would hurt export competitiveness, he said there will be some compromise in the short to medium term, but it would be mitigated by the economy’s performance in the short term, which he said was at its potential.

‘It does not make a significant dent on competitiveness over the medium to longer term,’ added Mr Tharman. The exchange rate is now about S$1.36 to the US dollar.

Source : Straits Times – 14 Apr 2008

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Decision to let Sing$ strengthen ‘not a response to spike in inflation’

Posted by luxuryasiahome on April 14, 2008

Policy change not a knee-jerk reaction, but aimed at medium term, says Tharman

THE decision to let the Singapore dollar rise further was not a knee-jerk response to a recent spike in inflation, but a decision with longer-term considerations in mind, said Finance Minister Tharman Shanmugaratnam yesterday.

‘Short term, we’re not in a crisis and if we do face a very severe downturn in growth, you can’t rely on monetary policy to solve that; you’ve got to have other policy responses,’ he told reporters yesterday on the sidelines of a community event.

The Monetary Authority of Singapore (MAS) caught many by surprise last Thursday when it said it would allow for an immediate one-off jump in the Sing dollar’s value in response to a backdrop of ‘continuing cost pressures’.

Singapore manages the value of the local currency as its chief weapon against inflation. A stronger Sing dollar helps make imports, such as oil and food, cheaper. But it also makes local exports less competitive in the global marketplace.

The policy change, which was widely regarded as an aggressive move, caught most analysts by surprise.

Many expected that economic growth concerns would deter the central bank from tweaking its monetary policy so soon after it had moved to allow for a faster Sing dollar appreciation at the last scheduled review in October.

Some analysts said the move suggested that the Government may have underestimated the inflation threat and is playing catch-up.

However, Mr Tharman said yesterday that the central bank looked at price trends over the next one to three years when it decided on the policy change.

‘It’s got to keep its focus on the medium term. That’s the way the MAS does its job.’

As such, Mr Tharman said he expected little impact on inflation in the short term. MAS has projected Singapore’s inflation rate this year to come in at the upper half of the 4.5-5.5 per cent forecast range.

Mr Tharman said that the MAS’ last two policy changes were not large jumps, but discreet moves that allow a gradual appreciation of the Sing dollar.

They came as the MAS assessed that in the next few years, inflation will be a risk around the world.

‘And if it’s a risk all round the world, we have to be on guard as well,’ said Mr Tharman.

Still, he acknowledged that there are short-term risks, which the Government is watching carefully.

‘The exchange rate remains supportive of sustainable growth in the medium term, so it’s always a fine balance between paying heed to inflation and paying heed to wanting to ensure that the economy keeps growing.’

The Government last week released a better-than-expected advance estimate of 7.2 per cent gross domestic product growth in the first quarter of the year.

At this point, he said, if Singapore did not focus enough on inflation over the next one to three years, growth would ultimately be undermined.

Asked if a stronger Sing dollar would hurt export competitiveness, he said there will be some compromise in the short to medium term, but it would be mitigated by the economy’s performance in the short term, which he said was at its potential.

‘It does not make a significant dent on competitiveness over the medium to longer term,’ added Mr Tharman. The exchange rate is now about S$1.36 to the US dollar.

Source : Straits Times – 14 Apr 2008

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