The following article was published in the Business Times on 26 November 1998.
Foreign worker levy cut not permanent
By Carol Eng
Business Times Singapore, 26 November 1998
ABOUT 25,000 companies will benefit from the reduction in foreign worker levy, but Manpower Minister Lee Boon Yang reminded employers yesterday that the levy will be restored gradually when economic conditions improve.
Speaking in Parliament, he also elaborated on various government measures announced on Tuesday, like the bridging loan for mortgages and how the CPF cut will be applied to older workers.
CPF rates for workers aged above 55 will be halved to 2-4 per cent from Jan 1, said Dr Lee. The employers' contribution rates will be: For workers between 55 and 60: 4 per cent (round up from 3.75 per cent), from 7.5 per cent now; For those above 60, 2 per cent.
Originally, the employers' contribution rates for workers above 60 was supposed to be lowered to 4 per cent from Jan 1 due to the extension of the retirement age from 60 to 62. But in line with the principle of proportionate cuts in CPF, Dr Lee said the rate will be reduced to 2 per cent.
As for the bridging loan scheme (BLS) for CPF members who have depleted their ordinary and special accounts for monthly housing repayments, Dr Lee said this will be made available over three years, with the first draw down on March 1, 1999.
The quantum of the monthly bridging loan will be capped at the amount of shortfall, arising directly from the 6 percentage point cut in the ordinary account contribution rate, he added. Also, the cut-off age limit for this scheme will be 62 years.
Repayment will start one year after the end of the three-year draw-down period. Full repayment has to be made over 10 years or by the age of 65 or when the property is sold, whichever is earlier.
This scheme - which charges a concessionary rate of CPF interest plus 0.1 per cent - also applies to private property mortgages, HDB owners paying Credit POSB rates, and those who buy their flats before the CPF cut.
For HDB lessees who currently enjoy concessionary interest rates for outstanding mortgage loans, Dr Lee said they can apply for HDB's financial assistance measures instead, which is at the same concessionary rate. Further details on this and BLS will be released today.
Dr Lee said the government is aware of CPF members who have already committed their savings to pay tuition fees and insurance premiums. Hence, it will allow members to set aside sufficient amounts to meet these payments, when they apply for the loan programmes.
About 18 per cent of CPF members, or 217,100 people, will have insufficient monthly CPF contributions to meet their housing instalments after the 10-point CPF cut. Of these, 165,700 are HDB owners, 46,400 are private property owners and 5,000 are both HDB and private property owners, said Dr Lee.
He also said that of the 20,000 employees axed in the first nine months, about 30 per cent were foreigners.
As for why the domestic maid levy will not be cut, he said this is because the number of foreign maids rose despite the downturn, and there is a need to ensure their numbers do not grow out of proportion.
