Minister Lim Hng Kiang's written reply on Micron Loans

Question No 943 in Notice paper No. 46 of 2009

For Oral Answer

Name and Constituency of Member of Parliament
Mr Inderjit Singh (MP for Ang Mo Kio GRC)

Question
To ask the Minister for Trade and Industry (a) what are the terms of the $300 million loan provided by the Government to Micron Technologies; (b) what are the risks of this loan and are there terms and conditions which benefit Singapore; (c) whether this loan was disbursed through any of the banks in Singapore or was it a direct loan from the Government; and (d) whether the Government is now prepared to give direct loans to companies instead of sharing risks with banks.

Answer
1.Mr Speaker Sir, Micron Technology Inc. was awarded a S$300 million loan to facilitate further investment into TECH Semiconductor, its Singapore-based Joint Venture wafer fabrication plant for memory chips. The loan is a 3-year loan, to be drawn down over one year and repaid in entirety at the 3-year mark.

2.The loan was made conditional on Micron investing in TECH an amount that is significantly larger than the loan quantum and Micron providing leading edge technology to upgrade TECH. The new technology will help TECH maintain its position as one of the most cost-efficient memory chip plants in the world. Micron’s investment will also generate significant economic spin-offs to the rest of the semiconductor industry in Singapore, and to other supporting industries such as semiconductor equipment and chemicals.

3.The loan to Micron is backed by collateral that is worth much more than the loan. The risk of diminution in collateral value through action by Micron or TECH has been mitigated through appropriate financial covenants in the loan terms.

4.The Micron loan was made under EDB’s existing scheme for targeted investment promotion, and was hence not disbursed through a bank. This loan is not a financial assistance measure for the economic downturn nor should it be compared to the government’s risk-sharing facilities for loans made to local companies through the banking system under the Special Risk-sharing Initiative, or SRI. The SRI facilities are temporary and intended to facilitate the flow of credit to deserving companies facing a credit crunch in the current economic climate.

5.The investment promotion loans made by EDB, such as the Micron loan, are different: they are made under a standing scheme and subject to having in place satisfactory guarantee and collateral, rigorous cost-benefit analysis, and conditions designed to maximise economic benefits to Singapore. EDB’s use of a variety of tools for investment promotion has been instrumental in helping to anchor a range of manufacturing and services industries which have provided good jobs for Singaporeans over the years.