The wage cut call follows a wide-ranging cost cutting package announced by trade and industry minister Lee Yock Suan on Wednesday which included a key proposal to halve employers' contributions to a mandatory pension fund scheme.

All in, both measures, together with a range of cuts which would include tax rebates, lower government rentals and reductions in foreign worker levies and infrastructure charges, are targeted to save some Singapore $10 billion a year ($6.02 billion) for businesses.

"The cost cutting can have an immediate impact because the cash flows of companies can be improved immediately instead of through an increase in government spending, which would take some time to filter down," said Kaan Quan Hon, director of economic research at DBS Securities.

In terms ofimpact, both the manufacturing and financial services sectors will be key beneficiaries of the wage cuts, Fraser AMMB Research said in its daily review on Thursday.

"It is estimated that companies in the electronics sector will enjoy cost savings amounting to 15 per cent of the total through these measures," Fraser said, adding that "banks will also benefit given that labour accounts for almost half of total expenses."

Fraser said the package of cost cutting measures would help raise aggregate net profit in the 80 companies it covers by 11.6 per cent next year and 5.3 per cent in 2000.

In 1997, wage costs for Singapore's 1.9 million strong workforce, excluding the employer's pension fund contribution, amounted to some Singapore $50 billion, NWC chairman Lim Chong Yah told a news conference.

"A cut of five to eight per cent of wages would range from S$2.5 billion to S$4 billion. Supposing all these are implemented, you literally have a savings of S$6.5 billion to S$8 billion in terms of costs involvingwages and CPF contribution," he said.

The competitiveness committee had recommended on Wednesday a total 15-per cent cut in the overall wage bill, adding the additional cuts could come from variable bonuses.

"To achieve a reduction of 15 per cent in overall wage costs, the NWC recommends that in addition to the (Central Provident Fund) cut, total wages for 1998 be cut by 5 per cent to 8 per cent as compared with 1997," the NWC's Thursday statement said.

"Companies which perform exceptionally well or very poorly may deviate from this general guideline."

The NWC advised companies to use the "variable component" of wage packages, which includes performance-based bonuses, as the "main instrument" for the wage reduction.

The NWC, a tripartite body comprising representatives from the government, unions and employers, advises the government on wage policies and also issues wage guidelines in line with long-term economic objectives.