Hansard, 1960-05-16

PAWNBROKERS (AMENDMENT) BILL - (As reported from Select Committee) Order for Recommittal read.

PAWNBROKERS (AMENDMENT) BILL - (As reported from Select Committee) 32 p.m. New clause (Amendment of section 13)-

PAWNBROKERS (AMENDMENT) BILL - (As reported from Select Committee) Mr Speaker, Sir, I beg to move, "That the clause be read a Second time." Hon. Members are aware that the intention of the Pawnbrokers (Amendment) Bill is to give the poor the benefits of obtaining a loan at a cheaper rate of interest. This, of course, does not meet with favour by the pawnshop operators, who live on the interest paid by the poor. In the course of the deliberations on this Bill, the pawnbrokers attempted to coerce the Government by suspending business even before the Bill becomes law. A warning issued by the Government to withdraw their licences brought them to their senses. Within a few days, the pawnshops resumed business. The pawnbrokers have learnt that if they want to convince the Government of the justice of their case, coercion is not the proper way. They have come to realise that this Government cannot be cowed into submission by threats. Thus, after the resumption of their business, the pawnbrokers were told in a statement that the Government is always prepared to consider their views if they can produce sound reasons to convince the Government of the justice of their actions. Since then, a further representation has been made to Government. This representation is under consideration. In the meantime, Government has gone into the question of providing alternative means of giving loans to those who are in need. Several proposals are now under consideration, and its implications examined. The new clause before the House is to give the Government more flexible power to deal with the situation in the interim period by enabling the Minister to vary the rate of profits whenever he thinks the time is opportune. In order that those who have to frequent the pawnshops should receive some immediate benefit from the Government's policy of helping the poor and at the same time to avoid a possible temporary dislocation of the service in case pawnbrokers resort to exploiting those who are in distress, the Government has decided when the Bill becomes law that the Minister should exercise the power conferred in this clause to reduce the rate of interest from 24 per cent to 18 per cent per annum in the first instance. The Government will also take immediate steps, when the Bill becomes law, to reconstitute the Pawnbrokers Licensing Board so that it will implement the Government's intention of having more competitors in the field instead of the present monopolistic provision and to cancel the business licences of those who deliberately seek to exploit the distressed. Mr Speaker, Sir, I beg to move.

PAWNBROKERS (AMENDMENT) BILL - (As reported from Select Committee) Mr Speaker, Sir, this is another classic example of Government's inconsistency. If this Government feel that they want to help the poor, so do we. And if Government feel that the pawnbrokers might close down, thereby causing difficulty to the poor, we will support Government. But unfortunately this has happened, and a little too often, Sir. You will remember, Sir, at the last sitting I pointed out that "An Ordinance to suppress betting places" actually legalises and promotes more gambling places. I also mentioned that the monogamous marriage Bill legalises polygamous marriages. For mentioning that, I was accused of being a chameleon, changing colours, changing my opinion, and after having hailing the Bill at a women's meeting, coming here and attacking it - that is just the point of my argument, Sir. Yes, I did hear it. But why did I then speak against it? It is because when the monogamous marriage Bill was introduced-

PAWNBROKERS (AMENDMENT) BILL - (As reported from Select Committee) Order. We are going right back to debating on monogamy. I think we should concentrate on this Bill now. I think the hon. Member was quite correct in mentioning these facts in passing, but if she goes into detail and tries to reopen the debate on monogamy, of course, she is out of order.

PAWNBROKERS (AMENDMENT) BILL - (As reported from Select Committee) I am sorry, Sir, I am not trying to reopen it. I am trying to show how Government confuses not only me but also the rest of the people in Singapore. I was just going to show that it was because I was confused by the words "a monogamous marriage", which legalise polygamous marriages that made me say one thing at one time and another thing at another time. In the same way, this is going to confuse the public because at one stage the amendments in the Pawnbrokers (Amendment) Bill were to reduce the rate of interest, but today, if the amendment is accepted and the Bill is passed, it does not reduce the rate of interest. That was what I was trying to compare when I mentioned monogamous marriages. When the Bill says it is out to do one thing and in the end it does not do the thing it claims to do, the public gets so confused. When we say one thing at one time and another thing at another time, we are accused of changing our minds. We change our minds now because the Bill has changed its colour, Sir. The Bill, Sir, did say it was going to reduce the rate of interest. The Minister did say, even today, that it is to enable the poor people to be able to get loans at a lower rate. After that, as the Minister said, it did not meet with the approval of the pawnbrokers. Not only did it not meet with their approval, but the Government were very firm in their decision. And when the pawnbrokers threatened, the Government threatened in return and told them in no uncertain terms that they would not be coerced. In the Select Committee, Sir, the Government showed firmness, and I had great confidence in them. Some of the members of the public did tell me that the Government were going to withdraw the clause reducing the rate of interest. They seemed to believe that they knew the reason why the Government wanted to withdraw the clause. It did shake my confidence for a time. But when I was in the Select Committee, I put that all to idle rumour, because the Government was very firm. In fact, some of the Members of the Select Committee on the Government benches were selling me the idea, "Mrs Seow, do not believe the pawnbrokers. They will never close down. This is just a bluff and they will continue even if we reduce the rate." So I stood as firm as they did because I thought that they knew what they were talking about. Then, at the last sitting, when the Third Reading of the Bill was deferred, my confidence began to be a little shaken. But the Minister did reassure us that the measures which he was taking were - shall I quote him - (this is dated 7th April, 1960): "Just to give the Government time to take such measures as may be necessary to counter the suspension of business by Singapore pawnbrokers."

PAWNBROKERS (AMENDMENT) BILL - (As reported from Select Committee) 7th of April of what?

PAWNBROKERS (AMENDMENT) BILL - (As reported from Select Committee) Of the Straits Times. Well, Sir, having been reassured like this, I again said, "What the public said was just wild rumour." But today, Sir, the Minister has given me the idea that the warning was something more than wild rumour, because, after having been so firm, Sir, the Minister said, as reported in the Straits Times of 25th March, 1960: "Mr Ong, in describing the pawnbrokers' refusal to accept the pledges as a calculated attempt to embarrass the Government, taking as an excuse the government's crisis, says,. 'No Government can be coerced into accepting all kinds of things. The moment they use this kind of tactics we cannot ignore the situation that is created and must consider measures to stop it.'" That was quoted from the Straits Times of 25th March. Then on the 29th of March, it was again reaffirmed, and this time the Minister said: "He had given the pawnbrokers a chance to reconsider their action before the Government decided to take `other measures' to meet the situation." Then, on the 30th of March, we hear that Mr Kularajah is starting a cooperative pawnshop society, and the Minister for Labour and Law said: "It is a new venture in co-operative enterprise." And we read in this paper that the draft constitution is now being finalised and an inaugural meeting to form the society will be held next week. After all this assurance, Sir, we have come here today to cancel that very clause which is going to reduce the interest rate. 2.45 p.m. Can you blame me, Sir, if I start wondering whether, in view of the reason put forward by the public and the warning that they have given me, that the Government for certain reasons want to withdraw that amendment, there is anything more to it than just wild rumour? What are the Opposition and the public to think of this inconsistency? Government have always said that they cannot be pushed from pillar to post. What mysterious powers, Sir, have the pawnbrokers applied that they have driven the Government now not only from pillar to post, but from post to nowhere? In a statement to the Press, the Minister for Home Affairs has interpreted the pawnbrokers' refusal to take pledges as an attempt to intimidate Government, as I have read just now, Sir. Now do the Government admit giving in to this intimidation? Otherwise, what could explain the Government's wanting to withdraw that clause now? And to add insult to injury, Sir, after showing all this weakness and inconsistency, we are now asked to give the Minister power to raise or reduce the interest whenever he has more strength to do it, since it has been shown that he has given in to this intimidation and is too weak to implement it. Now we are asked to give him power so that at any time when he regains his strength he is going to implement it. Sir, cannot the Government decide one way or another if by reducing the interest it is going to be detrimental to the State of Singapore and its people, the poor and the pawnbrokers? Cannot they decide, "We will not reduce it."? If they think it is good, cannot they decide, "We will reduce it one way or another", and not keep everybody in suspense, the pawnbrokers included? The pawnbrokers do not know whether they are going to function on 2 per cent or whether tomorrow or the day after the rate is going to be 1 per cent again - when the Minister has the power. Sir, I would appeal to the Government to make a decision. Surely they know what they want. Are they going to reduce the rate of interest or are they going to let it remain as it is?

PAWNBROKERS (AMENDMENT) BILL - (As reported from Select Committee) Mr Speaker, Sir, the Member for Mountbatten seems to me to have a most simple and innocent approach to this problem. Considering that she has been a Member of the Select Committee to study the Pawnbrokers (Amendment) Bill, I am horrified to see how utterly ignorant she is of the problem she is supposed to have studied on behalf of the Assembly and on behalf of the people of Singapore.

PAWNBROKERS (AMENDMENT) BILL - (As reported from Select Committee) Not the pawnbrokers!

PAWNBROKERS (AMENDMENT) BILL - (As reported from Select Committee) And not, as my colleague has said, on behalf of the pawnbrokers. If she thinks that, by this amendment, the Government is being chased from pillar to post, then she is even more foolish than I thought any Member of the Assembly could be. Obviously, she has not taken the trouble to read today's Order Paper Supplement, which defines the way in which the amendment to section 13 is being sought. May I read it for her benefit the actual wording of the amendment we are now seeking: "PAWNBROKERS (AMENDMENT) BILL as reported from Select Committee (Paper L.A. 5 of 1960) - Recommittal in respect of the following new clause:- New clause: 'Amendment of section 13. Section 13 of the Pawnbrokers Ordinance is hereby amended by inserting immediately after subsection (4) thereof the following new subsections:- "(5) The Minister may by order amend the rate of profits and charges specified in Schedule B to this Ordinance."'" and so on and so forth. Sir, there is no evidence whatsoever to support the charge made by the Member for Mountbatten that this Government is being chased from pillar to post. On the contrary, when we discovered that the pawnbrokers were attempting to coerce this Government, we called them up and said, "Look here, chums, don't try to be funny." And these are salutary words, because the next morning they all opened up. And this is not the behaviour of a Government that is being chased from pillar to post. I say quite frankly that the fault lies completely and entirely with the pawnbrokers, because they utterly failed to make a case before the Select Committee. The Member for Mountbatten, being associated with big business which, as we know, gives full support to the S.P.A., must have advised the Select Committee about the way the pawnbrokers operate. Members of the People's Action Party can be excused for not having the depth of knowledge about the intricacies of the pawnbrokers' business. Either the Member for Mountbatten took her duties very lightly during this Committee Stage, or there were other reasons, of which I cannot understand, why she could not have assisted the pawnbrokers to lay their case before the Select Committee. The pawnbrokers made such a poor case that the Select Committee had no alternative but to reject the application for reconsidering the reduction of the rate of interest. But after the findings of the Select Committee were known, Government made a study of the method of financing pawnshops, the whole machinery of pawnshop financing, and the system of loans, and they came to the conclusion that the matter was not as simple as either the Select Committee believed on the one hand, or as straight, forward as the pawnbrokers, through their solicitor, had made out. Now the whole pawn business is in itself an isolated money market in Singapore. Because of its special function within a limited sector of the economy, it became possible for the pawn broking business to draw a substantial amount of capital at comparatively high rates of interest for lending to persons, mostly consumers, at even higher rates of interest. The pawnbrokers were, I think, right in saying that a great majority of their capital came from small deposits loaned to them by miscellaneous small men, possibly hawkers, small businessmen and so on, at very high rates of interest, which vary from time to time, depending on how urgent the demand of the pawnbroker is for this short-term capital. Because the people who have this capital - and they are mostly small people - have not developed the more modern approach to means of investment, they are willing to part with their capital at very high rates of interest, round about 12 per cent per year. Given this fundamental factor that a great part of the capital which the pawnbrokers now rely on can only be obtained at 12 per cent interest per year, it is not reasonable to expect that they will lend money at an identical rate of interest. That is one aspect of the money market in the pawn broking business. The other aspect, and this is more vital, is that when pawnbrokers are short of capital for some reason or other, and they cannot go to this group of small savers for loans to help them out of a very tight financial position, they have, as lenders in the last resort, the goldsmiths who, as a result of convention and tradition, have agreed to accept pledges made to pawnshops and not redeemed at certain agreed price levels. Now what complicated the position after the Select Committee's Report was published was that a number of goldsmiths, for reasons which are still obscure, had to go out of business, and that confused the whole situation. This was one of the principal reasons which led the Government to come to the conclusion that it would be prudent for the time being to have a reappraisal of the situation. Hence the amendment that we now seek. This will give the Minister authority from time to time to lay down the maximum rate of interest which could be charged on pledges. And I can assure the Member for Mountbatten that the rate of interest which will be effective forthwith would be a reduced rate of interest, and we are carrying on with our intention to see that the poor people who have to borrow money can do so at as low a rate of interest as possible. The rate of interest is the price which a borrower has to pay for the loan of capital, and that price must vary from time to time according to the supply and demand position in the market. It is, therefore, necessary when one regulates a price, whether it is the price of a commodity or the price of a loan of capital, that there should be provision for variation to meet the supply and demand position of the market. We are of the opinion, having studied the question in some detail, that it is not possible today to bring down the rate of interest as rapidly as was originally envisaged in the first Bill. And it may take some time before we could reduce the rate of interest to that extent. There are many factors in the situation which have to be dealt with before we can make available to persons, who want loans from pawnshops, loans on low terms which we think the poor need and the poor deserve. 3.00 p.m. It may take some time because it means that the market for loan money must be made more fluid. Obviously here, the short-term market for capital which the pawnbrokers are now tapping is an imperfect market in that the people who have money can only channel it through this one sources When we make available to them other sources of investment, the final result no doubt will be that the rates of interest which they now receive will be reduced in the course of time. Of course, the one factor which makes for high rates of interest in this particular sector of the economy is the instability of the pawnbrokers' business itself. Supposing you are to lend your life savings to a pawn broking business. You have $3,000 and you know that there is a certain risk - the business may go bankrupt and the man may disappear. You would expect a higher rate of interest than what you would get from Government bonds. That is in the nature of things. But when we improve on the whole organisation of this particular part of the loan market, I say the end result will be that we shall be able to provide a lower rate of interest for patrons of pawnshops than it is possible today.

PAWNBROKERS (AMENDMENT) BILL - (As reported from Select Committee) Mr Speaker, Sir, the facts which the Hon. Minister for Finance says only reached the Government after the Select Committee had submitted its report and as a result of which Government is now having second thoughts, to my mind, were all available in the report itself. The pawnbrokers were represented by a lawyer. They gave their evidence before the Select Committee. The facts which the Hon. the Finance Minister now says impel the Government to change its mind and to reconsider its decision were all available to the Select Committee. The fact that a greater portion of the monies which are lent out by the pawnbrokers are monies invested by small men at 12 per cent or 10.8 per cent is set out in the evidence contained in the Select Committee Report. What the Finance Minister has now said - that is to say when the major portion of the money comes from investors who get 12 per cent on it, it is hardly reasonable to expect the pawnbrokers to lend out at I per cent, was all within the knowledge of the Select Committee. Even in spite of that the Select Committee would not deviate from the position which the Government had originally taken up; that it would bring the rate of interest on loans by the pawnbrokers to the same level as that of the moneylenders. I am not saying, Mr Speaker, Sir, that the Finance Minister is not correct in his estimate that one has to go carefully over this situation. But I do accuse the Government of introducing legislation such as this in a hasty manner, and of not thinking out all the full implications of such a move before the Bill is introduced in this House. I would submit, with respect to the Minister for Home Affairs, that before he even thought of introducing such a measure he might have consulted the pawnbrokers, found out where their money market was, and how they financed their loans; if he had taken that little trouble to go into these matters, he might possibly have satisfied himself at that early stage that 1 per cent for pawnbrokers was not possible. Even when the Minister for Home Affairs moved the postponement of consideration of the Report of the Select Committee after the pawnbrokers had made their representations, the Minister did not give any inkling to the House that the Government was having second thoughts about the matter. The impression given to this House was that the adjournment of the consideration of the Bill was being sought for to tell the pawnbrokers in no uncertain terms to behave and not for the reason that the pawnbrokers had made out a good case. However, Sir, there is another aspect of the Bill in which I am particularly interested. It is this. I think it is highly undesirable as a form of legislation, Mr Speaker, Sir, that, where the Bill itself sets out a fixed rate of interest, there should be further provision in the Bill enabling the Minister by an Order to vary the statutory provision of a fixed rate of interest. I think such legislation is highly undesirable, particularly when the Minister, on his own account, can, by an Order, vary the rate of interest either up or down. The Hon. Minister for Finance has said that until economic conditions in this country settle down and people have other avenues of investment, and until such time as people give up the idea that they must get this high rate of interest on investment, we will be left with the position that pawnbrokers can only get a major portion of their monies which they can lend out from small investors who will ask high rates of interest. Mr Speaker, Sir, I feel that introducing the new subsections (5) and (6) into the existing section 13 is no way of keeping invested the monies that are already going into the pawn broking business. Unless the investors are satisfied that their monies will remain at a given rate of interest, without the unilateral action of the Minister intervening and reducing their rates of interest, I am afraid very few people will invest with the pawnbrokers.

PAWNBROKERS (AMENDMENT) BILL - (As reported from Select Committee) Buy gilt-edged bonds!

PAWNBROKERS (AMENDMENT) BILL - (As reported from Select Committee) I am on the topic of pawnbrokers, Mr Speaker, Sir. We are told that the pawnbroking business today is working at half-steam because the majority of the small investors have withdrawn their monies and because of the uncertainty with regard to the present position. We understand that about $15 million to $20 million have already been withdrawn. If uncertainty is to continue as a result of this legislation, that $15 million to $20 million will stay away permanently and, possibly, yet more money will be withdrawn from this particular type of banking facility, which is now available to the poor man. The Government has probably made up its mind what the rate of interest should be. If Government has made up its mind, Mr Speaker, Sir, then I suggest that Government should set out the rate of interest in the Bill and not hide behind a Minister's order. Surely, the Government must have some idea now after all these months of investigation. I believe, they have spent 6 or 7 months investigating this particular problem. Government should know now what is the appropriate and fair rate of profit, which a pawnbroker should derive from his business. All the Government need say is that it wants to amend the figure "1" to "1½". I think the Hon. Minister for Home Affairs in his Second Reading speech said Government was considering 18 per cent, that is if I have heard him correctly. All that the Minister need have said was, "Strike out the figure `1' and insert '1½' ". That would have met the situation, instead of keeping both the pawnbrokers and the investing public in the pawnbroking business in doubt.

PAWNBROKERS (AMENDMENT) BILL - (As reported from Select Committee) Mr Speaker, Sir, whether the provision is specifically set out in the Bill as 1½ per cent or in the rules to be made thereunder, uncertainty as to whether the l½ per cent will continue indefinitely, or only for such time as the Government can either persuade the investors or the pawnbrokers, or make other arrangements to make capital available for this particular form of enterprise. So long as it is the intention of the Government to try and bring about a situation whereby interest rates are reduced, then it does not matter whether you have written 1½ per cent into your statute or whether it is an order by the Minister which this Assembly can accept or reject. The provision is there. In my submission, on principle, just answering the point that the Member for Farrer Park has made, it is just as sound to say that a ministerial order can vary the interest, subject to this Assembly annulling it, because in any case, rather than go through three readings on a certificate of urgency, I Thiok it is neater and more decorous to have a debate arising out of a resolution to annul a ministerial order. I would like to answer the other point made by the Member for Farrer Park. To a certain extent, I would say that it is an irresistible conclusion that the Minister for Finance, having taken everything into consideration, has decided that the Minister in charge should proceed warily. That is not the same as saying that we have decided to allow things to remain as they are or that the Pawnbrokers (Amendment) Bill was ill conceived. It has brought the rate down from 24 per cent to 18 per cent in the first instance. It is a continuing issue for some time. It is the opinion of the Government that the borrowing impecunious public should be made to pay less heavily for their unthrifty ways. But ultimately the issue is this. I agree that we are not resolving this matter with a finality which should perhaps be desirable in these matters. Not being able for reasons which the Minister for Finance has stated, to bring about the final position in one phase, I think the Members on the other side should be grateful that we have decided to face the position by reducing gradually, and we hope less painfully, from 24 per cent to 18 per cent. Meanwhile, of course, I think the pawnbrokers are fully aware that the Government intends not only to hear evidence, but also to know from its positive operations the conditions of the pawnbroking business. Mr Speaker, Sir, in India the banks run a pawnbroking business. Every bank has a branch which has a pawnbroking department. That possibility here is being explored. In Israel, the State runs a pawnbroking business. I think there is as much a measure of finality in economic and financial matters for the pawnbroking business as is possible in the circumstances.

PAWNBROKERS (AMENDMENT) BILL - (As reported from Select Committee) Mr Speaker, the Prime Minister has very effectively dealt with the point why the rate of interest should not be set down on the statute book, because we expect that, in the course of time, there will be further variations in the rate of interest. I would like to reply to the other point made by the Member for Farrer Park; it is that during the Select Committee's consideration of this Bill, all information was made available to us. I dispute this point, Mr Speaker. It is true that the pawnbrokers presented a case. 3.15 p.m. Various measures were proposed but it was necessary to evaluate the reliability of the information on which they were based as it was obvious that the pawnbrokers were in the position of supplicants making out a case. They had an axe to grind. And it was a misfortune that they did not present their case as ably as they could. For instance, there were doubts on at least two points. The first was on the amount of profit that they made from the sales of unredeemed pledges. There were also doubts whether the figures on the overhead costs of the pawnbroking administration were correct. And, of course, the whole business of the role of the goldsmith - the re-discount facilities, so to speak, that go to them - was not at all brought out clearly before the Select Committee. As a Member of the Opposition, the Member for Farrer Park could hardly take the Government to task for not accepting the findings of the Select Committee, because the Opposition Members in the Select Committee came to agreement over certain recommendations. And it was the Government itself, in the course of events which developed after the publication of the Select Committee's deliberations, which sought further information and made a more detailed appraisal of the situation. And it came to the conclusion that certain changes were necessary.