Mr Speaker, Sir, I beg to move, That this Assembly approves the financial policy of the Government. Sir, the P.A.P. Government has this week completed its fourth year in office. Many momentous events have taken place during this period. And now we stand on the very threshold of independence through merger with the future Federation of Malaysia. Although, at this moment, the constitutional arrangements concerning finance have not reached finality, I am hopeful that on the resumption of talks, final agreement would be reached. Only two outstanding issues remain to be settled, namely, the quantum of our contribution for Federal services, and the terms under which the common market is to be established. While it is unfortunate that at this very late moment agreement could not have been reached on these matters, we should not overlook the fact that discussions in the official sub-committees and in the plenary sessions of the inter-Governmental committee had resolved successfully many complex and intricate problems to the mutual satisfaction of both Governments. In presenting the Budget for 1963, I recognise that there must necessarily be less interest in the Estimates now before the House than is usual. The obvious reason is that nearly half the year is over. What the House is asked to ap-prove is really to provide finance for the remaining six months of 1963. In December, 1961 the House voted and approved a vote on account for expenditure for the first half of this year. For reasons I have explained, it was not possible then to present the Estimates. Such being the case, I wish, in this speech to devote more time to an examination of the basic financial and economic problems confronting the State than to discussing the details of the Estimates. In doing so, I would like to undertake a review of events in the last four years and assess the performance of the P.A.P. Government against the financial and economic policies on which it was elected to office in 1959. I will also attempt a pre-forecast of probable trends after Malaysia, although this forecast must, in the nature of things, be tentative. Nevertheless, it is worth making it, if only to discover the limits within which the future financial and economic progress our State is likely to make. It falls outside my province to review progress in the lion-economic aspects of our programme such as the Women's Charter, labour legislation, the work of nation building, educational progress and other non-economic matters. I shall refer to these only in passing and in so far as they have relevance to the economic and financial policies of the Government. Basic Problems In 1959, we saw with far more insight than other political Parties what the basic problems were that faced Singapore then. On the economic side, the problem stems from the high rate of population growth in the postwar years. The average annual increase between 1947/57 was 4.3 per cent, a rate higher than that known to be achieved by any country in the world. This population explosion, as it is commonly known, brought about two sets of immediate problems to the State. The first is to maintain a rate of expenditure on the social services - health, education, housing - to maintain a rate on these services adequate to keep up with population growth and to allow for improvement. The second problem is to create a sustained rate of economic growth which would afford increased employment opportunities to absorb the thousands of young men and women who would be looking for work each year. In 1959 we told the electorate (and I quote from The Tasks Ahead, Part I, page 19): `Although unemployment is a serious problem now, it is trivial when compared with what would happen after 1962 if no steps are taken now to expand the economy and increase opportunities for work.' The first problem, that is expanding the social services, is a comparatively straightforward one from the point of view of finance. It is a matter of finding money to pay for new schools and houses and clinics and to pay for the salaries of the teachers, nurses, doctors and other personnel that would be required. And this is possible, if we were to avoid punitive increases in taxation, only in a bouyant economy yielding increasing revenues to the Treasury. The second problem of economic expansion is a more intricate one. It is a problem common to all the newly independent countries of Asia and Africa. This is the problem of sustaining economic growth of underdeveloped countries, which in the postwar years received unprecedented attention among international organisations such as the United Nations and its specialised agencies, national Governments, universities and the enlightened public of most countries. A vast literature has proliferated on the subject of the techniques and policies which national Governments should pursue to achieve what is commonly termed "the take-off into self-sustaining growth". Not only has there been great interest but recent years witnessed an upsurge of confidence that economic growth is possible in underdeveloped countries. Indeed, no less august a body than the United Nations has termed the 1960s as the decade of development. It has taken but 3½ years of this decade to bring about a growing disenchantment about the prospects of this take-off into self-sustaining economic growth. The countries of Asia have, one after another, experienced not only a slowing down of growth but actual decline. We have only to look outside our country to see several of our neighbours in dire economic distress. But for Malaya and Singapore, the first three years of this decade have been years of promise. Substantial economic expansion has taken place both in the Federation of Malaya and in Singapore. And the reasons are not far to see. We both possessed and still so far have retained all the pre-requisites of economic growth. We have a strong and stable currency. There is a firm legal framework in which contracts are enforceable, thereby making future business relations predictable. There is also an effective administration and a reasonable supply of experienced managerial skills. Economy of Singapore The case of Singapore, however, is unique in Asia. The large Asian countries have their economies based on the production of food grains, especially rice, an occupation which engages the energy of nearly three quarters of the population. We in Singapore do not produce a single grain of rice and our agriculture is limited to intensive market gardening and highly capitalised poultry farming and pig rearing. This is an advantage to us because the production of food grains generates low per capita income even under the most favourable conditions. Another peculiarity of Singapore is the complete absence of natural resources, but this factor is more than balanced by our central geographical position, our excellent natural harbour and our talented and energetic population. Because of this, the most important pursuit in Singapore is trade and its related occupations, such as banking, shipping and transportation. Singapore's pre-eminence as a trading centre of South-East Asia Is known to all of us and is not a matter upon which I need elaborate. But this has led to two difficulties in bringing about our own economic growth. The first is that the expansion of trade largely depends on external factors not within our control. If our neighbouring countries decide to introduce import controls or exchange controls to reduce the volume of trade with us, then there is little we can do about it. And even if this does not happen there is no reason to expect that trade will grow in keeping with the growth of our population. The second difficulty arises in the slowness with which capital and enterprise can be transferred from trade to other sectors of the economy which could be expanded. While our trading communities are not short of managerial skills, such skills are specialised and the business attitudes generated by trade are dissimilar from those required in other pursuits. I shall develop this point at some length later. When we took office in 1959 we were convinced that the laissez faire approach in economic matters that was characteristic of past administrations could not be relied upon to generate economic growth. Some form of positive State action was required. But it was necessary first to assess and define problems of our economic growth. From such an appraisal, we should lay down the strategy for promoting economic growth and, on the basis of such a strategy, we could create the necessary financial and economic institutions needed to carry out the immediate and long-term policies dictated by this strategy. The broad approach to these problems had been enunciated in the Party's The Tasks Ahead. The policies outlined in this document needed to be elaborated in detail and translated into a programme for administrative implementation. And this was done soon after we took office in the Four-Year Development Plan of the State. This document was presented and approved by the Assembly early in 1961. State Development Plan The Four-Year Plan sets out in detail the development projects to be carried out in the public sector. These include the new capital projects which are to be carried out by the Government and the Statutory Authorities of the State, such as Public Housing, the Public Utilities, the port, the Telephone Board and the rest of them. It is possible, however, in going through the Four-Year Plan to get lost in a morass of details and not to see the wood for the trees. I may therefore be excused if I now give a brief resume of the underlying strategy to promote economic growth which we, in the special circumstances of Singapore, must employ in our pursuit of prosperity. The approach adopted in this Plan is a flexible and empirical one. Recognising that the creation of new jobs is of over-riding importance, the Government believes that the attack must be mounted on a broad front. First, we should maintain and develop the traditional strong-points of the economy, our trading, banking, shipping and communications services which have sustained our entrepot trade. It would be an error to take measures harmful to our established economic functions in the quest of something new and uncertain. Not only should we maintain and improve our efficiency as a trading centre, hut also other established lines, particularly our agriculture which consists mainly of market gardening and animal husbandry, should also be improved. While improving the traditional pursuits, we should also try to seek new lines of expansion. Because our land space is limited and no mineral resources of value exist, only a narrow range of opportunities are open to us. Since Singapore is the fifth largest port in the world, it is obvious that employment on board ships offers promise of expansion, particularly in respect of ships in the international sea routes. Accordingly the Government instituted special training courses and made special arrangements with shipping lines to increase the enrolment of Singapore citizens in sea-going occupations. Over the last two years. Singapore provided 1,800 new entrants to employment in ocean-going ships. The Government intends further to enlarge opportunities for young men to obtain employment in ships and will introduce a comprehensive training scheme of deck, engine rooms and catering services to be conducted on a training ship in the Singapore harbour. Last year 15 Singapore citizens obtained foreign going and home trade deck officers' qualifications. The Polytechnic is preparing a steady flow of students for these examinations and more local citizens are also qualifying as harbour pilots. Another line of activity which promises rapid expansion is tourism. The opportunities offered by tourism were not, at first, fully appreciated by the Government. In fact, in the 1959 election platform, there was no mention of tourism. A study of the subject made after we took office reveals that there are considerable potentialities for expansion in tourism. This industry can add to our national income and increase employment in the catering, hotel, entertainment and transportation industries of the State. The Plan to develop tourism is being worked out now and will be put into operation in the near future. Industrialisation But all these activities, our traditional entrepot trade, shipping, banking, agriculture, together with the new lines of employment on board ship and tourism, cannot provide sufficient outlets for our growing population even when they are pushed to the limits of their existing potentialities. The one hope of our island State lies in expanding the manufacturing industries. And this must be done largely within the framework of a competitive free enterprise system, unless we are prepared to suffer an immediate and severe decline of our standards of living brought about by high cost of production of goods that we buy. The subject of industrialisation is one which has been exercising the mind of the Government at all times. It is a matter of over-riding importance, for on the success of its effort to industrialise depends the survival of the State. If we fail, then there follows inevitably mounting unemployment and misery and this will bring in its train mounting social tension which will finally lead to an explosive catastrophy of some kind. This being the case, I intend to devote some time to an examination of what we can do in Singapore, what we have done and what still remains to be done. First what can Singapore hope to do by way of industrialisation? A large nation with a big population and an extensive land area with many natural resources can afford to experiment with high cost industries set up under a prohibition of imports or a high tariff wall. Such a country can allow these high cost industries to survive even if the industries are not efficient in the first instance, by passing on the increased Cost to the consumer. Industrialisation on these lines can be rapid and spectacular if it is pressed forward with sufficient energy. Singapore, however, lacks the prerequisites for such an endeavour, namely, a large population, varied natural resources and extensive land area. This being the case, our plan of industrial expansion must be more circumspect and judicious. Particularly as our economy still rests so much on trade, enforced industrialisation at the expense of trade can be an uncertain gamble with such a small domestic market as we have. In The Tasks Ahead the essential strategy is outlined which is needed to promote industrial growth. Three basic policies were recommended; first, the establishment of an Economic Development Board; second, expansion of technical education; third, the setting up of a Malayan Common Market. That was the programme which we recommended to the electorate in 1959 and the policies recommended have been implemented or are at some stage of realisation. That was the policy in 1959. What has been the performance? As Members already know, the Economic Development Board was established towards the end of 1961. I recollect the many questions that were asked in this [louse in the first two years, which showed a natural impatience over the establishment of the Board. I had explained that industrial promotion was a novel venture in the State and that the Government had to give the most thorough preparation and consideration of all aspects of the subject before embarking upon it. I am happy to say that the Economic Development Board is now firmly established and work is in full swing. The Board is staffed by both overseas and local experts. There are six expert personnel provided by the United Nations. They consist of the Director of the Board, a Chemical Engineer, a Mechanical Engineer, a Cost Accountant, an Industrial Consultant and the Chief of the Technical Consultant Services. In addition, the short-term services of three other United Nations experts for specific duties have been obtained. namely, a Naval Architect, an expert on tanneries, and an industrial food consultant. But the main numerical strength of the Board comes from local staff. Local personnel of the Board at the, expert level now numbers 31. They cover a wide range of professions. Most of them belong to some branch or other of the engineering profession-civil, mechanical, chemical and electrical. There are also chemists, economists, accountants and architects. In addition, the Industrial Research Unit was established only last month. It is staffed by various professional experts provided by the Government of New Zealand with local counterparts under training. So it can now be said that the Economic Development Board, in terms of financial and technical competence, constitutes a powerful agency to promote industrial growth. What have been the results so far? We can discuss this under two aspects. First, that of providing the basic services needed for industry, such as industrial sites complete with roads, railways, ports, water supply, power, telephones and other services. The achievement of the Board in this respect has been nothing short of spectacular, as any visitor to the Jurong Industrial complex can testify. More than $16.7 million have so far been spent at Jurong. Hills have been levelled and swamps have been filled. An area of 900 acres is immediately available for occupation as factory sites. More than 60 applications have been received and these, if approved, would cover a total area of 340 acres. More than 11 miles of roads have been laid of which 7 have been metalled or will soon be metalled. The railway line is due to be laid and construction will commence in a few weeks' time, the work of planning and surveying having been completed already. Work has also commenced on the construction of 5,000 feet of wharf. This is due for completion by the end of 1964. Telephone cables have been laid, so have power lines, and water supplies should be ready sometime this year. The other smaller industrial estates, one at Redhill and the other at Tanglin Halt, are in an advanced stage of completion. Redhill Estate is fully booked and 25 factories have been completed or are due for completion soon. The 43 acres at the Tanglin Halt industrial estate have been almost completely booked and new industries are starting up there at a satisfactory pace. The industries at these two small industrial estates cover a wide range of light manufactures. Twenty-four Pioneer certificates have been granted and 19 firms are in operation or will soon commence operation. The new pioneer industries already established represent a total capital investment of $130 million and are providing permanent jobs for more than 3,500 people. Another 13 pioneer certificates will be awarded shortly. The companies concerned will have a subscribed capital of $14.3 million and will provide jobs for 1,150 people. In addition, the production of a wide range of manufactures has been under investigation by the Economic Development Board for some time. Since the Referendum in 1962, there has been a substantial increase in interest, both locally and overseas, in establishing industries in Singapore. The industries on which a decision to establish can be expected to be made this year include a wide range of manufactures such as bitumen, fertilisers, ceramic wall tiles, ceramic sanitary ware, calcium carbide, caustic soda, chlorine, car batteries, ammonia and ammcnium sulphate, plastic products, leather, ground phosphate, electric light bulbs, insulated cables, pipes and galvanised iron sheets and various items of food-processing. This new range of industries, if and when they start off, will involve a capital investment of $56 million and will provide employment for 1,620 people. A large part of the industries I have mentioned above represents the direct result of the promotional effort of the Economic Development Board. All this promotional work was undertaken against a relatively unfavourable background of political strife in Singapore and politically inspired labour troubles. It should also be remembered that these new industries are being set up without the tariff protection which most other countries consider essential. I have no doubt that with the tariff protection accorded by a Common Market, we shall see a rapid acceleration of industrialisation in Singapore. I shall deal with this subject later. I now come to the second approach advocated in The Tasks Ahead - the development of scientific and technical skills at all levels. Modem industries require men trained in a wide range of skills. At a professional level, we have the Singapore Polytechnic and the Science Faculty of the University of Singapore. For courses not provided at these two institutions, the Government has made arrangements with various Colombo Plan countries to provide increasing numbers of places for scientific and technical education. In fact, today there are no less than 139 scholars abroad engaged in undergraduate or postgraduate studies in various branches of science and engineering. We cannot afford to neglect the training of personnel at the lower level of technicians and craftsmen. The, Ministry of Education has examined this aspect with some thoroughness. A plan is now in hand to expand technical education to provide industry with an increasing supply of technicians and craftsmen. There is now a Vocational Institute with an enrolment of nearly 1,000. There are in addition two secondary technical schools with an enrolment of 2,500 pupils. Next year, no less than four new secondary schools will be ready to admit a total maximum enrolment of 7,680 pupils in two sessions'. And in 1965 an additional three new vocational secondary schools will be established to provide places for 5,760 pupils in two sessions. Common Market The third policy is to establish a common market. Our election programme in 1959 declared that a common market with the Federation of Malaya would be essential to fast economic industrial growth in the two territories. Members are aware of the efforts made by the Singapore Government to obtain the agreement of the Federation Government to establish a common mar-ket. Initially, progress had not been as fast as we would have desired, but nevertheless definite advances were made towards this goal. The breakthrough occurred in February this year when a World Bank Mission under the leadership of Professor Jacques Rueff came to the Federation of Malaya, Singapore and the Borneo territories, for a study of the subject. The two Governments have received the report of the Rueff Mission. Sir, I am not at liberty to disclose recommendations of the Rueff Mission nor do I wish to anticipate the future course of negotiations which will take place between the Governments of Singapore and Malaya. But I have no hesitation in saying that the Report of this Mission will prove to be of profound importance to the future of Malaysia and will find an authentic place in the annals oil the economic history of this territory. I wish here to give a broad outline of how the economy of Singapore would be affected by a common market. First, let me explain, without going into intricate technical details, the basic issues which the establishment of any form of common market will bring about, given the existing tariff systems, and the present economic structures of Singapore and the Federation of Malaya. As I have stated before this House on previous occasions, there would be no difficulty whatsoever in getting agreement on a common market with the Federation of Malaya if we were prepared to join them in a full-scale customs union. This means that we shall have to introduce in Singapore the same tariff scales as in the Federation of Malaya. The trouble about this proposal is that, while it will give a decided impetus to industrial growth, it will also dislocate the entrepot trade to a dangerous extent. A complete customs union is therefore not a feasible proposition for Singapore at the present juncture. We have therefore proposed a limited form of common market whereby goods manufactured in the territories of Malaysia will be subject to common market treatment. That is to say, there would be protective duties imposed on these goods when imported into any part of Malaysia while local manufactures can move freely within the area without duty. On the other hand, tariffs on goods which are not now manufactured and are not likely to be manufactured in the Malaysian territories would not apply to Singapore. This would reduce the degree of dislocation that would be caused to the entrepot trade. Even with the limited form of common market which we consider practical in the present circumstances, the range of imported manufactures which will be subject to import duties will be extensive. This is likely to increase in time when manufactures of an increasing range of goods previously imported will be possible in Malaysia. How would the common market affect trade and industry in Singapore? The first point to be noted is that protective tariffs in Singapore will apply only to manufactures and not to tropical raw materials which form the greater bulk of our entrepot trade. So the traditional entrepot trade in, rubber, copra, coffee, sago, spices, jungle produce and other goods will not in any way be affected by the common market. Second, even where import duties are placed on imported goads, every facility will he given to the re-export trade. An elaborate system of bonded warehouses with adequate facilities for handling and packaging of goods will be set up as part of the common market arrangements. The bonded warehouses will enable these goods to be re-exported without duty and in this way will help to sustain the competitive position of our re-exports. In spite of all that we can do to safeguard our re-export trade, it is necessary that traders engaged in the entrepot trade in manufactures should undertake a basic re-appraisal of their future prospects. I must make it clear that the lamest sng1e market for our re-exports of manufactured goods is the Federation of Malaya. It is likely that, under the common market, industrialisation in the Federation of Malaya itself will gain an added momentum and it is certain that many of the goods which she now imports through Singapore will be produced in the Federation itself. However, it is not open for the traders to say that if Singapore keeps out of the common market then they can hope to retain their re-export trade to the Federation. If Singapore keeps out of the common market, then the Federation would industrialise by her own efforts and produce many of her goods which she now imports through Singapore. In this event, we would lose our re-export trade to the Federation without any compensating advantage in the way of local industries to produce these goods in Singapore. My advice to importers and traders now engaged in these lines is to take a more serious interest in industrialisation than they hitherto have done. If they divert their energies and business talent in gradual stages from trade to industry, then there is no reason why their present prosperity cannot be maintained in the future. The profits which they now make in trade in imported manufactured goods will come in a different form in the shape of profits in making these goods themselves. This will happen if traders are sufficiently alert and aware of the changing economy of Malaysia. The Government, `through the Economic Development Board, will do everything possible to enable traders to move into industries in the line of products they have experience in handling. On the other hand, if these traders refuse to accept the new challenge and grasp the new opportunities that arc offered, then they only have themselves to blame if the diminution of their re-export trade is not matched by an accretion of income from new sources. The common market is the last of the three-point programme of industrialisation which we announced we would carry out in 1959. This has been the missing link of Singapore's drive towards industrialisation. It is by far the most decisive single factor in accelerating industrial growth. For nearly four years we have strained every resource and ingenuity to achieve it, but this objective has until now eluded our grasp. Now at last the Government of the Federation of Malaya has announced that it accepts in principle the establishment of a common market in Malaysia. It only remains for the terms of this common market to be worked out and agreed upon. I have no doubt that the common market in Malaysia will provide a greater impetus to our industrialisation effort than anything else can do. It will, in addition, also quicken the pace of industrial growth in other parts of Malaysia. If we conduct our affairs with intelligence, energy and resourcefulness, there is every reason to hope that Malaysia will, in the 1960s, fully live up to the expectation that this will be a decade of development. For Singapore it means that we would have found at last a solution to our problem of unemployment. If all goes well, the thousands of young men and women who would be looking for decent and secure jobs in the years to come will find the jobs available. And if they are prepared to go through the many courses of technical training which will be made available to them, then they will not only secure for themselves better jobs in industry but they will also be providing our growing industries with a much needed supply of skilled labour. 1962 Economic Review Sir, I now turn to a general review of economic activity in 1962. By all accounts, 1962 was a good year for Singapore, even better than 1961. There were marked advances in most fields of activity. As we are a trading centre, a review of economic activities should properly begin with trade, in 1962 our total imports came to $4,036 million as compared with $3,964 million in 1961. Exports amounted to $3,419 million as compared with $3,308 million in 1961. There was therefore a small though significant increase so far as the value of our external trade is concerned. But it should be remembered that 1962 prices of major commodities were considerably lower than those obtaining in 1961. For instance, the average price of rubber in 1962 came to only 78.2 cents per pound as compared with 83.8 cents the previous year. There were also substantial falls in the prices of practically every item entering into our entrepot trade, particularly products such as coconut oil, pepper and coffee. This decline in prices conceals the real expansion in the physical volume of trade conducted through our port. For Singapore, it is the physical volume of trade that really matters, for we draw our income from handling, processing and packaging of goods through a number of stages, and the larger the volume, the more work and income are generated. In physical terms, the amount of cargo loaded in Singapore was 7.66 million tons in 1962 compared with 6.51 million tons in 1961. This represented an increase of 18 per cent of cargo loaded in our port, both at the Harbour Board wharves, in the roads and at our oil terminals. The volume of cargo discharged in 1962 was 13.40 million tons as compared with 11.75 million tons in 1961. `This increase comes to some 14 per cent. But quite the most spectacular expansion of our economy occurred in the construction industry. In 1962 the Housing and Development Board completed 12,230 houses as against 7,320 in 1961. Exact figures for private housing are not available, but visual evidence of private construction now in progress at so many places in our island suggests that a substantial increase did take place in 1962. The statistics on building materials bear this out. The output of bricks showed an increase of 51 per cent in 1962 as compared with 1961. Retained imports of cement amounted to 260,000 tons in 1962, representing an increase of 39 per cent over the 1961 figure of 186,000 tons. Retained imports of structural steel amounted to 45,000 tons in 1962, showing a percentage increase of 36.8 per cent over the 1961 imports of 32,000 tons. Labour statistics on the number of workers employed in the building industry also show a substantial increase between 1961 and 1962. There were 10,372 workers in the building industry in March 1961 as compared with 13,033 in September 1962, an increase of 26 per cent. The actual increase was probably larger, as statistics on the activities of small contractors and sub-contractors in the building trade are notoriously difficult to collect. This increase in the general level of economic activity is reflected in the statistics on finance. Loans and advances by banks in Singapore over the year came to $706.7 million as compared with $625.5 million the previous year. There was a substantial increase in bank deposits from $880.9 million in 1961 to $983.9 million in 1962. This increase in bank deposits occurred in all categories, for example, current accounts, time, as well as savings deposits. The increase in time deposits was particularly marked, being of the order of some $80 million. This expansion in private commercial banking is matched by the performance in public finance. I shall deal with this aspect when I come to the 1962 expenditure and revenue accounts. It is to be expected that with heightened economic activity, people will be better off and would buy more goods. Here again the statistics show that the consumer in Singapore did well in 1962. He bought 8 per cent more motor-cars than in 1961, spent 6 per cent more on refrigerators, 8 per cent more on radios, 27 per cent more on cameras, drank 7 per cent more liquors, used more petrol, went to cinemas more often, wore more and better clothes, and generally had a better time than in 1961. But we are still far from being an affluent society. It is our business to see that the affluence which is now enjoyed by a limited section of our society is extended to everyone. This is not a matter-if I may be permitted a metaphor-of sharing our existing cake in equal slices all round but of producing a bigger cake so that everyone can have a larger slice. In other words, it means producing a larger national income through fast economic growth. Revenue and Expenditure in 1962 Sir, I now turn to a review of revenue and expenditure in 1962. From my brief account of the economic situation last year, it would hardly come as a surprise to Members if I were to say that the financial outcome for that year was not unsatisfactory. The revenue collected amounted to $418.8 millions and the total expenditure was $351.7 millions. With the transfer of $30 millions from current revenue to the Development Fund, this means that the total surplus on current account in 1962 was $97.1 millions. Ordinarily this might have been a subject for unqualified satisfaction, but, however, recently our annual financial surpluses have been the object of embarrassing attention in certain quarters. Nevertheless, 1962 was a good year financially and the reserves both in the Consolidated Fund Account and the Development Fund Account were strengthened by the end of 1962, when they stood at $208.8 millions and $141.6 millions respectively. This was a great improvement on the $87.2 millions we started with in 1959. I am sure that Members will be pleased that this strong position had been achieved in spite of very heavy expenditure incurred in providing the people of Singapore with increasing numbers of houses, schools, roads, standpipes, lighting, community centres and, of course, the massive Jurong industrial complex. Confidence in the Government was reflected in the support for the $60 million loan raised last September. The World Bank undertook a detailed financial and economic review of the State and endorsed the sound financial standing and economic policy of the Government. On the basis of this favourable report on the credit-worthiness of the State of Singapore, the World Bank agreed to a loan of $45 million for the extension of electric power supply. The loan agreement has since been signed in Washington on the 16th May, 1963. I should mention here that construction work at the new Pasir Panjang Power Station had not in any way been delayed at any stage because, while the loan negotiations were proceeding, tenders for Construction of the Station and the supply of equipment were proceeded with simultaneously. Members are also aware that an application has been made to the World Bank to finance the Johore River project to ensure that there will not be any shortage of water in the foreseeable future. The World Bank loan for the power project carries an interest of 5« per cent a year and is repayable over a period of 20 years. These terms are eminently satisfactory. Sir, I do not wish to delve in too great a detail into the revenue and expenditure account for 1962. Revenue exceeded the estimates by $26.5 millions while a shortfall of $47.8 millions was experienced in expenditure. This shortfall in expenditure has been recurring for some years and in my previous Budget speeches I have explained the main reasons which brought about these savings. Some of these reasons still held good in 1962, but there were a number of other factors which cropped up during the course of the year, including certain economy measures which were introduced. The Estimates Committee of the Assembly has examined certain cases of over-estimation of expenditure and the recommendations of the Committee have been accepted by the Government. It would be impossible to guarantee that there will be no further shortfalls in future estimates of expenditure. So long as departments are expanding and so long as the services provided to the public are being expanded, it is virtually impossible to avoid shortfalls, especially in personal emoluments. In most instances, provision has to be made for staff for the full year in the Estimates, whereas in practice, time is required to recruit staff. This means that the full complement of staff will not be available as from the first day of the year but sometime during the year with consequent savings in expenditure. In passing, I might mention the big items of under-expenditure in the various Ministries. There was a shortfall of $4 millions in the Ministry of National Development of which $3.4 millions was in respect of O.C.S.E. items and $½ million under Personal Emoluments. The main reason was that the Work Brigade did not expand to the full extent we provided for. This was principally due to better economic conditions which resulted in a smaller number of applicants joining the Work Brigade. The Public Works Department experienced a shortfall of $1.6 millions, nearly all of which was in respect of Personal Emoluments. There was a saving of $3 millions under Public Works Recurrent, a smaller figure than previously experienced. The Ministry of Health spent $5 millions below their estimates, of which half was due to savings in personal emoluments. The expenditure for pensions, retirement allowances and gratuities saw a shortfall of $9.1 millions, and this was principally due to faulty estimation. One of the reasons was that the amounts that had to be set aside in the past for Malayanisation compensation had not been sufficiently reduced. The Ministry of Culture underspent by $2.2 millions, and most of this was due to over-provision for the television services. A large staff of technicians, programme assistants, cameramen, studio floor managers, costume designers, script writers and other grades had to be engaged to run a television service, and by the end of the year, it was not possible to engage more than a fraction of the full complement. Since then, however, substantial progress has been made. The Defence Services underspent by $1.4 millions and this was due to the slowness in recruiting the Second Battalion of the Singapore Infantry Regiment. Finally the Ministry of Education underspent by $7.5 millions, most of which was in respect of personal emoluments. I now turn to the yield of revenue which, as I said, had exceeded the estimates by $26.5 millions. The additional revenue resulted from the buoyant economic conditions which existed during the year, particularly after the Referendum. The Inland Revenue Department had a good year, income tax exceeding estimates by $8.5 millions, while property tax, stamp duty and estate duty taken together yielded some $1.8 millions in excess of the estimates. The Customs Department also exceeded their estimates. The excess was $5.3 millions and was distributed more or less evenly between petroleum, liquor and tobacco duties. Entertainment duty showed a modest half a million dollars excess over the estimates. The increase in the yield of property tax by $0.4 million was particularly noteworthy in view of the concessions that were made to owner-occupied attap houses. Until the granting of tax concessions to these persons, the rate of tax on owner-occupied attap houses in the city areas was 36 per cent. The Government felt that these properties did not enjoy the same benefits by way of roads, lighting, water and electric supply as compared with permanent dwellings. Accordingly, on grounds of equity, it was decided to reduce the rates of tax from 36 per cent to 27 per cent. The Government has also decided to follow the Federation policy in respect of exemption of income tax from all owner-occupied houses. We have, however, imposed a limit of $3,000 net annual value by way of tax exemption. Members will recollect that when the Property Tax Ordinance was passed by the Assembly, it was specifically provided that property tax should be paid on unoccupied buildings. The reason for this measure, as I then explained to the House, was that under conditions of acute housing shortage, which we then experienced, there was no valid reason for any dwelling to remain unoccupied for any length of time. We also know that sonic property owners are holding out at high rents to take advantage of the housing shortage, and hold the prospective tenants to ransom. Obviously exemption from tax during the period of vacancy of his properties would encourage him to do this. I promised the Assembly that when the housing situation improved, I would make a review. With the unprecedented boom in both public and private housing construction now in progress, the time has come to make this review. Accordingly, I have authorised the Inland Revenue Department to exempt from Property Tax all unoccupied buildings as from the 1st January this year, subject to certain conditions. Revenue and Expenditure 1963 I now turn to the revenue and expenditure for 1963. When I asked for a vote on account in 1961 for the first six months of expenditure for 1963, I then had in mind the possibility of agreement on the financial terms of merger which will enable the Estimates for 1963 to take into account the changing circumstances following the setting up of Malaysia. As Members know, final agreement around the corner has yet to be reached. Accordingly, the Budget for 1963 had been prepared on the basis of maintaining existing services wherever possible. The keynote has been that of maintaining the services as they are. But, however, there are a few cases where it is necessary to implement certain proposals immediately which would facilitate amalgamation after Malaysia. For instance, it is necessary to establish the Second Battalion of the Singapore Infantry Regiment now rather than to wait for merger. There are also certain consequential increases in the Defence services as well as the Police Force. As regards other Ministries, the expansion on education expenditure, which has been particularly rapid since this Government took office, continues. We have now reached a stage when there is de facto free primary education for all children between the years of 6 and 14. If we compare our achievements in education with those of other States in Asia, we shall have cause for pride and satisfaction. At the same time, we must not forget how much we owe to the dedicated corps of teachers and school principals whose hands will mould the future generation of Malaysians. This year $94.7 millions have been provided for the Ministry of Education as against $89.1 millions last year. The increases cover staff for the new schools, increases in bursaries to the Universities of Singapore and Nanyang, and Ngee Ann College and the Polytechnic. Hon. Members will recollect that in 1960 I drew attention to the burgeoning expenditure on education. This was the result both of the population explosion as well as our policy to achieve free primary education. Members will learn with some relief that there has been a sustained decline in the birth rate over the last five years. The number of births appears to have been stabilised at between 59,000 and 60,000 a year, and this will afford some relief in future years on the increasing sums that have to be spent on primary education. But the task of building more secondary schools and expanding higher technical, vocational and professional education will remain with us for many years and threaten to make severe inroads into our finances in the future. A number of new services have been introduced and financial provisions have been made for them in this year's estimates. In Head 29 (Industrial Arbitration Court), a provision of $348,010 has been made as against last year's provision of $171,300. This is to pay for the cost of a second Industrial Arbitration Court, which is necessary because of congestion in the first Court. The television services introduced last February call for an increase of $3.3 millions under the Ministry of Culture. In the Ministry of Finance, Head 33, there is an increase of $6.8 millions which is due to a new item under Other Charges Annually Recurrent, namely, a subsidy to the Housing and Development Board. This is a new departure from previous policy and I wish to comment on it at some length. It has been the practice of previous administrations to give the housing authority, then the Singapore Improvement Trust, a concealed subsidy by way of favourable loan conditions. Loans extended to the housing authority in the past were repayable in 60 years, and this, of course, reduced the annual cost of amortization on public housing. In addition to this, low rates of interest were charged, sometimes as low as 2½ per cent per year. It is the view of this Government that subsidies to public housing should not be disguised or concealed and that the full amount should appear in the financial estimates. The loans now extended to the Housing and Development Board are made on terms approximating as closely as possible to the existing market rates. As against this, a subsidy is given to the Board which represents the difference between the open market loan terms and the subsidised loan terms. I should mention here that a substantial subsidy arose from the uneconomic rents which the previous administration had fixed during 1958/59 shortly before the general elections. The basis of the subsidy and the details of the computations of sums involved have been under negotiation for more than a year between the Housing Board and the Ministry of Finance. The details will be announced when final agreement has been reached on all matters. I wish to draw the attention of the House to certain substantial decreases in expenditure. The Ministry of National Development, Head 20, shows a decrease of $1.4 millions. Head 35, Pensions, Retirement Allowances and Gratuities have been reduced by $7.1 millions and Public Works recurrent by $1.5 millions. In regard to revenue, I expect the favourable conditions of last year to continue. Accordingly, the estimated yield of the main items of revenue has been increased. There is an increase of $4 millions over last year's estimates of income tax, and increases have also been allowed for in respect of customs duties. The total yield of liquor, petroleum and tobacco duties is expected to be $6.5 millions larger than last year's estimates. Increases have also been allowed for in respect of stamp duties, estate duties and entertainment duties. Telecommunications and postal services are expected to show an increase of $2.1 millions. The estimate for Registration Fees in respect of motor vehicles has been substantially increased by $3.5 millions. In sum, the total revenue expected to be received for 1963 had been set at $409.7 millions as against an estimated expenditure of $411.7 millions. The accounts therefore just about balance. Administrative Reforms Sir, I think it is only proper that I should conclude this report of the administration with an account of two basic reforms which we have completed. The first is the integration of City Council departments into the Government Service, and the transfer of the rest - members of the staff of the trading departments of the City Council - to the Public Utilities Board. As Members know, the first step towards this integration was undertaken in 1960 when two Bills were approved by the Assembly, namely, the Property Tax Ordinance, 1960, (No. 2 of 1960) and the Local Government (Financial Integration) Ordinance, 1960, (No. 64 of 1960). Both these Ordinances took effect as from 1st January, 1961. Together with the Local Government Integration and the Pensions (Amendment) Bills now before the Assembly and the Public Utilities Ordinance, which was passed by the Assembly earlier this year, the legal framework for the integration exercise is complete. The Public Utilities Board was established last month. All the assets and liabilities of the City Council connected with its water, gas and electricity undertaking have been transferred to the Public Utilities Board. These assets include those portions of the City Council common user property hitherto used for the utilities departments, such as portions of the Treasurer's Office, Transport Centre and City Hall. Public street lighting and public standpipes, however, have been transferred to the ownership of the Government. The assets and liabilities connected with public loans of the City Council and the sinking funds for these loans have been transferred to the Public Utilities Board, with the Government contributing to the Board for the portions of outstanding loans which were used for purposes unconnected with the trading activities of the former City Council. This has been a major administrative exercise of considerable scope and complexity. The number of staff involved is 13,420. Of this, some 8,370 have been transferred to the Government and the balance 5,050 to the Public Utilities Board. It is not unexpected that numerous problems of establishment, pay, service conditions and related matters follow from the integration exercise. There have been prolonged and numerous negotiations between the unions affected and the Government. Matters still outstanding have been referred to a Board of Inquiry set up by the Minister for Labour under section 70 of the Industrial Relations Ordinance. This Board of Inquiry deals with the salary structure and service conditions of monthly-rated employees of the City Council on their transfer to the service of the Government or the Public Utilities Board. Outstanding matters involving the daily-rated staff of the City Council have been referred to a Commission of Inquiry under the chairmanship of the Commissioner for Labour. These protracted negotiations and reference to a Board of Inquiry and a Commission of Inquiry consume much valuable time and energy of both the staff of the Government and officials of the unions. But they are an essential part of the democratic process whereby an acceptable and fair settlement of disputes between employer and employee can be reached. The second reform of importance which was carried out during last year concerns the acceptance in accordance with our election pledge of the principle of equal pay and equal treatment for women officers in the Civil Service. Equality for women took effect from 1st March, 1962, and some 4,500 women officers benefited from this reform in several ways. The equalization of salary scales is one obvious method whereby previous discrimination against women officers has been abolished. Secondly, married women officers who had been debarred from appointment on a permanent and pensionable basis on account of marriage, now stand to benefit from the removal of such disqualification. They thus stand to gain greater security in tenure of office and better promotion prospects and, of course, better retirement benefits by way of pension rights. Other forms of discrimination against women officers, such as lower age retirement, downgrading of women clerks on marriage to assistant clerks and discrimination against women officers in the highest echelon of the Civil Service were abolished. Before the P.A.P. Government came to office, the administrative service was the preserve of men. Since then seven women officers have been appointed to the Administrative Service aid, in fact, in last year's recruiting exercise the majority of successful candidates were women. We have accorded women equal treatment and we look forward with confidence to equal performance by them. After Malaysia Sir, earlier in my speech I told hon. Members that I would say something about probable trends after Malaysia. I deal first with Singapore. So far as Singapore is concerned, the most important objective is to ensure that the economic expansion of the last 18 months or so should not be allowed to lose its momentum. Without Malaysia and the common market, it is likely that this expansion will be difficult to sustain beyond a few years, even under the most favourable conditions. In fact, without Malaysia, it is likely that we shall witness a return to political strife inspired by the pro-Communist elements who are now being kept under control. With the return to instability, whatever gains that have been made in recent months will be rapidly dissipated and economic decline will inevitably set in. But with Malaysia and the common market, we look forward with confidence not only to the continuation of the present rate of expansion but to its actual acceleration. Industrial growth is likely to gather momentum from year to year after Malaysia and before long, industry will be making a greater contribution to our national income than trade. It is important in the years to come that we deploy the maximum resources in money and men to accelerate the growth of our industries. At present, we have more capital than we can profitably use in direct investment in industry. This is because of the limitations of the present economic situation. But it will not be tong, however, before the position will be reversed when we shall be in need of more capital than in fact we possess. To some extent this can be made good by the inflow of overseas capital. But we must remember that the basis of our future growth must come mostly from our own resources. Further, as I shall explain soon, we shall have to bear a fair share of the responsibility in the provision of capital for the development of the Borneo territories. One encouraging element in our present situation is the slowing down of population growth to which I earlier referred. In future, the development of our social services, which is necessary to sustain an increasing standard of living, will take the form largely of improvement of quality rather than quantitative extension of services at a fixed standard. While this decline in the rate of population growth is welcome, the present rate is still too high and we should continue in our endeavours further to reduce it. Taking Malaysia as a whole, the future is full of both promise and challenge. There will be a territory of 129,000 square miles with a population of 10 million. The resources of the States of Malaysia are valuable and varied. Much of these still await development and exploitation. The Borneo territories in particular are in urgent need of development. They need to develop not only their natural resources but also to develop their social services, particularly in education. A large section of the population in Borneo still live in tribal societies often in remote and inaccessible places. The cost of providing these communities with roads, schools, health services and other modern amenities will involve a staggering amount of finance which is quite beyond their present domestic resources to provide. Therefore, the wealthier sections of Malaysia, such as Malaya and Singapore, must fulfil their obligation to provide the capital that will be needed. We are likely to prosper in Malaysia and it is only right that a share of the additional prosperity brought about by Malaysia should be made available to the under-developed parts of Malaysia. As the Prime Minister of the Federation of Malaya has put it, Malaysia will be the goose that will lay the golden eggs in Singapore. Indeed, in his own words, Tunku Abdul Rahman has said that Singapore shall be the New York of Malaysia. It will be wrong for us in Singapore to adopt a selfish and grasping policy after Malaysia and to try to hog the whole prosperity for ourselves. This will bring resentment in other States of Malaysia and in the end this will rebound to our disadvantage. At the same time, we cannot share the golden eggs before they are laid. If I can mix my metaphors, we must not count our golden geese before the eggs are hatched. If we prosper, and the indications are that we will, I am sure that the people of Singapore will not be wanting in generosity and enlightened self-interest in sharing the additional prosperity with all in Malaysia. Mr Speaker, Sir, we live in an era where momentous events are taking place. In Singapore, the history of the last ten years have been full of strife, tumult and excitement. There are many people who consider that we have had more than our share of strife and that it is about time that the energies and effervescence of our youthful society be diverted towards constructive endeavours. There is much wisdom in this approach. Malaysia will provide the solid framework within which we can create in Singapore a progressive and prosperous society. Sir, I beg to move.