Mr Speaker, Sir, I beg to move, That the Assembly approves the financial policy of the Government for the year 1964. This is the fifth Budget which I have the honour to present to the Assembly. It is characteristic of our bustling and dynamic City State that each of these budgets appeared under markedly different circumstances from its predecessor. Once again this holds true this year for the present Budget which this Assembly is considering. This Budget is considered when Singapore is now a part of independent Malaysia. Being the first Budget under the new Federation of Malaysia, the Estimates show in detail the operations of the financial agreement of merger, that is to say, the division of departments and responsibilities as between the State and the Centre and the division of revenues between the State and the Centre. In normal circumstances, this would in itself be a memorable occasion. However, the establishment of Malaysia has brought about the severance of diplomatic relations between Malaysia and two of our neighbours, the Philippines anti Indonesia as well as the suspension of trade between Malaysia and Indonesia. Since Singapore is the most important trading centre in this region and since we depend to a considerable extent on the entrepot trade, it follows that the trade severance will have important and far-reaching effects. I propose to deal with this subject in some detail. First I wish to undertake a brief review of economic conditions in 1963. After the Referendum in September, 1962, much of the uncertainties which then prevailed in Singapore were dispelled and with a new upsurge of confidence, there was a decided improvement in trade as well as private investment and public investment. The State's Four Year Development Plan gathered momentum in all fields. The indications are that for the first nine months of 1963 Singapore was having a substantial rate of economic expansion. Bank deposits increased from an average of $984 million in 1962 to $1,090 million by the end of September this year. Bank loans and advances show an increase of 18 per cent from $707 million in 1962 to $786 million by September this year. All the other indicators of trade, shipping, building and construction point to a picture of a thriving economy. For instance, the value of our imports which average $336 million a month in 1962 increased by 8 per cent to $364 million per month over the first three quarters of this year. A similar increase of 8 per cent was experienced in the value of our exports. Shipping figures also show corresponding increases, cargo loaded increasing from 639 thousand tons per month in 1961 to 716 thousand per month in 1963. For cargo discharged the figures were 1,117 thousand tons per month for 1962 and 1,206 thousand tons for 1963. There was a 15 per cent increase in the registration of new motor-cars, a 16 per cent increase in the registration of new trucks, and 45 per cent increase in the registration of motor-cycles and scooters. Sir, I can quote many other figures, but I think I have established the point - which will not be in serious dispute - that up to Malaysia Day Singapore appeared to be heading for an unprecedented rate of economic expansion. While Malaysia gave us our independence, it also brought in its train the hostility of our neighbour, the Republic of Indonesia. After the severance of diplomatic relations between the two countries, Indonesia decided to suspend trade relations as well. Indonesian Confrontation The decision of the Indonesian Government to suspend trade relations with Malaysia was motivated by political considerations arising from her hostility towards the establishment of Malaysia. This policy stems from a fear that a progressive and prosperous Malaysia may have, from her point of view, an undesirable impact on some islands of the Indonesian Archipelago. However, to understand the full implications of Indonesia's confrontation, it is necessary to examine the traditional Indonesian attitude towards trade with Malaysia, particularly her trade with Singapore which forms the bulk of this trade. The Indonesian Government had for more than a decade looked with suspicion and resentment at the volume of Indonesian goods which were handled through the port of Singapore on their way to the markets of the world. The imports concerned are principally tropical produce such as rubber, copra, coffee, rattan, pepper, timber and other products grown or cultivated in the islands of Sumatra and in South Kalimantan. These products are grown in the hinterland of these two territories and they find their way to the river ports, from whence they are transported in small coastal vessels to Singapore. The logistics of the situation make these Indonesian territories dependent on external lines of sea communications for the movement of these products. Singapore, because of its central position, serves as the central market for these products. Further, there is not only the question of physical transportation but also the need to process and grade these products to conform to the requirements of the world market. And, of course, a substantial and complex network of business and financial relations grew up to support and sustain the trade. The trade is of long standing, its origin going back virtually to the founding of Singapore in 1819. It is to be expected that with the foundation of the Republic of Indonesia in 1949, a review of her traditional marketing pattern must take place. New Nationalist Governments, for good or bad reasons, strive to be self-sufficient in economic matters. It is not unexpected that the Indonesian Government would take a series of measures by which direct trading contacts will be made between the Republic and the rest of the world thereby bypassing Singapore. For example, the best grades of rubber such as R.s.s. 1 and R.s.s. 2 were not allowed to be exported direct to Singapore. Only the poorer grades were permitted. Similarly, the Indonesians imposed a ban on the export of copra from Sulawesi to Singapore. We could only obtain copra from Sumatra and the neighbouring islands on a barter basis. The Indonesian Government continued the agreement of 1947 concluded between the Dutch and the British Governments whereby the proceeds of exports from Indonesia through Singapore could be made available to the Indonesian Government in the form of convertible U.S. dollars. In the immediate post-war years when sterling was a soft currency and subject to rigid exchange control, this was of considerable advantage to Indonesia. So long as the rupiah remained a stable currency there would be no particular difficulty for Indonesia to obtain her full proceeds of foreign exchange earnings. When, however, the financial position in Indonesia deteriorated as a result of inflationary practices adopted by the Government, the rupiah weakened and inducement to export capital through non-legal channels became increasingly greater. One method by which capital can be exported without the consent of the authorities is through the foreign trade by over-invoicing and under-invoicing of imports and exports respectively. So a growing concern developed in Indonesia over her foreign trade with Malaya and with Singapore in particular in regard to foreign exchange losses. Matters came to a head following the PRRI revolt in Sumatra and other islands of Indonesia in 1958. The rebel movement exported large quantities of rubber and copra through Malaysian ports for which the Central Government received no payment in foreign exchange. Indonesian Trade Agreement, 1961 When the P.A.P. Government assumed office in 1959, it was obvious that the question of normalising trade relations with Indonesia had to be accepted as being of great urgency. Accordingly, one of the first acts of the Government was to approach the Indonesian Government for discussions on normalisation of trade relations. Previously, the Colonial administration had taken the attitude that the safeguarding of Indonesia's foreign exchange was entirely a matter for the Republic and that Singapore could not be held responsible for breaches of customs and foreign exchange regulations through activities originating at the Indonesian end. The P.A.P. Government adopted a more realistic and more sympathetic approach to the problem. We took cognizance of the fact that substantial leakages occurred and that we should do everything that lay within our power to reduce or eliminate these leakages. The Indonesian Government had all along pressed for strict control measures and their attitude was made clear as far back as 1955 when a Singapore trade mission visited Jakarta. The same demands were made in 1960. Certain difficulties, however, stood in the way of accepting the full proposals of the Indonesian Government. First, if Singapore were to impose complete control over her entrepot trade this would not be of value to Indonesia if it led to the diversion of the entrepot trade from Singapore to other ports of Asia. Control measures of the stringency that the Indonesians had in mind to be effective had to be mounted through an international agreement with several governments. The Indonesian officials proposed an extensive regime of control including joint customs patrols, complete examination of cargoes, licensing of traders and so forth. It was pointed out to them that the customs administration in Singapore does not have the capacity to mount the controls that were sought. Further, such controls may have the effect of completely paralysing Singapore's trade. We put forward a counter proposal which, if accepted, would go a long way to solving Indonesia's problem of foreign exchange leakages. Briefly, the basic object of our scheme was to eliminate any advantage which the Indonesian exporter would have to contravene Indonesia's foreign exchange regulations, and to give the exporter adequate incentive to accept payment in rupiahs in Indonesia while delivering the export proceeds of hard currency to the Indonesian exchange control. This was to be done under our scheme by the issue to the Indonesian exporter of a counter-import certificate to the value of 60 per cent of the products exported. These counter-import certificates could be used to import freely from Singapore the consumer goods which were in short supply in Indonesia. These would fetch a high price in the free market and the exporter would then be able to make substantial profits either from importing these commodities themselves or by selling the counter-import certificates to other businessmen in Indonesia. The prices of these certificates would then be related to the profitability of imports and this, in turn, would reflect the relative scarcities of goods in Indonesia. Under our proposed scheme, the Indonesian exporter would be reimbursed with 40 per cent of the value of Indonesian exports to Singapore, the balance of 60 per cent will be held back in Singapore banks and this will be used to pay for purchases made from Singapore. In return Singapore will mount the necessary controls to ensure that there are no leakages. Regrettably, the scheme that we outlined to the Indonesians was found unacceptable on the grounds that the question of incentives to their exporters was a matter solely for the Indonesian Government to decide. As a matter of interest, in late 1962, when the Indonesian Government introduced measures to stabilise the rupiah they adopted a scheme of counter-import certificates not dissimilar to the one that we have proposed to them. However, these measures were related to Indonesian exports in general and there was no particular tie up with the Singapore exchange control. As a result of our inability to accept the control measures proposed by the Indonesians and the inability of the Indonesians to accept our counter-proposals, the trade agreement which was signed between the two governments in 1961 left these matters open. The agreement sets out the general objectives to be pursued in trade relations between the two countries and both Governments agreed to endeavour, within the limits of its own laws, to assist in putting the trade on a healthy basis. On Singapore's part, we urged upon our merchants the necessity for correct transactions and, in certain cases, assisted the Indonesian exchange control in prosecuting certain cases where violations of Singapore's laws had concurrently taken place. The trade agreement was the best that could be reached at that time and under the circumstances then prevailing. It led to rapid growth of trade between the two countries both in regard to import and export. In particular, our imports of rubber, by far the most important commodity, showed an increase : - 1960 285,000 tons 1961 332,000 tons 1962 375,000 tons Our exports, consisting of rice and foodstuffs, textiles, building materials and other consumer goods also increased. In money terms they were: - 1960 $ 121 million 1961 $ 194 million 1962 $ 293 million By 1962, i.e. last year, the earnings of our import and export trade with Indonesia had been of great value to us. The earnings on trade alone are estimated at $184 million in 1962, while our ships earn another $25 million, making a total of $209 million. This represents 8.7 per cent of our national income of that year. In July this year, in view of worsening relations between the Governments of Indonesia and Malaysia, the Government undertook a study of the possible impacts of the suspension of trade between the two countries. Studies are still continuing to assess the effects of economic confrontation, Apart from loss of earnings and a net reduction of national income, the employment situation is also affected. Some 8,200 workers directly affected by cutting off of supplies of rubber and other produce and the laying up of ships may eventually lose their jobs. The latest available figures show that 901 workers and seamen are on the Government's emergency scheme whereby employers and Government each pay one-third of the worker's normal wages. Of course Indonesia cannot escape the economic consequences of her own policy. Her foreign exchange earnings which are already in a precarious state will be further reduced by suspension of exports to Singapore. The withdrawal of Singapore-based ships from Indonesian waters has caused a severe dislocation in the Indonesian transportation system. This has resulted in an accumulation of raw materials at Indonesian ports and an acute shortage of rice and other imported consumer goods. It is common knowledge that the immediate impact of economic confrontation has brought about greater disarray on the Indonesians themselves than on their adversaries. Food prices have doubled or more, prices of their export goods have declined, and in the free market the price of rupiah weakened considerably. So far as our own position is concerned, the severance of trade between Indonesia and ourselves has brought about an adverse situation. It is important that we see this position in its correct perspective. The loss of income at the rate of $209 million a year or 8.7 per cent of the national income represents a severe blow to our economy and it is no use for anyone to pretend that this is a trivial matter. Having said this, I also want to make it clear beyond all doubt that severance of trade with Indonesia will not bring about an economic collapse in Singapore or anything remotely approaching it. Severe though its effects are, the economy of Singapore is in a sufficiently robust state to ride confrontation. I shall deal with this aspect in more detail after I have made a review of Singapore's economic growth in the last few years. Economic Defence I wish to turn now to the more immediate and pressing problems created by this severance of trade. The Singapore Government had decided upon certain measures once the confrontation policy of the Indonesian Government has been assessed by us as being likely to be of long duration. The earlier studies made in July indicated the need to take positive counter-measures, particularly to combat unemployment. The first step was therefore to ensure that those who are more severely hit by the trade suspension and who are most vulnerable to its effects should be given a measure of protection. These are the seamen on ships on the Indonesian run and workers who are directly employed in industries which process the raw materials imported from Indonesia and whose supplies are now cut off. These are the rubber mills, rubber packing and grading establishments, coconut oil mills, sago factories, processing of coffee, rattan. In all 121 firms, including shipping firms, are affected and they give a total employment of 10,800. As I have said before, some 8,200 will eventually be laid off as stocks of raw materials get exhausted. Earlier this afternoon, I introduced two Bills to give legal authority for the measures to be taken to protect workers affected by the trade suspension. At the Second Reading of these Bills I shall go into greater detail into their contents. Here I shall confine myself to their general nature. The first Bill, the Economic Defence Bill, allows a worker laid off as a result of closure of his factory to receive 6 months' income at two-thirds his normal earnings. This scheme is already in operation on a voluntary basis with the full co-operation of employers and responsible trade union leaders. The payments made by the Department of Economic Defence to workers are intended to tide them over for a period of time during which, if confrontation is not called off, it would be necessary to find these workers some other suitable employment. To achieve this with the minimum amount of dislocation to business and the minimum delay to the workers, it is necessary for the Government to have certain powers to direct employment. These powers are sought in the Economic Defence (Direction of Employment) Bill, the second Bill to be introduced on this subject. The direction of employment is a novelty in Singapore. The Government is aware of the dangers of misuse of authority in the direction of employment. I wish to assure the public that the utmost care will be taken in implementing the provisions of the Bill to ensure that the industries absorbing the workers laid off will not be injured or rendered inefficient by having to employ an unsuitable working force. There are sufficient safeguards in the Bill for the rights of both employers and employees. But basically the operation will succeed only by sensible co-operation between all parties concerned, labour, employers and the Government, with the object of working the scheme successfully. I shall deal with these matters in more detail at the Second Reading of the Bill. As an ancillary to these emergency measures, the Government intends to expand the training facilities now available in the State. For some time, this subject has been under consideration, but it has been made all the more urgent under the impact of confrontation when large numbers of workers may have to be re-deployed to new employment for which they must be given adequate training. Apart from this, the expansion of some industries has already been retarded by the lack of adequate numbers of suitable grades of skilled labour. The shipbreaking industry in Singapore, for instance, is unable to expand because of the shortage of certain grades of workers and a training programme has now commenced to train these grades of workers. Assistance to Businessmen The two measures I described will be sufficient, for the time being at any rate, to protect the interest of the workers. The interest of businessmen must also be considered. I have discussed a plan with officers of the Economic Development Board whereby special arrangements will be made to make it easy for owners and management of establishments affected by the confrontation to gain an entry into the new industries that are being planned for Singapore. This scheme has three aspects. The first covers equity participation in some large industrial enterprises which have been planned by the Economic Development Board and are in various stages of implementation. The industries include a sugar refinery, a fertiliser plant, a solvent extraction plant, an iron ore loading terminal and benefication plant, a grain silo operation, the Jurong shipyard and others. The total share capital in these projects exceeds $65 million. It will be possible to reserve a portion of the share capital for subscription by owners of establishments affected by the trade suspension. The Economic Development Board itself will be a direct participant in most of these enterprises. There is also a number of small promising industries which have been carefully studied by the Economic Development Board. These include a bicycle assembly and manufacturing plant, a fruit juice cannery, meat processing, manufacture of preserved ginger, mosquito coils, building hardware, fire crackers, plastics, automobile components and others. In most cases, the capital investment ranges from $100,000 to $500,000. The Economic Development Board will provide technical and managerial assistance in establishing these industries. However, the businessmen who wish to participate in these enterprises should be prepared to give their full attention to both the planning and operation of these enterprises. They should contribute not only money but also management. Thirdly, some of the businessmen affected may wish to pool their resources together and form an industrial investment company to undertake equity participation in industrial enterprises and to promote new industries. The Economic Development Board is prepared to provide technical assistance in the organisation of such a new project. Nearly all the firms affected by confrontation are local businessmen. Their establishments range from small-sized grading and processing plants to substantial industrial undertakings. We should remember that just over twelve years ago Hongkong experienced a similar need to re-orientate her economy from a purely trading port to an industrial economy. The success which Hongkong achieved in effecting this change has been a spectacular one and there is no reason why we in Singapore, with the advantage of a protected Malaysian common market, cannot do even better. The businessmen now affected by confrontation are in a better position than their Hongkong counterparts were a decade ago. They have the advantage of positive Government assistance and the services of an effective industrial promotion agency. I shall be holding meetings with them shortly to discuss in more detailed and concrete terms the general proposals which I have outlined to the House. The interests of our local shipping companies also deserve protection. Various possible ways are being investigated with a view to ensuring that the ships which used to ply in Indonesia are not laid up too long. These are the measures of economic defence which the Government is taking in the face of Indonesian confrontation. What the Indonesians have done amounts to waging economic war on Malaysia. We cannot watch passively any action that is being or will be undertaken by any foreign country which assists Indonesia in pursuing her policy of economic confrontation to our detriment. Singapore is a free and open market to all the industrial countries in the world. The large industrial countries have an export market in Singapore of $300 million a year or more. Even a small country like Holland has an export market here of $70 million a year. The Malaysian market is more than twice this. Any profit which the businessmen of these countries hope to obtain by assisting Indonesia either by supplying ships or by direct purchases of rubber and other tropical produce for re-export and by managerial and technical assistance to achieve these ends can only be marginal. It would derive from the margin between low prices of produce now accumulating in Indonesian ports and the world prices for these products. These countries will do well to balance the possible profits from hazarding into Indonesia against the earnings which they now enjoy from their established export market in Singapore. They should not sacrifice a bird in the hand for half in the bush. If we find that any country which now enjoys a thriving export market in Singapore goes out of her way to assist Indonesia in her economic confrontation of Malaysia, then we shall have to take steps to ensure that such action does not pay. This will be done by closing our markets to exports from these countries. The goods will be placed under a system of specific licensing and may be banned. The interest of our own local traders who have links with that country will be protected by allowing them the quota of imports of licensed commodities, provided these goods are imported from any other country. Financial Position, 1963 I now turn to a review of the financial position in 1963. There arc two special points to be mentioned: (i) Expenditure for the first half of this year was met from a vote on account: and (ii) the apportionment of certain revenues and expenditure between the Central Government and the State after Malaysia Day on 16th September. On the expenditure by a vote on account, there is nothing much to comment, except that I wish to mention that no special difficulties were encountered. All Ministries by judicious control over expenditure managed to keep within the limits allowed them. After Malaysia Day, the Central Government is responsible for the expenditure of Departments dealing with Federal matters. Certain revenues on the other hand are apportioned between the Central Government and the State on the basis of 40 per cent and 60 per cent. As an interim measure until the end of the year, the State continues to pay for the expenditure of the Federal Departments in Singapore on behalf of the Federal Government, from the portion of revenues that is payable to the Central Government. Malaysia Arrangements Arrangements for the collection of National Revenue in Singapore since Malaysia Day in accordance with agreed Financial Arrangements recorded in Annex J to the Malaysia Act have been proceeding smoothly. By that Agreement, all National Revenues collected in Singapore, with certain exceptions, were to be paid into a separate fund in a branch of the Central Bank to be established in Singapore. This fund would then be divided in the proportion of 60 per cent to the Singapore Government and 40 per cent to the Federal Government. Unfortunately, owing to various factors, these arrangements could not be brought into operation this year. However, by means of an agreed Federal Revenues (Singapore) Order, 1963, made by the Yang di-Pertuan Agong under Article 112 E of the Federal Constitution, National Revenues were collected by the Singapore Government. The State Government then paid to the Federal Government the difference between the Federation share of the revenue collected, which is 40 per cent, and the actual expenditure on Federal Departments in Singapore. The difference is remitted to the Federal Government at the end of each month. The estimated expenditure on Federal Departments in Singapore has been of the order of $5.5 million per month since Malaysia Day. The average estimated monthly share of revenue accruing to the Federal Government has been about $8 million. The average balance of about $2.5 million per month is therefore due to the Federal Government since 16th September, 1963. By the end of this year, a sum of $9.25 million would have been payable to the Federal Government as a consequence of these arrangements. As the Revenue and Expenditure Estimates for 1963 were prepared without taking into account the apportionment with the Central Government consequent on Malaysia, I shall for ease of comparison deal with the expenditure and revenue for 1963 as though no change had occurred. The key-note for 1963 as far as possible was to maintain services as they were in anticipation of merger arrangements. Revenue has, nevertheless, exceeded the estimates by $44.5 million. $454.2 million of both State and National Revenue was actually collected when we expected to obtain $409.7 million. Apart from an un-anticipated sum of $25 million transferred to revenue on account of City Council assets which came to Government as a result of integration, a further $10 million was received from the British Government in respect of holdings of State Land by the U.K. Government in Singapore. Generally good economic conditions account for increases in revenue, which reflect the growth of the economy rather than the results of any change in taxation policy. The collection of Income Tax exceeded expectations by $4 million. Property Tax, Stamp Duty and Estate Duty taken together yielded $5.2 million in excess of estimates, Duties collected by the Customs Department exceeded estimates by $4.3 million. There was a modest increase of $600,000 in Entertainment Duty. Other notable increases are: (i) services rendered by the Government - $2.5 million. (ii) Interest on Investment - $3.6 million. 1963 Expenditure Expenditure for the year is expected to come to $611 million. This includes transfers to the Development Fund of $230 million and $9 million being the balance mentioned above which is payable to the Central Government. By deducting the City Council surplus and the $10 million U.K. grant from revenue and capital transfers from expenditure, the revenue for the year will stand at $419 million and expenditure at $381 million, giving a surplus of $38 million to the State. Together with the $9 million payable to the Central Government, the surplus of current revenue over current expenditure amounts to $47 million, as compared with a surplus of $97.1 million last year. This fall in the surplus of $50 million, in spite of the fact that revenue has increased by roughly $11 million over the previous year, reflects the steep rise in expenditure of $60 million. This rise is partly due to the expansion of services especially in the field of Education, Police and Defence, and the establishment of Television. Excluding capital transfers the total expenditure for the year is expected to fall short of the original estimated sum of $381.7 million by about $9 million. The short fall in expenditure of $9 million is very much smaller than in previous years. This is partly due to more careful estimating. Expenditure for most of the Heads is expected to come very close to the amounts estimated. The only Heads that show substantial savings are Head 13 - Ministry of National Development, Head 18 - Hospitals Division, and Head 34 - Ministry of Culture. The savings occurring in the Ministry of National Development are mainly due to under-expenditure on Work Brigade projects. The savings of the Hospitals Division and the Ministry of Culture are due to the usual reasons, which I have explained in previous years, partly because of over estimation and partly because certain posts were not filled for the whole year. The Heads where expenditure is expected to exceed the original Estimates are Head 21 - Ministry of Finance, Head 22 - Charge on Account of the Public Debt, and Head 39 - Social Welfare. The increase in expenditure under Ministry of Finance is due to the transfer of an additional $200 million from the Consolidated Fund to the Development Fund and a transfer of an expected sum of $9 million, being balance of revenue payable to the Central Government. The increase under Charge on Account of the Public Debt is because of sinking fund contributions and interest on new loans floated in 1963. The rise in Social Welfare expenditure is caused by an increase in public assistance and expansion in Community Associations. 1964 Estimates of Expenditure In 1964 the number of Heads of Expenditure is reduced from 57 in 1963 to 40 because certain departments which fall under Federal responsibilities in Malaysia no longer appear in the State estimates. The estimated total expenditure for these 40 Heads including a capital transfer of $16 million to the Development Fund is $326.4 million. Excluding the capital transfer the estimates of expenditure amount to $310.4 million. Let me say a few words on the general lay-out of the Estimates of Expenditure now before the House. At the cover page, I have introduced an innovation in classifying expenditure under the main functional heads. A classification of revenue is also attempted. Members will at once notice that the bulk of our expenditure is now on the Social Services. Two-thirds of the $300-odd million we will be spending next year will be on the Social Services. Our function is to see that our children get the best possible education, that our citizens are usefully employed on good conditions, that the sick are adequately treated, and that the families of our citizens are decently housed. The 1963 Estimates for these 40 Heads of Expenditure less capital transfer amount to $306.5 million. The total likely to be spent in 1963 is $299.6 million. The increase in 1964 over 1963 estimates is small, although compared with the amount likely to be spent in 1963 there is an increase of approximately $11 million. The small difference between 1963 and 1964 estimates is due to an attempt in 1964 to determine only what will be actually required and to provide for this only. Since the estimates have been trimmed of all margins, it is likely that certain Heads of Expenditure may require supplementary provisions in the course of the year if unforeseen items of expenditure should occur. The Head of Expenditure that will almost definitely require additional funds in 1964 is the Ministry of Education, although it has the lion's share of the total expenditure for the year. The sum of $94.85 million provided under this Head is almost one-third of the total estimates of expenditure. Included in this sum is a vote of $8.5 million as contribution to the University of Singapore. This vote may he increased depending on the outcome of discussions that will take place between the University and the Government. Nothing has been entered as contribution to the Nanyang University. This is because certain related matters have yet to be settled. Once the difficulties are cleared, a substantial sum will have to be provided. Supplementary provisions are therefore likely to be required in 1964 in respect of these two items. Of the 40 Heads of Expenditure, the estimates of 17 Heads are smaller than their 1963 provisions. Of the rest, whose estimates show a rise, only Head 22 - Charge on Account of the Public Debt, Head 24 - Contributions and Charitable Allowances, and Head 19 - Public Health Division, show substantial increases. The increases of the rest are small and are due to normal expansion. 1964 Revenue I now turn to 1964 Revenue. The revenue estimates for 1964 have been prepared separately for the State shown on pages 17 to 36 of the 1964 Estimates and for National Revenue shown as Appendices A and B on pages 331 to 341 of the 1964 Estimates. The revenue estimates for 1964 are based on actual revenue realised provisionally in 1963 on the assumption that the general economic conditions existing in the State in 1963 will continue. The pattern of distribution of revenue between the different taxes in the 1964 estimates is the same as for 1963. The total State Revenue for 1964 amounts to $326.7 million including the State share of national revenue which is 60 per cent of all National Revenue collected in Singapore. This is expected to amount to $175.6 million. The total National Revenue for 1964 will probably amount to $292.7 million. Of this, 60 per cent by agreement will be paid to the State, leaving an estimated balance of $117 million to be paid to the Federal Government for 1964. The total combined State and National Revenue for 1964 amounts to $443.8 million. As compared with the Estimated Revenue for 1963 amounting to $409.7 million, the 1964 revenue is increased by $34.1 million. The main increases in the State revenue will be obtained from the following sources: Property Tax $8.2 million, Other Services $3.21 million, Arrears of Contribution by the Federal Government on account of expenditure on the University of Singapore $8 million. The main increases in respect of National Revenue are with Income Tax $6 million, Selective Sales Tax $2.1 million, Import Duties $6.8 million, Motor Vehicle Road Tax $1.2 million, Property Transfer Tax $2 million, Other Services $1.4 million. 1964 Revenue Proposals I now deal with the 1964 Revenue proposals. The main change in the revenue pattern next year over this year is an increase of 10 cents per gallon in the customs duty on motor and aviation spirit and other petroleum having a flash point of below 73�F. In Singapore the full rates and excise rates are $1.20 per gallon. In the Federation the rate is $1.
30. As a first step to the harmonization of duties with Malaysia, which is to be carried out in accordance with the provisions of the Agreement on Common Market and Financial Arrangements in Annex J to the Malaysia Act, the concurrence of the Federal Government, which is responsible for customs duties, has been obtained to amend these rates in the Customs (Duties) Order, 1962. This will yield an additional total of $3.2 million by next year. Of this amount, $1.9 million or 60 per cent will accrue to Singapore. On the other hand, the Government will make two concessions in the new year. Despite our efforts to provide large numbers of low-cost housing as quickly as possible, many people for various reasons are still living in attap dwellings. In January 1963 the property tax on owner-occupied houses in the 36 per cent rating area was reduced to 27 per cent as an initial concession. With effect from 1st January, 1964, the tax burden on owner-occupied attap dwellings will be further reduced to a concessionary flat rate of $6 per owner-occupied house per annum. This will mean a fall in the State revenue for this item but, as I stressed in my Budget speech last year, these properties do not enjoy the benefits like roads, lighting, water, electricity, that permanent dwellings invariably do. Now, for some time professional boxing in Singapore has been in the doldrums. Promotions of good fights have been few and far between. Those interested in the sport claim that entertainment duty on professional boxing has been far too high. It is 33� per cent of ticket money collected in Singapore, while the duty up-country is half of the Singapore rate. To give the sport a fillip, entertainment duty on professional boxing will be reduced to 15 per cent with effect from next year. So that as many people as possible may see and enjoy this sport, arrangements will be made with the boxing promoters for Television Singapura to obtain rights to film without charge the fights for re-broadcasting on T.V. Review of State Development Plan, 1961-63 Sir, before I deal with the Development plans for 1964, I wish to present to the Assembly a general review of progress achieved in the State's Four-Year Development Plan. The end of this year will mark the three-quarter stage of this Plan and members of this Assembly as well as the general public will undoubtedly be interested in a review of progress so far achieved. Before I proceed in detail, I should perhaps explain that the Four-Year Plan relates to capital expenditure in the public sector. That is to say, it covers the development projects of the State Government, the Statutory Boards, namely, the Harbour Board, the Public Utilities Board, the Housing and Development Board and the People's Association. It does not include private development expenditure as, in an open economy like ours, it is unrealistic to set targets for private investment. With your permission, Mr Speaker, I wish to circulate to Members a set of tables* standing in my name which give details of the performance of the State's Development Plan. They will assist Members to follow my explanation with greater ease. * Appendix I Annual Budget Statement(Cols 0109-0112) Sir, in the public sector, a total capital outlay of $871 million was envisaged in the plan period 1961/64 [Table I]. For the period 1961/63, that is the period under review, the plan estimate of public sector capital expenditure was $651 million. The actual expenditure that is expected to be incurred during this period is $516 million. This means an achievement of the plan of 79 per cent of the target figure. However, if we take into account that some of the projects originally entered in the plan have been abandoned or severely modified, the rate of implementation is about 84 per cent. Bearing in mind that some time must elapse before the machinery of implementation gets into top gear, the rate of performance can be considered satisfactory. While the performance rate of 79 per cent was achieved for the plan as a whole, the rate of progress varied in the principal sectors of the plan. These are Economic Development, Social Development and Public Administration. The projects grouped under Economic Development achieved the highest rate of performance, namely, 80.9 per cent. This means an actual expenditure of $306.4 million as against $378.7 million envisaged in the plan. Social Development registered a performance rate of 76.7 per cent; the actual expenditure being $200.4 million as against a plan total of $261.4 million. Public Administration, a small sector, shows an actual expenditure of $8.7 million as against a plan outlay of $11 million, which gives a figure of 79.4 per cent. Now I want to deal with each of the sectors in some detail. In the field of Economic Development [Table II], projects can be conveniently classified under three main headings: namely, Land and Agricultural Development; Commerce and Industry; and Transport and Telecommunications. These projects are designed to strengthen the sinews of our economy, to increase our earning power and to increase employment opportunities. As such, they were accorded high priority both for the provision of personnel resources and of money. Under Land and Agricultural Development [Table III], the performance was well below the average for the economic development sector. The main projects consist of Flood Alleviation Schemes, Rural Development Schemes, Purchase of Land, Animal Husbandry and Station, and equipment for public works. General Rural Development Schemes are progressing on schedule, $1.6 million to be spent as against $1.64 million in the plan estimate. These schemes have provided more than 250 rural streets and kampongs with lights and extension of electric supply. 239 stand-pipes have been installed for rural dwellers. Farmers and fishermen have received extension services in agricultural, fishing and other veterinary services from seven centres. Fertilisers, technical advice and other services are also given to farmers and fishermen at little or no cost to increase their farming or fishing productivity and lower the cost of production, thereby increasing their incomes. Purchase of land exceeds the plan estimates, being $10 million as against $8.8 million. As against these successes, the swamp reclamation schemes hardly got off the ground, $0.24 million being spent as against $2.7 million ear-marked for these schemes. Flood Alleviation is also well behind schedule, $1.7 million being spent as against the plan estimate of $9.0 million. This lack of progress is mainly due to the obstruction by squatters which was engineered and encouraged by pro-Communist groups as part of their deliberate policy to frustrate development in the State. The projects under Commerce and Industry detailed in Table IV*, show a satisfactory rate of progress, namely 92.7 per cent. Actual expenditure incurred amounted to $228.8 million as against $246.7 million in the plan. All projects except two in this sub-division went according to schedule or even ahead of it. The two projects behind schedule are the Kallang project, that is, the filling up of the Kallang swamp and utilising reclaimed land for housing and industry. Some 380 acres of land were planned to be reclaimed. Up to the present, 40 acres have been filled. Progress has been retarded because of a major change in policy as to how the swamps should be filled. The original plan envisaged the fill to come from one of two sources: first, earth from Paya Lebar and Changi, to be transported by a miniature railway to Kallang; or, second, the use of sea and river mud to be pumped into the swamp and held together by a system of polders. Both these methods were rejected in favour of fill from the Toa Payoh district. This is now being done by the Housing and Development Board and the work is progressing satisfactorily. * Appendix I. Annual Budget Statement(Cols 0109-0112) The other project which falls behind the plan estimate is water development. The original plan estimate is $54.2 million for the period 1961/64 or $40 million for the period 1961/63. In fact, only $21.9 million is expected to be spent in this period, representing a performance rate of 54.5 per cent. However, the Scudai River Water Project is now under implementation. Progress is being made in the construction of the Scudai water works. Pipelines measuring more than four miles have already been laid to link the source of the water works at the Scudai River in Johore, to distribution pipes in Singapore. The project should be completed by June next year with a supply capacity of 15 to 30 million gallons of water per day. Meanwhile, preliminary work and designs for the bigger Johore River Project have been completed. Actual construction work would begin early next year. The project should be completed in four years' time with an initial capacity to supply about 40 million gallons of water per day. 250 million gallons a day is claimed by the Water Engineers. All the other projects in the sector went on schedule or exceeded the targets. The Economic Development Board is now in full swing. The Jurong project is going ahead of schedule. $35.4 million will be spent by the end of this year as against the plan estimate of $30 million. Jurong industrial Estate 1,040 acres of the Jurong Industrial Estate have been levelled and prepared for occupation. Forty-seven industrialists have been allotted sites covering 380 acres. Another 35 applicants have received tentative allocations of sites covering another 329 acres. Of the remaining 300 odd acres, 199 acres are reserved for public housing. 220 flats and houses have already been constructed and another 3,000 will go up by the end of 1964. The remaining areas are reserved for or occupied by roads, wharves and drainage canals. Port facilities for Jurong are also being developed. Work on the 3,000 feet deep water wharf and the 2,000 feet coastal wharf costing $14.5 million has begun and should be completed by the end of 1964. The approach roads to the Jurong Estate, namely Boon Lay Road from Jurong Road, the Main Access Road, Jalan Ahmad Ibrahim from the West Coast Road, are almost completed and are already opened to traffic. Within the Estate itself, ten miles of road network together with the required drainage have been completed. Earthworks on the eight-mile railway track from the Bukit Timah Railway Station to the Jurong Industrial Area costing $600,000 is more than 80 per cent complete. The present phase of Jurong construction is proceeding satisfactorily. The seven hundred acres already allocated to industry exceeds in size any other industrial estate in Malaysia. Ten enterprises are in production or are in an advanced stage of completion. Another seventeen will commence construction within six months. By early next year, we expect some twenty-five factories to be in production. In addition, the 73 acres and 96 sites in the smaller industrial estates at Redhill, Tanglin Halt and Jalan Ampat are fully booked. Twenty-eight factories are in operation. Thirty-three are expected to be in production by the end of 1964 and the rest by the middle of 1965. The extension of our power supplies is also proceeding satisfactorily. In fact, $75.5 million have been spent as against $55.6 million planned for the three years 1961/63 giving a performance rate of 135.7 per cent [Table IV]. Members already know that a World Bank loan of $45 million has been concluded successfully. The foundation stone of the new power station has recently been laid by his Majesty the Yang di-Pertuan Agong during his State visit this month. The construction of the new power station at Pasir Panjang is on schedule. Orders for two 60 Mw. steam turbo alternator units have already been made. One unit will be installed by February 1965, and the other in July 1965, to bring plant capacity to 120 Mw. The demand for electricity has been increasing steadily. In 1960, the peak demand was 113.5 Mw.; in 1961, it was 128.5 Mw.; in 1962, it was 139 Mw. and in 1963, this year, it was 150 Mw. It is envisaged that the peak demand for electricity would be much greater in the next year and the following 5 years, particularly due to the rapid expansion of the industrial sector. As the new 120 Mw. Pasir Panjang Power plant would not be ready until 1965, two new 11.25 Mw. automatic gas alternator units have already been installed at the St. James Power Station to meet the expected increase in demand in 1964 and early 1965. During the 3 years under review, more than $25 million as compared to the target of $24.1 million was spent to provide distribution net work of electrical supply main lines and feeders to various parts of Singapore, especially to the outlying districts and kampongs and the Jurong industrial area. The total length of electrical cables laid during the 3 years measured about 1,000 miles. For the expansion of gas supplies, $10.3 million will be spent in 1961/63 as against a plan figure of $10.2 million [Table IV]. The number of consumers will increase from 23,000 in 1961, to 45,000 by the end of 1963. It will reach a figure of 57,000 by the end of next year and a new plant will be necessary in the next plan period to provide the additional gas supplies. Transport and Communications [Table V] present a varied picture of success and set-backs. The East Wharf Scheme had been completed on schedule and represents a valuable extension to our harbour facilities. The Improvement scheme of the Singapore River has been abandoned after an overall re-appraisal of port development. With the completion of the East Wharf, four new berths, measuring 2,500 feet, were added to the deep water wharves of the Singapore Harbour Board. Even with these additions there is still a pressing demand for further wharf facilities. In the last three years, the tonnage of vessels anchored at the wharves of Singapore has shown a steady increase; 13.2 million tons in 1960, rising to 14.2 million tons in 1962. It is proposed to construct another 4 new deep water berths measuring over 2,900 ft, at the East Lagoon with complete harbour facilities and equipments to handle all types of cargo. The project would cost about $44 million. Civil Aviation is progressing according to plan [Table V]. The extension to the runways, the construction of the new passenger terminal building, and improvement in electronic equipment are progressing satisfactorily; they will make Singapore one of the best equipped airports in South-East Asia. The completed extension of the runway from 8,000 to 9,000 feet has made it one of the biggest runways in Asia, capable of meeting the needs of all types of aircraft including the latest high-speed jets. The new Passenger Terminal Building would be ready for use in April 1964. It would have a floor area of over 122,000 sq, ft. The Main Concourse, Transit Lounge and reception rooms, covering an area of more than 29,000 sq, ft., would be air-conditioned. The Terminal Building would be ultra modern with three murals in various parts of the building, portraying the cultures of Malaysia, the Singapore Water Front, and the races and religions of Malaysia. The expansion of our telephone system is progressing at a faster rate than was expected. $16.4 million is to be spent in the years 1961 /63 as against a plan target of $14.1 million. During the three years under review the number of new subscribers increased by 10,378. This is an increase from 37,383 lines and subscribers in 1961 to 47,741 subscribers and lines in 1963. Three new telephone exchanges were installed at Nee Soon, Changi and Jurong. They are all in operation. These are the success stories. As against these, however, construction of roads, drains and bridges is well behind schedule. Only one-half the roads, one-third the drains and one-fourth the bridges that were expected to be constructed have in fact been constructed. The reasons are partly shortages of technical personnel in the Public Works Department. A more important reason has been the difficulties encountered in the removal of squatters. In all $22.3 million was spent on roads, drains and bridges as against a plan estimate of $51.7 million. The Ministry of National Development is now making a determined effort to improve performance. Telecommunications like Posts, and Civil Aviation are now Federal departments. Development in the expansion of telecommunications services was retarded pending a merger between the Telecommunications Department and Cable & Wireless. The Singapore Government had completed an agreement with Cable & Wireless for such a merger. With Malaysia on the horizon the Federal Government decided against proceeding with the merger; and hence final decision on development projects was withheld. Essential services, however, were proceeded with and there was no deterioration of efficiency in the services provided. In this connection I wish to mention that the Round the World Commonwealth Cable scheme was agreed to by all participating countries and this cable will have its terminal in Singapore. Work is in progress in the construction of this terminal. A new project introduced in this sector is the Multi-storey Car Park, now under construction in Cecil Street. It will be completed in June next year. It will be a six-storey building with parking bays for 700 cars and also bays for motorcycles and scooters. Social Development [Table VI] In the field of social development we are concerned with public housing and the development schemes of the Ministries of Culture, Health and Education. As I have said earlier, the actual performance has been 76.7 per cent of planned expenditure, i.e. $200.4 million as against a plan estimate of $261.4 million. In the field of public housing, the performance of the Housing and Development Board is acknowledged by everyone to be outstanding. No less than $130.3 million had been spent in the three years as against an estimated amount of $109.1 million [Table VI]. In terms of houses this represents completion of 29,550 homes as against a plan total of 26,521. The Ministry of Culture has embarked on an expansion programme, the main items being the establishment of T.V. services and the installation of more powerful sound transmitters. $6.6 million was spent in the three years as against a plan cost of $10.7 million. The television service has proved to be very popular and the technical quality of its transmission high. By August this year, more than 20,000 T.V. licences have been taken out and the number of sets actually in houses is estimated at 25,000. The performance of the Health expansion schemes fell way behind the plan as set out in 1961. $6.8 million was spent on capital expenditure as against a plan total of $24 million. The explanation is that the original plan of the Ministry of Health was unrealistic both in relation to staff resources and to the needs of the population, a number of projects had to be abandoned or deferred, including the second District Hospital. Nevertheless expenditure of $6.8 million on new health projects resulted in valuable additions to the Health services which the citizens of Singapore can now enjoy, particularly those in the lower income groups. No less than eleven Polyclinics, outdoor dispensaries and Maternal Health Clinics were built during 1961/63 and another five are under construction. In addition to this, extension projects were commenced at the General and Thomson Road Hospitals. The expansion in outdoor medical service brought about a severe strain on the available medical staff, and nurses and doctors had to work long and punishing hours to maintain the enlarged services. During 1961/63 the Ministry of Education built 23 Primary schools, nine Grammar/Technical schools and four Vocational Commercial schools - or a new school every month. Another twenty-six schools are under construction of which 18 will be completed next year, or one new school every three weeks. The increase in the number of new schools together with the enlarged output of trained teachers has enabled the State to keep pace with population growth. We have now reached a stage where every child of school-going age can receive free primary education, and nearly all of them are, in fact, so receiving. The cost of schools constructed in the three years amounted to $32.5 million as against $73.2 million envisaged in the plan. It is clear that the targets set out in the plan were much in excess of needs and this will be taken into account when the plan for the next five years, 1965-69, is drawn up. 1964 Development Estimates I now turn to the 1964 Development Estimates. This will be the last year of the Four Year Plan. The Development Estimates for 1964 is mainly to provide for the continuation or completion of projects which I have already described. As such they do not call for further comments. There are three matters of note. First is the deletion of a number of projects entered in the original plan. The two Heads under which a significant number of projects have been deleted or deferred are Head D18 Hospital Services and Head D37 Fire Brigade. The second District Hospital has been deleted from the present plan as also has been the second Maternity Home and the Chronic Sick Hospital. Similarly all proposed clinics for 1964 have been deleted. The second District Hospital and the Chronic Sick Hospital have never got off the ground. These are matters which may be raised again in the second Five Year Plan or some other Five Year Plan. The Orthopaedic Hospital and the Radiography unit, for which there is more justification than the other projects, may be reconsidered; in the second Five Year Plan. It will be necessary to assess the availability of doctors when these major projects are reassessed. Reassessment of the needs of the Fire Brigade will have to be made, and a criterion established to determine the number of new stations, fire fighting equipment and personnel in the Fire Brigade. It appears that the original expansion plans of the Fire Brigade were excessive. There are a number of new projects that have been included in the 1964 Estimates. Customs and Excise, Head D26, will need to build new bonded warehouses to ensure adequate warehouse space for the storage of goods that will be made dutiable under the Malaysian common market. The Government Printer will acquire new line composing machines to enable a more speedy output of work. Some of the machines of the Government Printing Office are now more than 20 years old. Under Head D39 Social Welfare, a sum of $1 million has been allotted for the construction of the Youth Leadership Training Centre. The Centre is sited in a former large Community Centre in Buona Vista Road. Additional buildings will be needed to serve as dormitories for trainees, a dining hail, staff quarters, lecture rooms and other amenities. Under Head D42 we have included estimates of the cost of development projects of Federal departments such as telecommunications and prisons. Under the terms of the financial arrangements for Malaysia, Singapore will meet the full cost of these development projects. These departments perform important services in Singapore and their continued efficient operation is vital if we want to retain our status as a well organised and efficient port and training centre in South-East Asia. The sums included in the 1964 Estimates are mainly based on the original plans for these departments. It is possible that there will be variations or changes in these items if and when the Federal departments undertake a re-appraisal of their needs. The Ministry of National Development will commence the work of rebuilding the city in 1964. Many houses in the central areas are decrepit in the extreme and an effort must be made to remove these. City re-development will require some basic and far-reaching changes in Government policy and these matters are under urgent consideration. A sum of $10 million has been allotted for urban re-development but as the operation proceeds, we are likely to require substantially larger sums. Another new project of the Ministry is the Bedok Reclamation. Work has already commenced and $1.5 million is allotted in the estimates for 1964. A record sum of $76.8 million has been allotted to the Housing Board next year. In addition to the normal development projects, there is need - to which I have referred - to build flats and houses for workers who will be employed in the new industries rising in Jurong. $15 million has been provided for this. Under Head D21, Ministry of Finance, two new items appear. They are the $30 million loan for development assistance to Sarawak and Sabah in accordance with the terms of the Malaysia agreement. There is also provided $25 million being the loan which we expect the Public Utilities Board will require in 1964 to finance their expansion schemes. What has been the impact of the State's Development Plan on the growth of the economy? The expenditure of $500 million over three years must have an impact on the economic growth. There are, of course, the visible signs such as new houses, roads, street lighting, industrial estates, wharves and other physical manifestations of actual construction. Undoubtedly over the last four or five years, there has been a marked increase in economic activity and in the standard of living and in general prosperity. In every budget address I have quoted in extenso figures of increased consumer spending occurring each year. But these do not give a comprehensive measure of progress, being selective or subjective or both. The best single indicator of economic growth is provided in the national income statistics [Table VII]*. National income covers the whole range of economic activities undertaken within the country. * Appendix II. Annual Budget Statement(Cols 0109-0112) There are several entities going by the name of national income and the one which we use in Singapore is known as the gross domestic product. In non-technical terms, this is the value of all goods and services produced within the territory during the given period. These estimates are compiled each year by the Department of Statistics and they are reported each year to the Colombo Plan Conference which assesses progress, or lack of it, in the developing countries of Asia. In 1959, our national income was $1,934 million; in 1960, $2,020 million; in 1961, $2,307 million and in 1962, $2,437 million. Therefore in the four years, there has been a substantial growth of national income by 26 per cent and this is a remarkable achievement by any standard. Most of the growth occurred in the years 1962 and 1961 since the implementation of the State's Development Plan. It will be inaccurate, however, to claim that the whole of this growth has been due to the Plan itself. Undoubtedly, the general prosperity brought about by good prices of rubber in the years 1960 and 1961 contributed substantially to our recent prosperity. But without a well conceived plan to channel resources into the desired sectors of the economy, it could well be that the prosperity generated by good rubber prices in those years would he frittered away. This, however, did not happen. It can be said that the atmosphere of confidence generated by the sound financial and economic policies of the Government was also responsible for bringing about a larger volume of private investment and a general increase in trade. It should be noted that not only was there an increase in the absolute level of national income between 1959 and 1962, but there was also a substantial rise in the per capita national income. Our population grew from 1.58 million in 1959 to 1.73 million in 1962, but the growth of national income outstripped population growth by a substantial margin so that the per capita national income in 1962 was 14.9 per cent higher than it was three years ago. This is a performance which has very few equals in under-developed countries of Asia and Africa. I wish to say a few words about estimates of gross domestic capital formation during the period. Gross domestic capital formation is the value of total investment taking place in the economy both for replacement of used capital assets as well us the construction or acquisition of new capital assets. During the first two years 1959 - 1960, the level of capital formation was dismally low, being $146.5 million and $138.5 million. Those were the years when the P.A.P. had just been returned to power in the State's first general elections. The uncertainties of the pre-election period and the nervousness following the election and the economy measures enforced then explain the low rate of capital investment. Business confidence was then at a low ebb and the State's Development Plan was in the process of preparation. The year 1961 saw a turn of events when gross domestic capital formation saw a substantial increase from $138.5 million to $226.4 million, an increase of 97 per cent. The rate was further accelerated in 1962 when total investments in both the Government and private sector totalled $247.6 million. In terms of percentage of national income, the rate of gross capital formation in Singapore saw an increase from 7.6 per cent in 1959 to 10.2 per cent in 1962. Although this increase is welcome, it is still very low for a country with Singapore's per capita national income. The paramount need is to increase the rate of gross capital formation. In an economy which wants to expand its basic wealth at a fast rate, a target like 20 per cent or more should be aimed at as the rate of gross capital formation. Nations which have recently achieved spectacular expansion rates, such as Japan and Australia, have attained a rate of capital formation of more than 20 per cent of the national income. The national income figures and capital formation figures for 1963 are of course not available, the year not having ended. All the indications are that the rate of capital formation in 1963 will be considerably larger than it was in 1962. The statistics on output and imports of building materials in 1963 show very substantial increases over the figures for the preceding year. It is likely that the total investment in 1963 will exceed $280 million this year. It is against the background of economic growth in the last four years that we must assess the impact if Indonesia's economic confrontation, a subject to which I referred earlier. The loss at the rate of $200 million national income a year is a serious blow to our economy. If unchecked, the ultimate decline in our National Income may be larger than this as secondary repercussions make their impact. We can limit the extent of these secondary repercussions by accelerating growth in other sectors. In the immediate future, there is need to increase Government expenditure on public work projects by stepping up the programme of road and drainage construction. Similarly the building of houses both by private developers and by the Housing Board, now already at a high tempo, is likely to reach new heights of activity when the Urban Renewal Scheme of the Government gets on the way. These, however, are the short-term measures. The permanent and basic remedy lies in the creation of new sources of wealth which would generate a steady stream of incomes over future years. Fortunately for us, the basic groundwork of our industrialisation programme is in an advanced stage of completion and in the next few years we are going to see the growth of many new industries. The Common Market arrangements are likely to come into force next year and this will give an additional impetus. The Economic Development Board estimates that the new industries which are now being established in Singapore will generate by 1965 an additional $90 to $100 million National Income a year. The normal growth of existing industries may add another $50 million by 1965. The industrial sector, therefore, alone could fill up more than half the gap caused by confrontation. Finally, we must not forget our own potential for economic growth in other sectors. In the last three years, the National Income has increased by $500 million and the $200 million direct loss of National Income caused by Indonesian confrontation means that if we could sustain, in the other sectors of the economy, the rate of growth of the last three years, we could make good the losses caused by confrontation in something like two years or less. Of course, if in the meantime trade is restored, then all the better. My view is that some decline in the economy is unavoidable in the next few months, but by 1965 we should have completely recovered if no other major economic setbacks occur in the meantime. In other words, Indonesia's confrontation sets back our time-table of progress by two years. This is a severe blow but it does not add up to a crippling blow. Looking back to the years 1958-59 when political ebullience threatened to overwhelm the State, few would have dared to predict the robust rate of development that was actually achieved. No one in his senses in 1959 could have prophesied that four years later merger with Malaya would be an accomplished fact. And not many could have foreseen the spectacular decline in the fortunes of the Communists and their open front organisations. Yet in the space of a bare four years, these things were accomplished. We are now in Malaysia and our fortunes are irrevocably tied with the rest of Malaysia. We enter Malaysia in a strong financial position and with a stable political background. Confrontation notwithstanding, the future holds great promise and opportunity for us and our achievements in the next four years should exceed those of the last four. Sir, I beg to move. 4.48 p.m.