Sir, I beg to move, That Parliament approves the financial policy of the Government for the year 1968. After two years of independent existence, the Republic of Singapore continues not only to survive but also to flourish, to the surprise of many observers. In his Budget Speech last year my predecessor, now the Defence Minister, gave a full account of the growing strength of the economy achieved in 1966. Expansion of the economy continued this year. Trade figures show an overall growth of 8 per cent. In the period January to September 1966, the total imports and exports was $5,513 million. The same period this year showed an increase to $5,956 million. These are increases in terms of value. Because of the decline in the prices of primary products such as rubber and tin, value figures understate the growth in the physical volume of trade. The total amount of cargo discharged and handled this year compared with last year showed an increase of no less than 15.3 per cent -17.3 million freight tons in the first eight months of last year compared with 19.9 million tons for the same period this year. The number of ships using our harbour showed an increase of 8.8 per cent over last year. In terms of tonnage, the increase was 11.5 per cent. Other indicators support the evidence of rapid growth. For instance, the volume of bank deposits in the first 10 months of this year shows an increase of no less than 29 per cent - from $1,312 million at the beginning of the year to $1,697 million at the end of October. Building construction also shows substantial increases. The number of new buildings commenced this year showed no less than a 66 per cent increase over last year. Construction of 5,096 units started in the first six months of last year compared with 8,461 units for the same period this year. Private construction was particularly active, showing a 94.5 per cent increase. $21.8 million worth of private construction was started in the first six months of 1966 compared with $42.4 million this year. The use of granite continues to increase. In 1966 it averaged 100.9 thousand cubic yards a month. In the last three months of this year the figure has increased to nearly 130 thousand cubic yards a month, which is more than two and a half times the volume in 1961. This is an indication not only of housing construction, but also of a substantial increase in the construction of new roads as well as improvements to old roads. There was also a rapid expansion in the tourist trade. Last year the occupancy rate of first-class hotels averaged 84.2 pet cent. Now all these hotels are solidly booked several months ahead, and thousands of tourists had to be shunted to second-class hotels, much to their discomfiture. Business expansion gene-rated by growth in these and other fields, has created an acute shortage of office space. Nor can it be said that this rise in affluence is confined only to the wealthy. One economic indicator which I find interesting to watch is the number of motor cycles and scooters registered each month. Five years ago, this averaged 548 per month; the average for the last three months was 1,258. This gives some indication that the skilled artisan and the white collar worker are also benefiting from economic expansion. What are the reasons for the good performance of Singapore's economy this year? I think there are three main reasons. First, the growth of trade with Indonesia; second, expansion of exports to South Vietnam; third, a substantial increase in the inflow of Hong Kong industry into Singapore. Let me deal with each of these factors in turn. The total merchandise trade with Indonesia in 1967, i.e. trade excluding petroleum and petroleum products, is likely to surpass the pre-confrontation level. The oil trade with Indonesia, which was very substantial before confrontation, is now but a shadow of its former self. We used to import more than $200 million worth of oil products from Indonesia a year and export $90 million to her. Imports are now running at a third of previous levels and oil exports to Indonesia are negligible. The picture, however, is different with the merchandise trade. Before confrontation, Singapore was importing an average of 30,000 tons of rubber per month as well as a substantial volume of coffee, pepper, copra and other tropical produce. But the rubber trade accounts for more than two-thirds of the value of imports from Indonesia. By September this year the physical volume of imports of rubber had exceeded the pre-confrontation average of 30,000 tons a month. On the exports side, performance this year is likely to surpass the highest level achieved before confrontation, and that was in 1962. In that year, our exports of merchandise, excluding petroleum products, to Indonesia amounted to $226.5 million. This year the figure is likely to be in the region of $355 million. One reason for this is the ready availability of supplies of manufactures now produced by our new industries such as wheat flour, galvanised iron sheets, cement, iron and steel construction material and so on. Early delivery dates and attractive credit facilities had enabled us to increase by a very substantial amount our export trade to Indonesia. Also the rational policy of the Government of Indonesia in granting export bonus certificates has helped to increase the supplies of necessities - foodstuffs and construction material - to Indonesia. The expansion of our trade with Indonesia is undoubtedly the principal reason for the present buoyancy of the economy. As regards Hong Kong industrialists, I reported to Parliament on the 2nd November that a very substantial number of them have made firm arrangements to establish manufacturing facilities in Singapore. The number since then continues to grow at a gratifying rate and Hong Kong industrialists have bought up all available factory accommodation - both those recently completed as well as under construction. It has, therefore, been necessary to mount a crash programme of new factory building to meet the requirements of Hong Kong industrialists as all available buildings have already been taken up by them. This is being done in the Kallang industrial estate as well as in Jurong. The Economic Development Board has now under construction no less than 131 factories which would be leased or rented out on completion to industrialists. Tenders for another 76 factories will soon be called for. Thirty of the 131 factories under construction are in Jurong and the rest are in the Kallang Basin Industrial Estate, Redhill Industrial Estate, Kampong Empat Industrial Estate and the Tanglin Halt Industrial Estate. They include several types of factory buildings, such as blocks of flatted factories, box-beam type temporary factory buildings, terrace type factories and so on. The figures I give do not include factories which are being built by the industrialists themselves in Jurong and elsewhere. All these activities reflect the growth of our manufacturing industries, particularly the pioneer firms. As at June this year, there was an increase of pioneer firms in production from 97 last year to 126, an increase of 30 per cent. Total investment in fixed assets increased from $293 million last year to $336 million this year, an increase of 25 per cent. The number of persons employed increased during the same period from 11,000 to 13,400, an increase of 22 per cent. As regards trade with South Vietnam, this has been helpful but the extent has probably been exaggerated by people who look only at the gross figures. Five years ago, before the increase in the American military effort in South Vietnam, our exports to that country were in the region of $50 million to $60 million a year. In 1965 this increased to $110 million, going to $256 million last year. This year it is running at the rate of about $300 million a year. However, most of the products exported to Vietnam consist of petroleum and petroleum products. While these no doubt have been useful to our refineries and to businesses connected with tanker operations, the benefits accruing to our manufacturing industries are much less. For instance, in 1966, 80 per cent of the exports were petroleum products and exports of other manufactures amounted to only some $50 million - a useful sum, no doubt, but not one which can explain the rate of our economic growth; nor should it place our industry in severe difficulties should the war there come to a close. While it is gratifying to note the sturdy growth of our economy and its present rather healthy condition, our future prospects can give us no cause for complacency. Everybody knows that we are now faced with a severe challenge to our economic prosperity, when the British plan for reducing their military forces in Singapore gets under way. The programme is to reduce their military establishment by half by 1970/71. Concurrently with the run-down of the military establishment, there will be corresponding reductions in the civilian establishments which provide supporting services to the fighting units. By 1970/71 the extent of the run-down, so far as Singapore is concerned, will mean a reduction of half of the 31,500 locally-enlisted personnel and locally-recruited civilians now employed in British bases. In other words, by April 1971, there will be approximately 16,000 people now working in British bases who will be retrenched. A quarter of these are non-citizens coming from Malaysia and India, and the rest will be Singapore citizens for whose welfare we have a responsibility. The Government is preparing plans whereby discharged civilians who are citizens of Singapore may be re-absorbed into industry - if necessary, after a period of industrial training. These details will doubtless be announced in due course by the Minister for Labour and I will not encroach on his territory. So far as the economic effects are concerned, the British military run-down will mean not only an increase in the number of unemployed persons in Singapore, but also a reduction of local expenditure. Undoubtedly these effects on the economy will be severe and protracted. It is necessary that we should quantify these effects as precisely as we can. On the basis of this numerical assessment, we would be able to have an accurate idea of the magnitude of the counter-measures that we have to take to counteract these effects. A lot of this work will be possible only when the detailed plans of the force reduction are known. Also, the counter-measures that are available to us must include the productive use of base facilities when they are released by the British. A special unit has been established in the Prime Minister's Department to go into these details. What I need to do here is to give an indication of the order of magnitude involved and the terms of the general policy which we have to evolve and implement to cushion off the effects of the military run-down from unduly upsetting our economy. The consequences of the military reduction can be viewed from two angles. First, in terms of reduction of local expenditure which these base facilities generate. This includes not only payments to civilian and locally-enlisted personnel but also expenditure by British military personnel and their families, and expenditure by military forces on local goods and services; such expenditure has been running at the rate of $281 million in 1961 and increasing to $450 million last year. It should be noted that in 1966 the total local expenditure of the British military forces amounted to no less than 14 per cent of our gross domestic expenditure. If we can assume that this expenditure will be halved by April 1971, that is, three and a half years from now, this will mean a cumulative reduction of two per cent of our gross domestic expenditure each year. I have already given figures of the expected numbers of civilian and uniformed employees who will be discharged in the first phase of the British run-down. Roughly, this will mean that we have to find some 12,000 additional jobs if we want to re-employ all our citizens discharged by the British. If we assume that the rate of discharge is evenly spread throughout the three and a half years, this will mean an additional 3,400 jobs each year. We are thus faced with a substantial increase in the number of persons unemployed while at the same time there will be a reduction in spending which, unless balanced by additional spending in other sectors of the economy, will not create the circumstances favouring the growth of economy to absorb retrenched base workers. I want to deal with the subject of unemployment in some detail. This has always been the central economic problem of Singapore and the military run-down will obviously make it even more acute than it had been during the last several years. I would therefore like to discuss in some detail this problem as there appears to be widespread misconception about the extent and nature of unemployment in Singapore. There have been two excellent studies on the subject made last year which had received inadequate attention. These studies are the Government tabulation of National Registration identity cards made last year when the old cards were exchanged for new cards. There was also an excellent piece of research undertaken by the Economic Research Centre of the University of Singapore which carried out a very large scale sample survey of households in Singapore. Until the analysis of unemployment was made in these two studies, the only current source of data was the registration records maintained by the Labour Exchanges of the Ministry of Labour. Anybody who wants a job registers his name there. He may be unemployed or he may be working and in search of a better job. Since registration is not compulsory, nor does it carry with it cash benefits by way of social security payments, there is no inducement to register apart from the hope of getting a job, and there must be many unemployed people who did not register. So the figures reported by the Labour Exchanges must be taken as uncertain as to their exact meaning. Provided, however, that the different biases entering into the figures are constant from year to year, then changes in the level of Labour Exchange registrations may be taken as an indication of changes in the trend of unemployment. But even this is a risky exercise only to be undertaken as a last resort for want of anything better. The Sample Household Survey carried out by the University of Singapore Economic Research Centre enquires of all economically active persons 10 years or over what they are doing. It considers any persons unemployed if he or she is not working and is actively looking for work. The number of unemployed estimated in the Survey amounted to 52,630 as compared with a working population of 524,025. This gives an unemployment rate of 9.1 per cent. A count of identity cards gives the number of unemployed as 43,405 against a working population of 541,758 - an unemployment rate of 7.4 per cent. I have circulated to Members of the House a table setting out the findings of these two studies and would ask Members to refer to this table marked Appendix "A"* (* See cols. 503-4.). The differences in the two estimates are no doubt the result of different definitions,methods of enumeration and other technical factors.But whichever figure we take, the rate is very high, though not as high as the estimates made by some alarmists. A closer study of the composition of unemployed persons reveals Appendix "A" to Annual Budget Statement(Col.448) (Cols 0503-0504) certain interesting features. Both the Sample Household Survey and the National Registration data are agreed that the majority of unemployed persons were those who never previously worked and who were looking for their first job. The National Registration data estimate this group at 28,826, or 66 per cent of all unemployed persons. The Sample Household Survey estimates it at 28,789, or 54 per cent of the total unemployed. Both are agreed that the majority of those unemployed persons who were looking for work for the first time were teenagers. This is what one would expect. The National Registration data give the number of unemployed persons looking for their first job aged between 12 and 19 years as 21,937. The Sample Household Survey places the figure at 18,545. Whereas the majority of those looking for their first job were teenagers, the majority of persons unemployed who had previously worked were persons aged 20 or over. Of the 14,579 unemployed persons who became unemployed by losing their previous jobs, only 2,813 were teenagers and the rest 20 years or older. Very much the same distribution appears in the Sample Household Survey data, although the figures of persons who became unemployed by losing their jobs, as contrasted with those looking for their first job, are considerably larger in the Sample Household Survey. It is not easy to reconcile these two sets of figures. I am inclined to believe that the Sample Household Survey data are more reliable. The method of enumeration by trained interviewers is likely to produce less recording errors. The National Registration data were compiled by relatively untrained clerks, and recording mistakes could be a serious source of error. All this strengthens my belief that there should be established in the Government machinery a system for the periodic estimation of the number of unemployed persons by some reliable statistical method. This is the one key economic variable in Singapore and yet it cannot be known with any certainty simply because of the absence of a machinery to collect information. To go back to the studies, 21,900 teenagers looking for work is not suck a horrifying problem considering that each year some 40,000 persons - boys and girls - reach the age where they can reasonably be expected to earn a livelihood. But the number of people unemployed as a result of losing their jobs - 14,600 according to the National Registration data and 23,900 according to the Sample Household Survey data - these numbers constitute a very serious problem. Most of these people are of the age where they could be expected to be supporting families. The number comes to some 10,000 in the National Registration data and no less than 19,000 in the Sample Household Survey data. While we can expect teenagers to spend another year or two living with their families without experiencing undue hardship, the older ones who have lost their jobs and are trying to get another create both an economic and a social problem of some importance. As I have said before, their ranks will soon be swollen very substantially by those who would be retrenched from the military bases. If we regard the Sample Household Survey figures as the more reliable one, in addition to the 19,000 adult persons unemployed in 1966, there will be a further 16,000 persons now working in military establishments who will be thrown out of job in the next three and a half years. So, in addition to teenagers who are looking for work in increasing numbers each year, we are faced with a substantial increase in the number of unemployed persons with family responsibilities. We have to try to provide them with a livelihood. To sum up the figures, we have 12,000 Singapore citizens who will lose their jobs in military bases over the next three and a half years. This is to be added to some 52,000 already unemployed. A further 25,000 must be added each year, representing teenagers entering the labour market. This is the magnitude of the problem we have to solve. To pose the problem in summary form, what we have to do in the next three years is -
(a) generate an additional $80 million expenditure each year to offset the reduction of British military expenditure; (b) create 18,000 additional jobs a year to absorb those who are now unemployed and to provide work for base employees expected to be retrenched; (c) create a further 25,000 new jobs each year for the teenagers coming of age and looking for work. Can we do this? To answer these questions with any degree of completeness, I think it is necessary to make a review of our performance over the last ten years. Members know that the prime objective of the P.A.P. Government since 1959 has been to create new jobs for Singapore's growing population. So in a sense, what we are faced with now is not so much a novel situation but an aggravation of an existing one. A review of our performance over the years might yield some insight as to what practical possibilities exist for successfully surmounting the very grave difficulties that lie ahead for us. Since 1961, we have embarked on a major attempt to industrialise the economy and there have been visible changes in the shape of industrial estates, new factories which have given a concrete form to our policy. It is possible, however, in our concern over day-to-day events, to overlook the rather radical changes which have resulted from this policy in the structure of our economy. I have circulated a simple Table (marked Appendix "B"*) (* See cols. 505-6.) which sets out the distribution of the working population between the various industries in 1957 as ascertained by the Population Census of that year and in 1966 Appendix "B" to Annual Budget Statement(Col.448) (Cols 0505-0506) as ascertained in the Re-registration exercise. The National Registration data shown in this table show a very good degree of correspondence with the Household Survey and I therefore have not used the latter data. The first feature that stands out is the very substantial reduction in the number of persons occupied in agriculture and fishing. In 1957, 31,500 were so engaged. The present number in 1966, namely, 22,800, shows a substantial reduction of more than a quarter. The reasons for this decline must await closer investigation. All I can say is that the probable causes lie in the substantial decline in small-scale fishing and in the increasing use of rural land for residential and industrial purposes. The next important feature is the substantial increase in the number of persons engaged in manufacturing from 68,000 to 106,300, an increase of 56 per cent. The increase in the number of persons engaged in the manufacturing industries is confirmed by the annual census of manufactures. This covers all manufacturing industries engaging 10 persons or more. It therefore excludes the small backyard enterprises which in Singapore account for a very substantial number of persons working in manufacturing industries. In the larger firms covered by the census of manufactures, the figures run as follows: 1959 25,607 1960 27,416 1961 27,562 1962 28,642 1963 36,586 1964 41,488 1965 47,334 1966 52,594 These figures show that significant industrial expansion did not start until 1963 and since then there has been an annual net increase of between 5,000 and 6,000 jobs each year. This figure takes into account not only the additional new jobs provided by new industries and expansion of old ones, but it also takes into account jobs lost by contraction of industries or closing down of established firms for one reason or another. Sir, it is a sobering thought that with the prodigious efforts we put in and the vast amounts of money and resources which the Government had been channelling towards increasing the growth of the manufacturing industries, all that bad been achieved is a net increase of some 5,000 jobs each year in these industries. Clearly this rate of increase is inadequate to meet our future needs. It has not even absorbed the increasing numbers of young people looking for jobs though, no doubt, without the effort that was actually put in, the unemployment situation today may well have passed the critical point at which social discontent may seriously disrupt all prospects of political stability and economic growth. This element, the rate of net increases in jobs in the larger manufacturing industries, is a critical economic variable, to which I will later return. The other aspects of this Table do not call for much comment. The increase in the number of persons engaged in construction is substantial, 37 per cent, and of course is the natural result of the large building programmes under way. A very noteworthy feature is the number of persons engaged in trade which has virtually been stagnant over the last 10 years, being 115,000 in 1957 and 116,800 in 1966. This stagnation in the number of persons engaged in commerce is something which we had expected when we came to office in 1959. In the outcome, our expectations appear to have been fully realised. I have dealt with this subject in considerable detail, taking into account the researches made in the past which have a bearing upon it, because I want to establish beyond all doubt that to counteract the effects of military reductions and to reduce the number of unemployed persons, we will have literally to redouble our present efforts, to promote industrial growth. First, I think I have to establish that it is this sector of the economy, the manufacturing industry, which lends itself most easily to expansion as a consequence of deliberate government policy. This is the experience not only in Singapore but also in most under-developed countries which had attempted the same policy as ours. The second conclusion is that the scale of our past efforts is quite insufficient to meet future challenges. What then are we to do? What measures must we take to bring about sufficient industrial growth to provide not merely 5,000 new jobs a year but twice or even three times this figure? A preliminary question we have to dispose of before we go to the main issue is what other sectors of the economy can we hope to produce economic growth? We have ruled out the trade sector and we have seen that agriculture is a declining occupation. Construction of buildings is a good provider of jobs, but this is dependent on other sectors expanding to produce a buoyant economy. In itself, the growth impetus of the construction industry will dry up as soon as people who buy private housing run out of money or when the development funds of the Government diminish because economic growth cannot be sustained. Here, fortunately for us, Singapore's unique geographical position once again comes to the rescue. Our central position in South-East Asia had enabled us in the historical past to become a trading centre, which we still are. When trade had become stagnant as a provider of employment, we had to diversify our economy with useful but limited results. Now, the military value of our geographical situation, hitherto a large source of employment and income, will be reduced in stages. However, a new factor emerges which, without much merit or great effort on our part, will come as a very welcome element generating much local expenditure and providing a large volume of employment. This is the tourist trade. I had earlier referred to the great influx of tourists which has now resulted in an acute shortage of hotel accommodation. To remedy this shortage, there are under construction five large first-class hotels totalling 1,509 rooms. The capital invested in these enterprises is estimated at $45 million aid they should provide employment for 2,500 when completed. A third of this new hotel capacity will be completed next year, giving us a badly needed additional 566 rooms. There has been a large number of applications to the Chief Building Surveyor's Department for the construction of more new hotels or for the extension of existing ones. Building approval has already been given to 16 new hotels or extension projects. These involve another 2,089 rooms with an employment potential of more than 3,500. Applications have also been received from another nine concerns for which building approval has not yet been granted. These involve 1,240 additional rooms with a corresponding increase in employment potential. So over the next three and a half years, most of these projects should have come to fruition and they will generate are additional 9,000 jobs directly in these hotels with many more in associated tourist industries. Combined together, they constitute a very welcome additional impetus to our economic growth. In the aggregate, the newly created employment in the tourist industry will equal in volume the number of citizens retrenched from the bases. This does not mean, however, that the expected growth of tourism will completely offset the effects of the run-down. There is the additional indirect employment created by the expenditure of servicemen and their families and of service departments which have not been allowed for. All the same, the expansion of tourism will provide, as I said, a very welcome relief. May I return to industrial growth which remains our principal weapon to provide more income and employment. Our policy in the past has been to encourage industries of any kind so long as they are economically viable, that is to say, they can make a decent return on capital invested. As a result of this, we have seen a miscellany of factories established in Singapore. This phase - if I can coin a phrase to describe it. "the shoes and ships and sealing wax" phase of industrialisation - must give way to a more selective and discriminating policy. This does not mean that we would not support any proposal to establish any kind of plant in Singapore by a local or overseas industrialist who is willing to put in the money and take the risk. All proposals are welcome, but some will be more welcome than others. In the new phase, it is necessary for the Government, through its agency of industrial promotion, the Economic Development Board, to make a deliberate selection of those kinds of industries which have the greatest potential for long-term growth. Every economy has certain natural advantages which are related to and are determined by the natural resources that it possesses, the size of its domestic market, access to export markets and other economic factors. In Singapore, we have no natural resources worth the mention and the domestic market is really too small upon which to mount the kind of industrial development upon which we must now embark. Obviously, we must look to export markets, but here the difficulty is this. Where we depend on capital and know-how from overseas - as we now must for any industry that goes beyond a certain level of sophistication - the question which the overseas industrialist will ask of himself, even if he is too polite to ask it of the Economic Development Board, is this, "Why should I want to establish a plant in Singapore to produce for an export market in Europe, the United States or the Soviet Union? Why can't I do it more safely and more easily with the plant which I now have, in my own country?" There are specific instances - textiles, for instance - where there are good reasons why overseas enterprises gain by establishing a factory in Singapore. In the case of textiles, there was a brief escape from quota restrictions until these were unceremoniously banged down on us as well, but in general no convincing answer can be given to the question that I posed, unless we can create tangible incentives for exports. The award of pioneer certificates carrying with it exemption from income tax for five years is one such incentive. The specific export incentives incorporated in the Bill which I am taking through Parliament today will provide even more substantial benefits. But merely providing incentives would not produce the results that we want, unless it is backed by the right policy implemented by an effective administrative agency. In this second phase of our industrialisation programme, it will be necessary for us to make increasingly large outlays on selected growth industries. In the case of Singapore, the experts in the Economic Development Board and I have independently come to the same conclusion, and that is that the growth industries which we must foster are the engineering and metal fabrication industries. These industries are labour intensive which, of course, is a decided advantage. Further, they require a substantial amount of skills at all levels from the machinist working on machine tools to professional engineers with a wide range of background and training. The greatest asset, however, that this group of industries possess lies in what economists call "inter-industry linkages". Firms in the engineering and metal fabrication industries buy a lot of products and services from each other. So an expansion of one unit or one branch increases the market for many others, allows them to lower costs by making possible the purchase of more costly equipment and to resort to better techniques used in larger scale production. This built-in tendency towards self-reinforcing growth is one which marks out the engineering and metal fabrication industries as deserving of special attention. The products which these industries will turn out cover a very wide range of commodities, from ships to engines of various kinds powered by a variety of fuels to the making of different kinds of machinery and components. There is a very substantial volume of international trade in these products and within this vast complex volume of international business in engineering products, we should be able to find that mixture of products which we can produce on advantageous and competitive terms. As a start, I have asked the Ishikawajima-Harima Heavy Industries of Japan, the largest ship-builders in the world, to make a technical study of the prospects of building medium-size ocean freighters in Jurong. Their team of engineers and naval architects recently returned to Japan after an intensive on-the-spot study of production facilities in Singapore which must support ship-building operations. Their recommendations should be made available to the Singapore Government early next year. The Economic Development Board are also conducting feasibility studies into other engineering industries. There has been a very substantial expansion in the training and service facilities for the engineering industries in Singapore undertaken by the Service Divisions of the Economic Development Board, and these will be of growing importance. Sometime next year, I hope to receive from the United States through the assistance of the International Executive Service Corps a personal adviser on policies relating to the expansion of the engineering industries. I believe that technical and production problems can be solved provided one spends sufficient resources by way of training, capital investment and supporting infra-structure facilities. To be sure, this is going to be a vast undertaking, larger than anything we have undertaken so far. I do not imagine it would be the production problems that would be the major difficulty. We have an energetic population which does not shirk work and which is willing to put in arduous and sustained effort in work, in training and in professional studies. It will, of course, take much time to turn out a wide range of professional technical competence which we need to man a sophisticated industry, and this must be a long-term and continuing undertaking. But I believe that the real difficulty is not in production but in marketing. Of course, it is in a sense artificial to regard these aspects as separate issues, for they are inextricably connected. For instance, if your production is so efficient that you can undercut all competitors in the world in producing a given product, then no marketing problem exists, for you will be able to sell all that you produce. We cannot, of course, assume that we shall reach this happy stage of excellence, for all that we can hope for is that we would be roughly competitive `with other countries. In regard to some aspects and some countries, we may have the advantage of higher standards of education, more finance capital, easier access to export markets, better communications, lower labour costs and so on. In regard to others, the relatively low stage of our technical development must be a severe handicap which needs to be overcome by exploiting our other advantages to the full. On balance, an efficient marketing organisation which will transmit the demand for machinery components and engineering products in international trade to manufacturers in Singapore, will be a decided advantage to our industrial growth. By this, I do not mean merely export promotion activities which governments normally engage in and which take the form of overseas market research, special products display, dissemination of information, and so on. These are necessary but not sufficient. We must establish in the not too distant future an international trading agency of some kind which will relieve the manufacturers in Singapore of many of the problems connected with the export of their products to overseas markets. This subject is receiving very close attention in my Ministry and in the Economic Development Board, and I would say no more than that the implementation of this policy may well result in far-reaching rearrangements in the structure and pattern of our international trade today. These then are the problems we are facing. Many of them, as I have said, are not new, but with the run-down of the bases, they have acquired an added urgency. I have outlined both the magnitude of the problem and the broad lines of policy upon which we have to embark in attempting a solution by accelerating our industrial growth. I would not like to be more specific than I have been, if for no other reason than that a great deal of the details of policy will have to await closer study. For instance, it is clear that the Government will have to put in more capital into industrial growth both by way of direct investment as well as by the provision of infra-structure services, especially in the shape of additional technological and sub-professional training institutes. As regards Government investments in new industrial projects, the policy in the past has been one of prudence. Obviously, the Economic Development Board must make its calculations with some accuracy before it invests in a new venture, since it cannot risk failure in its initial attempts. The result has been that nearly all its equity investments in industry have been extremely profitable. For instance, the share value of National Iron and Steel, in which it has a substantial equity holding, has increased to two and a half times in value. Similarly, Jurong Shipyard, where the Economic Development Board owns nearly half the capital, is known to be making large sums of money this year. I do not suggest that in future we should be reckless in these matters, for such an attitude is completely out of place in responsible government. What I do suggest is that calculated risks must be taken where the promise of growth makes this worth while. All this means that substantially larger funds must be allocated to building up our economic sinews than had been the case in the past, and it cannot be said that the Government has been niggardly in providing these funds. A whole host of questions follows upon such a policy. For instance, will it be necessary to create new financial institutions for the more effective mobilisation of domestic capital? To what extent can we look for useful assistance from or fruitful alliance with external sources of finance? These and many other aspects of the problem are constantly exercising the minds of my staff, and the coming months should see some important developments in this field. Before I go to discuss the estimates before Parliament, may I bring together the main threads of the arguments which I have been developing? They can be summarised under six main headings. (1) The last 10 years have seen a marked change in the structure of the economy of Singapore as a result of our policy on industrialisation. (2) Industrial growth has managed to keep unemployment within manageable proportions. In spite of rapid population growth, the increase in unemployment has been from 29,600 in 1957 to 52,630 in 1966. Most of the unemployed persons are teenagers looking for their first jobs. However, the seriousness of the present position must not be under-estimated, for the present level of some 9.7 per cent of the work force is not very far removed from the danger level where social discontent may provoke instability. (3) Unemployment created by the reduction of British Forces would present the Republic with an aggravation of an already serious unemployment problem. (4) The expected expansion of the tourist trade will present the Republic with much needed relief. (5) This will not, however, obviate the necessity for intensified effort to produce faster industrial expansion. Such future efforts will require much larger allocations of financial and other resources and at the same time the effort will have to be more selective in the choice of growth industries to be encouraged. (6) The additional effort will call for the establishment of new institutions in at least two fields, namely, the mobilisation of domestic capital and the exploitation of opportunities in export markets. With these comments I turn to the Estimates that now lie before the House. The main point is that the considerations which I have discussed at such length and in such detail have placed certain constraints on the policy that has to be followed in the allocation and raising of funds for next year. Because the detailed items of the accelerated growth policy which I have outlined have yet to be worked out into an operational programme, it has not been possible to quantify actual requirements by way of funds and resources. For this reason, I have adopted what virtually amounts to a normal continuation budget with no major innovations or changes both in the Ordinary Estimates and the Development Estimates. In the first place, I have not provided in this Budget for an increase in taxes next year. So the Estimates of Expenditure have to be framed within the expected yield of existing taxes. Secondly, a large proportion of the additional revenue resulting from normal economic growth will have to be allocated for Defence expenditure. This is not the result of any increase in our Defence programme, but merely the normal implementation of `the Defence Plan worked out in previous years. This point is of some importance, and perhaps I may be allowed to elaborate on it. The planned withdrawal of the British military presence by the mid-70's has happily no effect on our Defence expenditure for next year. The reason is that in framing the original Defence Plan of the Republic, some two years ago, one of the crucial elements which had to be taken into account was the probable duration of the British military presence in Singapore and in the region. We came to the conclusion in the Ministry of Defence that we could not depend on the continued presence of British Forces in this area beyond 1975. 4.30 p.m.