ESTIMATES OF EXPENDITURE - FOR THE FINANCIAL YEAR - 1ST JANUARY, 1969, TO - 31ST MARCH, 1970
Mr Speaker, Sir, I will start off with prices and price committees. When my Parliamentary Secretary yesterday announced that the retail price index had gone down from January to September this year from 113 to 111 points, his statement was greeted with a great deal of scepticism, if not with downright derision. Obviously people believe that the cost of living is increasing. But before we argue about whether prices are going up or down, I would like to explain how the cost of living is measured statistically, what the retail price index means, and the basis on which the index is computed. When you say that prices are going up, it is always very easy for anybody to point to particular examples. The prices of bicycle-tubes, or shoes, or socks may be going up in one week and you say that on the basis of this evidence, prices are going up. On the other hand, you can point to the prices of other goods which may be going down - rice, or chillies, or blachan, or what have you. So in our type of economy which is based on a free market, prices are always changing - some are going up and some are going down. So how do you say, "In general, prices are going up or prices are going down, or prices have remained stable when some are going up and some are going down and others are remaining stable."? Obviously, there must be some kind of averaging process applied to prices of goods bought and sold in the market. This is exactly what the retail price index attempts to do. The retail price index is based on a study of what people in Singapore actually bought in the year nineteen fifty something - I have forgotten the actual year. Some people went out and studied what some 500 working class families in Singapore bought in one month. They kept detailed records of what the housewife spent every time she came back from the market. They asked other members of the family, "How much did you spend on transport, education, cigarettes, entertainment, clothing, and so on?" Taking the total pattern of expenditure of these few hundred working-class families, you then arrive at the relative importance of different types of consumer goods and services that enter into a working-class family budget. Then you can say that food will come to, say, 45 per cent or 51 per cent - and the food items are these: rice, noodles, this, that and the other. For each item, you can say that it comes to a certain percentage of the total expenditure. The pattern of expenditure of these working-class family budgets gives you what is called the weights, that is, how much importance you attach to the different commodities - say if they spend ten. per cent of their expenditure on rice, then rice will occupy one-tenth of the total expenditure, and if the price of rice goes up, then it has a weight of ten as compared with the total weight of 100. This is the way we measure the cost of living movements. Once we get the weights which are based on actual budget surveys of working class families, we periodically send out inspectors to take down the prices. There is a team of price inspectors attached to the Statistics. Department, each of whom is provided with detailed instructions. They do not just find out whether the price of shoes this week is more expensive than that of last week. They are told, "Go to this shop, check this kind of shoes and record its price regularly." Different inspectors, will go to different shops to get different types of shoes properly specified, so that we do not have changes in prices which are due to, changes in quality. And similarly with the whole range of vegetables, fish, and so on. Of course, there are many technical difficulties of definition in getting standard qualities and so on. But within what is possible to standardise and what is possible to define, this is the way the cost of living index is formulated and kept up to date. It may be asked, "How is it that in Singapore in the first nine months of this year, the retail price index has gone down by two points, whereas we know for a fact that in most other countries, the cost of living has been going up?" If advanced countries like Britain or the richest country in the world, the United States, are taken, it will be found that this year the retail price increases have been of the order of between 4� and 6 per cent. That is the measure of inflation that is going on in these countries. But in poorer coun tries, the situation is worse. In a large under-developed country like Brazil when they have an increase in prices of 80 per cent a year, they say that they have done well because the prices had increased by 200 per cent the previous year. Take our neighbour, Indonesia, which has been racked by inflation ever since Dr Sukarno thought that economics was a matter for book-keepers. In our case, when the official price index showed a decline of two points from 113 to 111 points this year, there is a rational explanation for it. You will remember that last year there was a very big increase in the price of rice because of a drought in Thailand and a general shortage of rice from our other traditional source - Burma. The price of rice shot up to 50 cents or more a katty for the best quality. But since then it has gone down. And because rice is such an important item in the budget of a working-class family, this decline in the price of rice has brought down the retail price index. Therefore, when you say that the prices of shoes and socks have gone up, they might have gone up a little bit. But because the proportion of money spent on shoes, socks, match-boxes, or what have you, is so small compared to that spent on rice, the general fall in the price of rice has brought about a fall in our retail price index. So much for the background. Therefore, it is not necessary, in order to measure price movements scientifically, to form a Price Committee. Unless the committee works according to these principles of measuring prices, we will be constantly arguing about whether prices are going up or going down, because they may be collecting prices at different shops and at different markets and indeed in respect of different brands or different qualities of products. So I do not think that a Price Committee will be more useful in giving us information as to movements in the cost of living than the official retail price index. The Member for Sembawang believes that a Price Committee can prevent increases in prices. This is what King Canute thought. Governments have tried to control prices and the net result is the emergence of black markets, bribery and corruption. Where a com mittee has no statutory powers, I do not see how it can exert any influence over prices. Mind you, it can probably browbeat the grocer around the corner, but that is not going to help the people. So in order to ensure that the cost of living does not go up, we can take a number of precautions. The first, of course, is to ensure that we run an efficient port. We get most of our consumer goods from abroad, including the bulk of our foodstuffs, textiles, and so on. So long as we have an efficient port, a competitive importing system and an absence of monopolies, we can ensure that we buy the cheapest and the best goods from any part of the world. 4.00 p.m. Similarly for locally produced goods. I will deal with this subject in some detail later. The Member for Delta has raised this point also. The second point raised by the Member for Sembawang was : what would happen to the old notes and coins after 16th January, 1969? They will no longer be legal tender. Anybody who has these coins had better put them either into the bank or the Currency Board, because after 16th January, 1969 the bus conductor has a right to say, "I do not want this money." We have already announced to the public to send in their old coins and old notes quickly, because after 16th January, 1969, they will no longer be legal tender. The public will be put to a lot of inconvenience to get par value for these coins and notes. They will not, of course, be utterly worthless, because the value of these old notes and coins is guaranteed by law. But it would be very inconvenient. With regard to unemployment, the Member for Sembawang has suggested opening up arable land, fish ponds and so on and so forth. The trouble with opening up arable land is that we have only 224 square miles of land at low tide. Where are your vast areas - the new western frontiers? I do not see them. In fact, I am trying to persuade my colleague, the Minister for National Development, to induce our pig farmers to raise pigs in flatted concrete structures. This has been tried in England, and with such great success that the British Ministry of Agriculture have banned this method of raising pigs because they say it will knock out the ordinary farmers who raise pigs on the ground and not in concrete structures. This is a very efficient method of raising pigs. I hope I can convince my colleague that we should do likewise. But so far I have not been successful. The Member for Sembawang is greatly concerned about the gap between imports and exports. He says that we imported more than we exported, and that there was a deficit in our balance of trade. Of course, there is a deficit in the balance of trade. There has been a deficit ever since Sir Stamford Raffles landed here. Mind you, each year, for some reason or another, within a day or two after we have published the twelve months' trade figures, Radio Peking will say, "There you are, Singapore is in trouble again. Exports are $2,000 million and imports are $3,000 million. There is a deficit of $1,000 million. They are going bankrupt." And this has been going on for years. I would ask the Member for Sembawang not to worry at all. We are in no danger of going bankrupt. What you want is not so much a balance of trade; that is, the goods you buy, the goods that are transported from the holds of the ship to the harbours and thence into the shops and godowns, and what we export by sea or by air. That is only part of what the economists call the balance of payments. Although there is a deficit in the balance of trade - that is, we import more than we export, and the deficit is very substantial; this year it will probably be short by $1,000 million - we make it up by what we call "invisible exports". They are, for example, the earnings of tourists, what the seamen spend when they are on shore in Singapore, the British base expenditure, which unfortunately is getting less and less each year, and our earnings on shipping, insurance, and on the general entrepot trade. All this makes up the balance. Of course, nobody really knows what our balance of payments position is in any given year. I have come across dozens of estimates of balance of payments made by the International Monetary Fund, the World Bank; estimates made by our own statisticians, by the University of Singapore Economics Department and so on and so forth. But, quite frankly, I do not believe any of them. At one time those who estimated Singapore's balance of payments were very modest. You will find that one of the biggest items will be what they call "E, and O." - Errors and Omissions, and they will be running to $500 million. But now statisticians have presumed to be more accurate and this "E, and O." business seems to be getting smaller and smaller. I wonder whether that is, in fact, the case. The proof of the pudding, as they say, is in the eating. Whether we balance our trade or not, the question is whether in the end our external balances go up or go down. In the case of Britain, they say all the time that their assets go down and they have to borrow from people. So sterling is in trouble. But in our case, our assets are going up year by year and, in fact, at a very rapid rate. What are we going to do with such sums of money with the international monetary system in such an insecure situation? It gives me many sleepless nights to think of what to do with the $2,000 million that we have All is well with our imports and exports. Do not worry about that. The Member for Delta has dealt with the cost of living. I think I probably answered her points when I replied to the Member for Sembawang. I do not know whether I have got her right, but I had the impression that she was complaining about merchants making money as a result of devaluation. I do not know why she should complain about other people's good fortune. After all, some make profits, others suffer losses, and in the end it all evens up. She said that after I had said that there would not be a painless budget, rumours apparently were quite rife in Singapore and people rushed to buy refrigerators, T.V. sets and what have you. So what ! She cannot blame me. I cannot tell them that there would not be any increase in tax in refrigerators, T.V. sets or shoes or what have you. So if they listen to rumours and act foolishly, that is their business. I do not think - Madam Chan Choy Siong rose -