Mr Speaker, Sir, I beg to move, That Parliament approves the financial policy of the Government for the financial year 1st April, 1971 to 31st March, 1972. In this budget statement, I propose to begin with an outline of the economic setting with particular reference to our performance in 1970, estimate future prospects, then deal with the estimates of expenditures, both current and development, before going on to consider the revenue or other methods of financing these expenditures. For the convenience of Members, I am circulating tables of statistics* on which I shall base my remarks. Members already have also two Memoranda+, one on the Ordinary Estimates and another on the Development Estimates, as well as the Estimates++ themselves. (*See Appendix, cols, 593-634) (+Papers. Misc. 1 and 2 of 1971) (++Papers Cmd. 3 and 4 of 1971) Appendix to Annual Budget Statement (Col.549) (Col 0593-0634) In order to prevent confusion among Members who may have cause to refer to previous published data, I should perhaps add here a word of explanation relating to the statistical tables. In many instances, the data has been revised on better information or on better classification and redistribution. For example, ship-repair services now come under manufacturing instead of entrepot trade in the statistics. Review of the Singapore Economy Contrary to expectations at the last budget, the year 1970 has been another very favourable year for Singapore. A quick look at the main economic and social indicators which are given in summary in Table I will be sufficient to confirm this. After the exceptionally prosperous last two years of the Sixties, we entered the new decade of the Seventies with some diffidence as to what the future would hold for us. The major external factors then looming over the horizon and likely to affect the economy during the first half of the decade were the continued instability of the international monetary system, depressed share prices combined with inflation in the developed countries and, in consequence of these uncertainties, the expectation of a gradual slow-down in the growth of world trade. Domestically, there were the expected consequences of the British Government's decision to withdraw all its military forces from Singapore by the end of 1971. Added to this was the uncertainty as to the effects, both economic and political, of the accelerated run-down of American Armed Forces in Vietnam. In the event, whilst there was some cause for our apprehensions, the worst has been avoided in 1970 largely by a coincidence of favourable factors. The decision by the Labour Government for total military withdrawal from South-east Asia was reversed by the victory of the Conservative Party in the United Kingdom elections. The Conservative Government intention to maintain an effective presence in the area has given added strength to the Five-Power Defence arrangements for Malaysia and Singapore. It has resulted in greater confidence in businessmen and investors in the future of both countries. Instead of an expected $150 million loss in income, the reduction of British military spending also proved to be slight in 1970. (But the drop will be all the sharper in 1971!) World trade in value terms continued to expand, not in accordance with earlier GATT (General Agreement on Tariffs and Trade) estimates of a 4-8 per cent rate, but at the relatively high rate of 13 per cent. This is only slightly less than the 14 per cent rate in the boom year of 1969, but account has to be taken of the fact that because of the increase in manufacturers' export prices, the increase in the actual volume of world trade was somewhat less than this. The rate of growth of world trade was nonetheless impressive, particularly in view of the recession which hit the American economy during 1970 and the prognostications of a possible world recession as a result. In the light of these fortuitous circumstances, our economy in 1970 was able to more than maintain the healthy level of economic activity achieved in the previous two years. According to preliminary estimates, which are given in Table II, the Gross Domestic Product, our best indicator of overall economic health, reached $5,565 million at factor cost, an increase of $730 million over 1969. This is an increase of some 15 per cent compared with the average annual growth of 14.5 per cent for 1968-69 and of 9.5 per cent for the past decade. I shall want to look more closely at the components which make up the total of $5,565 million Gross Domestic Product shown in Table II, but before doing so, it may be of interest to note the related or twin indicator of economic health, the Gross Domestic Expenditure shown in Table III. This gives the expenditure on all goods and services in the economy. At $5,707 million, the Gross Domestic Expenditure shows an absolute increase of $928 million or, percentage-wise, 16.3 per cent over 1969. More than half of this increase in Gross Domestic Expenditure is attributable to the growth in Fixed Capital Formation, which reached $1,403 million, a hefty increase of 41 per cent over 1969. Not only will this large investment ensure a sustained rate of economic growth for the future, but it is strong evidence of investors' confidence in the political stability of Singapore and its potential for profitable economic investment. Table IIIA shows that the largest portion of the Gross Fixed Capital Formation was in machinery and equipment, and in construction, both indicative of industrial investment. It may also be of interest to note that the private sector share of both consumption and capital expenditure is some 80 per cent. This ought to allay any incipient fears such as have been expressed sometimes of over-intrusion by Government into what is properly the private sector of the economy. Let us now return to the Gross. Domestic Product and examine the contribution of the various sectors shown in Tables II, IIA, and JIB. The agriculture and fishing sector continues to show the small but nevertheless welcome yearly increment. Its potential may, however, be limited. Vigorous efforts will continue to be made in developing the Jurong Fishing Port and in promoting deep-sea fishing. The next sector, manufacturing, on the other hand, continues to play an increasingly larger role in the economy. In 1970 more than one-third of the growth in Gross Domestic Product was the result of the growth in manufacturing output. Our industries are gradually moving away from the limited possibilities of import substitution on to the more promising fields of export promotion. We shall so gain a larger share in the benefits of expanding world trade in manufactures. The time has long passed since Singapore relied solely on her traditional entrepot outlets for her export markets. Singapore products in increasing range and quality are now finding their way to markets in Europe and America. In Table V, the figures show that direct exports of manufactures rose from $1,265 million to $1,708 million in 1970, a gain of 35 per cent over 1969. The steady increase in investment, increasing the productive capacity of new industry and expanding existing industry has resulted in an increase in value-added output to $1,104 million in 1970 (see Table V). The Gross Domestic Product figures for manufacturing and quarrying in Table II show a growth of 29 per cent in 1970 as compared with the average annual increase of 22 per cent for 1965-69. Manufacturing industries now comprise slightly more than a fifth of the national economic cake compared to less than one-tenth a decade ago - see Table I1B. Their contribution to total employment is also significant. Preliminary census data covering establishments with 10 or more workers indicate that there were about 126,500 workers employed in manufacturing industries in 1970. This represents an increase of some 25,000 workers or 25 per cent over the previous year's 100,758 and against the average increase in employment for 1968-69 which was about 21,250. The utilities sector's contribution of $136 million to the Gross Domestic Product reflects the expansion of industrial consumption, particularly of electric power. Industry played the most dynamic role in the growth of our economy. Because of the stimulus given by industry towards trade in manufactured products, trade was the largest contribution to our Gross Domestic Product, 30 per cent for 1970. However, entrepot earnings in 1970 dropped by 4.5 per cent or about $30 million compared to the previous year. And total entrepot earnings made up about 11 per cent of the Gross Domestic Product in 1970 as against 19 per cent in 1960. This percentage may be expected to decline further as our industrial and economic base expands with domestic trade keeping up its steady rate of growth. Two factors may, however, explain the poorer entrepot performance in 1970 relative to 1969. First, despite the remarkable growth of world trade, the prices for rubber registered a downward trend in 1970. Consequently, the value of crude rubber exports fell by about $250 million. This was a fall of 17 per cent compared with the increase of 62 per cent in 1969 when rubber prices were on the uptrend. Secondly, our exports to South Vietnam fell by about $100 million. In spite of these adverse developments, however, there has been some slight increase in total export earnings because of the increase in the export of manufactures. This increase amounted to $433 million, more than sufficient to offset the fall in the value of exports of rubber and exports to Vietnam. Whilst export growth has been sluggish, imports have been buoyant. Concern has been expressed over the widening trade deficit and its possible repercussions on our balance of payments position. However, analysis of the trade and payments accounts suggests that there need be no undue anxiety because of the following considerations. First, for an economy with a small resource base enjoying rapid industrial growth, the buoyancy in imports is due largely to the fast pace of investment in imported capital goods. This is borne out by the statistics which show that between 1968 and 1970, total imports increased by less than 20 per cent on an annual average, whilst in the same period capital expenditure on machinery and equipment in Gross Domestic Expenditure increased by more than 50 per cent. Secondly, the outflow of payments for capital goods is, by and large, balanced by the inflow of foreign long-term capital for investment in Singapore. This has generated the demand for the capital imports. Thirdly, because of imperfect data, the trade deficit in the balance of payments is thought to be smaller than shown. A part of the positive large amounts for "errors and omissions" in the balance of payments figures in Table VII is believed to be due to the trading account. Finally, and the most conclusive factor, our foreign reserves have been rising steadily in recent years. Official overseas assets have increased from $2,278.9 million in 1968 to $3,556.4 million at the end of 1970. For the present, therefore, there is no need for alarm at our large trade deficit. That is not to say, however, that an improvement in export performance would not be necessary. Our traders and manufacturers should make greater efforts to penetrate more markets and make more sales in higher value goods. Greater promotion efforts, including participation in trade fairs, would help. Turning now to the building industry which has a traditional role in pump-priming sagging economies, our original use of it in the last few years was intended to mitigate the effects of the British military withdrawal. The stimulus which was provided through incentives such as property tax reduction or payments by easy instalments has been successful, perhaps somewhat over-successful, in getting investors to build hotels, shops and office accommodation and other urban renewal projects. As an indication of the brisk activity of our construction industry, preliminary figures for the Construction Sector in the Gross Domestic Product available indicate an increase of 36 per cent in value-added output. This is the highest rate of growth recorded since 1961 for the industry. Statistics on the production of broken granite and of cement show an output increase of 19 per cent and 19 per cent respectively compared to 7 per cent and 13 per cent in 1969 and substantiate the high level of activity of the industry. At the same time, however, the smaller increases recorded for these building materials indicate that the construction industry's 36 per cent increase in earnings may be constituted partly by higher profit margins and only partly by increased constructional capacity. It could also be due to an increase in constructional labour costs. This is suggested also by the acute shortage of skilled building and construction workers. One of the consequences of this has been an unprecedented rise in the cost of new buildings reflected also in the value of existing buildings such as dwellings and office blocks. However, some hotels have declined in value for other reasons. The situation is being closely watched to prevent the cost increase from developing to serious proportions. It may be necessary also to take other measures to ensure that a run-away escalation in costs does not occur in the building industry. This could have serious effects on our total development effort. It may be convenient at this point to refer to the ownership of dwellings sector in the Gross Domestic Product. The increase in earnings of $22 million over 1969 appears to be commensurate with the expenditure on dwellings shown for 1970 in the statistics at Table IIIA. In keeping also with the capital expenditure, the earnings year by year show a steady rise in absolute terms and make a useful contribution to the economy. In percentage terms, however, there has been a slight decline to 3.7 per cent in 1970. Reference was made earlier to the reduction of British military spending. Preliminary estimates indicate this reduction last year to be small, only $30 million. The final figure could well be larger. But for 1971, the reduction in spending will be considerable as British force levels go down to just over 2,000 men. Of all the areas of economic activity which were fostered and developed during 1970 to offset the loss in foreign exchange and other effects of the military run-down, one of the most promising was the tourist industry. The statistics of sea and air passenger arrivals indicate the very rapid increases in passenger traffic to Singapore from 306,000 in 1965 to 562,131 in 1969, and 716,139 in 1970. If we exclude local passengers from these figures, we find that 521,654 tourists arrived in Singapore in 1970. This represents an increase of 110,000 or about 25 per cent more visitors than in 1969. The exceptional increase may be due to visitors going to or returning from Expo `70 and passing through Singapore. With this inflow of tourists into Singapore, and in spite of the much increased number of 62 tourist hotels in 1970, it is possible still to keep the monthly average occupancy rate above 70 per cent. This figure, judged by more developed tourist countries, should ensure a more than profitable operation. Preliminary estimates of earnings from tourist services in Singapore total $272 million. This is about 5 per cent of Gross Domestic Product. A decade ago, earnings from tourism contributed less than 1.5 per cent. We have moved away from the thinking that Singapore would be unable to attract tourists in significant numbers because of a dearth of tourist attractions. I would now like to turn to the sector of "other services" which make up some 15 per cent of our economy. Among these "other services" must be reckoned those of the financial institutions which make possible our trade, industry and other economic activity. Our instrument for the issue of currency remains the Currency Board with its 100 per cent backing by external assets of all money issued by the Board. It is an automatic regulation mechanism of money with foreign exchange earnings. At the end of the year, there were $726 million of currency notes in active circulation. With $875 million also of demand deposits (excluding the deposits of the Government in the banks), money supply matched the overall pace of progress in the economy, increasing by 15 per cent in 1970. May I mention the action which was taken in the past year to strengthen other financial institutions? I refer specifically to the establishment of the Monetary Authority of Singapore and the arrangements to reorganise and strengthen the Stock Exchange of Singapore and Malaysia. The Monetary Authority of Singapore Act was gassed. Opportunity was also taken to revise and re-enact the Banking Act, which put on a proper footing the licensing and control of banks, and the regulation of their business by the Monetary Authority of Singapore. The many activities we have and are expecting to develop in the financial sphere --the Asian Currency Unit or Asian Dollar market, the gold market, the numbered accounts system, merchant banking all these will ensure that we have a firm framework for these operations, The Monetary Authority commenced functioning on the 1st January, 1971, and the first Board meeting was held on the 5th February, 1971, to arrange for the management and routine business of the Authority. A Managing Director has been appointed and staff is gradually being recruited It is hoped that the Authority will move shortly under One roof, albeit in temporary premises, until the permanent site at the Central Provident Fund building can be ready by 1973. As the functions of the Commissioner of Banking have now been assumed by the Monetary Authority of Singapore, it will now be responsible for the performance of the banking sector. The year 1970 has been one of steady progress for that sector. Table VI statistics indicate that commercial bank deposits by the end of 1970 rose by about $500 million to $3,195 million. Though this is equivalent to an increase of 16 per cent, it is still a somewhat lower rate of growth than the 19 per cent for 1969 or 26 per cent for 1968. The slower growth is partly because of the drop in entrepot earnings. Bank loans and advances, however, to the private sector grew at the much faster rate of 26 per cent to reach $2,168 million by the end of the year. Bank loans and advances to manufacturing industries grew even faster, by more than 50 per cent from $448 million in 1969 to $739 million in 1970. Manufacturing loans and advances now constitute 34 per cent of bank loans and advances as compared with 26 per cent in 1969. The Asian Dollar market, which has become a part of the banking system, continued to expand in 1970. Total resources are now estimated at about US$400 million, and this despite declining interest rates consequent upon the fall in interest rates in international financial centres during the last few months of the year. When the market was first established, most of its funds were being reinvested in Euro dollars and U.S, dollars in London, European financial centres and the United States. However, there is a growing awareness, on the part of the very large number of creditworthy companies in Southeast Asia, of the possibilities of borrowing from the Asian Dollar Market for their bankable projects. Our policy will be to encourage the channelling of more and more Asian Dollar funds into regional uses. The lower rates of interest now payable for Asian Dollars should assist in such use. With regard to the Stock Exchange, I need not repeat the reasons for the legislation now known as the Securities industry Act, 1970, and the related Companies (Amendment) Act, 1970. Conditions in the Stock Market had led to such a loss of confidence that legislation was needed. I am glad to say that the market has reacted not unfavourably to the legislation. Close consultations are being held between officials of my Ministry and the Committee of the Exchange as to how best to implement the various provisions of the legislation and the recommendations of the Ferris Report. There are indications that similar legislation is being considered in Malaysia and the Bank Negara has begun discussions with the Exchange on the matter. The domestic price level remained fairly stable within the pattern of economic and financial developments I have just outlined. The Consumer Price Index with 1960 as base o 100 registered a monthly average of 111.5 for 1970 compared with 111.1 for 1969. The relative stability in the overall index does not mean, however, that there were no price movements during the year. There were such movements but they largely offset each other. The Housing sub-index, for example, moved up by about two percentage points because of a tax on Public Utilities Board bills, but there was a decline in the sub-index for food items. In particular, the prices of rice and other cereals showed a significant decline as shown by the fall in the sub-index for these items from 115 for 1969 to 109 for 1970. Future Prospects I come now to the less predictable subject of our future prospects. Can we sustain the very high growth rate of 15 per cent for 1969 and 1970 in the coming year? To deal with this question, we must try to learn from the analysis of the economic situation which we have made of the past year, and earlier years, and from the experience of other countries. First of all, growth rates of 15 per cent are very exceptional. They are far in excess of the six per cent per annum target of the new United Nations Second Development Decade. Our comparison should not, however, be the average developing country. More relevant ones for comparison are our keenest competitors in Asia. Taiwan with corresponding figures of 9.9, 9.3 and 10.3 per cent, South Korea with 13.4, 8.9 and 13.1 per cent, and Hong Kong for which Gross National Product figures are not available but whose export trade expansion of 15.8, 15.3 and 14.2 per cent for the same three years indicated a similar high growth rate. Then Japan with its sustained growth rate of 12.3, 12.9 and 14.3 per cent of Gross National Product growth in real terms for the years 1966, 1967 and 1968 respectively. In an analysis of their very high growth rates, Mr S. Okita, President of the Japan Economic Research Centre, attributed the high growth of the first three countries to the following: (a) rapid growth of manufacturing industries; (b) export-oriented economic growth; (c) cost consciousness of the business enterprises about their products; (d) widespread small and medium sized industries developed mainly by private initiative; (e) relatively efficient and productive agriculture; (f) relatively high standard of education and public administration; (g) paucity of indigenous natural resources which necessitates exports of manufactured goods; (h) aggressive importation of foreign know-how and its adaptation to local conditions; and (i) frequent cases of the separation of imported know-how from imported capital or management participation. We were like-minded with Mr Okita in emphasising the development of export-oriented manufacturing industries for countries wishing to attain a rapid economic growth. Exceptions would, of course, be countries with rich endowments of exportable natural resources such as oil and minerals. Larger countries also can depend more on domestic markets as compared to smaller countries. For us, however, there is no choice. It is comforting to know that, according to the examples and results of the high growth countries I have mentioned, we have roughly been charting the right course. All we need do is keep the Singapore ship steady as she goes. But there are signals of storms ahead. On the international horizon the dark clouds consist of continued inflationary conditions in some of the major industrial countries, and the threat to the stability of the international monetary system caused by pressures on these economies' balance of payments. The international climate may not be entirely favourable to growth. A further cloud consists of the uncertainty over the state of the U.S, economy. Because of its size, it exercises a very powerful influence upon the economies of the rest of the world. Its economic health and the measures its Government takes to maintain it are therefore of universal concern. Judging by the index of Stock Exchange business, with its sustained trend over many months towards ever-increasing share prices, there are encouraging signs of a healthy recovery of the economy. Policy measures being adopted to stimulate the economy are much more pragmatic and less doctrinaire and ought to have beneficial results. Official U.S. economists' prediction is of a 9 per cent rise in Gross National Product at current prices. A moderate recovery is considered by others more likely, with a 3 - 4 per cent real growth, with lower inflation rates of 4 - 4 1/2 per cent, and with unemployment falling slightly. Notwithstanding this improvement, a slight downturn in world trade prospects is expected, as the U.S, recession of last year would, according to expert opinion, be felt in its delayed effects on world trade only this year. GATT forecasts are that world trade will grow between 7 and 11 per cent in value and between 5 and 7 per cent in volume in 1971. This would not be unsatisfactory. But it will not sustain an increase in Singapore's trade of the same proportions as in 1970. Further, a disruption could be caused by measures in the U.S. Congress to reintroduce the legislation, better known as the Mills' Bill, which seeks to impose restraints on the import of textiles, shoes and other articles. Its passage could lead to retaliatory action by Japan, the OECD (Organisation for Economic Co-operation and Development) and other countries for similar restraints against U.S, imports, with adverse consequences also upon world trade generally. The restrictive climate could jeopardise international co-operation in expanding trade, gains made by the Kennedy Round cuts, the scheme for generalised preferences for the manufactures of less developed countries, and the tendency towards greater liberalisation of trade and investments in Japan. Nearer home is the accelerated run-down of the British military bases which is due to commence at the end of this month and to be completed by the end of the year. British military spending in 1970 is put, by preliminary estimates, at $350 million. The greater part of this will be lost by the end of the year. Some 15,000 civilian employees and 2,000 locally enlisted personnel will lose their jobs. Unemployment in such numbers and a decline in national income of the order of $250 - $300 million between 1971 and 1972 must affect the economy. We must have more counter recessionary measures, in accelerated public sector development in building and construction, and further induced private investment should cushion some of this shock. Another adverse factor is that entrepot trade earnings can be expected to decline further. Our neighbouring countries will do more and more of the processing of their own commodities and enter more and more into direct trading relations with consumer countries. We understand their national aspirations and wish their policies success which is likely if their decisions are based on economic considerations. Singapore can still have a vital role to play in the provision of financial, transportation, marketing and other services. The present depressed prices in rubber and some other primary commodities, aggravated by higher freight rates, will accentuate the decline in our entrepot trade. With the withdrawal of American forces from Vietnam, entrepot trade in petroleum and other products will also be affected. Fortunately, the clouds on the horizon are not all dark. A new international factor, which will have considerable influence in South-east Asia, is Japan's rapidly increasing economic strength. She is the largest economic power after the U.S, in the non-Communist world. She is likely to continue to expand at around eight or more per cent in real terms - the Japanese economy would possibly reach the present level of the United States economy in a decade, according to some American predictions. She can therefore become a major determinant of the rate of economic development of nearby countries in Asia and in the Pacific. Japan already represents a very large market for the products of South-east Asia, particularly for those in which she will have lost her competitive edge in labour intensive production. Countries like Korea, Taiwan, Hong Kong, Singapore and others with lower wage costs will increasingly take over from Japan. Her intentions in regard to increasing her aid to one per cent of her Gross National Product by 1975 will have an increasing impact on the prosperity of the countries she will be assisting with such aid. This should be in the region of US$4,000 million by 1975, at one per cent of US$400,000 million in GNP double that of her 1970 GNP of US$200,000 million. In manufacturing, the leading growth sector in the Singapore economy, a record number of very large projects by well-known international companies were announced in 1970 and are now in the pipeline. The amount of such commitments in 1970 exceeds the total of all foreign investments in the manufacturing industry made in Singapore to date. At the beginning of 1971, it was estimated that the figure for total foreign direct investments in fixed assets in manufacturing industries, including approved commitments, stood at nearly $1,700 million, compared with an actual cumulative figure of $600 million at the beginning of 1970. These new projects will take two to five years to reach full production. However, both quantitatively and qualitatively, in the next few years as they commence production and expand, they will undoubtedly contribute towards a continuing high rate of growth. They will also extend the diversification of our manufacturing sector. Increasing benefits will be derived from the progressive implementation of committed projects in the pipeline. Then there are hopeful signs that continued progress will also be made with further new industrial projects. Some of the main reasons for optimism are as follows. Inflationary trends in all industrialised countries will continue to exert pressure on international companies to readjust their global manufacturing and distribution strategies. This will probably accelerate the tendency to decentralise and to adopt a multi-national approach, in which careful calculation of optimal cost and distributional advantage will figure strongly. So it is crucial that reputable international companies, especially those interested in long-term growth, should continue to find Singapore an efficient base with an overall investment climate that is hospitable and conducive towards long-term growth. In particular, if they find in Singapore adequate physical infrastructure, necessary commercial facilities and communications services which are continuously being expanded and modernised, if they see the growing increase and diversification of our supporting industries and engineering services, if they find that the high general education level and quality make our workers readily trainable in modern skills, then the bigger international companies, in planning their long-term world-wide strategy, will invariably consider Singapore one of the key locations. This will be particularly so if our workers and the unions are educated to the realities of our economic life, keen to make their contribution to the transformation of our society with high Industrialisation and sophistication in technology. Already a large and growing number of such international companies, having done their surveys, have indeed decided that Singapore is the place where they can sink deep roots by establishing projects in which long-term considerations play a major part. To stimulate overall growth, our strategy towards promoting this most important sector of the economy is important. In response to the increasing interest of international companies in investment in Singapore, we have expanded the network of Economic Development Board offices overseas to serve such companies. In order to get the greatest advantage and to maximise benefits from these new trends, however, Singapore must also readjust priorities to evolve what may be called an optimum investment policy. In this connection, two aspects, in particular, deserve special consideration. Firstly, in promoting new industrial projects, it is necessary to be more selective. Increasingly, emphasis will have to be placed on those industries with world-wide markets, with scope for progressive growth in technological content. We must now select industries with greater capacity to contribute towards the development of modern skills at all levels. Indeed, we are already restricting certain types of industry with low technology which are set up purely on short-term considerations. Secondly, the important question of training. To sustain the accelerating pace of industrial development, manpower with modern skills is required not only to meet immediate demands but also to create a large reservoir of skills at all levels to ensure continuing growth. This calls for a crash programme which can meet both short-term and long-term needs. At higher levels of skill, for managerial and technical staff, industrial firms now find no difficulty in filling immediate requirements. As opportunities expand, increasing numbers of our graduates abroad are now returning. In addition, with the liberalisation of immigration, Economic Development Board centres abroad find increasing response by many professionals, particularly Asians, of all categories of skills who are willing not only to come and work in Singapore but to take root here as their permanent home. In the long term, of course, we have to expand our universities, the Polytechnic, Ngee Ann Technical College, and other institutions of higher learning and technical training, which we are now doing, and I shall further elaborate when I deal with the the Development Estimates. As for middle level skilled personnel, such as foremen, craftsmen and workers with specialised skills, who are equally important, we have now introduced three measures. First, we are implementing joint Industry-Government training programmes in co-operation with international companies who are starting sizable projects in Singapore. In such programmes, costs are shared between the Government and the sponsoring firm, on condition that it will undertake to train more workers than its own requirements, so that the surplus may be released to upgrade the general pool of skills in Singapore. Another condition is that the training programme and t he standards of skills to be achieved are approved by the Government. Such joint training programmes are valuable not only in supplementing the instructors and facilities in the regular educational system. Even more, they help to ensure a much greater realism and practical value in the content of courses. For the firms concerned, such programmes have the advantage of being much more closely geared to their specific requirements, and also ensure them the requisite skilled manpower at reasonable cost. Secondly, we will also give similar encouragement and support to the longer established firms in Singapore which have the capability and readiness to introduce joint training programmes along the same lines. Thirdly, we are intensifying the programme whereby firms are supported in sending trainees abroad to the parent plants. Such trainees have already been placed in West Germany, Switzerland, Japan and other countries. Here again, the Government shoulders part of the costs, provided the training programmes meet agreed skill standards and will provide more trained workers than the firm's own requirements. In this connection, the Economic Development Board is directing its efforts towards placing the trainees not only in firms which have already made commitments in manufacturing projects in Singapore, but also in those firms which have Singapore in mind as a location for their future global development programme. The response from both these kinds of firms is most encouraging. Needless to say, the implementation of these crash programmes will require considerable financial support from the Government. For this purpose, I propose to use part of the revenue from payroll tax. I shall refer to this again when I come to the Revenue Estimates. Perhaps more important than financial support, the success of all these programmes depends upon careful pre-selection of the trainees. Appropriate tests will be given to ensure that they not only have adequate educational standards but also have suitable mechanical aptitudes to benefit from the specific training programmes. With these efforts, we should be able not only to meet the immediate requirements of existing firms but, more important, in the next two to three years, they would provide the necessary pool of skilled manpower by which we can derive the maximum benefits from the more demanding operations that are being set up, and also ensure continuing success in the promotion of further projects of progressively increasing sophistication. Any assessment of our future prospects must give due weight to developments of our other growth sector -tourism. By the end of this decade, tourist and passenger traffic at Paya Lebar International Airport will have doubled itself twice in the ten-year period. Investments for further development of the Airport are necessary and have been authorised. With the advent of the airbus and other types of larger and faster passenger aircraft, new and sophisticated air control and air communication facilities will be required. Work has already commenced on improvements to the present air terminal building. The first stages of the development and extension of the runway are now being implemented. External sources of funds have been sought from the Asian Development Bank to help in this development. When the tourists arrive, a good proportion I hope by M.S.A, planes, they will want to know what there is to see in Singapore. The considerable attractions of our shops, hotels and restaurants, our garden city atmosphere and our interesting mixture of races with their different customs and exotic cuisines, will delight many tourists, but we must cater for all other tastes as well. We have already in operation the Bird Park in Jurong, but we should shortly have Chinese and Japanese gardens also in Jurong, a zoo in Seletar, a Marineland or Aquarama in Bedok, and cable cars from Mount Faber to Sentosa, where other facilities for tourists are being planned. A team of international consultants, Messrs. Dillingham Overseas Corporation, was appointed to study the development of Sentosa into a tourist centre. Their report, which recommends a comprehensive and far-reaching plan for public and private investment in the island, is now under study. Two projects recommended by them, an 18-hole Golf Course and a Swimming-Boating Lagoon, are now under construction. The total investment involved is in the region of $300 million to $400 million. Because of the major part the Government will have to play in initiating the plan, the details have to be very fully examined and assessed. On the whole, the report is optimistic that Sentosa can be developed into an attractive and profitable tourist centre with consequent benefits to the economy of Singapore, particularly foreign exchange to help even out the deficit in our trade balance. With these facilities and with the number of hotels already in operation and in the last stages of completion, we are in an excellent position to take advantage of the growth in tourist traffic. But if the progress is to continue, tourists arriving at the Airport, the harbour and at Woodlands must meet with nothing but courtesy and efficiency. They must be treated by taxi-drivers, hotel receptionists, porters and workers in hotels, restaurants and shops in a friendly, polite and efficient manner and the standard of cleanliness must be high. The cuisine must be excellent, particularly in the exotic Asian dishes. Efforts by our Tourist Promotion Board for the maintenance of these standards and for other promotion are continuing, including increasing our tourist attractions with historical sites, which have been given some publicity in the press recently. But a more direct and more business-like effort would be that which is being seriously considered, of developing Singapore into a centre for international conventions and conferences. Singapore is ideally situated for this purpose, and the availability of first-class hotels and convention facilities and an efficient network of telecommunications are added advantages. We have the necessary experience to organise big international conferences like the E.C.A.F.E. Plenary Session in 1969 and the Commonwealth Heads of State Conference in January this year. Preparation for the Annual Meeting of the Asian Development Bank in April this year is now under way. What is now needed is an intensive and sustained international promotion drive and the setting up of a convention servicing unit to handle the matter. If our tourist industry develops as we hope, it will not be at the expense of our neighbouring countries. I mentioned earlier in my speech that Expo `70 had indirectly increased our tourist inflow in 1970. Similarly, any increase in tourist traffic to one country in the region can only be beneficial to others in that region. The full scope for regional co-operation in promotion of tourism is being studied by A.S.E.A.N. (Association of South-east Asian Nations). Immediate arrangements can, however, be made to organise more regional tours on a package basis and I hope our entrepreneurs in the tourist industry will get down to doing this in a big way with other entrepreneurs in other countries. Mr Speaker, Sir, to summarise this part of my budget statement, all-out efforts will be made domestically to achieve once again the high growth rate of the preceding years, with emphasis on developments in the sectors of trade, manufacturing and tourism. Our success or failure will depend on our efforts, although external factors, outside our control, particularly in their effects upon the trade sector, can upset our best plans. Our economic strategy for further diversification, of markets as well as of industrial products, should help to reduce our vulnerability to such adverse factors. Estimates of Revenue and Expenditure, 1971-72 I now turn to the essential, if more mundane part of today's business, the Estimates of Revenue and Expenditure for the financial year 1971-72, The two Memoranda* which Members already have, one on the Ordinary Estimates and the other on the Development Estimates, give the reasons for the major changes in the provision and allocation of funds as well as the forecasts on the basis of existing taxation of revenue yields in the next financial year. They also contain information on revenue and expenditure (*Papers Parl. Misc. 1 and 2 of 1971) performances in 1970. As detailed explanations in these documents are available to Members, I do not propose `to go into a very detailed commentary on the Estimates. I need only set out the policy framework within which the Government has drawn up the budget for 1971-72 and highlight some of the noteworthy items in both the Ordinary and Development Estimates. Estimates of Expenditure The total provision proposed for 1971-72 is $1,306.8 million which is 25.5 per cent more than the 1970-71 provision but 28.1 per cent higher if compared with actual expenditure in 1970. The expenditure in 1970 was in turn 35.1 per cent higher than `that in 1969. Therefore, the increased provision for 1971-72 is not exceptionally high. Basically, the policies adopted this year are the same as those which determined `the last budget. The building-up of our defence capability maintains topmost priority. However, there is a limit to what we can afford even in the initial years of rapid build-up from zero capability. It is desirable to peg the provision for defence needs to no more than 10 per cent of our Gross Domestic Product. The provisional estimate of Gross Domestic Product at Factor Cost for 1970 is $5,564 million. Total provision for defence purposes in the Ordinary and Development Estimates is $530.0 million which is 9.5 per cent of the Gross Domestic Product. This, however, does not take into account some of the provisions available to the Ministry of Home Affairs which definitely are complementary to defence needs but are not readily apportionable. With regard to other provisions in the Ordinary Estimates, as in the last few years, care continues to be exercised over the expenditure on social services. The provision for this group of services is increased by 7.6 per cent. For 1971-72, health services are allowed the highest increase at 12.0 per cent. Even this figure is understated in that the provisions for the new Alexandra and Sembawang Hospitals are meant for eight and nine months respectively. Expenditure on education is increased by 9.8 per cent. The health and education services together take up 84.2 per cent of the total provision for social services as against 82.0 per cent in 1970-71. In consonance with our economic growth policy, adequate provision has been made for all economic services as these help not only to maintain but also to increase the momentum of growth. Next to defence and internal security, economic services as a group have been allowed the most rapid expansion. The total provision for this group for 1971- 72 is 20.5 per cent higher than for 1970-71. Transportation and communications claim 41.1 per cent of the provision as against 38.4 per cent in 1970-71. Statutory expenditure is 11.6 per cent more than in 1970-71, mainly because of additional interest payments and contributions to sinking funds. Now the major changes in the provisions under each Ministry. The Prime Minister's Ministry needs a smaller provision because the Public Works Department and Public Health Division will take over the maintenance of public health in the areas taken over from the British authorities. This decrease is partly offset by additional provisions required for the new Anti-Pollution Unit which is now properly established and geared to begin operation. The Ministry of Science and Technology requires more funds mainly because of the promotional activities to be undertaken by the newly-appointed Metrication Board. Actually the provision in respect of this Ministry is higher than is apparent because the contribution to the Science Centre Board which, prior to the formation of the Board, took the form of "Staff and expenses of the Popular Science Centre", is now shown under the Contributions and Charitable Allowances Head of Expenditure. The Ministry of Defence is now shown as a separate Head of Expenditure in the 1971-72 Estimates and the provisions are not readily comparable with those shown under the former Ministry of the Interior and Defence Head of Expenditure. Whilst the Armed Forces will continue to be built up, the Ministry will be concentrating increasingly on consolidation. Three of the Deputy Secretary posts are upgraded and two new units are established. One of these is the Direction of Employment Department established to enforce provisions of the Direction of Employment Ordinance. However, because of the rapidly expanding employment opportunities, applications from employers for exemption from the provisions of this Ordinance are freely granted. The other is the Science and Management Group which will provide the technical and managerial expertise in the Ministry for dealing with such problems as evaluation of weapons systems, implementation of contracts, etc. In view of the very large sums of money which are being spent on defence, any greater scientific or economic precision on evaluation of military expenditures should result in very considerable savings. Also, a number of civilian posts at artisan, craftsman and technician levels are provided to give the Ministry greater flexibility in recruiting supporting staff. The block provision for "Armed Forces" is $354 million as compared with $208 million in 1970-71. There is a decrease of $171,940 in the overall provision for the Ministry of Foreign Affairs. This is largely achieved through closer estimation of the resources likely to be needed by the Ministry. The creation of 32 new posts for the Ministry headquarters and Overseas Missions, annual increment of salaries and increases in the provision of Overseas and Children's Allowances require an additional half a million dollars. However, a more realistic estimation of funds required based on past expenditure on Special Make-up Allowances, emoluments of officers on leave, etc., passage and miscellaneous expenses result in a net decrease in the total provision. The increase in overall provision under the Ministry of Labour of 3.5 per cent should be viewed in the light that expenditure on the Hotel Training School now comes within the purview of the Technical Education Department of the Ministry of Education. The main factor for the increase in the overall provision for this Ministry is the strengthening of the Factory Inspectorate to curb the rise in industrial accidents. Thirty posts had to be created urgently under an Establishment Warrant in 1970. As may be expected in view of its importance to economic development, the Ministry of Communications is given a significant increase in provision. The Ministry headquarters is given 12 new posts, mainly in the Administrative and Executive grades, so that the Ministry can co-ordinate as well as guide its ever expanding departments. The Civil Aviation Department has not only to expand and improve facilities at Paya Lebar Airport but also to manage Seletar Aerodrome. It has to prepare for the taking over of Changi Aerodrome and provide fire-fighting services at Tengah Aerodrome. At the same time, it is necessary to train Aircraft Surveyors as aircraft registration work will be of increasing importance in the years ahead. The Postal Department has also experienced a tremendous increase in workload over the last few years. This department requires more postal Clerical Assistants and postmen to maintain a high standard of service. For 1971-72, a total of 98 additional posts will be available. Funds have to be provided for the department to progressively clear accumulated liabilities in respect of transport and freight of postal articles. The Telecommunications Department will be making preparations to become a corporation by April 1972. During 1971-72, the department needs additional administrative staff to ensure that the transition will be smooth. At the same time, additional staff are required in the development, planning, engineering, maintenance and operation sections, so that even as the department is undergoing a major reorganisation, it will be able to cope with the rapidly increasing work-load. The Registry of Vehicles will also have a heavy programme in reorganising the road transportation system. The Registry will mainly depend on the new Enforcement Unit and the strengthened Investigation Unit to carry out its programmes. The Ministry of Education gets an increase of 9.8 per cent in total provision. Over the last two years, there has been a major reallocation of resources from general to technical education. This will continue in 1971 - 72 although we are now approaching the limits within which such reallocation may be made. For 1971 - 72, a number of not insignificant adjustments are made to the teacher posts. The main objective is to cut down the number of non-graduate teachers and increase the number of graduate teachers in order to step up the general standard of teaching in secondary schools. A sizable number of supernumerary posts is also provided and these will be reduced as vacancies arise so that the number of non-graduate teachers bears a closer relationship to the enrolment in the primary and lower secondary classes. The increase given to the Ministry of Education is not entirely for schools. Grants to the two Universities, the Singapore Polytechnic, Ngee Ann College and aided schools account for about a quarter of the increase. The Ministry of Culture is given additional posts for the National and Queenstown Libraries and the new Anti-Smoking Advertisement Unit. The Government Printing Office will increasingly operate as a commercial organisation and eight new posts are given for this. The Government Printing Office has been very successful in securing jobs from statutory bodies and commercial firms and consequently it is given a larger provision for printing supplies. Under the Ministry of Social Affairs, the amounts required by the Social Welfare Department for public assistance and Tuberculosis treatment allowances in 1971 - 72 are expected to drop following the trend in recent years. Also, the Sports Division and Stadiums and Pools Division of the Ministry have ceased to function with the formation of the National Sports Promotion Board. The Prisons Department, however, requires more funds but these are mainly for the Prisons Industries and for bread-making at Changi Prison. The Ministry of Law and National Development gets a fairly big increase of 18.6 per cent mainly for the National Development Division and the Public Works Department. Under the National Development Division, $1.6 million is for the administration expenses of the Urban Renewal Department for which provision was made, it is considered less appropriately, in the Development Estimates in previous years. The Public Works Department will take over responsibility for the maintenance of buildings and installations handed over to the Government by the British authorities. It has taken over the maintenance of all roads in the Jurong Town Corporation's estates, the Toa Payoh New Town and some new private housing estates. It will maintain catchment drains and canals previously looked after by the Ministry of Health. Its own new sewerage pumping stations and treatment works will be coming into operation. For these and other new activities, the department requires additional funds. The Ministry of Health is also given a substantial increase. Part of the increase is due to the impending takeover of the Alexandra and Sembawang Hospitals from the British. However, existing hospitals are given a total of 445 new posts and larger provisions for equipment so that patients will get a higher standard of treatment and doctors will be able to work under better conditions. For the Public Health Division, 157 new posts are provided, with the largest single share for the School Health Branch. This Division also requires additional funds to pay for public utility services and to extend public cleansing and anti-mosquito measures to areas which will be handed over to the Government by the British. The Ministry of Finance has an increase in provision of $39.7 million. Considering, however, that the allocation to the Development Fund alone has increased by $40 million, there is a net decrease in the other provisions under this Ministry. This is largely due to the fact that a number of units such as the Overseas Investment Section, Banking Control Unit and the Office of the Commissioner of Banking have been transferred to the Monetary Authority of Singapore. These are to some extent counter-balanced by new posts for engineers to be recruited from abroad for assignment to other Ministries, posts for the new Career Development and Training Section and other posts to strengthen the Organisation and Methods Branch as well as the Central Supplies Unit. A smaller subsidy is expected to be required by the Housing and Development Board but this decrease is more than offset by a new subsidy for the building of standard cargo vessels. The departments under this Ministry which are given substantial increases in staff are the Inland Revenue and Customs Departments. The Inland Revenue Department has a net increase of 41 posts to enable it to reorganise its Income Tax Division. The Customs Department gets 116 new posts to man new points such as the Naval Base and Seletar Aerodrome, new units such as the Cess Collection Unit and the Motor Assembly Plant Base, and to reinforce the personnel at the Central Sea Stores Warehouse, the Dutiable Parcels Section, etc. The New Ministry of Home Affairs is given adequate funds to pay for 329 new posts which are necessary to support the reorganisation of the Police. Additionally, $875,000 is provided for radio patrol cars, stand-by engines for Marine Police launches, uniforms and training equipment for Police Cadet Corps in schools. The Immigration Department gets 67 new posts to man new checkpoints as well as to cover existing check-points more adequately. This concludes a quick survey of the Ordinary Estimates. I will now deal with the Development Estimates for 1971. 4.29 p.m.