Hansard, 1974-03-04

Under the provisions of clause 2 (d) of Article 30 of the Constitution of Singapore, I have granted permission to the following Members to be or to remain absent from sittings of Parliament (or any Committee of Parliament to which they have been appointed) for the periods stated: Mr L. P. Rodrigo (Serangoon Gardens) - from 22nd to 30th December, 1973. Mr Lee Khoon Choy (Hong Lim), Minister of State for Foreign Affairs - from 1st January to 30th June, 1974. Encik A. Rahim Ishak (Siglap), Minister of State for Foreign Affairs - from 8th to 18th January, and from 21st January to 9th February, 1974. Mr P. Selvadurai (Kuo Chuan) - from 14th January to 28th February, 1974. Mr Lee Kuan Yew (Tanjong Pagar), Prime Minister - from 15th to 17th January, 1974. Mr S. Rajaratnam (Kampung Glam), Minister for Foreign - Affairs - from 15th to 17th January and from 20th January to 9th February, 1974. Mr Ahmad Mattar (Leng Kee), Parliamentary Secretary to the Minister for Education - from 15th to 17th January, 1974. Encik Othman Bin Wok (Pasir Panjang), Minister for Social Affairs - from 25th January to 10th February, 1974. Dr Lee Chiaw Meng (Farrer Park), Minister for Education - from 27th to 31st January, 1974. Mr Lee Yiok Seng (Bukit Panjang) - from 27th January to 3rd February, 1974. Mr Ng Kah Ting (Punggol) - from 28th January to 5th February, on 4th March and from 11th to 27th March, 1974. Mr Sim Boon Woo (Changi) - from 1st to 10th February, 1974. Mr Sia Khoon Seong (Moulmein) -from 17th February to 3rd March, 1974. Mr Phey Yew Kok (Boon Teck) - from 17th February to 3rd March, 1974. Tuan Haji Ya'acob Bin Mohamed (Kampung Ubi), Minister of State, Prime Minister's Office - from 4th to 24th March, 1974. Tuan Haji Sha'ari Bin Tadin (Kampung Chai Chee), Parliamentary Secretary to the Minister for Culture - from 6th to 13th March, 1974. YEOH GHIM SENG, Speaker Parliament of Singapore

asked the Minister for Communications whether any positive decision has been made on the proposed Mass Transit System, in view of the rapidly deteriorating traffic situation and the current pace of physical and economic development; and whether a Mass Transit System is likely to be operational before 1980.

Mr Speaker, Sir, the Mass Transit Study (MTS) project commenced in July 1972. The project is undertaken with the assistance from the United Nations Development Programme (UNDP) and with the World Bank as its Executing Agency. The aim of the MTS, which is in two phases, is to assist the Government in the formulation of a transportation programme that would efficiently serve present and future needs and complement overall plans for long-range development of the Republic. Phase I of the Study will provide recommendations for development of mass transit services based on comprehensive evaluation and analysis of available transportation alternatives. Phase II will be a detailed feasibility study of the recommended system. Phase I of the Study was recently completed and the Consultants are expected to submit their Final Report around the end of this month. On receipt of the Final Report, the recommendations of the Consultants would be reviewed and submitted to Government for decision. When a decision is made on the system selected for detailed study, Phase II will commence. The details of Phase II cannot be finalised pending a decision on Phase I. For these reasons, it is not possible to say at this stage whether a mass transit system is likely to be operational before 1980. It is relevant for me, Sir, to point out that the objective of the MTS is to provide long-term solutions. For the short-term, as Members are aware, vigorous steps have been and are being taken to improve the public transport system and the traffic situation. These measures include reserved bus lanes some of which are already in operation, as well as measures to restrain the growth of the private car population. Plans are also being studied for the location of over a dozen parking places around the periphery of the congested Central Business District to accommodate between 25 to 30 per cent of private cars entering the Central Business District at peak hours and arrange for special buses to carry such commuters into the Central Business District. This plan is based on the park-and-ride schemes operational in several large cities where cars which do not use these peripheral car parks have to pay a fee to enter the restricted zone. This plan when finalised will be published. After public discussion the plans may be improved upon before implementation.

asked the Minister for Communications whether he is aware of the many breakdowns of public buses daily, and if he will consider taking effective steps in the matter such as requesting the Singapore Bus Services Limited to promptly tow away buses which have broken down on the roads so that traffic flow will not be hindered for long and to engage more mechanics and operate a two-shift system, or engage private motor workshops, to expedite repairs of the buses so that they may be put back into service quickly.

Mr Speaker, Sir, not only are we aware of the daily occurrence of public buses breaking down on the roads, but have viewed it with concern. Since Singapore Bus Services Ltd. (SBS) took over operation of the public bus service from the three former companies - Amalgamated Bus Co. (ABC), Associated Bus Service (ABS) and United Bus Co. (UBC) - on 1st November last year, it has been required to submit daily returns to the Ministry of Communications and the Bus Services Reorganisation Committee (BSRC) on the bus operations. Included in these returns are the number of breakdowns occurring daily. The returns show an average of 35 breakdowns daily over the four months from November 1973 to February 1974. The breakdown figures were counter-checked with daily reports from the Police for the months of November and December only. This represents 2.5 per cent of the daily average operational fleet of 1,400. It should be noted the buses operate for about 18 hours a day, often under congested traffic conditions and severely overloaded. This would strain even the best of equipment. We are as concerned as the hon. Member for Sembawang that buses breaking down by the roads should be quickly removed and not allowed to obstruct traffic. Through efforts of the BSRC. SBS entered into an agreement with a private motor repairer to tow away and repair its buses which breakdown by the roadside in the city area. At the request of the BSRC, SBS also undertook to obtain other private motor repairers to assist in the repair of its buses which break down, including those breaking down by the roadside. Advertisements inviting such private motor repairers to undertake this work were published by SBS in the Press on 14th, 19th, and 20th February. It is expected that SBS would finalise the arrangements with those companies which respond, shortly. SBS is also finalising arrangements for installation of mobile VHF communication equipment in its repair vehicles with the control centre at its main workshop. This, when installed, would speed up the repair of roadside breakdowns. In addition, under the Road Traffic (Removal of Vehicles) Rules, the Police are empowered to remove broken down vehicles on the roads which cause obstruction and to charge the owners for removal and storage fees. The present removal charge for a bus is $60 and the storage charge is $20 per day. The Registry of Vehicles and Traffic Police are reviewing this with a view to increasing the rates as a deterrent to roadside breakdowns and incentive to better maintenance. The Traffic Police are also arranging with suitable private contractors for towing away of buses broken down by the roadside which are too large to be towed away by their present contractor. The key, Sir, to reducing the number of buses breaking down by the roadside is, however, to maintain the buses properly. SBS inherited most of its present bus fleet from the three former bus companies, and many of these buses, I am sorry to say, were very poorly maintained. More than 400 were out of repair and laid up when SBS began operations on 1st November last year. Through the efforts of the BSRC, an agreement was entered into by SBS with a private motor repairer to repair these 400 buses at an estimated cost of $1.2 million and to put them back on the road as soon as possible over the six months from November 1973 to April 1974. Unfortunately, owing to the poor state of maintenance, many of these buses are irreparable without replacement of major components. Up to 28th February last month, only 43 of the buses have been repaired and put back into operation. However, SBS now has, on order, 227 replacement engines, gearboxes and axles costing an estimated $2 million. It is also undertaking some of the repairs itself and is arranging with additional private repairers to assist in the work. To ensure higher standards of maintenance of the buses in future, SBS is leasing a 17.6-acre site at Braddell Road for 15 years from the Housing and Development Board to put up a proper central depot and workshop. Plans for the workshop are now being drawn up by the architects commissioned by SBS with the assistance of consultants from certain major motor suppliers and repairers. SBS has also employed a qualified mechanical engineer to supervise its workshops operations. Arrangements have, in addition, been made for SBS to recruit more motor mechanics and to undertake a proper scheme for motor mechanic trainees in conjunction with the Registry of Vehicles, the Industrial Training Board and the Singapore Industrial Labour Organisation. All public buses are required to be inspected and certified fit by the Mechanical Inspection Unit of the Registry of Vehicles once every six months. These inspections have been intensified and proposals are being studied by the BSRC to ensure that buses appearing for inspection in future have properly documented and certified service record cards. Under the proposals, these cards would show the repair jobs and servicing carried out on the buses in the six months preceding each inspection. Buses which do not meet the standards of maintenance specified by the Registry of Vehicles would not be passed for use on the roads and the bus company would be penalised for operating buses which are not up to the standard of maintenance required. False certification of the service record cards would also be subject to penalty. The hon. Member for Sembawang may be assured that every effort is being directed towards ensuring proper maintenance of our public buses with a view to avoiding roadside breakdowns and providing a maximum operational fleet.

Mr Speaker, Sir, I fully sympathise with the Minister on the state of the bus service in Singapore. From the points which he has raised, I would like to ask him a few supplementary questions. Firstly, it would seem to me that the introduction of bus lanes on certain roads has created new problems. The right of way for smaller vehicles is one such problem. It is all right if we are in a mini-car alongside a big bus. Actually out of fear for our own safety, we give way to the bus. What happens if an army truck happens to be parked at the red light next to the bus? Who has the right of way to turn left? The introduction of bus lanes also leads to a slowing down of traffic. All buses following behind a bus that stops at a bus stop will naturally have to stop. This will mean that the entire chain of buses have to stop, whether or not there are passengers getting off from the second, third or fourth bus. I am sure these problems have been thought over carefully by the Ministry, and the Minister will have good answers to them. The second question concerns the efforts made by the Ministry of Communications to encourage more and more people to use public transport. I notice that there are no schedules of routes at bus stops to help commuters. I think it would be a good idea if the Ministry could ask SBS to publicise at all bus stops a schedule of all the buses that come that way, giving the routes and Service number of every bus. I am sure this can be done and should be done with haste. Thirdly, I notice that the SBS has recently introduced some 40 to 50 jumbo buses. This jumbo bus can carry 90 passengers. I am told that at certain junctions cars following closely behind this jumbo bus have got to reverse in order to allow this jumbo bus to turn into a small lane. I am sure the Ministry can also ask the SBS to reschedule bus routes so that these jumbo buses will not cause any inconvenience to other commuters on the road. Fourthly, the question of conductors, I am sure that the provision of just one conductor for a jumbo bus is going to create more problems for the commuters and also for the bus conductors. I am inclined to believe that unhealthy incidents between commuters and conductors may increasingly occur if we do not provide one more conductor to each jumbo bus. Let us say that we should have two conductors instead of one conductor in each jumbo bus. Can I have the answers?

Sir, I shall endeavour to answer the rather long-winded question with its many provisos. Firstly, on the question of the reserved bus lanes and the problems arising therefrom. Problems will always arise when we start on something new. There will be teething problems. Even the bus drivers and bus conductors realise for the first time now that they have the right of way when they are in the bus lanes. The answer to the question of right of way is very simple. When there is a reserved bus lane, the right of way is the privilege of the buses. Anyone getting into this lane will be booked, and he will have to exercise greater care. If a driver of a vehicle, be it an army truck, wishes to turn left, then if there is a bus lane on his left, he should first have to give the right of way to the bus. He should be more patient before turning left because he has to see that the passage is clear before making his turn. Otherwise he will get a ticket for the offence. With regard to the question about the change of buses and so on and whether adequate steps have been taken to review the situation, I can assure the hon. Member, as well as members of the public, that this matter is constantly under review. If it is found that certain adjustments have to be made to improve the flow of traffic, we will do so. May I also assure the hon. Member that it is not just the Ministry of Communications and a few officials in the Registry of Vehicles who are involved in the drawing of lines on the road. We have a technical team of road engineers and planners from the Ministry of National Development. They are the ones who really plan the whole scheme and, of course, it did receive our criticism as well as that of the Traffic Police in the Ministry of Home Affairs. The whole scheme of reserved bus lanes was not just the work of one Ministry. I would say that at least three Ministries were involved. The second question is about encouraging more commuters by providing certain facilities which the hon. Member considers should be the responsibility of the bus company. There is no doubt that the bus company should do much more than just print some bus guides. In fact, the company will have to make up for lost time by having more officers appointed so that they can communicate with the public, and the business of the BSRC is to ensure that the needs of commuters are looked after. The other point raised by the Member is that at each of the main terminals there should be sufficient boards to indicate routes of the buses that leave the terminus, and so on. This takes a little bit of time to eventuate. I can assure him, however, that every effort will be made to get the SBS to provide a public bus service that is up to standard. But we have our difficulties, and the first is the objective to get 400 buses, which are now off the road, to be back on the road. Once the public get the buses to travel in, then we can think of other improvements to the service. As to his last suggestion about having two conductors to one bus, may I say that it is our hope that ultimately there will be no conductors in the bus. But that is a long way yet. This is something which we would like to see -that ultimately each bus will be operated by only a driver and the commuters need only to drop their shillings for a ride, depending on distance, and there would not be any conductors at all. But I do not wish to agitate my good Friend, who is in charge of the Singapore Industrial Labour Organisation, by causing a ripple amongst his midst. That is quite a distant dream.

Mr Speaker, Sir, as hon. Members know, about 400 to 500 physically broken-down buses have been sent to the grave. What I would like to know and very firmly ask is whether the bus service is going to improve in three months' time, or never at all? Or is the Hon. Minister for Communications still thinking of doctoring the SBS and "transplanting" engines and whatnots, rather than performing the last rites of the SBS and the funeral service?

Sir, I am sorry to hear that the hon. Member thinks that I am doctoring the SBS. Having seen the collapse of one bus company (the Singapore Traction Company) in December 1971, it is my last wish that the SBS will collapse. I think it is only fair that we should give the bus company some time to get on its feet, because it is only four months since the company started operations as a single organisation. As I have stated, there are a number of deficiencies, including 400 buses not put on the road. To be fair, I must say that SBS has entered into a contract with a motor repairer to repair the 400 buses in six months' time, that is, by April 1974. We should therefore not judge it before then. If it is necessary for "surgical operations" to be done, perhaps I would be in a position to do it then, but not now.

Sir, there has been Some talk that public transport may be nationalised. I would like to have the views of the Minister on this talk about the nationalisation of the transport service.

Mr Minister, is it relevant to the main question?

Sir, this supplementary question looks like an extension of the many supplementary questions that have been raised. I believe it has been stated in this House sometime ago that the present Government has no intention to nationalise the public transport. If a Member puts in an Oral Question and then withdraws it, I am not in a position to answer it. And since he has not raised it, I would say that the position remains the same - there is no intention to nationalise public transport at this stage.

(In Mandarin): Mr Speaker, Sir, I would like to ask the Minister whether he is aware that the buses are emitting a lot of smoke, and whether the Singapore Bus Services Company is being penalised for running such smoky buses. Every day we see buses emitting black smoke. What measures are being taken by the Government to remedy this situation?

The question is very simple, Sir,It is a matter of either having a bus to carry passengers although the bus appears to have smoky exhausts, or to look after the smoky exhausts and thereby have less buses on the road. The answer is simple: let the buses run and look after the passengers first.

asked the Minister for Law and National Development (a) whether there are statistics of the lifts installed in Housing and Development Board estates, private housing estates and in Government and private buildings; (b) whether these lifts had been checked and approved by the Government department concerned before they were installed and again, after installation, before they were put into operation; (c) whether steps have been taken to set up a body to make compulsory periodic inspections of all lifts after installations; and (d) for public safety and the cleanliness of lifts, if he will consider introducing legislation to require lifts to be operated by lift attendants only.

Mr Speaker, Sir, as at the 31st of January this year, there were 1,350 lifts in Housing Board estates and another 117 in Government buildings. There are no statistics available for private buildings at the moment. But with the introduction of the Buildings and Common Property (Maintenance and Management) Rules sometime this year, statistics of lifts in such buildings will become available. The lifts in Housing Board flats are installed in accordance with the Board's specifications and under the supervision of the Board's electrical engineers. The lifts are tested for a period of two weeks before use. They are cleaned regularly and serviced and oiled fortnightly. The Board also maintains a 24-hour Lift Emergency Unit to deal with breakdowns. Lifts in Government buildings are checked and approved before and after installations by the electrical branch of the Public Works Department which is also responsible for their maintenance. Regular cleaning is carried out by the user department. Lifts in private buildings were previously subject to the 1931 Lift by-laws which required owners of buildings to engage and authorise lift contractors to carry out regular maintenance and to ensure safe operation. As this piece of legislation is not adequate to cope with the high-rise developments, the Building Control Division has been given the responsibility for the control and installation of lifts and escalators by the Building Control Act of this year. The Division proposes to introduce regulations that will require lifts to be installed and maintained by a professional engineer in accordance with the code of practice for installation, operation, and maintenance of lifts. The code is being finalised in conjunction with the Singapore Institute of Standards and Industrial Research. Sir, apart from the Building Control Act which I have mentioned, action has also been taken to ensure the proper maintenance of lifts in private buildings under the Buildings and Common Property (Maintenance and Management) Rules which I have mentioned. The Commissioner of Buildings will be responsible to ensure that owners keep their lifts in clean and proper working condition at all times and have them serviced monthly and inspected annually at least. It is not practicable to make it compulsory for all lifts to be operated by lift attendants, as too large a number of attendants will be needed and it will be difficult to recruit or retain such persons. The Housing and Development Board would then require about 3,375 lift attendants to man the 1,350 lifts now in operation. The presence of a lift attendant may ensure that the lift is clean, but not necessarily safe. The Robinson fire is an example. Legislation is being drafted to ensure that stand-by generators are installed in all public lifts so that they can be brought down to a safe floor in the event of fire or a power failure. There will also be provision for all public lifts to be provided with a communication system, whereby if the hon. Member for Sembawang is trapped in a lift, he can always call for help from outside.

asked the Minister for Health and Home Affairs if he is aware that, though action has been initiated against Government servants having long hair, there are certain Government employees still sporting long hair, and what action he intends to take against such persons.

Mr Speaker, Sir, since May last year, all Government departments and statutory boards have each appointed a senior officer as Enforcement Officer to ensure that the Government's anti-long hair policy is conscientiously implemented. The Enforcement Officer checks (a) on the staff and ensures that appropriate disciplinary action is taken against those who sport long and unkempt hair; and (b) to ensure that the policy that males with long hair will be attended to last is enforced. He also submits monthly reports to the Ministry of Home Affairs, giving details of the number of male officers sporting long hair and the action taken against them. The Ministry of Finance has also issued circulars warning male Government servants that the sporting of long hair constitutes a disciplinary offence and may result in their dismissal. Up to December of last year, more than 4,000 male officers in Government departments and statutory boards have been called up and warned for sporting long hair. Among them were three Division I officers, 25 Division II officers, and the rest were Division III and IV officers and daily-rated employees. All those who were warned did not sport long hair again, except for seven Division IV officers, five of whom were dismissed and the other two resigned. In general, the Government's anti-long hair policy is having its intended effect. There has been a marked improvement in the hair styles of civil servants since the anti-long hair policy was introduced. However, there may be isolated cases of Government employees sporting long hair which may have escaped the attention of the Enforcement Officer. Government departments and statutory boards have been reminded to exercise continued vigilance over all their employees and to take action against them. The Member for Sembawang may rest assured that any male civil servant found sporting long hair will be appropriately dealt with.

(In Mandarin): Mr Speaker, Sir, I raised this question three months ago but I had no opportunity to raise any supplementary questions at all in this House. Now that three months have passed, I was hoping that the authorities concerned would pay more attention to this matter. But recently I notice that certain Government servants, particularly those in Division IV, are still sporting long hair. Even Police Inspectors are now sporting long hair. Can the Minister pay more attention to this matter?

Sir, although the question was put in three months ago, as the Member for Sembawang has said, the figures given in my answer are up to-date. As far as those sporting long hair are concerned, as I have said, appropriate action had been and is being taken. But in the event that they have escaped the notice of the Enforcement Officer, then if the Member himself has seen any offenders, he can make a report.

asked the Minister for Finance if he will consider setting up a special anti-inflation agency with suitable consumers' representation and armed with statutory powers to investigate into public complaints of unjustifiable price increases and other manipulative practices and to take punitive action against offenders.

Mr Speaker, Sir, a special Anti-Inflationary Agency, as proposed by the hon. Member for Jalan Kayu, will not be necessary at this juncture. My Ministry already possesses the machinery to co-ordinate the formulation as well as implementation of various anti-inflationary measures. An Anti-Inflationary Committee has been formed within the Ministry to look after all aspects of anti-inflation policies. Legislation, such as the Price Control Act and the Control of Essential Supplies Act already enacted, give the Government statutory powers to take drastic punitive action against manipulation by traders. Private consumers associations such as CASE can liaise with my Ministry on various anti-inflationary measures which are being implemented. While the Government has to play the main role in combating inflation, success hinges crucially on the co-operation of all concerned, including employers and employees, manufacturers, traders and consumers. I believe that there is no better way to counter the present rise in prices than by curbing our demand especially on luxury goods; by abstaining from panic buying and hoarding, as well as being more selective in our shopping habits, and in specially bad cases of profiteering or manipulation, by a boycott of the goods or the sellers concerned. 3.06 p.m.

"to amend the Environmental Public Health Act (Chapter 155 of the Revised Edition)", presented by the Minister of State for the Environment (Mr Wee Toon Boon); read the First time, to be read a Second time on Thursday, 14th March, 1974, and to be printed.

"to amend the Mutual Benefit Organisations Act (Chapter 254 of the Revised Edition)", presented by the Minister for Social Affairs (Encik Othman Bin Wok); read the First time, to be read a Second time on the next available sitting of Parliament, and to be printed.

"to provide for the registration and control of martial art associations and instructors and trainees in martial arts and for matters connected therewith", recommendation of President signified; presented by the Minister for Health and Home Affairs (Mr Chua Sian Chin); read the First time, to be read a Second time on the next available sitting of Parliament, and to be printed.

"to amend the National Registration Act (Chapter 45 of the Revised Edition)", presented by Mr Chua Sian Chin; read the First time, to be read a Second time on the next available sitting of Parliament, and to be printed.

"to provide for the levy of a surcharge on property tax levied under the Property Tax Act (Chapter 144 of the Revised Edition)", recommendation of President signified; presented by the Minister for Finance (Mr Hon Sui Sen); read the First time, to be read a Second time on the next available sitting of Parliament, and to be printed.

"to provide for the issue from the Consolidated Fund of the sums necessary to meet the estimated expenditure for the public services of Singapore for the financial year 1st April, 1974 to 31st March, 1975", recommendation of President signified; presented by Mr Hon Sui Sen; read the First time, to be read a Second time on the next available sitting of Parliament, and to be printed.

"for making Supplementary Provision for the public services for the financial year 1st April, 1973 to 31st March, 1974", recommendation of President signified; presented by Mr Hon Sui Sen; read the First time, to be read a Second time on the next available sitting of Parliament, and to be printed.

3.11 p.m.

Mr Speaker, Sir, I beg to move the motion* standing in my name as it appears on the Order Paper. * The motion reads as follows: That this Parliament, noting the Report of the Commission on Parliament Staff as contained in Paper Misc. 1 of 1974, accepts the recommendations of the Commission as contained in paragraph 16 thereof and resolves in accordance with such recommendations. Honourable Members may be aware from the Report, which was presented to this House as Paper Misc. 1 of 1974, that a Commission consisting of you, Mr Speaker, the Deputy Prime Minister and Minister of Defence, the Minister for Finance, the Chairman of the Public Service Commission, and myself, was appointed to study the terms of service of the staff of this House. The Commission has met and has made certain recommendations as contained in the Report. To attract and to continue to attract good officers to the Parliamentary service, and also in the interest of the present staff of this House, the Commission has considered it necessary to revise the terms of service of the senior posts such as will appropriately equate them, in terms of salary and status, to the rest of the civil service. The Commission recommended that the three senior posts of the Parliamentary service be restructured as recommended in paragraph 13 of the Report. It is the view of the Commission that, with the restructuring of the two existing promotional posts of Clerk Assistant and Second Clerk Assistant, there will be a wider basis in that serving officers in the Administrative or the Legal Service may be attracted to the Parliamentary service either on secondment or even on substantive appointment. The Commission did not, however, recommend any change with regard to the post of Clerk, (Grade E) as it is satisfied that the salary attached to the post is sufficiently attractive. Sir, I beg to move,

Question put, and agreed to. Resolved, That this Parliament, noting the Report of the Commission on Parliament Staff as contained in Paper Misc. 1 of 1974, accepts the recommendations of the Commission as contained in paragraph 16 thereof and resolves in accordance with such recommendations.

3.15 p.m.

Mr Speaker, Sir, I beg to move, That this Parliament, pursuant to section 7 of the Civil List and Pension Act (Chapter 52), resolves that the Schedule to the said Act be varied by deleting the figures "$52,000", "$594,010", "$135,270" and "$91,000" appearing in the second column thereof and substituting therefor the figures $56,320", "$667,020" "$145,060" and "$14,050" respectively. Sir, the provision approved under Classes I and II of the Civil List is insufficient to meet increasing expenses, such as the 9 per cent wage supplement and the higher rate of Central Provident Fund contributions. The increase under Class III is mainly for improvements to the Istana grounds. A smaller provision is required under Class IV. The provision is for the purchase of lawn mowers and other equipment for the maintenance of the grounds as well as two colour TV sets for the use of guests. It is, therefore, necessary to augment the provision for the Privy Purse from $52,000 to $56,320; the provision for Salaries of Personal Staff' from $594,010 to $667,020; and the provision for Expenses of Household from $135,270 to $145,060. The provision for Special Services is to be reduced from $91,000 to $14,050. Sir, I beg to move.

Question put, and agreed to. Resolved, That this Parliament, pursuant to section 7 of the Civil List and Pension Act (Chapter 52), resolves that the Schedule to the said Act be varied by deleting the figures "$52,000", "$594,010", "$135,270" and "$91,000" appearing in the second column thereof and substituting therefor the' figures "$56,320", "$667,020", "$145,060" and "$14,050" respectively.

3.17 p.m.

Mr Speaker, Sir, I beg to move, "That Parliament approves the financial policy of the Government for the financial year, 1st April, 1974 to 31st March, 1975." Sir, following the practice I started last year, I have asked and you have agreed that my Economic Survey of Singapore in 1973 be distributed in advance to Honourable Members for their detailed study. I crave your indulgence and theirs once again to have my remarks extended in the Parliamentary record by the inclusion of this Survey as the first part of my Budget Statement. I have also asked for the distribution to hon. Members of the first 30 pages of my Budget Statement, as I propose with your permission to also skip some of the paragraphs in the hope that they will also be extended in the report in Hansard. Economic Survey of Singapore in 1973 Preliminary estimates show that Singapore's Gross National Product (GNP) at current prices grew in 1973 by $1,832.7 million to $9,892.9 million, at an annual growth rate of 22.7 per cent. Allowing for the large price increases during the year, real GNP probably grew by only 11 per cent, which is not altogether surprising considering the many uncertainties in the international scene, particularly those caused by the "oil crisis". I propose therefore, as in previous years, to survey external developments of direct bearing on Singapore's welfare before analysing the State of the Domestic Economy in 1973. Survey of international Economic Events International economic developments in the past two years have shown by their effects on the world economy the strong interdependence of all countries, but more especially of those which depend substantially upon international trade, capital flows and tourist spending for the generation of domestic output and employment. Singapore, by virtue of its size and geographic location, cannot help but be influenced by external economic conditions. "Oil Crisis" In terms of frequency and intensity, the economic crises of 1973 surpassed those of the previous year. Of greatest impact was the "oil crisis" which threatened the very fabric of Japan's prosperity. The "economic miracle" of its rapid, sustained development post-war was worked on the increasingly larger importation of cheap petroleum energy resources for its industries, mainly from the Middle East. Although less dependent on oil supplies for its economies, other major industrial countries including the United Kingdom, West Germany and France, and to a lesser extent, the United States, were not spared. The warning signs of impending petroleum shortages had appeared some time before but the "oil crisis" was actually triggered off by an announcement by the Arab oil-producing countries in October 1973 that oil would be embargoed against certain countries and that production would be reduced by 5 per cent every month with effect from the end of September. In November, the cutback was proposed to be raised to 25 per cent, but was subsequently relaxed by 10 per cent in December. The real problem remained, however, in the phenomenal increases in oil prices. Since October, the posted prices of crude oil (on which taxes and royalties to the oil-producing countries are calculated) had been escalating, threatening oil-consuming countries with catastrophic balance of payments problems. The unilateral increase of 70 per cent in posted prices by the Gulf States in October 1973 was followed by further increases in December 1973, bringing the posted prices to US$11.60 per barrel, a four-fold increase compared to the pre-October prices. The production cutback, oil embargo and the high oil prices accentuated the underlying recessionary pressures on major industrialised countries already existing before the oil crisis and it was feared that the economic growth of the major industrialised countries would be severely affected. Economic Slow-down in the Industrial Countries The boom conditions which prevailed in the major industrial countries in the latter half of 1972 continued into 1973; the average growth in real GNP for these countries was estimated to have increased by 6.5 per cent as compared with 5.5 per cent the previous year. The rate of growth in the two halves of 1973, however, differed considerably. Real output in the first half of the year accelerated as expansionary policies adopted earlier began to take effect. In the second half, there was a tapering off, with real growth estimated at 4.5 per cent against 7.2 per cent in the first half. Several factors contributed to the slower growth rate. To counter inflation, several countries had adopted restrictive measures which subsequently curbed growth as aggregate demand moderated. Physical constraints, including high rates of capacity utilization and tightness in labour markets, set limits to continuing expansion. The growth momentum was further checked when the oil crisis developed towards the end of the year. Worldwide inflation 1973 was also characterised by high prices throughout the world. An excessive demand for primary commodities reflecting the upsurge in economic activities propelled prices upwards, while a shortfall in agricultural output and subsequent steep increases in food prices reinforced the inflationary momentum. Despite the later anti-inflationary policies adopted by the major industrial countries, prices continued to spiral. The GNP deflator (a commonly used indicator of the inflation rate) rose in the United States by 7.1 per cent in 1973 (against 3.3 per cent in 1972), Japan 10.5 per cent (4.8 per cent), West Germany 6.2 per cent (6.1 per cent) and the industrial countries as a whole 6.9 per cent (4.7 per cent). Consumer prices rose at even higher rates, being 8.4 per cent for the United States (compared to 3.5 per cent in 1972), Japan 19.9 per cent (4.8 per cent) and West Germany 8.3 per cent (5.8 per cent). The developing countries were not spared, as the rapid price increases were transmitted to them via imports. In 1973, consumer prices rose in Hong Kong by something of the order of 24 per cent against 6.1 per cent in 1972 and 9.5 per cent against 4.9 per cent in Taiwan. Singapore's own rise in consumer prices over the two years of 22.9 per cent and 2.1 per cent did not therefore appear excessive, having regard to the fact of our being non-food producers. International Trade Parallel with the upswing in economic activity in 1973, international trade registered marked increases. In terms of volume, world trade was estimated to have risen by 13.6 per cent compared to 8.6 per cent for 1972. In terms of value in US Dollars, the growth of international trade was even more remarkable with an increase of over 37 per cent or more than twice the rate of the previous year. The increase reflects the depreciation of the US Dollar for the larger part of the year as well as the high rate of inflation. However, this rapid expansion in world trade was accompanied by growing shortages of certain commodities and policies restricting exports. What could be the most significant event in 1973 relating to international trade set a hopefully opposite trend away from restrictive policies. At the Multilateral Trade Negotiations (MTN) Ministerial Meeting in Tokyo, in September 1973, countries including non-GATT members agreed to enter into multilateral trade negotiations aimed at the expansion and liberalization of world trade with consideration also to increasing the exports of developing countries to developed countries. However, as progress in the MTN would be dependent on so many factors, including an early solution to the problems of the disordered international monetary system, it was expected that negotiations would be extended over a couple of years. Any assessment of the outcome of the MTN would therefore he premature at this stage. Among other developments of note in 1973 was the entry of Britain into the European Common Market, when she began to align her customs tariffs to those of the EEC, and to phase out her Commonwealth preferences. Singapore's exports to the United Kingdom were affected, though not severely. As against this, we were able, together with our ASEAN neighbours, to secure the EEC's in-principle agreement for improvements to its Generalised System of Preferences for our exports, especially in regarding as within the percentage requirements of its rules of origin of products, the proportion contributed by cumulative manufacture in countries of the ASEAN region instead of by manufature within Singapore alone. The EEC also agreed to recognise Singapore's special position as a Market for primary commodities produced in the region. International Monetary Situation In my Budget Statement last year, I made reference to 1972 as a year of high monetary instability and to the unsettling effects of currency developments in early 1973. The subsequent part of 1973 witnessed no significant improvement in the situation. In fact, the oil crisis during its period of buildup and subsequent development added further elements of uncertainty and instability to the monetary situation. Following the devaluation of the US Dollar in February for the second time in 14 months and the floating of major currencies of the world, the US Dollar continued to weaken for some months after its devaluation and only strengthened towards the closing months of the year. These developments had their repercussions on Singapore, for the earlier weakness of the US Dollar led to a large speculative capital inflow, with inflationary effects caused by domestic over-liquidity. The need to curb this inflow, coupled with concern over imported inflation, led to the decision to float the Singapore Dollar on June 21, 1973. Several other countries revalued their currencies in 1973 citing the curtailment of inflation as the main reason. These countries included the Netherlands, Norway, Australia and New Zealand. The US Dollar staged a dramatic recovery towards the end of 1973 as her balance of trade improved and as her own large domestic energy sources gave rise to a general expectation that the US would be relatively less badly hit by the oil crisis than other industrial countries. The depreciation of the Japanese yen in late 1973 resulted from a deteriorating balance of payments as well as the threat of economic dislocation arising from the Arab countries' oil cutbacks. In the United Kingdom, the Pound continued to weaken in the face of industrial unrest, and intensified inflationary pressures. The French franc and the Italian lira also showed weakness stemming mainly from industrial unrest and certain political factors. These violent changes in major currency exchange rates point to the need for an early and satisfactory reform of the international monetary system. However, only minor progress was made by the IMF and its Committee of Twenty during 1973. The first outline of reform was presented to the Board of Governors of the Fund at the IMF Annual Meeting at Nairobi in September 1973. Discussion of the changes recommended was taken up by technical groups. Developments since the IMF Annual Meeting have changed somewhat the outlook for reform. First, the termination of the 1968 two-tier gold agreement followed by the termination of the IMF Agreement on South African gold sales to finance payments deficits indicate some recognition of the desire to de-sterilize gold reserves for use by central banks and the urgency of agreeing on the future role of gold vis-a-vis reserve currencies. Secondly, the effect of the energy crisis would probably be to delay the deadline for Agreement of Reform originally set for July 31, 1974 by up to 1�-2 years. Moreover, balance of payments difficulties caused by the energy crisis have changed the positions on reform which various countries have taken. Some of them will no doubt re-examine the effect on their individual interests of the reform proposals. Nevertheless, the current economic uncertainties indicate the desirability of reaching an interim solution which could be further developed and modified over a period of time until a complete restructuring of the international monetary system is achieved. There is some consensus that in such a system, the existing flexibility for adjustments in exchange rates would be useful in cushioning any sudden shocks caused by extreme balance of payments difficulties arising from the massive increase in the petroleum import bill of oil-consuming countries. State of the Economy I now turn to the domestic economy. We shall look first at Singapore's performance as measured by its Gross Domestic Product. In 1973, according to preliminary figures, our Gross Domestic Product at current prices grew at the record rate of 22.0 per cent. But inflation, which had over the years been at very moderate rates in Singapore, even when it was rampant elsewhere, finally caught up with us. The very rapid rate of GDP growth is attributable partly to the large price increases in 1973. Discounting these increases, the growth of GDP at 1972 prices is estimated at only around 11 per cent, which is lower than the average growth of 12.5 per cent for the past four years. In analysing the main components of Singapore's growth which I now propose to do, it is necessary, if one is not to be lulled by the apparently expansive boom conditions of 1973 into a state of euphoria, that one should remember to mentally deflate all the figures which are given at current prices to arrive at the more sober real growth rates. Gross Domestic Product by Industrial Origin The manufacturing sector continued to be the leading growth sector in our economy. Its contribution to the Gross Domestic Product increased to 26.2 per cent in 1973 from 24.6 per cent in 1972. The growth in construction slowed down in 1973, resulting in a slight decline of its share in total GDP from 7.6 per cent in 1972 to 6.7 per cent in 1973. This relatively poorer performance of the construction sector was, however, compensated by the performance of the wholesale and retail trade sector which grew at 25.8 per cent compared to 6.1 per cent the previous year. Manufacturing Sector The manufacturing industries contributed a total of $2,378.8 million to GDP in 1973, an increase of $545.6 million or 29.8 per cent (compared with 28.2 per cent in 1972 and 25.0 per cent in 1971). This increase in the value added by the manufacturing sector accounted for about one-third of the total increase of $1,637.9 million in GDP. As a result of its rapid growth, the manufacturing share of GDP has increased from 16.7 per cent in 1967 to 26.2 per cent in 1973, and with its direct effect in generating trade in the imports of raw materials and exports of manufactures, and its indirect effect on the services sector, maintained its position as the most dynamic sector of our economy. Our manufacturing industries continued to show increasing orientation towards exports and higher quality products. Overall, some 45 per cent of our domestic manufactures were exported. In 1973, developed countries continued to be our main export market absorbing about half of our domestic exports, as compared to less than one-fifth in 1967. While increases in output and value added were registered in all the major industry groups, some industries have continued to be the mainstays of the manufacturing sector. Petroleum refining is still the largest individual industry in the value of its products, its contribution to total output of the manufacturing sector accounting for 25.6 per cent. Its rate of growth in output was 9.9 per cent in 1973, compared to 8.2 per cent in 1972. However, the contribution of petroleum refining to the total value added to the product by the manufacturing process in Singapore has declined from 15.7 per cent in 1972 to 13.4 per cent in 1973. The electrical machinery industry contribution is larger than that of petroleum refining, its value added accounting for 23.1 per cent of total value added. Petroleum refining has in this respect also been overtaken by the transport equipment industry (including shipbuilding and ship-repairing). The manufacture of textiles and garments and the more traditional food, beverages and tobacco industries are other large sectors taking 9.8 per cent and 8.9 per cent respectively. 1973 has therefore been a good year for Singapore's manufacturing sector, in spite of the uncertainties prevailing in the international monetary situation as well as the "oil crisis" which developed towards the end of the year. Our strategy of promoting high technology and export-oriented industries has also begun to show encouraging results as an examination of the foreign investments committed in 1973 will show. Total investment commitments in manufacturing rose from $336 million in 1972 to $819 million last year, an increase of 144 per cent. 01 these commitments, the foreign investment component rose from $255 million to $602 million, an increase of 136 per cent. Most of the investment commitments were for higher technology industries, in particular petroleum and petrochemical products, chemical products, metal products/mechanical engineering and professional, scientific, and precision equipment. These industries together accounted for 86.7 per cent of the total investments committed in 1973. Construction The construction industry in 1973 faced shortages as well as high prices of labour and building materials, and managed to grow by only 9.1 per cent as compared with 39.1 per cent in 1972. Its percentage share of GDP accordingly dropped from 7.6 per cent in 1972 to 6.7 per cent in 1973. Private non-residential construction as a whole showed a decline of $26.5 million in 1973 or a negative growth of 6.7 per cent primarily due to the completion of work on new oil refineries. However, other types of nonresidential buildings such as shopping and office complexes registered increased growth. In the public sector, the growth was mainly attributable to the construction of public housing which grew by $86.2 million or 34.8 per cent. Some contribution to growth in construction was also provided by the relatively high increase of 21.2 per cent in private residential construction. Wholesale and Retail Trade The contribution from Wholesale and Retail Trade activities which had been slowing down for the past five years picked up in 1973, increasing at the record rate of 25.8 per cent which is more than four times the rate achieved in 1972 and about 1� times the average rate of growth for the period 1967-73. As a result, the share of this sector in GDP grew from 26.3 per cent in 1972 to 27.1 per cent in 1973. The main cause for the high rate of increase in 1973 was the world commodity boom, and in particular the high produce prices especially those of rubber and other raw materials. This is shown by the fact that of the total increase of $505.8 million in contribution to GDP by this sector, entrepot trade accounted for $259.5 million, while domestic trade accounted for the remaining $246.3 million. The value added for the entrepot trade sector registered a growth of 38.4 per cent in 1973 (as compared to a negative growth of 0.8 per cent in 1972) while domestic trade grew by 19.2 per cent (as compared to 10.1 per cent in 1972). As a result of its large growth in prices, not in volume, the relative share of the entrepot trade in the total GDP which had been registering a declining trend since 1969 showed an increase from 9.1 per cent in 1972 to 10.3 per cent in 1973, while that of the domestic trade sector in the total GDP showed a marginal decline from 17.2 per cent to 16.8 per cent. External Trade The value of total external trade in 1973 soared to new heights with increased prices registering a record increase of 36.9 per cent over 1972 which more than trebled the 11.8 per cent accomplished the previous year despite the world currency problems and energy crisis. Of the total value of $21,476 million of external trade, $12,562 million was imports and $8,914 million exports. For the second year running, the rate of increase of exports exceeded that for imports, the former reaching a spectacular 45.0 per cent and the latter 31.7 per cent. Both, however, showed higher rates of growth as compared to 14.5 per cent and 10.1 per cent over 1972, respectively. The vigorous expansion of external trade in 1973 was due to the larger volume of trade with our trading partners, the significant price increases in most primary commodities such as rubber, palm oil and timber, as well as the general worldwide inflation. High prices of primary commodities also accounted for the very high growth of re-exports in 1973 of 35.3 per cent far exceeding the corresponding rate of 1.7 per cent achieved the previous year. It is heartening to note that even after eliminating the effects of price increases, total exports still registered an increase of 14.1 per cent which is as high as that attained in 1972, while re-exports grew at 6.0 per cent (thrice the rate of 1.7 per cent achieved in 1972). On the other hand, the growth in imports after discounting for price increases was slightly lower at some 6.2 per cent compared to 10.1 per cent in the previous year. The high growth in exports was made possible mainly by the rapid expansion in our domestic exports, the bulk of which comprises local manufactures. At current prices, domestic exports reached $4,791 million in 1973, representing an increase of 54.5 per cent. Malaysia remained Singapore's leading trading partner, accounting for 17 per cent of our total trade based on estimates of January-November 1973 figures. The currency split, the severance of the rubber market, the separation of the joint stock exchange as well as the establishment of independent timber boards in Singapore and Malaysia emphasised further the separateness of the two economies. These have had only a minimal effect upon Singapore's trade performance. Our trade with Malaysia remained buoyant. Our next three largest trading partners in order of importance continued to be the United States, Japan and the United Kingdom. Government Services and Public Utilities In 1973, Government services contributed $559.7 million to GDP, an increase of 18.2 per cent over that in 1972. This rate of growth was almost treble the previous year's rate of 6.7 per cent and was also higher than the average annual growth rate of 13.3 per cent for the 6-year period in 1967-73. However, the share of Government services in the total GDP was 6.2 per cent for 1973, which was slightly lower than that of 6.3 per cent for 1972. The main increases were in respect of services provided for internal security and defence, education and health. The public utilities sector maintained a steady growth rate of 13.8 per cent which is slightly higher than the 13.1 per cent achieved in 1972. Its share of GDP, however, declined marginally from 2.3 per cent to 2.2 per cent. Ownership of Dwellings The value added by ownership of dwellings to GDP increased by about 19.9 per cent from $343.2 million in 1972 to $411.4 million in 1973. The relatively high growth rate was, however, lower than the 24.5 per cent achieved in 1972, leading therefore to a slight decline in its share of GDP from 4.6 per cent to 4.5 per cent. Other Services The contribution of this sector to GDP increased by $315.6 million or 16.6 per cent to reach $2,221.9 million in 1973. The performance of this sector was attributable mainly to the growth of the banking and insurance, and tourism services in the private sector, as well as Government-controlled enterprises, such as the Port of Singapore Authority and the Singapore Airlines. Reflecting the Government's effort to promote Singapore as a major financial centre of Asia, the contribution of the banking and insurance sector to GDP increased by $35.3 million or 23.8 per cent in 1973. Because of its relevance to the Government's monetary policies and the effects of such policies on our Balance of Payments, I propose to deal with the growth of our financial institutions at some length later in this Statement. The tourism sector registered a substantial increase in its value added of 27.9 per cent (as compared to 26.1 per cent registered in 1972), increasing its share of GDP from 5.5 per cent in 1972 to 5.8 per cent in 1973. This high growth rate is the result of the rapid growth of tourist arrivals. The number of visitors to Singapore by air and sea passed the million mark in 1973. A total of 1,134,000 visitors (including 149,800 Malaysian visitors from West Malaysia) arrived in Singapore by air and sea, representing an increase of 28.9 per cent over the corresponding total for 1972. By country of residence, Australia maintained the leading position among major overseas tourists-generating markets for the third year running, with 173,900 visitors giving an increase of 25.0 per cent over 1972. However, the fastest growing market was Japan which generated 113,400 visitors or an increase of 59.1 per cent over the preceding year. Foreign military expenditure showed an increase of 11.4 percent, from $141.1 million in 1972 to $157.2 million in 1973. However, as a component of total GDP, its share declined from 1.9 per cent in 1972 to 1.7 per cent in 1973. Gross Domestic Expenditure Let us now examine the other indicator of economic health, the Gross Domestic Expenditure. In 1973, estimated Gross Domestic Expenditure at current prices, consisting of consumption and capital formation, showed an increase of $1,655.3 million, or 21.2 per cent over that in 1972, to reach a total of $9,450.6 million. The higher rate of increase compared to that experienced in 1972 of about 15.5 per cent is to a large extent because of price increases especially in consumption goods. The high growth rate of GDE was reflected mainly in the relatively higher growth of consumption of goods and services of 25.4 per cent as compared to that of fixed capital formation of 11.6 per cent. Consumption Both private and public consumption grew considerably in 1973, the former by 25.7 per cent from $4,545.1 million in 1972 to $5,714.3 million in 1973, and the latter by 23.7 per cent from $905.2 million to $1,119.8 million. Inflation especially in imported food prices was responsible for a large part of this growth. The corresponding growth rates in 1972 were 11.2 per cent and 14.5 per cent, respectively, which had already begun to reflect price increases although at much lower levels than 1973. While every major component of private consumption showed large increases in 1973, three components, food, clothing and transport and communications registered the fastest growth with rates of more than twice or three times those of 1972. Expenditure on food, accounting for 15.8 per cent of total GDE, grew by $366.3 million or 32.5 per cent to $1,491.9 million, reflecting the substantial rise in prices of food, especially rice. Clothing expenditure increased by $208.2 million or 31.6 per cent to $867.6 million. Expenditure on transport and communications increased by $179.5 million or 28.9 per cent to $801.5 million. Another component of consumption expenditure that more than doubled the growth rate in 1972 was expenditure on beverages and tobacco which grew by 19.7 per cent to $442.3 million in 1973. Gross Fixed Capital Formation Building, other construction and works comprised 46.1 per cent of the total fixed capital formation in 1973. Capital formation in machinery and equipment, largely directed towards expanding the manufacturing sector, accounted for another 35.4 per cent while expenditure on transport equipment accounted for the remaining 18.5 per cent. Of the three components of capital formation, expenditure on transport equipment registered the highest rate of increase of 61.8 per cent as compared to only 3.9 per cent in 1972. A large part of the increase was due to the purchase of aircraft. Expenditure on buildings, other construction and works grew by 9.2 per cent, which was disappointingly low compared with an increase of 39.9 per cent in 1972. So was the expenditure on machinery and equipment, which, in fact, declined by 1.6 per cent as compared to an increase of 19.1 per cent in 1972. The dismal performance of these two categories of expenditure was due partly to the fact that the balance of the construction work for the oil refineries was completed in early 1973, and partly perhaps to the fall in investment commitments in 1972 arising from currency uncertainties. The overall slower growth of Gross Fixed Capital Formation was experienced by both the public and private sectors, which grew by only 15.6 per cent (as compared to 54.8 per cent in 1972) and 9.8 per cent (16.0 per cent), respectively. It is disquieting that the growth in 1973 should have been stimulated mainly by large increases in consumption expenditure while gross capital formation showed relatively low growth. Moreover, even the low growth achieved in gross fixed capital formation was contributed largely by expenditure on transport equipment and only marginally by machinery and equipment. The latter, in fact, registered a decline. Growth in 1973 was regrettably generated substantially by increased consumption spending, which was manifested in higher imports, while investments declined from 31.5 per cent in 1972 to 28.8 per cent of GDP in 1973. Inflation and Prices Though I mentioned it briefly in the early part of this Statement, it is necessary to expand on the problem of inflation. This is in the main of external origin. The consumer price index rose by an average of 22.9 per cent in 1973, compared to 2.1 per cent in 1972. Food prices rose even faster at 35.5 per cent, compared to 2.7 per cent in 1972. Even this did not reflect the increase in price of rice, the staple food of the majority in Singapore. Assisted by a ban on exports from Thailand, the retail price of Thai rice rose spectacularly from 35 cents in December 1972 to $1.07 cents per kati in December 1973, or an increase of more than three times. This was the sharpest increase in prices since 1960 when the consumer price index was first introduced. Most of this inflation was caused by external forces, outside our control. Estimates based on the unit value index for imports revealed that import prices rose by 12.5 per cent in 1973 while food import prices rose by as much as 19.1 per cent. Actual import price increases have, of course, been higher than these indices showed, as the estimates have a downwards bias. As a very open economy which imports most of its food and raw material requirements from other countries, Singapore is inevitably affected by any rise in their prices. Inflation measured by consumer prices in the advanced countries has been running at rates of between 8.0 per cent to 20 per cent. A good indicator of the worldwide inflationary pressures can be found in the World Commodity Price Index compiled by the Economist. This shows that the price of food commodities rose by 56.5 percentage points during 1973, a percentage increase of 35 per cent over the same period one year ago. The corresponding figures for fibres were 109.1 percentage points and 56 per cent, and for all items 73.3 percentage points and 51 per cent, respectively. However, domestic forces worked to accentuate the "imported inflation". While increases in prices of finished goods could be expected from the increased cost of imports or of production (including higher materials import cost), the inflationary situation gave rise to greater opportunities for profiteering, and traders, including producers, often marked up prices higher than required by the increase in costs. On the other hand, consumers often over-reacted to the inflationary situation by panic buying and hoarding of certain commodities, creating or aggravating a tight supply situation, and causing the much higher prices they feared. The Government took whatever measures were practical to tackle the inflation problem locally. Apart from monetary and fiscal policies, which will be discussed below, the Government thought it desirable to diversify the sources of our most essential food supplies as well as of the raw materials for our industries. It decided to revive the scheme for a rice stockpile which would eliminate any fear of shortages by ensuring availability of supplies for six months and would result in more stable prices for consumers. Also, the Sugar Industry of Singapore, in which Government has an interest, by prudent forward purchasing, had assured the availability and price stability of its sugar supplies. Some panic buying of sugar occurred on one or two occasions during the year, but confidence was quickly restored by plentiful supplies being quickly made available by the Company at the same unchanged price of 45 cents per kati, which it undertook to maintain. Moves to stamp out or reduce profiteering which was undoubtedly the cause of these and other panic situations have, so far, proved difficult. However, credit must be given to the Community Centres which helped to sell rice and publicise its availability at reasonable prices, to the NTUC for the good start it made in helping to ensure lower prices for consumers through its establishment of Welcome Supermarkets, and to the Armed Forces which also opened its first SAFE Supermarket. These actions served notice upon our wholesalers and retailers that their greedy and anti-social actions will lead to consumer support going permanently to public and quasi-public enterprise and corporations and affect adversely their system of private enterprise, which if not abused during periods of shortages, is the most efficient as it allows for free competition. Employment and Wages I shall now touch briefly on the employment position in 1973. It is estimated that more than 50,000 new jobs were created in 1973, the bulk of which was found in manufacturing (24,400), trade (11,700), transport and communications (4,200) and other services (7,300). Such a massive new job creation was, however, not in accord with our strategy of raising the productivity of labour. This increased by only 3.6 per cent in 1973, less than half that achieved during 1970-72 which was 7.7 per cent, a result which runs counter to our objective of enhancing efficiency through the upgrading of industries and orderly but significantly large enough wage increases. Home market supply activities (wholesale, retail and other services activities) in which labour productivity was far below the national average, continued to absorb large numbers of workers which should, for the greater part, have gone into manufacturing. The National Wages Council increase for the lowest paid workers in 1973 was 9 per cent with no setoff of wage benefits given under normal yearly increments in wage schemes. But even this, equivalent to an increase of about 15 per cent monthly wages, was in due course offset by the rapid rise in the cost of living which, according to the present imperfect cost of living index, averaged 22.9 per cent last year. Real wages for workers therefore declined. Furthermore, as prices increased, on the very rough figures available, it is thought that business profit margins for the manufacturing sector as a whole expanded considerably over the previous year. Therefore, despite having to pay the NWC agreed increased wages in 1973, employers apparently did not feel sufficiently induced to economise on scarce labour. Domestic Monetary Situation We must now examine our domestic monetary situation. Singapore continued to grow vigorously as a financial centre in 1973 despite anti-inflationary policies restraining credit expansion and the influx of US dollars. As Singapore expanded its international financial links and developed increasing sophistication in its domestic monetary institutions and instruments, the monetary and other sectors became more interdependent. It is therefore of interest to review the major developments in the domestic monetary sector in the past year. Financial Institutions 1973 witnessed a growing sophistication in the development of our money and capital markets, with the establishment of 11 new banks and one merger, bringing the total number of banks as at the end of December to 54. One local bank (the first local bank to be formed since the establishment of the Development Bank of Singapore in 1968) commenced operation in February 1974. Total bank assets in 1973 grew by 31 per cent which, although lower than the 35 per cent achieved in 1972, was attained in spite of monetary measures to curb credit expansion. Total deposits increased by 23 per cent, slightly lower than in 1972. Total assets of finance companies rose at a higher annual growth rate of 33 per cent compared with 23 per cent in 1972. Deposits also grew at a higher annual rate of 25 per cent compared with 24 per cent the previous year while total loans and advances grew at the even higher rate of 45 per cent as against 28 per cent for 1972. Hire purchase finance and housing loans again absorbed the major portion of finance companies' credit operations. In its fifth year, the Asian Dollar Market continued to expand rapidly, stimulated partly by the Government's tax concessions and exchange control liberalisation measures. The market's resources swelled to over $15.5 billion (over US$6.3 billion) by the end of 1973, showing a growth rate of almost 85 per cent during the year. Although in percentage terms this is lower than the growth rates of previous years, in absolute terms, the increase is still the largest annual increase so far and the Asian Dollar Market continued to generate international confidence and interest in Singapore as a financial centre. There were significant developments also in the Asian Dollar bond market with the floating in early November 1973 of the United Overseas Bank US$30 million convertible Asian Dollar bearer bonds, and in early December 1973 of the US$10 million Asian Dollar bonds by the Orient Leasing Company of Japan. Further, Asian Currency Units (ACUs) have been participating in an increased number of consortia loans in 1973. As at the end of 1973, 17 merchant banks, actively involved in the underwriting business and in the Asian Dollar Market, supplemented and complimented the services provided by banks. The three discount houses grew significantly with total assets expanding more than seven times, from $49 million as at the end of November 1972 to $369 million as at the end of December 1973. The year 1973 saw two events affecting the Stock Exchange in Singapore, namely, the establishment of the Securities Industry Council in January 1973, and the break-up of the joint Stock Exchange of Malaysia and Singapore in May 1973 along with the termination of the Currency Interchangeability Agreement with Malaysia and the new exchange control measures imposed by Malaysia. However, practically all the counters which were listed in the previous joint Stock Exchange were listed in the Stock Exchange of Singapore throughout the rest of the year. The rate of new listings of Singapore incorporated companies was also stepped up. The new Stock Exchange therefore went off to a good start in June 1973 and the current depressed state of the Stock Market must be regarded as contemporary with similar conditions in major stock markets round the world. Monetary Policies In the light of the uncertainties of the international currency markets and the inflationary pressures within the economy, our monetary policies were designed to stabilise the economy without adverse effects on our growth as a financial centre. Anti-inflationary monetary measures implemented in 1973 included the imposition of a 5 per cent (subsequently raised to 9 per cent) Special Deposit on the net foreign liabilities of banks, the raising of the minimum reserve ratios for banks and finance companies and the increase of bank interest rates for deposits and loans by � per cent in April and subsequently by another 1 per cent in December. Banks were also requested by the Monetary Authority of Singapore in early 1973 to exercise caution in extending loans for speculation in the then feverishly bullish stock market. These measures were intended to counter unstable developments in the international monetary situation which were contributing increasingly to imported inflation in Singapore. Despite the devaluation of the US Dollar for the second time in February 1973, the US Dollar continued to remain under speculative pressure in international currency markets. The situation developed into one of widespread floating exchange rates in March. As the major EEC currencies and the Japanese yen floated upwards against the US Dollar to which the Singapore dollar was then pegged, an artificially low external value resulted for the Singapore dollar, which thereby attracted a large speculative inflow of foreign funds into Singapore, swelling the already excessive liquidity in the economy. It was therefore decided in June 1973 to allow the Singapore dollar to float upwards to stem any further inflow of unwanted funds. The Singapore Dollar went up to 11.8 per cent over par exchange rate with the US Dollar in July 1973. At present it is ranging between 2-3 per cent above par. At the same time as an anti-inflationary monetary policy was adopted, the need to promote a healthy growth of the monetary sector was recognised. Measures to stimulate the growth of financial institutions included the reduction of corporate tax on income earned on offshore loans from 40 per cent to 10 per cent, exemption from tax on interest received from Asian Dollar bonds issued in Singapore and the waiver of stamp duty on Asian Dollar bond certificates and promissory notes issued by or in favour of or negotiated through merchant banks. Exchange controls were liberalised in July 1973 and Singapore residents were given permission to invest up to specified limits in the Asian Dollar Market. The Monetary Authority continued to provide the discount houses with lender of last resort facilities with occasional intervention in the money market in order to smoothen out unhealthy fluctuations. Priority was also given for the establishment of a training programme to upgrade the skills of bank officers. Balance of Payments In spite of uncertainties in international trade and of monetary instability, our balance of payments for 1973 continued to be favourable, although the overall surplus of $333.6 million for 1973 was lower than the $582.6 million surplus for 1972. One reason which slowed down the further accumulation of official foreign reserves during 1973 was that in June 1973, the Singapore dollar was floated upwards to relieve the pressure caused by an abnormal influx of US dollars due to international investors seeking a safer currency than the then weak US Dollar. Under the regime of a floating exchange rate, there was less speculative incentive to convert into Singapore dollars. The persistent trade deficit, which increased in 1973 by $301 million to $3,471 million, was financed largely, as in the past, by earnings from the services sector as well as by capital inflows. Recorded net earnings from services increased by $102 million to $901 million, largely on account of higher net receipts from investment income, travel and other transportation. In the capital account, net long-term capital imports fell by $117.6 million to $622.5 million. Government official long-term borrowing also declined as there were in 1973 no substantial new loans of the nature of the DM bond or Asian Dollar loan of 1972. Private long-term capital, however, increased by $24.9 million to $577.1 million. Official Reserves The year ended with Singapore's total official assets standing at $5,707.5 million, an increase of $776.6 million from the $4,930.9 million held at the end of 1972. The healthy state of Singapore's reserves will stand us in good stead to weather any storms which the oil crisis, the worldwide inflation, or the international monetary and balance of payments uncertainties may bring in 1974. [The Minister for Finance continued --] It would be useful for me here to recapitulate the main points of this Economic Survey and to state what I consider to be its main conclusions. The Economic Survey has shown that despite adverse circumstances, Singapore performed reasonably well in 1973 to achieve the high growth in Gross Domestic Product (GDP) at current prices of 22.0 per cent. We have not yet constructed an accurate GDP deflator. An estimate of real growth is around 11 per cent. Our leading growth sector, manufacturing, continued to maintain its buoyancy, growing at 29.8 per cent. External trade registered a record increase of 36.9 per cent with exports growing at a very high rate of 45.0 per cent, exceeding the growth rate for imports of 31.7 per cent. The contribution to GDP of the wholesale and retail trade sector (consisting of entrepot and domestic trade) grew at 25.8 per cent which was more than four times the growth achieved in 1972. The value added by entrepot trade increased at a record rate of 38.4 per cent while that of domestic trade grew by 19.2 per cent. Other Sectors registering high growth included government services (which grew at 18.2 per cent), public utilities (13.8 per cent), ownership of dwellings (19.9 per cent), banking and insurance (23.8 per cent), and tourism (27.9 per cent). The contribution of foreign military expenditure to GDP rose by 11.4 per cent. However, the construction sector showed a poorer performance, growing at only 9.1 per cent. The surplus in our balance of payments was maintained although at a reduced sum of $333.6 million, and our official reserves ended the year with a healthy $5,707.5 million. Though the economy expanded creditably in 1973, there were major weaknesses or adverse factors in our economic position. First, despite a full-employment situation, economic growth last year was contributed largely by a quantitative increase in the labour force rather than by increased productivity. More than 50,000 new jobs were created, representing an increase of 7.7 per cent of the employed labour force. The value-added per worker rose by only 3.6 per cent, less than half that achieved over the period 1970-1972. This runs counter to the results we expected from our policy measures for an increasingly labour scarce economy. Secondly, the high growth of Gross Domestic Expenditure was achieved largely through a rapid growth of consumption of 25.4 per cent, while gross fixed capital formation rose by only 11.6 per cent. Economic expansion was therefore sustained mainly by rising consumption rather than by increased savings channelled into productive investments. Thirdly, while there was high economic growth, there were also strong inflationary conditions. Consumer prices rose by an average of 22.9 per cent over the previous year, largely the result of importing worldwide inflation. As inflation for many countries was at equally high or even higher rates, our export competitiveness was fortunately not jeopardized. However, the rising cost of living severely affected the real income or purchasing power of the earnings of our workers, particularly those in the lower income groups. Fourthly, there appeared to be no solution in sight to the problems of a disordered international monetary system, and the sharp changes in rates and general uncertainties of the major currencies. And finally, 1973 saw the beginnings of the energy crisis and the problems which a reduction in oil supplies and higher oil prices would bring upon all economic and social activities as well as upon the international balance of payments position of different nations. Turning our attention from the economic scene in 1973 to that of the current year, what can we see regarding our prospects for economic growth in 1974? And what are the broad economic policies that are required to overcome the problems that we are likely to face in the coming months? In my earlier budgets, it was possible for me to describe external factors such as international inflationary conditions, monetary instability, economic stagnation or recession as looming over the horizon or posing a threat. But they never posed as immediate threats to the continued expansion of our domestic economy. We are no longer in that, it seems to us now, happy position. These recent external events have become factors unfavourable to our domestic economy. The problems carried over from 1973 which are presented by the oil crisis, and by inter-related worldwide inflation, monetary instability and currency rate uncertainties, restrictions on international trade and economic stagnation or recession, will directly affect our internal conditions either for growth or stagnation. Some examination of the impact of these external factors on our economy would therefore be useful before we examine the purely domestic factors. External Factors: The Oil Crisis The world entered 1974 in a somewhat better state in regard to oil supplies than it had dared to hope during the earlier months of the oil crisis. As a result of the decision in late December to restore production cut-backs from 25 per cent to 15 per cent of the September 1973 level, the threat of oil starvation in 1974 becomes somewhat less likely. However, until a final settlement is reached in the Middle East negotiations for peace, it would be premature to assume that oil embargoes and production cut-backs could not be extended and reimposed or made even more severe than in the past. The problem of higher oil prices, in any case, remains. The average price of crude oil is now well over US$8 a barrel, a four-fold increase in price over the pre-October 1973 rate. It may rise even higher depending on the price which oil producers may have to pay to the OPEC states for what is known to the industry as "buy back" oil, oil which producing countries are free to sell to third parties if they choose. Some very high prices indeed have been paid in a few auctions of such oil, which could eventually influence oil producers' and therefore oil consumers' prices. High oil prices impose very large burdens on the balance of payments of consumer nations. These burdens on developing nations with limited foreign reserves and rapidly dwindling foreign aid may prove unmanageable. They also add to the already severe inflationary pressures affecting most of the economies of the world since the second half of last year. Of course, they bring to the oil producing countries greatly increased oil revenues which they are unable to absorb by expenditure on even massive development projects at home. The resulting revenue surpluses accordingly accumulate as very large holdings of external reserves, estimated to grow at over $50 billion or more a year. Reserves of such magnitude, unless sterilized in long term asset holdings, are likely to cause monetary instability and violent currency rate fluctuations by its movements in large capital flows and reflows, from currency to currency seeking the most profitable or safest investments. These disturbances could have disastrous international consequences. Much depends upon how the large oil importing and exporting countries react to the oil shortages and increased prices. Already, there have been sharp movements in the exchange rates of major currencies. The date for the reform of the international monetary system will be set back indefinitely as the major developed countries turn from their contemplation of its seemingly academic complexities to grapple with their own urgent monetary problems. An economic slowdown is expected in the major industrial countries, accentuating the trend which was developing even before the oil crisis. According to the OECD estimates, made in December, 1973, the forecast of growth has been scaled down in the United States to only 2 per cent in 1974 (from 6 per cent in 1973), in Japan to 8 per cent (from 11 per cent), and in West Germany to 3 per cent (from 6 per cent). If, in addition, the large oil importing countries pursue beggar-thy-neighbour policies by resorting to competitive devaluations to promote exports and setting up trade barriers to curb imports and reduce their balance of payments deficits, then the world will head for a very severe economic depression. Fortunately, there are welcome signs of a general, if not unanimous, recognition by both oil consuming and producing nations that the problems of energy shortages and pricing should be solved by consultation together, and not by the attempts of individual countries or groups of countries acting alone without regard to their effects on other countries. There is awareness also of the need to avoid a disruption of the world trade and monetary system. There even is growing acceptance of a moral obligation by the oil producing countries to channel part of their oil surpluses through the IMF, the World Bank or other multi-national banks to the developing countries, in particular, to assist them in their balance of payments and development financing difficulties. There is hope therefore of an accommodation and adjustment between oil consuming and oil producing nations, and of a new equilibrium between the prices of oil and of other goods and services, which will remove or reduce the present resort to bartering with the oil producing nations and restore the trade and payments functions once again to the world economic system. Such an equilibrium must, in any case, eventually be reached even without deliberate agreement. In the long term, the price of oil must take into account the possibilities and the cost of working previously uneconomic oil deposits, of winning oil from shale or tar sands, and of discovering large new oil sources through the intense exploration which has been stimulated in other areas. And it would also certainly have regard to the ready availability and cost of alternative proven sources of energy, such as nuclear power. Singapore's Economic Situation Until such an equilibrium is reached, whether sooner or later, each country must cope, as best it can and without beggaring its neighbour, with the problems as they affect its individual economy. How will Singapore manage? One effect of the oil crisis will be on our balance of payments. Unless we can reduce our present domestic consumption of oil of around 2 million tons annually, Singapore will have to spend more than $290 million this year on oil imports for purely domestic consumption equivalent to 6 per cent of the value of Singapore's domestic exports last year. If there is no serious downturn in international trade, however, we may expect to recover some of the increased cost of oil by higher export earnings on those of our manufactures, including petroleum products, which use higher cost oil among their inputs. We need not fear being undersold as our competitors will also have to pass on such higher costs to their customers. It is possible also that with the OPEC countries' large oil revenues seeking international investments, capital inflows into a financial centre such as Singapore can be more than sustained. However, if, by a combination of adverse circumstances, we should end the year with an overall adverse balance of payments for the first time in many years, we shall, in any case, have more than adequate reserves to tide us over the period until stability returns into the international economic system. Another effect will be on the already serious inflation in Singapore. The oil industry has estimated that an increase of US$1 in the price of crude oil would raise the cost of living or the rate of inflation by 1 per cent in industrialised countries. Though the impact would be less for a country like Singapore, there is unlikely to be any relief for us from the burden of imported inflation this year or from the direct effects of the higher price of oil on our own manufactures. Inflation will, unfortunately, work its relentless way into our economy through higher prices in partially oil based products such as chemical fertilisers for food; steel, cement and other building materials; paper, synthetic textiles, plastics and many other essential commodities we have to import, and through the escalating costs of transportation, public utilities and other services. In spite of better weather and better harvests, there appears also no sign as yet of any substantial drop in the prices of food grains or other agricultural commodities. Perhaps exporters are holding back sales to keep up high prices and importers are buying more than their immediate needs to store against a poor harvest. There is very little one can do about such high import prices except to ensure that these are not aggravated by manipulation and profiteering. The Government will take measures to minimise the effects of inflation. Tariffs will be continually reviewed for the purpose of removing or reducing them, where possible, to curb inflation. More consumer cooperatives and Welcome-type supermarkets will be helped to set themselves up in the main population centres. But, I strongly urge that our people should restrain demand, refraining from hoarding and purchasing in advance of their normal requirements. People should become more selective in their shopping for essential commodities. Cutting down expenditures on unnecessary purchases and increasing their savings and channelling them into productive investments, our people can help themselves to fight inflation. At the same time, traders caught manipulating supplies to raise prices, retailers giving short weight of rice or bread will find their business cut off by withdrawal of supplies or licences to import or export. However, price controls are not suitable as a means of curbing inflation in a very open economy like Singapore's. Even large countries, like the USA which is less dependent upon imports and which has adopted the system of price controls, have had only modest and temporary success in curbing inflation. When controls continue beyond realistic limits, goods disappear. So when controls are lifted, another bout of large price increases immediately occurs. My view is that it is better for Singapore to let market forces operate. But checks will be mounted to ensure that wholesalers will deal fairly with the public, and themselves help the Government to check the manipulation of a minority, for which they, as a class, get the blame. The problem of inflation is a complex one with implications on growth. If the wrong set of solutions is implemented, economic growth will suffer, generating unemployment which is a more serious problem than that of an inflation. As long as the economy is able through larger export earnings to bear the increase in import prices due to inflation, we shall be able to maintain our economic growth. There may be need, however, to correct the adverse effects of inflation on the real wages of workers and this will no doubt be considered in due course in the National Wages Council's recommendations on wage increases this year. Fiscal and Monetary Policies In a situation of rising prices, the Government is faced with a difficult policy choice. There is an inherent conflict between the need for increased expenditure to sustain expansion of the economy and the equal need to alleviate inflationary pressures by curbing public expenditure. And in deciding policy we have to take note of the economic recession widely forecasted in America and the industrial centres in the latter part of the year. A policy of cutting down public expenditure indiscriminately would sacrifice growth, and not help reduce, to any significant extent, price increases. The best policy in these circumstances is to dampen increases in recurrent expenditure, but at the same time, to allow in full all development expenditure required for the expansion of productive capacity essential to economic growth. The budgets of Government, and of the statutory boards, will therefore be scrutinised both for their growth potential as well as their inflationary impact. The measures we take should have the beneficial effect of increasing public savings and investment. Monetary policy will likewise balance the objective of achieving sustained economic growth and the need to dampen inflationary pressures. The existing anti-inflationary monetary policy will not be relaxed, but consideration will be given to the need for minimising as far as possible any financial constraints to economic growth. To reinforce this objective, a package of monetary measures will be implemented by the Monetary Authority of Singapore. First, the Authority is consulting with the Association of Banks to raise interest rates on deposits to encourage higher savings. At the same time banks' prime lending rate will be raised slightly to check wasteful spending as well as to align it with comparable interest rates to reflect the real cost of funds. Secondly, the Special Deposit ratio which was modified from 9 per cent to 5 per cent in December 1973 will be reduced to zero per cent. This Special Deposit requirement was imposed to check the large influx of foreign funds in early 1973 and has served its purpose. The funds released will be available for financing productive activities within a system of selective credit control administered by the Authority. Thirdly, the Authority would also be ready to consider some reduction in the reserves ratios of banks and finance companies provided the resources are used to finance investment and productive activities in priority sectors in the economy. Banks and finance companies will have to submit monthly data on their loan operations relating to changes and usage of credit by purposes. This information will be closely monitored by the Authority within a framework of ceilings and guidelines for credit to various sectors. Where credit is being channelled into productive activities the Authority will be more flexible. But credit for inflationary spending and speculation will be reduced. With all these efforts, we may still find inflation too obstinate a disease to respond to local treatment. We need not be overcome with gloom if these unsettling economic circumstances persist. Nor should we be dismayed if in the latter part of this year, as a consequence of inflation and the inability of the major nations to keep up demand at inflated prices, a recession of serious proportions sets in. This is not the first nor will it be the last time that we have to meet the challenge of adverse conditions. Singapore overcame successfully even more severe disruptions like separation from Malaysia in 1965 and the rundown of British Bases in 1968. Our survival depends, as then, upon a robust approach to life, that the world does not owe us a living. Nothing is for free. Hence, the virtues of thrift and hard work and our resilience and capacity to adapt to changing circumstances saw us through. The question is whether we have not already been softened by the increasing affluence now so clearly and even delightfully evident in the colourful dress and appearance of our bright young things. This change in life style is shown in our sombre statistics indicating a propensity to save less and consume more. With annual economic growth no longer to be expected as of right, we shall have to rely on the qualities of hard work, thrift and grit to see us through a difficult time ahead. In 1974, we are in better shape than we were in 1965 or 1968 to deal with a severe economic crisis. First, there is now full, or perhaps overfull, employment to cushion the shock of any business recession and retrenchment. If our economy does not grow quite as fast as in the past or even if it stagnates for some time, we need not fear, as we did in the past, the spectre of widespread unemployment. Secondly, our economy is now more diversified than it was in the Sixties. Being more broadly based on manufacturing, trade, construction, transportation, tourism and a growing financial sector, the economy should be better able to withstand a recession in any one sector or market. Specific anti-recession measures could be put in hand, if necessary. For example, the enormous backlog of Housing Board building could take up any slack of building activity as well as provide job opportunities for those thrown out of work. Other public sector projects can also be used for the same purposes. Short of a disastrous world slump, which economic forecasts consider unlikely, Singapore should be able to earn a modest, if not comfortable, livelihood. We must, however, improve our ability to cope with the present circumstances. What specific remedies can we devise in each sector? Manufacturing Sector As the leading growth sector of our economy, manufacturing will continue to receive the Government's full encouragement and support either for new industries or for expansion of existing ones. The choice of industries must finally lie with the investors or entrepreneurs. But the Singapore Government and its agency, the Economic Development Board, will always give help on preferred new industries or assist in the upgrading of existing ones which take into account Singapore's existing and future factor endowments. We shall press forward with our policy of promoting skill-intensive, high technology industries. This policy is showing results. The progress in upgrading industries can be gauged from the expected labour productivity (measured by value added per worker) of the new industries. It has been estimated that the average value added per worker of the major new projects under implementation and in the pipeline will show a 120 per cent increase over that of similar industry groups in 1973. We do well therefore to concentrate our efforts on the industrial promotion of these higher value added industries and to offer them appropriate incentives. Moreover, our strategy of enhancing the value added by our manufacturing operations is entirely appropriate in the current situation of rising freight, fuel and raw material costs. High technology industries require a large supply of skilled workers. While the Government will continue for the time being to be liberal in its immigration policy towards skilled workers, an adequate solution can be provided only by creating our own ample supply of trained workers. We will accordingly continue to make substantial sums available for massive technical and industrial training, and the Government has earmarked $12.3 million for such training in FY 1974 compared to $9.7 million in FY 1973. With the successful implementation of our industrial training policy, our dependence on immigration of foreign workers for growth can then be scaled down to an acceptably modest level. The Economic Development Board now has under its administration various training programmes for workers. In industrial training, we have the joint training programme, overseas training programme, industrial development scholarship scheme and apprenticeship training scheme. There is also the new industrial training subsidy scheme for sophisticated industries which I announced in October 1973. The response to this training subsidy scheme has been very good. So far, 42 companies have expressed interest and 12 have put up concrete proposals for training. Moreover, last year, 53 trainees were sent overseas under the overseas training programme and 177 machinists underwent training under the joint training programme. All the training programmes I have mentioned are regularly reviewed so that our targets of building up and providing a large reservoir of skilled workers can be met in the most efficient way. With our industrialisation gathering momentum, I expect that in 1974 our strategies in upgrading industries and providing adequate incentives and training subsidies for manufacturers will be sufficient to cushion any decline in performance by the manufacturing sector caused by the economic slowdown in the industrial countries. Our manufacturing industries should be able to meet the challenges posed by the energy crisis, without too serious a dislocation of their operations. The high oil prices should be reflected in terms of higher prices for our industrial goods. In an inflation-prone world, when other countries with a higher base in manufacturing costs are expected to inflate by 7-12 per cent in 1974 (depending on the countries concerned), our competitive edge in overseas markets will be maintained, as buyers will still find Singapore goods relatively competitive even at the new prices. Employment, Productivity and Wages In a situation of full employment, labour productivity through the modernisation and upgrading of industries can be promoted by appropriate wage policies, formulated to induce employers to be more efficient in their usage of scarce labour. A desirable secondary product of such policies is to help workers, particularly those in the lower income brackets, to recover by wage increases the loss in their real incomes due to inflation. But these wage increases would still have to be related to productivity increases to avoid generating further inflationary pressures. To upgrade industries and raise productivity, wages must be made sufficiently high to attract labour from low productivity sectors which are less able to afford such wages into the high productivity sectors. There need not be any undue concern that somewhat higher increases in wages in 1974 for Singapore workers will affect our competitiveness in overseas markets. According to the International Labour Organisation (ILO) Year Book of Statistics 1972, manufacturing wages in Korea since 1967 have gone up by 37.8 per cent and in Hong Kong by 14 per cent. These countries are our major competitors. On the other hand, according to our own Census of Industrial Production, Singapore experienced increases in wages in manufacturing by much less over the same period. Moreover, when compared to the developed countries to which a major portion of our exports are destined, that is the United States of America, the United Kingdom, Japan and West Germany, workers in Singapore obtained much lower wages, compared to workers of the United States of America who draw six times as much, of the United Kingdom 3.6 times, of Japan 3.1 times and of West Germany 3.7 times. Higher wage increases for Singapore in 1974 will narrow this differential only very slightly, given the wage cost spirals in these countries. Of greater concern would be the risk of unemployment considered in the economy as a whole, which we must weigh against the beneficial effects of a higher wage rise. Although employers are expected to pass on at least a part of their wage increases in prices to their customers, there is still the possibility of an undesirably high degree of unemployment. In our labour scarce economy, however, a slackening only of the present overfull employment situation could be beneficial. Trade Sector Despite the international monetary uncertainties and the oil crisis, Singapore's external trade grew at a record rate in 1973. In 1974, however, the deflationary policies already adopted by the major industrial countries to curb inflation coupled with the adverse effects of the oil crisis and the consequent uncertainties of the international situation are expected to slow down the economic growth of these countries in 1974. World trade is therefore unlikely to show the boom conditions it exhibited in 1973, and the economic slowdown of our trading partners will equally affect our trade with them. On the brighter side, however, our neighbouring countries in the South-East Asian region especially ASEAN countries are relatively unhurt by the oil crisis and will continue to enjoy high prices for their primary exports. Their buoyant economies should be a plus in our relations with them. In the Middle East, it is not unlikely that negotiations for a settlement of the Arab/Israeli conflict can progress sufficiently for the Suez Canal soon to reopen. In that event, international trade would most likely recover a lot of its buoyancy. On balance, therefore, it would appear that there will be some slowdown in world trade but this should not be so serious as to generate a world depression, and we can remain hopeful of surmounting without undue hardship the adverse effects of such a slowdown in world trade. Services Sector Singapore must continue to improve its capabilities as a brain services centre. Our increasingly sophisticated financial, banking, insurance, transport and communications institutions should take on a regional, and even a global role. Among special developments relevant to the Services Sector in 1974 will be the situation caused by the oil crisis which has intensified the search for oil. Singapore, with its capacity for building oil drilling rigs and production platforms and its offshore supply bases, should be well placed to service any increase in offshore prospecting activities in the South-East Asian or even in the Pacific Basin area. With higher prices for oil and other primary commodities, the economies of ASEAN are likely to remain buoyant. This buoyancy will stimulate demand on services, especially in economic engineering supply and construction services. Conclusion 1974 therefore poses a number of new challenges for Singapore. High oil prices will exert pressure on the Balance of Payments of Singapore as it will do on those of other oil importing countries. Inflation and the uncertainties in the international monetary system will continue to plague world economies with the result that Singapore, like all the major industrial countries, is likely to experience some deceleration in the pace of its economic growth. To meet these new difficulties, concerted efforts by employers and workers, producers, traders and consumers must match the Government's own efforts to achieve continued economic growth, with inflation kept down as low as possible. If we all pull together, in the first half of this year at least, we may still be able to achieve a real growth rate of some 10 per cent per annum. Employers and employees alike must move vigorously also towards productivity increases. Wastage must be reduced both in the home and in our factories to counter the growing shortages in industrial raw materials and consumer goods. Consumers, both industrial and domestic, should economise on their consumption of fuel and electricity, so as to make more available for industries. We should cut down unnecessary consumption especially on luxury goods. Thus we should correct the unhealthy situation of last year when consumption expenditure registered very high increases and surpassed the growth of fixed capital formation. The Budget I would like to turn now to the Estimates. But first, I should like to explain some of the more important presentational changes which have been made in this year's Estimates. Last year the provisions in the Main Estimates which were entered for "Contributions" to various statutory boards and non-profit making organisations not directly responsible to the Minister for Finance were deleted from the Ministry of Finance Head of Expenditure and shown, it was thought more appropriately, under the Ministries having responsibility for the functional policy and performance of these bodies. This year, for similar reasons, the provisions entered for "Loans" to these bodies which were still shown last year under the Ministry of Finance Head have also been devolved to the respective Ministries. However, the terms and conditions of the loans will continue to be set as before by the Ministry of Finance, which was the reason for retaining the provisions previously under the Ministry of Finance Head. With these changes, the share of total Budget Expenditure properly allocable to the Ministry of Finance would also now be more correctly shown. In previous years' Estimates, for comparison with the new Budget requests, the provisions in the current Budget were reproduced exactly as Parliament had approved them. Our experience is, however, that there are invariably organisational changes during the year such as the establishment of new units, the merging of units, the transfer of functions from one unit to another, the conversion of units into statutory boards, etc. The figures for the current financial year as approved by Parliament, therefore, no longer reflect the existing organisational structure, and to that extent, comparisons between the figures for the new financial year and those for the current financial year shown exactly as approved by Parliament will clearly not be valid. From FY 74, therefore, I propose to show more correctly the current financial year's figures so that they can be directly and therefore more conveniently compared with the new financial year's figures. In this way, for example, we have some means of assessing the changes in the proposed provisions for FY 74 requested under the two new Heads of Expenditure, namely, "Primary Production" and "Police". I mentioned in my last Budget Address that my officials were exploring the possibility of a re-structuring of subheads in the Main Estimates. A set of proposals was subsequently developed and presented to the Estimates Committee of this Parliament, and, I am pleased to say, agreed in toto. These proposals have given this year's Estimates a new look and I hope, Members will also find it a more useful and helpful budget document. Briefly, all subheads are now coded and grouped into two major categories, namely, Expenditure on Manpower (EOM) and Other Operating Expenditure (OOE). In the EOM category only political and superscale posts are shown in detail. Other posts are shown by Division of service so that the user of the Estimates readily gets a picture of manpower cost and manpower mix rather than feels lost in a myriad of details. Those who need the details may, however, find them in a separate Establishment List which has been tabled as a Command Paper. The codification of subheads will facilitate studies of like Government expenditure. For example, present circumstances call for surveillance over the consumption of water and electricity by all departments and all the figures of expenditure by individual departments on public utilities can now be aggregated easily because they come under the same code. If the increase in such expenditure is too rapid it is possible to trace more easily than before, those departments which are principally responsible for causing the increase. Similarly, studies can be carried out in respect of inputs such as maintenance of vehicles and vessels, rations and diets, printing, transportation, etc. Within limits, two or more departments or sub-divisions of a department doing similar work should have similar patterns and scales of expenditure in relation to those inputs. Whilst such an input-oriented view on expenditure is necessary to detect waste or inefficiency in organisational units, it is equally useful to see how funds are allocated to the major functions of government such as defence, justice, health, transport and communications, etc. Such a function-oriented approach transcends departmental delineation and is possible again because of the codification of the subheads. The coverage of a particular function can be specified with reference to the sub-head codes which generally will not change from one year to another. In fact the various Divisions and departments which have to prepare past expenditure figures, study budget allocations or estimate future expenditures have agreed to a common functional classification of expenditure and this has been made possible largely as a result of the codification of subheads. A fuller presentation of expenditure is now possible as this year's Memorandum on the Main and Development Estimates for FY 74 shows. Thus, the new format of the Estimates has already brought benefits. My officials will continue to search for improvements to the Estimates format so that more information may be made available for management purposes. Budget Cornerstones The Government budget for FY 74 is designed to restrain operating expenditure and channel more funds into desirable development projects. Revenue is expected to reach $2,035.4 million in FY 74 owing to the satisfactory growth rate of the economy in 1973. Total provision for expenditure in FY 74 under the Main Estimates is $2,299.5 million of which $480 million is a transfer to the Development Fund. Such a large transfer is required because the total provision for expenditure under the Development Estimates in FY 74 is $1,561.6 million or 32.6 per cent more than that in FY 73. Faced as we are with inflation, all Ministries and departments are expected, indeed required, to scrutinise their operating expenditure patterns to cut out waste or unnecessary operations. Direct operating expenditure excluding the Armed Forces is allowed to increase by slightly more than 19 per cent only. Allowing for the general increase in prices and the additional manpower costs such as wage supplements and other allowances, there is hardly any growth in real terms and in the context of ever increasing workloads, this means that Ministries and departments have to exercise great care over their expenditure in the next financial year. As regards manpower, the search for manpower saving methods of work continues. Grass-cutting in school compounds will be progressively undertaken by grass-cutting contractors and the number of school servants accordingly reduced. Security alarms will be installed in schools so that school watchmen can be phased out eventually. More mechanised road sweepers will be introduced and existing staff will be redeployed for the cleansing of new housing estates and roads. Over and above the mechanisation effort, a stringent control was imposed on the creation of additional posts so as not to add fuel to the inflationary fire. As a result of these measures, the net increase in the permanent establishment for FY 74 including those created by Establishment Warrants is kept down to 1,762 posts or 2.9 per cent of the establishment level in FY 73. This, of course, does not mean that expenditure on manpower will also be held down to a 2.9 per cent growth. In fact, as I have stated in this House, the Government and statutory boards will adopt National Wages Council's recommendations and will require to make provision for payments in accordance with such recommendations. At the same time, I should mention here that as the NWC wage increases are already fairly substantial and as shown by their interim $25 wage supplement, already would have regard to the rising cost of living, ad hoc revisions of salary for particular services except where necessary to remove obvious anomalies, will not generally be entertained. Whilst some restraint is imposed on operating expenditure, there will be no let-up on implementing desirable development programmes and projects. I mentioned earlier that the total outlay under the Development Estimates for FY 74 has increased by 32.6 per cent. Of the total provision, about 28 per cent is allocated for direct expenditure by Ministries and departments as well as the Armed Forces. The remainder is earmarked for loans to statutory boards and commercial and industrial enterprises. Expenditure The Treasury Memorandum on the Estimates explains in some detail the expenditure provisions under each Head of Expenditure and there is no need for me to repeat what is already stated therein. I would like to highlight, however, some of the major areas of Government endeavour and the allocation of funds to these areas, viz. Housing, Education and Industrial Training, Health and Environment, and Road Transport. Housing Low-cost housing continues to be the key area of building development. In fact, some other major projects have had to be rejected or postponed in order to ensure that there is sufficient building capacity and supplies for the implementation of the low-cost housing programme. For FY 74 the provision of loan funds and subsidies to the Housing and Development Board is some 48 per cent higher than that for FY 73. The share of total net provision allocated to Housing has increased from 12 per cent to 15 per cent. One of the basic infrastructure facilities directly related to housing is, of course, sewerage. Provisions are made for low-cost housing estates such as Bedok New Town and Telok Blangah New Town, the East Coast Reclamation Area and the North and South Precincts under the Urban Renewal Programme. More schools will be built in new satellite towns and major housing estates. It is expected that 12 schools will be completed and provision of funds for the building of another 20 schools to be commenced in FY 74. Education and Industrial Training Whilst the construction of schools goes on, the Ministry of Education is pressing ahead with its programmes to increase the second language exposure time in primary schools and to implement curricular changes in secondary schools. After taking into consideration the changes in enrolment in primary and secondary schools, a net increase of 233 posts is provided for FY 74. With the greater emphasis on quality, there will be a corresponding increase in the cost of education. This will be reflected not only in the salary of teachers, but also in the higher cost of equipment, chemicals and materials for laboratory work and workshop practice. It will therefore be necessary to increase the education fees from time to time, to remind our people of the enormous State subsidies in education, and parents of their responsibility in paying towards the cost of bringing up and educating every additional member in his family. As an earnest of our interest in technical and industrial training, grants to the Industrial Training Board, Singapore Polytechnic and Ngee Ann Technical College have increased by $4 million or 19.4 per cent. Even more significant is the increase by $2.6 million or 270 per cent in the provision for the overseas industrial training scheme, the industrial development scholarship scheme and subsidies for local industrial training. It is hoped that industry will, on its part, take an increasingly active participation in industrial training through apprenticeship and other programmes. `The production of enough personnel with the necessary industrial training skills must, in the long run, be a joint effort between industry and Government. Health and Environment Recent energy and materials shortages have reminded us once again of our lack of natural resources and therefore the importance of upgrading what we do have - our human resources and our environment. The allocations for Health and Environment add up to almost 20 per cent of total net provision in the Estimates. Improvement of medical facilities for the people will proceed on a broad front by the further development of medical specialities, the opening of new hospitals and the expansion of existing hospitals. Of these, the largest single project is still the re- development of the Outram Road General Hospital. All require investment in buildings, equipment and manpower, that is, the training of nurses and the upgrading of skills of doctors. Unfortunately, these are too often taken for granted. It is necessary that hospital charges be increased from time to time to help symbolically towards the increasing cost of medicine and drugs, disposables and rations and diets. However, increasing expenditure on health facilities will not lead to better standards of care if the population growth is unchecked, and pollution of the environment goes unabated. If the number of patients increases hand in hand with total expenditure on health facilities, no improvement can be expected. For FY 74, the grant to the Singapore Family Planning and Population Board is increased by two-thirds and more Maternal and Child Health Clinics will be opened in low-cost housing estates. In the area of pollution control, I have mentioned the sewerage projects which will be undertaken in FY 74. The development of proper markets and hawkers centres will continue and the Refuse Incineration project will be implemented a stage further. Road Transport Finally, I should say a few words on the provisions for the improvement of road transportation, a subject which has recently attracted much attention both from the public and the Government. Provisions for the construction, widening and realignment of roads and bridges total $28.1 million. Another $5 million is set aside for special projects recommended by a high level Road Transport Action Committee. This total allocation of $33.1 million is 8.4 per cent of the provision for direct expenditure by Government departments on development projects and reflects the high priority which Government gives to the solving of problems in road transport. Revenue We must now consider the question of financing the proposed expenditure. It is expected that external loans, domestic loans, loan repayments and interest and dividends will together yield $1,057.5 million. This together with the expected Government revenue of $2,323 million at existing tax rates will just about meet the net total provision for expenditure. The revenue estimate of $2,323 million for FY 74 represents a 14.1 per cent increase over the latest estimate of revenue to be collected in FY 73. This rate of increase in revenue is not unreasonable despite the gloomier international scene this year. One reason is that the largest single source is income tax and this is dependent on the previous year's earnings rather than those of the present financial year. Another reason i5 that inflation tends to increase revenue through indirect taxes which are based on prices. For FY 74, income tax is expected to reach $700 million or 20.7 per cent more than the revised estimate for FY 73. It also represents around 30 per cent of total revenue for FY 74. Property tax is the next largest single source of revenue. For FY 74, this source is expected to yield $230 million or 12.2 per cent more than the revised estimate for the current financial year. Other main increases in revenue in FY 74 are expected to come from land sales, additional registration fees on motor cars, road taxes, customs duties on liquors, petroleum products and tobacco as well as regulatory charges. These together account for 52 per cent of the increase over the revised estimate of revenue for FY 73. Taxation Policy and Changes And now we come to the question of new tax measures. Hon. Members will be glad to learn that there will be no new taxes. I propose instead to give a number of tax concessions. The reliefs, which I shall describe in detail, will cost some $8.8 million, which can be broken down as follows :- Million (1) Raising of exemption and remission limit under Estate Duty $7.0 (2) Increase in Relief for Parents and Grandparents $0.6 (3) Exemption of the Balancing Charge on Singapore registered ships from tax $1.0 (4) Tax only on the Interest Portion of Annuity Instalments $0.2 ---- Total $8.8 ==== (1) Higher Exemption and Remission Limits of Estate Duty Under the present tax rates, estates are exempted from duty on the first $10,000 of its value. In addition, since March 1972, any estate duty payable has been remitted for estates which do not exceed $25,000 in value. The intention of this remission was to ensure that families buying the low-cost Housing and Development Board housing units under Government's scheme for encouraging a property-owning democracy would be in no danger of losing their homes because of inability to pay the estate duty. It was not intended to benefit the majority of the tax-payers owning estates above this value which would, however, still enjoy the exemption on the first $10,000 which was introduced in 1955. Representations have, however, been made about the inadequacy of the present exemption and remission limits by the public through the press, and also by hon. Members in this House. Property owners hope the Government will extend exemption or remission to the terrace or semi-detached house or even the owner-occupied family detached house. Since prices of land and houses have increased substantially in the past few years, it is argued that wage earners may find it difficult to bear the full burden of estate duty. While I have considerable sympathy for these suggestions, I have rejected the demand for complete exemption from estate duty in respect of one owner-occupied family house. Such an exemption would benefit the wealthy more than others and result in discrimination against other forms of assets like shares, deposits and life insurance policies. However, recognising the need to ensure against undue hardship and possible disruption of families as a result of burdensome estate duty payments on the death of a breadwinner, I now propose to raise the exemption and remission limits of estate duty. The intention is to give relief from estate duty by a combination of exemption and remission. The exemption will be for the first $50,000 of the value of the estate which represents an increase of $40,000 over the existing exemption limit of $10,000. The remissions will be one declining by steps of 10 per cent of the duty payable. Thus 90 per cent will be remitted of the estate duty payable for the next $20,000 in value of the estate, and 80 per cent, 70 per cent, 60 per cent, etc, of the duty for every succeeding $20,000 in value of the estate up to $230,000. This would mean that if an estate is worth up to $50,000 only, no duty will be payable. If the estate is worth $150,000, the duty payable is $3,337 and if the estate is worth $230,000, the duty payable is $14,037. Estates which are worth more than $230,000 will be subject to full duty on the amount exceeding $230,000. The revised exemption and remission limits will apply to estates passing on or after 1st April, 1974. The proposal will give full relief to people in the lower income group living in all, even the largest, HDB flats, who form about 40 per cent of the population. The people in the middle income group living in owner-occupied terrace, semi-detached and even detached houses will have the burden of estate duty considerably reduced. Those who wish to reduce or avoid estate duty further can transfer the property as a gift during the lifetime of the owner or create joint tenancies or tenancies in common or mortgage or charge the property, thus reducing the value of the estate. (2) Revision of Tax Relief for Dependent Parents and Grandparents from $300 to $750 Last year when I announced the relief to taxpayers for supporting parents or grandparents, many hon. Members felt that the tax deduction at $300 per dependant was inadequate. I have given this matter further consideration and I am happy to inform hon. Members that the relief will now be increased from $300 to $750 per dependant. There will be no change in the other conditions announced last year. The increase in the relief will also take effect from the year of assessment 1975, that is, based on 1974 income. (3) Balancing Charge on Sale of a Singapore Registered Ship Profits from the operation of Singapore registered ships are exempted from income tax as an incentive for ship-owners to register their ships in Singapore. However, when a Singapore registered ship is sold and the sale price is higher than the written down or depreciated value, a balancing charge arises which under ordinary tax liability, is subject to income tax. If this liability is not removed, it could discourage local shipowners from upgrading their fleets through disposal of older vessels and possibly also act as a disincentive to foreign shipowners from setting up shipping companies in Singapore to operate Singapore registered ships. To encourage the registration of ships in Singapore, we have already provided for income tax exemption for profits, low registration fees and annual tonnage fee, rebate of half the tonnage fee if 25 per cent of the crew are Singapore citizens, a simplified registration and mortgage system and income tax exemption for crews working on Singapore registered ships. After giving such incentives, it was not specifically intended that there should remain a liability to tax of the balancing charge on the sale of a Singapore registered ship. I therefore propose, by the removal of this liability, to add still another incentive for the registration of ships in Singapore from the assessment year 1974. (4) Income Tax on Annuity Instalments The aim to develop Singapore as an important insurance centre is in line with our efforts to develop Singapore as the "brains" service centre of South-east Asia. Hon. Members will remember that I have in previous Budgets announced fiscal incentives to foster the growth of the finance and insurance industries. As a further step to assist the insurance industry, I propose to revise the basis of the income tax on annuities. Annuities, at present, form a very small part of the insurance business here because, among other factors, tax is imposed on the whole of an annuity instalment received. An annuity purchased by payment of an insurance premium or premiums provides for the payment of periodic sums of money to the purchaser. Essentially, the payment represented by an annuity instalment consists of two elements: one is repayment of part of the capital, and the other is the payment of interest on the outstanding capital. At present, both elements comprising the whole of an annuity instalment received are subject to income tax. This is an anomalous situation because only the interest portion should properly be considered as income and taxed, leaving the capital element free of tax. With effect from the assessment year 1975, therefore, I propose to change the basis of tax to charge only the interest element of annuity instalments. This measure will not only assist the insurance industry but also popularise a different and attractive form of insurance cover. The above remarks conclude the account of tax concessions I propose. Since there still appears to be some lack of understanding of Government's taxation policy, particularly with reference to recent tax measures, let me take the opportunity here to state it once again. For the growth of revenue to meet rising Government expenditure, it is our policy to rely mainly upon a rapid expansion of the economy and upon an efficient machinery for enforcement and collection of the taxes which such an economy can afford to pay. While major and painful new taxes or increases in tax rates for the purpose purely of raising additional revenue will generally be avoided, it may be necessary in order to implement our social or economic policies that from time to time, we impose new tax disincentives, or give incentives. The last really new taxes were introduced at the 1968 December Budget and were prompted by the need to raise revenue for building up our own defence forces consequent upon the withdrawal of the UK armed forces from the Republic. Since then, revisions mainly have been made to taxes on private motor vehicles, cigarettes and tobacco products, liquors and petroleum. These revisions raised additional revenue but were made quite as much to alleviate traffic congestion and pollution; to bolster Government's anti-smoking campaign; and to discourage consumption of luxury and non-essential items. If such higher taxes and duties encourage the people to forgo or reduce the consumption of these items, the whole community will benefit through the better flow of traffic, reduced pollution, better health and a smaller national expenditure on imported luxury items. Tax revisions have not affected food items or daily necessities. On the contrary, during the financial year 1973, Government lifted import duties on 149 items of a wide range of foodstuffs, household appliances and construction materials, resulting in a potential loss of revenue of $21.4 million per annum. And, of course, the tax concessions now announced and costing some $8.8 million per annum give some recognition to changed economic conditions. I should like to make it clear, however, that it is not part of Government policy to subsidise or to continue to subsidise activities which are not viable in the long run, and it will be Government's intention to recover, so far as is consistent with Government's policies for social justice, all costs for the provision of Government services. It is useful to re-state the principles which determine the philosophy on which our way of life is based. Since 1965, one principle which has enabled us to survive and to thrive is not to encourage passengers. Nothing is more likely to ensure our bankruptcy and disintegration than feather-bedding and subsidies in pursuit of equality, not of opportunities, but of rewards. Over and over again, in developing countries, political parties have won office by putting attractive proposals of subsidised food, free education and health services to a semi-educated electorate, unable and later unwilling to face the hard facts of economic life. Inevitably these countries have ended in economic chaos and bankruptcy. If any political party succeeds in selling this `something for nothing' philosophy, it will be particularly bad for Singapore. For we make our living through organised servicing and production, not with the help of the sun and rain to produce food and agricultural commodities. So when the financial rot sets in and the firm framework which rewards effort and enterprise gives way, there are no soft rice fields to cushion the hard fall. And the fall will be most painful for the poor and the unskilled. When the price of imported oil goes up, it is no less than madness to subsidise PUB charges, as some letters to the press have urged, particularly when we want people to cut down on consumption of electricity and oil. On the contrary, in the case of petrol, a tax was added in order to further cut down non-essential travelling by motor cars. However, to meet steep price increases in foodstuffs, and the effects of increased oil prices, the Government has accepted the National Wages Council's recommendation to give a $25 interim allowance. There is a likelihood of a further increase in July. Meanwhile, the cost of running buses has gone up - half because of wages, half due to higher cost of diesel oil, spare parts and tyres. So the Government has had to allow the bus companies to put up bus fares. There have been suggestions that the Government nationalise the bus companies and subsidise the commuter. But what happens when the Government nationalises a company which has not yet got institutionalised management, and corruption on a scale rampant in the former Singapore Traction Company inevitably results? Let us first get management and services improved through tighter supervision from the Ministry of Communications. Hospital ward charges for `C' class patients have gone up by a token $1 per day, since January 1974, when the actual cost per patient per day went up $8 from $37 in 1972 to $45 in 1973, the result of increase of wages of all hospital staff and the cost of equipment and medicines. The underlying rationale is, whoever makes use of these services must pay a token share towards its cost, to check abuse in the unnecessary use of these services. This has happened in even developed countries like Britain. There, a Labour government in 1968 was forced to introduce prescription charges. Human nature being what it is, the charge, however small compared to the actual cost, helps to cut down wastage. With miscellaneous school fees, a cognate principle applies. Every parent must bear a token sum, to remind him that the bigger his family, the higher the burdens on his family and on the State. We must employ every means to impress on our people the need for family planning, or abortion, or serialisation. That there is a small surplus in miscellaneous fees for the cost of ECA, means that more activities can be catered for, and principals and senior teachers can be more imaginative in planning activities such as educational tours during holidays. The hefty increased cost of education, at about $324 per annum for a primary school student, and $582 per annum for a secondary school student, is carried by the Government. This, as with all subsidies, comes from taxes paid for by the people. The largest single tax revenue is from income tax, paid for on a graduated scale, those earning more paying more, to subsidise those earning less. It is nearly 30 per cent of total revenue. The principle of the more you can earn, the more you must pay for the poor, when carried too far has led, in many countries like Britain, to professionals migrating to North America, Australia and New Zealand. They see no reason why they should work to pay for the indolent and irresponsible. We are in a poorer position than the British, for we are short of top level personnel. If our trained administrators, managers and professionals leave, those left behind, nearly all of whom cannot emigrate, will become unemployed and suffer grave privation. Every society has its quota of idealists, and of hypocrites, especially amongst the intelligentsia. The idealists believe in equal rewards. But many are hypocrites, pretending to feel sorry for the poor. They are the people who, whilst lamenting the extra dollar on miscellaneous school fees, quietly send their children abroad to expensive schools in Australia, Britain and elsewhere. For those of us who intend to stay, let us take a hard look at our circumstances. To protect our long-term interests, everyone, even our poor, must face up to our responsibilities to each other, and to the country. To spread the belief in heavier and heavier subsidies to cushion the adverse effects of world economic forces on our lives, means encouraging and making more people into passengers. People who can help push the economy by striving to earn and pay a part of their essential needs will just sit back, waiting to be carried for free. This is the road to ruin. The Government's duty is to ensure the wellbeing of all, including the poor. We best do this by ensuring that people get better and better paid as they improve their training and attain higher skills. The basic formula for Singapore's continued success, without raw materials, is hard work. There is no magic strategy for economic growth which can feed us without work. This budget reflects a realistic appraisal of our position in a world where only those who make the effort will make the grade. Sir, I beg to move.

The Question is, "That Parliament approves the financial policy of the Government for the financial year 1st April, 1974 to 31st March, 1975." In accordance with paragraph (1) of Standing Order No. 84, the debate now stands adjourned. Mr Hon, debate to be resumed on what day?

On 15th March, 1974.

So be it.

Resolved, "The Parliament do now adjourn to Thursday,14th March,1974."[Mr E. Barker]. Adjourned accordingly at Eight minutes past minutes past Four o'clock p.m to Thursday, 14th March,1974. Appendix to Annual Budget Statement(Cols 81-124)