Mr Speaker, Sir, as we look back at 1981, we should be very thankful to Almighty God for blessing this nation of ours. In the midst of a very dismal year for most countries in the world, with recession, high unemployment and inflation, we achieved almost 10% economic growth. Our inflation rate was below the average OECD rate and those of ASEAN, Hong Kong, Taiwan and South Korea. It is almost a miracle. The Ministry of Trade and Industry aptly described our growth rate as enviable. The Hon. Minister himself must also be the envy of his colleagues elsewhere for being able to present solid achievements for 1981 and to offer tax concessions at a time like this. However, Sir, I am sure neither the Government nor the Hon. Minister would wish to rest on their laurels. Moreover, as they are constantly exhorting Singaporeans to better effort and performance, it is the duty of Members of Parliament to point out shortcomings and to make constructive suggestions so that the Government can make greater and better efforts for the improvement of our nation. Please note my use of the word "constructive" as opposed to destructive and that which appeals to emotion. One can also speak out of resentment and bitterness and one can pander to the gallery. I hope, Sir, that Members of Parliament will avoid this during the course of the debate on the Budget. I propose now to review our economic performance for last year. Let me hasten to add, Sir, that I am speaking with the benefit of hindsight and from the perspective of the armchair. As I read the Economic Survey of Singapore for 1981, the first observation that came to mind was that domestic factors were more important for our economic growth last year than in previous years. (1979 and 1980, external demand contri- buted 73% and 72% respectively to our economic growth, while last year it contributed only 53%. In other words, 47% of our growth last year was internally generated. But for the big decline in holdings of inventories, the contribution of domestic demand would have been greater. This is a reflection partly of adverse world economic conditions, partly a reduction in the rate of capital accumulation and partly a relatively high rate of consumption expenditure, There was, for example, a 21% increase in expenditure on recreational goods and services. The last factor does not augur well for the future. The Economic Survey also reported that the three fastest growing sectors of the economy were financial and business services (18%), construction and quarrying (17.7%) and transport and communications (12.6%), noting that the financial and business services sector contributed 27% to the overall GDP growth rate. The Economic Survey went on to point out, and I quote from page 15 of the Economic Survey: 'Healthy demand for domestic and offshore banking and other financial services and buoyant activities generated by the thriving stock and property markets provided the main impetus to the expansion.' In other words, Sir, speculative activities in the stock market and property market generated high profits for banks, brokerage firms, real estate agencies and legal firms. This statement is confirmed by the Economic Survey on the same page where it says: 'Despite depressed re-export trade, banks extended loans and advances at a more vigorous pace than in 1980. A greater proportion of the increase in loans and advances was used to finance the booming construction industry and property market as well as activities in the stock market.' I would have more to say later about our monetary policy. For the moment, Sir, let me concentrate on the property market. The Economic Survey also states: 'The property market remained active in the early part of the year. Fuelled by strong demand for residential, commercial and industrial properties as well as by speculation, property prices continued to rise sharply in the first half.' What the Survey failed to mention is that property prices increased by well over 500% between the end of 1979 and June 1981. And, contrary to what the Economic Survey reported, property prices did not fall considerably in the latter half of 1981. Such prices were and are still 350-400% higher than in 1979. As I warned in the debate on the Presidential Address in this House in February last year, the inflation in private property prices inevitably affected HUDC and HDB prices by escalating land and construction costs. And sure enough, barely six months later, both of these agencies raised their prices. I might add, Sir, that one additional undesirable sideeffect of the property market boom was the election of the Member for Anson. The question is: Could the unhealthy property boom have been avoided? In my view, there would still have been a boom as an upturn in the construction cycle was overdue and as property prices were rising in most countries of the world in reaction to inflation. However, I believe we could have moderated the boom somewhat. Consider, Sir, the following factors: Firstly, Government's land alienation policy. Government is the largest landowner in Singapore. Moreover, Government has been acquiring huge amounts of private property to build HDB flats and also for URA development. No figures are published but I rather suspect there has been a net decrease in private land holdings over the years. Moreover, URA's tender system has probably contributed to the inflation of property prices. At the last URA sale, for example, some choice property sites were withdrawn because the tenders were considered too low. Government could have helped to stabilize the property market if the land had been sold cheaply. Secondly, plot ratios and density regulations. Sir, I am not an architect, neither am I an engineer. But I am told that the regulations laid down by Building Control Division in respect of plot ratios, heights of building and density of different types of building use have contributed significantly to the cost of each square metre of floor space constructed, In view of the land shortage in Singapore, as so vividly illustrated by the Minister for National Development himself recently, perhaps the Building Control Division may want to review its regulations. Thirdly, unnecessary frills in condominiums. I notice, Sir, that many condominiums have swimming pools, tennis courts, squash courts and other recreational facilities. Moreover, in many projects, the floor space per apartment is very generous. All these add significantly to cost. In view, again, of the land shortage and demand for recreational facilities, might it not be better to avoid private recreational facilities and provide more clubs which the general public, including HDB dwellers, could join? Fourthly, foreigners are allowed to buy condominiums. In 1974 or 1975 the property market was greatly stabilized when the Residential Property Act, which prohibited foreigners from owning residential property in Singapore except by permission, came into force. Subsequently, as a result of representations by developers, the Act was partially lifted to allow foreigners to own condominiums or to buy flats in buildings above six storeys. The net result was an unprecedented boom in the property market, pricing most properties beyond the reach of Singaporeans, If the Government were to reimpose the Residential Property Act, prices would drop to more realistic levels. Fifthly, wrong timing in the release of CPF funds for private housing. The Government's intention to release CPF funds for purchase of private residential property was a good one. Unfortunately, the timing was inappropriate and exacerbated the boom. Consider, Sir, the effect of the boom on the real value of our CPF holdings. Before the boom, a CPF balance of, say, $100,000 could have bought a decent terrace house or apartment. After June 1981, the same amount could only buy a third or less of the same unit. Sixthly, release of Government building projects. When the property boom was in full swing, Government launched many new building projects, escalating construction costs. Sir, consider the data on construction contracts awarded during the first three quarters of 1981, as reported in the Economic Survey of Singapore, Third Quarter, 1981. Government should have withheld some building projects last year. Instead, it gave out $3,059 million worth of building contracts for the first nine months of 1981, or 66% of the total for the period. In the third quarter, it tendered out $1,549 million worth of contracts, double the average quarterly value of contracts and more than double those launched by the private sector. I believe that there should be better coordination between the economic planners of the Ministry of Trade and Industry and the physical planners of the Ministry of National Development. There is no reason why we should be building Raffles City, Marina City, Changi Airport, viaducts, roads, HUDC, HDB flats, hotels (and note, Sir, we are trying to double the hotel capacity over the next five years), shopping complexes and private residential units all at once. We can surely phase the various projects so as not to overstrain the capacity of the construction sector. Last year, the construction sector grew by 31% in current prices or 17.7% in real terms. No wonder there was such a big labour shortage and no wonder the productivity in construction actually declined. And no wonder building costs escalated tremendously. Table 40 on page 64 of the Economic Survey shows that the construction sector experienced the highest rate of inflation in the economy of 12% compared to the GDP deflator of 5%. I come now to the subject of money supply and inflation. In his Budget address the Hon. Minister complained about what he called the stubborn rate of inflation of 8.2% in Singapore. This is, of course, lower than the OECD rate of 10.8% but somewhat higher than Japan's 4 3/4% and West Germany's 5 3/4%. The Economic Survey stated that 58% of the inflation was due to rising food prices and that 60% was internally generated. However, we should note that the figure of 8.2% represents an average inflation rate for the whole of 1981. For example, the December cost of living index itself was 10.4% higher than a year earlier. In January of this year, the cost of living index was rising at an annual rate of 12%. The question, Sir, is: What are the causes of our inflation and whether we could have managed with lower inflation? There are both internal and external causes. Let me deal first with the external causes. If the exchange rate is fixed at, say, S$2.10 for every US$l, then a 10% US inflation would also raise prices in Singapore by 10%. However, if we allow our exchange rate to fall by 10%, then we need not import the US inflation at all. It follows then that the key to imported inflation lies in the degree of flexibility in the exchange rate that we are prepared to have. On page 71 of the Economic Survey, it is stated that: 'in maintaining the stability of the exchange rate, the authorities had to balance the benefits of an appreciating Singapore dollar in containing imported inflation against the adverse effect on the competitive edge of Singapore's exports of goods and services.' I suspect, however, that we could have allowed more flexibility in our exchange rate, thereby importing less inflation. I do not believe that our exporters would have been hurt by greater appreciation of our currency for two reasons. The first is that imported inputs probably constitute about 64% of the value of manufacturing output. Hence a currency appreciation would have lowered costs of imported inputs even as it lowered selling prices of exports in Singapore dollar terms. Secondly, the OECD inflation rate of over 10% already provides our manufacturers with considerable competitive edge. Let me now come to internal causes, the first of which is money supply. When we try to hold down the value of our currency, the Monetary Authority of Singapore's official reserves increase and there are more Singapore dollars in circulation, causing domestic inflation. Col. 725 of the Economic Survey reported that, on the average, our money supply as defined by M1 grew by only 12% last year compared to 14% the previous year. However, there were a number of aberrations. At the end of December 1981, our money supply as defined by M1 had actually grown by 18.1% compared to December 1980. Moreover, during the last quarter of 1981, the money supply grew at an annual rate of 49%. No wonder, Sir, the stock market took off again early this year. Sir, please note that according to the Economic Survey Report itself, 59% of the increase in bank loans and advances last year went to the following: Building and construction ... 23% Financial institutions ... 20% Professionals and Private Individuals ... 16% In other words, a substantial part of the increase in money supply went to speculative purposes in the stock market and in the property market. The Monetary Authority of Singapore was probably trying to keep interest rates low in Singapore in an effort to encourage investment. For much of last year, our interest rates were on the average 5-6 percentage points lower than the Asian Dollar rates. This further indicates the under-valuation of the Singapore dollar. However, instead of investments being stimulated, the resultant effect of the increase in money supply was to fuel speculation in the stock and property markets. I do not believe that keeping interest rates low will help our exporters when there is a world recession on and people just do not want to buy our products. We only compound our own inflation problems and distort the stock and property markets. If we wish to help our exporters, we could do so directly by preferential lines of credit instead of increasing money supply generally. The second cause of domestic inflation is our ambitious growth targets. At the present stage of development, I believe that a growth rate of 8-10% is ambitious and will inevitably trigger high inflation because our labour force is growing at a much slower pace than the last decade and there are infrastructural constraints and construction bottlenecks, as noted by the Minister himself. The question is: are we prepared to pay the price in terms of a distorted property market and a distorted structure of wages and salaries? Please note that something of a merry-go-round has already started. The private sector salaries for the graduates and professionals have increased way above the public sector, and recently the Hon. Minister himself had to announce substantial wage increases for graduates in the public sector. This will merely push another round of salary increases because basically there is a shortage of graduates and professionals caused by our very high growth rate. At the same time, these professionals and graduates are not going to be satisfied with the wage increases because they are much less meaningful today since they can no longer buy the type of housing that they could have bought three years ago. The third domestic reason for inflation is the National Wages Council (NWC). We have had three years of high NWC wage increases. Let me illustrate this problem by taking the case of a barber. Because workers in manufacturing and other sectors of the economy get NWC awards, the barber, the person who cuts your hair, feels that he too must reward himself or else it would not pay to be a barber after some time. There would be very few people willing to be barbers. There is no productivity increase in barbering. The barber can try to cut your hair faster with possibly disfiguring results. Similarly, bus conductors, bus drivers, chambermaids, sales-girls, waiters and waitresses get NWC awards without necessarily increasing productivity. The hawker too raises his prices, as he must, because if he does not do that, no one wants to be a hawker after some time. But there is no productivity increase. The result can only be inflation. We should, therefore, take the Hon. Minister seriously when he exhorts us to increase productivity, wherever possible, in the economy. To sum up on inflation, Sir, we could have reduced the inflation rate by, first, increasing the flexibility in our exchange rate; secondly, by controlling the money supply more carefully; thirdly, by being less ambitious about economic growth and, fourthly, by phasing our construction projects to prevent overstraining our construction capacity. Let me now turn to the Budget for 1982-83. The three-fold objective of increasing skilled and professional manpower, of further developing our infrastructure and our public housing, are realistic and consistent with the long-term development of Singapore. Singapore's annual budgets for the last 21 years have, in general, been exercises in good stewardship. As usual, emphasis is put on development expenditure which takes up 55% of the Budget. Recurrent expenditure is kept to a minimum with emphasis on manpower saving through mechanization, rationalization and computerization to increase productivity in the public sector. I am only a little uneasy about the additional amount of $1,720 million budgetted for the Petrochemical Corporation of Singapore. I only hope that the project will be viable or else it will turn out to be an expensive white elephant. I am also a little concerned at the high standard of luxury in new buildings put up by statutory boards and by the Government itself. In the Energy section of the Economic Survey, it is reported that electricity consumption by the public sector itself rose by 18% for the Government itself, that is, taking out the statutory boards, electricity consumption rose by 31%. I get a little worried by the vast airconditioned corridors and open spaces at the Singapore General Hospital, and at the luxurious facilities that I see there. I see no reason why people, who can afford to pay for luxurious rooms, cannot go to private hospitals. I still believe that the public sector should provide decent facilities at low prices. Similarly, Changi Airport itself has a lot of vast open spaces and I shudder at the airconditioning cost. I hope that the civil servants themselves will take the lead in minimizing luxury and in saving energy. Coming back to the Budget for 1982-83, Members should not be alarmed by the $3 billion deficit. The deficit is to allow the Government to tap the resources of the Central Provident Fund which now annually generate about $3 billion for development purposes. In fact, Members may like to know that the public sector as a whole, inclusive of the statutory board, generates a substantial surplus every year. This is reflected in the increasing foreign exchange reserves as reported in our Balance of Payments. On the question of tax concessions, Sir, while I welcome the additional relief for CPF contributions, I should like to see explicit provision to encourage people to take up insurance policies. I am concerned that, for many people, housing will gobble up most of their CPF balances by the time they retire, leaving them with little to live on. A good insurance policy will alleviate social hardships and save the State from rescuing destitute people later on. Sir, what I find most unusual about this year's Budget is Government's concern about the preservation of the family. First, there is the concern about promoting filial piety by increasing the allowance for aged dependants. However, the income ceiling of less than $1,500 per year that dependants are allowed to have, is very unrealistic. And if people are honest, very few will qualify for the relief. In his address, the Hon. Minister stated, and I quote: 'We will have to be more imaginative and more determined in our efforts at retaining a large number of our womenfolk in the labour force without endangering the upbringing of our children. The family unit is the most fundamental building block in our society and is an institution which we must cherish and preserve even at the cost of sacrificing some economic growth.' Sir, this is indeed a most refreshing and necessary change of emphasis. When women go out to work and commit their infants and toddlers to baby amahs and baby sitters, I believe that there is a great psychological cost in the alienation between mother and child, and the child will grow up with a sense of rejection, hurt, insecurity, selfishness, even a sense of abuse and rebellion. It is simply not worth it from the point of view of developing a healthy nation. After the children have grown up, women may re-enter the labour force. Alternatively, as the Member for Leng Kee has suggested, work could be farmed out to the homes or short-shifts could be devised. Finally, Sir, I agree with the Hon. Minister's warning of the economic dangers we face this year. He was not exaggerating when he spoke of the possibility of the world economy going into a tailspin, and by that I think he means an economic depression. At the most, the OECD countries are expected to recover only slowly and only towards the latter part of the year. In view of the time-lag, it will be a few months before Singapore can catch up. We can, therefore, expect increasing protectionist pressures upon our exports this year. At home, a pressing issue is to build more homes, especially HDB flats. The problem is not whether we can build 58,000 HDB flats in the next two years or 21,000 private and HUDC units in the next three to four years. The question is whether the prices will be affordable by the people. We need, therefore, to set our construction priorities urgently and examine the economic implication of Government land, zoning, building and other policies. Permit me now, Sir, to conclude by congratulating the Hon. Minister for Trade and Industry for a Budget which is not only imaginative but incisively presented. It is a Budget reflecting not just one man's wisdom but, I believe, the accumulated wisdom of 21 years of Government and eminently deserves the Support of every Singaporean. 6.00 p.m.