Mr Speaker, Sir, I rise in support of the motion in the name of the Minister for Finance. I welcome the move towards the reduction of manpower in the public sector and the scrutiny of whether particular activities in the public sector are necessary. It will surely lead to lesser involvement of the public sector in the economy and hence, hopefully, lesser expenditure. With the lesser need for manpower and expenditure and a greater part of our infrastructure completed, the need for Government revenue in the coming years hopefully should be reduced. This will surely be translated into lesser taxes. Consumption taxes may then not be necessary. Another desirable effect, Sir, is of course that more manpower will then be available to the private sector. If the private sector is meant to be the engine of growth, it will need all the manpower it can get. Mr Speaker, Sir, I congratulate the Minister for a simpler presentation of this year's Budget. However, disclosure of material information still leaves much to be desired. In this respect, I would like to recast some of the figures in another light. May I ask the Clerk of Parliament to distribute some figures. Before proceeding, Sir, may I reiterate that stimulation of the economy through Government expenditure is the increased spending by the Government in 1986 compared to 1985. In other words, it means that the 1985 economic performance was achieved with Government spending in 1985 taken into account. Hence, to increase the impact of Government spending on the economy in 1986, it must be based on the additional expenditure or the increase over 1985 that the Government should be prepared to spend. It is therefore the increase, not the absolute expenditure that matters. Appendix 1 simply shows a rearrangement of Table 3 from page 9 of the Budget presentation. Presented this way, Sir, without the transfers to and fro from the various funds, it shows a total intended expenditure increase of $5.95 billion. Put it simply, the intended increase of this amount is about 16% of 1986 estimated GDP of $37.3 billion. It does seem an extraordinary stimulation. However, the Minister has given clues that it will not be so by referring to the increased loans and the grants-in-aid to HDB because of the change in HDB's accounting methods. For a more accurate impact, I would like to refer to Appendix 2. I try to adjust what I would call the larger intra-public sector transfers, ie, transfers between some of the statutory boards and the Government. I have taken the public debt servicing and the HDB items because these are the most obvious and also incidentally the largest increased expenditure items. The Government expects to spend $1.01 billion more in public debt servicing. In the budget it is treated just like another expenditure, such as expenditure on manpower or other operating expenditure. However, I would like to ask whether this large increase in interest payment will ever leave the public sector. The answer, Sir, is a qualified no because the bulk of the interest payment will go to the CPF. To find out why, we must look at Appendix 3. It shows the amount of advance deposits CPF has with MAS. At the end of December 1985, the amount was estimated to be $12.1 billion. What are these advance deposits? Basically, it is the amount that CPF has put aside for purchasing Government bonds. As there are not enough Government bonds available, it has put the money in MAS so that the funds can be used to purchase new issues of Government bonds. Hence, the bulk of the intended domestic borrowings by the Government in 1986 would be taken out by CPF whose funds are already with the Government. The issue of the bonds by the Government and the purchase of these bonds by CPF will be like transferring funds from the left pocket to the right pocket. The interest payment will go to CPF where it will again be put as advance deposits with MAS. This increased expenditure of $0.1 billion is therefore more like an intra-public sector transfer. The increased expenditure by the increased grant-in-aid of half a billion dollars to HDB and the increased loans to HDB for land purchases could also be of the same nature. This is because, as what the Minister has said, these increases are for the purpose of purchasing land from the Government at market value. This expenditure, therefore, cannot be considered as expenditure like salaries or payments for services. The private sector does not benefit from this increased expenditure. Table 2 does show an increase in expenditure of $1.81 billion instead of $5.95 billion. Sir, increasing Government expenditure at this time as a means to stimulate the economy is not wrong. However, there is a difference between the stimulative effect of an increase of $5.95 billion and an increase of $1.81 billion. More importantly, Sir, is the disclosure, or rather the lack of disclosure, in the Budget. The Companies Act requires companies to prepare their annual reports on a group basis, ie, consolidation with its subsidiaries. May I ask why cannot the Government follow the spirit of its own laws. Why cannot it also present its budget on a group basis, ie, consolidation with its statutory bodies and subsidiary companies? If the full group consolidation is too difficult, perhaps it can consider the inclusion of the major statutory boards and companies. A budget with large intra-public sector transfers eliminated would certainly present a truer picture. The impact on the economy could also be better assessed. Mr Speaker, Sir, I would now like to touch on only one area identified as having potential for growth. This area is financial services. Yet the measures taken, or rather the lack of measures, differ from those operating in the market. Permit me, Sir, to make some comments on fund management. The Government wants Singapore to be a fund management centre. Over the years, including this year, it has given a number of tax concessions to achieve this goal. Yet it has consistently ignore the most important issue of all, ie, the distinction between trading profits and capital gains. I do not wish to go into technical details of this issue. However, putting it simply, fund managers in Singapore would have to contend with a lot of difficulties. Sir, the management of funds and securities need nimble minds and quick responses. The managers are already operating in a world of extreme uncertainty. They certainly do not need the uncertainty created by the regulations of our Inland Revenue Department. I do not normally like to make predictions but on this issue, Sir, I would predict that Singapore would never become a fund management centre until this issue is resolved to the satisfaction of the market. There are too many cities - Hong Kong, Sydney, Melbourne, Auckland, Tokyo and more - which also want to be fund management centres. These are not cities in underdeveloped countries with poor infrastructure. These cities too have the telecommunications facilities, the legal expertise, the computer link-ups and the people to be successful financial centres. The advances in telecommunications and information technology have made it unnecessary for international fund managers to be in Singapore. If the terms of their coming here are not right, the fund managers will never come here. On another point, Sir, I would like to touch on is the tax concessions given to non-residents but not to residents. This has certainly created a most unusual situation in the Singapore financial market. While banks compete for deposits from abroad, our residents are very busy depositing their own funds abroad. The reason is very simple. It is because interest earned in Singapore is taxed while the interest earned abroad, as long as it is not remitted back to Singapore, is not taxed. Hence, the result is that our residents have substantial deposits outside the country. The latest tax incentive for investment in local stocks and shares by non-residents will only exacerbate the situation. Again, Sir, I urge the Minister to provide some solution to this problem so that our own funds, that means the funds of our citizens and residents, can come back to Singapore to enlarge the base for financial activities. Sir, many have called, and this includes the Opposition Members of Parliament, for a reduction in the employee's CPF contri- bution. It will, so they say, stimulate local demand. In the best tradition of supply-side economics, the Minister has apparently agreed that more money in the hands of our people will indeed stimulate local demand. He has thus given us a tax rebate for this year. It is, in fact, one step further than what has been asked for because returning the savings back to the people may only induce them to save the savings. I therefore support this move as I think this move will be more stimulative than the return of a portion of the employee's CPF funds. Now, however, they say it is unfair. It benefits the rich and penalizes the poor. The Straits Times even had an article in its 6th March 1986 edition. But, Sir, does it really benefit the rich and penalize the poor? Here, again, begging your pardon, Sir, I would like to distribute another set of Tables. Perhaps while the Tables are being distributed, I would like to say that the first Table is the one that the Straits Times has published in its article. Sir, it can be reasonably inferred from the Table that those earning above $158,000 per annum gain from the combined impact of the 15% CPF cut and the 25% tax rebate. You can also infer that those earning below $158,000 per annum lost. The calculations in this Table are based on the assumption that the annual salary is divided equally into 12 monthly portions. I do not think that this is a true reflection of salary structures in the market. Most salary structures in Singapore have bonuses. Normally the higher the salary level, the greater is the bonus element. In Appendix 5, I have used the assumption that the annual salary of $158,000 is now divided into 13 months, ie, there is a bonus of one month's salary. By using this assumption, there is a loss of $1,973 instead of breaking even. In Appendix 6, I have restructured the top annual salary into what I consider a more realistic assumption. The monthly salary is $10,000 and the bonus element is $120,000. Sir, as you can see, the loss is now very much larger. I do not, Sir, bring up these tables to prove or disprove which assumptions are right or which tables are wrong. However, I do want to show how lopsided assumptions can lead to wrong conclusions. Sir, I would like to conclude here but, before I do so, may I provide some food for thought from an article by Peter Drucker. According to Mr Drucker, the German economic performance during the past few years was every bit as impressive as that of the Japanese. He went to list certain statistics as examples to support his point. But I think the part that interests us most is the following and I would like to quote from this part: 'Still the West German achievement is significant enough to demand more than it usually gets.' What explains it? He gave a number of reasons and went on to say: 'But then there is also government policy. The West German government practises unalloyed supply-side economics, albeit with great moderation. Income taxes are being cut by US$8 billion. The government is now contemplating even bigger cuts. Several government-owned enterprises have actually been privatized. Scores of regulations have been abolished or relaxed. Capital markets have been deregulated to give small and medium-sized firms access to the equity market. But the real "secret" of the West Germans is business policy. Managements, with government and public opinion supporting them, have made maintenance of their firms' competitive positions in the world market their first priority and the overriding goal in their planning.' Sir, this article was also reprinted in yesterday's Straits Times. When I read this article very much earlier, I thought I was reading part of the Economic Committee's peport. It sounded so similar. Sir, we are just starting on our new economic journey, based on the recommendations of the Economic Committee. The Germans have shown the world their success based on the same philosophy. This year's Budget reflects the same philosophy too. That is why, Sir, I support the motion. 4.16 pm