MAIN AND DEVELOPMENT ESTIMATES OF SINGAPORE FOR THE - FINANCIAL YEAR 1ST APRIL, 1986 TO 31ST MARCH, 1987
Sir, we are currently discussing in the National Wages Council and in the National Trades Union Congress the question of wage restraint for our workers in Singapore. This is a painful subject. This is not something which anybody likes to talk about and is something which our workers have to bear. But I would like to make a couple of points here that might aid the discussion. One of the many principles enunciated by the Economic Committee's Report is that foreign investors would only come to Singapore if they find the rate of return here is greater than they find elsewhere. How much greater, it depends on the risk premia. What are the risks involved? Firstly, any investors, whether foreign or local, have to contend with market risk. After setting up the factory, they have got to market their produce, they have got to market their services, and if the market demand turns against them, then of course it would be a failure. Secondly, there is the risk of exchange rate changing against them, and that often happens in investments in developing countries. And exchange rate changes are something which is really quite beyond the control of governments. Thirdly, there is the question of whether political stability will continue. One finds that in countries where there is greater political instability, the risk premium demanded by investors is understandably greater. Fourthly, there is the risk premium that is paid for the possibility of industrial strife. That is why, Sir, in Singapore over the last 20 or 25 years, we have emphasized tripartism, a climate of cooperation between Government, employers and employees. Getting our workers to realize that a climate of industrial peace is necessary in order to attract foreign investors into Singapore. And to the credit of our workers, they have responded remarkably well, and we have got to ensure that industrial peace continues. But that can only happen if our trade unions continue to be constructive. Fifthly, Sir, the risk premium is also affected by comparative tax rates because in the ultimate analysis investors are interested in after-tax returns. That is why we had the recent tax revisions, in both income and corporate taxes. Government is trying to make after-tax returns more attractive to foreign investors. I hope these considerations would help our workers to understand the need for wage restraint, so that if they should happen to be working in a company that is showing profits at this time of recession, they should not be greedy and try to grab as much of those profits as possible because the idea is that we should allow companies to generate rates of return which are favourable compared to alternative investments elsewhere. If we fail to heed this all-important lesson, then I think our future may well be jeopardized. Sir, may I now move on to the question of statistics, that we need to do better forecasting, better monitoring of what is happening in our economy. First of all, may I express my appreciation for the improvement that I have seen, especially over the last 5 or 10 years, in the quality and in the range of statistics that have been published. Having said this, as I look at the manpower provisions for the Statistics Department, I find that there are only nine senior staff (statistical staff) that are handling national accounts, only 10 senior staff dealing with economic statistics, and only seven senior staff dealing with coordination and demography. Sir, our need for additional data is very pressing, particularly in the service sector. At the moment we only have a survey of the service sector every two years. We need to have annual surveys done. Then we need to de-seasonalize our data. This is quite a complicated procedure and requires a lot of expertise; it requires a team put on the job, and to do it properly. We lack data on flow of funds. We need to know how funds are utilized in our economy, efficiently or inefficiently, and the relationship between various sectors in the financial network. We need data on sectoral accounts and the relationship between sectors; for example, the relationship between the hotel sector and the corporate sector, and how the external sector impinges upon domestic sectors. We need to have national income accounts on the income side. I understand that while these may be available, they have not been published for certain reasons. We need to know certain components, like disposable income, if we want to make a proper analysis of the impact, say, of tax changes and other policy changes upon the economy of Singapore. These data are vital and necessary. We need to have data on personal savings, on marginal propensities to import, marginal propensities to save. We need to know what a multiplier looks like for an economy like ours. Right now, we only have guesstimates. We need to have balance of payments data, at least on a quarterly basis. If they are available, I have not seen them in a published form. We need to have public sector accounts, integrated with Government accounts, to show what the impact of the public sector is from year to year. Sir, these needs are quite pressing and, in addition to this, we have the need to generate an econometric model and that takes additional manpower. So I urge the Acting Minister to look into the staffing requirements, especially in the Statistics Department. I mentioned GATT earlier. I saw that the provision of $738,000 for GATT for 1985 was not fully utilized; only $533,000 was spent, and that for the current financial year, only $596,000 is budgetted. I want to know the reason why. I want to know the extent of support that the Ministry is giving to GATT. I want to reiterate and re-emphasize the need for Singapore to take the lead in international fora on free trade and protectionism. We need to sponsor conferences located in Singapore. We may want to have some of these international agencies that are fighting for free trade, perhaps, to be located in Singapore or at least to have some of their branches located here in Singapore. Because we live by free trade, we ought to give all the support necessary to professionals and international agencies that are propagating the idea of free trade. Then, Sir, as I look at the input/output Table of our economy, here again there is a deficiency. The latest published Table is that for 1978. When one is trying to make policy decisions in 1986, it would not do to have to rely upon input/output coefficients which are eight years old. Furthermore, as I look at the Tables, I find that our economy is truly very open, in that so little of any expenditure is on local goods and services. Can we do something about it? Can we encourage the formation of a greater domestic economy so that we are then less vulnerable to external forces? We can see that, over the years, the proportion of external demand to domestic demand has been changing towards greater dependence upon external demand. Can we not encourage greater purchase of Singapore goods and services through Government? Government could consciously encourage the purchase of domestic goods and services through the various Government departments and statutory boards. We had a recent exampleof the HDB wanting to furnish its new offices. Practically all the tenders specified furniture which were to be imported. I asked the question, "Why can't Singapore carpenters do the job?" And the answer was, "They lack the technology." But I said, "It is quite simple technology. Why can't you show them exactly what you need? Ask them to produce some mock-ups and give them preferential treatment so that we can generate employment domestically." We have a lot of foreign contractors in Singapore. Contracts above $20 million each have over the past years gone to foreign contractors. And I am told that these contractors do not pay taxes in Singapore at all. They come to Singapore with financial packages virtually subsidized by their governments. Now, I know we benefit by the lower tenders but at the same time we should recognize a device called "dumping". What is dumping? If a country wanted to dump its goods and services abroad, what it typically does is to offer these goods and services at lower prices than their competitors. Then, having captured the market, they later will raise these prices, and then there is no way of escape. This is the practice of dumping. If we are operating in an entirely free market, it makes sense to do nothing about the situation. But if there is conscious dumping being done and problems of economies of scale and subsidies via government's financial arrangements for their contractors, then it is time that our Government does something in response. And when the time comes to promote the exports of our services and goods, we too should present a package to help our exporters. We should try to identify cases of dumping in the Singapore market so that we can give suitable incentives and help to our domestic producers and consumers. We cannot be throwing up our hands all the time and say, "Well, if these guys cannot compete, what can we do about it?" I mean, we have got to do something. The Japanese government is very good at this. In fact, the whole Japanese psychology is geared towards Buying Japan, buying things made in Japan. If this were Japan and in a recession like we are in right now, we would be seeing banners all over the place, "Buy Singapore goods and services", and Government will be taking the lead in the process. Of course, we can do this to a far less extent than the Japanese can do. But to do nothing is also wrong. So I urge the Government to take my point seriously. Now a comment on the Jurong Town Corporation (JTC). Why is it that for 1985 the provision of $111 million was largely not spent, and only $19.3 million was spent? Why is it there is a provision in 1986 of $117 million? What is the JTC going to do with this money in 1986 when there is so much excess capacity of factories and of warehouses? Further, is the JTC considering a further reduction in factory rentals? I am told through the grapevine that about 900 factories are in arrears of their rentals to JTC. If this is so, then it portends trouble ahead unless we do something about it. On the Economic Development Board, I notice an increased provision, from $17.8 million to $20.8 million for this financial year. Is this enough? Because there are two additional burdens that the EDB has to bear from this year onwards: (a) the Small Enterprises Bureau; and (b) the promotion of companies that are service-oriented. So I foresee a much greater workload. Is the EDB equipped sufficiently to deal with both these additional burdens? At the same time, I am encouraged to note that the development expenditure for EDB has gone up from about $40 million to $85 million this year to give capital assistance to industry. It is all to the good. I notice too, Sir, a provision of $25.5 million for financing the joint-industrial training centres. My question to the Minister is very simple: how cost-effective are these centres? What are they producing? Are they producing people of the right skills? Finally, a word on the Trade Development Board (TDB). I notice a reduction in overall expenditure from $16.5 million to $15 million and a corresponding reduction of the Government subsidy from $9.3 million to $7.9 million. At a time when the TDB should be working harder, why is expenditure being reduced?