Hansard, 1988-03-15

Under the provisions of clause 2(d) of Article 46 of the Constitution of the Republic of Singapore, the following Members have been granted permission 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 Bernard Chen (Clementi) - from 15th to 24th March, 1988. Mr Lee Kuan Yew (Tanjong Pagar), Prime Minister - from 15th to 21st March, 1988. YEOH GHIM SENG Speaker Parliament of Singapore

In accordance with the provisions of paragraph (7) of Standing Order 87 and paragraph (5) of Standing Order 88, I have fixed the times for the conclusion of consideration of the heads of expenditure in the Main and Development Estimates of Expenditure for FY 1988/89 in the Committee of Supply. These times have been notified to hon. Members and will appear in the Official Report. (Cols. 777 - 782) Committee of Supply - MAIN AND DEVELOPMENT ESTIMATES OF EXPENDITURE FOR THE FINANCIAL YEAR 1ST APRIL, 1988 TO 31ST MARCH, 1989 (Cols. 777 - 782)

"to provide for the confiscation of benefits derived from corruption and for purposes connected therewith", presented by the Second Minister for Law (Prof. S. Jayakumar); read the First time; to be read a Second time on the next available sitting of Parliament, and to be printed.

Order read for Resumption of Debate on Question [4th March, 1988] [2nd Allotted Day], 'That Parliament approves the financial policy of the Government for the financial year 1st April, 1988 to 31st March, 1989.'. - [Minister for Finance]. Question again proposed.

Mr Deputy Speaker, Sir, I rise to join my colleagues in supporting the motion moved by the Minister for Finance. This Budget for fiscal year 1988 is aimed at not only putting Singapore's economy on a full recovery but also to ensure steady growth for the future. Singaporeans are very pleased to note that last year our economy grew by 8.8% and we hope that, as forecasted, we can achieve about 5-6% growth this year. The Minister and his officials at the Finance Ministry must be congratulated for doing a fine job. Sir, for this Budget the ordinary man-in-the-street are hardly affected at all. The tax increase on cigarettes will be felt only by smokers. I believe this is a good way to get more revenue from people who insist on smoking despite the numerous anti-smoking campaigns. They can do without smoking but if they insist on doing it, then I think they should be willing to pay a bit more. Sir, yesterday my colleagues spoke at great length on foreign workers' levy, property tax and other revenue and tax changes. I do not intend to cover the same ground but shall concentrate on one very important matter, that is, upgrading the workforce. Our labour statistics showed that the educational profile of our workforce was such that 52.5% in 1986 has less than a secondary education. This is better than the 58.6% in 1980. However, when compared to the US, Japan and Taiwan, our workforce is less educated. More than half of our workforce, that is 53% in 1984, have primary level education only. This is less favourable compared with 15% in the US, 35% in Japan and 45% in Taiwan. I think the government, employers and unions must look into this matter seriously and take steps to upgrade our workers. No doubt we have many courses for workers like BEST, MOST, WISE, COSEC, etc., but the question is whether these courses are enough to upgrade all our workers. Are our workers given time to attend these courses? We should do more by having more grants for training of workers. If the Americans can spend between $750-800 and the Japanese between $2,000-3,200 on training every year for each employee, I see no reason why we should only spend about $100 per employee. This $100 is based on SDF statistics on formal off-the-job training. So I believe we can do more by having more grants from the SDF for the training of workers. Sir, I am pleased to note that the NPB has made recommendations on initiatives for re-skilling the workforce in May 1987. I believe the Government has accepted the report. May I ask, how far have we gone to implement the recommendations made by the NPB Council? Let me quote two of the eight initiatives mentioned by the NPB report: Initiative No. 1: setting up of a coordinating agency to study, monitor and plan skills requirements and the training required by the Singapore workforce to meet changing economic and work condition; and Initiative No. 8: setting up of a network of skills centres or training information centres to provide on-the-spot information on training programmes and to counsel workers on the alternatives and options open to them. I wish to ask the Minister whether the NPB is being given the task to be the coordinating agency and information centre. Sir, the greater emphasis on training of workers will definitely upgrade the skills and productivity of workers and, thus, the competitiveness of Singapore-made goods in the world market. However, during this Budget, the Minister did not announce the increase in the contribution to the SDF even though we are aware that very soon the disbursement of the SDF will greatly exceed its annual collection. In no time, the SDF will be depleted. Based on our economic growth for 1986 and 1987, I think the Government should compel the employers to contribute more to SDF for the benefit of our workers. I urge the Government to announce the increase of the SDF levy together with the increase of the CPF rate after the first quarter of this year. And I think it is for the benefit of our workers, for their re-training and upgrading. With that, Sir, I support the motion.

Mr Deputy Speaker, Sir, the Budget Statement delivered by the Minister on the 4th March has been described by various Members of this House as cautious, undramatic and unexciting. The remarkable thing is that he did not do a number of things that he could have done, such as the introduction of additional taxes, which is surely good news for taxpayers. The Budget has been designed and calculated to instil prudence and flexibility - qualities which have served us well in the past - which will be of increasing importance in the years to come which will be characterized by increasing competitiveness and protectionism in the world markets. Most of the sectors in our economy did very well in 1987. But in the face of a possible slowdown in the world economy this year, our cost-effectiveness must be monitored even more carefully. Sir, the total investment commitments in 1987 rose by 21% and reached the target of $1.7 billion, a significant portion of which came from the electronics and supporting industries. These industries were boosted by buoyant demand in many countries. However, it is well to remember that such demand has fluctuated cyclically every few years. Rapid obsolescence in the electronics industries means that production facilities need to be upgraded regularly and perhaps shifted to other locations from time to time. In some instances, the cost advantage of a plant in Singapore may be more than offset by other considerations such as proximity of markets and consumer preference. For example, it was reported in the press that Apple Computers may shift its overseas production facilities away from Singapore to Europe despite a very recent announcement by its Chairman that Singapore would be their production centre outside the United States of America. It is, therefore, important to remain agile and adaptable. Changes in circumstances may come about sooner than expected. The Minister emphasized the importance of adequate investment in training. And he pointed out that in the case of Singapore, only 1% of our national payroll is spent on training as compared with 2-4% in the more advanced countries. By 1989, investment in training will increase to 2% and by 1992, to 3%. It is, of course, crucial to upgrade the skills and improve the knowledge of our workers. Even in the United States, it has been pointed out that between 1929 and 1957, about half the economic growth was attributable to training and technology. And for the years in the 1990s, the role of knowledge-intensive industries could be even more pronounced. The benefits of greater and more effective training can only be seen in the long run. The availability of funds for training is a necessary but not a sufficient condition for better training. The selection of relevant training courses, the standard of the instructors and the quality of the training materials are equally, if not more, important. The training of the trainers must be given greater attention to ensure that we have a competent and committed pool of trainers in Singapore. Foreign trainers, of course, must be used. But we cannot depend on them for all kinds of training courses for an indefinite period of time. Among the significant aspects of the Budget Statement is the absence of additional taxes on motor vehicles. This is surely good news for the motorists! If road tax is to be used to regulate the number of vehicles on the roads to reduce congestion, then car ownership per se is not an equitable basis for any tax increase. The additional tax should be borne by those who contribute to peak hour traffic. Sir, from Year of Assessement 1988, unit trusts and investment holding companies can elect to have their gains on disposal from investments taxed on a sliding scale of zero to 33%, depending on the period of time during which investments have been held. For investments held for less than six months, they will be taxed in full, that is 33%, whilst those held for more than 18 months will not be taxed at all. In the case of investment holding company, the tax measure is acceptable as it has removed a long-standing uncertainty about the liability of investment gains. However, the extension of the proposal to unit trusts has not been well received. It is believed that the tax proposal instead of promoting the industry will retard its growth for the following reasons. Currently, individual investors on their own can buy and sell shares in the market and are not taxed on the gains derived. The proposed tax therefore acts as a disincentive to potential unit trust investors. Secondly, unlike investment holding companies, unit trusts may be forced to sell their investments to meet the redemption of units by unit holders even though the intention may have been to hold the investments for over 18 months. Unit holders redeeming their units may have to suffer tax that is eventually not payable if the investments are held for 18 months or more and the gain is therefore not taxable. The tax burden is therefore not equitable. From an operational viewpoint, considerable difficulties will be encountered in building the tax into the daily unit pricing. Moreover, it is specifically provided that CPF account holders are tax exempt on gains if their funds are invested in approved unit trusts. Complicated procedures are stumbling blocks to efficiency and precious time and energy may be spent elsewhere. The problems mentioned are not insignificant and I hope the Minister will review the proposal in respect of unit trusts and see how these difficulties can be resolved or at least minimized. If the primary objective is to promote fund management in Singapore, then I am afraid the tax proposal for unit trusts is not likely to contribute towards it.

( In Mandarin): Mr Deputy Speaker, Sir, just like what the Member for Tanah Merah has said too many MPs have talked a lot about taxation, so I would not like to deal with it any more. However, in the Budget Statement of the Finance Minister there is one characteristic which, although it is a small point yet it has a major significance, ie, the financial management has shifted from central control in the high-ranking officials of the Ministry of Finance to the other Ministries. This is a decentralization and delegation of management and control of finance from the Ministry of Finance to other Ministries. Henceforth, senior Finance officials can no longer monopolize the power but delegated to various Permanent Secretaries of other Ministries. On page 8 of the second section of his Budget statement, it gives the policy statement. It says that subject to a maximum of $10 million for development, any expenditure on any project lower than $500,000 need not seek the approval of the Ministry of Finance. Sir, this change is a major change in policy and it is good. It will have great effects. Henceforth senior officers of the various Ministries need not pass the buck round to the Ministry of Finance, eventually landing on the Minister for Finance and blaming him for everything for nothing. I feel that from now on the various Permanent Secretaries will be enboldened to do on their own discretion the necessary tasks that behove their action without passing the buck. In the past two years there has been a strange phenomenon. When the Government's policy is quite right, however, when it comes to the higher officers of various Ministries for implementation they could not implement correctly according to the policies laid down. They would deviate from the policy lines, thus causing the people to complain and blame the Government. Let me give two examples. Recently, the People's Association has decided that for the new type community centres the time of opening hours would be advanced from 2.30 p.m. to 8.30 in the morning. This is a correct measure, as it is beneficial to the people. The P.A. requested Finance Ministry to supply the money in order to engage more staff. However the officials of the Ministry of Finance rejected their request, saying that the Government now is trying to cut down the number of staff to economize, yet you want more money to increase your staff! I won't give you. What can you do? So now the few staff in such new type community centres will have to work overtime everyday, being seriously short staffed. I asked them what happened. They won't dare to say there is no money forthcoming from the Ministry of Finance. They won't dare to offend the high-ups. How dare you! Let me give you another example. There were some poor people trying to apply for stalls in school tuckshops. They have the right to do so. When they approached MPs for help, they in turn wrote to the Ministry of Education. All MPs know what would happen. Even when MPs of substance including the Ministers sought their help, their reply would always be the same, saying that they could only convey the message to the persons concerned. Whether or not the outcome is successful, it has got nothing to do with them. You can ask those persons concerned. So that is the most they could do. This reminds me of what the Prime Minister said last Saturday the 12th March when he officiated the opening of MRT. It was reported that before MRT construction work started he asked the officer in charge whether the MRT construction could be sped up. The officer after careful consideration replied that it could be done. I would like to stress this phrase, "after careful consideration" which expresses sense of responsibility, I appreciate very much this responsible manner of dealing with a matter and service attitude. He dared to take up the responsibility on his own and could give a definite answer. Sir, now the officers of various Ministries being in charge of certain duties and delegated with discretionary power could not pass the buck to Finance Ministry or blame it. This is very good. They should try to help the Government implement the new financial policy which is introduced just in time to realize the Government's vision of 1999. Whoever one is, whether an MP, a senior officer of the Government or a Minister of the Government or anybody else, I hope all will take up their responsibility to serve the people well and not let them down in order to help realize our future vision. Thank you.

Mr Deputy Speaker, Sir, to me, this Budget Statement is a very special and significant financial statement since the younger leadership led by the First Deputy Prime Minister took charge. It confirms the resolve of the younger leadership in steering the nation out of recession, as we see for ourselves the capability of the leadership in conceiving the corrective measures and the ability to implement them effectively. It took only two years. As a management accountant and having worked in the commercial and industrial sectors for more than 20 years, I cannot find an exact word to describe this phenomenal achievement. I cannot use the word "miracle" because a miracle does not need hard work. So as a reticent Oriental, I humbly and gratefully say, xie, xie. All of us realize that another recession cannot be ruled out in this uncertain world economy. But this Budget Statement has given us the comfort that this younger leadership has proven that they can steer a vulnerable ship through the stormy economic sea. This Budget Statement also revealed very clearly that the younger leadership is farsighted, as evidenced in the relentless drive for foreign investments. Over the last two years, Cabinet Ministers strenuously went on a selling mission overseas and the achievement of S$1.7 billion of foreign investment commitments shows the confidence of the foreigners in the younger leadership. Mr Deputy Speaker, Sir, the S$1.7 billion foreign investment commitment in some ways make up for the absence of a large domestic market. It creates thousands of jobs and provides our local businessmen with opportunities to be supporting industries. However, I am concerned that if our local businessmen continue to be just supporting industries, we will run into serious economic problems if the next recession were to hit us. With a breathing period of substantial foreign investment commitments, the Government should look into ways and means to nurture our local businessmen to be export orientated. The incentives which are presently available for the local businessmen are directed at upgrading so as to serve the multi-nationals better. The incentives are not sufficient for them to compete overseas. The local businessmen not only lack finance but also management and marketing expertise. Incentives like the Product Development Assistance Scheme may be a good start where the local businessman is given a grant based on his proposal to market overseas and for a given period if he makes profits to pay back the grant. A faster way is to encourage existing local businessmen who have the finance, management and marketing expertise to start or increase their business overseas. They can become the pace setters and serve as models for others to follow. I see the Economic Development Board as the most suitable body to spearhead this move. But the incentives package must be generous and flexible. Needless to say, time is the essence and sense of urgency the rule of the day. We certainly wish to look forward to a day when we can have both foreign and our own multi-nationals existing side by side. This is really a challenge for the younger leadership. Mr Deputy Speaker, Sir, I want to move on to another subject. It is a very sound policy that every abled citizen should earn his own keep. However, there is a group of lower income citizens who have to supplement their low income in order to make their ends meet. But there are almost no opportunities for such people. These citizens are usually lower educated, no special skills and earning basic wages. If they cannot supplement their income, I do not think that they can come out of the poverty trap. Let me share with you a case to make my point clearer. Some months ago a middle aged man came to see me at my regular Meet-the-People session. As he entered my room I saw that his eyes were red as though he had been crying. Crying or not, he certainly looked drained, worn out and sad. I could sense his sadness and disappointment with life when he handed me a note and started to relate his problem. He worked in a bakery and earned about $400-$500 a month. With this he has to support two school-going children and, I think, two aged parents, a house and utility bills. He can hardly make his ends meet. His kind employer suggested that he could sell some bread at the void deck to supplement his income. This he did. But little did he realize that this ironically made him poorer. You see, the note he handed me was an HDB notice for illegal hawking. Mr Deputy Speaker, Sir, I want to ask: where and how in Singapore can this man supplement his income without resorting to crime? The answer is a bleak one. Can we help? I believe so. I support the Member for Kebun Baru when he called for the formation of a Council for the lower income. I want to add here also that we should not develop into the undesirable social conditions like that of America and Japan where the countries are rich but the majority of the citizens are poor. I am also grateful to the First Deputy Prime Minister when he said that he needs more time to analyse whether anything can be done before he commits himself. Caution is his virtue and I personally think it is a good virtue for a leader, and I hope the Government will do something about it.

I have a clarification for the Member for Paya Lebar. He is appreciative of the Budget and he cannot find an appropriate word to show his appreciation. According to him, he says the most appropriate word is "xie xie". I am sure I also speak on behalf of the Malay MPs here, and I say that the most appropriate words should be terima kaseh.

Mr Chiam, can you please resume your seat. I do not understand what you are trying to clarify. You are strictly out of order. Mr Yatiman.

( In Malay): Mr Deputy Speaker, Sir, the debate today is on a serious matter and if we were to interject on trivial matters, such as the right language in which to offer our thanks, I am afraid the debate will deviate into petty issues. Mr Deputy Speaker, I rise to support the motion of the Finance Minister. Sir, the hon. Finance Minister deserves to be congratulated for preparing a balanced budget that also contains provisions to ensure continuity in our economic growth, to prepare ourselves for the possibility of a change in the economic situation, to provide no fewer incentives and to broaden the areas of growth, to maintain cost -savings in the public sector and to encourage a high private and public sector savings rate and finally to encourage the growth of intellectual expertise. Apart from the increase in tax on cigarettes, foreign workers' levy and a number of other small increases, there are no punishing taxes. Actually the budget this time is not only a wise one but is also cautious and inspiring. Congratulations once again to the Hon. Finance Minister. Mr Deputy Speaker, since the debate began yesterday many matters have been raised concerning manpower resources. This is because of the increase on foreign workers' levy and our rather tight labour market. This is proper considering that manpower resources is the only resources that will determine the progress or otherwise of our economy and our future. In fact the tight labour market has compelled us to study in depth the implications of all the policies introduced in its connection. We are aware of the fact that bringing in and depending on foreign manpower produce undesirable effects. This is because it not only delays the process of transfer of technology and expertise but also brings about not insignificant social and psychological effects on our population. Hence it is our responsibility to reduce this dependence by looking into ways in which we can prevent ourselves from being trapped within this circle. We heard many proposals to overcome this problem yesterday. These include the maximization of women's participation in the labour market, by providing various incentives to free mothers to go out to work, to provide a multi-tiered levy, to attract retirees to continue working, by providing for different CPF rates for them and being selective in allowing foreign workers to work here. Of all the proposals, I am most impressed by the one made by the Member for Chong Boon who advocated a two-tier levy that gives priority to developing sunrise industries over sunset industries. I also agree with the amendment proposed by the Member for Jalan Kayu who stressed that we should introduce a tender system to reduce the cost of employing foreign workers. However, the most important issue to me is that the provisions should not merely contain cost-reduction elements but also offer effective and sufficiently attractive incentives to prevent our dependence on foreign workers or the indiscriminate entry of foreign workers. Mr Deputy Speaker, before we introduce these measures we should ensure that we have taken all the necessary steps to look to our own human resources first. There are two matters that I want put across here. First, have we ensured that we have studied, scrutinized and investigated our labour market situation in full? Second, have we ensured that we have made maximum use of existing domestic labour? Our domestic employment market is a function of supply and demand. It is exposed not only to internal but also external supply and demand. The presence of cheap labour from abroad makes them compete in our labour market. If we compare our labour shortage with our unemployment figures, we believe something can still be done to overcome this problem before we look outside for labour supply. We once questioned the accuracy of our projections of manpower requirements. We acknowledged that the manpower projections survey often did not give the true picture of the labour demand. Perhaps the time has come for us to seek a new formula for more accurate estimates and projections. If we have grasped the actual position of the contributions and potentials of our VITB graduates and the less-educated, if we have made full use of on-the-job training and introduced a truly effective system of incentives, and if we have given the utmost opportunities to former drug addicts and ex-convicts who wish to return to the fold and to hold responsible jobs - then I believe we have succeeded in reducing the brunt of this problem. On this issue of manpower, allow me to speak on the problem of manpower shortage faced by the public sector. When he dealt with Expenditure On Manpower, the Hon. Finance Minister stated, and I quote: 'EOM is projected to increase by $98 million or 6% because of normal salary increments and filling of essential vacancies.' We have decided that the private sector should be the engine of economic growth. In this regard, it would not be inappropriate if the private sector becomes the pace-setter and leader in the labour market. Because of our tight labour market, keen competition not only happens between private firms, but has also produced adverse effects on the manpower situation in the public sector. Because of attractive salaries there has been a draining of manpower resources from the public sector to the private sector, particularly in the service sector. Perhaps we should review our labour cost-saving measures in the public sector and make the necessary adjustments. The shortage of nurses and ancillary staff in Government hospitals and the great number of those who leave the public hospitals to work in private hospitals is a manifestion that we should be concerned about. If we want our health services to be the best and most excellent in this region, this problem must be rectified. Actually the manpower shortage that we face is also felt by other ministries. In fact, it is also felt at different rates in various economic activities. The employers I have met, especially those involved in the service sector, say that the manpower shortage can be likened to a man with a short sarong - if he draws it up, he exposes his legs, but if he brings it down, he exposes his top. But they say what is happening now is that everyone is pulling at it from different directions, tearing the sarong everywhere. Sir, whether these claims are true is something that we have to look into. As a result of the keen competition, job-hopping has become common practice. The result is that those who are inexperienced in a particular field of work gain high positions. Because it happens at both the lower-end and the high level it not only reduces the quality of work but also the quality of decision-making. This in the long term could undermine our economic performance. Another matter that I wish to touch upon is our ability to nurture and expand our indigenous industries. The US move in withdrawing its GSP for Singapore is an early sign that we are facing bigger obstacles to our exports. The experience of several developed countries has shown that one of the important factors that enable them to overcome this problem is the strength and the capacity of their indigenous industries to make the move abroad. Although we acknowledge that a large part of the contributions to our economic growth come from foreign firms and the MNCs, it does not mean that we should ignore the contributions of local entrepreneurs. We need to create a suitable climate to continue attracting foreign investors - a stable politic situation, a competitive edge through lower production costs, modern infrastructure, banking facilities and increased productivity - all these should be maintained and improved. But, at the same time, Sir, efforts to cultivate, to nurture and to develop local industries should be given attention. Our entrepreneurs should eventually invest abroad. If we can help this by ensuring that we enjoy a kind of invisible exports in the form of expertise from those who contribute by bringing in income from overseas employment, I do not see why our local entrepreneurs cannot do the same. The only thing is that before they could compete with the foreign giants, we need to improve their capabilities and efficiency locally. The question is: have we helped them and given sufficient incentives to enable them to enhance their capabilities and efficiency? I am sure that in drawing up policies on taxation, manpower utilisation and development technology-transfer and management, this question has not been overlooked. Mr Deputy Speaker, on that note I support the Budget motion by the Minister for Finance.

Mr Deputy Speaker, Sir, thank you for allowing me to join in this debate. I do not propose to go over all the points that have been raised by Members of this House. But I would like to speak on two points raised by the Member for Yuhua and the Member for Bo Wen, and that is, concerning the use of CPF for education. I think this is one time the Minister for Finance need not reply to what I am going to say, but I would like to lobby his support so that he can use his influence on the Minister for Labour to see whether this proposal of mine can be taken into consideration when the Ministry of Labour discusses the possible use of CPF for education. I therefore submit to you, Mr Deputy Speaker, Sir, a copy of the report on the CPF for Education. It is a draft proposal done by the Government Parliamentary Committee on Education. [Copy of Report handed to Mr Deputy Speaker.] I have already circulated the report to Members of this House and I hope they will go back and read it and we will debate in more detail when we come to discuss the Ministry of Labour's head of expenditure during the Committee of Supply. I would just like to briefly lay out the scheme to this House so that some of you who may not have read that proposal may understand it and perhaps give us your support later on. Very briefly, we will not disturb the CPF arrangement. There will be no increase in CPF contribution. We will only use an existing scheme, an approved scheme in the CPF, and that is your approved investment scheme. We want to tag along that scheme. We want the Ministry of Labour to offer Singaporeans a choice - to use it for investment in stocks or to use it for education. The approved scheme for investment has got certain safeguards and we have also incorporated into our scheme certain safeguards. Some of the safeguards we have proposed are: we would place a limit on the amount withdrawn. Under the approved investment scheme, members can use only up to 40% of their investable savings or balance in their Ordinary account after the necessary deductions, whichever is lower. We want to ask the Ministry to consider education as another option and it can also place that 40% limit on its use. Just like the various safeguards in the investable scheme, we hope that CPF will only be allowed for tuition fees and not for any other fees. I think preference to local tertiary education should be given. There has been a fear that some Singaporeans would go to institutions of less repute and therefore we should provide some form of guidance to them. We could draw up a list of approved accredited tertiary institutions as a guide for those who want to pursue their studies abroad. On top of that, we have also another safeguard and, that is, we draw up a list of approved courses. We do not want Singaporeans to go abroad and do courses that are not very relevant to our economy.

Order. Dr Tan, can I point out to you that under the Standing Orders debate on this motion is confined to general principles of Government's financial policy as set forth by the Minister for Finance in his Budget statement. I see that you are going into very great detail, and I would like to suggest that the proper place to bring this up would be in the Committee of Supply under the Ministry of Labour head of expenditure. Could you confine yourself to very general principles?

Yes, thank you very much, Mr Deputy Speaker, Sir. I know.

If you know the Standing Order, and you still persist, that is a serious breach of Standing Orders!

Well, I have been given only five minutes or 10 minutes. So you have to just give me another two minutes.

I was hoping that you would come back to the right track on your own.

All right, I think basically that is what I want to say. We will pursue this matter when we come to discuss the Ministry of Labour. Please, I hope all of you will read this proposal and support it, especially the Ministers.

Mr Deputy Speaker, Sir, thank you for this opportunity to speak. It seems that Members cannot wait to discuss the budget of my Ministry. I had not intended to join in the debate today. However, as many Members have spoken on the foreign workers' levy, I felt that it may be better for me to respond now, to avoid any misunderstanding. I will, as directed by the Deputy Speaker, only speak on CPF in the Committee of Supply. As I explained in the last Budget debate, the levy is basically a cost equalization measure. It is meant to equalize the cost of employing a foreign worker versus a local worker. As we all know, the foreign workers come from countries where the wage levels are much lower than ours. Unless we have a levy to equalize the cost, the tendency will be for employers to employ more and more foreign workers, possibly at the expense of our own older workers. We must bear in mind that the workers who are on the levy scheme do not pay CPF. Neither do the employers have to contribute CPF on their behalf. Let me give you an example. If an unskilled foreign worker has a take-home pay of $300 per month then, with the existing levy of $140 per month, the total cost to the employer is $440 per month. Similarly for a local unskilled worker, if the take-home pay is also $300 per month, then you can easily calculate that the total cost to the employer, inclusive of CPF, is also $440 per month. Thus, it costs the same to hire the foreign worker or the local worker in this example. The $30 levy increase therefore works out to about 7% cost increase for this particular worker. It is a smaller percentage cost increase for those workers with higher pay, for example, more senior workers, semi-skilled workers or skilled workers. Therefore, the levy system favours the recruitment of semi-skilled and skilled workers. The levy is basically a pricing mechanism. It was in fact recommended by the Economic Committee, if you go back to the Report, and we have adopted this method. As the demand for foreign workers rises, the levy has to be raised to dampen the demand. This is looking at it from the overall macro-economic point of view. The Government cannot afford to wait until foreign workers become excessive and then clamp down completely and suddenly. So it has to be a progressive system. Employers should make better use of existing workers and seek out alternative local workers. For example, there are many local housewives who would like to work part-time. Many Members have suggested that we should look further into how to overcome this problem of worker shortage. I take that point and we will have to look at the various measures. In fact, we are looking into how to encourage part-time work and so on. But at the same time we must also dampen the demand for foreign workers because otherwise, as the pool gets greater and greater, it will have various adverse social, economic and even political implications. So long as foreign workers are freely available at low wages, there will be no incentive for our employers to hire older workers, to extend the retirement age, or even to introduce part-time work. For example, we have heard of instances where workers who are above 35 years old are already classified as old. Frankly, I was a bit disappointed yesterday when I heard the Member for Radin Mas stating his opinion that electronics firms can only recruit young workers. How young is young? Is a 35-year old woman too old for employment in the electronics firms? Surely not. The foreign workers' levy therefore serves to dampen the demand for foreign workers. Otherwise, in the current situation with the adjustments in foreign exchange rates of the yen versus the Singapore dollar and the fact that our cost has become very competitive internationally, there is a flood of investments coming in, very labour-intensive investments, so much so that the supply of foreign labour creates its own demand. The more you are liberal with the entry of foreign workers, the more there will be a demand for them. I agree that we must not allow the labour market to become too tight. So we have to perform a very careful balancing act and use the mechanisms at our disposal. It is not only a question of the foreign workers' levy but also a question of approval rate and so on. I must correct a misconception here, that the levy affects mainly local employers. This is not true. It affects mainly employers who depend to a large extent on foreign workers. For example, there are many local employers - banks and other trading companies - who have very few foreign workers. Therefore, the levy increase would have no impact on them at all. I think it is fair that those companies which depend more heavily on foreign workers should be more affected by this measure because they have had more than their fair share of foreign workers. In fact, I think some local companies have complained of limited access to foreign workers. So it is not a question of just the levy alone. As the Member for Chong Boon and the Member for Jalan Kayu have mentioned, we should look perhaps into other systems, and this is something that needs further study. But the ones who are affected are the ones who already have large numbers of foreign workers. In fact, in a sense, those companies which are allowed access to foreign workers are privileged because there are many employers which are not allowed to employ foreign workers. These, of course, are the non-approved sectors. Now, the cost impact on the total economy will be very small. I think it is a fact that this Budget contains very little for Members to sink their teeth into. So they tend to zoom in on this particular issue and blow it out of proportion. If you look at the facts, it affects only less than 3% of our workforce. Of course, it will go up as more and more of the foreign workers change jobs and if there are more foreign workers. But the total impact will still be very small. I have estimated that the total quantum of the levy increase, the total increased levy collected a year, is of the order of $10 million. This is really very insignificant compared to the size of our GNP. In fact, if we compare it to the impact of, say, a 1% increase in the CPF rate which affects all the workers, this increase is really nothing. The Member for Whampoa and several others asked the question: why implement this levy increase now when there are fears of slower growth? It is correct that the Government should take a cautious approach. But at the same time we should not be paralyzed into inaction. The number of foreign workers has been rising far too rapidly, as mentioned in the Budget Statement. Last year out of the 48,000 jobs created in manufacturing, more than half were taken up by foreign workers. And even now, despite all the talks of recession, the foreign workers are coming in at a rate of 2,500 or so per month, which would work out to about 30,000 foreign workers in one year. Therefore, certain adjustments have to be made and they have to be made now. It is a progressive fine-tuning of the economic system. The levy is a pricing mechanism, as I have said. If the number of foreign workers, for example, were to fall as a result of economic slowdown,k than the foreign workers' levy can be adjusted downwards. However, if the demand for foreign workers continues to rise sharply, the levy again to dampen the demand for foreign workers. I think Members may not have realized this or may not have emphasized this enough. But it is a fact that the levy if to the benefit of our local workers. It benefits our local workers. We cannot have an uncontrolled situation where more and more foreign workers are willing to come in to work at low wages and as a result, depress our wage levels. As a result of that there would be no incentive for the companies to automate, to upgrade, to move on to higher level activities. The objective of economic development is not just to have more and more jobs, but to create better jobs for our own people. The levy, therefore, acts as an import duty to discourage overdependance on foreign workers. Otherwise employers may tend to hire younger foreign at the expenses of older Singaporean workers. However, I must add a word of caution here. Local workers should not demand excessive wage increases or job-hop. The local wage situation should continue to be moderated so as not to upset the economic recovery, especially now with this prospect of a slowdown in the economy. Our local workers should accept flexible wages which vary with the performance of the company and the worker. This is the best way to ensure that our companies will be able to survive through good times and bad. In good times the employees are rewarded; in bad times they take a pay cut or have a lower bonus to help the company to tide over the recession. I would just to touch briefly on this idea of a two-tier levy system or tender system. As I said, this is something that we have to look into very carefully. I have just a few immediate reactions. One is that at the moment we do not allow non-approved sectors to recruit any foreign workers. Why? Because they are generally oriented to the domestic market and do not face international competition. If these employers have difficulty getting workers, it may be a question of whether the employer is willing to pay adequately for the kind of work. Since all the competitors within these sectors face the same situation, that means no foreign workers, the market will adjust itself ultimately through pay increase, through passing on the costs, and so on. But these are all domestic market-oriented. It is a fact that these sectors are now able to manage with hardly any foreign workers. So the sectors are like a dry sponge. Once the sectors are allowed to recruit foreign workers, they will soak up foreign workers in large numbers. Then stiffer measures will become necessary to bring the situation under control. Now, we must not make the mistake of thinking that small and medium enterprises are classified as non-priority sectors. For example, supporting industries can recruit foreign workers if EDB supports their applications. However, those small enterprises (barbers and so on) which are oriented to the domestic market are not in the approved sectors, for reasons I have explained. The other consideration is that a two-tier levy scheme will complicate the administration of the work permit policy. It will give rise to disputes why certain employers pay one levy and others another. And personally I am not convinced that the employers are really prepared to pay a premium. What kind of premium? For example, if we charge them $340 per month instead of $170, will they still want to recruit foreign workers? I am not sure. What they want are foreign workers at low wages. There is a better alternative for them, and that is, to recruit foreign workers with five 'O' levels and skill. I am prepared to admit them to any sector of the economy. There are also other foreign workers who are already here within the unapproved sectors. My Ministry has allowed them to continue to stay on in Singapore and they are allowed to change jobs if they want to within the unapproved sector of from the unapproved sector to the approved sector, so long as the new work permit is issued one month after the cancellation of the old permit. These are what we call "change of employment" cases. So there are various avenues open for them and, if there are other deserving cases, I can look at them on a case-by-case basis. Finally, this point raised by the Member for Potong Pasir where he had this bright idea that we should use the levy collected to subsidize and pay local workers more. This sound very good on the TV, in the papers. But in actual fact, it is no more than politicking, in my opinion; because if the Government were to forgo the levy and the foreign workers are not subject to CPF, then employers will find the foreign workers much cheaper than local workers and they will tend to hire foreign workers at the expense of the local workers. And if you use this levy, the way it is suggested, will the employers really use the savings to pay local workers more? Or will they just pocket it? All I can say is "Good try, Mr Chiam." I think from now on Singaporean workers will have to listen very carefully to what the Member for Potong Pasir says in the Parliment. Yesterday he advocated that the employer's CPF rate which has been cut from 25% to 10% should not be restored. He seems to have forgotten that workers have endured the cut as a temporary measure to help the economy to recover. Now the Member says there should be no restoration at all. Instead, he held out the idea of using the levy increase to pay local workers higher wages. If you examine this more closely, as I said, it is no more than politicking. Thank you.

Mr Deputy Speaker, in view of the fact that I have been singled out by the Minister, I feel obliged to say a few words on what I said yesterday.

Mr Chng, you have already made you speech yesterday.

But he specially asked whether 35 years old are old Singaporeans. So I feel obliged to reply because I did not make any assertion of that kind.

Do you want to make a clarification?

Yes.

All right, a brief clarification.

What I said yesterday, if the Hon. Minister would recall, was that at the last retrenchment exercise, the workers who were retrenched were mainly over 40 years old and they were males. As far as I understand, the electronics industry requires girls to work in the production lines. Unless the Minister is absolutely convinced that a 45-year old man can work on a production line where all the girls are between 25 and 30 years old, I think it is going to be very difficult to say that you can employ this man to work on the production line. I will like to assure everyone that, as far as I am concerned, 35 years old is very young in Singapore. 12.14 pm

Mr Deputy Speaker, Sir, the Budget debate this year has taken less time than in previous years largely because there are no significant tax changes available to excite the imagination and rhetoric of Members. Although fire and brimstone was generally absent, nonetheless a large number of issues have been raised, many of which can be better dealt with by the relevant Ministries during the debate on the Recurrent and Development Expenditure Estimates. This morning, I will therefore confine myself to responding on issues in seven main areas. But before doing so, I would like to thank all the Members who have, with one exception, generally supported the Budget proposal. Some have even been effusive in their commendations, for which I thank them. However, I believe that much of this commendation should be directed at the permanent staff of my Ministry who have laboured long and hard to formulate and recommend much of the policy and structural changes you have seen over the past several years. I refer, in particular, to the officers in the divisions responsible for the Budget, Public Service and Revenue. The quality of their work is such that the public can be assured that the management of Singapore's finances is in good hands. In this connection, I have often thought that Japanese system in which Civil Service officers are obliged to respond to questions in Parliment on behalf of Ministers may be worth adopting! Mr Deputy Speaker, Sir, the issues I will touch on are tax competitiveness, corporate tax issues, public sector savings and current account surpluses, duty on cigarettes, statutory and Government charges, public sector accounts, property tax, CPF rates and SDF levy. But before I go into these matters, I would like to make a general statement on the Government's past and present fiscal policies. During the early stages of Singapore's economic development, Government's fiscal policy was designed to yield consistent budget surpluses in order to fund a large and continuing programme of infrastructural development expenditures and to build up a reservoir of foreign reserves. All this has been accomplished and we have accumulated a very comfortable level of reserves. And the fruits of the development programme can be seen all around you. That all this has been achieved in less than 30 years in a small over-populated country devoid of natural resources is a permanent tribute to the people of Singapore, its Government and to prudent past Ministers for Finance. Today, our priority in fiscal policy needed no longer be the generation of budget surpluses, although we will continue to do so in good years. We can now luxuriate in looking forward to balance budgets. Our concern now is to ensure that the hard-earned reserves are not frittered away but are preserved as a permanent reservoir, only to be drawn on to tide us over temporary economic reversals due to factors outside our control. It is against this background that Government's tax policy for the future should be viewed. Where revenues and expenditure are in balance, there should be no need for tax changes except when tax cuts in one area not offset by expenditure reductions or revenue gains elsewhere will require compensatory increases in other area, or where measures are introduced to achieve specific social purposes (eg tobacco tax). I will now turn to the specific issues raised: Tax competitiveness. To begin with, I would like to thank the Member for Potong Pasir who has kindly enlightened this House that Hong Kong had reduced their corporate and personal tax rates by a percentage point or around 6-7% and that we should be mindful of what Hong Kong is doing. I would in turn remind him that he seems to have forgotten that our corporate and personal tax rates were cut by 7 percentage points or around 7% i 1986. Our tax cuts since 1985/86 have injected something like S$3 billion into the economy compared to the HK$2.7 billion, he claims, for Hong Kong. In making this comparison, the Member should perhaps be reminded of the fact that Hong Kong's fiscal objectives and economic fundamentals are quite different from ours. Hong Kong registered an inflation rate of 5.5% in 1987 in comparison with our rather low and stable 0.5% for 1987. The per capita indigenous GNP for the two countries are of the same order. There is therefore no pressing need for us to make adjustments against inflation. Our personal tax system is well positioned against that of Hong Kong's. As I have mentioned in my Budget speech, a large number of individuals earning assessable incomes of up to S$150,000 pay less taxes than their counterparts in Hong Kong. I would like to inform the Member for Potong Pasir that Singapore corporate competitiveness vis-a-vis the other NICs, including Hong Kong, are carefully monitored continuously. Our effective corporate tax rates are lower than Hong Kong in many instances because of the following: (a) Generous depreciation allowances of one to three years which reduce a company's taxable profits. Additionally, investment allowances of up to 50% may also be granted on a selective basis. In comparison, most other countries, including Hong Kong, depreciate their capital equipment over long periods. (b) Various incentive schemes which make certain sectors very competitive taxwise. For example, the 10-year pioneer exemption for manufacturing and service industries; tax exemption for shipping profits, the 10% ACU tax for banks; and the tax exemption schemes for syndication and fund management activities. In all these areas, Singapore offers tax advantages which Hong Kong does not. (c) A wide network of 25 double taxation conventions which confer certain in-built tax advantages to promote trade, investment and technology flows. Hong Kong has no tax treaties. We must be careful that we do not lower our rates so much that we run the danger of being labelled a tax haven with its attendant pitfalls. In summary then, it would appear that our present income tax structure is sufficiently competitive. The situation will, however, continue to be monitored. The low tax rate in Singapore in itself should not be overriding concern. It is equally important to ensure that other elements of business costs are kept at competitive levels. Corporate tax issues. Members have made various suggestions on the use of corporate tax incentives to promotes specific objectives. Incentives to promote agrotechnology. Specifically, the Member for Potong Pasir suggested granting incentives to promote the agrotechnology industry. In my Budget speech, I extend the industrial building allowance and double deduction of R & D expenses to the agrotechnology industry. This is in line with our policy to develop the service sector. The agrotechnology sector is also eligible for pioneer incentive provided they satisfy EDB's guidelines. This pertains largely to the extent of benefits they generate for Singapore. I would like to assure the Member for Punggol that the EDB will, in consultation with my Ministry and the Ministry of Trade and Industry, consider granting pioneer status to the agrotechnology sector if it is necessary and if the benefits to Singapore is substantial. Incentive to encourage overseas investment. The Member for Kaki Bukit has raised the issue of more Singaporeans having to work overseas as part of the move to encourage local companies to invest overseas. Government has encouraged investment overseas as it recognizes that there is a limit to the extent of new activities which our small economy can absorb. Incentives have therefore been geared to actively encourage overseas investment which would result in the transfer of technologies to Singapore, increased overseas marketing channels for Singapore products and services, and the expansion of activities and extension of the scope of operationsof local companies. At the initial stages of our drive to encourage overseas investments, the need for Singaporeans to work overseas is not an overriding concern. The objective I have just mentioned can be achieved without large numbers of Singaporeans having to live and work abroad. In many cases, com- panies overseas also find it more advantageous to employ locals. Venture capital incentive scheme. To better encourage overseas investments, the Member for Jalan Kayu has also suggested that the venture capital incentive scheme be modified to allow tax deductions at the point of investment rather than after the loss, as is presently the case. I do not think this is necessary. The The existing scheme whereby losses incurred from the sale of shares in approved technology projects can be set off totally against an investor's other taxable income, is in my view, sufficient. The concession is designed so as to provide a buffer for those investors who had invested in risky projects overseas from losing all their capital should the project turn sour. Companies will invest overseas even if such incentives are not available so long as a project is viable. Double deduction for overseas promotion. The Member for Jalan Kayu has suggested granting some form of double deduction for local manufacturers who incur expenses in the overseas promotion of their products. The Member would be happy to know that double deduction is allowed for expenses incurred by a manufacturer or trader in respect of approved trade fairs, exhibitions and trade missions aimed at promoting Singapore manufactured exports. Likewise, export market development expenditure which is principally for promoting Singapore manufactured exports is allowed double deduction. Deductibility of overseas business expense. The Member for Potong Pasir has maintained that overseas business expenses are not automatically deductible and that IRD requires proof that contracts are secured before a deduction is allowed. I would like to inform the Member that documentary proof of contract is not a prerequisite as he mentioned. Rather, deduction is allowed automatically if two basic conditions can be satisfied: (a) that the expenses are incurred solely and directly for the production of income which is subject to Singapore tax; and (b) that the expenses are revenue in nature and not capital. Unit trusts and investment holding companies. Some Members have expressed concern over the tax uncertainty for unit trusts and investment holding companies. The proposal to allow unit trusts and investment holding companies the choice of having their profits taxed according to the prescribed holding period is to remove tax uncertainty. This is to promote a more vibrant domestic fund management industry. The proposed scheme will allow fund managers to choose the tax system best suited to their operating style and thereby provide them with greater flexibility. I believe the concerns have come mainly from unit trust managers who consider the profits from funds which they manage as not liable to tax because of their current mode of operations. Such unit trusts would obviously be better off if they elect to remain with the existing system of taxation. But they should recognize that there will always be an element of uncertainty in their tax liability, especially if they should choose to change their mode of operations significantly. Unit trusts which intend to manage their stocks and shares actively and want certainty in their tax liabilities can elect to choose the new system of taxation in which the tax rate varies with holding time. At this juncture I would like to deal with other points raised by Members. First, I would like to thank the Member for Whampoa for his suggestion to conduct cost benefit appraisals of past tax incentives. My Ministry will certainly take note of this. The Member for Fengshan spoke about the impact of the 1986 US Tax Reform Act on the shipping industry. The Government is aware of the adverse consequences imposed by the US Tax Reforms on the shipping industry. The Member should also take note that other industries are equally badly affected, if not worse. To resolve these problems, the Government has begun negotiating a comprehensive tax treaty with the United States. Public sector savings and current account surpluses. The Member for Whampoa commented if would not be appropriate in view of the current surpluses achieved in 1986 and 1987, to place a dampener on our savings rate. It is important to remember that our high savings rate has over the years stood us in good stead, as it has allowed us to maintain an extraordinarily high rate of investment without having to resort to borrowings. This has led to higher income growth and subsequently higher living standards. With the exception of 1986 and 1987, investments in Singapore have always exceeded savings, resulting in a persistent current account deficit. The current account surpluses achieved in 1986 and 1987 are small, amounting to less than 3% of GDP. These current account surpluses have largely arisen from a sharp but temporary downturn in investments in the construction sector, downturn, resulting in reduced imports of raw materials and labour for construction work. I do not think we can conclude from the experience of these two years that we have reached the stage of a permanent or structural surplus in the current account. On the question of public sector savings depriving the private sector of funds, I would think it is hardly the case judging from the fact that interest rates in 1986 and 1987 were lower than any time in the 1980s. Public sector savings have been used to finance public infrastructure, and as shown in Table 5.1 of the Annual Economic Survey, if debt service is excluded, the primary balance of the public sector only registered a small surplus of some $800 million in 1987. At the same time it can be noted that net contributions to CPF have also fallen substantially over the last few years, from $2.6 billion in 1985 to some $150 million in 1987. This is a result of reduced CPF rates as well as increase in withdrawals. Duty on cigarettes. The Members for Leng Kee and Telok Blangah have commented that the present rate of duty on cigarettes is not sufficiently high to discourage smoking and should be raised substantially. Customs' records show that the annual consumption of cigarettes and tobacco products has fallen over the last few years, from 6.6 million kilograms in 1982 to 4.8 million kilograms last year. Experience has also shown that a gradual and continuing increase in duties is more effective in countering the rise in smuggling, usually associated with large duty increases of easily smuggled goods. Statutory and government charges. Charges for interdepartment services. The Member for Bo Wen has asked if the introduction of charges for services rendered between Government departments might result in a steep rise in fees, especially in the areas of health, education and public housing. I should like to assure the Member that this would not be the case. The objective of inter-departmental charging is to make Ministries more cost conscious and curb excessive demand on services by user departments. This should result in economies and help keep down costs of services to the public. It should also be noted that the charges for services in areas such as public housing, health and education are heavily subsidized and are not based solely on costs. Indeed, the fees charged for these services will also take into account affordability and other social considerations. Statutory charges. Several Members have touched on the question of statutory charges and their impact on Singapore's competitiveness. In particular, the Member for Geylang Serai has spoken of the need to exercise caution when statutory boards' fees and charges are revised. I agree with him. Indeed, as I have said earlier, we are monitoring our cost competitiveness very closely. Our policy is not to burden the private sector with excessive statutory costs. Any revision in the statutory board's fees and charges which have a significant impact on the population and business are cleared with my Ministry. Adjustments to such fees and charges, where necessary, are implemented with caution to ensure that our international competitiveness is not eroded. Public sector accounts. The Member for Jalan Kayu commented that the inclusion of certain intra-public sector financial transactions in the budget gave a misleading picture of the Government's financial position. He cited in particular the purchase by Government of the URA and JTC landbanks and the payment of interest on domestic borrowings. The Member is of the view that as such outlays involve transactions between Government and statutory boards, they are not true expenditures but more in the nature of intra-public sector transfers. He has also suggested that statutory board accounts should be consolidated with those of Government and the overall public sector position reflected in the budget. I do not agree with the Member's views. Existing legislation requires that all transactions involving the Consolidated and Development funds be reflected in the budget. Moreover, the Budget has to be prepared from the perspective of Government as an accounting entity. Statutory boards, while part of the public sector, are distinct accounting entities and transactions between them and Government must be reflected in the Budget. Legal constraints aside, my Ministry is looking into the feasibility of including relevant information on statutory boards in the Budget document. There are, however, a number of technical issues to be resolved including differences in accounting periods and classification conventions. The Estimates Committee of Parliament has been briefed on the progress in this exercise. I would also point out that we have introduced in this year's Budget for the first time the concept of a primary surplus or deficit into Government's accounts. This is the Budget position before debt servicing and is a critical measure of the health of the budget. A continuing deficit in the 'primary' balance will lead to structural budget deficits requiring tax changes. Members will note that we have always had primary surpluses and that there is a forecast primary surplus of $719 million for FY 88. Foreign Worker Levy. As Minister for Labour has already spoken at length on this subject, I will confine myself to saying that the levy was not introduced for revenue reasons. Property tax, CPF rates and SDF levy. The Member for Punggol has suggested that the property tax rebate be maintained until the economy has fully recovered. I wish to assure the House that the 50% rebate on property tax is effective until 31st December 1988. It is only the rates for 1989 that are under review and this will be done in the second half of this year in conjunction with an overall review of our property tax structure to ascertain whether our existing rates are competitive with property tax structures in other countries, particularly those with whom we compete with in export markets. Some Members have voiced concern that the decision to defer a review of the SDF levy and CPF rates, until after the first quarter economic results are known, will make businessmen 'nervous'. Whilst Members' anxiety over this matter is understandable, I wish also to assure the House that Government will take a prudent approach and not make hasty decisions. The availability of an uncommitted reserve fund of $300 million will also provide assurance that immediate or near-term changes are not contemplated. Members have also touched on other issues such as child care centres, wage reform, measures to help the poor and land use policies. These will be more appropriately dealt with by the respective Ministries in the Committee of Supply. I now turn to the statement by the Member for Potong Pasir that he does not support the budget. That he does not support the budget is no surprise as it seems de rigueur for the Opposition to oppose anything and everything put up by Government. What surprises me is the convoluted logic underlying his opposition. He says that the budget is no good because it is an election budget, for apart from the increase in tobacco duties, it hardly touches the man-in-the-street. I am amazed at this statement. Is he suggesting that he is disappointed because taxes were not increased? I would suggest that he reads the Budget document carefully as he will see that an essentially balanced budget is forecast for FY 88. May I suggest that it is he who is engaging in blatant electioneering. I have something to say regarding the Member for Potong Pasir's statements on the but will not flog the issue again as the Minister for Labour has already dealt with it. The Member says that the reduction in development expenditure for education is inconsistent with Government's excellence in education objectives. He seems to have forgotten that a massive school rebuilding programme is nearing completion and that the Ministry will have other programmes in its pipeline. I believe that this and other related education issues will be dealt with by the Minister for Education. Finally, I would strongly support the call by the Member for Cairnhill for more Singapore investments in Johore. In our quest for overseas markets, we should not overlook our immediate neighbour Johore where there are excellent opportunities for investment. I would also support the Member for Jurong's call for Singaporeans to learn Malay as this will help us in our dealings with our neighbours. Conclusion. Mr Deputy Speaker, Sir, we have done well in 1987 in achieving a broad based growth of 8.8%. However, against an international environment of increasing protectionism and an expected slowdown in economic growth in the next six months, we must be ever alert and willing to adapt. Government's philosophy has centred on flexibility, cost competitiveness and a trim and efficient public sector. We have also taken steps to upgrade our labour force, help local businesses and promote the service and financial sectors. Our economy has demonstrated resilience in recovering from the recession. Our people have proven their mettle and their willingness to adapt. I am confident that if we continue to work together as a team, we will do just as well, if not better, in the years ahead. [Applause.]

Question put, and agreed to. Resolved, That Parliament approves the financial policy of the Government for the financial year 1st April, 1988 to 31st March, 1989.

Resolved, "That Parliament do now adjourn." - [Mr Wong Kan Seng]. Adjourned accordingly at Fifteen Minutes to One o'clock pm. Committee of Supply - MAIN AND DEVELOPMENT ESTIMATES OF EXPENDITURE FOR THE FINANCIAL YEAR 1ST APRIL, 1988 TO 31ST MARCH, 1989 (Cols. 777 - 782)