Hansard, 1992-03-10

In accordance with the provisions of paragraph (7) of Standing Order 89, I have fixed the times for the conclusion of consideration of the heads of expenditure in the Estimates of Expenditure for FY 1992/1993 in the Committee of Supply. These times have been notified to hon. Members and will appear in the Official Report (Cols. 723 - 726). Committee of Supply - ESTIMATES OF EXPENDITURE FOR THE FINANCIAL YEAR 1ST APRIL 1992 TO 31ST MARCH 1993 (Cols. 723 - 726)

Mr Speaker, Sir, on 29th May 1989, I informed the House that I had received complaints alleging cheating in claims for resettlement compensation by squatters on State lands. CPIB investigations confirmed these allegations. The most common cases of cheating involved the planting of fruit trees after the resettlement eligibility cut-off date, so as to claim extra compensation and other resettlement benefits. I informed Parliament then that a Resettlement Task Force comprising representatives from the Attorney-General's Chambers, CPIB, HDB and my Ministry had been set up to review every resettlement case handled since 1979. I would like to inform Members of the progress made by the Task Force since it began its investigations in December 1989. The Resettlement Task Force screened more than 100,000 resettlement cases and identified 380 cases where there was strong prima facie evidence of cheating involving planting of fruit trees after the cut-off date. The CPIB's investigations of these cases confirmed the Task Force's findings. Of the 380 cases investigated, 332 or 87% admitted to having planted trees after the cut-off date. More than 90% of these cases have made restitution. The total amount of overpayment was $2 million. As at 31st January 1992, $1.6 million had been recovered from the ex-squatters involved. Recovery of the remaining $400,000 is in hand. I am satisfied that the Resettlement Task Force has identified and thoroughly investigated all the serious cases of possible cheating on resettlement compensation. The exercise has demonstrated clearly that those who conspire to cheat the Government will be discovered sooner or later and will have to face the full consequences of their wrongdoing. The culprits will be brought to justice and monies wrongfully claimed will be recovered. Since the problem came to light in 1987, the HDB's Resettlement Department has tightened administrative procedures to prevent further malpractices. HDB has also implemented changes recommended by CPIB and the Auditor-General's Office to rectify weaknesses in the resettlement compensation system. These changes include new guidelines for classifying squatters as farmers, and revised procedures for census-taking, compensation assessment and computation. Since all serious cases of cheating by ex-squatters have been thoroughly investigated and comprehensive safeguards against a recurrence of the problem are in place, the Government is closing investigations into resettlement compensation wrongly claimed by ex-squatters. It should be abundantly clear to all that it does not pay to try to cheat the Singapore Government.

Sir, may I ask the Minister whether the 332 cases he mentioned include those cases from the Yio Chu Kang/Jalan Kayu area and, if not, may I ask the Minister how many cases were there from the Yio Chu Kang/Jalan Kayu area, and how much money was recovered? At the same time, may I also ask on those cases that have been closed, whether all the files have been returned to the Resettlement Department by the CPIB, and payments due to the resettled farmers have been paid, and no excuses will be made on the basis of the files being kept by CPIB. Also, no accounts are being frozen for the purpose of investigation by the CPIB.

Mr Speaker, Sir, the figure I mentioned in my statement just now does not include those from Yio Chu Kang which were already covered in the investigations before the Task Force was set up. In the case of Yio Chu Kang, more than 600 cases were investigated and those who cheated were dealt with, and more than $5.5 million was recovered from these cases. The closing of the files will apply to all, including the Yio Chu Kang cases. I have been informed by the Resettlement Department that all the cases where payments have been frozen because of the investigations have since been paid and, in fact, payments were completed by February this year.

"to repeal and re-enact with amendments the Rubber Industry Act (Chapter 280 of the 1985 Revised Edition) for the promotion, regulation and control of the rubber trade and industry and to repeal the Rubber Dealers Act (Chapter 279 of the 1990 Revised Edition)", presented by the Minister for Trade and Industry (BG Lee Hsien Loong); read the First time; to be read a Second time on the next available sitting of Parliament, and to be printed.

"to amend the Trade Development Board Act (Chapter 330 of the 1985 Revised Edition) and to repeal the Rubber Association of Singapore (Incorporation) Act (Chapter 278 of the 1985 Revised Edition)", presented by BG Lee Hsien Loong; read the First time; to be read a Second time on the next available sitting of Parliament, and to be printed.

"for the regulation of trading in certain commodity futures and for matters connected therewith", presented by BG Lee Hsien Loong; read the First time; to be read a Second time on the next available sitting of Parliament, and to be printed.

"to amend the Housing and Development Act (Chapter 129 of the 1985 Revised Edition)", presented by the Minister for National Development (Mr S. Dhanabalan); read the First time; to be read a Second time on the next available sitting of Parliament, and to be printed.

"to amend the Town Councils Act (Chapter 329A of the 1989 Revised Edition)", presented by Mr S. Dhanabalan; 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 [28th February 1992], "That Parliament approves the financial policy of the Government for the financial year 1st April, 1992 to 31st March, 1993." - [Minister for Finance]. Question again proposed. 12.40 pm

Sir, I rise in support of the motion moved by the Minister for Finance. You will recall, Sir, that yesterday I was talking about the 1992 Budget statement being a pro-Singapore budget. I said that the Budget looks to the future in the cautious perspective of the past and as our economy slows down to a more sustainable 4-6% growth, we should rally behind the Minister even more. But some people are unhappy. Many are looking for softer options. More tax cuts is the usual cry. I personally believe that tax cuts should never be used as a counter cyclical measure unless the structure of public spending has changed, ie, there will not be likely tax rise in the future. There are others who clamour that the reserves are growing too fast. One Member said that we should allocate less of our surplus to the reserves. But the most irresponsible are those who want to rob our reserves and spend them now on the various consumptions. I will speak more about that later, Sir. Sir, I also hear that some Singaporeans are saying that we should not talk about the reserves and that too much talking is bad, and people are not listening anyway. I think that is something which is good, like protecting the reserves must be said again and again. If we have said it not enough times, I think all of us should be committed to trying to sell the idea even more. Why is it that some people are asking us to use our reserves at this point when there is really no need to do so? I ask them: has our economic ship run aground? Are we in real trouble? Because the simple fact is that we do not have so much reserves. Our reserves, statistically at about US$15,600, we do have the highest reserve per capita in the world. But this fact is very misleading. It has misled some into thinking that we are sitting on a mountain of gold. In fact, we are not. In reality, those reserves can buy us no more than one year's supply of imports. To be precise, it is about nine months of retail imports. And after nine months, what do we do? I think we will have to starve. Because we do not have the collaterals to borrow money. We have no agricultural land, no livestock and no mineral resources. So no banker will lend us money from their own pockets. Clearly, we do not have the qualifications to beg and we are not sitting on a mountain of gold. Perhaps we have a few trinkets for the pawnshop which will buy us a few months of livelihood. Over the last few decades, prudent financial policies, like spending what we can afford, like allowing the market to prevail whenever possible, have allowed Singapore to achieve the twin goals of strong economic growth coupled with equitable income distribution. And we are a very equal society because we are all equally rich. In some countries, they are equally poor. Along with this economic progress, we have also debunked the commonly accepted modern economic theory these days that full employment can only be achieved at the expense of high inflation and vice-versa. In short, Singapore is an economist's utopia. Since the early 80s, economists at the OECD have used the "economic diamond" to measure a country's overall performance. Sir, I have asked the Clerk to circulate copies of the diamond. Members can see clearly that it is the jewel in the OECD's crown. It is big, and big is beautiful. Singapore's diamond is bigger than the Japanese diamond and the diamond measures the four indices that all governments aim for - strong growth, low inflation, low unemployment and a "sound" balance of payments position. Yesterday, in this House, Mr Chiam said that South Korea did better than us. In what respect? One set of statistics does not tell a story, but a group of them might. The OECD has decided that these four indices - strong growth, low inflation, low unemployment and a "sound" balance of payments - together reflect a country's strength and you can see that Singapore is doing very well. But people are saying that the diamond is too big now and let us cut it and share it around. I say it is nonsense. We know that the price of diamond is not proportional to its weight. The price of diamond is exponential to its weight. If you have got a 10-carat diamond it is worth more than 10 1-carat diamonds. So why split it? Keep it. One MP said yesterday that growth is slowing down, but we should aim for higher growth. It is not sustainable. You look at Japan's growth. You look at the "G" index. They are about 4% now, whereas ours was 8.5%. I think eventually, in the long term, the north end of the diamond will come down lower and hopefully the right end will shoot to the right end side. I think we can present the diamond this way - slower growth but a better overall balance of payments position, like Japan's. I take the diamond and pass it down as an heirloom to future generations. And also there is one more reason why she keeps the diamond, figuratively speaking, to finance our own old age. I think many of us will be around by the year 2030, and if present democratic trends continue, there will only be 2.2 working adults to support each elderly person. Compare this to the relatively generous ratio of eight working persons to one retiree now. Sir, to maintain the same standard of living in the year 2030, we have two alternatives. One, we can tax the working population then heavily. Unfortunately, even with the highest productivity, which we do not have, it is difficult to see how one young adult can support 2.2 retirees for a high standard of living. So also morally, do we want to condemn future generations of Singaporeans yet unborn to bear this very heavy tax burden? The second solution is more amenable, more workable, and more humanitarian. From now to the year 2030, we should put aside some money every year to build up a bigger reserve, more than the nine months of retail imports that we now have. And the interest from that reserves can then be used to lessen the tax burden of our adults in the year 2030. Sir, the signs are quite clear now. Over the years, the contribution of income and profit taxes to total revenue have become smaller. So Singaporeans are paying less. Yet miraculously our standard of living has gone up. How do we do that? The short answer is that our non-tax revenue has been getting a healthy injection of earnings from our reserves, which is another reason why we must not rob our reserves now. One MP said yesterday that we should allocate a smaller surplus to our reserves which is in fact what is being done now. The size of the budget surplus as a proportion of the GDP is shrinking, from 11.7% in 1989 to 7.8% in 1991, and 4.5% this year. In fact, this budget year 4.5% of the surplus will go to the reserves. So you see it is already shrinking by the natural order of things. My worry is, will it shrink even smaller? Sir, my GPC Chairman and my various GPC colleagues have elaborated on the various merits of the tax changes and the reservations of the people and the business community. I want to return to two more fundamental questions on taxation. First, why pay taxes? Because at every budget, people will clamour for tax cuts, very few for tax increases. The simple answer why taxes are raised is that they are raised primarily to pay for public spending. So, first, we agree there is public spending, we need taxes. Second, why do people dislike paying taxes? This is philosophical, because most people doubt that they are getting their money's worth. That is not hard to fathom. After all, it was Edmund Burke, the 18th century British MP, whom I quoted in the President's Address, who said, "To tax and to please, no more than to love and be wise, is not given to man". So rationally, if we think logically, if we pay and we get our money's worth, we should be happy. And if we get more than our money's worth, we should be delirious. Yesterday in this House, Mr Ling made a song and dance about the Government not doing enough, not helping the poor enough. I say a government, such as the PAP that has done as much to help the poor, need never be apologetic about its policies. Let us look at the statistics. About 60% of Singaporeans pay only 6% of our total tax collection. So the poor are not paying a lot. In fact, most of them are paying very little, many are not paying at all. Let us look at the above average income taxpayers (those earning $24,000 a year) with two children. That group pays less than $500, after all the reliefs and deductions. Now compare this to the bundle of benefits the taxpayer's family gets: subsidised hospitalisation, subsidised education, subsidised housing in HDB flats (and that is life-long, and the Government is putting in more under the refurbishment programme). These benefits run to thousands of dollars a year. Mr Ling said that we are not doing enough for education, we must help them more. I say, it is rubbish. Let me put the Government subsidy into perspective for the middle income taxpayer with one child in a primary school and one child in a secondary school. The total cost to the Government of educating his children is about $5,000 minus his school fees. So, just focusing on education alone, this non-typical taxpayer (non-typical because the average taxpayer pays less than $500) is getting a return on investment of something like 1,000% -- where can he get this anywhere in the world? Talking about refurbishment programmes, my constituents in Tiong Bahru are very happy about the scheme but they are rather impatient, and they want me to ask the Government when they are getting it. They are happy because they know that they will inherit a more valuable asset. They will also inherit a more salubrious environment. They are also happy about this year's Budget, because it is a compassionate budget. In my constituency, more than 80% of the people live in rental and 3-room flats. The Government has committed to paying their December's service and conservancy charges. They are happy. Because they know that when the Government is rich, they are not forgotten, they also get richer. What about the remaining 40% of Singaporeans and companies who are paying something like the bulk of the taxes, over 90%? Shouldn't they be unhappy? I say, no. Quite the contrary, they should also be happy. Why? Because while it is true that in terms of subsidies they do not get as much as the majority of Singaporeans, they are getting their returns in kind. What kind? What are these? For the individuals, an excellent environment for professional fulfilment and a quality of life matched by few nations on this planet. For the companies, a first class infrastructure and support system to make even more money. Not forgetting that Hong Kong's budget has just been announced. They raised 1% of the corporate tax. For both citizens and companies, Singapore offers one of the lowest income and corporate tax rates in the world. Perhaps here I would like to ask the Minister to clarify for this House how is it that with a higher personal and corporate tax rate, we are still competitive vis-a-vis Hong Kong -- the country that we compare over and over again. Sir, in six months' time the White Paper on the proposed broad-based consumption tax will be tabled in Parliament. I would like to say from the outset that I support the consumption tax. The evolution of taxes began with wealth tax. They found it not so good, then it moved on to using income as a basis for taxation. And then in the later stages, most countries use indirect taxes, consumption taxes as a supplementary form of taxation. Modern taxation in most countries is now a hybrid of all these three -- wealth, income, direct and indirect taxes. Members of this House have also spoken very eloquently, fiercely, passionately on the consumption tax at considerable length from 1986, when the idea was first mooted, to 1991. I do not want to tread on old ground. The Hansard is overflowing with ideas, comments, criticisms. But while I support the implementation of the consumption tax in the near term as a supplementary tax source, I would urge the Government to look at the merits of the expenditure tax in the long run. Most people wrongly confuse consumption tax as the same as an expenditure tax. But the Minister knows what I am talking about. The nomenclature of the expenditure tax is unfortunate, but its usage has stuck, so changing it might even add to the confusion. An expenditure tax, in short, is not a consumption tax. An expenditure tax is a tax on expenditure, not income. It operates like a consumption tax, but acts like an income tax. It can be progressive, regressive, it can give reliefs, it can give rebates, as the Minister wishes it to be. In this House, only two Members have spoken out on it. One, Mr Heng Chiang Meng tried in 1986 and then in 1991 to convince the Minister on its merits but without success. Two, DPM Lee Hsien Loong himself made an oblique reference to it when he urged Members of this House in 1986 to read three articles about the expenditure tax in The Economist. Sir, why am I trying to peddle the virtues of the expenditure tax when more eloquent speakers like Mr Heng Chiang Meng before me have found it wanting? Because I think that a good idea is worth selling, worth telling and worth convincing. Like the reserves, you must say it over and over and over again. Because I think that a good idea can never be stale and it is always fresh when different people say it and, hopefully, in the next Budget, somebody else will take over the baton from me as I have taken over from Mr Heng Chiang Meng. There is another reason why I think expenditure tax should be said again. Since we are standing at the taxation crossroads, we should look at the evolutionary process of tax systems overseas, how most of them have now mired themselves into a tax sphagetti and how we can avoid stepping into the same shoe in the next century. Sir, the expenditure tax I am proposing is not for next year or the year after. It is for the future, five to ten years from now. Sir, in order to focus our thoughts on this issue, I will move an amendment in the Committee of Supply to map out the reasons for and against the expenditure tax and why we should go where others have feared to tread. Dr Vasoo yesterday said that we should have some schemes to encourage savings. Expenditure tax will encourage savings. He talked about exempting interest from deposits. They have tried in America under the Individual Retiree's Account (IRA). In the United Kingdom, they are trying to put up the Tax for Retiree's Deposit (TRD). In the same period that these schemes were put in place, that is, not to tax interest on savings, personal savings plunge. So I think his scheme will not work. It was George Bernard Shaw who said, "People dream dreams and ask why." "I dream dreams," Shaw said, "and ask why not?" In taxation reforms we should all share a dose of Shaw's dreams and ask ourselves, "Expenditure tax, why not?" Sir, I support the motion moved by the Minister for Finance.

Mr Speaker, Sir, yesterday the Member for Bukit Gombak made several points in this House. The Minister for National Development has effectively debunked his main point - the upgrading of older HDB estates. There are other points deserving of rejoinders. However, in view of the time factor, I will confine myself to only one point. In doing this, it is not my intention at all to put the hon. Member down. It is just that I feel Singaporeans deserve the benefit of another viewpoint. Sir, this relates to his call for more subsidies. In my assessment, the Government is not against subsidies as such. It is a question of: for what, how much, and why? What is anathema to the Government is the development of a subsidy mentality, one that undermines the will to work, and worse still, provoke a slide down the slippery slope into a crutch situation. In appropriate areas, subsidies have indeed been given, and heavy ones too. Education, health, basic housing -- three vital areas of people investment as opposed to areas of consumption. I hope Singaporeans will know and appreciate this. Mr Ling himself agrees to this approach. It is important to dispel the myth that when the Government espouses free market policies, it is out to make money from the people. This is not only untrue, but it is damaging. It hinders Government-people bonding and should be demolished. To do that, we have to see why the myth exists. I think there are three possible causes. First, Government's use of the quota system and price mechanism in regulating goods such as cars; secondly, the imposition of heavy fines as a form of punishment; and thirdly, accumulation of large surpluses by statutory boards. Sir, please do not get me wrong. I am not advocating that we abolish all three approaches. I think better packaging and marketing of these three phenomena is called for. Of late, we have heard much of the need to market and package policies well. Let us apply that not only to policies but also to approaches which we are talking about here -- the need to limit and distribute certain goods, the need to deter criminal conduct, and why the fine may be more appropriate than other forms of punishment, and the need to remain efficient and competitive as statutory boards begin to privatise. Help the people to see beyond dollars and cents. Accumulation of money is not an end in itself but a means to an end, the advancement of a social cause. Therefore, even if there is a need to package and market substantive policies well, there is also a need to package and market basic philosophies or methodologies well. In this regard, I welcome the announcement that the Ministry of the Environment intends to introduce the community service order as a form of punishment. It will be a welcome addition to the arsenal available to our judges and shows that the Government does not want just to fine people. But please explain the aims and rationale for its implementation well. Another point is the much publicised announcement of massive profits by our statutory boards. While it is good to be profitable and totally justifiable to feel proud of a good bounty, Sir, I feel we should be sensitive in doing these things. Surely it is not the case that the CEOs are out to outdo each other in order to please their political masters. But some people may feel this way. Also, please take pains to assure people that the profits are not derived simply at their expense. To me, therefore, Sir, subsidy in itself is not a dirty word, creation of a crutch mentality is. Mr Ling How Doong has asked why not subsidise education more. This is exactly the mentality that the Government should watch out for, one that shouts from the heart, "give me more or meet my needs". There is a need to pause a while, and use the mind; a lot is already given, how much more is more, can more be given without jeopardising other areas? Mr Speaker, Sir, permit me now to touch on three points arising from the Budget Statement - foreign maid levy, reservist tax relief, which I would deal with at some length, and a brief comment on the service charge and conservancy charge (SC & CC) rebate. Foreign maid levy. Much unhappiness has been caused by the latest increase in the foreign maid levy. The Minister for Finance says, in his Budget Statement, that in certain areas, and these include foreign domestic maid, significant market imperfections and non-economic considerations require market forces to be tempered by Government intervention. He goes on to say, and I quote: "... although the markets in these cases are not perfect, the most efficient solutions are still found by harnessing market forces to the greatest possible extent." Sir, I wonder if the most efficient solution has been found in the case of foreign domestic maids. The Statement says that for road transport, the use of market forces ensures that COEs go to those who value them most. While this is true, the other point left unsaid is that COEs go to those who not only value them most, but are also able to afford them. I hope the same situation will not happen in the case of foreign maids. It is possible that not everyone who needs or values a foreign maid, because of special circumstances, will be able to afford one, if the consideration is essentially financial. The present approach is essentially a fiscal one - the imposition of a fixed sum levy across the board. Despite a series of increases from $120 in 1984 to currently $300, the number of maids has continued to rise. The Minister for Labour's position, and rightly so, is that if not for these levy increases, the number would be even larger. No one can dispute that. All aggrieved Singaporeans have also been reminded, and again rightly so, that these levies should not be viewed in isolation but together with other measures to alleviate the hardship of working mothers, both financial and non-financial types. However, looking and thinking ahead, the question to ask is whether the Government will continue to take this fiscal approach without more. As I mentioned earlier, it is exactly such an approach that generates loose talk on the ground that the Government is making money out of the people. I am sorry that I missed the Minister for Labour's remarks in this House yesterday. In any case, I think this matter requires and deserves deeper and more comprehensive study than currently undertaken. Why do I say this? This is a matter that is sui generis. It has special features and stands on its own. It concerns many households in Singapore and impacts on the quality of life enjoyed by such households. As the Next Lap seeks to enhance the quality of life of all Singaporeans, it is legitimate for some Singaporeans to ask why the Government is placing an obstacle to their quest for a better quality of life by making it difficult for them to have a live-in domestic help. What are the special features of the maid issue that require further consideration? Firstly, the needs of employers are very different. For example, some have young children, others have aged or ill parents; some mothers work, others may not, and even if they work, their level of contributions to the economy may differ. Secondly, whether a family succeeds in employing a maid may have knock-on effects on family lifestyle decisions, with implications at both personal and national levels, such as quality and quantity of leisure time; whether or not granny or grandfather lives in; whether or not baby is fostered out or put into day care, the effect on baby in those situations and the travelling required in those situations. Thirdly, a large number of maids may cause social problems, at family and national levels. At the family level, in the upbringing of Singaporean children who may imbibe foreign values, or who may be over-pampered. At the national level, the presence of a large number of such foreigners living in Singapore, and the impact of adjustment, should the availability of such maids cease. Mr Speaker, Sir, this is a complex matter. I am not saying the current approach is not right, or may not be right, but my plea is that perhaps a more comprehensive study should be undertaken. And in this study, I think these points should be considered. Firstly, the alternatives to employing a foreign domestic maid, what are these alternatives, are they viable? For example, for children who are infants, or toddlers, is it as viable an alternative to put them in day care centres as opposed to older children, when the body's health immunity system may not be as developed as in older children, and living in close proximity with other children on a daily basis may not be such a good solution. Or what is the effect of having children fostered out in terms of their upbringing? Secondly, perhaps we should also do a study on the social consequences of having a large number of maids in Singapore, in terms of their presence in Singapore and in terms of when they leave Singapore. Is it a mitigating factor, for example, that these maids live in with their employers and are not living in clusters of their own? In fact, in some families, the maids become a part of the family whilst they are here, and if the parents are careful and make sure that the children do not imbibe values from these maids, when they leave, there are no deleterious long-term consequences. Thirdly, perhaps some measures can be taken to see how foreign maids can better adjust to our lifestyle whilst they are here. I am not saying, go all the way and make them feel so at home, but maybe treating them as elements that are helpful to our economy. Steps can be taken to see how they can better adjust to working here. And finally, maybe Singapore employers can be encouraged or educated as to how they can become better employers. Not everyone, in terms of employing a foreign maid, knows what is best to be done in all circumstances. There are cases of errant employers being punished but that is when they come to light; for one case that is disclosed, there may be other cases that are not disclosed. Once upon a time, Sir, we debated on the wisdom of having MNCs in Singapore in large numbers. We also questioned whether tourists should be allowed in Singapore in large numbers. Here is a situation where we are also now wondering whether maids should be allowed in Singapore in large numbers. My plea is simply this: maybe a comprehensive study should be undertaken so that Singaporeans are convinced that this is indeed the right approach. Next, just a brief point on reservists. As a reservist, I join fellow reservists in welcoming this relief. It is something that will act as a motivation. Of course, it will not fully compensate for the anxieties, for the sense of uncertainty, discomfort and disruption to family life that reservist training brings about. I just want to ask the Minister for Defence one point on this scheme. It is clear that reservists who are currently performing reserve duties and who have completed their reservist liability are eligible. The criteria for eligibility, however, also include those who have completed National Service (NS) but who have been exempted from reserve duty. My question is: should these people enjoy this tax relief, ie, people who have finished NS but do not do reserve duties because they are exempted? The answer would depend on the basis for granting this relief. Is it for completing National Service, or is it for one's contribution to reserve service? If my understanding is correct and it is for the latter, for one's contribution to reservist duty, then the answer should be "no", these people should not enjoy this tax relief. I hope the Minister can clarify this point. Finally, Sir, just a brief word on the SC & CC charges. I want to join my fellow MPs in welcoming this move. I hope the beneficiaries will pause for a moment to appreciate the sentiments behind it. It has not been done before. It need not be done now, but the Government has paused a while, and made it possible for them to also enjoy a bit of the booty. Sir, on this note, I support the motion in the name of the Minister for Finance.

Mr Speaker, Sir, the Government has always been conservative in its fiscal policy. They have built up budget surpluses every year to add to our reserves. And this has proven to be a sound financial policy. Our strong reserves have kept the Singapore dollar up, inflation low, which, in turn, enhances the purchasing power of our workers. This year's Budget is no exception. It is a cautious one in view of economic uncertainties, both in the world and at home. It is estimated that there will be a budget surplus of $1 billion which will be set aside for the Edusave scheme. I am pleased to note that we do not need to draw upon reserves that were accumulated in the past to start schemes like Edusave and Medifund. Future contributions to these two funds will also come out from future budget surpluses. I support this policy. At this juncture, I would like to respond to Mr Ling How Doong's call yesterday to give more and more subsidies to education. The Government is already spending 4% to 5% of GDP on education. This is very close to the norm of the industrialised countries. This amount is enough for the schools to provide every student with a good education at minimal cost. We should remember that a dollar more for education is a dollar less for health care or other deserving public expenditure, such as housing or the building of roads. The expenditure on education and health care may be noble and desirable, but we must continue to do so in a manner that is sustainable in the long run. Hence, I would be the first to object if anyone advocates that we should dip into our past reserves to provide more and more subsidies for education. Next, let me comment on some of the revenue and tax changes proposed. First of all, the CPF contribution rates. The Finance Minister has announced that with effect from 1st July this year, the employer's CPF contribution rate will be increased from 17 1/2% to 18%, up 1/2%. The employee's CPF contribution rate will be reduced from 22 1/2% to 22%, down 1/2%. I must confess that the unions and workers view this adjustment with some disappointment. Many still remember the 15% cut in the employer's CPF contribution in one fell swoop back in 1986 when the economy shrank by only 1.6% in 1985. They also agreed not to demand for 15% restoration when the economy improved later, but only asked for 10%. However, they had not foreseen that the restoration would take so long, even though the economy had performed well since 1987, with GDP growth rates of 8.8% in 1987, 11% in 1988, 9.2% in 1989, 8.3% in 1990 and last year, it was 6.7%. These are very good growth rates, considering that Japan was only averaging 4.5% at the time when their GDP was around this level. Our forecast for the medium term growth rate is 5% to 7%. Taken in that perspective, I would like to urge the Government to restore the remaining 2% of the employer's CPF contribution as soon as possible, and not wait until 1996 to do so. Our relative unit labour cost in manufacturing against the other NIEs is still competitive, at around the 1982-83 levels. The sooner the employers accept the 20% CPF share of contribution as the norm, the sooner they accept that wages must go up every year in response to market forces, the sooner they will upgrade and innovate their production processes, the sooner we will be able to improve the industrial relations climate between workers and employers in Singapore. The Government should continue to help businesses in their transition without compromising the principle of free market competition. Next, I would like to touch upon corporate income tax. Companies welcome the reduction of one percentage point in the corporate income tax rate to 30% with effect from Year of Assessment 1993. This reduction will help to offset some of the operating cost increases, including the increase in CPF contribution. But more importantly, I think it will help to attract more foreign investments to Singapore, which in turn will provide more job opportunities for our people. Next, the individual income tax. Although there are no changes to the individual's tax schedule, we welcome the one-off rebate of 5% across the board for personal income tax for Year of Assessment 1992. Last year, at the same debate, I had argued for personal tax rates to be lower for Singaporeans than permanent residents or foreigners. The differential need not be too wide, but at the same time, significant enough to convince non-citizens that there are privileges in being Singapore citizens. I am pleased to note that this year's budget has taken a step in this direction. Citizen householders staying in rental and owner occupied 1-, 2- and 3-room HDB flats who pay little or no income tax will have the service and conservancy charges paid for by the Government on their behalf to the Town Councils for the month of December 1992. This is a very generous gesture by the Government. In fact, it is a hand-out which is not characteristic of this Government. It is a one-off payment which I hope will not be taken for granted. The other benefit for Singapore citizens goes to those who have done national service and reservist training. This means that almost every household in Singapore would have one person enjoying this benefit. It comes in the form of a tax relief of either $500 for non-active reservists or $1,000 for active reservists. As an active reservist myself, I must confess it came as a surprise, although a pleasant one. As a tax relief, the actual benefit a reservist gets varies with his civilian income, and not directly with his contributions to the SAF. However, I understand that it is administratively more convenient in the form of a fixed quantum tax relief. As reservists, we appreciate the tax break given to us. The amount may not be large but it is significant relative to the personal tax and earned income reliefs. But what reservists really appreciate, which go beyond dollars and cents, are the recognition and status which the Government is according to reservists who have given time and sweat to the defence of the country. The Government is planning to table a White Paper on a comprehensive goods and services tax in Parliament in the second half of this year. Most workers and lower-income Singaporeans view this with some anxiety, and rightly so because consumption taxes everywhere tend to be regressive. I hope the Government will take the opportunity to do a comprehensive review of all income taxes together with the introduction of the consumption tax so that our lower income group's purchasing power can be maintained. The Finance Minister has also announced that with effect from 1st June this year, the Government will restrict the eligibility of duty-free privilege for liquors only to travellers who spend not less than 48 hours away from Singapore before their arrival. This restriction, however, has been perceived by the lower income to impact them unfairly as they are the ones who do not have the financial resources to travel too far away and for too long. Perhaps the Minister would like to comment on this perception among the workers. With these comments, Mr Speaker, Sir, I support the Government's financial policy for the year 1st April this year to March next year. 1.20 pm

Mr Speaker, Sir, I support the motion to approve the financial policy of the Government for the financial year 1st April 1992 to 31st March 1993. Sir, the outlook for 1992 is now less rosy than the earlier forecast in November 1991. The Ministry of Trade and Industry's forecast for 1992's growth is now 4-6% and the main reason for this is the softening of our markets overseas. I gather from reports of the business sector's response to the Budget Statement that they feel that the Budget is conservative. They call for more measures to stimulate the economy and particularly to tackle increasing business costs. Sir, while measures like a bigger cut in corporate tax and other reductions in taxes and levies will help to stimulate the economy, I think it is equally important to ensure that measures which are proposed will not overheat the economy. This will bring us problems like inflation which can adversely affect workers' earnings and savings. Sir, I support an approach for a slower but steady and sustainable growth. A steady growth will enable us to maintain stability and to achieve a constant improvement in our standard of living. We do not want sharp changes in our economic growth which can bring severe financial hardship to workers in the event the economy gets into a downturn. Sir, the more effective way for our businessmen to cut down their costs of doing business and to be competitive is to make a greater effort to train their workers and to motivate them to improve their productivity and work performance. If they show that they recognise their employees' contribution and reward them well, I am sure that they will be able to motivate them to improve their work quality and productivity. And this in the long term is the most effective way to reduce costs and to remain competitive. Mr Speaker, Sir, the three main strategies needed to achieve our medium term growth target outlined by the Minister in the Budget Statement need our total support and commitment. Our domestic market is small and we need to export our goods and services to the world markets. To do so, we need to stay fit, trim and competitive. While we continue to strive to seek better opportunities in the established markets in the West, we must do our best to develop new opportunities in Asia and ASEAN. The creation of the ASEAN Free Trade Area brings about a wonderful opportunity for our businessmen. I am sure that we can make a significant contribution to help ASEAN become an important market, one which will be able to attract more good and high quality investments. Sir, our push for upgrading and restructuring should be a relentless one. Upgrading and restructuring bring about changes which are never easy. Experience has shown that if we want to progress, we must be flexible and be ready to accept changes to ensure that we are relevant to the world markets. Our businesses and their management and workers must work together to improve their skills and quickly expand the use of new technology. Mr Speaker, Sir, I do not have to stress that with our limited resources, it is crucial for us to ensure that our resources are efficiently and optimally utilised. There are many examples in the world like the former Soviet Union, now Commonwealth of Independent States, which do not rely on the free market system to allocate resources and their policies have brought about hardship for the people. The example which the Minister has given in his speech on the Indian experience is very relevant to us. Our approach based on the market system tempered by Government intervention in some sectors has helped our people to enjoy a good quality of life. Sir, in areas like health care and education, a certain amount of Government intervention and subsidy is justified to ensure that the costs of health care and education are affordable to our people. Mr Speaker, Sir, let me now turn to some specific areas in the Budget. I would like to touch first on the increase of the employers' CPF contribution by half a per cent, from 17 1/2% to 18%. My colleague, Mr Lew Syn Pau, has already touched on this issue and I also would like to say that workers are generally disappointed with this slow pace of restoration of the CPF cut. In fact, if we go by the Minister's statement, it will take another four years, up to 1996, before we can expect the restoration to 20% which is below the 1985 rate. Our workers ask only what is fair and equitable for their hard work and contribution. In the present context, we may have to settle for a slower restoration. However, I would like to urge the Minister, since it is stated that the outlook for growth in the second half is likely to be stronger than the first half, to consider whether another adjustment can be made to raise employers' CPF contribution in the later part of this year should a stronger growth be realised. Mr Speaker, Sir, labour-management understanding and cooperation is an important pillar of our industrial peace and stability. We cannot afford to lose workers' confidence and trust in their employers and in the Government. With this mutual trust and confidence, we can persuade our workers to make sacrifices during difficult periods. However, we must not take our workers for granted. Instead, Government and employers must demonstrate clearly their concern about workers' well-being and security. Sir, let me now touch on the question of productivity growth and wages. The Budget Statement stated that with labour productivity growing by 1.5% in 1991, this is the third year in a row that real wage increases have exceeded productivity gains. Mr Speaker, Sir, our long-term productivity growth target is 3-4%. The Economic Survey states that Singapore's productivity growth in the last five years averaged 3.8% which is at the higher end of our long-term target of 3-4%. Therefore, if we measure productivity improvement over a longer period, workers' performance has matched the long-term productivity target. We need therefore to examine more carefully before we can conclude that workers' wage increases have not been supported by productivity improvements. We should also examine wage increases earned by workers and by executives. I would like to also point out that unlike the situation before the recession in the mid-80s, we now have a flexible wage system in place. Sir, in a period of economic uncertainty, we can accept that wage increases on the whole should be moderate to enhance our competitive position. However, I would like to emphasise that companies that are doing well and showing good performance and profits should not take advantage of this to deny their workers a fair and equitable increase this year. Businesses doing well should continue to pay good and equitable wage increases to their workers. Sir, in the public sector, annual bonus payments are guided by the overall national economic performance. In the absence of a better measure, we have to adopt this annual growth rate to work out these payments in the public sector. I would like to draw the Minister's attention to his statement of the great success of the zero-growth manpower policy in the public sector, which was achieved without compromising standards and quality of service. Sir, I believe that the success of this policy is due to a large measure to the contribution made by the public sector employees. Although there has been no manpower increase, and in fact in certain areas there has been a reduction in manpower, the civil servants have continued to perform effectively and efficiently and provided a high quality of service. I think this should be taken into account when the Ministry of Finance works out this year's bonus payment. Sir, the daily-rated employees' union leaders in the various Ministries in the civil service have always pointed out that the number of daily-rated employees in the Ministries has been greatly reduced because of retirement as well as no new recruitment. Hence, their workload has increased. However, they have been able to cope with the increase in workload because of their hard work and improvement in productivity. Currently, the DREs and also employees in Division 4 receive low wages, especially if we take into account their heavier workload and contribution. I would like to urge the Ministry of Finance to examine the workload and contribution put in by the employees in the lower divisions of the civil service and to see how their terms of employment including wages can be enhanced. Finally, Sir, I would like to commend the Minister for Finance for the decision to give a rebate of service and conservancy charges to citizen householders in the 1-, 2- and 3-room flats in the month of December 1992. This shows clearly that the Government is prepared to share our prosperity with each and everyone of our citizens. However, it is important for our people to understand that such payments are only possible if our economy continues to grow and that we are able to generate healthy surpluses in our budget. We can only enjoy good economic growth if we continue to work hard and make every attempt to improve productivity. As mentioned by many of my colleagues, this requires our workers to upgrade their skills and learn new skills which are relevant to the economy. As our people work together in this direction, we will be able to meet the challenges before us confidently and look forward to enjoying more economic growth and success in the future. On this note, I support the motion.

Mr Speaker, Sir, it must be clear to all by now that what is certain about our short term economic outlook is its uncertainty. Certainly there will be surprises this year, some good, some bad. Some optimists have predicted an improvement in the economy in the fourth quarter this year, but some pessimists think next year could be worse. We are seeing conflicting signals about an economic recovery in the US. The UK remains in recession. Germany and Japan are expecting a slowdown in their economic growth this year. These leading world economies' continued downspin will sooner or later have a dampening effect on us because our economy is neither insulated nor isolated from the rest of the world. Sir, this year 1992 is also election year in the US and in the UK. Naturally, no efforts will be spared to make the economies appear buoyant and that they are heading for a recovery. But what happens after the election is anybody's guess. Last year, we managed to weather through the uncertainties, helped to some measure by the strong economic performance of neighbouring countries. The Singapore economy grew by 6.7% last year. Would we continue to have the same blessings this year? Already, official forecast by the Ministry of Trade and Industry is for a lower growth of 4-6% this year. Sir, while other Ministers for Finance are grappling with how best to please the populace in an economic slowdown, I am glad that our Minister has chosen, undauntedly and wisely, to present a Budget that is pragmatic, prudent and appropriate in today's circumstances. It may be described as "unexciting and conservative" but Singaporeans will understand that no responsible Government should give away bags and bags of goodies in the face of so much economic uncertainties. While the economic growth last year was commendable in the light of international economic developments, I am perturbed by a worrisome trend. Inflation remained within 2-3%, unemployment stayed below 2%, and wages grew by 7.6%, but productivity fell to its lowest growth since 1982, growing by only 1.5%. This marks the third year in a row where real wage growth has exceeded productivity gains. Sir, the signs reminiscent of the much dreaded 1985 economic recession loom large. We cannot take chances. This trend merits closer attention by the Government as well as employers and the unionists. We should study what has led the economy to slide so dangerously close to a productivity cesspool. Could it be due to excess capacity aggravated by squeezed profits and rising wages? On their part, and to help the Government, I suggest employers and unionists together study the trend closely and help to take or suggest immediate actions to reverse the productivity decline. Sir, Singaporeans themselves will also have a part to play to help bolster the economy. Other than continuing to work hard, they will also have to be realistic in their expectations. But what are realistic expectations? For those who have worked some years now, they understand that wages should never outstrip productivity. Consequently, many have tried to upgrade themselves, acquire new skills and subject themselves to further training so that their level of productivity gain continues to match wage increases. My concern is, will our young graduates and new job seekers subscribe to the same philosophy of matching their productivity with their wage expectations? I urge all Singaporean workers to recognise that a robust economy pays better than one that has slowed down, and hence they must be prepared to accept lower pay increases this year. Perhaps the National Wages Council should reiterate this point and go back to setting quantitative guidelines for wage increases this year. It is something which they have abandoned last year. Sir, businessmen are generally concerned about the high cost of doing business, particularly the strong Singapore dollar. While a strong Singapore dollar has kept our inflation low, enhanced our status as a financial centre, and benefitted Singaporeans, especially those who travelled abroad, we must ensure that a strong Singapore dollar do s not make us less competitive vis-a-vis our competitors. Sir, I am not against a strong Singapore dollar, as given the fundamental strength of our economy and political stability, the Singapore dollar is likely to continue to appreciate in the long term. But in times of uncertainty and in times of economic slowdown, we should try to keep the Singapore dollar at the level which will give Singapore companies the competitive edge. I hope the MAS takes heed of this. In the longer term, Singapore companies should find out from their Japanese counterparts how they survived in the 1980s when the Yen appreciated against major currencies. Sir, besides the strong Singapore dollar, the business community is also concerned that any further increase in Government rates and fees this year will add on to the cost of doing business. In view of the economic uncertainty ahead, may I suggest that the Government defer all increases in rates and fees in the next 12 months. Sir, the Minister has reiterated the need to enhance our linkages with the world economy. The move to encourage Singapore companies to venture abroad was stepped up in the 1980s. Indeed, many fiscal incentives were introduced in the past to encourage Singapore companies to go abroad. Many of these companies which have successfully ventured abroad are the bigger local and Government linked companies (GLCs). Sir, I believe what is needed now is to try to open doors for our small and medium enterprises (SMEs) to establish linkages with the world. The Government linked companies have in the past performed a pioneering role and ventured into businesses and industries that the private sector would not want to venture into, because of many reasons, such as large capital outlays, high risks and long gestation periods. Government linked companies have done well and played a key role in this aspect of Singapore's economic development. Sir, I think these Government linked companies could again play a leading role in our efforts to globalise Singapore companies, particularly the SMEs. Many of these SMEs hesitate to go abroad due to lack of financial and manpower resources, high risks, as well as lack of business opportunities. In bidding for overseas projects and establishing foreign subsidiaries and joint ventures, the Government linked companies could assist the local SMEs to establish or set up overseas plants and investments. What I am saying here, Sir, is that there is a need for a public-private sector partnership to be established to achieve our economic strategy of establishing global linkages with the world. In this regard, may I suggest that the Ministry of Trade and Industry look into how best these two sectors could collaborate to help accelerate the internationalisation of our local enterprises. Sir, having set up investments abroad, the SMEs need to find able Singaporeans who are prepared to go overseas to work and look after their investments. Are Singaporeans prepared to make the sacrifice to leave their cushy jobs in Singapore for a place that is foreign to them? Perhaps the Government should look into introducing schemes whereby Singaporeans will be encouraged to accept overseas postings; schemes such as housing priority, income tax exemptions, suitable educational system for their children, and so on. And employers too must play their part. They must not only reassure the employee that he will not be bypassed in any promotions, but indeed make overseas posting as a necessary condition for promotion. Only then will the belief that the dispensable are posted out be dispelled altogether. However, I wish to caution that no amount of schemes or fiscal incentives can work if Singaporeans treasure their quality of life here and avoid overseas postings. I therefore urge Singaporeans to consider seriously overseas postings if the need arises. Sir, I now move on to the call for subsidy. It has been eloquently asked: since we have accumulated large reserves, should we not return it to the people? I think the answer is yes, and that the Government is doing exactly that. The Government will be paying conservancy charges for 1-, 2- and 3-room flat dwellers in December this year, and the implementation of the Edusave and Medifund are some of the schemes the Government has thought of to plough back the reserves to the people. There will be more when the needs are established. Sir, in my view, the guiding principle of such subsidy is that it must be applied in a manner so as not to lull our hardworking Singaporeans to become complacent and slothful. The subsidy given must also be capable of being withdrawn without difficulty and pain to the public when changed circumstances call for its withdrawal. And lest it be wrongly assumed that a precedent has indeed been set to use our reserves for subsidies, Singaporeans must again be told by this House that the subsidies are taken from current operating surplus. I urge the Minister to continue with this guiding principle of using current operating surplus to finance any schemes to improve subsidies to the people, and not tap the accumulated reserves of $55 billion which should rightly be set aside for rainy days. Sir, it is heartening to note that the Government will continue to keep the public sector lean and trim. Government expenditure as a percentage of GDP will be less than 20%, and that is commendable. I hope the Government will continue to keep expenditure low as long as the long term benefit is lower taxes for the people and for businesses. Indeed the proportion of Government expenditure as a percentage of GDP should gradually decline as we privatise some of the Government agencies and statutory boards. The implementation of a Management Accounting System will serve as further checks on the use of resources in the public sector. My committee and I of the Estimates Committee will look into this system in greater detail to see how further improvements could be made. Sir, I have one comment regarding the use of manpower resources in the public sector. I have noted from a chart on page 19 of the Budget document which shows the strength of the civil service -- the budgeted strength versus the actual strength. One will note from this chart that the budgeted strengths of the civil service and statutory boards in the last three financial years were about 105,000, 100,000 and 99,000 respectively. But the actual strengths were 97,000, 89,000 and 88,000. There is always this gap between the budgeted and actual strength. What this chart shows is that we are on the average about 10% under-strength in the delivery of our public services. Indeed, the 10% under-strength goes beyond the last three years. My question to the Minister is: Does this mean that the standard of our public service has suffered all these years because the public sector is understaffed? If not, and if the contrary is true that indeed the level of services has remained as good as before, then my question to the Minister is, why the need to retain so many unfilled, vacant posts all these years? Shouldn't the zero-base manpower exercise conducted in recent years have deleted these posts? This will, if it is done, make our public sector services even more efficient and keep Government expenditure even lower or direct financial resources to more productive use in the public sector. On that note, Sir, I support the motion moved by the Minister for Finance.

Mr Speaker, Sir, thank you for letting me join in the debate. Sir, I rise to support the motion standing in the name of the Minister for Finance. The headline in the newspaper said, "Socialist China Mustn't Totally Reject Capitalism". This headline will be nothing unusual if it is made by some economic journal. But it is not an economic journal. This headline was the headline of the China Daily - the English counterpart of the People's Daily of the People's Republic of China. Learning from the experience of the now defunct Soviet Union, China's leaders are fully aware that the capitalist road -- once a very feared description -- is the only way forward for China. In freeing the economy, one of the very first prescriptions of the Chinese leadership was the removal of subsidies to state enterprises. Subsidies cause distortion, lead to inefficiency and prices of manufactured goods that bear no resemblance whatsoever to the cost of production. The Chinese leaders are going one step further - in trying to remove subsidies in social programmes. For example, rental of state housing at $1.00 per month is something which will lead inevitably to an inordinate demand for state subsidised housing. My next example is India. Let me quote one paragraph from The Economist on 7th March 1992. The opening paragraph of a leader says: "In all the world there is no more striking a case of opportunity squandered than India. For decades a breathtakingly inept approach to economic policy - one that contrived to make even less sense than communist central planning - separated the country from the world economy, held back growth and defeated progress on almost any measure you choose. An economy whose potential in the 1950s stood comparison with that of the East Asian tigers, on a much larger scale, today remained mired in poverty." Sir, we started with India on about the same basis after independence. Today, our per capita GDP is no less than 40 times the size of India. No wonder we have many Indians who like to come to Singapore to look for ways out of their economic misery. I think India has no choice, and Prime Minister Narashimha Rao, at high political cost and opposition, has to bring about economic reform. Amongst many free market moves, the Indian budget last month sought to remove a string of subsidies which were sacred cows. The string of subsidies included cutting the subsidy on fertilizers -- a very sensitive issue to farmers. Also, contrary to socialist principles, the wealth tax in India was removed. The maximum income tax rate was brought down from 50% to 40%. Sir, my third example is the United States of America. The world recently witnessed the spectacle of a US President, with chief executives of some of the world's largest auto makers in tow, going to Japan to ask for trade concessions. Such a development was once inconceivable. Who could have thought it possible that 46 years after General MacArthur rode triumphantly into Japan to dictate terms to a vanquished Japanese nation, the supreme leader of the same nation would have to go to Japan today as supplicant to bargain for more favourable trade terms? Sir, it is Pearl Harbour all over again! In a different form. Last Friday, 6th March, the headline in the Straits Times sums up all that is wrong with the US economy. The headline reads "US House rejects President's Budget." President Bush is from the Republican party. Congress is controlled by the Democrats. In rejecting the President's budget, congressmen were merely re-prioritising expenditure to where they can win most votes. The US budget deficit last year was US$400 billion, more than $2,000 for every man, woman and child. For the next fiscal year the budget deficit is projected at US$330 billion. The Straits Times reported, and I quote one particular sentence which says here, "Both the budgets of the President and the Democrats, neither budget address the swelling national debt." In the US, Medicare, social security and other social programmes are sacred cows. Profligate spending and high government subsidies are bringing ruination to the most powerful nation in the world. The three examples I have quoted -- India, China and the US -- show the insidious effect of government subsidies if mindlessly applied. Moves by India and China to remove subsidies at very high political cost and China's strongman Deng Xiaoping is no easy pushover. Surely the very fact that they are asked to do so or forced to do so must mean that the survival of the state is at stake. As for the US, the failure to address the deficit and public spending on social programmes points to a decline in a once economically strong country. Sir, all over the world, we see many former economically strong countries have been wounded, hurt by something more drastic than bombing by hostile alien forces. What we are seeing is economic harakiri, a suicidal beaching of whales among some of the once rich developed countries. There is no doubt that mindless spending and government subsidies are bringing ruination to once powerful nations. Yet, leaders of these countries are shying away from unpopular measures to curb such spending. Today, all countries with high subsidies and deficit spending are in trouble. Countries with generous welfare benefits, countries that have maintained high social welfare handouts without a matching return in revenue, are experiencing economic hardship, high unemployment, and a universal drop in the people's standard of living. And because the subsidy mentality has taken such deep roots in these countries, political leaders are paralysed. The politicians only look forward to the next election and dare not take the political risk of voting to cut off or reduce such spending and put their countries back on an even keel. It is said that a small increase in petrol taxes in the United States could overnight help to wipe out the country's recurrent budget deficit. But has any American leader in the US dared to suggest that? No, the American's love affair with the car is also another sacred institution. This is why, Sir, Singapore should never succumb to the temptations of subsidising spending or digging into our coffers to finance the whole array of social services. Free market forces, and less subsidy -- not the US way -- is the only way for Singapore to go. Unlike powerful and large countries like the US, Singapore does not have the clout to finance profligate spending, or to support budgetary deficits. How does the US do it? Despite its huge and persistent budget deficits, the US can keep on borrowing from the rest of the world. Banks and countries are still buying US bonds. The world has to prop up the US economy. No one can afford to let the US economy go down. Today, the United States is the most indebted country in the world. But the same cannot be true of Singapore, and probably never will, given the facts of life. Despite consistently very high credit rating for some years now, I think no banker will lend Singapore any money, once its economy runs aground for extended period of time. At the first whiff of trouble, creditors will foreclose. All it takes is a few years of deficits and drawdown of our reserves, and there will be no more lending to Singapore but foreclosure. Foreclosure will take the form of high unemployment, hyper-inflation and all the woes that come with economies that have gone wrong. Sir, last Sunday, Straits Times columnist, Sumiko Tan suggested that, and I quote: "The government has more than made its point about the dangers of mindless handouts. But by doing so, it has also given itself a bad press - inadvertently." I have high regard for Sumiko Tan and the contents of her article headlined "Reserves and Subsidies - Time to let the matter rest". However, I believe this headline and her conclusion have somewhat marred the excellence of her arguments. Seeing what is happening to the rest of the world, and the national income level that Singapore has achieved today, the question we must surely ask is: are we ready to restructure and remove further subsidies and cross-subsidies which may make our economy less rigid and of course remove distortions wherever possible? My view is that now is the time to go further into this somewhat painful and divisive subject. The Member for Bukit Gombak, the Opposition Member, yesterday asked how much reserves must we accumulate? My regard for him would have been notched up several rungs if Mr Ling How Doong had asked: how much subsidies should we have in our system? My regard for him would have improved if he had asked that question. Sir, today I want to make out a case for a deliberate move by Government to free the Singapore economy further. We should, instead of allowing contemplation of any new Government subsidies, direct our minds now at reducing where possible - and without causing drastic short-term hardships to the people - those subsidies which are no longer necessary, or are not in our people's long-term interest. After 27 years of independence, Singapore and Singaporeans, I believe, are ready to be weaned away from subsidies. It is also not a question of choice. It is better, while we are still able to, to prepare and focus our people on the need to earn what we get, and pay for the services we demand. History and current world developments prove the merit of a free market. Our people and our nation will be the better for it. We should allow free market forces to reign in as many areas as possible except in the most basic social services. Up to now, Singapore has focused on three major areas, housing, education and health. I think in these three areas, high Government subsidies have enabled us to arrive where we are today. Subsidies on education and health can be argued for continued support. But can we say the same thing about housing? Today, with more than 80% of our population already housed in HDB flats, we should examine and ask if flats of larger room types should continue to be subsidised to the present extent. This subsidy is real, Sir, if you make a comparison of the prices of the flats built by private developers on URA land and that of a comparable HDB maisonette or executive apartment. The difference is as much as 50% to 60% and this difference comes mainly from the land cost. A developer has to include the land cost fully into his project and into each unit or flat or apartment he sells. We should continue to subsidise first time home owners only, and this may be done either through the pricing system, or the tax breaks during budget time. Should these flats still be restricted to people earning below a certain level of income? When we have a situation where large profits can be made by selling existing HDB flats, should the HDB continue to operate as it is today, and offer executive flats at prices way below comparable private apartments? Will this not lead to a constant desire to upgrade to larger and bigger flats? Why should Singaporeans who pay high taxes - and therefore are subsidising such services as public housing, that is for those who pay less taxes - be prevented from buying HDB flats? By setting an income limit, those who are earning more and paying more taxes are not entitled to buy HDB flats. Instead of maintaining this state of affairs, with a mature economy, and the end of our housing problem, should the Government not re-examine the role of the HDB and its housing policy? I believe, Sir, now is the time for such a review. For greater efficiency in our economy, the long-term direction should be a freeing of the market and a start should be made now to let the market find its own level in housing. Prices may rise in some areas, and go down in others. But ultimately, it will mean greater efficiency, and better value for the people. And greater and more general well-being at the macro level will also condition our people to compete better among themselves and in the world. Which is why I am in support of the scheme to sell HDB shops. This is a step in the right direction, although I must say that the scheme is rather unfair at this point in time. I have submitted an amendment under this topic and I shall bring it up when we discuss the sale of HDB shops. Sir, there is a market value to every shop and HDB should not be involved in setting the rental charges. By working on some uniform structure, certain efficient businesses benefit, others which are less efficient, less productive, will cry foul because the tenants need the subsidies to survive and to continue their business. Once the shops are sold, the owners are able to resell their shop and their business, lease out their premises to others and, in some cases, some of the shopowners would be better off seeking alternative employment and, at the same time, collect rent for the shops. Sir, a second area which requires some review is the public transport system. We have a Public Transport Council that has done tremendous good in stabilising public transport costs, and in helping a good public transportation system take shape. However, in the process, it has also led, for instance, to some rigidity by preventing operators from charging higher or economic rates on certain routes. If these routes are unprofitable, operators will not be willing to maintain these services. If certain bus operators wish to charge higher rates for a run from, say, the MRT station to a housing estate, this should be done. If they can generate some profits from there, and if residents are happy paying a higher rate, we should allow for that. If it is popular, the rates will be reasonable and kept low. If the rates are too high, of course, there will be no demand and the operators may not run the service. I understand also that taxi operators also have difficulty in setting different rates, like setting premium rates for special or personalised services. Sir, instead of fixing a rate for all taxi drivers, if they are prepared to offer a personalised or different service, we should allow the taxi drivers to do so. We have, since independence, seen a plethora of bus service companies reduced to one giant Singapore Bus Service (SBS). More recently, new bus companies have been allowed to start and Trans-Island Bus Service (TIBS) is one good example of what can be achieved by good healthy competition. Sir, although we are not prepared to return to the bad old days of mushrooming public transport companies, if we allow these companies to charge what the market can bear, and what makes it profitable for them to operate, I believe we can expect more public transport operators to enter the market and this cannot do any harm to our public transportation system except to improve it. Rigid regulations have been given as one example why people from Hong Kong do not like to come to Singapore. Used to a free for all system in Hong Kong, with minimum and usually absent government, Hong Kong has managed to make tremendous progress despite a high distortion in the income spread. But such a laissez faire state of affairs, as shown in Hong Kong, has been vindicated over time. But because we have an efficient and honest Government, the process of freeing the market can be more orderly. Privatisation in many areas of Government services, such as Telecom and the Public Utilities Board (PUB), is a step in the right direction. Where possible, Government should also allow for other companies to enter those areas formerly monopolised by such Government agencies. If we free our market, and the Government reduces its role, personal income tax can and must, in fact, be reduced over time. In this way, people will be allowed to pay only for what they use. In the end, the whole population benefits. The Government should review, step by step, the different services with a view to scaling down its subsidy or involvement. Why should Singapore adopt such a move? It is, I submit, the only way forward to a real market economy, greater efficiency for Singapore, and most important, for the long-term well-being of the country. Continuation of a policy of subsidy, even at present levels, will result in perpetuation of a subsidy mentality, a give-me-more attitude and dependency among our people. Sir, I remember when I was a boy, the PUB first installed meters in the housing estates. Up till then when we achieved independence, water bills were charged on a flat rate basis. At that time, the move was very popular because people felt that they should not be paying a fixed rate of water as their neighbour when they might be using less than their neighbour. So the move for fixing water meters was popular. People felt that they were paying for what they used. But contrast this with the recent move of Telecom's time-based charges. We had a fixed rate. We have moved to the time-based system, and people should pay for what they use. We have created a tremendous problem. So over a period of time, the people are used to subsidies, the mentality is so entrenched, that it is very difficult to move people, as seen all over the world. It is like the buffet syndrome that we complain so much about. Because Singaporeans feel they have paid for it, or deserve more, they may insist on loading their buffet plates with as many Government subsidised benefits as they can, whether they need them or not. In our desire to build a more egalitarian society, we could also risk fostering a society that insists on more Government props. Now is an opportune time for Singapore to review the whole concept of less, and not more, government. While balancing political exigencies, we should take bold steps in preparing our people for an even better and more self-reliant future. Sir, while I am in support of the free market principle, enunciated by the Minister for Finance in his Budget Statement, I must take exception to his philosophy of maintaining or moderating economic growth. We are moderating our growth by imposing Government charges and restricting our foreign workers. Sir, our problem happily is that of managing growth in Singapore, unlike many countries which are trying to get their economies to kick-start or to grow. While it may be necessary to prevent overheating of our economy during a boom, should we give it a freer rein than at present? Should we not allow our economy to catch the wind and grow as quickly as it can? Instead of controlling growth at a manageable 4% to 5%, is it not better or worth debating that we should have less restraint and allow the economy to grow at even 8% when times are good, and allow us to build up our reserves? My view is that holding a rein on growth is a very dangerous concept. Holding the reins in moderating growth is only something which I believe the bureaucrats believe in. No businessman says you can moderate growth because you sell whatever you can, whenever you can. In the 1985 recession, Sir, we recovered within one year and we did that by cutting our cost, and the main cost item we had scaled back was the Central Provident Fund. I think this time round, we may not be able to do the same. Back in 1985, the US economy, the Japanese economy and Europe were still in a state of growth. Today, the US is in recession, with recovery in doubt; Japan is slowing down and the powerhouse of Europe, Germany, because of the reunification, is in to negative growth. Sir, this time round, just mere cost cutting will not work. If world demand drops in the major economies, how will cost cutting help us plug into the system? If there is no demand, even lower cost will not help. While there may be a need to dampen galloping growth during a world economic boom, can we be sure that in a world slowdown - as is happening now - we can still manage 4% to 5% growth rate? With the present drop in world demand, it will be very difficult for our economy to pick up. With all these signs, I feel that the latest Government curb on the number of foreign workers is ill-timed. With all signs of a slowdown already evident, and if growth is still uncertain, it is difficult to understand why the Government is still trying to restrain growth by continuing to take a hard line stand in this area. For example, by insisting on implementing the foreign to local worker ratio at 2 to 1, we may be forcing the shipbuilding and ship-repairing industry to shrink at a time when the slowdown will itself force the industry to contract. The shipyard and shipbuilding industry is a cyclical business and we must catch the wind whenever it blows strongly. Why not then let these shipyards hire from abroad more freely now if there is still demand in that industry? The world slowdown, when it finally hits our yards, will on its own take care of the problem of too many foreign workers. These guest workers are also not permanently domiciled here and need not be. In a recession, these people can be easily repatriated. Therefore, if growth is not so certain, the Government should be more careful in putting on the brakes. In conclusion, I wish to thank the Finance Minister on his painless budget. The 5% one-time personal tax rebate, which is running into the third year, is most welcomed. Such reliefs are better than direct unearned handouts, as this is on income that is earned. Our people can better understand such measures. In other words, if you pay taxes you get a rebate. And that, Sir, is my case today. Any largesse we wish to give to our people should be in the form of tax breaks and not direct subsidies on consumption of services.

Mr Speaker, Sir, thank you for allowing me to join my colleagues in this budget debate. Sir, the Singapore economy grew by 6.7% in 1991, 1.6% lower than in 1990. The annual growth rate for 1992 is estimated to be even lower. It is therefore not surprising to see the budget interpreted by Members as cautious, balanced and some describe it as a budget for continuity. Some critics, of course, are quick to point out and blame the Government for what they perceive as a failure to create a higher growth. The hon. Member for Potong Pasir even rhetorically asked: if South Korea is able to achieve 8.6% growth, why not Singapore? Mr Speaker, Sir, I am not an economist. But even as a layman, I can understand why the South Koreans are doing better than us, though I shall qualify, in some respects. My colleague from Tanjong Pagar GRC has completely demolished the argument that growth per se is the only and final indicator for success. I do not wish to go through his very complex yet convincing argument to show that what we have today is a lot better than what the South Koreans are having today. Sir, Singapore's economy is plugged to the developed countries. They form the wider external environment with tremendous influence over our economic future. The world economy grew by an estimated 0.9% last year, compared to 2.2% in 1990, with many industrial countries such as the UK, the US, Canada and Australia suffering from a recession while countries like Japan and Germany experienced slower growth. Some of us may ask: if Singapore is affected by the growth of these countries, so is South Korea. As I said earlier, Mr Speaker, it is not so simple and this brings us to the second reason. There is a basic difference between our economy - its structure and its powerhouse, hence its sensitivity to the changing world economic environment - to those of the South Koreans. In this respect, even Taiwan and Hong Kong are different. Each has its own strength given under certain circumstances. The South Koreans have their own giants, well-known as the chaebols in Ssangyong, Samsung, Hyundai, Daewoo and many others who are able to shift their operations away from the high cost home base and hence retain their competitiveness. Singapore does not have such big corporations both in size and number, equal to that of the South Koreans, and our relocated industries are mainly small and medium enterprises. Yet, we have our own strength. We have a better standard of living. We live under a better physical environment, less polluted than the city of Seoul and many others. We have a lower cost of living compared to the South Koreans. These together are more meaningful than sheer annual growth of another country. Sir, the main problem for Singapore is that, to the businessmen, the bottom line remains that the cost of doing business in Singapore is relatively higher, both for the manufacturing as well as the service related industries. With our labour market still tight with an unemployment rate at 1.9%, our productivity growth remained low at 1.5% in June 1991, our dollar appreciated faster than other NIE currencies, we have to look into the question of rapid erosion of our competitiveness seriously. Unless we act quickly and decisively, we will face a situation similar to that which haunted us about a decade ago. Sir, the lower economic growth also has its sobering effect on us. It lowers our expectations. It forces Singaporeans to review whether they have been fair and practical in their demands. And more important, Singaporeans have two options. First, accept the low growth cycle and make necessary adjustments and review our expectations; and second, reassess our position, identify new areas of growth and new strengths, formulate new strategies to overcome our space and manpower constraints and move ahead. Sir, I do not see Singaporeans settling for the first option. The Western industrial powers coped with these changes by drawing immigrants from poorer countries and at the same time automating themselves to remain competitive. We have tried this to some extent when we faced difficulties in the early 80s. We shelved, for a while, our plan to upgrade and restructure our industries and relaxed a bit the policy pertaining to our foreign workers. Now, as a result, we have something like 200,000 foreign workers, excluding about 60,000 maids in Singapore with all its social and political ramifications. I am sure that the Government is doing everything possible to strike a balance between our economic needs and our social objectives. However, the reality is that we cannot continue fuelling our economic growth by using cheap foreign workers. The reasons are many. Firstly, they will not remain cheap forever. Our experience with the Malaysian workers is a clear indication of how the cost could increase fairly rapidly. Secondly, socially, we are beginning to feel the negative effects. MPs are quite familiar with the number of applications for contract marriages between work permit holders and the locals. Thirdly, an over dependence on foreign workers will cause us to be held at ransom by them in case of a major economic downturn. Fourthly, they provide the easy way out, but not necessarily the best solution to our problem. Fifthly, it delays the process of upgrading and restructuring of our industries. Finally, in the areas where industries are of strategic importance to us, the sudden withdrawal of its foreign workers which form the majority of the workforce, for whatever reason, can cause paralysis to us. Sir, the most compelling reason to control and ultimately to reduce our dependency on foreign labour is our desire to improve our indigenous per capita income. We fought so hard when some countries tried to graduate us. Our argument was that our indigenous per capita income is much lower because of lower indigenous GNP. Sir, with so many of our MNCs bringing in their own managers and top supervisors and technicians, we will be placing ourselves in great peril if positions at the middle and bottom of the pyramid as well are occupied by foreigners. Nothing will be left for us. To my mind, the more acceptable solution to the unit cost constraint can be found through (a) improving our productivity; and (b) exporting our capital to other countries with labour surpluses. If the Japanese solution to similar high labour cost problem had produced a tide of manufacturing jobs in Singapore, Hong Kong, Taiwan and South Korea, there is no reason that we should not do it. We may not be able to act as a "big dynamo", a term the Senior Minister used for Japan and its role in the industrialisation of the NIEs. Few, albeit smaller dynamos, can collectively produce bright economic horizon for the region and elsewhere and at the same time provide additional "sails" to catch the wind, so to speak, for our nation's economic growth. In this respect, we may not have big corporations equal to those of the South Koreans, but we do have medium and small enterprises. It is here that we can pin our hope. While the creation of the Growth Triangle in this region and the presence of free market climate in China, Vietnam and elsewhere provides us with a new opportunity and new challenges to our local entrepreneurs, there are also opportunities open to us for joint ventureship with our traditional trading partners from the developed world, namely, Germany, the USA, the UK, Canada, Australia and many others. In fact, through our participation in joint ventureship with firms from developed countries, we are able to enter into high value-added activities and benefit from the more active transfer of technology. Perhaps more incentives in the form of reduction of corporate tax or even direct participation from Government-linked corporations, as proposed by the Member for Eunos GRC, could be given to local companies to move in this direction. In the field of productivity, I wish to congratulate the National Productivity Board for its untiring and creative efforts in improving our productivity. However, we are facing a tight labour market and a new generation of workers who were born and brought up under less trying circumstances and are thus different in their attitude towards work and life. Herein lies the great challenge to our productivity improvement. Sir, Singapore's economy is in good state. We enjoy full employment. We have low inflation. Our per capita national saving is still one of the highest in the world. We are opening ourselves to new opportunities. We may face short-term difficulties but we can still strive for a better future. On that note, I support the motion standing in the name of the Minister for Finance.

Mr Speaker, Sir, thank you for allowing me to join in the debate. My Ministry announced on 18th February a $50 increase in the foreign maid levy and changes in the foreign worker policy for the construction and marine sectors. Several Members of this House yesterday have questioned the need to increase the foreign maid levy. Some have asked whether Government can make foreign maids affordable to the lower-income women so that they can continue to work and have children. Mr Chiam claimed that the increase in foreign worker levy has led to higher business costs. A moment ago, my colleague, Mr Yatiman Yusof, has stoutly defended the need for a strict and firm foreign worker policy. Sir, let me now take a few moments to reiterate why we need to control the foreign worker population before I address the "how". The Government's foreign worker policy is to allow a limited pool of foreign workers in Singapore. This is to complement as well as to act as a buffer for the local workforce. This will allow the economy to grow beyond the natural growth of our population and our own productivity growth. It will also allow us to reduce the foreign workforce in times of economic slowdown, such as during 1985 and 1986. Sir, now that we have more than 200,000 foreign workers, including more than 65,000 foreign maids in Singapore, we cannot allow the pool of foreign workers to continue to grow unchecked and unregulated. The future of our economic survival and prosperity does not lie in trying to achieve more growth on the back of an increasing number of imported unskilled workers. What will ensure competitiveness and success are our efforts to upgrade the level of technology of our industries and to move our workforce to a higher level of skills. Without a rigorous foreign worker policy, the pace of upgrading and skills development will certainly slow down and we will be the worse for it. It is only natural, Sir, for employers to turn to low-cost foreign workers to meet their immediate needs because it is more costly and more difficult initially to invest in new machinery or to automate production processes. But this is necessary if we want to enhance the productivity of Singaporean workers. We need more skills training and upgrading, not more unskilled foreign workers. The policy to reduce our dependence on foreign workers will undoubtedly inconvenience and unsettle some companies, particularly those which are already over-dependent on foreign workers. Such companies, however, must search for alternatives, be it to retrain their workers, upgrade their operations or even to move part of their labour intensive operations to where labour is readily available, such as in the Growth Triangle. Indeed, some have already made the move quite successfully. Sir, a recent SMA survey showed that two out of five manufacturers have either moved or intended to relocate part of their business to neighbouring countries. Sir, this is part of economic rationalisation and restructuring. It may be at times a painful process, but it will in the long run ensure that the Singapore economy remains competitive against other NIEs. Moreover, Sir, if we do not control and regulate the influx of foreign workers, the lower wages of the foreign workers will certainly drive down and depress the wages of our own Singaporean workers. The earning power and standard of living of ordinary Singaporeans will then be adversely affected. The interests of Singaporeans must always come first. Mr Chiam has said that the increase in foreign workers levy led to an increase in business cost. But, Sir, we have not increased the foreign workers levy with the exception of the levy for the unskilled workers in the construction industry. The increase of $50 for the unskilled construction workers was necessary to slow down the intake of unskilled workers in this sector. The higher levy only applies to unskilled foreign workers. Contractors who employ skilled foreign workers continue to pay the low levy of $250 per month. Sir, let me now address the concerns expressed by Members over the increase in the foreign maid levy. Much of these concerns centre around employers of maids who are working mothers. Many have said that the increase in levy contradicts the Government's policy to encourage women to work and to have children. Underlying this is the premise that foreign maids are the only solution for such working mothers. Sir, if we were to accept this argument, then we must be prepared to allow in much larger numbers of foreign maids than we have here in Singapore today. Currently, there are about 260,000 married women in the workforce. If we do not revise the foreign maid levy regularly, more and more of these women can afford to employ maids and will want to do so. Since maids come from very low-wage countries and are prepared to work for as little as $150 per month, the foreign maid population could rapidly grow to unmanageable scale. Sir, this is the likely result if we were to adopt the approach of making foreign maids affordable to even lower income working women. What we must avoid, Sir, is to bring in large numbers of unskilled domestic servants so as to release equally unskilled Singaporean women into the workforce. To do so would be to further slow down our efforts to upgrade the economy and to move to a higher technology level and greater value-added output. Sir, we are not yet able to ascertain the extent of the problems from having such a large number of foreigners residing and working in Singapore. But Government should take a conservative approach. We should not wait till there is an overwhelming number of foreign maids in Singapore before we decide to revise the foreign maid levy. By then, it may be too late and there will be too many maids around. As I said earlier, Sir, there are 260,000 married working women actively contributing to the economy. According to the 1990 census and my Ministry's estimate, less than half of the working mothers with children below the age of 6 years (actually 6 years and below) are employing foreign maids. Sir, this confirms that, contrary to the popular impression, more than half of the working women have been able to cope with young children and career. It also indicates that employing foreign domestic servants is not the only solution. Sir, other countries, such as Japan, the UK and the USA, are countries where there is no ready supply of low cost foreign maids available, yet the female labour force participation rates for these countries are about the same or even higher than in Singapore. We should perhaps learn from the experiences of these countries and see how they cope. Foreign maids cannot and should not be the only viable option available to women who have to work and look after a family. The other alternatives are getting part-time local help, help from other family members and making use of childcare facilities. In many developed countries, where maids are not readily available, some working women even revert to part-time employment or stop work temporarily after child birth and return to the workforce only after the child is old enough to be placed in a childcare centre. This should certainly be worth considering, especially for working mothers who find the total costs of employing a foreign maid to be such that it leaves behind very little real income or net gain for them from their own salaries. If maids are so readily available at low cost, the tradition of having older family members and close relatives helping to look after young children will be eroded or even lost. Furthermore, alternatives to foreign maids such as childcare facilities will not develop fully or at the pace that is desirable to meet the demand. The Government has therefore taken measures to moderate the growing demand for foreign maids so as to minimise their long-term socio-economic cost. When demand continues to grow, as shown by the more than 20% increase last year, the levy has to be revised to moderate the trend. Sir, I would now want to address the question on how we should control the demand for foreign maids. Is the foreign maid levy the best option? Some disagree as they feel that it favours those who can afford. We operate a free market economy. Like all other resources, we should, as far as possible, leave the allocation of foreign maids to market forces by using a neutral pricing mechanism, such as the levy. Others point out that the impact of a levy increase is likely to be short-term. This is true, but it does not mean that the levy is ineffective over a longer period of time or in the longer term. What it means is that our economy is healthy and it is a matter of time before wages of Singaporeans will rise and overcome the increase in levy. Obviously, if we had not increased the foreign maid levy regularly over the years since 1989, we would have many more foreign maids than the 65,000 who are in Singapore today. My Ministry has over the years received about 20 suggestions on how we should regulate the demand for maids. These include allocation based on the needs of the households. However, we have to bear in mind that different people have different needs. Do Singaporeans want a system such that even if they can afford to pay for a particular service, the State tells them that they cannot have it because they do not fall within a particular category of families, or that their needs are less important, or that they have not chalked up sufficient points? My Ministry regularly receives appeals from people trying to explain why their particular need should be considered and approval for maids granted above others. Sir, there is no way for us to decide the merits of all of such cases. Is the need to look after a child stronger than that of an aged parent? Should the Government tell a highly-skilled woman with one child that her need for a maid is less than that of a lower-skilled women with two or three children? This would not seem to be fair or acceptable to the woman with one child. Sir, I hope Members will ponder over these questions in judging the merits of the levy system. There have also been requests to impose a higher levy on the second maid, or even to ban employers from having more than one maid. As I explained yesterday, less than 3% of the foreign maid employers have more than one maid. This means that even if we stop people from employing a second maid, we will not solve the problem of the maid population growing at the rate of 20% a year. The demand from the one-maid employer was the principal cause of the increase, not the small number of people who need a second maid. Sir, there are of course the "don't tax me, tax the other employer" type of suggestions. One wrote in to suggest that instead of regular increases for all foreign maid employers, new employers should be the ones to pay a higher levy. Current employers, those who already have maids, should be exempted from the new levy. This seems to be fair to the current employers, and I am sure they will support it, but is it really fair to all other employers? Is there a difference in the social and economic costs between a new maid and an old maid? Yet another suggestion goes this way: let us have incremental adjustments of the levy instead of sharp increases. Sir, this is in fact what we are doing periodically by adjusting the foreign maid levy to dampen demand when that demand goes up exceptionally high. I will not tax Members by going through all the 20 suggestions. The great variety and number of suggestions show that any one measure which we adopt cannot please all who are affected by it. Hence, we should always rely on neutral measures like the levy and allow Singaporeans to make their own rational choices. Sir, we have also received useful suggestions on how alternatives to foreign maids, such as childcare facilities and flexible working hours, could help to solve the problem. I have no doubt that the Ministry of Community Development will do its best to speed up the development of more childcare centres. I understand that in the last five years, the number of childcare places has gone up from 6,000 to 19,000. That is quite a high rate of growth for childcare services. On the flexible working hours, the Government has taken the lead by offering part-time employment opportunities for married women in the civil service. Even though the response has not been overwhelming, such schemes are viable options which working mothers ought to consider. My Ministry has also been encouraging private companies to offer part-time employment. In August 1990, we issued a set of guidelines for part-time employment to safeguard the interests of part-time workers while providing employers with flexibility to offer more part-time employment opportunities. Sir, we must see this rising demand for foreign maids for what it really is. It is a problem arising out of our success and prosperity. Because of our strong economy, a strong Singapore dollar, coupled with the relatively low wages and lack of employment opportunities in neighbouring countries, we are facing a sharp rise in the influx of foreign maids. Problems of success must also be managed, just like problems of stagnation, unemployment and falling standards of living. If we fail to manage this problem of success, it could seriously affect our long-term competitiveness and social development. If we manage it well, we can be assured of continued economic progress and cohesive social development. In conclusion, Sir, my Ministry favours taking a cautious approach to the inflow of foreign maids into Singapore. We do not intend to stop Singaporeans from enjoying the benefits of having the services of foreign maids. However, we will revise the maid levy from time to time to ensure that the maid population does not grow beyond manageable numbers.

Order. I suspend the Sitting and will take the Chair again at 10 minutes past Three o'clock. Sitting accordingly suspended at 2.47 pm until 3.10 pm. Sitting resumed at 3.10 pm

Debate resumed.

Mr Speaker, Sir, I join my colleagues in endorsing the fiscal principles as enunciated by the Minister for Finance. I would like to take this opportunity to discuss two areas of concern, namely, that of shopkeepers in HDB estates and the issue of health care costs. HDB shophouses Sir, first, on the issue of HDB shophouses. Mr Speaker, Sir, on 2nd March 1992, Mr Lim Boon Heng, Senior Minister of State for Trade and Industry announced the Retail Sector Development Plan. This together with the announcement by the Ministry of National Development on the sale of HDB shophouses brings new hope to the local small retailers. The Government's development assistance package for the retail sector, as well as the concept plans to upgrade existing HDB towns and neighbourhood centre, is timely. However, there is an urgency to this matter because, for many, it is indeed a matter of the "rice-bowl". Sir, in the Retail Sector Development Plan, eight key recommendations have been made and I would like to comment on some of them. (a) Promoting Economic Groups The National Productivity Board (NPB) will set up a Franchise/Cooperative Centre to help small retailers organise themselves into economic groups and benefit from economies of scale. This will indeed be welcomed by our small retailers as many now resort to buying from the large stores when certain items are on special offers to resell in the neighbourhood shops. (b) Providing front line business guidance and consultancy services Here, the Economic Development Board (EDB) will form an Enterprise Promotion Centre (EPC) to provide direct assistance to the small retailer. Here for the first time, the small retailer will receive professional advice and I am sure that this is much appreciated. (c) Selling of HDB shops to sitting tenants Sir, this is welcome news, and tenants are anxiously awaiting the prices, schedules and methods of financing available. One question that is in the minds of the tenants is the period of the remaining lease for the shops as this will affect financing. (d) Liberalising the foreign worker policy It is stated in the report that the Ministry of Labour will be more flexible in administering the 20% dependency ceiling for small retailers. When will this take place, when will the levy be reduced, and will the levy be reduced to assist an already "sick" sector? (e) Improving productivity and efficiency The provision by the National Productivity Board of structural training programmes is most welcome. This will also help alleviate the employee problem in the HDB retail shop as on-the-job training will make it more worthwhile to work in a small enterprise. (f) Promoting computerisation I am sure that the NCB with all its expertise and experience will be of great assistance to the neighbourhood store. I am sure that the NCB will also be mindful of the special needs of an affordable and user-friendly system for this special group of clients. (g) Concept plan for physical upgrading of HDB retail centre Sir, Tampines and Toa Payoh have been chosen as models for the pilot project. Whilst awaiting for a full evaluation of this project, could something else not be done for other estates? As I have mentioned earlier, there is urgency in this matter. (h) Other assistance I am glad that the EDB will be making available its whole infrastructure to help the "small retailer" as for too long the EDB has been seen to only care for the MNCs, although we know that this is not the total truth. In summary, Sir, I look forward to these benefits being made available soon to more shops, and especially to the shops in my own constituency, Bedok GRC, of which you, Sir, are also a Member of Parliament. Health Care Sir, much has been said on subsidies, health and doctors. I would like to focus on health care financing and managing health care costs. I will make reference to the Main Report of the Review Committee on National Health Policies. As the practice of medicine has changed world-wide, we have not been spared. However, in Singapore, we can still hold our heads up high. Overseas, we hear of cuts in health care, closure of facilities, unemployed or under-employed doctors, wasteful practices and poor doctor-patient relationship as reflected by high litigation costs and the practice of expensive and wasteful defensive medicine. Yes, we have our problems but they are not of the magnitude of that in many other countries. We are still in the happy situation where we can rationally plan for new hospitals and services. Health Care Financing Sir, the Review Committee supports the principle of cost-sharing to curb excessive demand for health services. This is correct. However, what is affordable in terms of cost-sharing is another matter. That Government should ensure that basic health care is accessible to all is correct. However, what is basic? Basic is different to different persons and to different illnesses. There must be flexibility in the implementation of this policy. Sir, first the issue of the Class C patients. It has been suggested that the cost recovery should remain at around 20%. However, as hospitals are restructured, 20% in real dollar terms will not remain static but will increase. Depending on the direction of restructuring, one must also keep a check on the real dollar cost to ensure that services remain affordable. Sir, it has also been recommended that "service in Government and restructured hospitals should cater mainly to the lower and middle income groups. Facilities for private patients should not be expanded any further". I could not agree more with this statement. In this context, I would urge the Government to consider the reclassification of Government hospital wards, as mentioned in the report. There should be only two main types of wards: full paying wards and subsidised wards. As mentioned in the report, within each type, room rates can be varied accordingly to the level of privacy and comfort that the patient wants. In this manner, the services provided by a hospital can be subdivided into, firstly, pure medical care - the medical care that the patient came for in the first place - and secondly, the hotel-type or lodging facilities which the patient wants. The standard of medical care given should be appropriate to the illness regardless of the type of ward in which the patient is in. However, the patient is free to choose the type of accommodation that he desires. Some patients, even though they can afford it, may not want a single room. For example, when they are warded in the hospital many will prefer the companionship of someone, ie, to have a room mate. In this scheme, it is also my hope that patients in the subsidised wards can choose a specialist of their choice. A properly advised patient would rather save on lodging and spend on medical care. This is what we should encourage. In this way, I believe health care costs can be significantly reduced. Medisave Mr Speaker, Sir, Medisave has been the cornerstone that has kept our health structure in good stead. It is indeed our life saver. It is obvious that the older person needs to spend more on health care. The younger person needs to spend more on housing and other needs, eg, children's education. Thus, a spread of the CPF contribution to different areas of needs at different eras of one's working career makes good sense. I, thus, agree that should the need arise to revise the Medisave rate, this principle should be followed. Sir, as the trend in patient care is towards ambulatory care (ie, reduce hospitalisation to the shortest period possible), it is now the correct time to look into how Medisave can be extended to cover outpatient treatment for chronic illnesses. Medisave has kept up its time in that in many cases of day surgery, Medisave can be used. This is a correct way. You do not admit a person for surgery if he does not need to stay overnight. So likewise, there are many chronic illnesses for which a person need not be admitted but can be treated as an outpatient. Can we extend Medisave to cover this group? This will encourage patient compliance and reduce expensive hospitalisation. However, as this is the fear of the Ministry of Health, and a very rational fear, this should not be done until a system of checks and medical audit is set in place so as to prevent wastage and abuse. In summary, Sir, the problems of health care will escalate, especially with an ageing population. No one wants to be ill, but get sick we all will. Prevention will help reduce illness, but there are many illnesses for which there is no preventive programme. There are many cancers for which we do not know the cause yet. But whatever we can do in the prevention of illness in encouraging healthy lifestyles we should. Government has and always will be a key player in the provision of health care - and thus the public and professionals will always look to the Government to provide the leadership. This is one area that "market forces" alone will not suffice to provide all the answers. Subsidy is a necessity and not a dirty word in health care. The quantum of subsidy required is, however, always open to debate. I am sure that the Minister for Finance will always be sympathetic to the needs of the Ministry of Health.

Thank you, Mr Speaker, Sir, for allowing me to speak in this budget debate. I wish to speak in support of the motion in the name of the Minister for Finance. But before that, Sir, let me congratulate the Minister for Labour for his very clear and well-argued exposition on the maid levy issue just a moment ago. I think it is a good example for us that we should not let emotion get into the way of clear logic and rationale when talking about the maid issue. It also gives a very good perspective of the social implication of growth. So I urge Members to study in depth the Minister's response to this issue. I also wish to cover only certain points, as my able Parliamentary colleagues have already covered many areas. Firstly, Sir, our economy grew by about 6.7% in 1991 compared with 8.3% in 1990, at 1985 market prices. Although many people may think that this is a letdown, I personally do not think so. It is, I believe, a realistic rate of growth for our economy at this stage of our development. Singaporeans should not expect the economy to turn in 8%, 9% or 10% of annual growth, although this was the norm in the 70s and the 80s. It is more important for our people to realise that productivity growth is a more crucial dimension of our real economic growth for us now. This is because by expanding capital inputs, we need labour to work with the capital. And as we are in full employment, such an increase in the labour input can only come from our own labour supply, or from outside Singapore. We already have about 300,000 foreign workers in Singapore. Alternatively, we need our workers to work with greater intensity of capital and to be able to do that they need skills and training. Hence, increasing our labour productivity is crucial at this phase of our economic growth. It is not very useful to talk purely in terms of economic growth alone. Sir, I am concerned that labour productivity only grew by 1.6% last year, while real wages went up by 7.6%. As pointed out by the Minister, this is the third year where our real wage growth exceeded our productivity gains. I urge the Government to tackle this problem anew. Related to this is the unit labour cost which has been rising for the past three years. We run the danger of pricing ourselves out of the competition. The second point, Sir, I wish to touch on concerns the wayward fortunes of the trade negotiations for the Uruguay Round. Through the leadership of our Prime Minister, Mr Goh Chok Tong, the creation of the ASEAN Free Trade Area (AFTA) is a significant achievement for Singapore and for the ASEAN countries. Singapore businessmen will benefit positively and significantly from this as it allows lower tariff for the movement of goods within ASEAN countries. More important, Singapore, through ASEAN, can benefit from the many favourable tariff preference arrangements. ASEAN and AFTA can be platforms on which Singapore and ASEAN countries can bargain for the optimal free trade arrangements for the simple reason that united we are strong, and divided we are weak. Thirdly, Sir, I must compliment the Finance Minister for his expose on Adam Smith and the virtue of the free market. Few Finance Ministers can afford this luxury. The only other Finance Minister in the world that can expound so proudly on Adam Smith, I believe, Sir, is the Financial Secretary of Hong Kong. Nonetheless, the Minister has not forgotten to mention this and I quote: 'The market system, suitably tempered by Government intervention, has served Singapore well.' Fourthly, Sir, I wish to compliment the Government for the policy on containing the public sector's share of manpower resources and on containing the size of public expenditure and the GDP. This is a very good yardstick to go by without sacrificing the quality of output and service. When the Government expenditure gets too big, there is always a danger of inefficiency. Finally, Sir, I must thank the Finance Minister for granting the tax relief for National Service reservists. Although this decision was taken after the recommendation of the Committee for the Recognition of Contribution of Reservists to Total Defence (RECORD), many outspoken reservists have, over the years, spoken out for similar ideas, for well past a decade, as far as I can remember, speaking with experience as a Manpower Officer of a brigade for the same period. To all the reservists who have been banging this idea, and who have by now gone ROD from the reserve, there is still a $500 tax relief for their past service. They are not forgotten. It goes to show that this Government does listen to the good ideas of the people and that people with good ideas should not give up, even though sometimes the Government seems hard of hearing.

The question of subsidies and use of reserves to lower the cost of living has appeared many times in today's and also yesterday's debate. Sir, I would like to address this issue in the context of health care services and in my capacity as Chairman of the recent Review Committee on National Health Care Policies. Sir, Singaporeans have by and large accepted that a welfare state is not good for us. But in certain areas, like health care, they are still hoping for bigger subsidies from the Government. However, we must not forget that subsidies have to come from the taxpayers' pocket. The burden ultimately falls back on the people. Therefore, the right approach is to control the rise in health care costs and to ensure that basic medical care will remain affordable to the nation. What is basic medical care? Dr Arthur Beng has just raised this question in the House. He also happened to be a member of the Health Review Committee. He probably would remember that we debated this issue at length and found it is very difficult to define. So we have to work with an evolving definition which we have to tackle from time to time. As far as the question of health subsidies is concerned and the right approach to controlling the rise in health care costs, the Review Committee has drawn up a number of recommendations on, first, how to improve the health of Singaporeans, so that the need for medical treatment will be reduced; second, how to improve the efficiency and quality of our medical services, so that they are worth every dollar spent; and, third, how to manage the rise in health care costs. Underlying our recommendations are several important principles. These have guided the development of our health care financing system and they have served us well. What are these principles? First and foremost, we believe that the individual has a personal responsibility to stay healthy and minimise the need for medical care. Hence our emphasis on health education, health promotion and disease prevention. Every person should make healthy living a way of life. A second principle is that the Government should continue to ensure basic medical care is accessible to all citizens. In practice, this means that market forces cannot be allowed a free play. The Government must intervene in such an important area as health care. Hence, the Review Committee's recommendation that the Government should continue to be the major provider of health care and subsidies should still continue to be provided for the lower income groups. Third, there must be a certain amount of cost-sharing at the point of consumption to discourage wasteful and excessive demand for medical services. As for Dr Arthur Beng's question as to how much is affordable, that is of course open to debate and subject to review. We have made our recommendation in this area also. Lastly, to enable Singaporeans to pay for their share of the costs, they must be encouraged to save, especially for their medical needs during their retirement years which, because of a lengthened lifespan now, stretch to about 20 years and more. So the Medisave contribution rate should be progressively raised, and the self-employed brought within the scheme. These principles are important and we believe they are the right principles. The specific measures and programmes should be seen as implementation of these principles. One of the recommendations that the Committee made with regard to the slowing down of the rise in health care costs has attracted much interest and this is our recommendation on the intake of medical students at NUS. Yesterday, Members of the House have engaged the Minister in a brief discussion on the relationship between the supply of doctors and health care costs. There were some articles recently in the Straits Times and also a letter to the Forum page. And even just now during the coffee break Members of the House were asking me to explain this relationship again. If I may put the issue in rather simpler language, it is just that, under a situation of over-supply, doctors can maintain their incomes by driving up the volume of their services through over-investigation and over-treatment. Patients are often not in a position to dispute the doctor's treatment, not only because they do not have the expert knowledge, but also because when they are ill, they require immediate attention and they are also under great emotional stress. Therefore, at that time, they cannot make rational choices. And where the patient mistakenly equates costly treatment to be the best treatment, he would demand it. The doctor would be only too happy to give it, thereby feeding the demand. Health care costs go up as a result, and people's health is not necessarily better. In the case of terminal illness, costly treatment may prolong life somewhat, but the patient's quality of life is often poorer. It may be true that doctors are not the only professionals who can play up an imperfect market. Others can, eg, lawyers and maybe others. But if I am not mistaken, America has the highest lawyer-to-population ratio in the world. But look at what has happened to legal costs there, and what a litigious society America has become. Sir, the training of doctors is very expensive. At present, it costs $53,000 per year to train one medical student. It is as costly to train doctors locally as it is for medical students to be trained overseas, because our standards are comparable to that in advanced countries. Out of this $53,000, the student pays $10,000. Thus, the Government is subsidising each medical student $42,000-$43,000 per year. For each student's entire course of study, which takes five years, the Government provides a subsidy of over $210,000, and this is a huge sum. Needless to say, such heavy investments in our doctors must be carefully balanced against the country's need to train lawyers, engineers, accountants, and so on. Besides, we must not forget that, unlike lawyers and engineers, doctors once trained cannot easily change occupations should the demand drop. This would represent a huge loss in taxpayers' money spent on their training. Therefore there is no question that we must carefully plan the supply of doctors and the intake of medical students. As with all projections, if the parameters change in future, such as, if Singaporeans are not returning from medical study overseas, or if foreign doctors are not coming to practise here, then of course we would have to make adjustments, and the NUS intake of doctors would have to be reviewed again. I hope this will help to clarify the Review Committee's recommendation on the intake of medical students and lay the issue to rest, at least for the next few years, Sir.

Mr Speaker, Sir, I support the Minister for Finance's Budget Statement for the financial year 1992 and would just like to make some comments on two areas of concern. In this year's statement, the Minister has taken considerable pains to give the background to some of the major policies the Government has implemented over the years. Underlying all these policies is the key decision to allocate our scarce resources by market forces. I subscribe fully to this very important factor in the formulation of our economic as well as social policies. With sustained economic growth over the past two decades, with the exception of a small hiccup in 1985, most of us in Singapore have come to take growth as virtually automatic. Many have indeed criticized the Government as too money minded and unduly obsessed with adherence to market forces. Success can often cloud our vision and lull us into believing that we have made it. Worse, we may come to believe that things can happen and economic growth will take place without any effort on our part. The reality, of course, is quite different. Given the scarce resource at our disposal and our virtually total dependence on the world market, we must make sure that we remain efficient always and to stay competitive. Competitiveness is dynamic. It changes not only with time but also with the way our competitors improve themselves. If we just stand still for a moment, they will overtake us. It will take us some time to catch up as they are better endowed with much more resources. Hence, in everything that we do, whether it is education, health, housing, in business and commerce, we must let market forces operate, in terms of encouraging maximum performance through a proper reward system. Subsidies will lead to inefficiencies as output is not commensurate with effort. The experience of the successful economies, especially those in the Pacific Rim, the NIEs and the Dragons, are living proof of the correctness of this approach. More telling, however, are countries that have followed the other way of subsidising the people in all kinds of activities. The sad state of affairs of these countries is an indictment against the policies that they have adopted. Even more painful is that they will have to undergo much more hardship before they can turn the economies around. Members may be aware that at present there is a delegation of Russian Members of Parliament in town. In the exchange of views, they were full of admiration of the policies that Singapore has adopted. I told them that it has taken us some 30 years doggedly following this market forces drive in order to arrive at what we have today. They were rather wistful and said that all they have got now is three months. And this is happening in a super power. We can only ignore these trends at our peril. This is not to say, of course, that we must stick to market forces at all costs. We have recognised that for health, education, we have to continue to fund the bulk of the cost of these services. Just take a small example of education. Much has been said about independent school fees. I understand that for independent schools, even when the school fees are supposedly much more substantial than Government schools and aided schools, in terms of meeting the expenditure requirements of these schools, the Government subsidy in the form of capitation grants to these schools accounts for more than 80% of total expenditure requirements. And for schools which are not independent in the Government and aided areas, I am quite sure that the subsidy would be more than 90%. This is something that we have done for the last 20 over years and I am quite sure the Government will continue to do it. We should also acknowledge that a certain segment of our population, for a variety of very valid reasons, would not be as well endowed as their fellow countrymen. We must therefore cater for these people and make sufficient room for them to make their contribution. For those who need to adjust to new circumstances or to overcome temporary setbacks, we must do our best to help them in whatever way we can. Indeed, a key element in the Government's economic and social policies implemented in the last two decades has been to pay special attention to this group of people. We have by and large succeeded, but as the Prime Minister has said in many of his speeches, more can and will be done. The objective must be to lift everyone to his maximum potential, rather than bringing everyone down to the lowest common denominator. The fundamentals of our policies are sound. They have been tested and proven correct. We should not ignore them. Let me now turn to the other comment. The Minister has referred to the changing world economy in the established countries like the United States and countries in the European Community becoming less dominant and the emerging economies, especially in the Pacific Rim, are assuming more prominence. With the formation of new trading blocs, Singapore's access to these traditional markets will become increasingly difficult. The Minister has suggested that we should look closer to home, ie, Asia and ASEAN. We should take this suggestion very seriously. If we look back to the past decade, economic downturn in the industrialised countries in the West had always been tempered by growth in the regional economies, except in 1985 when even our neighbours did not do well. An added advantage is that we are immersed in the same Asian culture and in many ways share the same values. In business dealings, much emphasis is placed on trust and relationships built over years of working together. Singapore has a head start on this and we should redouble our efforts in this direction. Opportunities in ASEAN, Indochina and the People's Republic of China can be tapped to our advantage. Even the Commonwealth of Independent States can offer good business potentials when the political dust finally settles. There is perhaps one obstacle, as Mr Chew Heng Ching has pointed out before the break. In our drive for more business and investment in these countries, our Singaporean managers are by and large quite reluctant to venture abroad and remain home-bound. Although quite a number of Singaporeans are now working in Hong Kong, the expansion of business will require many more. They are required in such countries as the PRC, Vietnam, Russia and the Republics, where living conditions are, unfortunately, quite far below those that we are used to in Singapore. There are valid reasons for them to avoid overseas postings, but we must find ways to encourage them to go abroad. I understand the Singapore School in Hong Kong is a very good move and very popular. The establishment of direct air links to these countries will also help. The more important thing, however, is the change of attitude of our Singaporean managers. They must recognise that it is no longer enough to operate only in the Singapore market. Increasingly, we have and must look outwards for growth and opportunities. We should be well poised to do this. We can stay competitive and efficient, something which, without their realisation, the Government has been trying to prepare them all these years.

Resolved, That the proceedings on the item under discussion be exempted at this day's sitting from the provisions of Standing Order No. 1. - [Mr Wong Kan Seng]. 3.46 pm

( In Mandarin): Mr Speaker, Sir, Singapore is a small country, both in land area and in population. The domestic market is limited. With the emphasis on economic restructuring in Eastern Europe, and the formation of economic groups in Europe and America, there is undoubtedly a threat to Singapore's export-oriented economy. At the same time, with the gradual opening-up of the ASEAN economies, there is a marked increase in market and investment opportunities. For Singapore's economy to go international is a necessity. As far as the economy of Singapore is concerned, all along, the resources are over-concentrated in the hands of the Government. All the Government companies and Government-linked companies are expanded in a large scale. Apart from having a fixed share of the domestic market to secure their positions, they are also developing externally. Some Government institutions which were originally meant to be serving the people monopolized the market and received substantive financial assistance from the Government to develop themselves into large enterprises. Some even expanded further to venture into the overseas markets. The infrastructure for the economy to go international has already been put in place. However, what worries me is that these Government companies and Government-linked companies have, all along, been given special privileges, and monopolized a major share of the domestic market. Basically, their management staff are technocrats and technical people. When these companies go international, are they able to compete agilely and effectively in the ever-changing scenes of the international market? The Government has concentrated its resources in these companies. The investments on these companies include the savings of the country and the people. These companies have also netted in a large pool of talents. In the event that these companies do not make profits as expected, would it not undermine our national economy? According to the 1986 Report of the Economic Committee and the Small and Medium Enterprises (SME) Master Plan, Government has promised to pay special attention to the development of the local private small and medium enterprises, so that more private entrepreneurs would have the opportunity to establish themselves locally, and then expand their business to compete in the international market. I believe if these indigenous industrialists can successfully find these places in the international market, they will be able to provide an economic buffer zone for our economy. Although the Economic Development Board (EDB) has been helping the SMEs in some ways to improve their competitiveness, in order to compete internationally, I believe there are still many enterprises and small businesses which are still struggling for survival. The Minister for Finance said that Singaporeans had accepted the fact that rapid changes were part of the process of economic growth and suggested that we should continue to restructure our economy. Mr Speaker, Sir, economic development and the changes and restructuring of the economy should complement each other. The industrial and commercial enterprises owned by Singaporeans should enhance their competitiveness so that they can venture into the international markets. By right, the purpose of economic reform such as automation and mechanization is to lower the cost, thereby increasing competitiveness. Since 1986 when the Government started to emphasize the reform of SMEs, have these enterprises succeeded in lowering their cost of operation? Are the local SMEs making better profits? Have those large enterprises which have implemented automation lowered their operational cost and increased their competitiveness? Over the years, the Government has compelled the industrial and commercial enterprises to increase their competitiveness by increasing their cost of operation, for example, foreign workers levy, and the various service charges. On top of that, the largest property owners in Singapore - HDB and the URA - have also adjusted their rentals. The cost of doing business here keeps on escalating over the years. Many hon. Members have been talking about the problems of escalating cost of doing business here. I shall not dwell on this point. Under such circumstances, the local SMEs are given no chance to catch a breath. I think it is difficult for them even to survive, not to mention stable development. If the Government continues to hasten its pace of increasing the cost of doing business here to force the local companies to restructure, then it may result in some companies, in the process of corporatisation, computerisation, automation, and owing to cash-flow problems, unstable market conditions and slow economic growth, ending up being closed down. As a result, they suffer severe losses, and even the economic foundation of the nation is affected. Under the high-cost policy, the small businesses will find it extremely difficult to survive. For those who have to depend on these businesses to make a living they will be hit very badly. Although the Finance Minister gave the assurance that there will be ample employment opportunities, the solution to the problems faced by these people in earning a living is not as simple as that. Mr Speaker, Sir, will the salaried workers benefit by the Government's policy of increasing the operational cost to compel the enterprises to expand their scope of business, and to go for corporatisation? First of all, before they can be fully corporatised, the businessmen would surely pass the burden of the increased cost to the consumers. The consumers will be the first to suffer. What is worse is that full corporatisation may bring a situation of large enterprises dominating the market. Prices of consumer goods may go even higher. Assuming all the provision shops form themselves into a conglomerate, perhaps to be taken over by the NTUC Fairprice Co-operative, and assuming all the food centres are to be operated by some conglomerates, then once they are fully developed, like the Singapore Bus Service, prices of consumer goods will no longer be subjected to the market forces, or to be determined by the demand-supply mechanism of the free market system. Then, they will not hesitate to adjust the prices as and when they so wish, and what can the consumers say about it? Mr Chng has already spoken about the SBS, and I do not intend to spend time on it. Furthermore, the Minister for Trade and Industry has indicated that the wage increase of Singapore workers has exceeded productivity growth for many successive years. It looks as if the era of huge wage increases is going to be a thing of the past. Yet, cost of living is going up and never coming down. How are we going to improve the standard of living of our people? Mr Speaker, Sir, in his speech, the Finance Minister expressed his worry that members of the family may fight over their shares in the pie, and forget that they should be working harder to make the pie larger instead. I think all Singaporeans know that the only resource we have in Singapore is our human resource. We also know that for our living, we have to use our hands, legs and mind together, and every trick in the book. However, Singaporeans are also aware that it would not do "if you want the horse to run well and you would not allow it to eat the grass". Nobody is advocating that we do not need to work hard to enjoy a good life, and no one is against "Majullah Singapore". We need to work hard, and we want the economy to continue growing. However, we also need to discuss what will the people get after they have worked hard. While our coffer is rich, when we are having budget surplus every year, has the burden of our people been lightened? Are those people who are struggling for survival getting any better? In this year's Budget, when our economic growth is not as good as before, there is no incentive given to further help our local enterprises to develop, to lighten their burden, and to cope with the setback brought about by market instability. This is very disappointing, just like the way the share market responded to this Budget. Very disappointing indeed! However, it is interesting to note that, for the first time in history, the Government has announced that it will set aside a certain amount from the budget surplus to set up an Edusave Fund, and to continue allocating a certain amount from future surpluses to enrich this Fund which will look after the interest of the people. In the last General Elections, Prime Minister Goh Chok Tong promised that he would withdraw from the reserves to establish this Fund. I am aware of the importance of the reserves to our nation. It cannot be used indiscriminately. But at the General Elections, the Prime Minister said that he was going to make use of the reserves. Yet now, the Minister for Finance said that only when there is a budget surplus would he allocate some money to set up the Edusave fund. No surplus, no fund! Now, what is happening? Mr Speaker, Sir, in this year's Budget, the Government promises to pay the conservancy fees for the month of December on behalf of the owners of the 1-room, 2-room and 3-room HDB flats. This is also an unprecedented move. Although this represents the Government's new direction in the "Next Lap", the Government should continue to work harder in lightening the burden of the people.

( In Mandarin): Mr Speaker, Sir, first of all, I would like to say that I support the motion standing in the name of the Finance Minister. In the speech by the Finance Minister, Dr Richard Hu, when he presented this year's Budget, the one point that strikes me most, or shall I say the one point that has got the greatest impact on me is that this year's Budget will, for the first time ever, be subjected to approval by the Elected President. To me, the reserves which have been built up by our people and the country through all the hard work over the years will henceforth be given another safeguard. This will further ensure that our national reserves will be put to optimal use, and prevent the reserves from being abused. For example, the Opposition Members from the Singapore Democratic Party (SDP), Mr Chiam, Mr Ling and perhaps even Mr Cheo, have suggested for more and more subsidies: more subsidy for education, for housing and, in the end, perhaps for the sake of getting more votes, they may even ask for subsidy for everything - telephone, transport and what have you. Then, inevitably our reserves will have to be raided. Fortunately, we have the establishment of the Elected President. The Elected President will decide whether they should be allowed to use the reserves. During the past two days, many Members in the House have discussed the question of reserves. My view is that so long as our economy is growing, we must increase our reserves because if the country has surpluses, strong reserves, then in the long run it will contribute to our prosperity and stability. Just imagine, if we do not have such huge reserves we would not be able to enjoy such prosperity, progress and stability as we do today. The war in Kuwait. By now, people have come to understand the kind of damage and liability war can bring about. If there were no huge reserves, then how was the country going to fight the war? How was the country going to re-build itself after the war? It would be impossible! There is this saying: "We are not afraid of cases, but we are afraid of `just in case'". Another saying goes: "When you have to use your money you'll know that it is insufficient." I hope Members of the Opposition and, for that matter, all the people in Singapore would continue to support our Government's financial policy of striving to make more surpluses and to increase our reserves. Yesterday, the Members of the Opposition, Mr Ling and Mr Chiam, said that we should increase our subsidies and move towards a system which provides for more social welfare. Mr Speaker, Sir, I would like to take this opportunity to express my views on this. I feel that in the process of pursuing our target of becoming a modern society, the most important thing to do is not in moving towards social welfarism but more towards achieving social justice. What is social justice? By this, I mean that a society in which everybody has equal opportunity to compete in a fair and square manner. Behind this competition, we have equal opportunity for education, which is a very important criterion. So given the equal opportunity to be educated, everybody will have to work hard according to his own ability to make money. Of course, there are bound to be some people who are, unfortunately, unable to keep pace with the progress of the society. In this regard, I think the Government should do something to help them maintain a basic level of income and a minimum standard of living. However, I must stress once again that we should not be reduced to a welfare state, like the United Kingdom. Mr Speaker, Sir, helping the less fortunate, the poor people, the aged and the helpless is something which the Government should take the lead, with associations and civic organisations being encouraged to participate in its actual implementation. The existing organisations such as MENDAKI for the Malay compatriots, SINDA for the Indians and the proposed CDAC (Chinese Development Assistance Council) for the Chinese will be able to take on this role. I would urge all Singaporeans to give these organisations greater support in order to ensure that the basic standard of living of the people of Singapore will not be threatened. Mr Speaker, Sir, in a good society and a good economic system, the most important thing is to stimulate and encourage the people to maximize their potential in economic development in order to create more wealth. If wealth and knowledge are concentrated on a small group of people, then so long as they are acquired in a proper and legitimate manner through their outstanding talents and efforts, then there is nothing wrong in it, and we should not try to suppress it. Therefore, in the process of creating wealth, so long as we can ensure that every citizen can have a basic standard of living, that they will be free from cold and hunger, then that will be good enough. Beyond this protected standard, then we should allow freedom for everybody to seek his own wealth, and create more wealth within the legitimate limits. In my view, we must first of all establish the need for a basic standard of living for the people. The Government must take up this responsibility to ensure that such basic standard of living is maintained. Over the past few years in Europe, because of excessive implementation of a welfare state policy, many countries are suffering grave consequences, such as much too heavy financial burden. Many people do not want to work. They rather stay at home and enjoy public assistance, resulting in extremely low productivity. The Opposition Members should ask themselves: in the circumstances, should we or should we not implement a welfare state policy? Mr Speaker, Sir, let me talk about subsidies, rebate of HDB service and conservancy charges and tax relief for the reservists. I think it is a very good gesture on the part of the Government to pay the December 1992 conservancy charges for those who live in the 1-room, 2-room and 3-room HDB flats, and to grant a tax relief to the reservists. This can be said to be a good deed. Many Singapore citizens rejoice over this announcement. However, there are some people who criticize the Government and complain that it is inadequate. Some said in dialect (Teochew): "A 5-cent coin is bigger than the wheel of a bullock cart". They simply do not bother about this good gesture on the part of the Government. Apart from that, those who live in 4-room flats and above grumble and complain: "Why are we not included in this benefit?" So it is quite clear that it is difficult for the Government to govern. When you give, you are wrong. When you do not give, you are also wrong. I feel that henceforth the Government should consider very carefully before they decide to hand out any goodies. Mr Speaker, Sir, let me now deal with the issue that Mr Low Thia Khiang mentioned a while ago about the cost of doing business in Singapore. When he talked about the cost of doing business, I began to wonder whether he was a member of the Workers' Party because a member of the Workers' Party would normally talk about the interest of the workers, not that of the businessmen. Since he mentioned about cost of doing business, let me express my views on it. He mentioned that Singapore is a small country. However, he must also agree that Singapore has a small population. When a thing is scarce it becomes precious. If any cost is related to land and people, then in the long run, the value will appreciate. This is inevitable! So think about it. If the workers in Singapore are not supported and assisted by our National Trades Union Congress (NTUC), it is most unlikely that they will have the kind of good life that they are enjoying today. Their wages, as compared to 20 years ago, have been increased many times over. Their standard of living has improved. Twenty or thirty years ago, could the Singapore workers afford to subscribe to the telephone service at home? Did they have television at home? No, not possible. Very few indeed! I came from a poor family. Thirty years ago, we did not have television at home. I had to go to my neighbour's house to watch television programmes. Today, my younger brother is a labourer, but he has television at home. Has the standard of living been improved? However, this is a very personal matter. We have to talk about the standard of living of the average workers. Generally, the standard of living has definitely gone up. From another perspective, how does the Singapore Government protect the interests of the workers? We control the influx of foreign workers through the foreign worker levy. So this is one measure that we use to control the increase in the number of foreign workers coming into Singapore. But if we look at it from another angle, this is one way to protect and ensure the wages of Singapore workers are not dragged down. That is right, is it not? Now, we say that Singapore is a small economy. If Singapore does not have foreign workers but only local workers, then what would happen to our industrial and commercial sector? Perhaps Mr Low could enlighten us on this topic at the next sitting of Parliament. Unfortunately, we have a small population. To expand our economy, we have to depend on foreign workers. But personally, I feel that the import of foreign workers must be controlled. The number of foreign workers cannot be increased without limit. Furthermore, we must be selective. For this reason, I agree with what was said by the Minister for Labour on this matter. I will give you another example. In our Jalan Besar GRC, we have a place which is quite famous. Not the place that you may have in mind, but the "Little India". One Sunday night, I went to attend a dinner function. I drove to Little India. There was complete darkness, not because there was no light, but because there were too many Indians around there. [Interruption]. No, I am not trying to play on communal lines. Sorry, we have Indian compatriots in this House. But I can tell you, the moment you open your eyes, you can see straightaway that they are not Singaporean Indians. Because their behaviour and expression are different from the Singapore --

Point of order, Sir.

Yes, Mr Chiam. What is it?

Sir, I think the hon. Member --

Are you raising a point of order?

I am raising a point of order.

What is your point of order?

I think it is not proper for him to make fun of other races.

Mr Chiam, that is not a point of order.

He should not make fun of other races.

That is not a point of order, Mr Chiam. You may continue, Mr Choo.

( In Mandarin): Mr Chiam has once again misunderstood me. Last year, he misunderstood me. The year before, he also misunderstood me. He does not have enough sense of humour. What I have said is that they are non-Singaporean Indians. The Member should listen to me. I am saying that what I saw were non-Singaporean Indians, and not Indian compatriots of Singapore. Under those circumstances, when you drive past that area, their reaction and behaviour clearly tell you they are not Singaporean Indians. If the Member has a chance, please take a drive to our Little India and see things for himself. Then, he will surely feel the same way that I did - that if we have too many foreign labourers in Singapore, will it not have a certain amount of effect on the social security and stability of Singapore? The answer is in the positive! If the foreign workers cause a rebellion in Singapore, ie, different foreign workers with different skin colours start a rebellion, then I believe it may most likely cause some unrest among the various races of the local people in Singapore. Perhaps Mr Chiam may hold a different view. But, we must always think of the worst scenario situation that may happen, when we plan our future.

Point of order.

( In Mandarin): Please let me finish before you talk. Mr Speaker, Sir, on the question of land, population and cost of doing business here in Singapore, I truly agree with Dr Ow Chin Hock's view that we must allow the free market system to allocate our limited resources. But for the sake of public interest, Government intervention is still very important. Mr Speaker, Sir, I feel that the Government should spare no effort to ensure that we have higher productivity and that wage cost is in direct proportion to labour productivity. At the same time, we must also give our enterprises, particularly the small and medium-sized enterprises, more assistance, especially in business management, consultancy, etc. I think this positive assistance will, in the long run, help our entrepreneurs who have the potential, to become more competitive and to grow even faster. Mr Speaker, Sir, just now, Mr Low said that Government companies and Government-linked companies are having a monopoly in the market in Singapore, much to the detriment of our Singapore enterprises. Is it a fact? Take a look at Singapore Airlines (SIA). How much profit and benefit have SIA brought to Singapore and what kind of good reputation has SIA built up for Singapore! Yes, it is a monopoly. However, if there were no support and assistance by the Government in the early stages, SIA would not be what it is today. At the same time, SIA also wants to get the best employees. Surely, if you want to perform well in the international market, in the business arena of the world, you must have a team of able and efficient people at the helm to steer the company through. Otherwise, it would not even survive. So I feel that Mr Low has too deep a bias against our Government companies and Government-linked companies. Of course, I am not saying that it is a perfect system. In the event of there being any shortcoming, I believe the Minister for Trade and Industry and other Government officials will remedy the situation. In any event, Mr Speaker, Sir, judging from the situation at the last General Election and the way we debated in this House, I hope that we would not fall into the trap of democracy. Philippines used to be the second richest country in Asia. The process in which they fought for democracy, and the consequences of their having fallen into the democracy trap, clearly demonstrated the fact that democracy and democracy alone cannot solve the imminent and real problems for the Philippines. If our Opposition Members keep on saying that they are looking after the interest of the people or trying to please the public with claptrap political arguments, then this is the democracy trap. If our democracy is not supported by national consensus and the rule of law, then we would not be enjoying our present prosperity and progress and the vision of many good years ahead.

( In Mandarin): Mr Speaker, Sir, I support this year's Budget Statement. This can be said to be a budget which is not saltish, not bitter, but slightly sweet. It is also one which is circumspect and far-sighted. From the speeches in this House, yesterday and today, particularly from the Opposition MPs, we can safely conclude that there is no serious complaint or criticism on this Budget. What they talked about are mostly on the use of reserves and heavy subsidies. I have just a few observations to make. In this year's Budget, the Government provides heavy subsidies on public housing. On the development of public housing and estate management alone, some $1.11 billion has been allocated, taking up approximately 55% of the total expenditure of the Ministry of National Development. I feel that the Government should consider building smaller 4-room and 5-room HDB flats. This will help to avoid over-subsidy by the Government and also prevent the selling prices of HDB flats from escalating, resulting in many young Singaporeans complaining about the selling prices of new HDB flats being too high. They are under the misconception that the Government is intentionally lifting the selling prices on HDB flats without realising that the Government is actually subsidising heavily. Therefore, in order to meet the demand of these people, one possible alternative is to build some executive flats of smaller floor areas of, say, 800 sq ft for a 4-room flat or 1,000 sq ft for a 5-room flat. This will not only alleviate the purchasers' financial burden but also cut down the Government's expenditure from excessive subsidies. The savings from the subsidies could then be re-channelled to education and health care, thus benefitting more people at large. As for the larger and more luxurious apartments, they can be left to the private developers to build. There is no need for the Government to subsidize the building of this category of flats. Moreover, I notice that younger Singaporeans are very anxious to purchase a flat, the moment they get married. This has created a situation of demand exceeding supply for HDB flats. In a family, each sibling will own his own HDB flat the moment he or she gets married, which in a way has indirectly disintegrated the system of a traditional large family. This is something which the Ministry of National Development should take note of. Another special feature of this year's Budget Statement is that the Government will pay the December 1992 service and conservancy charges for residents of 1-room, 2-room and 3-room HDB flats. This is equivalent to the income tax rebate granted to those who pay income tax. It is the Government's gesture of rewarding not only the high income earners but also having the interest of the lower income group at heart. A $1,000 tax relief for all active reservists and $500 for all who have done National Service but are not in the active service is yet another form of appreciation for the service rendered by all those who have served National Service. These tax reliefs are good measures. Therefore, I understand and appreciate the Government's good gesture. However, behind these tax reliefs are some causes for concern. Because, soon after the Government's announcement of the Edusave scheme where funds will be allocated to primary and secondary school students, the Government is expending another sum of money to pay the December conservancy charges for the lower income group in the 1-room, 2-room, and 3-room HDB flats, and allowing tax reliefs for reservists, in this year's Budget. This has created a worrying reaction among the people. The general reaction is that the handout is too little. To quote what Mr Chiam said yesterday, this is "peanut". There are also some who misconstrue the good gesture as the Government's attempt to please the people because of the coming by-election. What worries me is that some Singaporeans, for example, the Member for Hougang, Mr Low Thia Khiang, have misunderstood the Government's intention for introducing such measures, and they think that the Government is gradually turning towards welfarism to subsidise the people. That is why he said this was an unprecedented move on the part of the Government to please the people. They may even mislead the other people into thinking that under the open and consultative style, the Government is beginning to go for softer policies. More seriously, some may even harbour the misunderstanding that the Government is acceding to the people's request to make use of the reserves to subsidize the people. I believe we should let the people understand and appreciate the Government's motive and sincerity. I hope that hereafter, whenever the Government is making any move to help the people, it would be more prudent and careful to prevent our people from cultivating the attitude of shou zhu dai tu (standing by a stump waiting for more hares to come and dash themselves against it), which means "trusting to chance and windfalls". If this is the case, it will be disastrous. Therefore, hereafter, when the Government implements such measures, it should exercise more prudence so that the people of Singapore will not receive the wrong signal. Otherwise, it may be detrimental to the long-term economic benefit of Singapore, and it is not in line with the Finance Minister's emphasis on thrift and frugality in his Budget Statement to save for the predicted slowing down in economic growth in the years to come. There is another point which I would like to raise here. It is a pity that both Mr Chiam See Tong and Mr Ling How Doong are not here. There are altogether 239 amendments to this year's budget allocations for the various Ministries and Government departments to be moved in the Committee of Supply. Yet, much to my surprise, none of the three Members of Parliament from the Singapore Democratic Party has given notice to query any of the Ministries or Organs of State in the next seven days' debate on their expenditure. I do not know what is their objective and motive for not taking part in the debate. Is it because they are leaving the country for holiday in the next seven days, or is there any other reason? To me, if the Opposition Members want to check on the Government, they should be taking part in debates and raising queries in Parliament on the various Ministries and Government Departments. Yet, they have not made any "cut" to any of the expenditure heads. I just find it most surprising and difficult to understand. Just now, the Member for Hougang touched on two points - reserves and big corporations. My Parliamentary colleague, Mr Choo Wee Khiang has already rebutted Mr Low Thia Khiang's allegation of Government establishments monopolising the market. In fact, the Government establishments are competing with the foreign enterprises and not with the local enterprises. Let us be very clear about this point. Furthermore, it is not the existence of these large establishments that brings inflation to us. In fact, it is when we start to make use of our national reserves that inflation will follow. To allocate some funds for subsidies only when we have surpluses is the right thing to do. If we subsidise heavily, what will be the result? It would be like what Mr Chiam said yesterday, the people would derive some short-term benefits. For example, the people would be able to buy more daily needs. But, this is only a short-term benefit. In the long run, heavy subsidies or recourse to national reserves, I believe, will result in the depreciation of our Singapore dollar. The moment the Singapore dollar is depreciated to a point when it is lower than the Malaysian ringgit, then as a country without natural resources, we will have serious inflation and prices for our daily necessities will go up and skyrocket. This will affect our economy and our livelihood will be affected too. Therefore, we have to consider and reconsider very carefully when we want to make use of our reserves to subsidise our people. Secondly, he talked about the Government competing with the people, and the NTUC Cooperatives. I do not understand how the establishment of NTUC Fairprice Cooperative could do harm to the people. I believe everybody in Singapore today enjoys going to the NTUC Supermarkets for their shopping because the prices there are cheap. They can stabilize the prices of commodities. The prices of rice, salt, oil and the daily necessities remain so stable today because of the establishment of the NTUC Fairprice Cooperative. This, in turn, has resulted in the rapid expansion of the NTUC Fairprice Cooperative. Their supermarkets are set up in every nook and corner of Singapore to serve the people. If the NTUC Fairprice Cooperative is like what Mr Low Thia Khiang has described it to be, then I think these supermarkets would have been closed down long ago. They would not have prospered and expanded the way they do today. Mr Speaker, Sir, I support the motion. 4.30 pm

Mr Speaker, Sir, Mr Chiam yesterday quoted the 8.6% economic growth of South Korea in 1991 and commented that it did better than Singapore despite its internal political problems. The truth is that South Korea's growth last year was led by strong domestic demand, in particular consumption and construction. Its economy continues to suffer from structural problems such as high inflation, weakening competitiveness of exports and a widening trade deficit. Its trade deficit rose to a record high of US$9.7 billion, double that of its 1990 figure. And its inflation rate for 1991 was 9.7%, the highest in 10 years. The South Korean Government is now trying to correct these problems. Does Mr Chiam want us to follow South Korea? And if he thinks that South Korea is a better place than Singapore, perhaps he may want to consider emigrating there. Mr Chiam See Tong rose ---

Order. Are you giving way, Dr Chen?

I am not giving way, Sir.

He is not giving way.

Another coward!

Resume your speech, Dr Chen.

It is therefore better for us to go for a more sustainable growth rate and lower inflation. This means growth based on higher value-added activities, high productivity and better utilisation of resources - land resources, financial and human resources. Sir, Mr Ling How Doong accused the Government of accumulating massive reserves and wanted the Government to specify a limit to the yearly surplus. First, how can our reserves of about $55 billion be considered as massive if it only represents about five months of our total imports, considering that we do not have any natural resources? Second, he wanted a limit to the yearly surplus to be specified. How big should that limit be? If the surplus exceeds that limit, does it mean that we should then spend the excess unnecessarily? I say we spend our revenue wisely. Give rebates to Singaporeans, if necessary, such as the proposed one-off rebate of 5% for personal income tax and rebate for service and conservancy charges and put whatever surplus we have into the reserves. Mr Ling thinks that we do not subsidise enough in investing in our people and that we consider clamouring for more subsidies is bad. In fact, the Government not only subsidizes education, health care and public housing, but is proposing to increase its level of financial assistance through Edusave, Medifund and upgrading of HDB flats. Indeed, such subsidies are crucial to ensure that the basic necessities of life are extended to all Singaporeans. They also serve to maximise the potential of our people. For example, our children nowadays receive good education at nominal fees. Singaporeans who go to subsidised hospital wards receive better medical treatment than what is provided in public hospitals in many developed countries. Even our basic HDB homes are comparatively better than what most people in Taiwan, Hong Kong and Japan can afford. While we should continue to provide for these good quality basic needs, Government cannot subsidise the better things in life without undermining our objective to encourage our people to excel. This should be the way Government structures its policy on subsidies. Subsidies for A and B1 class hospital beds are being pruned. The same principle should apply to public housing. Subsidies for higher-end housing should therefore see a reduction or be removed. In education, the guiding principle must be that no child who is capable should be deprived of the best education possible, regardless of his family background. However, the nation's financial resources are limited and therefore must be allocated fairly. People who benefit from better education must be made to pay for it if they can afford. Hence, higher fees in independent schools and tertiary institutions. But students who cannot afford such payments can apply for study grants or loans from a variety of sources. In addition, scholarships are offered to motivate Singaporeans to realise their full potential. What better approach to providing Government subsidies is there? Sir, allow me to say a few words on tax reliefs for reservists. I applaud MINDEF for heeding one of the major recomendations of the RECORD Committee by proposing tax reliefs for reservists. The amounts of $1,000 and $500 are not insignificant compared with the personal relief of $2,000. They are also structured in such a way that in a steady state, those reservists who serve longer will get more relief. Sir, when the RECORD Committee was deliberating on the issue of a symbolic annual allowance for reservists, a number of reservists who sat on the Committee felt strongly that not only an allowance should be given, it should also be given through tax relief. We felt this way because, as we all know, most people treat the tax relief they are entitled to seriously when they come to filing their annual income tax returns. Tax relief is therefore one of the best ways to tell our reservists, once a year, without fail, that we recognise and appreciate their service to the nation. It is like sending roses to a girlfriend or a wife regularly. This should be the way we view this tax relief proposal.

How can you compare girlfriends with soldiers!

And not like what Mr Chiam has described as "mercenary". He demeans it by what he says. I wonder whether he is a reservist. But if he is opposed to the tax relief, then perhaps the Minister for Defence would like to consider not extending it to the reservists in Potong Pasir. Sir, we should not take for granted the loyalty and service of our citizens and reservists, just as we expect our people not to take good government and success for granted. We must therefore continue to look for ways to recognise and motivate our reservists, taking into account changes in our social, economic and security environment, and the expectations of our people. On that note, Sir, I support the motion.

( In Mandarin): Mr Speaker, Sir, before I enter into this debate on the budget, I would like to clarify the Singapore Democratic Party's stand on the use of reserves. Mr Choo Wee Khiang referred to this just now. His argument may lead people to misunderstand the stand of the SDP on the use of our reserves. Our stand is this. We do not advocate welfarism. We also do not advocate the indiscriminate use of the reserves. We are only holding the view that when the Government has some surplus fund, then we can make use of the surplus on certain necessary items such as education, housing, and health care. We feel that there is nothing wrong in using the surplus for these purposes to alleviate the burden of the lower income group. Otherwise, how is Prime Minister Goh Chok Tong going to explain his proposal to make use of the reserves to set up an Edusave fund? Mr Speaker, Sir, now let me join in the debate on the Budget. Mr Speaker, Sir, on the whole, this year's Budget is not bad. Because at a time when the world economy is taking a downturn, the Government has not announced any apparent increase in taxes. On the contrary, it has given special attention to help the lower and middle income people. This is something that is hard to come by! For example, the Government will pay, on behalf of residents and owners of 1-room, 2-room and 3-room HDB flats, the conservancy charges for the last month of the year is a good example of this good gesture. But personally, I feel that the unexpected generosity showed in this Budget presented by the Minister for Finance may have something to do with the by-election that is going to take place in the near future. After the by-election, will the Government impose some new taxes which are not in this Budget? I hope this will not happen. Sir, I do not wish to say too much in this House today because the merits and demerits of this year's Budget have already been touched on by many Members of this House and there is no need for me to repeat them. But there is one thing which I am very concerned about: the offices for Members of Parliament. The Government should make a special allocation in the budget for the construction of MPs' offices. Since the Housing and Development Board has given a "non-reason" for its refusal to provide MPs with offices on the void deck in order to meet their constituents, I think it is necessary for the Government to build permanent offices for the MPs on the vacant land in the constituencies so that Members of Parliament can provide better services to the residents. Whoever is returned as the MP for the constituency, irrespective of the parties they belong to, shall be entitled to make use of this office. Mr Speaker, Sir, let me take this opportunity to remind the Housing and Development Board that it should respect the Members of Parliament, because they are the representatives directly elected by the people. They are certainly in a better position to represent the people in the constituency than the indirectly appointed members of the Residents Committees. A Residents Committee can have an office in the constituency, yet the Member of Parliament has no office. What is the reason? I really cannot bear to see MPs having no offices and some even having to squat in the education centres. Mr Speaker, Sir, I personally support this year's Budget, but I hope the Minister for Finance would not forget and neglect my above appeal, unless the HDB can restore the provision of offices on the HDB void decks for MPs. Finally, Sir, I hope the Minister for Finance will not be too hasty in implementing the consumption tax.

Mr Speaker, Sir, I would like to explain a part of my speech earlier on which I think may have been misunderstood. When I mentioned heiqiqi (pitch-dark), I did not mean to offend anybody. If I have offended anybody inside the House or outside, please accept my apologies.

Sir, a number of Members have spoken on the tax relief for reservists. I want to briefly respond to some of the points. Firstly, Mr Leong Horn Kee suggested that instead of the $1,000 tax relief for active reservists and $500 for non-active reservists, we change to a different system of giving a flat rate of $100 and $50. There are many different ways of providing a tax relief. The flat rate is one way. The method that we proposed is another. MINDEF has looked into this problem carefully over the last year. I prefer the method that we proposed for a number of reasons. Firstly, the proposal that we have is symbolic. It shows very clearly Government's deep appreciation and gratitude to the reservists for the sacrifices that they have made, and for the contributions that they will continue to make to the nation's wellbeing, by providing peace and security. These are the essentials. These are the foundations upon which the nation is able to progress and to prosper. Sir, the method that we proposed is also simple and comes closest to what has been considered by the RECORD Committee and recommended by the reservists. If Mr Leong were to look into the details and the numbers, he will probably share the conclusion that we have arrived at, namely, the MINDEF proposal is much more beneficial to reservists in the long run. As the years go by, and as the incomes of reservists increase, the amount of relief that they will get will increase. In other words, the tax that they will pay will be diminished by a bigger margin than the flat rate of $50 or $100. Indeed, if the workers were to receive a pay increase of about 7% per year on the average, over a 10-year period, there will be a doubling of their income. And we are going to give the tax relief to reservists over a 40-year period, ie, from the age of 20, and if they continue working until they are well past 60. If Mr Leong were to do some calculations, he will appreciate that the relief that we are giving is not insignificant. Sir, Mr Chiam has said that the tax relief is too small, which does suggest that if it were bigger he would have given it his full support. Yet, at the same time, he says that we should not give any monetary reward, any monetary recognition, because in so doing, we make mercenaries out of our reservists. Is that right?

Yes.

Mr Chiam may not be aware of the fact that we are already making allowances of all sorts to our reservists. We give the Key Appointment Holders a Key Appointment Holder's allowance. For those in command, we also have a command allowance. For others, we have a service allowance. And for all the reservists, we have a make-up pay. Is Mr Chiam therefore suggesting that we take away all these allowances because money is involved?

Sir, can I clarify? Does he give way? Dr Yeo Ning Hong resumed his seat.

Thank you. Money is given in all kinds of ways. But if you give it in the form of a reward, then it is wrong in principle. But if you give it to compensate for his transport allowance, for loss of earnings, I think that is fair. Then that is a completely different principle. Payments are made out on a different principle. But if there is going to be appreciation, you can give him a plaque, you can put him on a pedestal and give him a clap; or you can put up a statue. These are different kinds of expressing appreciation. If we must appreciate, what sort of appreciation are we giving? We should not dish out money and say, "We are happy that you are doing reservist service." I think that is wrong in principle. That is my point.

Sir, Mr Chiam is entitled to his point of view. What we have done is to structure the recognition for the reservists' contributions in a manner that expresses the nation's appreciation. It is a symbolic gesture. The amount of money is a matter of opinion, whether it is large or otherwise. But giving recognition through a monetary system need not necessarily make mercenaries out of our people. Sir, mercenaries are professional soldiers who fight in foreign armies, not our own citizens being paid or given monetary recognition. Indeed, armies all over the world pay their soldiers. That does not make all the soldiers of the world mercenaries. We give allowances to our national servicemen. Is Mr Chiam therefore saying that we should not do that? Sir, Dr John Chen suggests that, because Mr Chiam said that he is not in favour of this system, we should not make the tax relief available to reservists in Potong Pasir. I do not think we should do that. I do not believe that Mr Chiam speaks for the reservists in Potong Pasir. But if there should be any reservist in Potong Pasir who shares Mr Chiam's point of view, he can easily ---

Can I have a second clarification, Sir?

Are you giving way?

If Mr Chiam would just let me finish the sentence.

All right, Mr Chiam, you can seek your clarification later.

If any reservist in Potong Pasir shares Mr Chiam's point of view and thinks that recognition through a monetary system is not appropriate, he can very easily opt out of it next year by not making a claim. It is as simple as that.

Sir, there are two points I want to raise. Firstly, whenever I put up a criticism, they will point to Potong Pasir: Potong Pasir can always opt out. Where are we going to end? Very soon, there will be more than one Potong Pasir and what is going to happen? They can all opt out. If they are not happy with their income tax, can they opt out? I would like to ask the Minister for Finance for that. If we are unhappy and we criticise income tax or property tax, can we opt out? That is the first point. The second point is in regard to this matter of giving tax relief to reservists. The whole idea is wrong. It is not a question of quantum. The quantum is no longer an issue. It is the principle that is involved. If you are going to give monetary rewards for service to the nation, where are we going to end? Because service to the nation cannot be measured in terms of money, and we all know that. Public service, services to charity, this kind of services, are all in the same category. In this kind of work, we do it out of commitment or service or duty to the nation or for the love of it.

Mr Chiam, are you making a speech, or are you seeking clarification?

But certainly, it is not for the money. That is the last thing in mind.

Sir, obviously, Mr Chiam did not hear what I said. I said that I do not agree with Dr John Chen not to make that tax relief available to all reservists in Potong Pasir. But if you speak on behalf of them, and indeed if there are reservists who believe exactly as you do, which I think will be an exceedingly small number, then as I said, they can easily exercise their right not to make the claim next year. Sir, I think we have spent enough time on Mr Chiam. We will move on. Mr Ho Peng Kee has suggested that we should consider not making available the tax relief for those who have completed their reservist training and also for those who are not actively in reserve. This was a distinct possibility which we looked at during the consideration of this proposal made by RECORD. What that means is that we will only be making a tax relief available for 13 years, because most of the reservists serve a 13-year in-camp training cycle, and after that they will not enjoy any tax relief at all. Over the last 11 years, I have been round the army camps and bases. I have been into the jungles with our soldiers. I have seen them training, and I appreciate the amount of effort and sacrifices they have put in. I believe that we should express our appreciation in a manner that is consistent with the way in which the soldiers have sacrificed and contributed to the nation. I have therefore decided that the tax relief will be available even after they have completed their reservist training. In other words, it is a life-long expression on the part of the Government to the reservists. As long as he has contributed in national service, as long as he has contributed in the reserve service, he will continue to receive that tax relief. When they are doing active reserve training, we give them relief at a higher level. Sir, there is also a small number of people who, for medical reasons, do not go on to do reserve service after they have finished their national service. I have decided that it would be mean on the part of MINDEF not to allow these people also to enjoy the tax relief. Therefore they too would enjoy the tax relief, again at the lower level of $500 instead of $1,000. It will really be splitting hairs to say that reserve service is much more important, much more valuable, and therefore to be regarded at a higher level, and recognised by the Government, but not national service, which all of them have completed. That is the reason for my decision to make the tax relief available to all who have completed national service, with those in active reserve receiving a slightly higher level of tax relief. Sir, Dr John Chen and Mr Lew Syn Pau, both reservist officers, have spoken positively of the tax relief. Our own surveys have shown that the majority of Singaporeans support this relief. Mr Lew has indicated that this does give reservists a very much higher level of status. I agree with him. Indeed, MINDEF will be liaising with the Ministry of Finance to encourage the Ministry of Finance to put a star next to the names of all reservists. People with a star will enjoy the tax relief for life, as long as they are working, as long as they are contributing towards Singapore's prosperity.

Sir, may I raise a point of order?. Just now, Dr John Chen spoke up in favour of the tax relief. I was not aware that he is an active officer. I have just been told that he is an active officer. He should have declared his interest because he is going to get monetary rewards.

Can I just make one point of clarification? I think I was misunderstood on one point. Just now I was talking about those people who have done national service, but do not do reservist training because they were exempted for medical reasons. I think the Minister for Defence has covered that point, which I take. I did not actually argue a case for not giving tax relief for those who have completed reservist training. I fully agree that those who have completed reservist training should enjoy some form of tax relief, which is the case here.

Sir, I have covered that point, but maybe I will just explain further. If we give tax relief to those who have completed national service and have served in the reserve service 13 years of tax relief, until they are 60 or 65, then, in effect, we are giving them tax relief for 40 or more years. But for those who have completed national service, but for some reason or other, mainly medical, they do not go on to do reserve service, we are saying that they are entitled to nothing at all. It is too big a discrepancy. We are putting too high a value on the 13-year cycle reserve service and ignoring completely the contributions that they have made during national service. Sir, it is unrealistic to say that reserve service is much more valuable and therefore has to be recognised in a much more dramatic manner than national service because national service is duty. I believe that is splitting hairs. I prefer to put it this way: They have completed their national service. Many of them go on to serve in the reserve service for 13 years. Because they have done that, the Government is grateful. The Government reflects the nation's gratitude for their sacrifices, for their contributions. Because of that, I have urged the Government to be generous, in making sure that the tax relief is available for life.

Sir, may I make a further clarification? Why should the Government be grateful? It is the people of Singapore that should be grateful.

That is what I said.

The soldiers are defending the whole country. And it is for the whole nation to show appreciation and respect to them. It is not the little group of people who call themselves "Government". They do not serve this little group of people who call themselves "Government". They are serving the nation. They are in fact the defence of the whole nation. So why do you say the Government is grateful and so must show appreciation?

Sir, time is moving on. The Government is the representative of the people. We operate a democracy, in case Mr Chiam is not aware of it. We were elected by the people, to represent the people, and the Government acts on behalf of the people. And as I said earlier, the Government reflects the nation's, the people's gratitude and appreciation to the reservists for their sacrifice and contribution. Mr Chiam repeats what I have said, again and again.

Order. I think we have gone on this point long enough. You can continue in the Committee of Supply. Mr Goh.

( In Mandarin): Mr Speaker, Sir, in his speech just now, Mr Cheo Chai Chen said that this Budget is one which is very hard to come by. I believe he was speaking from the bottom of his heart when he said that. Mr Speaker, Sir, this debate is being televised "live" by the Singapore Broadcasting Corporation. Anyone who has just switched on his television set and listened to certain MPs speaking may perhaps get the wrong impression that this Budget is one that yields a very large surplus. Worse still, they may even think that the Government will again be putting a large budget surplus into our reserves. If they have this sort of wrong impression, then I think it is bad. Let us do a little simple arithmetic. This Budget provides for an operating revenue of $15.2 billion. The Main and Development Estimates total $14.2 billion. The difference is only $1 billion. This $1 billion will go to the Education Endowment Fund which the Government is going to set up. So, the balance is zero. There is no money to go to the reserves this year. Just now, as I said, Mr Cheo described this Budget as one which is very hard to come by. This comment came from the bottom of his heart. This is also my comment from the bottom of my heart. At a time when we face a very bleak global economic outlook and our economic growth is likely to slow down, our Minister for Finance is still able to give us a well-balanced budget. On top of that, he has some "goodies" to give to our people. This is something which is very hard to come by indeed! However, as my friend Mr Choo Wee Khiang said just now, it is very hard to be a good man. You may please one, but you may not please another. Some may be happy with the "goodies" in this Budget, but there are also people who have expressed the view that they are not quite satisfied. I would like to mention a few of these dissenting views to the Minister for Finance for his reference. At the same time, I hope that he will give us his views on them. First of all, the tax on liquor. For those who drink beer, perhaps they may not have to bear additional burden. But for those who drink stout, a small bottle would cost 20 cents more while a big bottle would cost 40 cents more. A taxi-driver telephoned me and said, "You must urge the Finance Minister not to raise the liquor tax any more!" His reasoning is that they are manual labourers doing hard work. So, every night they need to drink a bottle of stout so that they can be revitalised. I do not know whether there is any medical ground for that. But this is a general belief among the manual workers. This is what they feel. Secondly, with regard to the tax relief for our reservists, the feedback I received is that the majority feel that this is a good thing to do. But one resident telephoned me and said that this is not fair. He feels that only full-time soldiers should be entitled to the tax relief, because in case of war they will be the ones standing in the frontline defending the nation. For this reason, all their incomes should be exempted from income tax. Well, this is what the resident told me over the telephone! This is his view. Thirdly, I would like to talk about the Government's intention to pay one month's conservancy charges, in December this year, for people in the lower income group who live in HDB flats. Generally, the people are happy with it. They feel that by so doing, the Government can be seen to be one which cares for its people. At a time when the economic outlook is not very promising, the Government is still prepared to set aside some $8 million to look after those in the lower income group. This is certainly an excellent gesture on the part of the Government. However, there are some anxious ones who feel that this is not in keeping with the Government's philosophy of not giving direct subsidy or hand-outs to the people as a form of welfare. By so doing, will this set a precedent for welfarism so much so that it may fall into the quicksand and sink deeper and deeper into being a welfare state like some of the developed countries where people may raise higher and higher demands from the Government? Finally, Mr Speaker, Sir, I would like to mention some feedback that I have received from the residents. They feel that the immediate effect of the Government's promotion of privatisation over the past years is a reduction in subsidies, for example, the reduction in health and education subsidies. They feel that since there is a reduction in subsidies, there should be a corresponding reduction in tax. In other words, the tax rate should be correspondingly lowered, particularly in personal income tax. This argument may sound too simplistic, but there is some logic in it. I hope the Minister for Finance would give us his comment on this.

( In Mandarin): Mr Speaker, Sir, I would like to support the Budget presented by the Finance Minister. I would like to touch on a number of points. First, is this Budget a reasonable one? Personally, I think this is a prudent, stable, balanced and reasonable Budget. When we look at the Budget, we have to take into consideration the overall policies of the Government, and some of the things the Government has decided to do. Otherwise, we may sometimes quote out of context, quibbling over a certain sector and neglecting the whole picture. As a matter of fact, there is already an element of welfare in the tax structure in Singapore. Some MPs commented that this Budget favours the rich. But, if you analyze the total revenue collected from personal income tax, you will see that it is in favour of the people in the low income group. In fact, out of the total revenue collected from personal income tax, 91% is paid by those who earn more than $20,000 a year. That is to say, the balance of only 9% comes from those earning less than $20,000 a year. If we go further into the matter, we will see that the tax paid by those who earn less than $10,000 a year accounts for only 3% of the total amount. Therefore, 97% of the personal income tax collected are paid by those with higher income. The personal income tax by itself has an element of welfare in it. So, it is wrong to say that the Government has not looked after the welfare of the lower income group. I fully support this scheme to upgrade HDB flats. In this aspect, the Government is very generous. The subsidy to be given is 75% to 90%. In fact, some friends who live in private estates are asking, "Why is the Government only upgrading the HDB flats? We in the private housing estates have been paying a lot of taxes, why are we not getting any benefit?" From many of the Government's activities, it is evident that the Government is really having the interest of the low income group at heart. As to whether the Budget is a fair one, I will quickly run through this point. While looking after the lower income group, the Government has not neglected the corporations. In view of the forecast of an economic slowdown, the corporate income tax is being reduced by 1%. At the same time, in looking after the interest of the lower income group, the Government will pay the December conservancy charges for those living in the 1-room, 2-room or 3-room HDB flats. I would like to give my views on CPF contribution rates, in support of the views presented by my fellow labour MPs. I feel that the delay until 1996 for full restoration of the employers' CPF contribution rate to 20% is not long. The cut in employers' CPF contribution rate from 25% to 10% took place as far back as 1985. I hope the Finance Minister will monitor closely the development in the matter. If our economy continues to grow within the range of our forecast over the next one to two years, then the employers' CPF contribution rate should be fully restored to 20%, as targeted. The Finance Minister also mentioned that a White Paper on consumption tax will be tabled some time in the middle of this year. In economic theory, if we compare consumption tax with personal income tax, consumption tax is not a bad form of taxation. In personal income tax, tax is payable the moment we start to earn money. But in consumption tax, after earning our money we have the right to make a decision, and tax is payable only when you start spending your money. However, I urge the Finance Minister to look after the interest of the people in the lower income group when implementing the consumption tax. Basic consumer goods and services should be exempted from such tax, as far as possible. Another point I would like to touch on concerns the reserves. Many MPs spoke about the reserves yesterday and today. Some felt that Singapore's reserves are large enough, some felt that the Government should be more generous. Personally, I feel that as a tiny country without any natural resources, our reserves of $55 billion are inadequate. Just now, one Member mentioned Kuwait. The population of Kuwait is less than one million. They have very rich oil wells. However, their reserves are in the region of US$100 billion, or $160 billion in terms of Singapore dollars, three times more than our reserves. That Kuwait is able to rebuild the nation so quickly in less than a year after the war, is due to the fact that they have such vast reserves. If we do not make a comparison, we might be wondering what is adequate, and what is inadequate? So if we take Kuwait as an example, then we can see that our reserves of $55 billion are inadequate. As one Member pointed out just now, it is barely enough to cover five to six months of our total imports. In the event of a war or a severe economic recession, with massive unemployment, we can only maintain about half a year of life at the present standard. So, think it over! I feel that our reserves are inadequate. Of course, I am not saying that since our reserves are inadequate, our Government should totally refrain from subsidising or assisting in education, health care, etc. I believe our Government, particularly our Prime Minister, has already proposed the setting up of Edusave and Medifund. However, we have to look at the whole picture when we consider these expenditures, to see how much money we actually have. On the whole, the reserves of Singapore, as a sound nation, are inadequate. Although the United States is in debt, they have oil fields and gold mines. They have just to dig out all these minerals for sale, they can solve a lot of their financial problems. We have nothing to dig. To us, every dollar counts! Another point I would like to touch on is the lowering of productivity and the rise in wages. We are very concerned with the slowing down in our economic growth. The growth in our retail, manufacturing and financial sectors is slowing down, resulting in a drop in our productivity. However, I personally feel we should not advocate the low wage policy because if you want to raise our standard of living, the low wage policy is not the answer. In any event, we can never compete with countries like India and China, or even Indonesia, insofar as cheap labour is concerned. Then, how are we going to peg our productivity to our wages? I will elaborate on this at the debate on the budget for the Ministry of Trade and Industry. However, I would like to serve a reminder. In the last nine years, BERI rated us as 14th in the world, in respect of skill level of our workforce. Perhaps this may be the time for us to conduct an overall review on our efforts over the past nine years. Why is it that the skill level of our workforce cannot be raised? Another thing I would like to speak on is our Government's economic philosophy and economic principle. I support the Finance Minister's preference for the American school of market theory and free economy. He is not in favour of the British economic school's advocation of more government intervention. I feel that we can adopt the free market theory as our general guiding principle. However, when we apply this principle, we must adapt it to suit our circumstances. If we go for full implementation of the free market theory, then there will be no HDB flats in Singapore. There will be no MRT! Therefore, we owe our success to the Government's prudence and flexibility in adapting this economic theory to suit our local situation. We often talk about privatisation of some Government agencies, such as SBC. I hope that SBC, after privatisation, will not go only for profits and choose only programmes which have commercial values, or put too much emphasis on commercials, or televise only programmes which cater for the interest of the viewers. It should strike a balance between these and the educational programmes. Take the children's programme, for example. I am aware that children's programmes are not normally supported by commercials. However, if we gradually reduce the number of these children's programmes or educational programmes, giving our children no choice but to watch only films imported from Europe or the US, then they may soon address their parents by names instead of Papa or Mama. My children may just address me as Yee Shoon and not Mama. (I told them that I would never accept that.) Therefore, when we privatise these Government agencies, we must consider the impact on our people and its long-term implication. On culture, I notice that our per capita expenditure on culture is only $5.14, much lower than the $8.00 to $9.00 in UK and $9.00 to $10.00 in Hong Kong. For this reason, I hope that the Government would be more generous in the promotion of culture and the cultivation of a more gracious society. We are going to spend $400,000 on the construction of a cultural city. If this is going to be run privately on a commercial basis, then I am afraid many cultural organisations and cultural bodies will not be able to afford the rent and very high hiring charges. Therefore, when this city is completed, we should consider keeping the rental at popular rates. The Finance Minister may consider granting some subsidy to these cultural bodies so that they can make full use of these facilities. Lastly, manpower planning. I would like to commend the Finance Minister for the successful implementation of the manpower zero-growth scheme in the civil service without compromising its efficiency and quality of service. However, I would like to make special mention of those people who are working in the community service, such as the People's Association and the RC secretariat. They have no fixed hours of working. Moreover, they have to deal with the masses and the problems they deal with are diverse in nature. I feel that their duty is very important, no less insignificant than the policy makers who work in air-conditioned office. Their duty is to explain our policies more accurately to the people. Therefore, I hope that we could treat them more fairly and give them a better deal in their terms and conditions of work.

Mr Speaker, Sir, I shall be very brief. I would just make general comments on the Budget as a whole. I feel that this is a sound Budget for two reasons. Firstly, given the economic uncertainties which lie ahead, it is better to err on the side of caution, and not to attempt too much fine-tuning of the economy to fiscal policy. The flip-flopping of the tax positions in the US over the past 18 months has made it difficult, or more difficult than ever, for both companies and individuals in that country to plan ahead. There is much to be said, therefore, in support of constancy of purpose and resolve in our fiscal and economic policies. Secondly, it is right that the Budget emphasises the upgrading and improvement of our infrastructure. The efficiency of our infrastructure is a critical pillar of our competitiveness as a nation, in relation to both the attraction of investments and a generation of exports. It is not endowed naturally and it must be mindful that just as we can overtake other locations, in terms of the quality of our port, airport and other infrastructure facilities, there are other countries who are looking over our shoulders, attempting to do the same to us. However, I would like to raise two issues in connection with the Statement which may require further examination. Firstly, while it is right to subject the allocation of our scarce resources to the discipline of free market as far as possible, it is not possible to recognise that there are sectors where free market conditions may not exist. An instance of this will be telecommunications. There may be many important commercial and, indeed, strategic reasons why Telecom, when privatised, should continue to enjoy a monopoly in the provision of most categories of telecommunication services in this country. However, it will be useful for the privatised Telecom to provide Parliament annually with a comparison of telecommunication charges in the country and of those countries, eg, Hong Kong, which have an approximately similar level of economic development. Secondly, from the business vantage, the budget could adopt a more encouraging stance, in terms of supporting the export of our services. This can be done without necessarily eroding the export, the amount collected as tax revenue. We might consider providing a tax incentive only on the amount by which export revenue in that particular year exceeds that of the previous year. For example, if a consultant's fee for projects or assignments undertaken overseas during the preceding year is $5 million, and the amount for this year is $6 million, a special tax incentive could apply to the $1 million increment. In the following year, the export incentive will only be applicable if revenues from overseas operations exceed the new base of $6 million and so on. Such a mechanism will encourage our firms to stay competitive in global terms, and Treasury can afford to be generous in granting incentives on such terms. Mr Speaker, Sir, I would take up details on the various Ministries during the debate in the Committee of Supply. 5.28 pm

Mr Deputy Speaker, Sir, I support the balanced and measured Budget Statement by the Minister for Finance. Against the backdrop of world economic gloom, it is comforting to note that despite the steady slowdown of economic growth in almost all sectors, we are able to achieve a growth rate that most developed countries would envy. But our economic performance in the next year or so will prove to be most critical. The US is struggling to get out of a possible prolonged recession. The normally strong economic standing of the Japanese is showing sign of decline, and the situation in Europe, at best, can be described as uncertain. For a country like ours that depends heavily on external trade, it is indeed worrying. However, an over-pessimistic outlook will only result in over-reacting in both investments and spending. This should be avoided at all costs as we will run the risk of talking ourselves into a recession. The outlook of the immediate future does not look encouraging because the only high growth rate of over 19% registered last year is the construction sector, and this may not be a true reflection of the mood in the property development market. The present rapid construction activities is really the result of development projects committed 2-3 years ago, when the property market enjoyed a certain buoyancy. The true indication of the property market perhaps can only be reflected accurately by the number of projects committed at the present moment and by the actual sales and occupancy rate of the completed developments. In fact, I believe this has already been experiencing a slowdown. In the light of the uncertainty we are faced with, we may want to learn a lesson from our 1985 recession. It was to the whole nation's credit that we got out of the recession almost as swiftly as we encountered it. The Government took the initiative of taking speedy and decisive action. The disciplined workforce responded in unity and the whole population rallied behind the Government positively, and we were able to avert a major economic setback for Singapore. Apart from that, one of the main reasons for this speedy recovery is the result of the setting up of an Economic Committee led by our then and now Minister for Trade and Industry, BG Lee Hsien Loong. This Committee comprised top talents from the public sector, the private sector and also from the multi-national companies. It was a powerful and effective committee. Because of the talent and experience of each member of the Committee as well as the close association with the various sectors of our business community, their inputs have helped the Government to formulate policy and taken effective actions to achieve the desired result. Therefore, this Economic Committee can be a powerful and effective committee to monitor the total economic progress of our nation, especially at this crucial period. I would suggest that perhaps the Government can consider reactivating this Committee and charge them with a new agenda. The new terms of reference can be, firstly, to monitor closely the economic impulse of our nation and, secondly, to recommend any short to medium-term actions to be taken from time to time to keep our economic objectives on course. Although the various Ministries keep close contact with the private sector, and MTI and the various economic machineries such as the EDB, TDB, CIDB, etc, constantly provide support and assistance to the various business sectors, the Economic Committee can provide additional impetus to the Government in monitoring the economic impulse of the nation, as well as help in formulating economic policy to respond to the ever changing situation. Although we are now more prepared and resilient in handling any economic setback, we must formulate an overall strategy to overcome this declining economic trend, instead of looking into problems in isolation and suggesting piecemeal solutions like cutting taxes and lowering charges, etc. We must prevent another 1985 recession from happening and not wait for it to happen and find ways to cure it.

Mr Deputy Speaker, Sir, I rise in support of the Minister's financial policy. Sir, from the Minister's Budget Statement, I am pleased to note the Government's commitment to ensure that we remain competitive and attractive in order to retain investors. The proposed 1% cut in corporate tax is a reflection of the Government's effort to keep operating costs low in Singapore. I am confident that, slowly but surely, we could reduce the corporate tax to a level where it will provide optimum return to the investors and Government. Sir, when the Minister announced that our economic growth is going to be slower in the years ahead, it has caused great concern to many Singaporeans who have been enjoying the fruits of high economic growth for the past few years. Many have taken the signal as the coming of another recession, particularly the employers. I was made to understand by some of my colleagues that employers have started using the two favourite words, ie, "to cut" and "to freeze". If this phenomenon of crying out wolf goes on, it will affect the morale of our workers and eventually the level of productivity. The Government must closely monitor to ensure that employers do not take advantage of our slower economic growth to be the reason for any wage freeze or, even worse, wage cut. Sir, given the adverse conditions of our external markets, we should be thankful and grateful that we have achieved a moderate economic growth. We have achieved, and are capable of achieving, continuous moderate growth at a time where many countries are struggling to narrow their deficit and are faced with zero or even negative growth. On the consumption tax, Sir, in the 1989 Budget Statement, the Minister for Finance mentioned: ' ... that in the longer-term, we will need to introduce some form of comprehensive consumption tax to complement our system of direct taxes. This is to cover the contingency that we may be compelled by external forces to cut our direct taxes to a level where it can no longer support the revenue we need for Government purposes. Or alternatively, if Government is persuaded by Members and the public to spend greatly increased amounts of revenue on social purposes, social welfare or on health measures which are considered desirable, and this imposes an exceptional burden on the Government budget process, and if the direct tax budget cannot support it, then it will have to come from consumption taxes. We cannot rely on the drawdown of reserves.' - [Hansard, Vol. 53, No. 3, col. 197]. My question to the Minister is: are we already in a state of condition where we have to spend a greatly increased amount of our revenues on social and health purposes? I am definite that we have not done so and, if not, why the need to introduce the consumption tax now? The only explanation that I can offer to the rationale of introducing the consumption tax is that the Minister is very concerned with our greying population. With many of our population reaching retirement age, we should expect an increase in expenditure on health and community development programmes. Let me provide figures so that we can understand the situation better. In 1990, 1 out of 9 persons was 60 years old; in the year 2010, 1 out of 7; and in the year 2030, 1 out of 4 persons is going to be 60 years old. What does it mean? It means that in the coming years we are going to have fewer people in the workforce and that means fewer people contributing to revenues via direct taxes. On the other hand, our expenditure will be on the rise in order to provide services to the elderly. If expenditure is more than the revenues collected, the Government may have to adopt either one of two solutions. One, increase tax rate on individual income or, two, cut down expenses. Cutting down expenditure would mean low quality health programmes, poor standard of education and inefficient Government services. Sir, both solutions are of no advantage to Singaporeans and the Government. This is where consumption tax will come to the rescue, because it is a more stable form of revenue and will make our economy less susceptible to economic changes. Perhaps another feasible solution to the problem is to increase the retirement age of our workers to 65. By stipulating that people can withdraw their CPF account at 55, the Government has made that age as the beginning of old age. But the biological clock tells a different time. People who have been healthy most of their lives generally do not begin to decline rapidly until their late 70s. Therefore, I would like to urge the Government to consider delaying the retirement age of our workers to 65. Massive effort must also be carried out by the Government to encourage the private sector to follow en suite. However, Sir, as much as I agree with the principle of consumption tax, I would like to register my disagreement to the timing of its application. My contention is that we are not, in any way, in a situation where our expenditure exceeds revenues and have started meddling with our reserves. Introducing consumption tax now will mean to supplement our system of direct taxes and not to complement it, as mentioned by the Minister in his 1989 Budget Statement. If we need to introduce the consumption tax, I would like to urge the Government to consider reducing the top marginal tax rate on individual income and to consider tax reduction on capital income. Reduction of personal income tax rate will make people work harder and for longer hours. Some economists advocate tax reduction in order to encourage savings and stimulate productivity. Savings should be encouraged to enable society to invest for the rate of productivity is related to investment rate. Moreover, encouraging people to save is one of the objectives of introducing consumption tax. Sir, I support the Government's principle of investing on human capital as well as physical capital. Education and public health should always be given the weightage. Singapore depends on its human resource for economic growth and continual investment on human capital will unquestionably increase the productivity, versatility and adaptability of our labour force. Our infrastructure must always be improvised to ensure efficient mobility and working environment for Singaporeans. However, Sir, as much as the Government would like to invest on human and physical capital, we must not forget or neglect the significance of the rate of technological change. Technological change is in fact one of the persuasive and determinant features in our economic growth. Technology is a society's pool of knowledge concerning industrial arts. It includes the knowledge of engineers, scientists, managers, craftsmen and others on how goods and services can be produced and capitalised. New technologies like microelectronics, computers and biotechnology have greatly influenced the rate of increase in labour productivity. Technological change takes the form of new methods of producing existing products. New designs make it possible to produce goods with important new characteristics and new techniques of organisation, marketing and management. To do so, we need innovators, people with the foresight or vision to see new things that can be brought out from the transformation of mere ideas into reality. Sir, our industries have reached a point where we need innovative people with creative ideas. Innovations which can help increase the level of productivity and as Joseph Schumpeter, Harvard's distinguished economist and social theorist, puts it: 'Innovators are the mainspring of economic progress.' Innovative people are out there in our industries and learning institutions. We must create an environment in which they could surface and come forward to contribute to our economic progress. Creating this environment is a painstakingly slow process, but it is a process worth investing because of its long-term benefits. I would like to compliment the Government for taking our research and development (R&D) industry seriously and I think more can be done to enhance this field in Singapore. However, what we need urgently now is design and development support to our industries, particularly the construction and marine industries. In a tight labour situation, we need to automatize our industries before they become over-dependent on foreign labour. The effort for automation must be a concerted one. Government should provide incentives to encourage industries, particularly SMEs, to go for automation. Many SMEs still do not see the long-term benefits of automation. Despite tax concession on all capital expenditure to buy equipment for automation, many are still reluctant to convert to automation. Therefore, I would like to urge the Government to consider providing other incentives that will make it more attractive for SMEs to consider going for automation. Finally, I would like to touch on the tax relief for reservists. Sir, I must say that the introduction of tax relief for reservists is timely and long awaited by many. It is a fact readily accepted that our reservists play an important and crucial role, not only to defend the country but to ensure continuous economic progress and political stability. Not only do they contribute to our private and public sectors, they also help to guarantee the continuity of appeal for investment in our country. The recent development following the post cold-war era, particularly in the Asia-Pacific region, makes it more imperative for us to have a formidable deterrent force to defend the prosperity of the nation. Hence, there is an irrefutable need for us to continuously appreciate their services and contributions. In this year's Budget Statement, the Minister has generously given a tax relief of $1,000 for all active reservists - an amount that I would deem substantive in comparison with the amount allocated for personal relief. Sir, our reservists deserve the tax relief because of their commitment to attend their in-camp training and other activities to maintain their operational proficiency. In appreciation to those who had served national service, but not an active reserve service, the Minister has granted a relief of $500. The Minister for Defence has pointed out that there is a group of people who had served their national service and completed their reservist training, I appreciate that the Minister is considering giving them a tax relief. May I now suggest to the Minister to consider giving them a one-time $1,000 tax relief and a relief of $500 for the successive years. I would consider it appropriate because it will serve as a token to show how the country appreciates the services rendered by them. Before I end, allow me to reiterate that for a country like Singapore that depends primarily on its human resource and its location as a world-known commercial centre, we must be economically viable and be able to stand through the hardest of global drawbacks. We must then carefully plan for an invincible financial stability and at the same time creating a balance between a desirable state budget and meeting the well-being needs of our population. Every accessible opportunity has to be taken. Sometimes what it takes is a little ingenuity added to our present technology to make it as if we are years ahead in standard and comfort. And this, Sir, I am sure Singaporeans are capable of. 5.48 pm

Mr Deputy Speaker, Sir, I would like to thank the many Members for their keen interest in this year's Budget. The debate has been a long one, and I will try to respond as briefly as possible. Members were generally supportive of the Budget. Some, nevertheless, felt that more could be done to help businessmen in the face of an expected economic slowdown. Others, like Mr Chiam, even believe that the slowdown was brought about by Government-induced cost increases. I will respond to these concerns and try to correct the misconceptions. In resource-scarce Singapore, economic expansion is dependent primarily on growth in the labour force and productivity. Over the longer term, our labour force growth is expected to be no more than 2% per annum. As attainable productivity growth is in the region of 3-4%, we can expect sustainable non-inflationary GDP growth to be around 5-6%. To grow significantly beyond this, we will need to deploy our capital overseas into areas with the requisite land and human resources. Growth in this area will boost our gross national product. This year, the economy is expected to slow down. There is, however, no cause for alarm. The Ministry of Trade and Industry's 1992 growth forecast lies within our long term sustainable rate. We are comfortable with this. Hence, the fiscal year 1992 Budget is a mildly stimulative one, with a mild tax cut accompanied by increases in development expenditures. Excessive fiscal stimulation now will only add to pressure on wages and fuel inflation. Members can, nevertheless, be assured that Government will monitor the situation closely and respond if circumstances warrant it. In this Budget, I have, on the revenue side, cut corporate tax rate and increased personal reliefs for reservists. Individuals will also enjoy a 5% rebate on income tax for the Year of Assessment 1992. These changes reaffirm Government's philosophy of taxing businesses as lightly as possible and to reward individuals for their contributions to our nation. In particular, the cut in corporate tax will help businesses cope with increases in business costs. The Budget also contains tax incentives to promote growth areas. Together with those introduced in earlier years, the overall package of tax incentives is now quite adequate. On the expenditure side, the Budget's emphasis is on investment in education, basic health care, public housing, defence and infrastructure. This is to enhance our productive capacity and ensure our national security. Investments in infrastructure, such as upgrading of HDB flats and basic hospital facilities, will also improve the quality of life without reducing the drive to work. The underlying philosophy behind this Budget remains the same as that of previous years. It is to invest in our citizens, encourage work and enterprise and subscribe to the free market. Government has succeeded in providing our people with education, public housing and basic health care at affordable costs. Those who want more must be prepared to pay for it. Government will not subsidize consumption expenditure. To do so will only undermine the incentive to work and to deplete the reserves which we have accumulated over the years. Our success has been possible because of prudent fiscal management. We should not deviate from this well-tested formula. On the contrary, the challenge ahead for Singapore would be to deal with increases in expenditure while revenue declines, as our population ages over the next 20 years. I will now deal with specific issues raised by Members. I will not respond to all of them as some will be more appropriately dealt with under the relevant Ministries in the Committee of Supply. A few Members have questioned whether a lower economic growth rate would necessarily result from a maturing economy. The Member for Potong Pasir has, in particular, compared our growth rate with that of Korea. Dr John Chen has touched briefly on this and I will deal with it briefly also. Korea has indeed grown faster than Singapore last year, by about 8.6% against our 6.7%. However, if we take the period from 1965-1991, the average economic growth rates of Singapore and South Korea are the same, with both attaining 9% per annum. The growth in Korea last year was accompanied by serious problems created by over-heating. Inflation was 9.7% while the current account deficit reached an all-time high of US$8.8 billion, four times that of 1990. As a result, the Korean Government is aiming for a more sustainable growth rate of 7% this year. In addition, South Korea's per capita GNP in 1991 was an estimated US$6,300. This is only about half of Singapore's. Korea is therefore growing from a lower per capita base compared with us. When we reached this base in 1983, we were growing at more than 8%. Several Members were concerned that the Budget had not addressed fully the problem of rising business costs. Sir, the increase in business costs is a natural consequence of our strong economic growth. The Singapore economy had been growing rapidly at an average rate of 9% per annum for the last five years. This is way above the potential output of our indigenous factors of labour supply and productivity growth, with the inevitable result that there has been a strong upward pressure on wages. Business costs as measured by the unit business cost (UBC) of the manufacturing sector grew by 5% in 1991, down from 6.7% in 1990. Many of the factors leading to the rise in business costs are not within the control of Government. The bulk of the increase is due to the rise in labour costs. Unit labour cost rose by 6.8% in 1991, about the same as the 6.6% in 1990. This is a reflection of our tight labour market. The solution to the high cost is not to avoid the increases, as these are necessary to send the correct signals to businesses to optimise the use of our scarce resources. Instead, we have to slow down the over-heating in the economy. Government will not burden the private sector with unnecessary statutory costs, but the private sector must do its part to improve productivity. I share the Members' concern that over the last three years, productivity growth has lagged substantially behind increases in real wages. This cannot be sustained year after year. All in the workforce must realise that we have to increase our value-added to enjoy higher standards of living in the future. The National Productivity Board has recently announced a four-pronged programme to raise productivity in Singapore. The Retail Sector Development Plan unveiled by MTI will also help retailers upgrade. Furthermore, the Government will continue to invest in education and training of our people in order to bring about continued economic growth in the long term. On the increase in the CPF contribution rate for employers, this is necessary to keep faith with our workers. Employers should remember that the 15% point cut in CPF rate in 1986 was meant only to be temporary. It is in cognisance of the slowdown in our economy that the employers' contribution rate is increased by only half a percentage point this year. Furthermore, I would remind employers again that CPF contributions constitute part of wages, and any increases in their CPF contributions should be taken into account in wage adjustments. That this exhortation has consistently fallen on deaf ears is a clear indication that the economy has been over-heating and creating a demand for labour which can only be met by constantly rising wages. Several Members have suggested that if the economy picks up, Government should speed up the restoration of CPF contribution rates. Let me assure Members that the Government is committed to restoring the CPF contribution rate to the target of 40%, with equal contributions by employers and employees. However, this must be done without hurting the economy. Government hence reviews and adjusts the CPF contribution rates each year according to economic conditions. We have allowed ourselves up to 1996, at the latest, to restore fully the CPF contribution rates. This, however, does not preclude us from a quicker restoration if the economy is able to support it. Some Members and many businessmen are concerned about the continuous strengthening of the Singapore dollar against other currencies, and the impact of the strong Singapore dollar on our export competitiveness. I should explain that the strengthening of the Singapore dollar is a reflection of our strong economic fundamentals. These include good economic growth, low inflation, budget surpluses and a healthy foreign reserve position. Funds have flowed into Singapore because investors have confidence in the continued sound management of the economy. The strength of the Singapore dollar has itself been a factor underpinning our economic fundamentals. It has allowed us to enjoy a significantly lower rate of inflation in recent years compared to the other NIEs, and most other countries. The appreciation of the Singapore dollar in recent years has served to neutralise completely foreign inflationary pressures. It has also exerted a cooling effect on the economy which had been growing well above its underlying potential until recently. If the exchange rate had instead been held at its 1988 level, inflation would have averaged 7% last year, twice as high as the 3.4% that we actually experienced. Calls have been made for a weakening of the exchange rate to offset the effects of higher labour costs in view of the economic slowdown. Such a move is bound to be counter-productive. In the short term, there would indeed be some gain from a weaker exchange rate. Our exports will become more competitive and we may achieve a little higher GDP growth. Import prices, however, would also be higher. Since our exports have a high proportion of imported inputs, ranging between 60% and 70%, the benefits of a weak currency would largely be nullified. Over the longer term, export competitiveness arising from a weaker currency would be further eroded in two ways. First, in the present tight labour market, wages would rise even further as the initial expansion in exports would lead to more demand for labour. Second, the increase in the price of imported energy, food and other consumer goods reduces real wages which workers would want to restore. The resulting increase in wages and other costs would completely offset the gains from a weaker currency. The level of competitiveness would be back to where it was. The only change is that inflation would be higher. Exchange rate policy, like any other Government policies, should be guided by long-term considerations. The best way exchange rate policy can promote long-term export competitiveness and sustained economic growth is through keeping inflation low. With the slowing down of Singapore's growth rate, I would expect the upward pressure on the Singapore dollar should also ease. A few Members have also commented that several Government-mandated cost changes were made outside the Budget. I would like to assure Members that, whenever possible, Government will announce major cost changes in the Budget. However, it is not always possible to do so if the changes are not introduced for revenue or budgetary reasons. For instance, the increase in foreign workers levy was necessary to curb the sharp increase in demand for unskilled foreign workers. However, it was announced before the Budget in order to give sufficient notice to the industries affected so that they could make the necessary adjustments. I shall now turn to the discussion on taxation. A few Members have asked for a comparison of the corporate tax burden in Singapore with that in Hong Kong. I would point out that it is not appropriate to compare ourselves with Hong Kong in this area. We are neither a colony nor a tax haven. What Singapore is aiming for is not to have the lowest corporate tax rate in the world. What we want is to keep our rate sufficiently low to attract a continuing stream of high quality investments and promote private sector growth, and we have been quite successful in this area. Some Members have commented that Government has not given sufficient assistance to help local enterprises develop and expand overseas. This is not the case. Government recognises the importance of local enterprises in our economic development. Many programmes have been implemented to help these enterprises grow. They include the Local Enterprise Financing Scheme, Market Development Assistance Scheme, Local Industry Upgrading Programme and the Business Development Scheme. These schemes are to help local enterprises acquire advanced production and marketing know-how, improve product quality and gain new markets overseas. Many local enterprises have benefited from these programmes. Last year, grants amounting to $33.8 million had been given to over 13,000 projects undertaken by local enterprises. In addition, $376 million in loans have been granted to over 1,700 projects under the Local Enterprise Financing Scheme. To help the larger local enterprises to expand their operations overseas, the Economic Development Board (EDB) has recently introduced the International Direct Investment Programme. The aim of this programme is to develop a core of home-grown MNCs by facilitating overseas investments by Singapore companies. As for the smaller local companies, EDB is formulating a new initiative called the Local Industry Globalisation Programme. Details of this programme will be released when it is finalised. Local enterprises also enjoy a number of tax incentives. Pioneer, Post-Pioneer and Investment Allowance incentives are all available to them. In addition, local enterprises can obtain a double tax deduction for expenses incurred in carrying out overseas marketing campaigns and for maintaining trade offices overseas. For the past five years, a total of $135 million worth of investment allowances has been given to local enterprises. They also enjoyed double tax deductions amounting to $61 million over that period. The Member for Eunos GRC, Mr Sidek Saniff, has called on Government to set up a business bureau to assist small local retailers. As part of the Retail Sector Development Plan, EDB will set up an Enterprise Promotion Centre later this year in one of the retail associations. This will be a one-stop assistance and referral centre where retailers can seek advice, information and contacts with relevant Government bodies. Some Members have called for the top marginal individual income tax rate of 33% to be reduced to the corporate tax rate of 30%. On the surface, the 3% differential between the top marginal individual tax rate and the corporate tax rate appears to favour businesses. However, the effective tax rate for individuals in the highest tax bracket is considerably lower than the 33% because of our graduated individual tax rates. For example, the effective tax rate for an individual with a chargeable income of $400,000 per annum is only 26.5%. I would therefore like to reiterate that our individual income tax rates are lower than those in many other countries and there is no need to revise the tax schedule at the present time. As pointed out by the Member for Leng Kee, the bulk of the tax burden falls on those in the higher income groups. About 10% of taxpayers contributed 75% of the total tax collected for the Year of Assessment 1990. On the other hand, taxpayers with chargeable income of $5,000 and below comprised about 40% of the tax base but carried only 2.3% of the tax burden. A few Members have asked for a comparison of our individual income tax rates vis-a-vis Hong Kong. I do not propose to deal with it here as a comparison would be long and tedious, but I will take it up again in the Committee of Supply if time allows. Some Members have called for personal reliefs to be increased. I must remind Members of our policy to ensure that the costs of social and security services provided by the Government are borne by as many people as possible. To achieve this objective, we need to maintain a wide tax base. As increasing reliefs would reduce our tax base, we have therefore instead preferred to reduce the tax burden for everyone through the alternative route of lowering our individual income tax rates over the years, which we have indeed done. I must also point out that the personal allowance of $2,000 is the only relief which has not been revised. Several increases in the reliefs for earned income, wife, children, parents and handicapped dependants have been announced in the past 12 years. In the past five years alone, we revised the following reliefs: wife relief was increased in the year 1990; child reliefs were increased in the Years of Asessment 1988 and 1990; while reliefs for parents and handicapped dependants were increased in the Years of Assessment 1990, 1991. Furthermore, our package of personal reliefs for the average family is comprehensive and generous. Let me illustrate this point with some examples. A working couple with two children and husband in active reserve service is now entitled to $10,000 in personal reliefs. A working couple with three children and husband in active reserve service is entitled to $11,500 in personal reliefs. In addition, if the couple qualifies for procreation incentives for the second child, they will be allowed a special tax rebate ranging from $5,000 to $20,000, depending on the age of the wife when the second child is born. If the couple qualifies for procreation incentives for the third child, they will be allowed a special tax rebate of $20,000. Each special tax rebate can be consumed over a seven-year period. Some Members have spoken on the goods and services tax. I would like to thank them for their suggestions. We will take note of these in the finalisation of the White Paper. So I would not deal with this matter today. Questions have been asked on the subject of personal expenditure tax. Again I would not deal with the subject today, but will refer it to the Committee of Supply. Fiscal prudence. Government frugality appears to be an over-rated virtue in the eyes of some commentators and some Members. For example, a recent article in the Straits Times said, and I quote, "Budgets revolve around maintaining the corporate entity's capacity to grow and maintain its economic capacity." I am quoting from a commentator, who declined to be named, who said that, "The adjustments are made by those below" with the implication that it is the poor who carry the load. Further on the article said, "But such frugality has been achieved at a price. Social security and welfare spending in Singapore is minuscule by international standards." Some Members appear to share the same sentiments. I believe that this is a dangerous line to take. It gives the impression that the Government budget does not spend enough on things that matter, and that, as a result, some people have suffered. Let us also have an international comparison, but with countries at a similar stage of development and who are also acknowledged to be economic successes, that is, the newly industrialised economies, or the NIEs. A number of tables (Cols. 727 - 732) have been distributed by the Clerk. I refer you to Table A which shows the latest Government expenditure expressed as a percentage of GDP of the four Asian NIEs. Some points are worth noting. tables - FUNCTIONAL CLASSIFICATION OF GOVERNMENT EXPENDITURE, Comparative Performance of Selected Low-Tax and High-Tax Countries, TAXATION AND ECONOMIC PERFORMANCE (Cols. 727 - 732) Governments of the NIEs spend roughly the same amount. The NIEs' expenditure averaged around 20%, with Taiwan the highest at 27%. This compares with a world average of 40% and a high of nearly 60% in countries like Sweden, Norway and the Netherlands. Singapore spends about the same on general administrative services and defence as the other NIEs, at around 7% to 8% of GDP. The exception is Hong Kong which is a colony and hence has no defence expenditure. In terms of economic services, it is interesting to note that the other NIEs are doing more than Singapore. Some of the higher expenditure in the other NIEs represents catching up on major infrastructural works. But the need to "hone our productive capabilities" is not an imaginary one. We are also above average in spending on social services, although details vary. All the NIEs spend heavily on education, reflecting the importance of the quality of human resources and economic development. Spending on health care and social welfare is comparable to the other NIEs. We spend about 1.4% on this compared with 2.9% for Hong Kong, and 2.3% for Korea. But the figures do not give the full picture. In Singapore, we have Medisave and CPF which are tax exempt. These provide Singaporeans the resources to look after their health care and social security needs. Our spending on housing and community amenities is again comparable to the other NIEs. What the figures cannot show is that, over the years, Government has allocated large amounts of land for our public housing programme. Singaporeans have been able to buy flats at subsidised rates, sometimes even below the cost of construction. The result is that 86% of our population live in public housing and more than 90% of them live in flats they own. Table B shows much the same pattern on a per capita expenditure basis. It is worthwhile noting that, on this basis, Government expenditure is highest in Singapore. Bigger Government does not mean better Government. Bigger Government means heavier tax burden. In Singapore, Government frugality has not been at the expense of a higher standard of living for Singaporeans or higher investment. I refer you to Table C which shows comparative figures on Government taxation and the economic performance for a cross-section of countries based on figures taken from the 27th February 1992 issue of the Asian Wall Street Journal. The figures show clearly that lower taxes are directly related with higher investment and higher productivity growth and, hence, faster growth in per capita income. The same information is presented graphically in Chart 1. It is, therefore, fallacious to say that lower Government spending and lower taxation would extract a price in the form of adjustments to be made by "those below", meaning the lower-income population. Frugal government spending in the right areas allows the economy to grow and citizens to prosper. I will now touch on the level of reserves and their usage. I was pleasantly surprised to note that Mr Chiam, Mr Ling and Mr Cheo have come out firmly against the squandering of our reserves. It is gratifying that they recognise the need for a country, like Singapore, to maintain adequate reserves, and I hope that this means that they recognise the wisdom of Government's policies and will vote in support of the Government's Budget later on. However, both Mr Chiam and Mr Ling have also said that they are strongly opposed to the Government's continued accumulation of substantial surpluses year after year, with the implication that this has only been achieved through taxing the people heavily and by not spending sufficiently on vital areas, such as education, culture and the arts. They have also demanded that Government declares its target level of reserves, again with the implication that without this, there will be no upper bound to the Government's appetite for reserves accumulation, and that this can only come from squeezing the people for increased taxes. I will respond to both these statements and, in the process, I hope that I will be able to clear up some misconceptions. First, on what is considered to be an adequate level of reserves. It is generally accepted internationally that countries should have hard currency reserves equivalent to between three and six months' imports. Depending on a country's degree of self-sufficiency, reserves at these levels should be sufficient to provide a cushion against temporary dislocations in a country's economy. For a country like Singapore, which imports all its energy, practically all its food, and up to 70% of its manufacturing inputs, its comfortable level of reserves should clearly be around the upper bound of the three to six months' range, and more, if possible. Singapore's current level of official foreign reserves is $55.8 billion, equivalent to 5.9 months of total imports, or around 80% of GDP. Our current level of reserves is, therefore, comfortable. However, bearing in mind that as our population grows and our standard of living increases with economic growth, our import needs will also grow. This means that the absolute level of our reserves cannot remain static but must grow in line with GDP growth. This we can achieve if our reserves are invested wisely and the income from such investments is allowed to accumulate and is not consumed. Hence, the provision that reserves accumulated by past governments should not be spent without the concurrence of the Elected President. Having said this, I should also point out that for a country like Singapore, which does not have natural resources, our aim should be to accumulate, over time, as much reserves as we can afford to do so, without overtaxing our people and without denying ourselves the expenditures necessary for economic growth. This we have succeeded in doing over the past 25 years, and we should continue to do so in the future. We should endeavour to emulate the Swiss whose surplus foreign assets stand at US$185 billion, or 94% of GNP. In addition, the Swiss also have a cushion of US$237 billion in 1989, or 120% of their GNP in private foreign assets held overseas; whereas in Singapore our private overseas assets are only US$7.5 billion, or 25% of our GNP. We have a long way to go before we can hope to attain the Swiss level of security. A comfortable stockpile of reserves is our best insurance against future external economic uncertainties. I will now turn to the question of the annual budget surpluses, which Mr Chiam and Mr Ling imply, have been achieved through increases in taxation and through insufficient spending on essential areas such as education. The facts contradict these contentions. On taxation, corporate taxes have been cut from 40% in 1987 to the just announced 30%, and for personal income tax the top marginal rate has been reduced to 33% since 1978. The only increases in Government levies have been in areas where prices have been used as the mechanism to allocate scarce resources, such as foreign labour and cars. And I hope that Mr Chiam and Mr Ling are not suggesting that we should resort to a process of pure allocation as the preferred route in order to avoid the levies. Such an alternative has been used in Communist countries and the outcome has always been spectacular inequities and general economic chaos. I would also remind Mr Chiam and Mr Ling that much of the revenues generated from the levies are now used to fund both educational and social programmes. The Member for Bukit Gombak is supportive of the Government's emphasis on education. He has, however, expressed concern that Government has not invested sufficiently in it. I should point out that Government will be spending $2.78 billion on formal education in fiscal year 1992. This amounts to 4.2% of GDP, which is substantially higher than that in recent years. In addition, a sum of $1 billion has been provided to the Education Endowment Fund. The Member has specifically raised the point that 75% of independent school students who would not be receiving scholarships under the Edusave scheme, would not be adequately provided for. Let me remind the Member that Government has time and again given the assurance that no student would be deprived of an independent school education because of financial hardship. All students with financial difficulties would have recourse to assistance schemes, administered by the Ministry of Education and the independent schools. The giving of scholarships to the top 25% of independent school students serves a different purpose. It is intended to motivate students to give of their best. All these demonstrate the Government's commitment to developing each individual to his highest potential. A number of questions have been raised on civil service manpower, but I will not touch on them this afternoon as they are more appropriately dealt with in the Committee of Supply. Finally, Mr Deputy Speaker, Sir, I would like to conclude by saying that over the last few years, Singapore has enjoyed spectacular economic growth. As our economy matures, we have to come to terms with a lower but more stable rate of growth. This Budget reflects the Government's long-term policies, serves to consolidate on what we have achieved so far and provides for continued economic growth in the future. [Applause].

Question put, and agreed to. Resolved, That Parliament approves the financial policy of the Government for the financial year 1st April, 1992 to 31st March, 1993.

Resolved, "That Parliament do now adjourn." -- [Mr Wong Kan Seng]. Adjourned accordingly at Twenty-six Minutes past Six o'clock pm. Committee of Supply - ESTIMATES OF EXPENDITURE FOR THE FINANCIAL YEAR 1ST APRIL 1992 TO 31ST MARCH 1993 (Cols. 723 - 726) tables - FUNCTIONAL CLASSIFICATION OF GOVERNMENT EXPENDITURE, Comparative Performance of Selected Low-Tax and High-Tax Countries, TAXATION AND ECONOMIC PERFORMANCE (Cols. 727 - 732)