Mr Speaker, Sir, can I request the Clerk of Parliament to distribute Charts 1 and 2, please? Mr Speaker, Sir, I rise to support this Budget. Sir, every year at Budget time, Members of Parliament dissect the Budget speech, sometimes wrongly by the Opposition, and we share our hopes, our fears, our dreams and aspirations with the nation. All these speeches have two basic objectives. First, to ensure that the Budget provides a conducive environment for continued economic growth. Second, that this growth can be achieved with equity. Yet, all over the developed world, economic growth has always been achieved with growing income inequities. Please refer to Chart 1. You see that in spite of all the efforts over the years, in the three countries (the United States, France and Japan), the top 10% has always earned more than the bottom 10%, and the gap appears to be widening. You look at France from the period, 1978 to about 1984, the gap appears to be constant, and it is not widening. That is because during that period, when France was under the Mitterand years, France was undergoing severe recession. In other words, if we want to close the pay gap, then we would have to suffer the pain of recession. It is clear that income growth and income equity pull in opposite directions. Even Japan cannot escape the malaise of diverging income inequity even though it is, by world standard, the nation with a remarkable degree of economic homogeneity. There is a lesson in these statistics, that is, if we want everybody to grow richer, then some of us will inevitably be richer than others. And I hope that Mr Chiam sends these charts to his Assistant Secretary-General, so that he can take a look at these figures closely. What is the alternative? The collapse of communism points the way. If we design budget after budget to make everybody equal, then there will be equality of poverty and misery for everybody. Why? Because we will be sharing a diminishing amount of a smaller national pie. Poor and deprived citizens of the former mighty Soviet Empire swallowed the lethal cocktail of ignorance and naivety, believing that a Utopia was an equal system. In a cruel twist of fate, they found their Utopia. They are now all equally poor and equally miserable. We can learn from the Communist Chinese. The quick thinking Communist Chinese reversed course. They saw that economic growth could only be achieved through a free market. So they liberalised the coastal cities, establishing pockets of affluence. But the clever Communists astounded our smart capitalists. They went one step further. At a time when western political economists were wrestling with the moral question of income inequity, the Chinese accepted it. They have reconciled themselves to the fact that if they were to grow rich, and rid themselves of chronic poverty, some will have to grow richer than others. Only then, the Communists concluded, from the central committee right down to the peasants, that only when everybody becomes richer, the richer among the richer ones can help the poor ones. Mr Jiang Zemin, the Chinese Communist Party Secretary-General, made this profound and seemingly heretical statement at the 14th National Congress of the Chinese Communist Party. I quote him. He says: " ... pay according to one's work". [But] "simultaneous prosperity for everyone is impossible." He carries on: [So for the sake of efficiency,], "we should widen differences in personal income ...". This was quoted in The Economist, page 23, 17th October 1992. Aggrieved Singaporeans, fanned by the Opposition's diatribe that the Government only helps the rich and ignores the poor, should listen to the voice of the reformed Communists. The Chinese people have been through economic hell, and here our Opposition are tempting us to enter where even Communists fear to tread. The key test of a budget, Mr Speaker, is not whether who gets richer. The real test is whether we will all get richer. The World Bank uses the percentage of people living below subsistence level as a test of equity. It recognises that the real test of equity is whether a society allows mobility among different classes. And it concludes that Singapore has almost nobody living beyond the poverty line. You look at Chart 2, and you see the countries with the percentage of people living below subsistence level, corrected for cost of living within the country. You see Singapore is not there. Why? Because nobody is living below poverty. You look at our neighbours - Malaysia, 2% below poverty; South Korea, 5%; China, 10%; Thailand, 16%, Indonesia, 15%, Philippines, 21%. The figures in the chart are for 1970, 1980 and 1990. If we compare our success rate by combining economic growth and achieving income equity with the NIEs and the ASEAN neighbours, we will begin to understand why they would love to have our problems. So in fact we have no problems. The Opposition keep telling us and they are worried about the $500 equity topping-up with an extra $200. I think the scheme is fair because we cannot give money frivolously away. This money has been accumulated over years of prudent management combined with the diligence of Singaporeans. In order to get something, it is fair that they put in an equity participation. $500 is one suggestion, and I think it is a fair one. It equates getting some more with either past participation, that means, you have accumulated money in the past, or present participation when you have earned cash today, or you can borrow from your children, future participation. I understand that the scheme is to allow Singapore citizens who have participated in nation building to buy, in the first instance, Singapore Telecom shares and maybe other shares at a discount. These shares are not going to increase in value overnight. It will take some time, maybe two years, maybe three years. So it is fair to lock this money inside. For those people who have already retired, within three years I think Telecom shares, or whatever shares, would have gone up. Then it is time to cash it in. For those people who are still below 55, not yet retired, they will probably have their $500. For those people who cannot afford the $500, in the first instance, I think their children can help, their friends can help. I am sure the banks will be quite keen to help, or at least some banks, with the understanding that they are going to buy equity. Mr Speaker, Sir, I endorse this Budget because it lays the foundation for further growth with minimal inequity. I use my words carefully - minimal inequity. Everyone will be richer because of the fundamental restructuring of the tax system. This budget re-focuses the perspective. It shifts taxes from direct income to consumption. This budget will encourage savings, promote investments and entrepreneurship. And the Goods and Services Tax, or the GST, lies at the heart of this tax restructuring programme. Newspaper headlines and most dialogues and seminars have so far focused on the GST debate, principally, on how it will impact on the lower income and retirees. I think this is right. It has been said by Dr Johnson, the lexicographer, that the "decent provision for the poor is the real test of civilisation". By that yardstick, I think we have passed our compassion test. Unfortunately, the most compassionate and important reason for implementing the GST got the least attention. Mr Speaker, Sir, it is important, in fact imperative, that we re-focus on the big picture. Singaporeans are worrying about the problems of full employment, things like how much will my bowl of laksa cost or how much will my cup of coffee cost. I think these are problems of the PAP - the Peace and Plenty syndrome. I think under SDP, if unfortunately it becomes SDP, it might be a different story. Sir, prolonged full employment has lulled us into a false sense of security, that is, we will never be unemployed. Many think that Singapore is immune from recession. Cushioning the lower income and retirees is indeed important, but it is more important to provide jobs for our people. At a time of full employment, retrenchment is a remote thought. In fact, the prospect of unemployment is very real. Recent events in the West have proved that an economy can grow, and co-exist, with rising unemployment. Milton Friedman, the Nobel prize laureate, and now fellow at the Hoover Institution, attributes this strange phenomenon to the alliance of two powerful forces: one, technological; and second, politics. In Friedman's words, "the technology revolution makes it possible to produce a product anywhere, using resources anywhere, by a company located anywhere, to be sold anywhere". In other words, there is no need to come to Singapore. At the same time, the political revolution caused by the collapse of communism and the rush for free markets by Latin America, Eastern Europe and China, has released to the developed world a seemingly endless supply of cheap labour that the technological revolution makes easily accessible. In short, unless we adapt to this New World Order - a world where investments have no loyalty, and where cheap labour is in plentiful supply - things will go quickly wrong with Singapore. This 1993 Budget is a watershed, Sir, because it is about adapting Singapore to this changing world order, the changing world of technological revolution and political revolution. Jack Welch, one of the few CEOs that is not being chopped recently in America, the CEO of General Electric, and author of the best selling book "Control your Destiny or Someone Else Will", puts it succinctly and eloquently. "Change", he said, "has no constituency. People like the status quo. Because they like the way it was". The GST is about making changes to our way of life. It is about making Singapore relevant to the third aspect of the New World Order which Friedman did not pick up. It is a world organised not according to free competition but according to geographic groupings; a world of trade blocs. The GST is about postponing, for as long as possible, our next recession which Singaporeans seem to think will never come. Mainly, the GST is about three things, Sir. It is about jobs, jobs and jobs. It was Marx, after all, who said, "Man is what he does". Sir, while excited Singaporeans were counting down the minutes to midnight on 31st December last year, 1992, to ring in the new year, a trade bloc bearing the name of the Single European Market (SEM) was only seven hours away from becoming a functional entity in Brussels. The newspaper report did not pick it up. The newspaper report on 1st January 1993 did not pick up as its headline or even as the main story the formation of the Single European Market. Instead, it focused on all the parties, the fun. But the SEM in a way is an evil trade empire. It is a frontier free trading zone of the EC-12. Together, this vast market corners something like 30% of the world's GDP, with a vast catchment of 350 million people of the world's richest population. In a few years' time when the EC-12 eventually embraces the EFTA-6 (probably Switzerland will come out), the enlarged European Economic Area will be the most powerful and most affluent trading bloc in the world. In an issue of Economist two weeks ago, one Economist writer asked rhetorically why is it that Japanese companies are now going to Britain to invest because Britain does not offer the cheapest labour cost. It also asked why is it that it is going to Britain in increasing numbers because Britain does not offer the best management. The answer obviously is that they need a base to avoid the new ruling of local content, indigenous labour. They need to fight the trade war within the EC, so they need Britain. And because Britain uses the English Language, it becomes a natural advantage. Sir, SEM is still in its infancy but it is really bad news for Singapore because white barriers within the SEM have fallen, barriers for non-SEM members, like Singapore, remain. So SEM confers privilege and access to members, while non-members, like Singapore, will suffer the pain of denial. Sir, on a level playing field, Singapore has a fighting chance. At a time when Japan and the world were shrinking its world-wide direct investments, Singapore continued to attract quality investments and technology. Translated, this means we have more and better paying jobs for us, for our children, from which we can help the less fortunate. Last year, the $3.5 billion worth of inward investments was a record. But why the flood of investments? Principally, because we offered very good risk of returns. According to the US Department of Commerce statistics, American companies investing in Singapore enjoyed a 30% return on investments, which is very high. This is more than double the average of 14% recorded for US foreign direct investments in all countries and above that of the G7 industrialised countries. Incidentally, it is 20.6% for UK, 15.9% for France, 15% for Germany, 10.1% for Japan. Singapore is 30%, which is very high. But the creation of the SEM will begin to divert marginal investments away from Singapore to Europe in the years to come, even though Dr Richard Hu has said that the 3% corporate tax cut will be enough to attract quality investments. I hope he is right. Sir, with the new SEM rules on indigenous labour and the use of local contents, I fear that some manufacturers, some marginal high-tech ones, will begin to move away from Singapore. As if one SEM is not enough, Sir, you have another monster lurking behind us. The US, Canada and Mexico are finalising the final paragraphs of the North American Free Trade Area (NAFTA) agreement. Barring unforeseen circumstances, NAFTA will come into effect on 1st January 1994, and with it, NAFTA will unite the America, the USA, Canada and Mexico into a borderless trading zone of 370 million people which will account for more than 30% of the world's GDP. Sir, the technological revolution and the political revolution, together with the creation of these two mega trading blocs, will divert trade and investments away from Singapore. I feel strongly that in order to retain the marginal investments, we have to give them a reason to come and one good reason is to give them a higher return on investments. The 30% on paper may still look 30% but because of the formation of barrier blocs within Europe, around Europe and around NAFTA, the 30% figure will drop in real terms. Sir, the experiences in Australia, New Zealand and Canada are instructive. Some Singaporeans, like Mr Chiam and Mr Low, are still unsure of the benefits of GST. But many Australians, I think, most Australians, appear to embrace it. Dr John Hewson, the opposition leader, has been campaigning on a punitive 15% value-added tax (they also call it GST) if his party were returned to power. The election is this Saturday, 13th March. If we believe the polls, he appears to be within grasp of the prime ministership. Sir, why do Australians accept the additional burden of a punitive 15% in consumption tax on top of a crushing income tax of 20% (lowest) to 49% (highest)? These are very punitive, burdensome figures. The reason is simple, because Australians need work. In Singapore, most Singaporeans have work. In fact, we have an over-employment problem. So we do not worry about unemployment. But the Australians need work and they appear to be embracing GST. Officially, 10% of Australians are unemployed. The unofficial and real figures are certainly higher. In some places, unemployment is as high as 30% and while the retrenched suffers a loss of esteem, the employed Australians are having nightmares over imminent prospects of retrenchment. Sir, John Hewson's proposed GST is not unwelcome. Why? Because it holds out the promise, however remote, of resuscitating the moribund Australian economy into providing more jobs. So they are not worried about the 15% because they are not paying any tax now. Because they are unemployed, they do not need to pay tax. So they do not mind the 15% if they have jobs, which is the bottomline. Sir, New Zealanders embraced their GST under very similar circumstances some years ahead. New Zealand's economy appears to be on the mend, but the trail of broken homes, despondency and desperation caused by more than a decade of unemployment is something, I hope, will never set foot in Singapore. Some critics point to the hated Canadian GST and tell us that there is a dark story to it and that we should not implement the GST after Canada's failure. But the parallel between GST in Canada and the proposed GST in Singapore is invidious. Ours is only an innocuous 3%, theirs is 7% on top of their extremely high tax rate. Second, Canada made the fatal mistake of introducing a GST when the economy was down and out - one troubled by high unemployment (about 11%, I read recently), high inflation and unbearable deficits. Third, Canada's GST was designed as a weapon to generate additional revenue to complement its income tax. Because there is a high deficit, they need to get money somewhere to top up and they cannot cut welfare. The Singapore GST has been designed as a device to restructure our tax system. I think this is an important point. The Australian, New Zealand and Canadian GST was designed as an additional revenue source. Ours has been designed to restructure an existing tax system. Because of our accumulated budget surpluses, our Government can afford to offer a comprehensive package of offsets, rebates, income tax reductions and subsidies to cushion the impact of the GST on the lower income and retirees, which the Canadian, Australian and New Zealand governments could not do so because their coffers were empty and they were already borrowing money. So the lesson for us is very clear. GST is a tried and tested tax system that works to encourage investments and create jobs. In all the developed world, not many countries are without an equivalent of the GST. When the rest of the world were taxing factors of production, a lopsided direct income tax was quite adequate. But when our competitors moved into different territories, when they moved into indirect taxation, through consumption, our outmoded tax system puts us at a severe disadvantage. Hence the question for us is not if we should endorse GST. The question is how and when to implement GST? I think the time to implement it is now. Why now? Because employment is full, inflation is low and our reserves healthy. How to implement it should actually be discussed in detail in the Second Reading of the GST Bill. But we have heard quite a lot of it today and I think that most of us welcome the Bill in principle. I want to ask Mr Chiam whether he actually agrees to the GST, in principle. He talks about the GST, he throws out a whole list of queries and he seems quite satisfied, but I am not sure. His only worry seems to be that, after five years, the GST rate might be moved up. Sir, lessons of Australia, New Zealand and Canada are very instructive, and they are all late comers to GST, as to when not to implement GST. GST is like a medicine. It is a strong medicine. When it is taken to cure a sick economy, the economy will slip further into sickness before it gets better. This is a masochistic approach to good health. You are sick, you take strong medicine, it knocks you off and after some time you recover. But when the GST is injected into a healthy economy, like ours, it acts as an aphrodisiac, like the Chinese say, che pui [ ], immunising the economy from a host of sickness. I think this is the holistic approach to keeping healthy. This is the Singapore approach to GST. Mr Speaker, before I end my speech I want to raise a point by Mr Chiam See Tong on the remarks made by our Senior Minster, Mr Lee Kuan Yew, in 1964 about not wanting to implement something like the GST. I am not sure in what context he quoted the speech but, in any case, since 1964 until now, times have changed. At that time, the people were unemployed. The economy was bad. If you had heard my speech earlier on, I said that you should never introduce the GST when the economy is sick. We should introduce it when it is strong. I think the GST is a good thing for Singapore. The rate is very acceptable and I support the motion.