The President (Mr Ong Teng Cheong): Honourable Members, the Asia Pacific region is prospering. The economies of ASEAN and East Asia are all experiencing dynamic growth. India and Vietnam are also opening up. Leaders of the Asia Pacific Economic Cooperation group (APEC) held a successful informal meeting in Seattle in November 1993, and is planning the next one in Indonesia this year. Our region is set to play an expanding role in the international economy. Singapore is prospering too. We enjoyed strong growth in 1993, and can look forward to further steady progress over the next few years. Our short term issues are well in hand. My Government_s focus is therefore on long term policies to position ourselves for the next stage of nation building. In economics, one major thrust is to venture abroad, to develop trade and investment links with neighbouring countries, and tap the vitality and opportunities in a fast-growing region. We will promote a regional outlook among Singaporeans, and remove obstacles that hinder our entrepreneurs and companies from going offshore. Our advantage is that we are familiar with both East and West, with the region as well as the developed countries. By investing in the larger economies around us, we can link our prosperity with their dynamism. At the same time, we must upgrade our domestic economy, to avoid losing business to other countries with lower costs and more abundant resources. We need to invest in the education and training of our people, attract a steady flow of talent from abroad, master new technologies, and promote key industries in the manufacturing sector. This will make Singapore a strong base to support our efforts in the region. We are restructuring our tax system to stay competitive. The Goods and Services Tax (GST) will come into effect on 1st April 1994. We will then reduce direct taxes in order to encourage enterprise. The comprehensive programme of offsets to the GST will protect the lower income groups, so that the new tax will not leave them worse off. The Government's asset enhancement programme will enable every citizen to share the fruits of Singapore's success. The HDB upgrading programme will benefit the 90% of Singaporeans who own HDB flats. The interim upgrading programme will improve the relatively younger HDB estates which need more than routine maintenance. The sale of two- and three-room HDB rental flats to sitting tenants will enable even more Singaporeans to own their own homes. The sale of hawker stalls and HDB shophouses at a discount to sitting tenants will help hawkers and small businessmen to own rather than rent their commercial properties. Last year, the Government paid $200 into the CPF accounts of Singaporeans who contributed at least $500 each themselves to their CPF savings, through the CPF Share Ownership Top Up Scheme. We also sold Singapore Telecom Group A Shares at a substantial discount to our citizens. These measures helped many Singaporeans take a direct stake in Singapore's economy. The Singapore Telecom flotation was a resounding success. 1.4 million citizens bought Group A shares. Significantly, people are holding on to them as long term investments, instead of selling them immediately for quick profit. Other major privatisations will follow Singapore Telecom. The next likely one will be the PUB Electricity and Gas Departments in two to three years_ time. The Government will use these privatisations to enhance the assets of Singaporeans. Singaporeans are enjoying better health and living longer. But birth rates remain low, and the population is aging. These fundamental demographic changes have serious social and economic implications. We must adjust our policies to prepare for them. Longer life spans mean that people need to stay economically active longer, and retire later. Older workers will need retraining to learn new skills and fit into new jobs. So will those seeking to re-enter the workforce, for example, women who had previously stopped working to have children. The Skills Development Fund will expand retraining programmes for older workers to help them upgrade and adapt to new technology. We have passed legislation to raise the retirement age to 60. We will gradually raise it further, eventually to 67. However, we must do so gradually, to avoid suddenly making the labour market inflexible, and to give employers time to adjust to new labour conditions. An aging population will need to spend more on health care than a young one. We have established policies to contain health costs, keep high quality basic health care affordable, and avoid the problems besetting health care systems in developed countries. Singaporeans must put aside enough for their old age. The CPF provides a sound foundation for this. The CPF Minimum Sum scheme, in particular, caters to members_ needs after they have retired. As people live longer, and as their standards of living rise, we need to revise this scheme to get members to set aside a larger Minimum Sum, beyond the normal annual adjustments for changes in the cost of living. A larger Minimum Sum will provide for a longer lifespan, and enable members to withdraw higher amounts each month after they retire at 60. We will raise the Minimum Sum gradually over a number of years. This way, workers who are now nearing 55, and have already planned on withdrawing their CPF balances in excess of the existing Minimum Sum, will only need to make small adjustments. But younger workers must start to make the full adjustment now. The Government will discuss the issue thoroughly over the next few months, and then decide on the best way to proceed. Last year, we had our first Presidential Election. We elected a President to safeguard the integrity of the civil service and protect our financial reserves. The elected President will make it harder for a government to go on a profligate spending spree, and squander our hard-earned reserves. But the elected President alone cannot guarantee our well being. Only the people can make sure that the government pursues prudent and responsible policies, by electing honest and competent Members of Parliament to form a good and clean government. For it is the government that creates the environment where people can generate wealth for themselves through enterprise, knowledge, skills and hard work. The Government's fiscal policy is to maintain a balanced budget. In good years, we will accumulate modest surpluses, to be held in reserve for economic downturns. Sooner or later we will face a recession like the short one we had in 1985, or like the prolonged current recessions in Europe and Japan. The surpluses will then enable us to reduce taxes appropriately in order to help business. However, we should not increase subsidies just because revenues are healthy. Subsidies must be justified by desirable objectives of improving the self reliance or long-term economic independence, not dependence, of those helped by subsidies. We will not subsidise services which benefit only those individuals who use them, e.g. PUB utilities. We will subsidise services where there is a public good, and the benefit is enjoyed not just by the direct user but by society at large. Examples are basic health care, education, public housing and infrastructure. Even then, we will avoid across the board subsidies, but focus the most subsidies on those whose needs are greatest. We should also charge for at least part of the cost of subsidised services, even though only a small part, so that people will appreciate the value of the service and not waste it. Wherever possible, our welfare schemes depend on self-reliance and savings, and not just on government taxation and direct transfers of income. We encourage self-reliance of the family and the extended family, by allowing CPF top-up for parents and Medisave payments for family members. The Government will also use part of its budget surpluses to fund asset enhancement programmes, like the CPF Share Ownership Top Up Scheme, and the Singapore Telecom Group A shares. Such programmes benefit the less well off proportionately more than the better off. However, they are not welfare schemes or entitlements. The Government can carry them out only so long as Singapore does well and accumulates healthy budget surpluses. Furthermore, the benefits must be related to effort. For example, under the CPF Share Ownership Top Up scheme, CPF members had to contribute $500 to their CPF accounts before they could receive the $200 grant. These conditions will prevent asset enhancement programmes from degenerating into a system of handouts. The Government's policy is to rely on the free market wherever possible, except where the free market does not work properly, for example, in health care. The free market matches supply and demand of goods and services through the price mechanism. It channels resources to where they are most needed and valued, and enables the economy to respond quickly and flexibly to constantly changing circumstances. People have the freedom to decide for themselves how to spend the money they earn, and take responsibility for their own choices, instead of having the government step in to spend their money for them. As a result, they have the incentive to give of their best. Free markets promote efficiency, enterprise and growth, as governments the world over have discovered. But in Singapore, the free market is tempered by government intervention. The Government intervenes to give everyone equal opportunities and a fair start in life, and to provide a safety net of last resort to the small minority who need it. We do this although it reduces the incentive for Singaporeans to strive individually for themselves, because Singaporeans also need to cooperate with one another to build one nation together. Developed countries in Europe, Australia, New Zealand and Canada once proudly called themselves welfare states. Now they have to "revamp" their welfare systems, in order to remedy the disastrous side effects of state welfare: like weakened family bonds, diminished incentives to work, and impoverishment of the country's finances. But turning back is slow and painful. Their problems confirm that we have chosen the right approach. We must stay with what has worked, and not follow the mistakes of others. The international environment is becoming more competitive. Fast growth in the region means more opportunities but also formidable challenges. Countries with abundant land, low wages, and hardworking, intelligent workers want to plug into the world economy. They will compete against us for exports and investments. To stay ahead, we must anticipate long term problems, and strengthen our will to achieve and excel. Every citizen will have his or her stake in our common future. So long as we are prepared to learn and to work our best, we can continue to be ahead. But we need the cohesion and determination to excel. Then we will thrive and prosper. Adjourned accordingly at Eight Minutes to Nine o'clock pm.