Hansard, 1994-03-08

Order. Pursuant to paragraphs (2) and (7) of Standing Order 89, -

asked the Acting Minister for National Development why there is a delay in the construction of a shelter over the pedestrian overhead bridge at Yishun Avenue 2, in front of Khatib MRT Station.

Mr Speaker, Sir, work on the shelter over the pedestrian overhead bridge at Yishun Avenue 2 in front of Khatib MRT Station was originally scheduled to start early this year. However, responding to requests from the Town Council and the MRTC, the Public Works Department has agreed to increase the scope of the works to provide a continuous cover from Block 838 to the MRT station as well as a cover to the taxi bay adjacent to the MRT station. This has resulted in some delay. The work will now start in June 1994.

Sir, may I know the expected date of completion of the project?

Such work should not take too long, so we should finish it in due course.

asked the Acting Minister for National Development what are the development plans for the following plots of land in Nee Soon South constituency: (i) the land between Blocks 791 and 792 at Yishun Ring Road; (ii) the land between Khatib MRT Station and Block 804 at Yishun Avenue 2; (iii) the land bounded by Yishun Avenue 2, Yishun Ring Road and Block 838; and (iv) the land bounded by Yishun Ring Road and Blocks 846 and 848.

Mr Speaker, Sir, the plot of land between Block 791 and Block 792 at Yishun Avenue 2 is designated for a primary school. The other three plots, as mentioned in the Question, are sites reserved for future development. The specific plans for these sites have not been finalised.

Is the Minister aware that the plot of land between Block 791 and Block 792 is all walled up by residential blocks and it is actually not a suitable site for a school? I would like to know whether his Ministry will reconsider the plan for that plot of land.

Sir, the intention of building a school on the piece of land between Block 791 and Block 792 is to give more space to the blocks. Because for a primary school, a large part of the site is the school field. We intend to design the school in such a way that the school building will be towards the gabled-end walls of the blocks and the school field will provide the open space between the blocks.

Resolved, That, notwithstanding the Standing Orders, the proceedings on the Estimates for FY 1994/95 on 9th, 10th, 11th, 15th, 16th, 17th and 18th March 1994, be continued beyond 5.30 pm, and be exempted from the provisions of Standing Order No. 1 until 6.00 pm on each day. - [Mr Wong Kan Seng].

Order read for Resumption of Debate on Question [23rd February, 1994], "That Parliament approves the financial policy of the Government for the financial year 1st April, 1994 to 31st March, 1995." - [Minister for Finance]. Question again proposed

Sir, when Parliament adjourned yesterday, I mentioned that it was perhaps timely for the Government to gradually move away from giving fiscal incentives, no amount of which is ever enough. Discounts and rebates as incentives should slowly make way for some other more meaningful and less money-based incentives. If we desire a more caring and gracious society, want to inculcate stronger family values, we should not always emphasize fiscal rewards. How much should be fiscal and how much should be non-fiscal incentives, I do not have a ready answer. But I do know that in the long run, and with resolve, the Government should be able to find a balance between incentives and rewards. With that, Sir, I support the motion moved by the Minister for Finance.

Mr Speaker, Sir, I support the Government's financial policy. This is a sound Budget to prepare Singaporeans for the future. However, Sir, there are two main areas of concern. First, with the implementation of GST, the continued good growth of the economy and the tight labour market, there are fears of overheating and inflation leading to increases in cost. We have to monitor these developments closely and be quick to take corrective measures to redress any problems. The next key area is whether we are allocating sufficient time and resources to tackle the issue of skill training and upgrading of workers, particularly older workers. Manpower is our only resource. Among our competitors in the NIEs, we have the lowest educated workforce. There is the urgent need to relook at the programmes for training of workers at the national as well as the company levels. Our Government's prudent and farsighted economic management has enabled us to enjoy rapid economic growth over the last 20 years. This was achieved despite the fact that we have limited resources. Fortunately, under a strong and good political leadership, we have got the fundamentals right. Our workers have also cooperated in a positive way with the employers and Government and this has enabled difficult policies to be implemented which helped economic development and with it employment and good income for the people. Our economic development strategy in the earlier years was to create employment opportunities for our people. We now want to achieve a qualitative improvement in our economy. Given our limited resources and the abundant resources and low-cost advantages which our competitors enjoy, we can only maintain our competitive edge if we enhance the quality of the work and services we produce. In this way, I am confident that we will be able to make the grade to enter into the First League. We must be ready to be pushed to the limit and accept that there may be frustrations and disappointments along the way. We have to take account of the realities of our limited resources. To succeed in the world market place, we have to be flexible and be able to make quick adjustments to meet the challenges in terms of development in other economies that compete with us as well as the development of new technology and ideas. We have to be innovative, creative and be able to quickly seize opportunities which become available because of the rapid development in the region and the world. Sir, to move ahead into the First League, education and skill training and upgrading of our workers are therefore of crucial importance. More innovative programmes would have to be implemented to train workers, especially the mature workers. I am sure that with Government's intervention in this key area it will ensure that Singaporeans will have relevant skills for the industries and services which we want to promote. The salary ceiling for the SDF levy has been raised from $750 per month to $1,000 per month. Employers should look at this adjustment in a positive way rather than to complain that it adds to their cost of doing business. They can benefit from the fund if they train their workers. And if their workers have the relevant technical and operational skills they will be able to compete effectively in the world market. Sir, while our larger companies have implemented effective programmes to train their workers, the small and medium sized companies are not doing so well. They may need Government assistance and incentives to help them organise training programmes for their workers. The SDF should work with these companies to identify the problems they may have whether in terms of expertise or resources and help them to train their workers. How do we get the people to continue to work with the Government to prepare for the future? One way which must be done is to continue to win their trust and confidence. It is important that when we enjoy good surpluses we must be ready to share with them. We must help, particularly those who are older and the others who cannot adapt to the free market operations and as a result are left behind and earn lower incomes. We must do our best to help them adjust. I am happy to note that the Government is giving income tax rebate, rebates on service and conservancy and rental charges for HDB residents, implementing a second Share Ownership Top-up Scheme and a higher rate of interest for CPF Retirement and Special Accounts. By giving this generous reward to the people during the period of good economic growth, it will help to motivate the workers to commit themselves to hard work and excellence so that we can even be more successful. However, it must be clear that such incentives and rewards can only be possible in years of high growth and when we enjoy good surpluses. The people's role and responsibility is to continue to work hard, to upgrade and learn new skills and be more innovative and creative in their work. We must not assume that whatever we have done in the past, our strategies and formula will continue to work and be relevant for the future. We must be prepared to adjust for any unexpected turn in the future. We can learn from the experience of the developed countries. However, no two circumstances are the same and there will be shortcomings and misjudgment as we move on. It is important that whenever they occur, we must pull together to overcome them rather than to blame each other. We cannot also afford to become soft and complacent and take our success for granted. To do so will result in the loss of our competitiveness and this will affect our very survival in the future. Sir, before I end, I would like to turn to another issue, namely, the increase of the employers' CPF by 1.5 percentage points. The Minister has promised us in the last budget that if our economic growth continues to be good he will make the final 1.5% adjustment to the CPF contribution rates. Employers should not complain about the restoration. It is important that they understand that they cannot afford to lose the trust and confidence of their workers as it will be more difficult to persuade them to tighten their belts in the future. Workers have made significant contribution to the economic growth and should be entitled to a fair share of the fruits of economic growth. Our union leaders have been responsible and they have helped to maintain a good and harmonious labour industrial relations climate. They understand that wage increases must lag behind productivity increases and they have been moderate in their wage demand despite a very tight labour market. As a result, we now see for the first time productivity growth exceeding real wage growth. This resulted in the Unit Labour Cost Index falling and it contributed to the continued decline in the Unit Business Cost Index. Workers' contribution has helped to attract investments to Singapore despite strong competition for foreign investment from other countries. We need foreign investments because of the technology which they bring to Singapore and the markets they offer. Sir, on this note, I support the Government's financial policy.

Mr Speaker, Sir, last year, businessmen hailed the Budget as a Santa Claus Budget. This year, they have expressed disappointment over the Budget. There are three issues that caused this disappointment. One, their expectation of a cut in corporate tax. Two, the unexpected restoration of the 1.5% CPF contribution by employers. Three, the proposed income ceiling for SDF levy of $750 to $1,000. To the business community, it will affect business and especially coming at a time of the introduction of the GST was something they did not bargain for. With the benefit of hindsight, this year's Budget should have been presented in 1993, that is, last year, and last year's Budget should be presented this year. This is because this is GST year and companies, including small and medium-sized businesses, do not expect more increased business cost. Last year, we announced a 3% cut of the corporate tax from 30% to 27% but there was no GST. Last year again, there was no restoration of the CPF in spite of the good economic growth and, again, there was no GST. But in 1994, GST looms over the head and expectations are high for some relief to ease their cost. There is thus a psychological impasse. Yet, in retrospect, if we examine the 1993 Budget, there were indeed many GST inspired changes for 1994 that were, unfortunately, forgotten. To recap, some tax incentives and reliefs that will be given in 1994 from the 1993 Budget, include the cut in the personal income tax rate from 33% to 30%, an increase in personal relief of $1,000 from the present $2,000 to $3,000, reduced import duty for cars to offset the impact of the GST and similarly, reduced petrol and diesel taxes. There will also be a rebate of individual income tax granted in 1993 starting at $700 and dipping $50 per year until it reaches $500 the fifth year and it will stay at that level after that. All these were in addition to the rebates given to HDB dwellers. Even the landlords were given a one-off 25% tax rebate for business properties. In addition, the FY93 tax package includes seven tax breaks to encourage companies to invest abroad. I will not elaborate. But above all, in 1993, there was a 3% cut (to take effect this year) in the corporate tax, representing a goal to a 25% corporate tax rate. Moreover, the employer's CPF contribution will be increased by half a percentage point from July last year and a 1.5% for 1994 was already announced by the Government to allow business to make adjustments in anticipation of the GST. I think this point was missed by many businessmen. That is why I said, in the earlier part of my speech, the unexpected restoration of the 1.5% CPF contribution by employers. I think this restoration is a fair one because the unions have, in the past, taken a pay cut during the bad economic time and now, eight years later, with the stronger economic growth, a restoration in 1994 is justified. Also restoring the CPF by 1.5% will help workers cope with the GST. Thus, in summary, many goodies were already given in 1993 for 1994 and I said, with the benefit of hindsight, if we had presented all these this year, we could have overcome the psychological impact of the GST. Mr Speaker, Sir, timing is important. It is not just giving, but giving at the correct time and this is a good lesson for us. What we have already given yesterday is yesterday's goodies. And no amount of explanation is going to change that. Human psychology is very complex. We should remember this in the years to come when we have bigger and more complex issues to tackle. Thus, in future, we should use more prudence and thought in our handling of issues. The 1994 Budget has looked into areas that are very important for our future. Money is being pumped into developments and to upgrade the social infrastructure. Hence, the Government is putting $1 billion aside for the Cluster Development Fund to invest in selective strategic projects. And more funds are being pumped into education, civil works and, of course, health. We must, therefore, look at the Budget in this light. If we take the two Budgets together, that is, 1993 and 1994, a more comprehensive assessment of the economic position of Singapore will be better appreciated. Prudence, more thought and, again, timing are important when we introduce policies in 1994, especially when such policies affect the pockets of the individuals. The recent civil service pay revision and medical benefits is one issue I had in mind because it affects the pockets and expectations of the civil servants. In fact, this issue also brought together a point we must consider very carefully, ie, Government's relationship with unions. The first generation leaders, I was told, were conscious of the union's needs. We must learn from them. The symbiotic relationship ensured industrial peace. This relationship is unique and must not be taken for granted. It must be strengthened further as new leaderships take over the respective unions and political organisations. We must not let this relationship be weakened. This is not because the leaders do not know the value of such relationship but because each has different agenda and needs. This is where careful understanding and awareness of each other's needs should be uppermost on their minds in future working relationships. There must be more interaction between the two groups. The lack of consultation between the union and the Government on civil service benefits is a clear proof of a breakdown. A few unionists called me lamenting on the way the matter was handled. They felt taken for granted. They supported the call for pay cut during the recession. At least give them some face to face their members. If you think the Prime Minister's speech has corrected their disappointment, let me tell this House that it helped a bit, but the hurt is still there. Finally, getting people into politics to run this country was the focus of the last Parliament sitting. Pay was discussed at length. While a reasonable salary is needed, there are many other aspects to consider. We must, for example, emphasise and evolve good values of loyalty, commitment, dedication and a sense of duty to country. These must be internalised in us so that we can stand tall in a crisis. The young are usually imbued with idealism. Idealism is important because it stirs up the passion in us to want to do well, and to want to make changes for the betterment of our society. This idealism gets tempered, as they gain experiences in life. However, this idealism will surface often to pull us from the draws of materialism that make us sit up and think beyond money matters. I was not in this House during the last Parliament sitting when Senior Minister made his speech. I had to look after a Romanian Delegation visiting Parliament. I read his speech and I was particularly disturbed by his statement that if he were 32 years of age at this period, he too would hesitate to have gone into politics. This left an uneasy feeling within me. I wish he did not make that statement. His words are always so carefully chosen and carry so much weight and influence. I worry his statement would have dented the idealism of many young men and women who want to go into politics out of a sense of duty and commitment to the country. I believe S. Rajaratnam, who knows him better than many of us, that what was said was pure rhetoric. I support the motion.

( In Malay): Mr Speaker, every time a Budget is presented in Parliament, we hear voices of approval in some sectors, and expressions of disappointment in some other sectors. Where the ordinary people are concerned, the Budget this time is seen to be generous. The various incentives at least give them a breather in coping with the various effects of the Goods and Services Tax to be implemented soon. But for the small businessmen, they see little hope of making much profit in the coming years, or at least for this year. Indeed, no Budget can make everyone happy. Nevertheless, the man-in-the-street is grateful that the Government has been generous enough not to impose a heavy tax and, in fact, is distributing wealth especially to the poor and to the low-income group. However, Mr Speaker, this situation might not be for long. Changes in the world political arena will affect our economic development. Political conflicts, protectionist tendencies and an environment of ill-will and allegations by influential world media are among problems that will affect our economic development and trade. Yeltsin's waning influence, the re-emergence of Super 301, Japan's reluctance to open its doors to American goods, the linking of human rights to Government aid, etc, are also developments that give us concern. To cope with the problems that might arise, we need to be watchful and diversify our approach to economic expansion. In addition, we must continue to be prudent so as to prepare for the day when things might take a turn for the worse. For this purpose, we should reserve some of the rewards or goodies that we might want to distribute to our people, and give these to them in times of difficulty. The more we save up now, the easier it will be for them to bear the dire circumstances that might befall them in times of economic recession or economic downturn later on. We also have to be cautious in distributing these so-called goodies. It has to be done in an equitable manner, everyone enjoying an equal measure, as in the case of the CPF Share Ownership Top-Up Scheme and the 5% across-the-board tax rebate. This distribution should also not be seen as the Government moving towards welfarism, something we have strived to avoid. Special benefits should be meant only for the less well-off who really need them. Usually, handouts for those in difficulty will have a deeper impact and will be highly appreciated. But handouts for someone who is not in such dire straits will not be so appreciated and, in such a case, the goals behind the Government's well-intentioned measures will not be achieved. Mr Speaker, the recent salary revision for civil servants has brought them relief. In addition, a better working environment, closer superior-subordinate relations, better promotion prospects, etc, have made the civil service career attractive. This has raised its competitiveness against the private sector and is good for our economic development. The public service is the backbone of a Government. Our future national development will depend a lot on the efforts of the Ministry of Education in nurturing our future generation. The other Ministries and departments are of equal importance. Together, the civil service forms the supports of an effective government. As such, the Government has to continue to pay attention to departments having manpower problems and ensure that their requirements are met so that they can be more efficient and be able to provide the public with satisfactory service. At the same time, we must appreciate the work of those departments which have not been getting the attention they need but manage nonetheless to cope with a heavier workload. They have performed well under the circumstances. I hope, Mr Speaker, that the Government will continue to ensure that public officers find a civil service career something to be proud of and not feel unesteemed and unappreciated. I support the Budget presented by the Minister for Finance.

( In Mandarin): Mr Speaker, Sir, the focus of this year's Budget is on the implementation of GST. The Government has said that the implementation of GST is to change our tax structure so as to improve our competitiveness. This is only the perception of the Government. Whether it is a good measure or not, we cannot tell as yet. We must understand that there are many factors affecting competitiveness. GST is not necessarily the most effective measure, because many countries which are implementing GST do not seem to be competitive. I have spoken in this House that the implementation of GST would adversely affect the lower-income group, particularly those who are aged and not gainfully employed. Unless the Government can grant various rebates year after year to offset the effect of inflation brought about by the implementation of GST, these people will suffer very gravely. The implementation of GST will lead to price increases. This is beyond dispute. Even before the GST has been implemented, we are already experiencing price increases everywhere. Before we could see the benefits the GST is supposed to bring about, we are already witnessing its adverse effects. According to the estimates of the Government, its revenue from GST in the 1994 budget year will be $960 million. The Government has also stated that it would cost $1.2 billion for the rebates on conservancy and service charges, rentals, etc. Therefore, we can presume that if the Government fails to get revenue from other sources to cover its losses, it will increase other taxes, or increase the rate of GST or simply withdraw all the tax rebates given to the people. The implementation of GST this year is already a foregone conclusion. I can only hope the Government will keep-on reviewing this measure and monitor its adverse effect on the low-income group. Now, let me talk about the foreign workers' levy. Many people may not have realized that the introduction of foreign workers' levy has brought about the rise in prices of residential property. The Government holds the view that without the foreign workers' levy, there will be an influx of foreign workers coming to Singapore, resulting in the wages of the local workers being brought down. In fact, this is a specious argument. The reason is simple. In many industries which are in need of foreign workers, there are many jobs which our local workers are not willing to take up. In fact, the employment of foreign workers is subjected to a certain ratio. As such, their number is under control. Furthermore, the Government can also adopt some administrative measures to control the illegal employment of foreign workers. For example, we can ask employers every three months or half a year to submit a list of employees, stating who are locals and who are foreigners. In order to ensure that the local workers are not disadvantaged, the Government can, apart from fixing the ratio of foreign workers to local workers in each business establishment, also fix the minimum wages for our local workers. On the other hand, the NTUC and the relevant unions can also play an important role in controlling the number of foreign workers. If our local workers feel that their wages have been dampened by the influx of foreign workers, they can complain to the unions. All these measures will allay the Government's fears and worries about foreign workers. In fact, if we look deeper into the matter, we can see that the foreign workers' levy has not only indirectly exploited the foreign workers of their hard-earned money, but also affected the wages of our local workers because the foreign workers' levy increases the employers' cost, and the employers, in turn, cut down on the wages for the workers. Therefore, I urge the Government to review its policy on foreign workers' levy. It is a fact that we are facing a labour shortage. The foreign workers' levy is a burden to the employers. It triggers off a rise in property prices. So long as we have a budget surplus, and so long as we can effectively control the influx of foreign workers, I think it will be a wise move to abolish the foreign workers' levy. Now, let me talk about the Government's policy to encourage our people to invest and work overseas. I feel that the Government should particularly encourage our people to develop their business in our neighbouring countries such as Malaysia and Indonesia. In order to make it more convenient for our people to go to Malaysia, I feel that the Government should abolish the "three-quarter tank" rule, and at the same time allow Singaporeans who are holding Malaysian work permits to drive Malaysia-registered vehicles in Singapore. Singapore should try its best to avoid practising protectionism or to interfere with the consumption pattern of our people. We have been regarded as one of the four Little Dragons of Asia. We should have a mind which is as broad as a dragon, and not as narrow as a worm.

( In Mandarin): Mr Speaker, Sir, having heard Mr Cheo Chai Chen's speech, I cannot help wondering why Mr Cheo, as the Member for Nee Soon Central, can say that the foreign workers' levy is a form of exploitation on the hard-earned money of the foreigners. Is he a Member of the Singapore Parliament representing Nee Soon Central, or is he the Member of a foreign country? No doubt, he spoke with sincerity, but he should not use this kind of language, as it is not fair for him to use such language. The foreign workers' levy has already been debated many times in this House and he is harping again on the same tune in this year's Budget debate. I do not think we should waste our time on it. He said that various rebates should be given every year to offset the impact of GST. Likewise, this matter has already been debated thoroughly in this House. Everybody already knows what GST is all about and has endorsed it. I think we should let the GST be implemented for some time before we come back and discuss how much effect the GST has on the commodity prices in Singapore. As a matter of fact, I personally share the concern about rising prices. Of course some people who complain about the increase of 1.5% in the employer's CPF contribution may take this opportunity to raise their prices and blame it on the implementation of GST. This is not only my concern, but also the common concern of all my PAP colleagues in this House. In other words, the final cost will be passed on to the consumers. This is to be expected. However, since everybody is beginning to expose all the profiteering activities of the unscrupulous businessmen who are using the excuse of GST or the 1.5% increase in the employer's CPF contribution rate to jack up their prices, we should take some action against them, such as boycotting them. The whole society, the whole Parliament, have been talking about this matter. So I feel that Mr Cheo should also look at our financial policy from a very long-term point of view. I feel that the Minister for Finance should in his Annual Budget Statement share with the people of Singapore what we have done over the past 5-10 years in terms of budget policies so that the people will be able to see what the country has done for them over the past 5 to 10 years. They must look back into the past in order to review and look forward to the future. When we look at the Budget each year, we should not take it as just a reflection of the present situation of our society or the present state of economy, but rather we should look at it as a part in our long-term economic strategy. Just now, Mr Cheo talked about foreign workers' levy and the annual rebates to offset the impact of GST. I feel that he should cast his vision further when he comes to Parliament to debate on such issues. Sir, I have spoken to the Chief Executive Officer of a German company in Singapore. I asked him why he chose Singapore as his regional headquarters. He told me that Singapore is a very good and very safe country where all the facilities and infrastructure are excellent. That was why he has decided to make Singapore his regional headquarters for Asia and the Southeast-Asian region. However, he also mentioned to me that he was afraid that Singaporeans would not be able to adjust to a not-so-well-off environment outside Singapore. So he was worried that he would not be able to get suitable people to be sent out to cover the Asia-Pacific region. The point I wish to drive home is: Why is it that foreigners who invest in Singapore would find it difficult to get Singaporeans to work overseas for them? Is it because Singapore is too stable and our economy has been growing so well? It is a well known fact that our economy has been growing very well during the past 30 years. As a result, Singaporeans are over-indulged in the comfort and sense of security in Singapore and are therefore not prepared to go and fight it out outside Singapore. I hope that the Government can, to a certain extent, inject into the minds of the Singapore people the need to fight for improvement and survival overseas so as to encourage more Singaporeans to treat the ventures and work outside Singapore as one of the means of survival, and a form of livelihood. Yesterday, when I heard Mr Chiam See Tong's speech, I could not help feeling a sense of regret. He seemed to be saying that our Budget each year is either unfavourable to this quarter or unfavourable to another sector of our people, such as the lower-income group. There has never been a year when he identified himself with the Budget presented by the Finance Minister. If we say Singapore in the 60s was like an under-nourished child, then after 30 years of nurturing and care by the People's Action Party Government, the Singapore of today is no longer under-nourished. It has grown into a rugged, fit and strong youngster. So I feel that when Mr Chiam makes his criticism he should look at the achievements of Singapore under the PAP Government over the past 30 years. He should not be finding fault with the Budget and say this is no good, and that is no good. What he is doing is in fact simply creating some unnecessary worries, and such unnecessary worries are bad for health. So I hope that the next time Mr Chiam looks at the Budget, he will look at the achievements of Singapore over the past 30 years and give it an overall assessment. It is easy to criticise but difficult to praise. However, I believe Mr Chiam is a sincere person. He should be able to make a fair and sincere assessment on the achievements of the PAP Government in Singapore over the past 30 years. Yesterday, Mr Chiam See Tong said that this year's Budget favours the higher income group and that there is hardly any benefit for the lower-income group. He said that the 5% tax rebate is more to the advantage of the higher income group because it will not benefit the 76% of our people who are not required to pay any income tax. That is why I say he has not been fair in making this remark. Let me tell him, if we were to scatter all our surpluses from a helicopter in the air, he will also say this is not a fair distribution of our wealth. If Mr Chiam says that the way our Finance Minister redistributes the surpluses to our people is wrong, then he should tell us how we could redistribute our wealth to our people so that each and every Singapore citizen would be satisfied. If Mr Chiam cannot offer an alternative which is capable of satisfying each and every Singaporean, then I feel it is not necessary for him to come to this House every year to criticise the budget of the day. Sir, every year, when it comes to Budget time, we talk on very healthy matters, such as how much income tax reliefs, how much rebates should be given, how many months' service and conservancy charges the Government is to pay on behalf of the people, etc. These are all very healthy matters, unlike in other countries where the only matters they discuss are unemployment problems, inflation problems, racial disturbance, social unrest, etc. So I feel that the Opposition MPs should make good use of the Budget time in this House to actively discuss the economic and social guiding principles of Singapore. They should not single out any particular issue for attack.

( In Mandarin): Sir, with regard to Mr Choo's criticism on me, I feel that it is necessary for me to say a few words. Sir, when I talked about the foreign workers' levy just now, my main concern was for the benefit of the Singaporeans, and not just for the consideration of the foreign workers' benefit. But Mr Choo must realise that foreign workers have also contributed greatly to Singapore. We should not ignore or neglect their interest. From what I know, because of this foreign workers' levy implemented by the Government, many foreign workers have to pay the foreign workers' levy out of their own pockets. As a result, their salaries were cut by a lot. Does Mr Choo feel that the employers should look after the interest of their foreign workers or should they exploit these foreign workers? If he feels that the employers should exploit their foreign workers, then he should give this House the reason why he thinks so.

What Mr Cheo has just said is indeed very regrettable. Is he speaking for our Singapore workers or is he speaking for the foreign workers?

( In Mandarin): I am speaking for the Singapore citizens. But I am also saying a few words of justice for the foreign workers, on moral ground. If he does not agree with me, then he is entitled to his own opinion.

( In Mandarin): The Member said that he was standing on moral ground. He feels that foreign workers in Singapore are being exploited. Can he give us some concrete examples in this House to show us how Singapore has exploited the foreign workers?

( In Mandarin): Has Mr Choo heard carefully what I said just now? I said "indirect exploitation". Perhaps, the word "exploitation" which I used was too strong a word. But I have already explained earlier on. Because the Government has imposed foreign workers' levy, many employers have asked the foreign workers to pay their own foreign workers' levy. So their salaries are affected. Their take-home pay becomes lesser and lesser.

( In Mandarin): I would like to ask Mr Cheo this question. First, he said that the word "exploitation" which he used was perhaps too strong a term. But what I want from him are actual examples. Sir, he is unable to give us any single example on how Singapore is exploiting the foreign workers. Secondly, if he thinks that he is speaking for Singapore workers, then let me tell him this: If we allow foreign workers to work in Singapore without controlling their basic wages, then the wages of our Singaporean workers will be pulled down because of them. Singaporean workers will not be able to maintain their basic salary at a certain level. Does he think that by so doing it will be in the interest of the Singaporean workers? Please illustrate.

( In Mandarin): Sir, I have already mentioned just now that Singaporean workers' interest and wages will not be affected, if the Government handles the matter properly. Moreover, I have made a few suggestions on how to control these foreign workers. Perhaps, Mr Choo did not hear me just now.

( In Mandarin): Sir, let me ask Mr Cheo one question. If in a factory, you have some Singaporean workers and some foreign workers, and if we do not have the foreign workers' levy, then may I ask Mr Cheo who will the employer choose to employ? In other words, if a Singaporean worker applies for the job and asks for $800 a month, whereas a foreign applicant is only asking for $300 to $400, may I ask Mr Cheo who will the employer employ?

( In Mandarin): Sir, I think even a secondary school student can answer this question. I have already said just now that in the industries which need to employ foreign workers, there are many jobs which our Singaporean workers do not want to take up. Furthermore, when we approve the import of foreign workers, we are already adopting a ratio system. There should not be any problem here.

( In Mandarin): Sir, I want to ask Mr Cheo this question. Which industry is relying 100% on foreign workers?

Mr Speaker, can I add something to the debate?

Okay, but make it short.

( In Mandarin): Sir, the foreign workers' levy itself is already an exploitation, so is the payroll tax. Otherwise the money can go to the workers. The $450 levy can go to the construction workers, and for the domestic maids, it is $300. I am not speaking for the foreign workers. But if you ask whether it is exploitation or not, and if the Government does not take away this amount of money in the form of a levy, then the employers themselves can give a bit more wages to the workers. So this is exploitation by the Government! No doubt about it!

Mr Speaker Sir, I absolutely disagree with him.

Mr Speaker, Sir, they have not answered my question. With regard to Mr Low Thia Khiang's remark, I would like to ask him this: If the Government does not impose the foreign workers' levy, to whose pocket will this money go? Would it not go back to the pocket of the employers? How can this benefit the foreign workers? If it is in the form of the foreign workers' levy, then the Government collects the money, and Singaporeans will benefit from it. This is a very important point.

( In Mandarin): Mr Speaker, Sir, I do not deny the possibility of the money going back to the employers. But, if you are talking about exploitation, then from the workers' point of view, it is indeed an exploitation, because the money is taken away by the Government. Otherwise the employers can pay the workers more. Mr Choo Wee Khiang rose ---

I will just allow one last remark from you, because I think we are getting nowhere. The proper place to raise this matter will be the Committee of Supply when we debate the Ministry of Labour's budget.

( In Mandarin): Mr Speaker, Sir, with regard to what Mr Cheo and Mr Low have said, I have a few observations to make. Just now, both of them mentioned about exploitation. I would like to ask them: Who is, in fact, exploiting who? Secondly, if the $450 foreign workers' levy is abolished, then can they say for sure that all the Singapore employers who employ foreign workers will give the $450 to the workers? Thirdly, without the foreign workers' levy, the interest of Singaporean workers will not be protected. The basic salary that they are asking for will not be protected. Therefore, the exploitation is not on Singaporean workers nor is it on foreign workers. We recognise and understand the contribution of the foreign workers in Singapore. We concur with them on that. However, maintaining a basic wage level of our Singaporean workers is our major premise. It is only when they can have a basic salary, can our Singaporean workers live a better life, a higher standard of living. Dr John Chen Seow Phun rose ---

Dr Chen, we can have more of this in the Committee of Supply. Dr Toh.

Mr Speaker, that verbal exchange has left me speechless. The 1994 Budget is a good one. The problem with good budgets is that the next one is expected to be better. Good budgets are also addictive. You need to give more the next time round in order to gratify. Anything less will lead to a severe withdrawal. Hence, the business community's disappointment when a self-initiated prophecy of a further cut in the corporate tax additional to last year's 3% did not materialise. Like other recent budgets, this year's will also end up with a surplus. This appears to be the Government's policy which is to meet all expenditure, operating and developmental, with our operating revenue. Our revenue is mainly from taxes, fees and statutory charges. The billions of dollars from investment returns and other capital receipts have been left untouched to swell our ever growing reserves. Our surpluses and, therefore, our wealth come mainly from our citizens through taxation. This is why some, including Opposition MPs, have questioned the necessity for continuing this accumulation of hefty reserves and have advocated that more be returned to the people. Let me remind them that, had it not been for the Government's foresight, we would have landed in debt during the recession and relied on loans to fuel our economic expansion. As it was, the Government could fire the economy again with our own funds by going into infrastructural development. Singapore also depends entirely on imports for our existence, from raw materials to food, to medicine and energy. Our reserves can only buy us six months of these. With a growing population, increasing consumption due to rising standards of living, imported inflation and an almost fully developed infrastructure, commonsense dictates that we should have more reserves and not less. The Government of the PAP has been doing just that. Sir, the acronym PAP has stood for different things to different people. To some, it is pay-and-pay; for me, it spells prudence-and-pragmatism. Apart from having their aspirations unfulfilled, the businessmen have also felt that the 3% in corporate tax rebate granted last year was insufficient to offset the cost of implementing the GST. This was a common grouse at the Feedback Unit's dialogue with the business community. Rightly, some have complained that it only favoured those who are already making profits with more profits, while those with little could end up with losses after spending money on starting up the GST. One member complained that he had to spend thousands of dollars to upgrade the computers and the weighing scales in his chain of retail food outlets. As the GST was an on-going thing, additional staff had also to be employed to keep meticulous records of receipting and invoicing. All were unhappy that extra costs had to be incurred on a tax reform they never bargained for and in the end, acted as surrogate tax collectors for the Government. In view of this strong reaction, I would like to suggest that the Government consider a once-only tax rebate for businesses to offset the cost of GST implementation. Fears of profiteering and inflation were also expressed. The recent price increases by some Government and statutory bodies had not helped matters. Coming on the eve of the GST, some felt that it could give wrong signals to retailers and hawkers, some of whom had already been queried for raising prices. They felt that this was a double standard. As the GST is anticipated to bring with it some teething problems, I would like to suggest that a national task force be set up to monitor prices and study the impact of the GST on consumption patterns. CASE has already started doing some of these. The other suggestion is that the Government and related bodies should withhold further price increases for at least one or two years. One other area of discontent with the business community is the restoration of the 1.5% CPF by employers. Their reaction to this has been very strong as they felt that this would increase costs and reduce competitiveness. But the trade unions' reaction to this reaction has also been very strong. Many workers are still sore that their total CPF has been cut from 50% to 40% and that it has taken such a long time since the recession for the full restoration of this cut. Sir, I am pleased that the Government has gone ahead with this full restoration. We have just heard Dr Tan Cheng Bock speak about the close bond and trust between our first-generation leaders and the trade unions. This closeness is important to Singapore. To delay the restoration any further would be to break faith with our labour force and put the Government's and the labour MPs' credibility to question. But the employers' worries about rising costs are also genuine as workers have enjoyed larger salary increments in the interim years and the 1.5% will now be on a higher base. I hope that both parties will bear these in mind in the next round of wage negotiations. The same arguments have also been raised over the reduction in property tax for commercial properties. Any savings would be eroded by the capital appreciation and upward valuation on properties. The cost of doing business would therefore not come down much due to this. But, Sir, the Government has also been pro-business in many areas, especially to the securities industry and those dealing in trading of some precious metals. Generous extensions of the tax relief periods and a shortening of time limit for issue of assessments have also been granted. It is, however, Sir, in the additional reliefs to the lower income groups for which this Budget will be best remembered. Despite the Minister's reassurance that last year's package to offset the effects of GST is more than enough, further help has been given in the form of waivers of HDB rentals and service and conservancy charges. Like Mr Cheo Chai Chen, I am also concerned whether the poor will be able to meet this increased cost due to consumption tax when the five-year grace period of a fixed 3% GST runs out. Hopefully by then, their lot will improve and they will get out of this poverty trap. Otherwise subsidies will have to become institutionalised. Another way out is to give more grants to accelerate their upward social mobility through better and higher education. Mr Speaker, Sir, education, or rather the lack of it, in our workers is worrying. The Minister has highlighted that our workers are less educated than their counterparts in the other NIEs, let alone the OECD countries. We should therefore not only upgrade the skills of our present labour force but enhance the general education of our next generation of workers by making schooling up to secondary level compulsory. Employers should also not begrudge the increase in contributions to the Skills Development Fund as it is an investment for the future. On our development expenditure, the Government's policy has been to invest in infrastructure that will have long term benefits, particularly in education. I welcome this as a good education will ensure that all Singaporeans, under our meritocracy system, can start at the same starting point and succeed or fail on the basis of ability and hard work. But, Mr Speaker, Sir, there are some who cannot even make it to the starting point. These are the people who are handicapped by physically disabling genetic diseases they never chose to inherit or who are born with a lower than normal IQ that makes them less than able to perform even the perfunctory. The Edusave Endowment Fund already has $1 billion and many more millions to come to enhance the learning capacity of our normal children. The financial year 1994 estimates show that only a paltry $115,300 will be spent on development of the Special Education Schools Programme. This is nearly a 90% drop from financial year 1993 expenditure. Surely some money from the Edusave Endowment Fund can be used for this group of people or perhaps they could have a separate endowment fund of their own. Sir, one other group has not been neglected in this, a people's budget - the pensioners. Pensioners must now feel reassured that their interests will be protected by the proposed pension fund, especially after the shock announcement that medical benefits to which they were entitled were at one time threatened with replacement by a system of co-payment for medical services. I would like to suggest that the widows and dependent children should continue to enjoy the same medical benefits as if their spouse and father were still alive until the children come of age. Finally, Sir, I would like to deal with some general aspects of Singapore's economy. We had a robust growth last year and experienced actual growth in productivity of 6.4%. We are also told that investment capital grew by $3.9 billion. I wonder how much of this is due to infusion of capital. If largely so, then we will do well to heed MIT Business School Prof. Alwyn Young's warning on the dangers of productivity growth spawned by continuous capital infusion. Already our capital output ratio has been considered high compared to Hong Kong's and our total factor productivity low. Our annual expenditure is adequately covered by revenue through taxes. We have increased our surplus and our wealth through taxation. Can we continue to become richer by dipping deeper into our citizens' pockets through more taxes, levies and enforced savings? The answer is obvious. Sir, I end by giving my support to the Finance Minister's 1994 Budget.

Mr Speaker, Sir, I give my full support to the Budget Statement presented by the Minister for Finance. In politics, Sir, the best intentioned and well meaning policy can sometimes go awry when implemented. If the public perception of a certain policy is such, it takes a great deal of persuasion to convince them otherwise. The implementation of Telecom's time-based charging is one such example. I hope our memory is not short-lived. We can only hope that the implementation of GST will not go the same route as the Telecom's time-based charging. I give my full support to the implementation of GST. It is a necessary move for our long-term viability and competitiveness. This shift from direct to indirect taxation is the most far-reaching change in our tax structure since we first started collecting tax. Although the Government is confident of the outcome, despite the ongoing campaign, I have this nagging anxiety that we may not have done enough. The people still see the implementation of GST as a revenue-generating exercise which is wholly unnecessary in view of the huge Budget surpluses which we have accumulated every year. Their main fear is that the price increases will overwhelm the financial offsets which they have been given and this will affect their lives and their standard of living. Hence, their biggest fear on the implementation of GST is high inflation and profiteering and they begin to see this happening with their daily cup of coffee at the local coffeeshops and hawker centres. They see the Government's threat on the use of the Price Control Act as paying lip-service. In fact, they see the Government telling them to eat or buy at some other place if they feel that a certain shopowner is profiteering. Moreover, the Price Control Act was only amended in 1973, 21 years ago, and traders and businesses are not convinced that the Government will activate the Price Control Act. Did the Government, after all, not bother to review the Act ahead of GST? The penalty in the Price Control Act, set some 20 years ago, is, in my mind, definitely outdated and not sufficiently intimidating. Therefore, the perception is that the Government is not serious in its threat on the use of the Price Control Act. It is not too late, however. The Act enables the Minister to appoint a Price Controller and other deputies whose authority and responsibility is to investigate cases of profiteering. I, therefore, urge the Government to act on the enabling provisions of the Price Control Act and do something about it now. If they do so, the Government will send a clear signal to businesses and consumers of its intention to use the Price Control Act in the event of profiteering as a result of the GST implementation. To ensure a successful implementation of GST, the Government must also act against price fixing. Presently, business groups are permitted to form a cartel and set prices. Two well-known examples which come to mind are the Coffeeshop Owners' Association and the airlines. The recent 10 cents increase in a cup of coffee is an example which has caused a lot of concern to Singaporeans. The other example is the concerted effort by a number of major airlines operating in Singapore in setting fares, in the guise of what they call orderly marketing. This has been going on for a number of years. But, Sir, if you were to recall, I brought up this matter in this Chamber on several occasions. I said then, and I say it again, that price fixing, or so-called orderly marketing, works against the interest of the consumer and this cannot be condoned or allowed. Our market is relatively small. When our coffeeshops implement an increase of 10 cents in the price of a cup of coffee, the consumer's choice is narrowed considerably. How can the Government persuade the consumers to have a cup of coffee at some cheaper location when, in fact, there is no cheaper location. In a market which acts against price fixing, the consumers have a wider choice as the more profitable coffeeshops may not see the need to increase their prices as part of the marketing mix. In other words, with high volume and enough profitability, they keep their prices low. In fact, they can generate even more volume. The airline industry, and this is usually led by our national airline, Singapore Airlines, acts against or blacklist travel agents for giving discounts or prevents Singapore travellers from travelling when they purchase less expensive tickets from outside Singapore. This is wholly unsatisfactory. If this kind of action is not detrimental to the interest of travelling Singaporeans, what is detrimental to our consumers? Sad to say, despite my protestations, the Government has seen fit to allow price-fixing activities to continue. As we promote free market principles, we must make a start and take action against price fixing practices. The Government will go another step forward in gaining acceptance of free market policies and, I believe, a smoother implementation of GST if consumers are more than convinced that their rights are protected. In implementing GST, we should not leave too much to chance. It is too important an issue and the Government must not be just doing the right thing, the Government must be seen to be doing the right thing. Although the financial offsets announced at last year's Budget and the additional rebates in rental and service and conservancy charges are generous, these could be easily negated by a one-off increase in inflation of 5% to 6%, which adds up to a total inflation rate approaching 9%. This is possible. Our current inflation rate is about less than 3%, add another 6%, you can reach 9%. Hence, it is better to err on the side of prudence and be even more generous where possible. Over-spending by government is worth every cent we give out, if we can gain widespread acceptance for GST. We should not bolt the stable door after the horse has bolted. Although I welcome the 5% one-off rebate in tax, the Government has missed a golden opportunity of giving an even higher rebate to mitigate the GST and also to link this 5% one-off rebate to economic performance. Despite the fact that the economy grew by nearly 10% and generated a surplus of some $5.5 billion, the 5% rebate is unchanging and this has been going on for the last few years. As a result, there is a growing perception that this 5% is actually structural. In fact, everybody accepts 5%, no more and no less. Mr Speaker, Sir, I turn now to the restoration of the 1.5% in the CPF. I have been quoted in the media that I would have been more comfortable if this increase is spread over another two years. Sir, no matter how strong our economic growth is, businesses always need time to adjust. In fact, with high growth in certain sectors, businesses in these sectors have naturally attracted higher wages, and wage increases in these businesses are actually more than 1.5%. But not all sectors of businesses perform similarly, and in a free market, wages will adjust to accommodate these and, in my mind, they will adjust more smoothly than if you impose structural changes. As CPF contributions are structural, I am concerned about the point advanced by some of my colleagues for a further 5% increase in CPF. The main argument seems to be that, in the recession of 1985, workers sacrificed for the benefit of businesses. My colleagues may recall that in 1985, our unit production cost was out of line with that of the other NIEs. We were just too expensive. This, together with high statutory costs, was the main reason for the recession. But very fortunately for us then, the world was not in recession and we could recover within two years just by trimming our cost structure. I am all for high wages, but I would rather prefer to leave it to the market place to decide than to build these high wages as part of our structure as it is in the CPF. By advancing the point continually that workers have sacrificed for the benefit of business organisations, such proponents forget the nexus between healthy businesses and employment. Without businesses, there will be no need for workers, much less high pay. We should not forget that businesses can relocate to a more viable and conducive environment, but not all unemployed Singaporeans can. When I look at a newly emerging market, like Vietnam, with low wages and a relatively well-educated population, and a large domestic market to boot, each time I visit the country, I feel that we have a hard enough time trying to keep ahead. Hence, we should not increase the expectations of our workforce unnecessarily. We should remind ourselves that we compete in an international arena where the business world increasingly finds little or no boundaries.

( In Mandarin): Mr Speaker, Sir, in last year's debate on the Budget, I criticised the Government for privatising social services and for blaming on the market forces the increase in prices. The Government has now admitted that the operation of market forces will hit harder the lower income group and the poor. The Government has also admitted that Government will provide the necessary social infrastructure services, education subsidies and health subsidies. All this open confession is gratifying. How the Government will be able to implement these promises and commitments, let us wait and see. First of all, let me discuss this Budget from the national economic point of view. In 1992, the Government forecast that the growth of 1993 would be 6% to 7%. Now we have gone beyond the forecast and attained 9.9% growth last year. Because the Government is encouraging people to buy shares, the turnover in the stock market has grown many times and this is one of the main reasons why the growth has gone beyond expectation. Therefore, many Singaporeans who buy shares have also made contributions to the economy of Singapore. My question is this: is this kind of growth healthy? The Minister for Finance said that the growth is across the board. It has done well in various sectors. But the overall GDP growth in 1993 had increased by 12.5% and the main sectors that had promoted this growth are finance and commercial services, public utilities and manufacturing sectors which grew at 20.4%, 15.6% and 10.9%, respectively. The manufacturing sector, particularly the electronics industry, grew because of the opening up of the American market. However, because of intense competition outside, the prices have gone down and the profits have also gone down. So now, even with the unexpected growth that has been achieved, I do not know whether the medium and small-sized enterprises would benefit by this or not. Now, with the implementation of GST, a lot of companies have to increase their cost on the software and manpower for administration of the GST. Although the Government says that the compliance cost is only 1.5% of cost of business, the estimate by the business people is that they need about $20,000 to $100,000 for the implementation of the GST. Even assuming that the Government's estimate is correct, that it is only 1.5%, coupled with the raising of the salary ceiling from $750 to $1,000 for SDF contribution and the restoration of another 1.5% of employer's CPF contribution, will that not affect adversely our competitiveness internationally? Will this not go against the very spirit of GST which is supposed to improve our competitiveness? If our local businessmen cannot compete internationally and if the economic forecasts are not as good as expected, then the wages of the workers will be affected, bonus will be affected, the price of goods would increase due to the increases in the cost of doing business. Then the wage earners will be doubly hit. What is even more puzzling is that the Government says the objective of GST is to enable our businessmen to be more competitive and has promised to reduce the company tax to 25%. Now, unexpectedly, the cost of business has been increased without the company tax being reduced. Is it because the Government expects that the companies will make a handsome profit this year and expects to collect more tax? Or when companies have difficulty in competing in the international market, the Government will then increase the rate of GST correspondingly if company tax is needed to be reduced further? That is the usual tactic adopted by the Government to induce you into the trap and later on they will squeeze you. Now, Mr Speaker, Sir, let me deal with some policies of the Government in this Budget. Singaporeans should remember that this is the first budget after the implementation of the GST. On the surface, the people seem to benefit with things like the increase of CPF contribution by 1.5%, more rebates, but those people with an income of $1,000 will only benefit by $15 a month. The Government will pay for the rentals and the service and conservancy charges for HDB flat dwellers so that they can save some money. All this, as the Government says, will enable the people and the workers to have more money in their pockets. It is because they have more money to spend, therefore they will pay more GST. Singaporeans should remember that with GST, every day people are paying tax. The Government, after taxing the people a lot of money, and paying back only a little bit, expects the people to be grateful. On the other hand, the Government also said that they wanted the people to share the wealth of the country. The floating of the Telecom shares had gone beyond expectation. So the people put in $500 in their CPF, the Government paid them $200. This year, when they put in $750, they will get $300. For the next financial year, if the people put in $1,000, they should expect to get $500. In order to share the wealth of the Government, the people must have the money first. So this wealth sharing scheme of enabling people to buy the shares of the Government-owned companies, which the Government remains the majority shareholder, means that these companies will be able to absorb a lot of money from the people and all the money will indirectly go to the Government, being the biggest shareholder, and it will be controlled by the Government. In this Budget, the Government is also spending a lot of money for upgrading of HDB flats. The maintenance and repairs of HDB flats were originally done by the HDB. But because the flats are getting older, they have become more expensive to maintain. So they have become a burden on the Government. Accordingly, the Government used the pretext of allowing the people to participate in the management of housing estates and pushed the heavy burden of maintenance to the town councils. At the beginning, some subsidies were given to the town councils to enable them to change the water tanks and to carry out all kinds of repairs and renovations. In the Budget, the Government has announced that from this year, subsidies for cyclical works will not be granted to the town councils. In this way, the Government will be able to save $100 million, and residents in HDB estates will have to bear the cost of all the cyclical repairs and renovations. If the town councils are not able to bear the cost, and are forced to increase the service and conservancy charges, who will be blamed? The Government or the town councils? To make things worse, the Government publicised extensively that it is going to upgrade the flats, in an attempt to make the people grateful to the Government, thereby attaining the political purpose of the PAP. But actually, the people have been paying more and more S&C charges to meet the cost of repainting of the flats and the Government has saved a lot of money. So when the Government uses the amount saved to pay for the upgrading of flats, it is only fair for them to do so. Mr Speaker, Sir, as it appears, the wage earners seem to be gaining a lot from this first budget after the implementation of GST, but in fact they are like the bamboo which has a thick outfit but actually hollow inside. Originally, it was thought that once the GST is implemented, the Government would help the businessmen lighten their tax burden in order to further stimulate the economic growth, with the hope that the industrial and commercial sector would make better profits, thereby further increasing the workers' wages to enable the people of Singapore to cope with price increases. Now the reaction from the business community is that the cost of doing business has been increased and there is no compensation from the Government. In order to meet the cost increase resulting from the payment of GST, they will have to increase the prices, but the workers' wage increase simply cannot catch up with the price increase. So will all these not add on to the burden of the cost of living of the people of Singapore?

Mr Speaker, Sir, we had a mini debate earlier on foreign workers' levy, but there is one very important point which was not touched on, ie, if we allow companies to have access to cheap labour, then there will be no incentive for companies to upgrade the skills of the workers to go for higher value-added activities. And at the end ---

Mr Speaker, Sir, can I seek clarification? Will you allow me to clarify the point?

Let him finish with his point. Please continue, Dr Chen.

Earlier I was trying to add a last point but Mr Speaker stopped me. Therefore, I am bringing it up now. Sir, as our neighbouring countries develop, sooner or later, we will find that the foreign workers will go back to their home countries. And sooner or later, the Singapore companies which employ these low-skilled labourers, including Singaporeans, will have to shut down. When that happens, Singaporeans will be adversely affected. This is a very important point which the Opposition Members have failed to see and which has a very significant impact on our workers if we continue to allow our companies to have access to cheap labour without imposing the foreign workers' levy. Sir, Mr Cheo Chai Chen, Dr Toh Keng Kiat and also Mr Low Thia Khiang touched on the fear of GST. I would like to put their fear in the right perspective. I believe that the Singapore Government has introduced GST not because we need GST now. In fact, if possible, we would not like to have GST at all. That can only happen when our economy continues to grow and when we have surpluses year after year. And that is why the Government has fixed the GST rate at 3%, the lowest possible, and promised that for the next five years, it will not be increased. The most important question is: how do we get the surpluses? We can only promote economic growth by capital investment. And to encourage investment, we need to lower corporate tax and income tax. Countries all over the world are doing this. So if we do not, then we will be losing investments and jobs. And when there is no economic growth, we will not be able to fulfil our budget obligations. Sir, Mr Cheo mentioned that GST is expected to collect $960 million and the Government is giving out $1.2 billion. So there is a deficit here. In the future, if it is not enough, the Government will have to increase the GST rate. But the point really is that if our lowering of corporate tax works, we will continue to have surpluses and his fear will be addressed. But we need to put GST in place because we will never know how low we should reduce our corporate tax, as it is subject to world competition. If we do not put the GST system in place now, when we have to reduce our corporate tax to stay competitive and we run into budget deficits, then we will have problems. By that time, if we try to implement the GST, we will find that it will be even more painful. It will not be easy because the system is a very complicated one. Mr Low Thia Khiang says that the Government did not give enough to Singaporeans to compensate for GST. But if he were to scrutinise the figures, in last year's budget, the GST impact is fully offset. This year, in addition to those offsets, more will be given out. Mr Speaker, Sir, in October 1991, I invited the Senior Minister to be the Guest-of-Honour at the 45th Anniversary Dinner of the Singapore Port Workers' Union. He agreed and asked me to list three issues which workers were concerned about for him to consider addressing them in his speech at the dinner. One of the issues I listed was that workers were increasingly perceiving the Government to be pro-business. At the dinner, the Senior Minister started his speech by asking a number of rhetorical questions. He asked, and I quote: 'What for? What is the purpose of all this effort and activity, education, campaigns to improve our people, to improve our lives? Can it be to get more businesses of Americans, Japanese, Britishers, Germans, Frenchmen, Italians to make more money? Is it not to improve our lives?' He went on to stress the importance of education, skills upgrading and productivity in a rapidly changing world where science and technology dictate the way we do things. He concluded his speech by telling the port workers, "the Government is pro-you; it is pro-workers; it is pro-your children." Sir, this Budget was described by many as pro-workers because of the generous rebates the Finance Minister dishes out. But I say that every budget is pro-workers. Last year's budget was hailed by many as pro-business. But what for? Was it not for the workers who will benefit from a more competitive economy? In fact, are not all Government policies pro-workers, be they COE, GST or revised civil servants' medical benefits? To me, the main message of this year's Budget is to reaffirm that Government will share the fruits with our people when the country does well. Singaporeans must view the generous rebates in the right perspective. The rebates can cut both ways. They can either give Singaporeans more incentives to work harder, to support better economic growth or to cause them to treat such payments as something they are entitled to year after year, regardless of their efforts. Minister Lim Hng Kiang told me that when S&C rebates were given in 1992 for the first time, he received a number of letters thanking the Government for its generosity. But last year, not a single letter of appreciation has he received. I do not know whether Singaporeans have now taken the rebates for granted. But I do hope they will be encouraged by the rebates to do better year after year. Sir, the Government has announced in January its intention to raise the CPF Minimum Sum from $34,600 to $80,000. The Prime Minister has said then that the Ministry of Labour was working on the details of the Scheme. May I ask the Finance Minister when these details will be announced because workers are concerned how the implementation of the scheme would affect them. Sir, the purpose of the CPF Minimum Sum is to ensure that retirees will have at least a certain monthly income to see them through their old age. I am concerned, however, that there will be some workers who will not have enough CPF savings to make up the required Minimum Sum. The CPF Share Ownership Top-Up Scheme is one way to help them. Through the buying of shares at discounted prices of Government-owned companies or statutory boards which are privatised, workers can benefit from the appreciation of value of such shares. But, Sir, we need to do more to help as many workers as possible to try to reach the Minimum Sum target. CPF Share Ownership Top-Up Scheme benefits all Singaporeans. As such, the benefits cannot be large. So it cannot help those who are in need very much. May I ask the Minister whether he would think of a scheme, such as a CPF Minimum Sum Top-Up Scheme, to help deserving Singaporeans to meet the Minimum Sum target. For example, if a worker continues to work after 55, the Government can consider topping up his CPF based on the amount which the worker contributes to his CPF. The principle is not unlike the Share Ownership Top-Up Scheme. But I think it will be more helpful. Will the Minister care to comment on this proposal? Finally, Sir, I also wish to speak for the pensioners. I commend the Government for its intention to set up a pension fund. This will make sure that future generations will not be saddled with the burden of providing for the pensioners. Our pensioners have served our country well. We have laid the foundation for the next generation to build on to achieve greater economic success. But every time when civil servants receive their year-end bonus, pensioners do not have a share. Sir, pensioners may not have directly contributed to the present economic growth, but they have certainly contributed indirectly. May I therefore ask the Minister to consider giving year-end bonuses to pensioners in the future? They may not get as much as the serving civil servants, but at least they should have a share of the nation's economic fruits. With this, Sir, I support the Budget. 3.18 pm

Mr Speaker, Sir, I rise to support the Budget presented by the Minister for Finance. Sir, this year, I wish to focus my views on the high costs of land transportation in Singapore, in particular, the Certificates of Entitlement (COEs). Before that, Sir, I must say that the Budget, far from a disappointing one, is one very appropriate for the economy. After a 9.9% growth in 1993 and with prospects of a growth rate of 7% or more in 1994, it is difficult to see how any responsible Minister for Finance could come up with a highly stimulative budget. Sir, have we forgotten the lessons of the 1970s and the curse and ravages of inflation? Sir, the wealth of Singaporeans, by and large, lies in the values of their homes and shares quoted on the Stock Exchange of Singapore. With the high appreciation in values of these two assets last year, the pressure on inflation which could be caused by the wealth impact is very real. The wealth impact is the tendency of people to spend more, especially in conspicuous consumption, as their overall wealth increases. True, the Minister has given much in the way of rebates and concessions to the people. These mostly benefit the poorer segment of our population living in HDB estates. This is rightly so, especially since it is an economic fact that higher asset values will sooner or later be reflected in higher prices of goods and services. Further, the policy to give more personal responsibility to the people through more choices but at market prices will also increase the cost of living. Already, fixing various Government services and fees such as medical services, independent school fees, wet market, hawker stall and shophouse rentals, COEs, etc., at or closer to market price levels, has affected the cost of living in more than one way. The implementation of GST next month will also add to the pressure for price increases. Such a policy of pricing Government services at market levels is certainly not wrong for the economy, because for the economy as a whole, it will certainly help to ensure that misallocation of scarce resources will be minimised. The majority of Singaporeans, I believe, can afford it because of higher affluence and lower tax burden. However, Sir, there is a minority, and a significant minority, who cannot keep up with such increases. They do not have the ability to earn enough to afford the higher prices. The lower tax burden is of little use to them because they do not pay taxes, or pay very little taxes, in the first place. True, the rebates in HDB rentals and service and conservancy charges will benefit them. So will schemes such as Medifund and Edusave. But are they adequate? Also, what about those not living in HDB flats? What about the handicapped whose costs of living in Singapore are higher because of their handicaps? So, instead of tackling this problem on a piecemeal basis, why not consider a general solution? Why not consider the concept of a general negative income tax to be given to these people? The concept is not new. Western nations such as the United States of America use food stamps as one particular way of providing such people with negative income tax. Instead of food stamps, I see no reason why we could not use their CPF accounts to be credited with negative income taxes. By way of an exhaustive means test, the CPF accounts of these people could be credited with funds for specific expenditure such as school fees, medical fees, HDB rentals, service and conservancy charges, and other approved items. We have shown the world how good we are at honouring and rewarding our best and brightest. It has resulted in a Singaporean society striving for excellence. Let us now show that we can be equally good at caring for our poor and our less fortunate. It will give us the communitarian values needed to glue together our society of excellence. Athens and Sparta alone are not sufficient to withstand the test of time. A heart is very much needed. The time for implementing a general payment of negative income tax to the poorer and less fortunate in our society is here. The system will also give them greater responsibility as they would decide how much they wish to spend on each item. Or even none at all. I hope the Minister will seriously give some thought to this idea. Let me now turn to the issue of land transport and COEs. Sir, I would like to bring to your attention the size of the operating revenue the Government received from land transportation in 1993. The total was $2.955 billion, of which the vehicle quota premium, or commonly known as COE fees, was about $1 billion. If 50% of the excise and import duties from petroleum products, which is approximately $595 million, were incurred by motorists, and therefore giving us a figure of $297 million, if we add this figure, we would have a grand total of $3.252 billion of taxes and fees collected from motorists in 1993. This works out to be 34.2% of the total operating expenditure of the Government of $9.5 billion. In other words, Sir, motorists in Singapore are financing more than one-third of the Government's total operating expenditure, excluding expenditure on development. I ask this question: Is this a fair burden on the Singaporean motorists? The irony of it all is while the general public complains about the GST of 3%, the biggest single consumption tax paid willingly by the public is the COE fees. In 1993, it was $1 billion. In 1994, the Government has estimated this consumption tax to be about $1.03 billion. On the other hand, the total estimated sum to be collected from GST is only $959 million. Why do I say that this is a consumption tax willingly paid by the public, or rather by the owners of motor vehicles? It is simple. The Government determines a quota of available vehicles. If the demand is more than the quota amount, the total number of available vehicles is sold, regardless of the level of COE fees. Sir, I would like to repeat this point. Under the system, the cars, lorries, vans, etc. are sold regardless of whether the COE prices are $60,000 or $1,000. Put it in another way, it means that if members of the vehicle-owning public cooperate with each other, the COE prices could be much lower. The concept is simple. Sir, let me give you an example of such a method of cooperation. I stress it is only one example. There could be more. First, let us reduce the cut-throat competition by reducing the number of bidders at each monthly tender. Let everybody agree voluntarily to bid only in the month corresponding to the last digit of their identity card numbers. This means that those with IC number ending in "1" should bid only in January; those ending in "2" in February and so on, until those ending in "0" bidding in October. November and December would be reserved for companies; November for those with business registration numbers ending in "1-5" and December "6-0". Next, let us also agree that we bid at a maximum price of, say, only $20,000, but always trying to go as low as possible. Then, to prevent speculation, let us all agree that we should not purchase any second-hand car less than one year old. As I said earlier, the concept is simple. But the cooperation? That, Sir, is the rub. The idea will work only if everybody cooperates and agrees to play by these guidelines.

What about counter-measures from the Government?

It is coming. Do not worry. The system may even withstand a limited number of abuses, but not if the numbers are large. The question is whether such an idea will actually work in practice. Alas, I must say that I doubt it very much, because Singaporeans, with their kiasuism, afraid of losing out and striving to be one up on their neighbours, will kill any idea which demands voluntary restraint and cooperation. I may be cynical, Sir, but this is certainly one area where I hope to be proven wrong. Sir, why then do I test your patience and this House's patience by bringing up such an impractical idea? Certainly not because it is practical, but more to show that the high COE prices are not the result of the current COE bidding system, but rather the dog-eat-dog attitude of Singaporean bidders. The final choice of paying the consumption tax for the COEs and the amount to be paid lies in their hands, not with the Government nor with the motor car dealers. If the prices are too high, consumers must be prepared to use their ultimate weapon, which is, do not buy. Not owning a car in Singapore will not kill anybody. Sir, I would like to also propose that even as I said that the high COE prices are the result of the dog-eat-dog attitude of the car-owning public, I feel that the Government has a duty to ensure that the prices of COEs are as low as possible. This means that the Government should welcome any system which can minimise COE prices whilst providing an equitable pattern of allocation. The COE price, or to give its proper name, vehicle quota premium, is only the means to allocate a scarce resource. The objective, as officially stated, is to control the number of vehicles on our roads given our limited land area. This means that any fair allocation method should be acceptable to the Government, since the quota system will ensure that the physical number of vehicles will never get out of control. It is, therefore, puzzling to me why the Government should repeatedly reject the "pay-as-you-bid" system, suggested by many members of the public. After all, the Government did respond to the public demand of non-transferability in earlier times and I see no reason why it should not continue to do so. That means to respond to the public demand as long as the quota system remains intact. However, Sir, I must agree with the Government on one point. The argument that the "pay-as-you-bid" system favours the professional and places the man-in-the-street at a disadvantage is not incorrect. As somebody who used to participate in the bidding of Government treasury bills, which is based on the "pay-as-you-bid" system, I can testify to that. Therefore, on this system, Sir, I would like to suggest that we first put all the COEs into one category. This system is basically to make sure that the numbers available for common bidding remain large. Large numbers will tend to even out the fluctuations whilst at the same time responding better to market demands. Sir, in order to protect the man-in-the-street, let us divide the COEs into two divisions: one division for competitive bidding, and another for non-competitive bidding. In a competitive bidding, one can go for the normal pay-as-you-bid. And those who are interested, like the man-in-the-street, could buy on a non-competitive basis. Because they do not know how to bid, they can always apply for a COE in the non-competitive division, and the price they should pay is the average weighted successful price achieved in the competitive side. For example, if in the competitive side, the successful bidding ranges from $18,500 to about $22,000, the average successful price will be perhaps about $20,000. Therefore, $20,000 will be the price that is given to those in the non-competitive division. And if the demand is more than the available COEs in that division, they can always have a simple ballot to determine who should get it. But they pay close to the market price. It is not free for them. Sir, by having one category, I would like to further suggest that we should retain the progressive nature of the COE, which means that the price they pay is the basic price for, let us say, the lowest category, the small car category. And for those who want to buy a medium-sized car or a large car, they can always pay a multiplier factor, say, 1.25 factor for the medium-sized cars, or 1.5 factor for the large cars. In this way, we will still retain the progressive nature of the COE system. And finally, with this system, we can scrap the open category. In fact, this favours those who want to buy small cars, because, as we know, under the present system, the open category is normally used for those who purchase large or luxury cars. In order to prevent abuse by those in the non-competitive division, those wishing to purchase COEs should therefore submit their applications with large enough cashier's orders before the competitive bidding begins. Sir, I am very sure that with such a system, the Government can respond to the public demand for pay-as-you-bid system whilst at the same time protecting the man-in-the-street because it provides for both the professional who can use the competitive bidding system and the man-in-the-street who can use the non-competitive system. Sir, I would also like to suggest a new role for the COE premium. Despite what I have said earlier about motorists willingly paying $1 billion for COE fees in 1993, I always wonder whether the entire sum is necessary or not. So what do the COE fees represent? Does the full $1 billion represent the price of scarcity? Or does it also partially include the cost of inefficiency? Sir, let me explain what I mean by the cost of inefficiency. Basically, if we look at car ownership, there are two aspects: status and transport convenience. Both these aspects are currently reflected in the high COE prices. In other words, car owners in Singapore are willing to pay for status as well as transport convenience. I think most of us will not disagree with this statement. But what we may not agree is how much for status and how much for convenience. Sir, in order to simplify this point that I wish to make, let us assume a scenario in which the Government can improve the public transport system to its ultimate efficiency, that is, the inconvenience of public transport is reduced to its absolute minimum. In such a scenario, the desire to own a car vis-a-vis the costs of car ownership would be at a lower price level than when public transport is not as good. Sir, in other words, there should be less potential car owners if prices go up too high. This means that as the Government improves the public transport system, at any given point, COE prices should be lower. Conversely, a poor public transport system will lead to more potential car owners and higher COE prices, all other things being equal. Sir, the difference in COE prices between the most efficient public transport system and the current situation therefore represents the extra cost paid by the public for Government inefficiency in not improving the public transport system to the level demanded by the public. Hence, my term, the cost of inefficiency. Using this argument, surely there is merit in suggesting that some of the COE fees collected should go towards improving the public transport system, particularly buses. While the MRT system forms the backbone of the public transport system, it is the buses which form the rest of the bone structure. Many parts of Singapore not served by the MRT must thus be served by buses. Unfortunately, given that the two bus companies in Singapore are monopolistic and profit-oriented, there are areas not served or inadequately served by buses on grounds of non-profitability. Sir, I can understand why profit-oriented bus companies do not want to serve those loss-making routes in the third segment. Here I am referring to the general guideline of segmenting bus routes from the most profitable to the least profitable or most loss-making. The first segment consists of profitable routes. The second segment consists of the least loss-making routes. The third segment consists of routes with the highest losses. In general, the bus companies operate the first and second segments since the profits from the first segment are more than adequate to offset the minor losses from the second segment. They do not operate the third segment on the grounds that they cannot afford to absorb the losses from the third segment. However, the wide dispersion of the population all over Singapore has created a higher demand for bus services in more and more remote areas. Unfortunately, the demand is not high enough for these routes to be in the second segment.

Order. Mr Heng, this is a debate on the financial policy statement of the Minister for Finance and we are supposed to debate on principles. It appears to me that in the course of your speech you are entering into details. Could I urge you to confine yourself to arguments on principles? You may proceed.

Thank you, Sir. I am confining myself to principles. But I have to explain something so that I can go on to the principles.

These are very detailed principles you are embarking on.

Sir, but with land transportation providing one-third of Government's total operating revenue, may I say that it is a large sum and we cannot ignore that.

That is a principle, but I suggest you confine your arguments just to principles.

Yes, Sir, I will do that. Sir, the result of this is a higher demand for car ownership, thereby adding to the likelihood of higher COE prices and more revenue for the Minister for Finance. Hence, if the Government were to use part of the COE fees collected to encourage bus owners to operate some third segment routes, as well as to increase feeder bus service routes, the pressure on car ownership and COEs would be lessened by the extent of those not needing cars because of a better transport system. Sir, I am not asking for subsidies because I know that the word "subsidy" is a dirty word in the Government's lexicon. Instead, I am asking for a grant [Laughter] to the Public Transport Council to help support the operations of buses operating such unprofitable routes and improving the general service level. Sir, I do not understand why the House laughed at this, because it is not a new concept. The Government has been giving grants to Town Councils. So, therefore, I ask, why not the Public Transport Council? Both are serving the majority of the Singaporean public. Sir, if that is too much to ask, why not allow the Public Transport Council to collect the COE premium? Let it use some of the funds to help defray the costs of unprofitable routes as well as improve the general service level of public transport in Singapore. The surpluses then could be transferred later to the Consolidated Fund. Again, I must add that the concept is not new. The Government already allows the Singapore Broadcasting Corporation to keep the TV and radio licence fees to help defray the costs of loss-making public service broadcasts. Why, then, Sir, not help to defray the costs of loss-making public transport services? Sir, with that, I support the Budget, and thank you for your indulgence.

( In Mandarin): Mr Speaker, Sir, recently, the US Federal Reserve Board cautioned against inflation and adjusted the Federal Reserve's interest rate by 0.25%. As a result, the stock markets, although not taken by surprise entirely, declined all over the world. But according to the economists, even if the US interest rates were to rise to a limited extent, the overall economic performance of the world would not be damaged. Japan will resume its growth. The Asia-Pacific region will maintain its leading position. China's target of tripling the economy by the year 2000 will be achieved, perhaps in 1995. Our economic performance has been good. Based on future needs, the Budget is aimed at economic upgrading and tax reform. The Government hopes that the people of Singapore will be more adaptable and seek opportunities in the rest of the world. The role of the Government is to provide the infrastructure, a healthy environment, improve education, and upgrade our quality of life. In order to avoid the ills of Western welfarism, we always remind our people of the responsibilities towards the family and society. They should not be enamoured of the entitlements considered as a matter of course by some countries. The European society represents the ideal of the welfare state. They have all kinds of schemes and programmes which reflect the tolerance of matured societies and the principle of community support. The idea of helping the weak and the poor is compatible with the tenets of many religions. In fact, welfare schemes are easy to introduce but hard to withdraw. The European countries have large deficits and economic difficulties. Apart from having to pay for the retraining of East Germans, Germany had to spend one-third of its GDP on welfare such as pension, medical, education, family and unemployment benefits. Sweden is reviewing the continuation of daily allowance to prisoners because a large number of Russians have entered the country, committed offences to get arrested to earn such allowances which are eight times what they earn in daily wages in their own country. More than 15% of the workers in Holland are paid an allowance meant for the permanently disabled. Western Europe is reviewing the quantum and standard of such benefits. Even if they had the political courage to carry out basic reforms, it would not be easy to implement. The productivity and competitiveness will decline. In the end, it is their people who will suffer. Recently, the changes in our civil service medical benefits have given rise to criticism and dissatisfaction. Fundamentally, everyone must be responsible for his own health. That we all agree. With increased allowance, the civil servants must bear a higher proportion of their medical expenses. There is nothing wrong about this. In recent years, medical costs have risen steadily. The trend is likely to continue. Ageing brings about declining health. But many people have yet to understand fully the new schemes. A decision made in haste is not right. I would urge the Government to give more time to the civil servants to appreciate the various schemes and avoid making a wrong decision. Mr Speaker, Sir, under the present taxation system, taxpayers can apply for relief for their aged parents and grandparents subject to a maximum of two such dependants, that is, a maximum relief of $7,000. But there are people who have to support more than two aged parents or grandparents. So will the Minister consider increasing the $7,000 limit? My reasons are as follows. With the implementation of GST, the tax net has been extended significantly. The dependence on income tax will correspondingly be reduced. Secondly, the average life expectancy of Singaporeans has increased and there will be more and more families with grandparents. Thirdly, we encourage respect for the old. The colonial government of Hong Kong has given such tax incentives on 2nd March this year so as to encourage people to support their grandparents. The Minister has also given some incentives for people working overseas, for example, CPF for these workers will be tax deductible from 1995. I would like to ask the Minister whether the scheme can be implemented earlier so that those people who are already working outside Singapore will have both moral support and appropriate recognition. Mr Speaker, Sir, over the past few years, our economy has been developing steadily. Even Arafat of the PLO intends to use Singapore as a model. The management of finance in a country is highly complex. Fortunately, we have an experienced Minister for Finance, Dr Richard Hu, who has natural talents for such work.

Order. I suspend the Sitting and will take the Chair again at 4.10 pm. Sitting accordingly suspended at 3.50 pm until 4.10 pm Sitting resumed at 4.10 pm

Debate resumed.

Mr Speaker, Sir, I would like to thank the Minister for Finance for a fair Budget. The interests of both workers and business are well taken care of. I am grateful that the Government has taken the final steps to achieve its target to equalize employers' and employees' CPF contribution at 20% each. During lean years, workers tighten their belts. During good years, Government must restore their confidence. The business community should not complain about this restoration, especially my MP colleagues who are businessmen. With sound economic growth, our salary structure will continue to shift upwards. We also have to set up workers' training to meet the needs of changing industries. Therefore, the SDF salary ceiling should be revised upwards from time to time. SDF levy is not an extra business cost. It is part of training costs for companies. Companies cannot avoid training their workers if they want to stay competitive. In fact, employers who send their workers for training have gained from SDF funding. So I should thank the Minister for Finance for revising the SDF salary ceiling. I am also happy to note that Government will give rebates on HDB service and conservancy charges and rentals, extend the claim period for procreation incentives from seven to nine years and further contribute $500 million to Edusave and $100 million to Medifund in the financial year of 1994. In his Budget speech, the Minister for Finance has clearly stated the role of Government in economic management. I have no doubt that Government, with its excellent track record, will continue to improve Singapore's competitive position. Mr Speaker, Sir, I would like to direct the House's attention to our social and community development. I feel that we need to pay more attention to strengthening our social fabric as we face fierce international competition. We need a strong and united home base to serve as the springboard for our external interests. Plugging into rapid growth in the Asia-Pacific region brings both opportunities and challenges for Singapore. The professional and skilled Singaporeans are mobile. They are keenly sought after. They will command world-class salaries. However, our less-skilled or unskilled workforce will have to compete against cheaper labour in Vietnam, China and India. This keen competition will make wage increases for them more difficult. As Singapore grows with the region, all our incomes will continue to rise. However, incomes of those at the bottom of the structure will rise more slowly. These trends can exert pressure on our social cohesiveness. One way to tackle these trends is to help those in the low-skill, low-income families to break out of the circle. We have to step up training and retraining of workers, especially the older ones. Many older workers above 40 do not receive adequate training. Those 40 and above make up about 30% of our workforce. Yet they took up only about 7.5% of training places funded by SDF in 1993. We must identify the obstacles and solve them. Companies must be prepared to employ older workers and equip them with the relevant skills. I am dismayed by the practice of some established companies, even Government-linked companies, which retire workers at 45. We must also equip our young with the education and skills that will stand them in good stead. Our policies must also motivate the low or under-achievers. We must continue to invest in vocational training for the less academically inclined in the institutes of technical education (ITE). We must pay close attention to those in the neighbourhood schools. During the period of rapid economic growth, the developed nations have responded to social change by giving out generous social welfare benefits. Today, as economic growth slows down, these welfare states could no longer sustain the promised benefits. The social contract between people and government is subject to great stress. Similarly, we will face increasing pressure from Singaporeans for Government to expand and strengthen the social safety net, especially given the recurrent budget surpluses. We do not want to go the way of the welfare states which weakens individual responsibility, the work ethic and the family structure. We have to chart our own way. Government has traditionally kept expenditure on community development low. For FY 94, 1.6% of the budget or 0.32% of GDP has been allocated. We do not want to give handouts. But some worthy programmes may incur expenditure. When necessary, Government must be prepared to implement creative incentives to promote self-reliance and hard work. For example, we may need to allocate more budget for MCD to implement programmes to strengthen the family and community. Grassroots organisations, the Citizen Consultative Committees (CCCs), Community Centres/Clubs (CCs) and Residents' Committees (RCs) are set up to promote social interaction and cohesiveness. They also form a crucial communication link between Government and people. We need an effective grassroots network to keep in close touch with residents and their changing needs. We can then respond effectively. Our grassroots leaders work hard to serve the community. They volunteer their time on top of their own work and family commitments. They require the support of the full-time Community Development Officers (CDOs) employed by the People's Association. Grassroots work is highly labour intensive. CDOs need to reach out to residents, talk to them, understand their problems, explain Government policies, organise community activities like block parties and so on. These require time and personal touch. More CDOs will be needed when residents increase, as in new HDB estates. More CDOs are needed also when grassroots organisations step up their programmes. Therefore, I request the Minister for Finance to be flexible in enforcing the zero manpower growth policy with respect to CDOs. Our investment in newer and better facilities in CCs has to be supported by investment in manpower. As our population ages rapidly, we will have to tackle its many attendant problems. One major issue is housing arrangements for the elderly. Government's policy in this area should be flexible enough to meet different needs. The traditional and perhaps best arrangement is for the elderly to continue to live with their children or grandchildren in the same household. According to a recent study, for the past decade, 85% of the elderly in Singapore still live with their families. Our policies should continue to encourage children to live with the elderly, either in the same household or nearby in the same block or neighbourhood. On the other hand, we should also provide options for those elderly who do not stay with their children for one reason or another. Taiwan's experience is instructive. The same study shows that in the two years between 1989 and 1991, the percentage of its old people living with their children dropped by 7%, from 70% to 63%. About 14% of Taiwan's old people now live alone. What choices should be made available to the elderly? At the bottom end, Government is already supporting the aged destitute in old age homes, and the aged sick in nursing homes. At the top end, private developers will respond to market demand for rich retirees. I would like to focus our attention on those in the middle. They are the ordinary salaried workers who have retired. They have to make their every dollar stretch. They may not want to continue to live in their 4- or 5-room flats after their children have moved away. Cooperatives and self-help groups can take the initiative to set up retirement villages. Retirement villages are dedicated housing for the old, equipped with special facilities. Cooperatives will be providing a valuable social service. Government can provide support by leasing suitable land at subsidised rates to the cooperatives. Cooperatives can run these retirement villages on a self-financing basis, covering operating costs. This will keep costs low for the retired residents. This works on the same principle as child care centres where Government leases out space at nominal charges. Another issue is how to encourage Singaporeans to support the elderly and strengthen family ties. Government should recognise the efforts of those who support their parents and grandparents. We can give suitable tax incentives. Under the present rules, a taxpayer can only claim parent relief if the dependent parent does not earn more than $1,500 a year or $125 a month. This income ceiling should be raised to a more realistic level. We want to encourage those beyond 60 to continue working. Such older workers can earn at least $300 a month or $3,600 a year. Therefore, I would like the Minister for Finance to consider raising the salary ceiling for parent relief to at least $4,000 per year. Under the present rules, one taxpayer can claim relief for his or his spouse's parents, grandparents or great grandparents, subject to a maximum of two such dependants. Our family size has been getting smaller; life spans are getting longer. Therefore, each of us has more aged dependants. Under the present rules, if a single taxpayer lives with his two parents and one grandparent in the same household, he can claim tax relief for only two of them, not all three. I would like to suggest that the Minister for Finance consider removing the ceiling of two dependants per taxpayer. Such a ceiling does not support our policy of encouraging filial piety. Tackling a substantial aging population is a new challenge for Singapore. We need to think of more innovative ideas, flexible policies and multi-pronged approaches to meet this challenge successfully. Government has recently reviewed its role in providing health care. Government is committed to providing good and affordable basic medical services to all. Government has since implemented the new medical benefits scheme in the civil service, based on the principle of co-payment. I am glad that Government has taken steps to clarify the initial doubts felt by many civil servants. However, questions from civil servants to the NTUC Hotline show that there are still some concerns. I would like to highlight some of them. (1) There are no Class C wards for some medical specialities. Officers eligible for Class C wards are automatically admitted to Class B2 wards. He has to co-pay his hospital bill based on B2 ward rates. Can such an officer co-pay based on Class C rates instead, since he did not choose to be upgraded? (2) This is a concern of woman officers whose husbands are also civil servants. Why must such woman officers opt for the same medical benefits scheme as their husbands if they want to enjoy the husband's medical benefits? (3) Some have asked whether the Minister for Finance can give them an assurance that the co-payment rates of 15% and 40% will not be increased at least for the next five years, like GST. I look forward to clarifications on these concerns. As our society progresses, we will face many new challenges. We will keep old methods and policies that have served us well. We must also continue to find new innovations and solutions. Our aim is to get everyone on board as we propel ourselves forward. Our policies must focus on our common destiny and strengthen our social fabric. I am confident that with prudent and farsighted economic and social management, the Government will be able to lead Singapore into the First League of Nations. With this note, I support the Government's financial policy.

( In Mandarin): Mr Speaker, Sir, this year's Budget has brought some good news to many people in the lower-income group. These include the 5% income tax rebate, the adjustment in the CPF contributions, both for employers and employees, the increase in tax deduction for CPF contributions by the self-employed and no tax changes in the import duties for liquor and cigarettes, but the most welcome measure is the financial assistance given to the 1-room to 5-room HDB flat dwellers in the form of rebates for S&C charges and rentals. These measures will go a long way to alleviate the burden which will be incurred by the people when they cope with GST. This also shows that the Government sympathises with the plight of the people. In the past few months, there has been a spate of price increases on goods and services before the implementation of GST. This has increased the burden of the people and, therefore, many people are dissatisfied with the Government with regard to GST. It cannot be denied that GST will be a major reform of our taxation system and will enhance our competitiveness and lay a strong foundation for our future. However, GST will bring about some pressures and worries for the people because after the implementation of GST on 1st April, everyone will be affected. The family expenditure will increase. Therefore, we have to provide more assistance to the lower-income group. The tax rebates and the various forms of assistance in the payment of HDB rentals and S&C charges provided in the Government budget amount to the Government giving some of its surpluses into the pockets of the people and this will foster the people's confidence in the Government. The people hope that during the period of rapid economic growth and when the Government accumulates more surpluses, the people should be allowed to share in the fruits of such growth. One example of the Government returning the surpluses to the people is the CPF Share Ownership Top-Up Scheme. However, such top-up schemes should be used to encourage people to increase their savings and not to create a frenzy to buy shares among the people, because investing in shares does entail great risks. Some people who have bought Telecom shares have made some money and they think that they could buy other shares and make the same amount of money. Hence, there has been a scramble to queue up to buy shares and such people are turning the share investments into gambling. As a result, some people have incurred losses. Mr Speaker, Sir, the Government will launch another CPF Share Ownership Top-Up Scheme. But we should ensure that such a scheme will not bring about the unintended result of gambling on the stock market. This year's Budget is pragmatic. This Budget not only lays the foundation for our future prosperity, it also helps, through various offsets and rebates, to alleviate the burden of the people, with the result that 75% of the people would not have to pay income tax. Many people hope that the Ministry of Finance will keep to its promise of not increasing the GST tax rate beyond the 3%. If the economy is doing well, the Government should not increase other taxes, and further adjustment should be made to the CPF contributions so as to make GST a means to strengthen our competitiveness.

( In Malay): Mr Speaker, I support the Budget presented by the Minister for Finance. Recently, much emphasis has been placed on family values in conjunction with the International Year of the Family this year. But the Budget this year has been more concerned with the individual rather than the family. I agree with the suggestion by Mrs Yu-Foo Yee Shoon to introduce incentives for family life. As we know, the family plays an important part in all aspects of our life. The Government needs to play a role in nurturing the family spirit. The Government can grant incentives for better family life. These incentives can open the way towards a stronger family life in our long term interests. The concern about a growing number of neglected elderly persons in the future can be allayed if the family spirit is nurtured as early as possible. These incentives can be in monetary form such as better reliefs for those who are looking after a multi-generation family or other privileges to reduce the burden or further encourage children to look after their parents. As such, I would like to call upon the Government to grant benefits aimed at fostering a family spirit and not benefits for the individual only. I also welcome the Government's move to increase the allocation to the Edusave Fund by 100% from $500 million to $1 billion. In view of the fact that our students are a valuable share in the future, these investments and increases are appropriate and timely. They will mean that secondary school students, for example, who are receiving $150 each will now have $300 each. There are already schools planning to use two-thirds of the amount and others which are going to use a certain sum only based on the needs and the capabilities of their students. In other words, even before the increase of $0.5 billion for this year, the schools are already making plans as to how best to use the money. The amount as a whole is no mean sum. In order not to burden the school administration in planning the use of the allocation, community self-help bodies like MENDAKI, SINDA and CDAC should be allowed to benefit from the allocation too. They can use the Edusave funds for activities that are in line with the goals of the schools. In this way, these organisations can enjoy a closer working relationship with the schools. I am confident that the two sides will obtain a more comprehensive and balanced benefit in the use of this Government grant. Another matter I would like to touch on here is the development of private institutions providing educational services, both academic and technical. The effective role of these private schools is undeniable. Indeed, they should be encouraged considering that they offer further opportunities for workers or those who are interested in continuing education to further enhance their achievements. At the same time, in view of the growing number of such institutions and the response from the public, this will mean the creation of a large, influential market of high potential. This might have an impact on the Government's policy to achieve a balance in expertise in all areas of endeavour. If we could have a form of guidelines to manage the direction of these institutions, their role will be more integrated with the aims of the Government. In presenting the Budget this year, the Minister for Finance stated the need for Singapore to enhance the individual's potential to the highest possible level. In this connection, I would like to know the progress of the Singapore Open University. Unlike the National University of Singapore, the Open University functions to give more people the opportunity to further their education to degree and post-degree level. Towards this end, it would be necessary for the admission system of the Open University to be more flexible in terms of qualifications and admission places. This flexibility should not mean that the degrees are perceived as being of a lower quality than they really are. I would like to ask the Minister whether the Open University can play a role in meeting the objective of enhancing the individual's potential to the highest level. Is every eligible applicant admitted to the University? If not, what are the problems faced by the administering body? Every year, the Government has presented strategies for Singapore to go overseas. Various strategies have been presented covering enterprise and industry, but no idea has been given by the Government as to the role that can be played by educational institutions like the polytechnics and universities in Singapore. The Government should issue guidelines to these institutions towards increasing the number of professionals who can then spread out and serve at the regional level in Southeast Asia. Singapore, as a reputable urban centre, is capable of an effective contribution by encouraging more professionals to find a foothold in countries requiring their expertise. Countries that are now adopting open market policies are in great need of their know-how. This would further expand and promote business for Singapore and the region. This can be achieved more effectively if university and polytechnic enrolments are increased according to the areas of expertise required. I understand the Government's concern over creating a situation where there are too many graduates or professionals chasing a limited number of jobs. However, I think this concern can be avoided because the demand for expertise in this region far exceeds what Singapore possesses. I am more concerned with the situation where the economies of the countries we have invested in goes into rapid growth and they require more professionals from Singapore. These professionals would then leave Singapore and we would be faced with the problem of shortage of professionals to lead the country in various areas. In conclusion, the prosperity that we have enjoyed year after year would be more meaningful if we can share it with the countries that have always looked up to us as an example. The rapid progress of the region can only be an advantage to Singapore. The Budget presented will consolidate further the stability of the country. Although it was not what our businessmen had expected, the signs indicate stable progress and a secure business environment.

Resolved, That the debate on the Budget Statement be proceeded with beyond 5.30 pm and the proceedings thereon be exempted from the provisions of Standing Order No. 1 at this day's sitting. - [Mr Wong Kan Seng].

Mr Speaker, Sir, the Finance Minister, Dr Hu, in his hongbao Budget, handed out plenty of goodies for the individual: rebates on income tax, rebates on S&C and rental charges, Share Ownership Top-up Scheme, etc. Dr Hu, Singaporeans love you for your generosity and recognition of their hard work. However, the businessman must feel like the child waiting expectantly at the end of the line to receive his hongbao, but when Uncle Richard reaches him and runs out of red packets to give him, he is understandably disappointed and upset. Although Uncle Richard keeps reminding him that he had already given him a large hongbao last year, he is still waiting and hoping for Uncle Richard to give him something from this year's hongbao Budget. To add to his disappointment, the businessman was given a few new bills to pay, such as the 1.5 percentage point adjustment to the employer's CPF contribution rate and the revision of the ceiling for the Skills Development Levy from $750 to $1,000, and all these are on top of the GST compliance costs. But businessmen are not ingrates and, on their behalf, I wish to thank the Finance Minister for lowering the corporate tax rate from 30% to 27% for the Year of Assessment 1994. However, in view of the recent reduction of the Hong Kong corporate tax rate by one percentage point from 17.5% to 16.5%, I appeal to the Finance Minister to bring our corporate tax rate down to 25% from the Year of Assessment 1995 or, alternatively, give a one-off 5% tax rebate for corporate tax for the Year of Assessment 1994, as it is being done for personal income tax, both as a way of rewarding the businessmen for their hard work and enterprising spirit which help to strengthen our economy in the face of tough international competition and also as a means to help them build up their reserves to enable them to venture overseas. Businessmen would have preferred a more gradual restoration of the employer's CPF contribution rate to 20% to keep their Relative Unit Labour Cost internationally competitive. But it seems like they will have to bear with such cost increases and look forward to other means of improving their productivity. In this respect, I wish to propose a new scheme to encourage more employees to upgrade their knowledge and skills through continuing education and skills training. Quite often, employers have expressed concern that owing to the tight labour market situation, they face great difficulty in persuading their employees, especially the more mature workers, to attend courses to upgrade their knowledge and skills. Under my proposed scheme, which I shall name the Employee Education Account Scheme, instead of paying the full 1.5 percentage point increase in employer's CPF contribution into the employee's CPF Ordinary Account, pay only 0.5 percentage point into this account. The other one percentage point of the additional 1.5 percentage point of the employer's CPF contribution should be paid into a special Employee Education Account in the employee's CPF account. Whenever an employee attends an SDF approved course to upgrade his knowledge or skills, an amount equivalent to the course fee paid by the SDF would be transferred from his Employee Education Account to the credit of his CPF Ordinary Account. For example, if he attends a course and the SDF gives a subsidy of $200, he will then receive a transfer of $200 from his Employee Education Account into his CPF Ordinary Account. However, if at the end of a two-year accounting period, the employee did not attend sufficient approved training courses to warrant transferring all of his two-year cumulative balance from his Employee Education Account to his CPF Ordinary Account, the remaining balance in his Education Account will be transferred to the SDF so that it can be used or recycled for training other workers. This way, it is hoped that the employee could see that 1% of his wages will be credited to his CPF Ordinary Account provided he has used the SDF of the same amount to put him through SDF-approved courses, preferably sponsored by his employer. I hope that the Government, trade unions and employers will take a closer look at this proposal. The ultimate objective is to produce a better educated and highly skilled workforce through the use of SDF and such incentives. Singaporeans should be grateful to the Finance Minister for his generous tax rebates, rebates on service and conservancy and rental charges. The tax changes to encourage Singaporeans to venture overseas are timely and will help companies in persuading their employees to take up overseas assignments to ensure the success of our regionalisation efforts. Mr Speaker, Sir, the reduction in property tax rate from 16% to 15% is a most welcomed move. I hope that the Minister will accelerate the process to lower this rate to 12%. However, many people feel that this reduction is academic as they have received hefty upward revision by the IRAS of about 30% to 60% of the annual value of their properties, resulting in enormous increases in the absolute property tax paid. The worst hit are owners of owner-occupied industrial properties who feel that such property tax increases would only add to their operating costs and reduce their international competitiveness without adding any tangible value to their current business operation. I wish to appeal to the Finance Minister to give a special concessionary property tax rate of 4% for owner-occupied industrial properties, similar to that accorded to owner-occupied residential properties. Already, our manufacturers are paying much more for their industrial properties and land or factory rentals compared to their competitors in the region, and such large upward revision of annual values and property taxes will seriously erode their international competitiveness and threaten their survival. On the subject of annual value, with residential property value escalating in the past few years, owners of older owner-occupied properties are also facing large upward revision of their annual value. Many who used to pay no personal income tax on rental income for owner-occupied properties because of the exemption from income tax for such properties with an annual value of less than $75,000, suddenly found their old owner-occupied property had been revalued to more than $75,000 and are now therefore subjected to income tax. I hope that the Finance Minister will grant a blanket exemption from income tax for the first owner-occupied residential property regardless of its annual value. This way, older folks who have been living in their old but now much more valuable property will not be unduly burdened to pay such income taxes on the notional rental income or be forced to sell their properties in order to pay such enormous taxes. To grow, sooner or later, our small and medium enterprises or local enterprises must venture overseas. However, they soon find themselves facing enormous challenges and obstacles. A major problem is the lack of funds for financing such ventures as local banks are not too sure about how to secure their loans while overseas host banks are not familiar with our companies and will therefore hesitate to support them. I propose that the Government look into forming a joint venture with the local banks and business groups to set up a bank or financial institution to help our businessmen, especially those running SMEs to finance their overseas ventures. The involvement of business groups will help the proposed financial institution assess the viability of and the risks involved in each project. The good news is that the economy grew by 9.9% in 1993 and the manufacturing sector, the health of which indicates our international competitiveness, grew by 9.8%. The bad news is costs might escalate as a result of the tight labour market, the GST implementation and other cost increases. I urge the Government to freeze or moderate any fee or cost increases so as not to precipitate any price spiral which will damage our international competitiveness. The Finance Minister in many ways has been generous to the people with his tax cuts. On the other hand, businessmen felt let down when they found very little for them in the hongbao Budget. I hope therefore that the Minister will study my proposals and respond positively with at least some hongbaos for the businessmen to keep them smiling until the next Budget. I support the Finance Minister's motion.

Mr Speaker, Sir, before the Budget for 1994 was announced, the mood in the stock market was expectant. The day before the Budget speech, the stock market rallied. But after the Budget was announced, the mood turned sour. And the Budget was unfairly blamed for the downturn. Sir, I don't play shares, but the ups and downs in the stock market do affect me because my friends and colleagues are affected by it. Their laughter and their sorrow rub off on me too. Shares, I am told in my Economics 101 course, is the economic bellwether of the nation. If the share market goes up, the economy is supposed to be doing well. If it comes down, the economy might be heading for a bad patch. But my economics tutor apparently was living in a closed world (the world was about the 70s) where people make decisions partly based on sound economic principles, and where markets do not attract huge inflows and outflows of foreign funds in anticipation of interest rate movements, and other real or imaginary political developments. Sir, the Singapore economy was on solid ground in 1993. It will continue to perform well in 1994. It was simplistic, therefore, to lay the blame for the fall of the market on the 1994 Budget which did nothing to rock the fundamentals of the Singapore economy. The sympathetic downturn of the major foreign markets over the same period suggests that the pessimistic mood is global in nature. But, nonetheless, as Mr Robert Chua has pointed out only just before I took up this stand, the Singapore market appears to be unhappy over three local issues. The first issue is that the Budget did not allow for an anticipated cut in corporate tax. The second issue, which keeps coming up in this House, is that the employers' share of the CPF was raised by 1.5%. And the third point appears to be that the ceiling for SDF levy was raised from $750 to $1,000. The 1994 Budget is certainly a pro-worker, a pro-consumer budget. But that does not mean it is also anti-business. The market has selectively forgotten that there was already a 3% corporate tax cut in the 1993 budget. That was given even before GST was implemented. The implementation of GST, therefore, is no reason for a further tax cut. In fact, with the economy going at 9.9% last year, there could be serious problems of overheating if further tax cuts were given this year. Sir, apart from the implementation cost of GST, which of course companies will pick up some cost, most companies have decided to pass on the 3% tax burden to consumers. So the GST does not really affect them that much, except for this initial transition period where they must change their accounting systems to capture the cost. Sir, it is true that business costs over the last few years have gone up. But relative to our neighbours, Singapore is still a very profitable place to make money. One proof was the productivity increase last year which for the first time in many years exceeded wage increase. And the returns on investment in capital by MNCs are still very healthy. Only last week, a Japanese MD of a major MNC company was posted from Singapore to Malaysia. I had met this MD once or twice in my union visits to his company. He asked to see me in my capacity as Executive Secretary of the United Workers of the Electronics and Electrical Industries. He wanted to say goodbye in my union office somewhere in Katong. He wanted to introduce the new MD to me before he leaves for Malaysia. Unfortunately, the new MD did not arrive in time. Still, the old MD and I met in my union office and we reminisced about several things. And I asked him: is it true that Singapore is becoming an unprofitable place to do business? He said that over the years business costs have gone up but Singapore is still a very good place to do business. He said, "No! Singapore is the place that I would like to be posted to and when I go to Malaysia, I will ask my management to look south and learn how you manage the system here." And his parting sentence was, "I am very grateful for the help of Mr Anthony (Mr Anthony is the Branch Chairman at this company)." He is going to a bigger set-up in Kuala Lumpur in Malaysia. There are 16 companies there as opposed to nine here. I asked him, "Isn't it cheaper to do the manufacturing in Malaysia?" He said, "Yes. When it comes to manufacturing, it is. But in Singapore you have a whole system in place. Your IPOs are in place here and with the opening up of the world, with the ratification of GATT, Singapore for now is still the best place to do business." So it is not true that business costs have gone up so much that the bottom-lines are affected. And I think this point must be brought home to some of our businessman MPs in this House that business cost is only one factor. The final factor must be the bottom-line. Because if business cost is cheap and you do not make money, then you should not be in business. This brings me to the second point. Why are employers still groaning about the 1.5% increase in CPF contribution? Again, Mr Robert Chua and others echoed the same view that this will raise cost, erode profitability and diminish our importance as a business centre. In fact, over the last eight years when CPF was cut dramatically, radically and suddenly from 25% to 10%, there were only two bad years. And over the eight years we registered an average of 6-7 percentage point economic growth every year. Last year we hit 9.9%. If we still cannot restore the percentage cut in the employers' CPF, I do not know when we can do it. In fact, many workers still consider a 20% CPF contribution from the employer a retreat of 5% from the original 25%. But the union's position is that we will settle for 20%, we will leave the past behind us and we will move on towards the 21st century. In other words, unions are going to write off all their "losses" over the last eight years and work for the future. We are therefore disappointed that employers and businessman MPs are nit-picking over this 1.5%. Some businessman MPs have said that the employer's CPF restoration was totally unexpected. Sir, I just went to the Library and I picked up the Hansard. Dr Richard Hu gave advance notice that this year's CPF will probably be restored. And I read you what he said last year under the heading "Outlook for 1993". He said, and I quote him [Hansard, Vol. 60, col. 543]: 'If the world economic environment remains favourable in 1994 and our economy continues to grow satisfactorily, Government will further adjust the CPF contribution rates in 1994 by an additional 1.5 percentage points, bringing the contribution rates for the employer and employee to 20% each on 1st July 1994.' So it is inexplicable, Sir, that some MPs in this House claimed that the announcement came as a bomb shell. Sir, the third point is about raising the ceiling for the SDF levy. The simple message the union wants to tell employers is that if companies send more workers for training, then they will get back their share of the contribution. In fact, I am told that right now, because bigger companies are more active in training, they are already using up the lion share of the SDF. Bigger companies usually employ staff at the higher starting salaries in excess of the present SDF levy of $750 which means that they are using up the SDF, while not contributing as much to it. Smaller companies which are the main contributors to the SDF, unfortunately, are not very active in sending workers to the SDF-sponsored courses. I think this announcement by Dr Richard Hu will serve to balance the redress between what big companies use and what small companies pay in. Sir, I want to move on and talk about a strange phenomenon, about how Singaporeans, in general, have acquired the habit of remaining silent when policies are good for them, while they scream and moan when they are affected by single issues. Consumers and workers should be happy for the goodies they get from this year's Budget for precisely the same reasons that business people appear to be unhappy. Because it must be, is it not? If businessmen are unhappy, obviously the Budget, according to the business people, has been skewed to favour workers. But, Sir, as I scan the daily papers and letters to the press, there were few cheers for the Government. In contrast, the headlines and the sub-headlines appeared to have been hijacked by people who were unhappy about the Budget. The majority who have benefited from the Budget, the ordinary persons in HDB flats, the consumers, should come out and cheer the Government. I think the Government has done well. I think we should cheer them otherwise they might also lose heart. Sir, between 1993 and 1994 Budgets, between the last two Budgets, everybody has gained: business people, workers and consumers. About two weeks ago, I attended the Tanjong Pagar Town Council meeting. It was the last Council meeting before the new Council comes in. And I was listening to the briefing by my General Manager on the new rates which the Tanjong Pagar Town Council will impose on its residents because of the 1993/94 Budget. If I may ask that the Table be distributed. [Copies of Table distributed to hon. Members.] You will see the dramatic reduction in the S&C rate. This is only correct for Tanjong Pagar because every Town Council sets their own rates. Sir, you will note that for 1-roomers, they used to pay $15.50 per month for their S&C charges before the 1993/94 Budget. But after the 1994 Budget, they will be paying $3.50 per month, ie, from $15.50 to $3.

50. And for this year, they will get rebates in April, August and December. The yearly saving for the 1-roomer comes to $154.50, representing a whopping 83% savings. If you go down the last column, 2-roomers will save $167 this year, representing 62%; 3-roomers save $142 this year, in percentage terms, 38%; and even 4-roomers save 8% this year. Sir, here we assume that 4-roomers are taxpayers. So they also have the tax rebate of $700 plus 5 percentage points this year. So, virtually, even the 4-roomers and 5-roomers will not be paying any taxes. If we factor in the CPF Top-Up Scheme, the Edusave Scheme, there will be negative income tax. In other words, the Government is paying them instead of they paying the Government. But even for this good news, in my Meet-the-People Session for the last few weeks, nobody has come to say that the Government has done well. In fact, they have remained embarrassingly silent. So I assume that is good news. But my businessman friends have lambasted me and they told me that the Budget has caused the share market to go down and it was totally unnecessary. They said the Government should have given the businessmen a 1% token corporate tax cut, if nothing else. But Dr Ow said it well yesterday. He said that the more you give, the more people want. Perhaps, on hindsight, the 3% corporate tax cut should have been withheld until this year, or 1.5% last year and 1.5% this year. Good things should be spread out over a long distance. Sir, taken together, the 1993/94 Budget lays the foundation for a bright future ahead and one that allows us to move confidently into the next century. I support the Budget.

Mr Speaker, Sir, first of all, I think I should thank the Finance Minister for a very generous Budget. I do not think any individual taxpayer can justly claim to be short-changed. In his Budget speech, the Hon. Minister for Finance outlined the role of Government in economic management. He said that the Government's role is to provide a conducive environment for private initiative while intervening directly only in areas where there is market failure. This philosophy is to be welcomed since it places the responsibility for economic growth where it should belong, with the private sector. I hope that the same philosophy will be employed in non-economic matters as well. The problem is that the Government is always tempted to intervene in people's lives, not just in the economic sphere but also in other matters. In the past, we have been told how many children to have, when to have them, when to marry, who to marry, how long to keep our hair, and even for those with long memories, to eat more wheat. Then people complained that Singaporeans lack initiative. Even the Government Ministers complained that Singaporeans expect the Government to do everything for them. I find this strange, if not, a little ironic. Before 1963, no one ever accused Singaporeans of lacking initiative and depending on the colonial government. If there was a need for a university, people went out and found the funds. They formed self-help groups themselves without Government prodding. They did not need Government to tell them where to invest and how to do business. Between independence and today, something seems to have happened to this natural initiative. If there is a lesson to be learned from the woes of the welfare states of the West it is that governments which create a dependency syndrome in their people are courting disaster eventually. And the dependency syndrome is not created only by welfare. It can also be created where the state takes over basic decision-making and refuses to let the people exercise their minds. If you never let your children choose their own clothes, you should not complain that they do not have any taste. If you do not let them make their own decisions, do not moan that they lack initiative. Parental control is often well meant, but over-control leads to over-dependent, maladjusted children. The analogy holds true for society. We have a very controlled society. No doubt the Government intervenes for our own good, or for what they think is our own good. But the effect is to stultify initiative and enterprise. The Government has gone from being a stern parent - with a whole list of "Thou shall nots" - to a concerned parent, but a parent nevertheless. The result, over the last two generations, is an erosion of the feeling that people are responsible for their own well-being and that it is not Government's job to take care of everyone and pander to their needs. When medical benefits were changed for civil servants, there were a lot of grumbles and rumbles from affected persons. Some of this unhappiness, I think, was because all of a sudden people had to think for themselves. From a Government pays-all scheme which is very easy for most people, you suddenly have a choice, you have a choice about which ward to be admitted to, you have a choice about which scheme to take, you have a choice about insurance, what plan to take, how much insurance to take. And for some people, I think, the effort of planning was painful. This kind of attitude is insidious and if it becomes widespread, it is a danger to Singapore in the long run. In the long term, it can sink us. But a well meaning, caring Government can still unwittingly foster a dependency syndrome by trying to do too much for people. If we are not careful, one day we will wake up in a society where people have lost the habit of thinking and deciding for themselves. Woe betide us if people ever reach the stage where they expect Government to spoon-feed them, cosset them and think for them, and then they will complain vociferously like they do in some other countries when things go to the dogs. It has happened in countries which were economically phenomenal, 50 years ago. I do not think that we are necessarily immune from this if we are not careful. Sometimes it is better to let go and let people make their own decisions and live with their own mistakes. More has to be done to foster an attitude of independence and self-reliance. A case in point is provision for old age. This is the problem that will be with us for a long time. It exercises the best brains in Government. We have heard senior members of the Cabinet mention the possibility that the CPF withdrawal age will be raised. We can understand Cabinet's concern. People are living longer, they should set aside more for old age. But should they be compelled to do so by Government? That is the question. Or should they be left to make their own provision? The temptation is for Government to work out in fine detail, how each and every one of us is to husband his CPF so as to last his lifetime. I think that would be a bad mistake. When you stop a person taking out his CPF savings at 55, or 60, or at whatever age, you are saying to him, "You can't be trusted to manage your own money. So we will manage it for you." This sort of thing does not go down well with intelligent people; and make no mistake about it: Singaporeans are more intelligent than the Government seems to think they are. What rankles, I think, is this implicit assumption that the Government is better able than the average Singaporean to decide what to do with his own money. If a person wants to use his CPF savings to start a new business, or to educate his children, or to go on a pilgrimage, or even to see the world, is the Government right to stop him? It is not the raising of the withdrawal age per se that irritates the people. It is the fact that the Government is patronising them, treating them like children. The CEOs of multi-national corporations, successful professionals, the businessmen, the senior employees holding positions of high responsibility, the parents who have brought up and nurtured their own families to adulthood, are these people incapable of seeing the problems of old age and adequately responding to them? Do they need the Government to think for them and decide how to employ the CPF funds? People will be put off by the Government's well meaning efforts. They will be cynical and grumbling and, ironically, do not expect thanks from those who do need Government's help to plan for their future. They will equally resent what they see as Government's patronising attitude. Paradoxically, I think the best thing for Government to do is to do nothing. Hand people's money back to them at age 55, and say, "Here, this is your money. We have done our bit, we have kept it safe for you. We have got your employers to give 20% on top of your salary. Now it is yours, invest it as you like." Make it clear that there will be no handouts to the prodigal son who blows the whole lot in one hedonistic binge. Then step back and let the people take over responsibility for their lives. We can understand Government's concern for welfare but lack of initiative and enterprise will sink us in a competitive world. The best thing the Government can do to foster initiative and enterprise is do less for people and let them learn from their own mistakes. I only cite old age provision as one area where Government can get people thinking for themselves. There are myriad others. Back off, and let people breathe. Singaporeans cannot be driven like sheep into the First League of Nations. If we are to make it into the First League, there has to be a genuine partnership between the Government and the people, not the partnership of the rider and the horse, with the Government as the rider and the rest of us as the horse, but a partnership based on mutual trust and respect. The Government says, "People trust us. Use your vote responsibly." I ask the Government, "Please, trust the people. Trust us and have some faith in our good sense, in our common sense." People should be given as much choice over as wide a field as possible. Let people take responsibility for their own lives.

( In Mandarin): Mr Speaker, Sir, the Budget Statement by the Finance Minister, Dr Richard Hu, has provided various tax reliefs and rebates to the people. For example, the rebates on rental and service and conservancy charges for HDB flats and the second CPF Share Ownership Top-Up Scheme, which would be of great benefit to the ordinary citizens. This can be said to be the first time since independence that the Government has been giving out such generous reliefs to the ordinary citizens. This is indeed the ordinary citizens' Budget. However, the business circle is quite disappointed. But they should know that so long as we have budget surpluses and the Government does not have to increase taxes or impose new taxes, then they should be thankful to have this painless and unexciting budget. The Opposition Member, Mr Chiam See Tong, said in the Budget debate yesterday that this year's Budget does not benefit the business, nor does it benefit the lower-income people. He is, as usual, trying to deceive others as well as deceiving himself and he is speaking against his political conscience. He felt that the Government's rebates for S&C charges for 1- to 5-room flats are not good enough and a few more months' rebates should be given. The Potong Pasir Town Council under Mr Chiam See Tong's management has operating surpluses too. Why does he not give another one or two months' rebates to his residents so that the Potong Pasir residents could be more happy? Let them share the success of his management of the town council. Mr Speaker, Sir, when we are implementing this budget, apart from reading from the newspapers the reaction of the ordinary citizens on whether they are happy or unhappy, I feel the Government should also consider what Mr Chiam See Tong said in Parliament yesterday. He said any government which has accumulated massive amounts of funds shall one day be tempted to use them for its own political ends. I think we should follow his suggestion so that we can test the ordinary citizens' reaction to our budget. What will be the reaction of the residents in the wards of the ruling party and the Opposition parties on the tough and unpopular Government policies which have long-term benefit to them? Would they not agree that we should have a good and experienced government before we could have good economic results? Are they going to just continue to share the fruits of success irrespective of whether the Government is good or bad? Have they not thought that if we do not have a good government, we would have no such fruits of success to share? Mr Speaker, Sir, this reaction would have a great effect on the future politics of Singapore. Therefore, I feel that the Government may consider what Mr Chiam See Tong said yesterday. Otherwise, the Opposition parties will be laughing at the Government for being so stupid. Moreover, some Opposition town councils have been using the service and conservancy charges collected from the people to carry out political activities for their own political purpose. This afternoon, Mr Low Thia Khiang, raised objection to the withdrawal of Government subsidies to the town councils. I must tell him that this subsidy is not a subscription of the political parties. It is the people's money. You should not use people's money for your political purpose. So long as the service and conservancy charges are properly maintained and used, I think this should not be a problem of the town councils. Sir, Mr Low Thia Khiang also created an unnecessary fear among us. He said the Government is giving incentives to induce the people and then exert pressure on them. We all know that many governments have to increase taxes to provide for expenditure. There is no other country in the world which acts like the Singapore Government where all sorts of rebates and reliefs are given to the people to prepare them for GST. Therefore, the Government has given rebates on service and conservancy charges and rentals and other reliefs to the people so that the lower income group would be able to cope with GST, and that they will not be so adversely affected by the implementation of GST. I believe that in the long run, the people, particularly the lower income group, will understand that the PAP Government is more caring for the people than the Workers' Party. The unnecessary fear that he had created, I think, will not be really the workers' fear. He felt that the workers in Singapore have more and more burdens to bear. I will ask Mr Low: Why is it that more and more developing countries like Vietnam and China are always praising the Singapore Government and envious of the lives of the workers in Singapore? Sir, another point that I would like to raise is that the small and medium enterprises in Singapore should be allowed to use their overseas assets as collateral for bank loans. I support the proposals by Dr Ow Chin Hock and Mr Leong Horn Kee that the Government set up an overseas development bank to provide loans to local enterprises and to allow CPF to be used for designated overseas investment plans. Sir, I feel that the Finance Minister, although he said that the Government encourages people to venture overseas, has failed to relax the restrictions imposed by the banks. I feel that our banks are really too conservative. They have indirectly restricted our capability to venture overseas. I hope that the Monetary Authority of Singapore would consider relaxing all these limitations so that the SMEs would be able to use their overseas assets as collateral, at least part collateral for their loans, so that they would have more funds to invest overseas. Particularly when they are purchasing overseas properties which are reliable, they should be allowed to use these properties as collateral for bank loans. Since overseas banks are able to accept these properties as collateral for loans, I do not understand why our local banks cannot do the same. I think when the Government encourages people to venture overseas, they should also consider relaxing these rules. Sir, with the economic recovery in the United States, Europe and Japan, and also with the economies of the East Asian and South East Asian countries like Malaysia, Indonesia, China, India and Vietnam, getting more and more prosperous and having a good prospect in the future, I think we would have a very good future and we are now encouraging our people to venture overseas and to develop our external economy. However, from a businessman's point of view, our overseas business faces very strong competition from others. We must be able to understand the situation overseas so that we will have an advantage over others in getting the deals. As it was said by Sun Tzu, "Know our enemies as we know ourselves, and we can win all the battles." So with regionalisation, we should set up more funds. For example, the Edusave Fund, which has been increased, is a very wise move. More importantly, we should also adjust our curriculum so that we will be able to cope with the demand in our overseas ventures. In this respect, I hope that the Government could consider a few proposals: First, we all know that English is the common language in our multi-racial society. It is also the nucleus for our multi-racial unity and it is also the key to the opening up of the western markets - the United States and European markets. Many people benefited because they know English and they are able to venture overseas. However, with South East Asia's economies picking up, I think we should also encourage and improve the teaching of our mother tongue so that we will be able to cope with the need to converse and communicate with our counterparts in this region. To improve the teaching of the mother tongue would be of great help to our future development. Mr Speaker, Sir, I hope that the Government would be able to raise the standard of mother tongue in Singapore so that our students will be able to learn more, not only in reading and writing, but also in the ability to communicate and understand the culture and the various aspects of doing business in this region. We know that the economic progress in this region is going much too fast. So we have to speed up in this respect so that we can meet the demand. When the future generations of Singaporeans go for overseas ventures, they must master the languages in this region. Therefore, we must strengthen our study of the history, geography, culture and customs of this region, particularly in China, India, Malaysia and Indonesia. We should encourage our younger people to study more on the Asian and South East Asian cultures, economy, geography and history. And we should also encourage them to step up their studies in this respect and to train them so that they would be able to work in multinational companies and to contribute to our future economy. Sir, the 1994 Budget is the ordinary citizens' Budget which is full of compassion. I support this statement.

( In Mandarin): Sir, the Member made some allegation against me. He alleged that I used town council's fund for political activities. I want him to tell me what activities he was referring to.

( In Mandarin): Sir, I did not say that it was Hougang Town Council which had been using its funds for political purpose. I only said that some Opposition town councils had been doing that. Well, if he has not done so, then he should not be guilty conscious.

( In Mandarin): Sir, Mr Peh's allegation is not fair. He should not be insinuating in Parliament. He should be specific. He should not insinuate.

( In Mandarin): Sir, if he has not done anything wrong, then he need not be guilty conscious.

( In Mandarin): Sir, Mr Peh is saying that I am guilty conscious. Can he give specific examples to say why I should be guilty conscious? He is not conducting himself like a gentleman.

( In Mandarin): I said that if he was not guilty, then he should not be guilty conscious. Why should he be?

( In Mandarin): Since the Member does not want to substantiate his claim, then he is making an innuendo.

( In Mandarin): Sir, he should understand the practice in the other Opposition town councils before he makes any remark. 5.30 pm

Mr Speaker, Sir, I would like to thank all Members of the House who have spoken on the Budget over the past two days. Criticisms there have been, but they have been all very mild, even from Members of the Opposition for which I am grateful. So I must be improving. Time will not permit me to address the Members' concerns point by point and I will therefore focus on major issues and leave matters of detail to be dealt with during the Committee of Supply. This year, I am building on the tenets which I introduced in my previous budget. One is the reform of our tax system through the introduction of a broad-based Goods and Services Tax (GST) and, two, the strengthening of our external economy. These moves are vital to our long term economic growth and development. I will now address the specific major concerns. Rationale for GST For a start, the Government's rationale for introducing GST is worth restating. GST will give the Government greater scope to lower income taxes. In other words, the Government would take a smaller share of every dollar earned by companies and individuals in the form of direct tax. This strengthens the linkage between work and reward and will encourage greater effort, enterprise, investments and savings. The aim is to achieve a better balance between income tax, which is a tax on the factors of production, and GST, which is a tax on consumption. GST is definitely not introduced to raise additional revenues. The restructuring of the tax system is not an exercise by a profit-driven Government to enrich its coffers at the expense of the people, as many wrongly believe. This was why I announced the reduction of corporate and personal income taxes as well as non-tax rebates to offset the revenues collected through the GST system. The Government fully intends to implement the GST in a revenue neutral manner. In fact, in fiscal year 1994, the tax offsets granted add up to some $1,200 million compared to an estimated GST collection of $960 million. While I am on the subject of GST-related offsets, I would like Members to note especially that the income tax changes take effect from the Year of Assessment 1994. This means that individuals and companies are already enjoying lower income taxes on income earned in 1993, even though GST will only be implemented from 1st April 1994. As I have said, the GST-related tax and non-tax offsets will ensure that Singaporeans are no worse off after the introduction of GST. The majority will in fact be better off. Nevertheless, for this year, I have decided on some extra measures to further benefit the lower income groups. They are the additional S&C and rental rebates for one- and two-room flat dwellers and S&C rebates for three- to five-room HDB residents. These extra measures are possible because the Singapore economy is flourishing and the Government's revenue position is strong. Despite the offsets, some still believe that they will be worse off after the introduction of GST. Let me reassure the House that this should not be the case. When GST is in place and the individuals know their actual tax and non-tax offsets, they can do their own sums. Every taxpayer will be told how much tax is saved as a result of the GST-related income tax changes. The tax savings will be shown in all Notices of Assessment this year. Mr Heng Chiang Meng has suggested that we should consider a negative income tax. I have said before, and I say it again, I am not in favour of such a scheme. It is but a first step towards a welfare state. In any case, if a strict means test is needed to control such a scheme, it in fact reduces this negative income tax proposal to our existing social welfare scheme, or to our CCC Fund Scheme, to help the lower income group cope with GST. Mr Cheo has argued that some countries which have introduced GST have not become competitive. I find that this is a very naive statement. These countries are not competitive not because of the introduction of GST but because they have extensive welfare systems which led to extremely high business cost and therefore they are not competitive. It has nothing whatsoever to do with GST. Mr Chiam See Tong also said that more than 75% of our taxpayers are no longer in the tax net, that they will not be able to benefit from the tax cut. Mr Chiam should remember that with economic growth, these taxpayers will, in the course of time, graduate into higher income groups that allow them to enjoy income tax savings. I hope that he does not believe that no one's income will rise permanently. Public education for GST We have embarked on an intensive on-going taxpayer education programme. To-date, the IRAS has conducted nearly 300 seminars involving 44,000 participants and held 380 dialogues with various trade associations. It has also visited 3,670 traders at their own premises. In addition, it has handled 40,000 enquiries through the telephone helpline. The assistance given has helped business understand and prepare for GST. IRAS has also reviewed its procedures based on feedback received. This is to make it easier for businesses to comply with the procedures for the collection and accounting of the tax. For businesses with specific difficulties, IRAS will continue to work with them to overcome these difficulties. We launched our consumer education programme earlier this month. Consumers are being made aware of GST through TV and press advertisements, cartoons in the press, radio programmes, advertisements in the MRT and bus backs and videos in schools and public libraries. We will intensify the programme closer to the GST implementation date. This is to make consumers understand the rationale of GST and assure them that they will be better off. Cost of implementing GST I am surprised that so many businessmen expected a corporate tax rate cut to be announced in the budget to help them offset the start-up and operating costs of GST implementation. They have obviously forgotten about the three percentage points reduction, as Members have pointed out, which was announced in last year's budget. My intention then was to give businesses the tax savings ahead of the GST implementation date in order to help them offset the initial cost of implementing GST. On hindsight, as someone has suggested, perhaps we should have kept the tax cut allowance until this year. Doing so would have made it easier for businesses to see the connection between the reduction of the corporate tax and GST. As for the on-going expenses incurred by businesses in collecting GST, experiences elsewhere, especially in the United Kingdom and New Zealand, have shown that compliance costs are low. They range from a fraction of a percent for companies with turnover of $10 million and above to only 0.2% for companies with turnover between $1 million and $2 million. In Singapore, we expect the cost of compliance to be low because our GST system is a simple one without complex exemptions and zero-ratings. However, we recognise that compliance costs will fall more heavily on small businesses. For this reason, we have exempted businesses with annual turnover below $1 million. Only bigger businesses with proper accounting systems will have to collect the tax. Businesses should also note that expenses incurred in the implementation of GST are deductible for income tax purposes. Nevertheless, the anxiety expressed by businessmen is understandable. GST is a new tax. The actual compliance costs are not known. IRAS will therefore undertake a study on the compliance costs of businesses one year after the implementation of GST. Should it be necessary, we will take further appropriate measures to minimise the costs. Dr Ow Chin Hock has suggested that in view of the implementation of GST, the Government should impose a two-year moratorium on Government and statutory board fees and charges. This is not wise. Fee increases are necessary when manpower, material or operating costs have risen significantly. The Government's policy is to recover unavoidable manpower and material-related costs through gradual and periodic fee increases in order to minimise their impact on inflation. Delaying such increases would only result in larger and more painful adjustments later on. I should also point out that the introduction of GST does not mean that there should be no price increases whatsoever for whatever reason. In the normal course of business, material and wage cost changes can lead to legitimate price increases. What is not acceptable, however, is for unscrupulous businessmen to use GST as an excuse to raise prices and profiteer at the expense of the public, and then to blame the Government for it. Where this can be demonstrated, I can assure the House that severe sanctions will be considered. The Committee on Profiteering and Inflation has been set up under the Ministry of Trade and Industry to monitor price increases on the back of GST. The Minister for Trade and Industry will elaborate on the projected inflation rate and the measures his Ministry has taken to prevent profiteering during the Committee of Supply proceedings. It is important to note that while we may guess that many prices are being increased, the overall figure to look at is the monthly CPI changes because that gives you an assessment of what is the true cost of prices of baskets of goods which affect the people. So whilst we will look at individual items of costs, we should also closely watch the CPI movement. On the issue of tax incentives, I have already put in place a comprehensive package of tax incentives for various sectors. From now on, I will concentrate on fine-tuning the existing incentives to make them more attractive instead of introducing new ones. As for tax incentives to promote regionalisation, I announced seven of these for companies in last year's budget. It is much too soon to add any new ones. I intend to allow the existing incentives to work through first. However, I have introduced two personal income tax changes to complement those for companies. One will help lower the tax burden for Singaporeans working overseas who opt for non-resident tax status. The other will help reduce the tax burden of those who declare residential status. The objective of both changes is to encourage more Singaporeans to accept overseas postings from their employers. This will in turn facilitate Singapore companies and entrepreneurs to venture abroad. Mr Lau Ping Sum has suggested that we bring forward the implementation date of the CPF-related personal income tax change to the Year of Assessment 1994. I think this is not necessary. Individuals and companies can only act upon the tax change after it has been announced, that is, from 1994 onwards. The Member should note that the Year of Assessment 1995 refers to income earned in the year of 1994. Dr Ow Chin Hock has commented that factor income from abroad declined between 1992 and 1993. I must point out that it was net factor income and not factor income from abroad, which declined between 1992 and 1993. The decline was due to lower foreign nominal interest rates which dampened public sector investment income from abroad. Dr Ow has also offered an interesting view that GLCs might be more a hindrance to projects in our efforts to regionalise. This differs from the other view that GLCs are better suited to undertake large-scale infrastructure type projects that require substantial investments, expertise and resources which reside in GLCs. The fact is that GLCs are private companies run on a purely commercial basis. The Government does not interfere with their day-to-day operations. Neither does the Government favour them in projects vis-a-vis the other private sector companies. Like such companies, GLCs are responsible for their own investment decisions. They have to compete with the rest of the private sector for business. They have to seek out opportunities and seize them quickly before it is too late. Many of the GLCs are listed on the Stock Exchange of Singapore and are thus accountable to shareholders for their performance. If it is true that GLCs are too bureaucratic in their decision-making process and take too long to evaluate projects, their regionalisation efforts will not succeed and their bottom-lines will be affected. Nevertheless, the Government's preference in our regionalisation effort is for the private sector to take the lead. To help local enterprises regionalise, the Government has implemented the Local Industries Upgrading Programme whereby Government agencies like the PSA can help upgrade their capabilities. GLCs will also partner private companies where it is in their mutual interest to do so. Dr Ow and several other Members have also commented that some companies are unhappy about Singapore banks requiring local collateral for overseas ventures. Entrepreneurs were asking whether this is a regulatory requirement imposed by the MAS. I would like to point out that there are no legal restrictions on our banks providing loans for the purpose of investing overseas. These are commercial decisions to be made entirely by the banks. As banks accept deposits from the public, they are fiduciaries of public funds. They, therefore, have a responsibility to their depositors and shareholders to extend credit facilities in a prudent manner by ensuring that the borrowers are creditworthy and adequate collateral is provided, if necessary. Banks may require the borrower to provide assets in Singapore as collateral, particularly if the borrower is not able to provide adequate collateral overseas or if the laws in the foreign country concerned do not allow legal mortgages to be given. Such collateral may also be needed in countries where the legal system is not well established and does not provide adequate protection of the rights of the mortgagee company. Mr Leong Horn Kee has also suggested allowing CPF funds to be used for overseas investments. In order to safeguard CPF members' savings, we have not allowed them to invest their savings abroad. Even with the recent liberalisation of CPF investment schemes, members are not allowed to invest their CPF savings abroad. They are only allowed to invest their CPF savings locally. The objective of the CPF investment schemes is to help Singaporeans take a stake in Singapore. Allowing CPF for direct overseas investments will not achieve this purpose. Another consideration is the risks involved. Because of the distance, individual CPF members might not be able to monitor the overseas markets closely. Besides, different markets behave differently and are governed by different laws. There are also foreign exchange risks involved. I believe we should continue to allow CPF to be used for investment in Singapore companies only. By allowing members to invest in Singapore companies which are investing abroad, we are indirectly allowing them to play a part in Singapore's regionalisation and to derive benefits from the extension of our economy outside Singapore. At this point, I would like to merely say that in the Government's regionalisation drive, the intention is not to induce every Singapore company to open up overseas, whatever their financial, commercial or technical capacity. Only companies well placed in terms of finances, technical know-how, business connections, with surplus funds, should undertake these relatively risky businesses. For the rest, unless they have nowhere to place their funds, other than in the stock market, it is probably more prudent for them to remain in Singapore for the time being until overseas markets mature. Concerns have also been expressed about the effect of the 1.5 percentage points rise in the employer's CPF contribution rate and the increase in income ceiling for the SDF levy on business cost. Employers should remember that employees accepted a 15 percentage points slash in the CPF contribution rate in 1986, as many Members have pointed out. Employees have therefore waited eight years for the rate to be restored to 20%. As for the SDF levy, it is used for the training of workers. Raising the qualifying salary to $1,000 from $750 is estimated to raise an additional $15 million a year. This is not a large sum and employers will benefit directly from the productivity gains of better trained workers. Last year's economic growth at 9.9% was exceptionally buoyant. The unit labour cost consisting of wages, employers' CPF contributions, staff benefits, foreign workers' levy and SDF levy fell by 0.5%. The unit business cost in the manufacturing sector also fell by 1.2%. In addition, this year's growth estimate of 6% to 8% exceeds the medium-term target of 4% to 6%. Most employers should, therefore, be able to absorb the CPF cost increase relatively well. Moreover, the CPF increase should be factored into wage negotiations. Mr Leong Horn Kee has commented that the CPF and SDF increases will raise labour cost by 2%. The Department of Statistics has, however, estimated that the unit labour cost for the manufacturing sector would only increase by 1%. At this juncture, I wish to reassure employers that the Government will always do what is necessary to ensure that the business environment in Singapore remains competitive. I have given a commitment to reduce the property tax rate from 16% to 12% over the next few years, with a cut of 1% effective 1st July this year. Last year, I gave commercial/industrial properties a one-off 25% rebate on property tax. However, the feedback I have received is that most private sector owners did not share the rebate with their tenants. I have, therefore, decided to reduce the property tax rate over a number of years to lower the cost of doing business in Singapore. The certainty of tax cuts should give tenants greater scope to negotiate better rental rates with their landlords, and thus benefit directly from the cuts. Some Members have also commented that the property tax rate cut does not reduce business cost because it is negated by rising annual values. I would like to point out that the annual value of a property is the estimated annual rental the property can fetch if it is rented out. This is determined by market forces. Just as annual values are reassessed upwards when the property market is buoyant, they are adjusted downwards when rentals fall. Market rentals for commercial and industrial properties have softened in the last year and they are expected to stabilise this year. Annual values should come down correspondingly. This, together with the cut in property tax from 16% to 15% and ultimately to 12% over the next few years, should help reduce the property tax burden of businesses. Zero growth in manpower policy Mrs Yu-Foo Yee Shoon has asked the Government not to impose the zero growth on manpower policy in specific areas such as community development. The Government is flexible in implementing the zero growth in manpower policy. It does not mean that no manpower increases are allowed. Indeed, increases are allowed where there is good justification for additional positions. What the policy does is to try and balance the increases in one area against reductions elsewhere so as to achieve overall zero growth. In this connection, manpower increases have been allowed for functions like the senior managers of community centres which have little scope for automation. A total of nine senior manager and senior Community Development Officer posts have thus been added since fiscal year 1990. Mr Ling How Doong and Mrs Yu-Foo Yee Shoon have asked several questions relating to the Government's revised civil service salary and medical benefits scheme. As they touch on matters of detail, I will respond to them during the Committee of Supply discussions on the estimates of the Ministry of Finance. Dr Vasoo has urged the Government to review the Singapore Allowance for pensioners in the light of the increase in the cost of living. The Government has already increased the Singapore Allowance with effect from 1st April 1993. The specified pension limit was also raised by $50 per month to $900 per month from the same date, so that a larger number of pensioners would benefit from it. The changes cost the Government $3.8 million per annum and benefit 10,600 pensioners. Long-term CPF contribution rates Mr Zulkifli Mohammed has asked whether the CPF contribution rate will be restored to 50% in the long term. In 1987, after a thorough study of the old age and housing and medical needs of our workers, the Government decided that the long-term CPF contribution rate should be 40% (20% each from the employer and the employee). Contributing at this rate, CPF members should have adequate savings to support a retirement income of between 20% and 40% of their last take-home pay and have enough Medisave to meet their medical needs after paying for a home commensurate with their income level. The 40% rate of contribution is therefore considered adequate. The Government has no intention of raising the contribution rate beyond 40%. Mr Chin Harn Tong has expressed concern that the privatisation of Government entities might only benefit the Government. He fears that privatised companies will only be profit-motivated and be driven to raise prices and lower performance. His concerns are misplaced. Privatisation should have the opposite effect. It exposes companies to competition and should lead to greater sensitivity for customer needs. Some Members have asked for an update on the Government's privatisation programme. Singapore Telecom was successfully floated in November last year. The public offering of ST shares was by far the largest flotation in Singapore's corporate history. The Government expects to privatise other major Government-owned companies or entities from time to time. The next major exercise would be about two years from now. In order to help Singaporeans build up enough CPF savings for the next exercise, I have announced that the Government will implement a second SOTUS scheme to top up CPF accounts of Singapore citizens aged 21 and above. The Government will pay $300 into the account of a CPF member when he or his employer contributes at least $750 during the 18-month period from 1st March 1994 to 31st August 1995. In addition to the major share ownership exercise which the Government will conduct from time to time, other Government-linked companies will continue to be floated on the stock exchange. The SOTUS or Topping-Up Scheme The main objective behind the CPF SOTUS scheme is to encourage Singaporeans to save so that they will be able to participate in the next major share ownership scheme, just as they have done in the last SOTUS exercise. We are aware that not all adult Singapore citizens participated in the last SOTUS. For the coming SOTUS exercise, we have therefore made it easier for them to qualify for the $300 top-up by extending the qualifying period to 18 months. The $750 co-payment needed for citizen CPF members to receive the full $300 top-up amount corresponds to a CPF contribution of about $42 per month over a 18-month period or a salary of about $105 per month. Almost all working class Singaporeans should be able to enjoy a full top-up. Mr Low Thia Khiang has complained that the Government requires a matching contribution for giving the top-up. This is in line with our basic economic philosophy of staying clear from welfarism. Government's approach in the asset enhancement programme is to assist Singaporeans who are able to save to build up their assets. It is based on this fundamental principle that we require co-payment from citizen CPF members. The CPF Minimum Sum Scheme was introduced in 1987 to help employees to set aside a sum of money for their basic needs after the age of 60. It provides a monthly income and acts as a safeguard against their CPF savings running out prematurely. To ensure that the CPF Minimum Sum will be sufficient to meet the needs of old age, the Government has decided to increase the sum gradually from $34,600 to $80,000. As these savings are held over the long-term, the Government has decided to pay a higher interest rate for the CPF Special and Retirement Accounts. I have announced that the extra interest rate will be 1.25 percentage points above the normal CPF interest rate. Dr Vasoo has, however, commented that the higher interest rate of 1.25 percentage points is inadequate. He has suggested higher interest rate differentials of between 2% and 2.25%. The additional 1.25 percentage points are considered reasonable and is comparable to what long-term investments in the market would yield above the savings deposit rate. At present, the normal CPF interest rate is 2.5%, and the additional 1.25 percentage points are 50% of the current normal interest rate. Dr John Chen has asked when the Government will announce details of the CPF Minimum Sum Scheme and when will the new scheme take effect. I understand that the Minister for Labour will be announcing details of the revised scheme later this week. In his announcement, he will also address the complaint by Mr Ling How Doong that raising the Minimum Sum will mean that thousands of Singaporeans who earn $1,300 per month or less will not be able to draw out any money at all when they reach the age of 55. Dr John Chen has also suggested that the Government do a Top-Up Scheme for the Minimum Sum to achieve the Minimum Sum amount. This is an interesting proposal which we will have to study very carefully. Mr Chew Heng Ching has asked if the Government will consider setting up a fund with revenue collected from COE and road tax to finance road improvement works. As far as possible, the Government's policy is not to match specific sources of revenue with expenditure. Like all other Government revenue, collections from COE and road tax are credited to the Consolidated Fund. This forms a common pool that the Government draws on to finance its expenditure. This will ensure that each Government programme is funded on its own merits, taking into account competing claims on Government resources and the total amount that the Government can spend. In this way, all important programmes will be adequately funded. As regards road improvement works, a significant 15% of the Government's development expenditure, or $900 million, is going into road development, road maintenance, MRT construction, bus interchanges, ERP and other public transportation schemes and improvements in fiscal year 1994. This amount is 80% more than what was spent, on average, in the last two years. The Government has also announced its intention to build a network of underground roads to relieve road congestion in the Central Area. When completed, this will allow more COEs to be released. The whole programme is estimated to cost several billion dollars. It clearly demonstrates the Government's commitment in constantly reviewing and improving the public transportation infrastructure. There is, therefore, no need to set up a special road improvement fund. Mr Chiam See Tong has commented that the Government's reserves are too large. He has asked why such large reserves are necessary and of what value are they. I would like to point out to him that our budget surpluses and large reserves are viewed with great favour by international investors. BERI, which is the Business Environment Risk Intelligence organisation in Switzerland, has consistently awarded Singapore its highest 1A category. This company is used extensively by foreign investors to assess the safety of investing in foreign countries. The rating criteria they use include a country's inflation rate, budget status, whether it is positive or negative, and reserve level and external debts. In all these categories, Singapore scores very highly. We have consistent surpluses, large reserves and negligible external debt. As a result, Singapore has been able to maintain its position as an attractive location for foreign investors, notwithstanding our obvious limitation in land and resources. Last year, we were able to attract a record $3.8 billion in new investments against a background in which foreign investments in the region as a whole declined because of recession in the United States, Japan and Europe. I have here with me an extract from the BERI rating comparing Singapore with a country like Nigeria which is unfortunately facing many problems. It is a much larger country but their track record, on the criteria used for assessment, is very poor. It says, "Nigeria: Profit Opportunity Recommendation is: Initiate no business transactions without pre-payment". In the case of Singapore, a summary of Profit Opportunity Recommendation, classified 1A, is: Invest in this low-risk environment. And they show tables giving budget deficit as a percentage of GDP. For Nigeria, it ranged from 11.4% in 1988 to 15% of GDP in 1992; foreign exchange reserve is less than $1 billion; current account balance, negative last year. Singapore, of course, you know all our figures. So the presence of our reserves not only confers specific comfort to us in times of need but also is an important asset which draws foreign investors to Singapore consistently and at a rate much higher than other countries which have much more resources. Fiscal Policy At this time, I would just like to restate and explain to Members about Government's basic fiscal policy. Our Government's fiscal policy is to maintain a balanced budget centred around a long-term sustainable non-inflationary rate of GDP growth of between 4% and 6% per annum. On this basis, revenue and expenditure projections are planned accordingly because there is a strong link between revenue collection and GDP growth. Following from this, it means that in good years when GDP growth exceeds forecasts and expenditures are kept under control, budget surpluses will be realised and these surpluses are set aside in reserves to be drawn upon in times of economic downturn. However, lest we become too complacent, I have to remind Members that economic downturns are bound to happen from time to time due to movements in the business cycle. So far, we have been fortunate to have been insulated from the severe recessions in the United States, Japan and Europe by the boom in the East Asian economies. In fiscal year 1993, a large budget surplus was realised because the economy grew at an exceptionally buoyant 9.9% and there was considerable under-spending in the development budget arising from delays in the implementation of several large projects. For fiscal year 1994, we are forecasting a more modest surplus. The forecast for the fiscal year is a GDP growth of between 6% and 8% which is still above our long-term level of between 4% and 6%, while the development budget estimates for fiscal year 1994 are substantially higher than actual expenditures in fiscal year 1993 due to carry-overs of delayed projects. And this accounts for the more modest surplus forecast. The Government's aim is to maintain strict control over Government expenditures, particularly, recurrent expenditure. The targets we have set ensure that total expenditures should not exceed 20% of GDP. With recurrent expenditure capped at 12% of GDP and the balance of 8% going towards development expenditure, we have consistently maintained overall expenditures below 20%. It has been around 17% in recent years. I will now come to the few issues raised by the more recent speakers. Mr Robert Chua proposes a new scheme to induce employees to attend training on SDF courses using the CPF system. I shall not go into this any further. It is for the Ministry of Labour to consider. I have explained why property tax cuts are not necessarily all offset by increase in annual values. They tend to fluctuate. He has asked for a 4% property tax rate for owner-occupied industrial properties. I think this question has been asked previously, and I have said no, because we do not want to give special preference to owner-occupied industrial premises against rented premises. There is no economic justification for that. I do not think the companies' competitiveness will be affected by not receiving this special grant, or special concession, because basically, for many companies, occupation costs represent quite a small fraction of total costs and, unless the movement is very large, most companies do not find it an unacceptable burden. He has proposed the setting up of a joint venture bank to finance external investments, particularly for SMEs. I am not sure exactly what is a joint venture bank. Presumably it is some form of development bank which issues loans at subsidised or low rates. It is a possibility, but I have not heard of any demand for it. But one has to be careful that this does not encourage small companies to go overseas simply because of cheap money. For those who really need it and can demonstrate the projects which are viable, I think we can try and arrange special facilities for them. Assoc. Prof. Walter Woon has expressed great concern over the Government's excessive paternalism and suggested that we should not coddle our people to the extent of trying to make sure that all old and retired people will be looked after. Effectively, if we take his theory to its ultimate limit, we should dismantle the CPF scheme altogether. I hope this is not what he suggests, because that would be the ultimate test of self-reliance. But if he means that we should not do anything to withhold money after 55, I should point out that even with the increase of the Minimum Sum to $80,000, the amount withheld is not very large for a large number of persons on the CPF scheme. It is certainly not a problem for graduates or people with tertiary education who will be quite able to look after themselves and will have savings substantially larger than $80,000 which they can withdraw. Our concern is confined to the older people who have not had the advantage of a good education, because they were born in an unfortunate earlier period, and we have substantial numbers of these people. The Government feels that they should not be left to fend for themselves. Otherwise, come the next century when large numbers of these people begin to retire, with low educational skills, and probably with inadequate know-how to manage their finances, we do not want a situation to arise when we say, "Okay, I have given you all this money. If you have lost all of it, just too bad. You sleep on the streets." I do not think this is socially acceptable. Hence the scheme to be put up. It is not something which will be raised from $34,600 to $80,000 overnight. It is going to be a scheme introduced over a period of time. And as the Minister for Labour will explain, it does not mean that you cannot withdraw anything at all at 55. It is a phased withdrawal programme. When the details are announced, Prof. Woon may find it is acceptable. On the issue of paternalism and individual initiative, I would also point out that he is, in fact, drafting a law to oblige parents to be looked after by their children. Is that not the ultimate dependency? Mr Peh Chin Hua has also asked about the proposal for a development bank. I think I have answered that question. Finally, Mr Speaker, Sir, allow me to sum up. 1993 has been an exceptionally good year. 1994 should also be a good one as economic growth has been forecast to be between 6-8%. Nevertheless, we cannot afford to rest on our laurels. World economic conditions change rapidly. At the end of 1993, there was euphoria about the successful conclusion of the GATT talks. Two months on, there is growing concern about the potential fall-out from an ongoing Japanese-US trade dispute and there are fears about its escalation into a trade war. We must recognise that Singapore is but a very small point in the world grid. We cannot afford to be complacent. We must not be lulled into a sense of security and take progress and prosperity for granted. To remain successful, we must constantly take pre-emptive measures to ensure our international competitiveness. I am confident that as long as we continue to value entrepreneurship, productivity, savings and investments, we will be able to manage the leap into the First League of Nations. [Applause]. Mr Low Thia Khiang rose ---

The debate is over, Mr Low.

Question put, and agreed to. Resolved, That Parliament approves the financial policy of the Government for the financial year 1st April, 1994 to 31st March, 1995.

Sir, can I seek clarification from the Minister?

We have finished the debate, Mr Low.

Resolved, "That Parliament do now adjourn." - [Dr Lee Boon Yang]. Adjourned accordingly at Nineteen Minutes past Six o'clock pm. Committee of Supply - ESTIMATES OF EXPENDITURE FOR THE FINANCIAL YEAR 1ST APRIL, 1994 TO 31ST MARCH, 1995 (Cols. 657 - 662)