Hansard, 1999-03-09

The following Bill was assented to by the President of the Republic of Singapore on the date stated: 8 March 1999 Infectious Diseases (Amendment) Bill. TAN SOO KHOON Speaker Parliament of Singapore

Order. Pursuant to paragraph (7) of Standing Order 89, I have fixed the times for the conclusion of consideration of the heads of expenditure in the Estimates of Expenditure for FY 1999/2000 in the Committee of Supply. In fixing these times, I have taken into account the motion which the Leader of the House proposes to move to extend the sitting time of the Committee of Supply by one hour and forty-five minutes each day. The times I have fixed have been notified to hon. Members and will appear in the Official Report (Cols. 303 - 306). Committee of Supply - Estimates of Expenditure for the Financial Year 1st April 1999 to 31st March 2000 (Cols. 303 - 306)

Order read for Resumption of Debate on Question [26th February, 1999], "That Parliament approves the financial policy of the Government for the financial year 1st April, 1999 to 31st March, 2000." - [Minister for Finance]. Question again proposed.

(In Mandarin): Mr Speaker, Sir, the Government responded to the regional economic crisis with two cost-cutting packages last year to boost the economy. One was a $2-billion off-budget package announced last June, and the other a $10.5-billion cost-cutting supplementary package announced last November. In addition, this year's Budget has adequately and reasonably taken care of Singaporeans of different income groups. I am glad that the largest allocation of the Budget has gone to Defence - at 25% of total Government spending, followed by Education at 19%. National defence is one area that the Government has always emphasised. In times like this, Singapore is a small country and when there are social unrest and chaos in some other countries, we need to be even more prepared. The emphasis on education is also appropriate. Singapore is a small country with no natural resources. Human resource is what we depend on most for our success. As economic competition intensifies in the region and in the world, it is necessary for Singapore to move into a knowledge-based economy in order to survive and continue to grow. The second largest spending on education therefore should help develop our human resources for this challenge. However, I urge the Government to also support training and retraining programmes for our semi-skilled and unskilled workers, because they will remain in the workforce for at least another 20 years. One area that I want to give special attention to is the 10% personal income tax rebate that the Budget provides for this year, up from 5% given in the last financial year. Though only 35% of the taxpayers enjoy this 10% rebate, the remaining 65% of the population have also not been forgotten, as the Budget provides for rebates in rents and conservancy charges for those staying in rented and owner-occupied HDB flats. The amounts of these housing rebates range from two months' net rent and three months' net service and conservancy (S&C) charges for one-roomers to one month's net S&C charges for the 5-roomers. It is right that due emphasis and consideration be given to the lower and middle income groups. This approach certainly deserves our applause. It shows that the Government is able to present a budget for everyone during this crisis. For many years, due to the prudent fiscal policies, Singapore is able to enjoy budget surpluses. This has helped to build up surplus funds that can be used during difficult times. From the Budget, one can see that the projected expenditure, which will lead to an operating deficit of $5.1 billion or 3.5% of GDP for FY99, is drawn from the accumulated surpluses. The Government has no need, at this moment in time, to use the country's reserves to help Singapore to tide over this crisis. This is another area that we, as Singaporeans, should appreciate. I am confident that the Prime Minister and his team will be able to lead Singapore out of the regional financial crisis. But we should unite together to fully support the Government's efforts. Mr Speaker, Sir, the 10% across-the-board income tax cut will help to cushion the impact of the CPF and wage cuts for workers. However, the workers would like to ask if it will be enough to carry them through this year if the economy registers a negative growth. If the economy goes into a recession, does it mean that workers will have to go through another round of CPF and wage cut? Besides, when will the workers know if they have to bite the bullet again to help the economy to pull out of the recession? When will these workers be able to know whether the cost-cutting measures announced last year are working? The Budget Statement has yet to provide answers to these questions uppermost in the minds of the ordinary workers. It is time now for them to have a clearer picture of what is in store for them this year. It is only fair that they be warned early of the painful adjustments, as in the last year. On this note, I support the Budget Statement.

Mr Speaker, Sir, after the major cost-cutting package announced last November, it was not expected that there would be anything spectacular about the Budget. True enough, the Budget contained few surprises. As expected, there was an income tax rebate and rebates on HDB rentals and S&C charges; and sector-specific fiscal incentives. I am glad that spending on education has increased to 19% of total Government spending or just under 4% of GDP. Preparing the young for their future is one of the most important challenges that we face. The only aspect that I think is insufficiently covered is expenditure on the upgrading and retraining of workers. In my view, this is a task of some urgency. The transfer of $79 million for the Skills Redevelopment Programme in FY98 notwithstanding, surely more than $150 million could be allocated to the Ministry of Manpower this year for this purpose. The projected deficit is $5.1 billion. The majority view expressed yesterday was that this deficit was appropriate, citing as a reason the increase in development expenditure. I share this view. I would also like to add that the deficit is well within the current Government's means. After taking into account the overall projected deficits in FY98 and FY99 - the technical term is net receipts in excess of outlays - there is still an estimated $2.6 billion left in Government reserves during this term of government. The actual budget surplus in FY97, the first year of this current government, was $5.25 billion, which is not sufficient to cover the combined budget deficit in FY98 and FY99 of $5.5 billion. However, the receipt in excess of outlays in FY97, which includes land sales, was $13.5 billion, which is $2.6 billion more than the net outlays in FY98 and FY99. Hence, in terms of the Government reserves, the Government would not be drawing down on past Government reserves. The $5.1 billion deficit therefore, in my view, is entirely appropriate in a time of crisis and, in short, I support the financial policy of the Government. For the remainder of my speech, I would like to focus on one aspect of the economy that deserves particular attention. Compared to other countries in the region, Singapore has not been as badly affected by the financial crisis. This, in large part, has been due to the sound economic structure and capable economic governance, including the series of decisive cost cutting measures, the proactive drive towards building capabilities for the future, and the promotion of innovation and entrepreneurship, particularly technopreneurship. In short, during this period of crisis, the macro framework has been refined and updated in order to sustain economic growth, both in the immediate future as well as in the medium term. Since the macro-economic aspects of economic governance are well in hand, I believe that it is now time to examine the micro-economic aspects of economic governance. What I have in mind is a comprehensive and systematic review of the regulatory environment in Singapore, to serve two objectives. The first objective is cost. Regulations can, inadvertently or otherwise, contribute to cost. The second objective is to examine whether regulations inhibit the flexibility and freedom required for creativity and entrepreneurship. There are three categories of regulations which I have in mind. The first category comprises regulations which, because they discourage competition, either do not allow prices to fall as much as they can, or do not provide sufficient incentives for suppliers to offer better quality products or services. What is needed, in this instance, is to examine whether deregulation or liberalisation will be beneficial to consumers, without affecting the financial viability of existing suppliers. The second category of regulations comprises those which have been introduced for perfectly good reasons in the past, but which could be rendered outdated and obsolete today, because the reasons for which they were introduced may no longer be valid in today's changed environment. However, because these regulations are still in place, there is an added cost of compliance which may be an unnecessary burden on businesses and consumers. The third category of regulations are what I call kiasu regulations. These are regulations which have the objective of protecting the consumer or general public, but because of the fact that they are overly protective, they may inadvertently hinder entrepreneurship. The twin objectives of lowering cost and encouraging entrepreneurship should be readily accepted. In fact, regulatory reform is precisely what has been occurring in three sectors in Singapore today - finance, telecommunications and electricity. In the financial sector, we are all aware of what is amounting to a paradigm shift where a wide-ranging series of liberalisation and promotional measures have already been announced, including the demutualisation of the stock exchange and SIMEX. These are designed to enhance Singapore's competitiveness and to further promote Singapore's positioning as a financial centre. In the telecommunications sector, we have witnessed how the entry of additional suppliers in various telecommunications market has resulted in dramatic reductions in cost of service to the consumer. For example, the launch of the third Internet service provider, Cyberway, in 1996, led to the offering of attractive price packages by the three Internet service providers. Till this day, both SingNet and PacificNet continue to take full-page advertisements to advertise innovative offers to attract new customers. Similarly, in the mobile phone market, Mobile One and SingTel continue to engage in aggressive price competition, much to the satisfaction of mobile phone users. In the fixed line segment of the market, a second operator, Starhub, is due to start operations next year. I look forward to likely reductions in price when this occurs. The lesson we learn from this is that in industries where there are few, or even one supplier, a monopoly situation, the entry of new operators will, by intensifying competition, result in more competitive prices and a wider range of products with a better quality. Consumers definitely benefit. Existing operators also seem to be energised by the enhanced competition. They have risen to the challenge and continue to be profitable. For example, PacificNet was even successfully listed on Nasdaq recently. This also goes to show that the Singapore market is not too small to support more than one or two suppliers. Another industry which is in the midst of reform is electricity. It was only very recently that the Singapore Electricity Pool came into operation. This is a wholesale electricity market designed to facilitate competition. There are currently three supplies to the Pool - Power Senoko and Power Seraya - which are separate entities owned by Singapore Power as well as Tuas Power. I look forward to the awarding of the tender of majority ownership of Tuas Power in the near future, for it would be interesting to see if the change of ownership would result in lower prices of electricity which would benefit both businesses and the general public alike. It is precisely this kind of liberalisation, which we have already seen in these three markets, which serves as useful examples. And we need to see if there are other industries which could benefit from liberalisation and the entry of additional operators. During the Committee of Supply, I will be speaking on certain areas where I believe that a regulatory review would be beneficial. One might ask why the need for a regulatory review now, at this point in time. There are strong reasons to support this. First, Singapore is likely to encounter even more aggressive competition in the near future when the region recovers. Companies in the region will not only be leaner, trimmer, hungrier for business, but they will also have the initial advantage of a nominal depreciation vis-a-vis the Singapore dollar. Hence, it is important that costs in Singapore do not bounce back quickly to pre-crisis levels in the near future. In the light of this, a thorough examination of regulations which impact on costs would be timely. Secondly, I believe that the crisis has accelerated the pace of Singapore's restructuring towards a knowledge-based economy, just as the previous crisis in 1985/86 accelerated the pace of restructuring towards a higher value added economy in Singapore. Hence, it is important to remove or modify regulations which hinder the move today towards a knowledge-based economy. I would therefore like to propose that the Government initiate a systematic and comprehensive review of all regulations, to examine whether they inadvertently or otherwise contribute to costs or inhibit entrepreneurship in Singapore. This can be done by each and every Ministry, with feedback from the business sector which would know best which regulations are excessively irksome where cost and entrepreneurship are concerned. This applies not only to business costs but also to costs which impact directly on the consumer, and which would ultimately feed back into business cost through the demand for higher wages. In conclusion, now that the macro framework has been settled, it is time to focus on the micro and, in particular, on modifying regulations, where necessary, in order to keep costs down and remove unnecessary constraints to entrepreneurship.

Mr Speaker, Sir, I must say that given the prevailing economic conditions, the Minister for Finance's Budget is an appropriate one. It is a remarkable balancing act in ensuring that Singapore lives within its means, maintaining our ability to compete in the market place and looking after the needs and welfare of Singaporeans. I am also very relieved that despite the relentless calls from various quarters, the Government has rightfully not dipped into our reserves. Singaporeans must realise that these reserves are built up painstakingly over many years. Hence, it must not be drawn at the first sign of trouble. Mr Speaker, Sir, the ordinary Singaporeans are also not left out of the scheme of things. The service and conservancy charges, utilities and rental rebates for the HDB heartlanders amounted to a sum of $142 million. This is a big testimony that the Singapore Government is a caring one. However, despite the effective measures put up by the CSC and the rebates from the Budget, there will still be some Singaporeans who need help. They have many worries. Jobs, school fees and daily expenses are nagging concerns. Meeting the medical expenses will be another challenge. In each financial year, from FY94 to FY97, the Government contributed $100 million to the capital sum of Medifund. I am pleased to note that for the year 1998 Medifund has paid out $13 million to patients from the lower-income families. As for my ward, Punggol South, about $50,000 was granted over the last six months. Therefore, I urge the Government to continue to make generous provisions for Medifund to ensure that the proceeds from its capital sum would be able to meet the increasing demand. The Community Development Council (CDC) is slowly but surely providing its worth during this trying period. Its active role of helping the needy in our community with the various assistance schemes deserves the Government's continuous financial backing. In Punggol South, we see an increase in the number of applicants for our one-time interim financial assistance scheme for the unemployed. For the last three months, we have an average of 20 cases per month. Sir, other entities that have seen a growing role for themselves are the Voluntary Welfare Organisations (VWOs). They are often very spontaneous in offering assistance to Singaporeans who need them. Thus, the Government can enhance the effectiveness and ability to help Singaporeans by providing more funds to the VWOs to computerise and to train their personnel in such areas like counselling management and care-giving skills. The better the trained VWO volunteers are the better equipped they are to offer help to Singaporeans. Sir, another area of concern amongst Singaporeans is the rising bill each time they have to incur at their favourite eating outlets like the coffeeshops and food courts. Many of my residents have come to share with me that they are very puzzled about the price increases at the coffeeshops and wondered what these outlet proprietors have done with the rebates given by the Government. For instance, the 55% property tax rebate for a coffeeshop of about 4,000 sq ft means a saving of $12,000 to $15,000. NTUC FairPrice and NTUC Foodfare are often cited as good examples of how cost savings have been ploughed back for consumers' benefit. These residents have wanted to know whether the Government has any monitoring mechanism to ensure at least some justice is being done with regard to ploughing back cost savings from tax rebates and lower prices. I think their concerns are valid and their request reasonable. Sir, I support the Budget Statement.

Mr Speaker, Sir, recently I represented the NTUC at a conference of trade unions in Seoul. What struck me was the passion in which many fellow unionists in South Korea called for a move to bring the labour movement into the mainstream of activity. Obviously, they are very unhappy with the present lot. It is the Government and the major employer groups that are calling the shots. All the unions could do now is to react. They expressed their frustration by calling for massive demonstrations and even strikes. What the Korean trade unionists want is to influence events, and not just to respond to decisions already taken. As the hall reverberated with slogans, I counted myself as fortunate that we have a system in Singapore where trade unions are a partner with Government and management in nation-building. How did we get to where we are today? It was because of a critical decision taken by political and trade union leaders in the 1960s. SM Lee Kuan Yew was then Prime Minister. The labour movement was headed by Mr C V Devan Nair. At that time, our labour movement was already linked in a symbiotic relationship with the PAP. But SM Lee felt that it was not enough that unions worked in harmony with Government. He wanted to see unions develop equally close relations with management. Singapore's separation from Malaysia and the British withdrawal were events that made our union leaders sit up and realise that the old-fashioned confrontationist policies would be suicidal. And so the groundwork was laid for the kind of industrial harmony we enjoy today. The trouble is that our style of industrial relations is often seen totally in a different light in some other countries. I read with amusement a report that people in high position in Hong Kong think that we have been able to cut wages in Singapore because our unions are under the control of the Government. Our unions do not dance to the tune of the Government or management. We play an active part in identifying problems, and in suggesting solutions. We face daunting challenges. Our economy has been affected by the regional crisis. Close to 30,000 workers were retrenched in 1998. How many more will be laid off this year? Workers are concerned about job security. So our labour movement has initiated training programmes. And we are encouraged by workers' response to training and retraining. We are working with Government and management to find jobs for those who are retrenched. We know that some workers would have problems in paying for their children's textbooks and uniforms. So we provide education grants to them. Our cooperatives also help by lowering cost of basic items. Other traders followed suit. We also got the bus companies and the MRT to lower costs. Our aim is to get workers to acquire skills so that they can remain employable for life. Our workers must have the ability to operate in a knowledge economy. Of course, IT is what will drive the knowledge economy. We must find imaginative ways to tell our workers what a knowledge economy is all about. We need to make them feel comfortable. Not everyone can become computer literate. But this does not mean that they cannot access knowledge through computers. There are computer screens that operate on the touch system. There is no need to key in the secret codes. People not familiar with the computer system should go to the URA Gallery. As you walk across the room, a big cinema screen comes alive. There is no need to touch anything. Then there are also computer screens where all you need is to touch. You point to what you want to see, and bingo, you get to see what you want to see! The NTUC is working with a company to develop IT kiosks, with computer screens, operating also on the touch system. Soon, you will find the i-ONE kiosks all over Singapore, providing information about our labour movement, among other things. In due course, many things which now seem so complicated will be made simpler. In a sense, it would be like the development of the telephone. Initially, the vast majority of Singaporeans did not have a telephone at home. Now there is hardly a home without a phone. Today, mobile phones are used by many Singaporeans. Mr Speaker, Sir, the labour movement is committed to playing its part in moving Singapore into a knowledge economy. We will spare no effort to look after and enhance the interests of our workers. We believe that we can do this by working as a social partner with Government and employers. Together, we can create even better paying jobs in the economy so that we will have enough opportunities for all Singaporeans to pursue. Together, we can create new and better skills in our workforce so that every Singaporean can participate in a knowledge economy, and live a better life in the 21st century. Mr Speaker, Sir, I support the motion in the name of the Minister for Finance.

Mr Speaker, Sir, last year when we were debating the budget that was presented by the Minister, the recession was still not on us. We had not gone into recession and we did not know what scars it may leave in our society. Indeed, the Minister and a number of others were indulging in some wishful thinking that perhaps we would not be hit hard and we would be all right, although there were warnings from the outside that the recession would be worse than the 1985 recession. But now, a year down the road, we can see what the recession has done. The evidence is all around us. We have 28,300 workers thrown out of employment just in one year. We do not have the figures for January and February of this year. I do not know why they are not available. I rang up the Ministry of Manpower and they said, "We only produce them every quarter." These 28,300 workers have swelled the unemployed in Singapore to 82,400 as at 31st December 1998. Then we were also told sometime ago that there were 21,000 Singaporeans above the age of 55 who have no CPF savings at all to fall back on. Many of our workers have not just lost their employment, but almost all others have suffered wage cuts, and this is on top of the cuts in the CPF savings. And as the Minister said in his Budget Statement, it has badly affected those above 40 years of age. It is not just the workers, the businesses are down. We have been told of the drop in tourist arrivals and we know that several businesses have closed and bankruptcies are on the increase. So it is altogether a gloomy picture. As the Minister said, we do not know whether 1999 will be any better. He says it is still too uncertain to predict anything for 1999. As a result of all these, the revenue is down by $3.1 billion. It is against this background that the Government has come to present its programme to the people. I say advisedly to the people, because let us not forget this is a programme of how the Government proposes to use our people's monies in planning for them through this difficult period and beyond. I was quite interested to see Mr Ngiam, the Permanent Secretary to the Ministry of Finance, writing in the economic newsletter from the Department of Economics of the University, say that the one constant in every administration is the political imperative behind every economic decision. He says politics drives economics. I was glad to see that admission from Mr Ngiam. But, of course, it is not new, without being disrespectful to him. That was stated by Aristotle many centuries ago when he said that politics was the master science. Sir, I am tempted to ask, and this does not appear in the Minister's Statement, what is this Government's political imperative in presenting the programme, not just for the period of the recession, the crisis, but beyond? Do the political imperatives include a concern for all our citizens, not just a particular section or sections, but for all our citizens and for their plight during the economic difficulties that they are facing? This is a political imperative because it is not just simply welfarism. It shows a concern for those who have contributed to Singapore's economy during the good days. Or is it the Government's political imperative that they have to get along as best as they can? We have got other matters to attend to, not that they are unimportant, to try and get the businesses moving and the economy revived, and we cannot be over-concerned with their plight. That would show a complete lack of concern for their situation and particularly, as I said, of the workers who have contributed to economic progress. And, of course, in the good days, we had tributes paid to them for their contribution to Singapore's economic progress. The other imperative I wish to know, whether it is one of the Government's imperatives, is how does it plan to minimise the risk of further recessions down the road. How does the Government see this as possible? Is it by having a society where all our citizens are well-equipped, that means, having the necessary basic education to recognise the pitfalls in our society that contribute to any recession that may come our way? Or is the imperative a society where the majority is left out from making any contribution, and the contribution is left to foreign workers and foreign companies, and the decision-making on economic matters left to a small minority of our people? If we adopt the latter, then we are robbing ourselves of the talent in our community. We have got to make sure that we draw in all the talents that are available to us in Singapore, and not just rely on the talents of a few people and particularly just the foreigners. Of course, it goes without saying that if our citizens are to play this role in making their contribution to our economic welfare and progress, then they must be well informed - and this is openness - on all economic activities of the Government, and be allowed to comment and even criticise anything that the Government proposes to do. So the question is: is the Budget preparing us for such a society or are we going to continue in the same way as we have continued from one recession to another? Speaking in last year's budget, Mr Speaker, Sir, I said that the Budget was disappointing. I am afraid I have the word again for it this year. It is not only disappointing but it is imbalanced in the allocations made to the various Ministries. Why is it disappointing? A writer in the Straits Times, the Government media, reporting on the Budget said it was a Budget for the man-in-the-street. I do not know how he came to that conclusion, and he also called it a "Singapore vintage". Again, I was puzzled by this. It looked to me it was certainly a PAP vintage Budget but hardly a Singapore vintage Budget, in the sense that Singaporeans would all be very happy and overjoyed with the Budget. He perhaps called it a Budget for the man-in-the-street because of what the Straits Times in another article hailed as the "goodies" for the heartlanders, the people who dwell in HDB apartments. I should not look at a gift horse in the mouth. My Party, of course, welcomes the relief that is being given and we would like to say `thank you'. But may I say that even that might appear to be given grudgingly because the Minister says they would not get the benefit of the 10% income tax rebate that 35% of the population will be receiving. But, as I have said, let us not be stinting in thanking the Government for this. But, Mr Speaker, Sir, may I say it is small fare. The rebates on utilities are offset by the increase in the water-borne fees and the conservation tax to take effect from 1st July. So the Government would appear to be taking away with one hand what it gives with the other hand. In last year's debate, my Party called for a suspension of the water conservation tax. Clearly, that has not merited any consideration with the Government. We also called for a suspension of the GST, or at least an exemption for the basic necessities. That, again, has fallen on deaf ears. But may I ask the Government how does it think these 82,400 people, who were unemployed as at 31st December, are going to pay for their food, their children's education and healthcare. Talking about healthcare, I see that the revenue for the Ministry has gone up by $2,066,000 whilst running costs have come down by almost $18 million and the other operating costs have come down by $25 million. But the charges made to our citizens for attending outpatient centres and clinics and cost of medicines would appear to remain the same. Should they not be given some relief from the high costs of healthcare? There is also the children's education. I know there are various funds. But we have called for free education for children of low income families, at least at the primary and secondary levels. Why is that not possible if our aim is to create a knowledge-based economy? If that is the purpose, then we should be spending money on providing education for all. We should be aiming for an egalitarian society, not a society where there are few elitists and the rest are left out. How are they going to pay for their transport costs and public transport is not cheap? The Minister says that the duration of unemployment in 1998 was about 8.9 weeks. How long have they been unemployed now? We were told some time ago that they had savings only to last them for about three months and for some, up to six months. This Budget, like the previous Budgets, does very little for our citizens who will suffer most in this economic crisis. Yet it is those people who have been contributing to our economic progress. We seem to take no account of that when it comes to a crisis. The Minister says that we must not succumb to the lure of welfarism because, once we succumb, it will be impossible to reverse it. May I assure the Minister, and I am sure the Government knows, that Singaporeans are not asking for welfarism. I do not think Singaporeans want welfarism in the sense that it has been understood as paying them for nothing. But these people have been thrown out of jobs through no fault of their own. It has been forced on them. They have been forced to take pay cuts, again, through no fault of theirs. So is it welfarism to see that they are helped? Is it welfarism to see that their children's education does not suffer? We keep talking about our only resource, our people. And is not education the best investment in that resource, if it is our only resource? So I say, Mr Speaker, Sir, that it is not welfarism that we are asking for, but a recognition of the contribution made by our workers and adequate caring for them in their times of trouble. May I propose that the Government consider very seriously giving a cash allowance to families who are in need during the period of the crisis? We called for this cash allowance to families in need a long time ago but nothing has been done. I must move on, Mr Speaker, Sir. I said it is also an imbalanced Budget. Although the revenue has gone down by 11.4%, I see the operating expenditure has gone up by 2% over 1998. And I recall that the Minister, speaking last year in this House, said that the Government intended to keep a tight lid on expenditure, and this year, he again speaks about the aim of keeping the public sector lean and trim whilst maintaining a high quality of public service. I do not want to run down the public service. It is good. But I am not sure that every Singaporean will agree that our public service is of a very high quality. The running costs, we were told, amount to about $14 billion and 92% of this goes to the running costs of the Ministries. The manpower expenses, we are told, amount to $3 billion. That leaves about $11 billion for other expenditures. We do not know what these running costs are. Should we not have some breakdown of the running costs of the Government? Mr Speaker, Sir, we are a population of three million, or is it that we are approaching four million? Do we need to spend $14 billion, in running costs, in governing ourselves? I have, in the past, and I was here in 1981 to 1986, called several times for a committee to examine the running costs of governing us. But, again, it has fallen on deaf ears. But the imbalance is seen sharply, Mr Speaker, Sir, in the disproportionate allocations made to the Ministries. Of course, I go straight to defence. I may be the only speaker in this House who queries this expenditure on defence year in and year out. But may I assure the Minister that there are a great many people outside who want to know why we are spending so much on defence. Should we not be told clearly in simple terms instead of just general language about the need to be ready, why we need to spend 25% of our monies on defence? If you add to that the cost of policing us and the civil defence, it comes to almost 1/3 of our monies. Last year, Mr Speaker, Sir, I informed the House of the spending in various countries. I said that out of a total of 167 countries, only about 24 or 25 were spending more on defence expressed as a percentage in terms of their GDP. That was for 1996. I have not got any figures after that. The Minister for Defence, replying partly to my call last year, spoke of the need for high technology and the need to spend the money on providing high technology. Well and good. But the question still remains unanswered. What is the threat that we are facing? Where is the threat coming from? And what form will the threat take that we need to spend 25% of our monies on defence? Is it that we wish or that we intend to impose a mentality in our citizens that they are under siege, that they are besieged by enemies outside and therefore we have to be prepared? That may have been the position years ago, in the 1950s or 1960s, but does that still continue that we are being besieged or surrounded by hostile neighbours? After all, we are members of several defence pacts under which the members are obliged to come to the defence of any country if it is attacked. There seems to be a paranoia about being attacked from outside. In the same way, I suppose, the Government and the PAP suffer from opposition parties. There is a paranoia about allowing opposition parties to function and perform their role in the society. I think one speaker in last year's debate asked the House to look at what happened to Kuwait. What happened to Kuwait? When Kuwait was attacked, the international community moved in. So we have the United Nations now and we should be backing the United Nations to see that they provide some security for the small countries. But most important is we have got to make a calculation on our spending and see whether it is cost effective. That is the most important thing. And again, I have been calling for a committee to study our defence needs and how much we need to spend on it. There has not been enough thought given to all this. All this is decided for us and we are told, "You, be careful, we are going to be attacked. So, we have got to be ready." Secondly is the amount proposed to be spent on education. That is only less than a quarter of our monies. And health, which is another important factor, takes up only about 1/25 of our monies, whereas defence and security take up a third. The Committee on Singapore's Competitiveness rightly stresses the role of education in our economic progress and it is not just the retraining of our workers, important as it is, ---

Order. Mr Jeyaretnam, you have used up your time.

(In Mandarin): Mr Speaker, Sir, I support the Budget Statement by the Finance Minister, Dr Richard Hu. On the surface, this budget would appear to be uneventful. Some people commented that it is like drinking plain water. Yet, it is a budget which is popularly supported by the people amidst this South-east Asian financial crisis. The budget deficit in 1999 has been increased from $470 million in 1998 to $5.05 billion this year, or 3.5% of our GDP which is the highest deficit in recent years. The increase in the budget deficit is mainly due to the increase in Development Estimates which is as high as S$13.94 billion, accounting for 48% of our total expenditure or 9.8% of our GDP which is again one of the highest figures in the recent history of Singapore. According to the Finance Minister, this is to be treated as an investment for our long-term development of our educational and economic infrastructure. For the education budget, it receives S$5.7 billion, which is 4% of our GDP and is much higher than the 3% in 1997 or 3.4% in 1998. On the Development Expenditure for the Ministry of Education, it has also increased by 31% or S$2.2 billion, out of which S$1 billion will be used for the construction of schools and the other S$315 million will be used on IT facilities. I am very glad that our Government would be able to spend so much money on education despite the economic crisis we are facing. I hope that the Ministry of Education would build more schools so that they could implement the full-day school programme as soon as possible, and that more computers would be purchased to facilitate our students with IT skills. On tax reduction, there is no big change in this budget, except for a 10% rebate for corporate and personal income tax only. However, provisions are made to help our lower income families tide over these difficult times, unlike what the NCMP had said just now. I welcome the rebates given to the HDB dwellers in terms of rentals, utilities and S&C charges. I hope that the Government could also provide some form of assistance to those who are retrenched or unemployed because of the economic downturn, as their families are suffering because of their loss of income. I personally feel that after the off-budget measures and the $10.5 billion cost-cutting package announced by the Government last year, if the Government again gives some cost-cutting provisions in this budget, it would send the wrong message to foreign investors and local businessmen that our economy is getting worse. Therefore, I feel that although this Budget is very cautiously tabled and seemingly uneventful, like plain water, it is nevertheless a confidence-boosting budget. I believe that foreign investors will continue to come here to invest and local businessmen would also make a comeback to recapture lost ground, thereby helping to resolve our present unemployment problems. In short, to look beyond the economic crisis and put our focus on the strategic industrial development after recovery from the crisis is the correct thing to do. Our Government has been cautious in avoiding over-reacting to the present crisis, particularly at this time where there are signs of recovery for the economies in the region. I think this budget would give people more confidence and would alleviate their worries about our economic future. Mr Speaker, Sir, since its inception in July 1997, the Asian financial crisis has been sustained for more than 11/2 years. Although the crisis has quite seriously impacted on us, our sound financial system and solid economic fundamentals have stood us well in withstanding this financial turmoil. Now, with some signs of recovery in the Asia-Pacific region, I feel that the Government and our people should not be too pessimistic about our future. We should see how we could seize this opportunity and move one step higher. The Government should also consider creating an environment which is conducive to foreign investors and local businessmen to invest here. This will help them to build up their business and, at the same time, bring out the entrepreneurship among our Singaporeans. Mr Speaker, Sir, on the first day of Chinese New Year this year, when community leaders, friends and relatives came to greet me, at first, I would avoid using the traditional Chinese greeting of "Gong Xi Fa Cai" because with this financial crisis and all the troubles in this region, no one will believe that we can fa cai or strike a fortune this year. So I just said very plainly, "Good Luck, Good Health". But then by the sixth day of Chinese New Year, my feelings changed because on the fourth day of the Chinese New Year, ie, on 19th February, the Japanese Parliament approved an unprecedented huge budget of S$1,211.5 billion to rescue the Japanese economy with the hope that in the new financial year starting on 1st April, it would be able to rescue Japan from its economic recession which had been troubling them over the last eight days. I have full confidence in this rescue package of the Japanese Government. Then on the sixth day of Chinese New Year, ie, on 21st February, the Government of the People's Republic of China decided that it would expand its domestic demand and strive for 7% economic growth this year and they also stated categorically that the RMB would not be devalued. With all my years of experience investing in China, I feel that this is not an impossible task for the Chinese government. And then on 19th February, the Finance Minister of Taiwan also announced that Taiwan's five main financial reform measures were receiving immediate positive results. Therefore, from the sixth day of the Chinese New Year, I began to say "Gong Xi Fa Cai" again because I was no longer pessimistic about our future. After the Chinese New Year this year, there are a lot of changes in the economic situation in Asia-Pacific. Apart from India and Indonesia, there are many countries which are beginning to see light of recovery at the end of the tunnel. For some countries, they see hope of getting out of the present financial crisis. Apparently, the launch of the Euro and Brazil's financial turbulence have also caused some upheavals to the stock markets in this region. However, the financial market was able to recover its tranquility in a relatively short time. Apart from the attempt to stimulate its economic recovery by the passing of a S$1,211.5 billion budget, the Japanese Government also adjusted its currency policy to lower the Japanese yen exchange rate to its lowest in three months. The margin of depreciation of the currencies of the other countries in this region remains quite normal. There was no particular upheaval in the forex market. On the contrary, I have observed that the exchange rates of the currencies of these countries have rebounded by about 5% to 30% vis-a-vis last year's values. In the stock market and real estate market, there have been no more slips and there seems to be a tendency of stable climb. All these changes are very encouraging. Furthermore, many countries in the Asia-Pacific have also increased their budget to stimulate their country's economy and to increase the need for their imports. According to a report, in January, Korea has increased 15.4% in their imports and Thailand has increased by about 1.6%. In a speech delivered at a function of the New York Foreign Policies Association, the Managing Director of IMF, Mr Camdessus said, "Apparently, the economy of the Asia Pacific region is in the process of recovery, and for the world's economy, the worst seems to be over already." He admitted that, of late, the mistake of IMF was to be over-pessimistic about the economic prospects. He also felt that the economic reform plans adopted by the Asia-Pacific region were already beginning to prove effective, and that Korea and Thailand have apparently stepped out of their economic crisis. I would like to point out that there are already some silver linings appearing from the black clouds overhanging the Asia-Pacific's economy. The financial situation is stabilised, foreign trade is gradually improving and foreign reserves are increased. This year, the Philippines issued international bonds to secure more financing from international financial houses and to buy in US dollars from the foreign exchange market, thus substantially increasing the foreign reserves of the Philippines. Malaysia has also increased its foreign reserves by 40%, attaining a high of US$28 billion in a short period of time. The Philippines' foreign reserves reached US$12 billion in February this year, back to the level before the currency crisis. As for Thailand and Korea, their foreign reserves have risen to US$29 billion and US$52.2 respectively. All these increases in foreign reserves will help the countries' debt repayment and import capabilities, and indirectly stabilise the exchange rates. More importantly, the five countries and territories which have the highest foreign reserves in the world, namely, Japan, China, Hong Kong, Taiwan and Singapore are all in the Asia-Pacific region. This shows that the resilience and ability to rebound in the Asia Pacific's economy is very strong. In addition, the world's semi-conductor industry is also showing signs of recovery with expected growth of 8% this year. This will in turn bring about more exports of electronic products such as personal computers, mobile telephones, etc. and this will be beneficial to South-East Asian countries whose main exports are electronic products. On this basis, I would say that there are already signs of recovery in the Asia Pacific's economy. I hope that the Government and our people will not be overly pessimistic about the Asia Pacific's economy. We must be properly prepared. Apart from consolidating our domestic economy so that we would have more and more good years of economic prosperity ahead, the Government should also do more to create an environment conducive to investment by foreign and local entrepreneurs, by providing financing facilities and simplified procedures. This will not only help our business people to tide over the crisis, but also prepare them properly so that they would be able to seize good opportunities when the Asia Pacific's economy recovers, and make a comeback to better contribute to our country's economy. Of course, our local businessmen must also seize the opportunities that may be available to them with the recovery of the Asia Pacific's economy. In general, we must encourage our local businesses and MNCs to venture into the Asia Pacific region this year. Be the "early bird that catches the worm" and pick the right opportunities to invest and develop their business for good returns. I hope that the financial institutions in Singapore will quickly and resolutely take this kind of economic recovery into consideration, and be daring in providing financing facilities to the more reliable promising local businesses so as to help them to seize such opportunities as they come along. This will be helpful to our economic development. Furthermore, a survey by MasterCard International revealed that there has been significant increase in the consumer confidence index. As a businessman, my feeling for the economy and the market is more direct and sensitive. In view of this whole bunch of good news, I believe that the new year ahead will indeed be a good year for us to gong xi fa cai. Let us work hand in hand to prepare ourselves to receive gong xi fa cai . Sir, I support the motion.

Mr Speaker, Sir, I rise in support of the Budget. I would describe this as a strategic budget, one for the long term and one that would allow us to take advantage of the opportunities when the region recovers. Because we can expect some intense competition from neighbours when and should their restructuring efforts succeed in making them more competitive and efficient. It is a predictable budget but, in this case, it is good because it demonstrates that we are not distracted by short-term challenges and remain focused on fundamental principles that have proven to be successful. I would like, however, to highlight five main areas which I think deserve more attention from the Minister: (1) strengthening our commitment and presence in the region; (2) enhancing the capacity and capability of our SMEs; (3) assisting the retrenched and unemployed; (4) encouraging and motivating positive attitudes towards conservation; and (5) developing social cohesion. Strengthening our commitment and presence in the region Despite great efforts in regionalisation, we still face many problems. We hear of many failures than success. What has happened to our Growth Triangle? Our investments in China continue to throw up many surprises. But such is the nature and risk of investment despite the fact that we are most familiar with the region. One of the problems we have today is the inability to reconcile the dichotomy between political and economic relationships, that when political relationship goes through a bad patch, it seems to discourage many companies from committing themselves or investing in the country. Should this be so? Can businesses and economic relationships not be based on mutually rewarding principles continue to survive the occasional and, of course, of late, a little bit more frequent, political challenges? Like it or not, we cannot change our geography. The region will continue to be our major market for our products and hinterland to expand our industrial base. It is still the region we know best where our relations are still strong, where our best hopes lie. Our forefathers brought prosperity to this country as middlemen. With only goodwill and friendship with neigbours as tools of trade, now, more than ever before, we need to re-establish this goodwill between our people and our businesses to be strong enough to withstand the occasional political hiccups. We need to strengthen and deepen this relationship with our neighbours beyond political relationships, which can be uncertain, but between businesses and between people. We should send a strong signal to encourage and motivate companies to develop and reinforce this relationship. We should not let failures to discourage us from continued commitment to this region. The financial policies and budget allocation can reflect this by making the necessary provision to assist these companies to establish their presence and infrastructure in the region. The economy in the region may be bad, but there are still good companies out there. We can help local companies to develop strategic relations through mergers and acquisitions, as this may be the right time to forge such relationship. On the humanitarian front, we can do more to help and assist our neighbours, through food aid and other social projects. We can create long-term goodwill, for example, by increasing the number of students under the ASEAN scholarship programme, or perhaps offer training and scholarships not only in educational institutions but to broaden the scope of this programme, eg, to train other professionals in the region. Government institutions, eg, hospitals and social agencies, can all participate in this effort to strengthen relationships and reinforce ties with our friends in the region. Enhancing the capacity and capability of SMEs A large number of SMEs are traders and distributors. They have strong entrepreneurial skills, but many do not own their own unique product of service. Most of them are suppliers to MNCs. We need to do more to help our SMEs. They must be nurtured to be a strong base of our economy, very much like in Taiwan, because an economy that is too dependent on MNCs can be vulnerable. If these companies decide to withdraw from the region to support their local industries back home, our economy can be severely affected. While the Local Enterprise Finance Scheme has been expanded, it is still primarily to finance plant and machinery and for investment in Singapore. What is needed is to help SMEs to strengthen their presence and operation in the region, and to support initiatives to explore new markets in other regions. We need to do more to encourage SMEs to merge and form bigger companies and be better able to withstand increasing competition. GLCs can take the lead by forming strategic alliances and partnerships with local SMEs. This may be a difficult task but one that we cannot run away from, because it is extremely important that our SMEs are strong and large enough to be regional or perhaps global players. I hope to see a more focused and determined effort to nurture and financially motivate SMEs so that they can enhance their capacity and capability to be truly regional players. Assisting the retrenched and unemployed The retrenched or unemployed are not just unskilled or poorly skilled workers. It affects also the skilled managers and executives. Even good and hardworking staff can be retrenched. For most of these people, the need for help is urgent and immediate. Not many have enough savings to help them cope with long periods of unemployment. With depreciating asset values, selling off their homes and cars may no longer be a viable option. They cannot think of retraining or other long-term solutions. To them, the most pressing need is to get a job and ease the pain of their financial burden. The subsidies for rental, utilities and S&C charges are timely. But I hope the Minister would be more generous in allocating funds for welfare, bursaries and scholarships and to make them more accessible. We should do more to help their children and families. The Government can also help lessen the burden in other ways by being more understanding in the collection of various Government and statutory board charges and fees. We must ensure that deficit spending does result in either job creation for Singaporeans or helping them ease the burden. Deficit spending does not necessarily translate to higher GDP growth because of the large import content of our spending. But as long as it creates jobs or helps them pay their bills, it would improve the welfare of Singaporeans. While the Manpower Ministry and NTUC have done quite a lot to help retrenched workers, we can do more to help a higher level of managers and executives. Why not make the Ministry of Manpower a first-stop placement agency and help search or find another job for all types of employees? Why not training for managers and executives too? They too need to be retrained, retooled and reskilled. Where can they turn to? Can the civil service and statutory boards, for example, take in more part-time or outsource most of their work to these self-employed professionals, not only to support these people in times of economic crisis but perhaps to make Government lean and, hopefully, develop a whole new industry of self-employed people? This is becoming increasingly common in some countries like the US, but I suspect will be more significant in Singapore too in the future. Encouraging positive attitudes towards conservation Recently, the issue of water supply has brought about greater consciousness amongst Singaporeans about the need for conservation. I would therefore like to see, in fact, in the Budget, a more specific attempt to motivate and incentivise, eg, property developers and industrialists to invest in energy conservation programmes and equipment as part of our consistent and long-term effort to make energy conservation a way of life. However, in reality, some of these equipment tend to be more expensive than conventional ones and, until and unless we help develop a local market that is large enough to support conservation efforts, energy conservation will continue to remain expensive and inconvenient. Developing social cohesion We have seen recent attempts to test social cohesion and multi-racial understanding of our people. Fortunately, Singaporeans are determined not to let foreigners interfere with our social issues or agenda. However, we cannot take this for granted. The recent debate on discrimination faced by job seekers, if not well managed, can lead to problematic race relations. We have agencies like the CDCs that are now tasked to forge community bonding amongst our people. Perhaps we can have programmes where self-help groups are encouraged to come together; all this for the purpose of exposing our people, especially our children, to have more contact with friends of other races, religions and economic backgrounds.

Mr Speaker, Sir, I rise in support of the motion standing in the name of the Minister for Finance. The Budget Statement this year, though cautious, is a prudent one against a backdrop of the regional crisis and the two off-budget measures last year. The most significant highlight in this year's Budget is perhaps the unprecedented budget deficit projected at $5.1 billion. The projected budget deficit is mainly a result of reduced revenues than increased expenditures. In fact, the expenditure is rising only by $1.5 billion or about 6% compared to the past year. While the reduced revenues resulting from tax concessions are indeed welcomed by all, there are those who feel that there could have been a greater balance in the range of growth sectors which should have benefited from these fiscal measures. For example, the financial services sector is very pleased with the measures to develop the bond market. However, with the Government's stated intention to make Singapore a knowledge-based economy, more fiscal measures could have been introduced in this year's Budget. Sir, I would like to mention three of these possibilities based on feedback from the public and media. First, there is a need to introduce tax deduction for the purchase of home computers. Presently, there is a heavy emphasis to equip our schools with computers on a ratio of two students to one computer within the next few years. But school students and working adults alike would find that having a home computer in the age of the Internet and e-commerce is very essential. Already more than 40% of homes in Singapore have a computer. I feel that to help the remaining homes own a computer through the deduction of the hardware cost against the personal income tax or through a grant for HDB dwellers who may not be in the tax bracket, will go a long way in enhancing our nation's computer literacy. This will also help level the playing field for the younger generation. Second, there is a need to lower the cost of information and knowledge acquisition. One of the key ways in which new knowledge and information are tapped is through licensing. It is common now to exploit licensed knowledge and information in the reseller markets where licensed technology is repackaged for sale, either as products or services. The cost of licensing is the royalty or licence fee payable. Typically, there is a withholding tax cost, which the licensee is required to bear. With our knowledge infrastructure getting in place, Singapore is well positioned to become a reseller hub. Reducing the withholding tax costs would certainly help boost this development. Purchase of information and knowledge outright requires capital investment. I understand that presently our tax laws consider the acquiring of patents, know-how knowledge and information as capital in nature. Unless it qualifies as approved patents or know-how, no deduction is given for the investment cost incurred. From an economic standpoint, these intellectual properties and rights are the very things that help create the final outputs, be it goods or services. Assets used in a business are given wear and tear allowances only if they qualify as plant and machinery. But this concept is somewhat dated. In this information age, we need to completely review this if Singapore is to become a knowledge based economy. Intellectual properties and rights, whether purchased or created in-house, are like plants and machinery in a knowledge-based economy. These are the tools with which businesses are done and carried out. Such costs should be given tax deductions, just like plants and machinery. Third, there is a need to encourage employee share options especially as we try to attract foreign talent to build our knowledge-based economy. In the US, many IT firms have succeeded in attracting and retaining IT professionals because of their very attractive employee stock options. The US tax laws also facilitate this use of employee stock options. In Singapore, tax is imposed at the time the options are exercised. The taxable amount is based on the excess of market value at the time of the exercise over the cost of acquisition. This does not necessarily encourage employee share options because share options are exercised when the market values are higher than the option price but the full amount is taxed in the year of exercise. As the values of quoted shares move up and down over time, the tendency is to sell at least some of the shares immediately to fund the tax payment and to lock in the reward. The current tax code does not encourage employees to hold on to their shares, and there is a need to make fundamental changes in this regard. The present system could be adopted in a number of ways to encourage share ownership and long-term employee commitment. Sir, I do hope that the Finance Minister would consider these three tax change suggestions to develop and grow our human capital as we move towards a knowledge-based economy.

Mr Speaker, Sir, I rise to support the Budget Statement. Sir, the Finance Minister has attributed to, as one of the main factors contributing to Singapore's economic slowdown, the sharp contraction in regional demand. The economies of Indonesia, Thailand, Malaysia, Korea and Hong Kong, have all suffered recessions. The financial crisis has brought with it damage to economies, decimation of wealth, job loss and, in certain instances, political fall outs. As a relatively unaffected country amidst the regional turmoil, Singapore has been facing increasing pressure to provide financial assistance as a favour to aid its fellow ASEAN members. One may also argue that such monetary transfers may be the necessary stimulant to revive and reinstate the much needed regional demand so vital to our own economic well-being. The Budget, however, is silent on this. The validity of such claims needs to be assessed using two yardsticks: firstly, does Singapore have the capacity to provide such forms of foreign aid and, secondly, is foreign monetary aid the best solution to the problems that cause chaos in such countries? There is no doubt that the Singapore economy grew very rapidly in the past, but the size of our national income, measured in monetary terms, is much smaller than the potential income of our neighbours. A suitable analogy is that Singapore is akin to a rabbit and our neighbours are the equivalent of elephants. As a small state without natural resources, Singapore bears no illusions about its inherent capabilities, with its GNP at only around 1% that of the United States, a major provider of foreign aid. As such, we are in no position to make available, in unconditional terms, monetary assistance to the magnitude that major developed countries are capable of. Nevertheless, we have consistently tried to assist Indonesia within our limited means since the start of the crisis. Examples include the proposed US$5 billion trade-financing credit facility, and our commitment to extend S$12 million worth of rice and supplies as humanitarian aid to Indonesia. Singapore has, however, come under criticism for stipulating tough conditions for the usage of the trade-financing credit facility. The real problem lies in the divergence of views on how Singapore can or should help countries which are suffering from the current crisis. There is a general belief that the rich should help the poor, that the haves should assist the have-nots. Moreover, the interdependent nature of regional trade and investment has led to assertions that Singapore's prosperity has, to an extent, been achieved using the resources of its regional neighbours. As such, we are now expected to give generously and without conditions. It must be reiterated that the proposed trade financing package serves, essentially, an enabling function: the main impetus is to aid Indonesia along the path to recovery by allowing normal economic functions, like trade, which have been hampered by the crisis, to continue. The folly of advancing financial transfers alone without ensuring its effective usage is well illustrated in academic studies on the efficacy of foreign aid. Let me elaborate. It has been extensively documented that cash transfers alone are unable to foster economic growth and recovery if the money was deployed poorly. In many instances, economic and political difficulties are concoctions of specific and particularistic circumstances prevailing within countries, and few of such problems are amenable to external intervention or assistance. Sound domestic policies remain the key solution in the generation of economic recovery and growth, such as reforms in the financial sectors, the adoption of appropriate fiscal and monetary policies and the nurturing of a solid political foundation and a firm social fabric. Countries suffering from economic difficulties should try to help themselves by restoring social stability which is necessary for growth and development. Once stability is restored, foreign investors, including Singaporeans, will start to trade and invest again. This is the correct way to generate badly needed economic recovery and social stability. This is also a more dignified way for such countries to emerge from the economic chaos, continue growing at their own momentum and realise their inherent potential. Sir, the offering of aid need not be manifested in cash transfers. Singapore has provided assistance in other concrete forms. We have been a strong advocate that ASEAN moves ahead with the ASEAN Free Trade Area initiative. Such policies precipitate positive externalities which benefit all ASEAN members. Singapore has also set aside S$12 million under the Singapore Cooperation Programme to provide about 30 undergraduate scholarships a year for ASEAN students over the next three to four years for study in Singapore. Upon the completion of their studies, these students will return to serve and contribute to their own countries. Sir, Singapore's fortunes and ASEAN's are intertwined. Singapore cannot afford to let other countries falter. I believe that within our means we have done our best to assist, and hope that they do not falter. In this regard, I support the approach taken by the Government in offering assistance packages to countries in the region. Sir, I support the Budget tabled by the Minister for Finance.

Mr Speaker, thank you for allowing me to join in this debate on the motion. I would like to raise some comments on Finance policy that I hope the Minister might respond to and clarify. There are some who think that this Budget is a "non-event". To the contrary, I think that there are people who are watching what Singapore does in the face of this crisis. What we do or do not do has significance, not just for individual pockets and corporate coffers in Singapore, but also in the region and the international context. Sir, in the recent past, economists and politicians alike believed, "We are all Keynesians now", as the late US President Richard Nixon said. What this means is that when faced with a financial or economic downturn, the answer lies with a greater government role. Government has to tax and spend, or if they cannot tax, then it should go into deficit and spend. Government spending and Government's role was the central key to continued economic good times. Government, in this view, was not only the regulator but also the active manager and big player in the economy. State-owned enterprises, subsidies and the welfare state were outgrowths of this thinking. This is especially in Europe, but also in many parts of the developing world. Things have changed since then. Internationally, in almost every continent, we have seen a movement away from the Government to the market as an arbiter of the economy. Singapore has not been left out of this movement. Indeed, we have been one of the first countries to move away from socialism towards the world market emphasising investment and international trade. As a marker of this, some observers have applauded our economy as the "freest economy" in Asia, ahead of Hong Kong. This movement and accolade are largely welcome. But an emphasis on the market is not an absolute blessing. Countries that have moved to the market have lesser ability to participate in their economies and less ability to control their economies. In good times, this may not matter. In bad times, however, there may be fewer tools and policies available for the Government to intervene. If the Government intervenes to bail out bad companies, or to establish welfare services that are beyond the ability of its budget, then the international market will rate their economic potential for the future accordingly and they will go elsewhere. This is, therefore, the first limitation to what our Government can do for our economy and our people. In a world that is moving towards the market, it would prejudice the confidence of the international community if we pull back. Yet, we cannot stand idly by as our economy and our citizens are hit by the crisis. It therefore becomes a question of making the right interventions that are helpful for the present and for the longer term, and which are acceptable to our people and to the international community. It is not a question that Government can do everything or, on the other hand, that we should rely only on the markets. Rather, it becomes a question of governing the market, as the political economist, Robert Wade, suggests. That is to say, we require government action and policy that are in line with market forces, but allied to achieving public and social good. Again, we are not alone in this. In many developed countries, there is a wish to continue and restore growth through economic globalisation, but also a wish to soften the sometimes harsh consequences of the market on ordinary people. There has been as such, talk of looking for a "Third Way", especially in the UK and USA. Against this background, when we consider this deficit budget and the financial policy of this Government, it is not the size per se of the deficit that should concern us. We should instead consider two basic questions: (1) Are we spending money in the right way? (2) Are our policies in taxation sending the right incentives and signals to our people? Let me turn, first, to the money we are spending. The Government has emphasised the need to continue development expenditure in key areas such as education and defence. I agree that we must think of the long term and use our reserves to develop areas that will advantage us in the future. On education, I welcome the continued expenditure. But in this light, in planning for the future, I would call for Government's assistance in two areas of more immediate concern. The first is of children and education. Schooling is not compulsory by law in Singapore. In good times everyone knows and most can afford to emphasise education for their children, for their future. My concern is that this calculation changes in this time of crisis. I urge the Government to monitor the number of drop-outs where this may result from changed economic circumstances. Sufficient and more generous bursaries may be necessary. These should support not just the direct costs of schooling a child but the opportunity cost of the family as a whole. The second immediate concern regarding education is of self-improvement by our citizens. As we tool up for the knowledge-based economy (KBE), we should try to make sure that all Singaporeans have a chance and the incentive for self-improvement. Government has generously funded schemes as the main plank, but individuals may also wish to invest in their own self-improvement. And where they choose to do so, Government should support those decisions with the right incentives. In this regard, the Budget proposes an exemption of $2,500, an increase of $500. But perhaps this may be insufficient, and I would urge the Minister to consider a higher tax exemption. In this sense, I am arguing that we need to link the long-term view of investing in education to the short-term realities in these difficult times. Let me turn next to defence expenditure. Like many other speakers, I see the need for good defence force as a factor of stability in these troubled times. Peace and security are the bedrock for our democracy. I would, however, raise two more specific questions. First, I note that it is not only the development expenditure that has increased, but also the operating expenditure, by some $160 million. The difference between development and expenditure is a bit like between investment and consumption. May I ask the Minister or his colleague, the Minister for Defence, to clarify the need for increases in consumption, in this sense, in this time of crisis? More, generally, I would like to ask the Government if there are ways of benchmarking efficiency and sufficiency in the Armed Forces. I ask this particularly in light of the recent second report of the Public Accounts Committee of November 1998 that reports some lapses in MINDEF's accounting practices. Second, on defence. Our expenditure has remained quite constant, if not increased, and this is a stark comparison with reductions among many of our neighbours in this time of crisis. Of course, we should be well defended, and I am not encouraging us to downgrade our expenditure according to our neighbours. We should not beggar ourselves because they are poor. But my concern is that our defence spending should not by itself be a source of misunderstanding and concern in the region. I would encourage dialogue and transparency to allay any suspicion that we are taking an aggressive posture and not simply an investment in a sound defence. Let me turn next to another area of expenditure - social assistance. There have been many calls to assist Singaporeans in this time of crisis. I do not wish to add to the various wish lists. This crisis should not see the overnight creation of a welfare state in Singapore. I do however wish to call on the Government to consider ways of innovating the ways in which it will spend money. We too should, between a suffocating welfare state and often harsh local marketplace, look for a "third way". One clear area for innovation is to specifically target those who have lost their jobs. The Budget has given a 10% rebate to all individuals. Some may consider this insufficient. But I understand that Government cannot help everyone all that more, given the current deficit already. But there should be special targeting in Government assistance. I think in particular of those who have lost their jobs and have been unable to find employment again for extended periods. For these people, I hope the Government will consider temporary measures to assist them further. Areas such as housing, the cost of their children's education, re-training and the creation and match-making to casual or part-time work should be considered. A second area is in jobs and discrimination. This is an issue that has arisen recently, especially as regards private sector hiring. If this is not addressed, the economic crisis will test our social cohesion. The Government has responded to that by saying that it will discourage discrimination and encourage meritocracy. I support this. I would also call on the Government to monitor the situation closely and continue to set a moral leadership in its own hiring. We sometimes take meritocracy and rights against discrimination for granted when times are good. But especially in these bad times, meritocracy and human rights must be a shield to protect our citizens. A third way in which I think we should innovate in our spending is to encourage giving among the citizens themselves. Our Government has moved away from a welfare state, dependent on the Government and its spending, to a policy of many helping hands. This requires private sector help and giving. In this time of crisis, there is a pressure on these private hands. When companies are showing bad results or losses, it becomes very difficult to sustain the giving to charities and other good causes. If companies, families and individuals still give, I think they should receive greater support from Government. I call on the Government to double tax exemptions for companies and individuals who continue to give to charities, arts groups and other causes, and to give tax incentives to families who support their own members who are dependants or who have lost their jobs. This approach does not, I want to emphasise, create a dependency on the State. Rather, I call on the State to encourage members of our community to help each other. This will increase our social cohesion and grow our heartware. Let me turn finally to Singapore and the region. The Budget reacts to the regional economic crisis. For it is the crisis, and not our own internal factors, that is affecting our performance. Conversely, I believe that we must consider and respond to the crisis. In so doing, our foreign and our foreign economic policy is not a distraction from the economic situation but an important task that is linked to possible routes to recovery. The region's financial crisis has led to social and political changes in our region, among our neighbours. There is a sense of autarky and a narrow nationalism rising in the countries around us. There are inclinations to close borders to foreign capital. There are great social dislocations, especially among the poor, the young and the women. A UNICEF report has warned of a lost generation in our region - children who drop out of school with little or no education. Neither of these developments - the autarky or this lost generation - would be in Singapore's interest, or our neighbours'. What can we do? Our role in this may be very difficult. There have been unwarranted and unfounded criticisms of us by our neighbours. These may anger our own citizens. But we should not over-react. People will say things in desperate times that they would not normally. We should look to the longer term. We should re-emphasise the win-win nature of cooperation in the region to seek engagement with those who welcome it to provide useful forms of assistance to those who most need it. We should offer cooperation and assistance to our neighbours in ASEAN. I agree with the previous speaker, the Member of Parliament, Dr Ker, that this need not be in terms of dollar aid only but our assistance should be tangible and sufficient. Additionally, we should offer cooperation and engagement to others outside our region, such as the USA and international agencies, whose help and attention can assist the region's recovery and, therefore, our own. Asia has been struck by a contagion. But because we have kept ourselves fiscally, not physically, fit over these years, we are less affected. Among the stricken economies, therefore, we should be among those assisting in the process of recovery. I shall propose specific policies in the cuts in the Committee of Supply. I hope the Minister will respond to my comments and suggestions.

Thank you, Mr Speaker, Sir, for allowing me to join in the debate. Sir, the most striking feature of Budget 99 is clearly the $5.1 billion deficit. Over the past decade, there has been a recurrent constant refrain in this House and outside for the Government to reduce its budget surplus and redistribute funds to individuals and corporates. Our current circumstances, in my view, amply demonstrate the value of the Government's stated approach. It has got prudence in years of plenty and preparation for the years when we have difficulties. In particular, I would like to congratulate the Minister and the Government for not flinching at a time like this in incurring a substantial budget deficit. I trust this would clear the doubts of many of its detractors. I also hope that the Government will remain steadfast in its commitment to continue with such largesse if the need arises in future with continued economic downturn. Sir, much has been said in the course of this debate on various aspects pertaining to the business and economy. I wish to confine my comments to the social dimension. One significant implication of this economic downturn has been the stiff challenge it has posed to our resilience and unity as a nation. Our social cohesion has been tested and continued to be tested by external as well as internal forces. Some manifestations of this are, firstly, the more negative attitude one detects towards the infusion of foreign talent; secondly, in a more pronounced socio-economic divide and consciousness as those with less skills lose their livelihood first; and, thirdly, in the more recent debate, which is the revival of something that has been lying low for a while, in terms of discrimination in the job market on the basis of age, sex or ethnicity. Clearly, Sir, as the pie shrinks, the instinct for self-preservation is heightened. So we need to be vigilant and guard against such divisive forces if our social fabric is not to fray. The question then is how the financial policy in Budget 99 supports this objective - the need to maintain and strengthen our social cohesion. Indeed, Sir, there is much that has been done in the form of S&C rebates, GST-related offsets, personal tax rebates, etc, and a quick back-on-the-envelope calculation suggested something to the tune of $500 million has been set aside by the Government, in terms of direct support for individual Singaporeans, particularly those who may need help. Sir, in my view, the question is not whether the Government has been generous, but whether it has been too generic in its efforts to help Singaporeans. More specifically, can we be sharper in the way we structure financial policy to help those who need help? Allow me to illustrate. If we have two neighbours in adjacent 4-room flats in the same block, their experiences pertaining to this economic downturn could be vastly different. It would depend on whether they bought their flat directly from HDB or on the resale market, when they bought their flat, the number of children they have in the family, the employment situation, whether anyone has been retrenched, etc. Some would have two properties, others would be servicing their first mortgage. Some may drive cars and others would rely on public transport. Yet the structure of the financial benefits which uses HDB flat size as a proxy for socio-economic status or, more importantly, their financial need begs the question whether it is appropriate as an indicator of where Government funding should be channelled. In my view, Sir, using HDB flat size on its own is a less than perfect indicator and it is one that the Government should re-examine closely. In particular, I think the system can be improved and the Government could be more targeted and layered in its approach. For example, whilst we could have a base layer of S&C rebates and other grants which are distributed along this line of flat size, there could be additional layers, especially those that emerge in these times, which can be more specifically targeted at those who need help. For example, instead of having an across-the-board town council S&C grant, we could have instead taken this money, put it into a fund, and say, "OK, let's target this at those individuals who specifically have difficulty and can go through CDCs, self-help groups and other voluntary welfare organisations to apply for such assistance." These organisations are already in close contact with the ground. They know the needs. They know the individuals in many instances and they would bring about a better matching between the Government's intent, in terms of setting up such schemes, and how it takes effect on the ground. Using voluntary welfare organisations, CDCs and self-help groups is one method. Even if it is to be done centrally, perhaps by referring to CPF accounts and whether they are multiple property owners or single property owners, or perhaps by reference to their property ownership in particular, we may be able to distinguish those who truly need help. My point, Sir, is not to deny Singaporeans in need of their dues. Rather, it is to state the point that Government has set aside substantial sums to help those in need. It is equally important that these sums be directed at those who truly need it. With that, Sir, I support the motion. 2.35 pm

Thank you, Sir, for allowing me to join in the debate. Some might say that this is a very appropriate Budget for the times that we are in. It is indeed a good Budget! After last year's off-Budget measures and after what the Government has come up in terms of the various programmes, this year's budgetary response is very appropriate to the times that we are in. And as the Minister has said, the Budget was carefully calibrated to respond to the regional crisis. Sir, I take heart in the use of the term "calibrated" because it denotes a sense of exact measure, not more, not less, but just right. It also means that the response would change accordingly depending on how the regional crisis develops. Indeed, Sir, it is a very pragmatic strategy in these changing and troubled times. In this House, a number of MPs have called on the Government to take care of our own people in these difficult times and that we should be more careful in giving PRs, employment pass and/or work permits to foreigners. Sir, I too support this call. In fact, I have had the same comments from my own ground. But, Sir, in the larger scheme of things, I would like to caution the Government to be very careful on this issue. There is a need to have a very fine balance of helping our people and making sure that we do not reject the foreign talents that will be very necessary to our economy. Sir, we cannot afford to be a closed economy. We should not over react, close ranks and help our people to the long-term detriment of our economy and, ultimately, our nation. Sir, closing ranks and rejecting foreign talents is not the way to compete. We have in fact only one resource, a point often mentioned in this House; our human resource. The only way that we should compete is to provide the means to make our people, entrepreneurs and companies stronger and better than the foreign competitors. In this respect, I am not disappointed because the Government has provided ample resources for these goals. But, Sir, in the larger sense, I must still admit that I am disappointed, not because of this Budget, but because the Minister did not make long-term changes to our tax system; changes necessary to promote Singapore as a total business centre, not only for the region, but for the world. This Budget and the past Budgets have done much to promote Singapore as a premier financial centre. But I ask, despite my own background in the financial area, why only the financial centre? Why do we stop there? We want to be a first world economy competing not on low cost but on high productivity. We want to be an industrialised country, not just only a centre for financial services. We want to attract top-notch MNCs to set up headquarters in Singapore, whether world headquarters or regional headquarters. We want our home-grown companies to be world beaters, both in Singapore and abroad. Sir, if we want these and more, it is time for us to have a comprehensive review of our tax system. We need to have a tax system compatible with these goals and not one which provides obstacles. For example, take the issue of group income. Other Members have spoken on group income in relation to single purpose or single property companies. Here, I am thinking of group income on a very much wider basis because our overall tax system still treats companies within the group as individual tax entities. Not only is it wrong but it is out of step with the rest of the advanced economies in the world. The United States, European countries and even Australia have some form of group income taxation. I am not asking the Minister to have group taxation in Singapore just because these countries are doing it. But I would like to ask the Minister why these countries have group taxation. If you look at it, the answer is simple. Because a group of companies, related to each other, through ownership and management, constitutes a single economic unit for the purpose of strategic management and financial planning. Sir, there is a very important phrase here. These companies within a group should not be considered as different entities, but as a single economic unit. Our current tax system ignores this economic reality and thus helps to create economic and business distortions. I suppose it provides good business for tax planners and tax consultants. But on the negative side, it uses up a lot of management time, wastes resources and distorts strategic planning in trying to achieve the tax plans to beat the irrational system. Sir, the point is that group taxation recognises this. Thus, it helps the single economic unit, that is, the group, to maximise its potential. Sir, this is not a new issue. I am sure the Minister is well aware of the pros and cons of group taxation as well as the way to move towards such a system with minimum dislocation, cost and loss of the tax base, if only he is willing to consider this. In fact, while I do not wish to go into any detailed argument on this, there is ample literature on this. For example, in 1994, the South African Government commissioned the Katz Commission to study this whole issue, amongst other issues. If Members are interested in this report, I can make it available to them. There are compelling reasons why, in a modern economy, group taxation should be adopted. It is not because others are doing it, but because it is a very rational thing to do. There are more issues, such as tax on remitted income and capital gains tax. Our tax system is based on a territorial principle. However, today, the world is one big marketplace. There is globalisation. There is freedom of capital and funds flow. There are WTO regulations and a host of other liberalisation measures which have made the world into one big marketplace, and our companies are competing in that marketplace. Our territorial principle of taxation compounded by the absence of group taxation really hampers our companies not only from competing in Singapore compared to the rest, but also in other countries. Again, financial innovations have made nonsense of what constitutes capital gains and income. Therefore, to preserve the integrity of our tax base, the IRAS has come out with all sorts of interpretations to remove what they deem as tax loopholes. But in doing so, they distort the very basic fundamentals of our tax system. Sir, let me give some over-simplified examples. If a company in Singapore were to have income overseas, such income, as long as it is not remitted to Singapore, will not be taxed in Singapore. It will be considered as income earned outside Singapore, not derived from Singapore and not remitted to Singapore. On the other hand, if this company were to use these funds to pay for the expenses of one of its subsidiaries overseas, then IRAS, under present interpretation, will most probably deem this as remitted income to Singapore, although the funds do not actually come to Singapore. This is what they call constructive remittance. Sir, this is a new interpretation. They have put this in place some two or three years ago. But it is causing a lot of difficulties for companies. Recently, for example, we allow companies to buy back their own shares. One would think this is a simple issue from the tax angle. These companies are returning back the capital to its shareholders, ie, capital which they feel they cannot use to the best of their ability. Again, IRAS is saying that if these funds do not come from contributed capital, that means capital that was contributed in the first place, then these funds which are being used in a buy-back scheme would also have to be taxed. How do these funds arrive in the first place? These funds arose because companies are able to generate some capital gains and therefore they put these funds into some form of capital reserve. It is part of the company's capital formation. These funds are therefore returned back to the shareholders in a buy-back scheme. But they are not contributed capital, having arisen out of capital gains. If they are taxed, then it is actually equivalent to IRAS taxing on capital gains. Again, it is causing problems and distortions. My main point is that these tax matters are knee-jerk reactions. Because the world has changed, because there are financial innovations, because the way businesses are done all over the world has changed, and the taxman is so worried about the tax base, they come up now with all these ad-hoc interpretations which in essence, as I have said earlier, distort the way business is being done and it does not help our companies when they compete with other companies in the international global marketplace. The reason is very simple - shareholders want after-tax returns, not before-tax returns. If we look at our tax system, it came into being when Singapore was a colony, when the world consisted of many closed economies, when we were limited by our shores and our vision by Whitehall. Now, we have changed. More significantly, the world has changed. So it is time for us to have a comprehensive review of our tax system to support Singapore's dream in the next millennium. I support the Budget with the hope that the Minister could be persuaded to initiate a comprehensive review of our tax system so as to maximise the potential competitiveness of our companies on the world stage.

Mr Speaker, Sir, I support the motion proposed by the Minister for Finance. Sir, while there were no surprises in this year's Budget, the Minister could have done more than just focus on the financial sector if we are really serious about the next phase of growth of our economy that has to be driven by more than just being a financial hub. So far, through a series of budget and off-budget measures, the Government has addressed mainly short-term cost-cutting measures in some of the sectors of our economy and I feel that it is about time that we started focusing on long-term strategic issues. The Budget has failed to introduce new initiatives that are badly needed for the next phase of growth for the manufacturing sector, the knowledge-based economy and in encouraging the emergence of a more vibrant small and medium enterprise sector. So I feel the Government needs to start doing something now because we have the unique opportunity to widen our competitive edge against our neighbours and we will be far ahead when the region recovers from the crisis if we start now. Sir, since many Members have commented on the details of the budget, I plan to touch on a few long-term issues in my speech today. Firstly, I would like to touch on the lessons the Government can learn from the experience of the last few years, and second, I would like to share my views on the areas we should focus on for the long-term growth of our economy. I have observed a few areas of weaknesses in the way the Government has executed the role for the planning of our economy in the last few years. While the Government has done an excellent job in many areas, there are always opportunities to be even better and I would like to suggest that there are three lessons that we can learn from the way we have managed our planning process for the past three years. Lesson No. 1: The Accuracy of Economic Indices Used by the Government I would like to highlight that as far back as in early 1997, even before the regional economic crisis hit us, the private sector saw signs of our economy starting to slow down in a few sectors, including the manufacturing and service sectors. Then again in early 1998, the business community projected a rapid decline in our economy, while in his Budget speech in 1998, the Minister for Finance talked about recovery and growth, including the recovery of the electronics and manufacturing sectors in 1998. However, many industry players, including some MPs in this House, expected a decline in these same sectors and predicted that Singapore will go into a recession in 1998, while the Government maintained a 2.5% to 4.5% growth rate. Results showed that instead of a growth in the electronics and manufacturing sectors, we saw a decline since the second quarter of 1998 and going into negative territory in the third and fourth quarters. Sir, the consistent pattern I have observed is that there is a gap between what the business community sees and what the Government agencies are able to measure. I also see that the planning agencies may not have a good feel of the real pulse of the ground and I also see a significant time lag for the information gathered by the various Government agencies to be used to measure the state of the economy. Since the information gathered and the measurement indices are used for economic planning and policy making, any inaccuracy or time lag could lead to policies that may not be optimal. So the first thing that needs to be seriously addressed is the type of indices and how these should be collected so that we can do a better job in predicting our economy. New mechanisms and indices need to be introduced if we want to do a better job. Lesson No. 2: The Inefficiencies of Small Incremental Measures We can also learn a lot about this from the mistakes that Japan has made in the last few years in trying to recover after its bubble economy burst. In Japan, the government of the day for the last few years had attempted to recover from their recession by taking small step-by-step measures and the impact on their economy has been insignificant, despite draining tremendous resources. We in Singapore also attempted to take a similar route by trying to make small piecemeal changes by announcing a conservative 1998 Budget and tried to follow up with a small $2 billion off-budget expenditure. However, we failed to create an impact and finally we decided to take a bold step by introducing the $10.5 billion off-budget measures at the end of last year. The second issue that needs to be seriously addressed is therefore our willingness to take bold steps in trying to influence changes to our economy. Lesson No. 3: Timing of Changes Sir, in this area, I would like to say that the Government has a mixed track record. We have shown that we are willing to come out with off-budget measures when needed and not wait for the regular budget cycle to make changes. Similarly, we have been prepared to make other non-fiscal changes if the need arises. On the other hand, we were at least one year late in implementing the May 1996 property market measures to address the growing asset price bubble. Therefore, the third area we need to address is the speed at which we are willing to make changes because sometimes, even a slight delay could result in a disaster as we can learn from Indonesia's delay in implementing the IMF measures which caused the rupiah to be drastically devalued. Sir, I would like now to focus on the long-term strategies that I feel the Government should focus on if we want to ensure another 30 years of economic prosperity. I feel that it is about time we looked at three key areas: a) how to ensure growth and new markets, including globalisation - not just regionalisation; b) putting in place new capabilities, technologies and mechanisms to plug into the knowledge-based economy and encourage technopreneurship; c) to change the direction and to re-orientate Singapore's economy to include a vibrant SME sector to encourage more technology intensive companies and to avoid over reliance on an asset-based economy, as we have done in the past. Sir, these are the areas that the Budget for 1999-2000 has failed to address. However, I still have hope that the much bigger development expenditure set aside this year will focus on these areas. I urge the Government not to over spend in fixed assets, unless these directly support the above three new areas. I will now touch on these three areas that we should be focusing on. First, on globalisation and exploring new growth markets. In addition to being cost competitive, it is about time we explored new markets, farther afield and go to new areas not explored before. In this respect, I believe the Budget could have been more proactive to accelerate growth and to take advantage of the opportunities available in the region as well as around the world. Because Singapore has been relatively unhurt by the crisis, we are in an excellent position to be the first to take off and find the best opportunities and markets as compared to our neighbours. So some tax changes to accelerate globalisation and in encouraging mergers and acquisitions could have been helpful. I strongly believe we need to restructure the current tax system, as some of the Members in this House have spoken about, to be more future oriented so that businesses will be prepared to invest early for future returns. Second, on technopreneurship and encouraging the entrepreneurial spirit. In my opinion, technopreneurship and entrepreneurial spirit are the most important areas we need to address for the future growth of the Singapore economy, and this is where I find the current Budget has a serious shortcoming. Sir, our success in building a flawless infrastructure through a strong civil service and our education system that inculcates benefits of stable professions and the glamour of working in multi-nationals is now causing our failure to encourage more entrepreneurs to emerge. We have to seriously address these mindsets among our young which, as I have said, are the results of our style of governance for the past 30 years. In Japan, after a decade of government led growth, the country is now looking at entrepreneurs to lead the economy to its next stage of growth. Taiwan's success is also attributable to its quest to encourage technopreneurship. From 1988 to 1998, the contributions made by science and technology-based companies in Taiwan to the economy has grown from 26.3% to almost 40% in a short span of 10 years. Sir, we too have to now shift our focus and I suggest the following four areas to be looked into. Firstly, our education system, from one that is vocation based to one that is knowledge based. In Singapore, we are still relying on old methods of teaching which were designed to train people to fit into the various jobs for the industries planned for our economic growth. While I can see some changes, I think we have to accelerate these changes if we are very serious about growing this part of our economy. In the 9th November 1998 Newsweek report on 'Silicon Valley' aspirant cities, it was reported that analysts felt Singapore's education system depends on "out-dated teaching methods and learning by rote with little chances of independent thinking". This together with the reward system that focuses on academic excellence and on a scholar system are becoming an obstacle in our drive towards nurturing more people who are willing to take the path of entrepreneurship that entails taking risk in more cases. We need to develop a reward system that recognises creativity and encourages doing things differently. The streaming in schools, the labels we place on our children and the fear of failing to make it to the best schools and the fear of failing to make it to the best streams, all add to this problem of discouraging creativity. I would like to quote our Senior Minister Mr Lee Kuan Yew. In an interview published in the Straits Times on 3rd February this year, he said "many of the entrepreneurs are innately bright people. It takes more than paper qualifications to be a good entrepreneur". That is, we need a good combination of both street smart as well as academic smart people to be successful. Second, tolerance to failure. The way we define and punish failures has a big impact on creating an environment that encourages entrepreneurship. We, as a society, have a low threshold to failure. The way we measure success is narrowly defined along the lines of academic excellence and material gains. We need to give second chances to people who have tried but failed. Sir, failure should be treated as just an event in a long process, and not to be treated as an end. Our people must be able to handle failure. In a reply to a question on how many times he failed in his efforts to invent the light bulb, Thomas Edison said, "I was successful in knowing 1,800 ways of how not to make a light bulb." Sir, we need to encourage such positive thinking about failure in Singapore. Thirdly, the availability of funds. This is one area where Singapore has a long way to go if we are serious about becoming the Silicon Valley of the east. In my opinion and from my experience, while we have a number of Government-linked venture capitalists, the decision makers are very conservative and bureaucratic and behave more like administrators. What we really need is a big pool of entrepreneur-led or managed venture capital funds, where decision makers too think in the same wave length as the entrepreneurs they hope to support. Sir, in Taiwan, small funds were introduced in the early 1980s and the government participated, not directly, but through equity in technology-oriented private venture capital companies. Today, I believe there are more than 100 such venture capital funds managing a total of about US$2 billion, which means each company manages an average of US$20 million, making them very nimble and able to move fast and to make decisions fast. It is also a well-known fact that in Taiwan, venture capitalists will commit to investments if they see even a 30% chance of success for a project, while the feeling is that in Singapore, venture capitalists will need to see at least a 90% chance of success before participating. Furthermore, the saying goes that in Taiwan, there are 100 venture capital funds chasing after one project, while in Singapore there are 100 projects chasing after one venture capital fund. Sir, there is an urgent need to encourage more Taiwan or Silicon Valley type venture capital funds to be set up in Singapore. Perhaps some Government funds could be used as seed money for technology savvy venture capitalists willing to set up base in Singapore. For example, Temasek Holdings could allow some private sector entrepreneurs to manage a certain proportion of its funds. Fourthly, the role of the Government. Sir, in my opinion, Government direct involvement should be as minimal as possible; otherwise, they risk crowding out private sector entrepreneurs, as our GLCs have done in the past The most important role the Government can play is to create an environment that allows entrepreneurship to flourish. One useful role for the Government is to fine-tune rules and regulations that are obstacles and stifle a creative environment. Rules like our bankruptcy laws, initial public offering rules for technological start-ups, restrictions in fund raising for small venture capitalists and taxation of stock options are examples of rules that need to be revised. However, I do feel that until we can have a vibrant environment developed, the Government can play the role of a match maker, especially in the area of making funds available and in revising some of the incentive schemes that require upfront spending before a company can collect the incentives. We also need a new EDB-type one-stop organisation to support technopreneurs who now have to go to multiple agencies for help. Once we have a natural environment, the Government should take a step back and play a purely supporting role and let the private sector flourish on its own. Sir, in my opinion, the people responsible for administering the many schemes and in setting policies all come from the same mould, because of the hiring and the promotion practices of the Government. I suggest it is time the Government considered a system where we have a good mix of street-smart as well as academic-smart people at the helm. Sir, ultimately, the "dare to dream" attitude must come from within and it cannot be Government driven. The third area that I think we should be focusing on for the long-term growth of our economy is a thriving small and medium enterprise sector. In the past 30 years, we have focused on attracting foreign multi-national companies to locate in Singapore. Our lower cost, our hardworking and educated workforce and stable Government were the attractions for the foreign multi-national companies. However, as we have recently learnt, our cost is no longer competitive, our neighbours also have a good workforce. They may still lack in good governance, but they will soon catch up. Singapore may no longer be a preferred choice for many foreign investments. And while we should still try to bring in such companies, especially in the area of high technology, we need to make a significant shift in our policies to pay more attention to building a vibrant small and medium enterprise sector with high emphasis on technology intensive companies. One of the reasons I feel why the Taiwan's economy has not been badly hit by the economic crisis this time round is because of its heavy dependence on SMEs who are engaged in technology intensive activities. On the other hand, South Korea was one of the first to be hit by the crisis and they built their success based on big conglomerates. Sir, the EDB's Industry 21 programme and its recent announcements to co-invest in local companies to help them grow is indeed a good move. I do see a shift of focus towards SMEs and I hope all of us will develop a positive attitude towards them as being key players needed to bring our economy to the next stage of growth. However, I feel a lot more can be done to reach out to even a small fraction of the 100,000 or so SMEs present in Singapore today. I hope we, in Singapore, can try to emulate what happens in the USA where one new company is started every 3.5 seconds! Sir, I would like to conclude by once again emphasising that while we have done an excellent job in addressing the cost component of the equation in the last few budget sessions, it is about time we started preparing for the future by working on the other parts of the equation that focus on the long-term strategies of growth. I will be giving detailed suggestions on how we can achieve this during the Committee of Supply discussions. Sir, I support the motion.

Mr Speaker, Sir, capable hands crafted this Budget to meet the exigencies of the time. The nation and the market received the Budget with confidence. I commend the Minister for an excellent effort and extend my strong support for the Budget. The relative appreciation of the Singapore dollar to the currencies of the competing economies is one among several factors that has eroded our national competitiveness. The Government resisted the temptation of relying on the depreciation of the Singapore dollar as a means to restore competitiveness. Instead, we embarked on the more difficult option of cutting costs. Our people and businesses support this option. Investors too have reacted positively. Cutting workers' pay is key to this option. That we have been able to do so, credit must go to our people, our workers, our unions and the Government. When the Government realised that cutting workers' pay could be necessary, it took great efforts to prepare the ground for it. The Government worked hard to explain the issues to the people, the labour union leaders and the workers. The union leaders, on understanding the issue, worked hard to help their members to understand them. The people and the workers, on understanding the issues, made a free and informed choice to sacrifice for the nation. There was thus a lot of hard work, a lot of learning and sharing, a willingness to choose the better solution for the country. Hence, contrary to the mistaken belief, Singapore was able to cut workers' pay not because the Government had dictated it. Singapore was able to cut workers' pay because the Government worked with our people to help them understand that this was the better way. And Singaporeans gave their support, even though it was painful. Thus, let not others belittle the noble sacrifices of our people and workers. This is our competitive strength and I am proud of it. I am particularly happy that the Minister has now agreed that it is important, necessary and possible to seek out new markets overseas. In June last year, when the Minister presented his first off-budget measures, I had asked the Minister about expanding into new markets overseas and the Minister was not very positive in his response. I am therefore glad that the prospects of new markets overseas have improved in the meantime. This is timely. During trying times, there are more incentives to experiment and explore. Our companies will be motivated to find new markets for their goods and services. I am encouraged at the speed with which efforts have been made to tap into new markets. A comprehensive programme has been put in place and implemented with generous support. The Minister is also right to remind our companies not to forsake our existing markets while we look for new ones. We must nurture our existing markets while we foray into new ones, developing both together. This confidence in overseas markets is also timely to counteract the disillusionment felt by our businessmen about venturing overseas as a result of an increase in the number of overseas ventures that have floundered because of the crisis. Business has its risks. We cannot just withdraw to and isolate ourselves in Singapore. We must continue to engage the world, for this is our destiny. I support the spending on our security. The relevance of security becomes sharper in times of crisis. Our past decisions to build up our security capability have proven right. Being a small nation, we become an easy and convenient scapegoat for things that have gone awry elsewhere. There are others who may want to cow us, to alter the status quo of our relationship. With a strong security capability we can respond with calm and composure to such provocation. But national security is not just about money and infrastructure. It is about love of country, about a spirit of and willingness to sacrifice, about commitment to defend and to protect what one holds dear. We must therefore be steadfast in our resolve and action to show the world that we are prepared to defend our national sovereignty and protect our right to live as equals among nations. Developing our security capability is a long-term process, and we should not slacken just because of a temporary glitch. The development and harnessing of our human capital is important. We cannot afford to miss developing our young, even in a crisis, for to do so is to lose an entire generation, which being less educated and skilled has impact on future generations. As we move into the knowledge-based era, the development of our human capital becomes even more important. Besides educating our young, we must also help our workers to advance with technology if we want to avoid structural unemployment, which can become a permanent societal problem. I commend the trade unions for recognising the problem and undertaking the difficult task to encourage and help our workers to upgrade, retool and re-skill. The Government responded by setting up several training initiatives and generously funding them. Now it is up to our people and workers to seize the opportunities made available. I realise that it is not easy for our older workers to learn new skills and knowledge, but we must persevere to encourage, convince and support them. Skills obsolescence can also occur among executives and professionals. I am therefore glad that the Minister also supports the upgrading of our executives and professionals. I would in fact ask the Minister to do more to help them to upgrade. With the lengthening of our working life, there will be much wastage of our manpower resources if we fail to upgrade our older workers. This can lead to other problems, which will be costly for society. There are lessons that our people, especially our young, can learn from the current crisis. First, we must appreciate the vicissitudes of the market. When we rejoice in good times, we must not assume that it will last forever. During good times, we should prepare and set aside something for difficult times. The Government has shown that this approach works. Second, our people must understand the growing intensity of global competition. In the long term, our competitive edge will depend on our productivity and our ability to function in a knowledge-based world. This means that we have to become a better educated and a more creative and innovative society, and to work even harder. Let us not look for an easier life, but a balanced and fulfilling one. A Singapore that can compete with the world but does not need to work hard is an illusion. Let us aim for a life where we need to work hard, but where there are sufficient time and opportunities for relaxation and enjoyment. Third, our people must take this opportunity to appreciate the importance of good government. There are many reasons why we are doing better than many other economies during this crisis, but the most important is good government. To ensure a good future for our children and us, we must demand good government. There is no better insurance than this. The current crisis has also exposed the danger to organisations of straying from their areas of core competence. It is clear that organisations must consider more carefully before diversifying from their areas of core competence. This is most clearly illustrated by organisations that rushed into property developments for quick gains during better times. Not only does it sap limited management talents, but the market is capricious and what seemed like a pot of gold at the end of the rainbow quickly becomes an albatross around the neck when there are not enough management talents to handle the changing circumstances. An organisation must also use its manpower resources, especially its expensive expertise, appropriately. For example, we should avoid using professional manpower for administration. Not only is this misuse of manpower resources costly, but it can demoralise administration staff who find their career paths blocked. This does not mean that there can be no cross-over of talents, but such cross-overs must be done through an explicit re-designation of post and duties. While the concern applies also to organisations in the private sector, I am addressing this concern in particular to our Government and statutory board organisations. Mr Speaker, Sir, the individual and family felt left out in the two off-budget exercises last year. The Minister had taken this opportunity to rectify this neglect. The Minister had taken a step further to spread the benefits. To the better off, he increased the tax rebates. To the less well off, he gave generous rebates and grants on HDB flat rental, service and conservancy charges and public utilities bills, calibrated to give more benefits to those who needed them more. In this trying time, the benefits are most helpful. The Minister also recognised that this economic crisis has bitten deeper into society when he extended service and conservancy rebates to the 5-room flats. I thank the Minister for this extension. I had asked for it last November when this House debated the report of the Committee on Singapore's Competitiveness. Unfortunately, most people will not see the money given to them. The transactions will be carried out electronically. It is, however, important that our people know, understand and feel for what the Government has provided. The Budget does not fully describe the care and concern that the Government has for the people. Government has set up and generously funded many grassroots organisations such as the CDCs, CCCs, CCMCs, RCs, NCs and NGWOs to reach out to and care for the people. Last year, as in years past, these organisations have done a good job in bonding the community and giving help and hope to many people in need. Many Singaporeans from all walks of life have volunteered their time to serve and some have even contributed resources. They are the unsung heroes. We cannot and must not take our national unity and cohesion for granted. We must strive to maintain and strengthen the ties among our people, especially during difficult times. We can see in the neighbouring countries how quickly social order and stability can unravel and how devastating the effects can be. Sir, as long as Singaporeans continue to stand together, we will be able to face the storms and emerge intact from them. Let me conclude by saying that I share the Minister's confidence that Singaporeans will rise to the occasion, and we will emerge from the crisis stronger and leaner.

Mr Speaker, Sir, I rise to support the motion. Against the backdrop of worsening economic and political conditions in the region with Singapore showing in 1998 its first spending shortfall in 10 years and a forecast deficit of S$5.1 billion in 1999, a no-frills Budget containing no radical moves is a prudent and measured approach. Indeed, we have to appraise the Budget within the context of having had two other off-Budget measures in June and November 1998, which had benefitted the business community in more ways than one. This time more individual relief is given. As a citizen, I am grateful that we have accumulated funds to fall back on to cushion our spending shortfalls. We are still able to fork out large sums of money to enhance the competitiveness and employability of our workforce through retraining programmes and IT in education. And now, we all stand behind this country to ensure its continued competitiveness and viability, in preparation for making that quantum leap when the economy recovers in the millennium. This steadfast, resilient and committed "Singapore Spirit", Sir, is what I would like to highlight and give credit to. The Government has done a good job, so have the people of Singapore. In the recent parliamentary visit to Hong Kong led by MP Dr Wang Kai Yuen, I had the opportunity to meet up with some of my old professors in Hong Kong University as well as some old friends. One common reflection from them was: "You Singaporeans are `One heart in cohesion' (yak tiu sam). No way can we push through a cost cutting package in Hong Kong the way your Government has done. And without violent protests from the people too! And you are making all the critical investments now to prepare for the future. It is truly an enviable spirit that Hong Kong should learn to emulate and nurture." I could not fail to note the strains of envy, frustration and helpless anxiety among my Hong Kong friends. I felt proud as a Singaporean. I remember in my four years stay in Hong Kong in the late 70s, the perception of Singaporeans was "they talk, eat, walk, think and act far too slowly and too cautiously." I used to be rather defensive about these comments but now, on hindsight, maybe these attributes which have characterised Singaporean over-prudence and excessive cautiousness have stood us in good stead in the past two decades. They reflect our underlying anxiety about survival and a tested conviction that things can always get worse but as long as we steadily chip our way through the odds to make the best of the situation, in measured prudence, we will see the light at the end of the tunnel. I have observed similar prudent financial and lifestyle management in many Singaporean households today. Parents, with growing children whose needs are never ending, are careful about how they spend their dollar. Instead of buying three sets of new clothes for the children for Chinese New Year, they bought two sets, maybe only one; and one pair of good shoes to last two years instead of several fashionable ones which last less than a year and in total cost more. Some families I know have adjusted their meals to include less meat - which is healthy anyway - and have cut back on eating in restaurants. Some have sold their flats and moved to a smaller home in order to save the profits as contingency reserves. Others have sold their cars and travel only by bus and MRT. In some cases, I have been offered cats and special breed dogs, even goldfish! In other cases, children have stopped taking tuition classes, and foreign maids have been dismissed. Singaporeans are scaling down their expectations and re-adjusting their lifestyles in order to cut costs at a personal and household level. They are willing to do this because they know they have in previous years enjoyed the prosperity and had reserves to fall back on. They also know that we are not a welfare state and personal financial prudence is the key to survival. Sir, if or when the crunch comes and their personal reserves become depleted, they will hold the Government to the promise that no Singaporean will be out on the streets without a shelter and no Singaporean will be uncared for if he or she falls sick and is unable to pay the medical bills, and no child will be forced to leave school because of the inability to pay school fees. But if this recession persists, and even if we are to achieve only stagnant and very slow and low rates of growth for the next few years, the number of Singaporeans who can be considered the marginal poor will increase. They may not be the totally destitute and homeless, or denied hospital care, but many heads of households, particularly the older, lower-skilled workers, may be unemployed for a long time, and the household may be in dire need of some financial assistance. I know we have a number of assistance schemes already available in different Ministries and at grassroots levels that respond to those in need. Whether the assistance is sufficient and how we can better meet the needs of the less fortunate - as we make this difficult transition to a knowledge based economy in the midst of a recession - I hope will be a policy focus following the debate and suggestions proposed by MPs during the last two days and in the following days. This policy must adopt a policy perspective beyond welfarism. Beyond the economic fundamentals, what resources we allocate for strengthening the social service components within our society to nourish the hearts and souls of Singaporeans are critical in securing our cohesion. Could we in extraordinary times adopt more flexible and responsive policies to meet the needs of families in distress? Have we done enough? Could we, instead of cynically viewing such moves as falling prey to the "lure of welfarism", see enhanced assistance schemes as strategic investments in reinforcing the social contract between our people and Government? For example, in concrete terms, could we allow Singaporeans in the older age groups after 40 to draw upon their Medisave account for medical needs such as annual screening tests which do not classify as "treatment"? This is consistent with our call for a healthy lifestyle through early detection of diseases. Could we allow family members to draw on their Medisave account to pay for their parents' medical bills? Could we increase medical and living subsidies for the needy elderly after 60 according to age categories? Could we consider allowing single mothers with a stable job and children to buy first-hand two-room HDB flats in designated residential zones, since we allow single mothers to do so under joint ownership scheme? This is consistent with our policy of family protection. Sir, these are just some examples which I hope to illustrate my call for the Government to allocate our resources using a multi-tiered and multi-faceted approach to flexibly benefit needy families, instead of applying one policy for all which may err on the side of being over restrictive and rigid. While guarding carefully against irresponsible welfarism, we should also not neglect principles of reasonable distribution of social security benefits for the vulnerable. We need a fresh perspective to focus the family as a primary unit for policy formulation. This perspective may require a critical review of defining who are the vulnerable and the potentially vulnerable. We can easily spot the destitute and the disabled and the Government has been prompt to assist them. But we may need to define the less obviously needy, what I call the marginalised segment of our society. And these are people, I would call, the dis-enabled, the dis-advantaged and the dis-empowered. They are like what MP Sin Boon Ann described yesterday - not poor and not paying tax, and now unemployed. I was heartened by PM's call for "family care" during the weekend when he opened the 3-in-1 FSC in Tampines. Indeed family members should do their utmost to care for their families, but I also hope that the spirit of giving, as exemplified by PAP Members handing out $200 "ang-pows" to residents in Potong Pasir will be adopted as a broad principle of "family care" by the Government. Sir, there are many women-run single parent families who are facing difficulties in meeting basic necessities, like food, transport, rent and utilities. In other cases, due to working adults not being able to find or pay for home help, they left their elderly parents alone in their homes, all locked up because they suffered from dementia. Such unintentional or cannot-be-helped neglect could be dangerous if the flat caught fire and the elderly was trapped inside. If family members are working, who supplies the food for the elderly? Sir, "family care" or filial piety is not simply a matter of the heart or culture, it is a function of how much children can shoulder the real burden of caring. When there is no job, carers have no money to care. The rich should help the poor, we heard many MPs said today. But they, too, facing business downturn, feel "less rich" to be generous. It takes months to organise fund-raising events and needy families cannot wait. Sir, we do not have adequate information on the families. I propose the setting up of a multi-disciplinary FAMILY 21 Working Committee to identify new policy changes for strengthening the families. I would also propose that the CDCs carry out a comprehensive crisis monitoring survey to find out the impact of the crisis on families. And together, they will explore what has to be done to ease the misery in the community. If the finding shows that I have exaggerated the misery picture, then it is good news. If the finding shows that problems are mounting, then we can plan on what we must do as a community to set things right. At this point, may I add that I am curious why, after so many calls from this House during last year's debate for more allocation of funds for MCD, the development expenditure for the MCD in 1999 is even less than last year, from 0.38% to 0.34% of the GDP? If we compare with the various Ministries, MCD's total expenditure estimates for 1999 show a decrease by 10.5%, representing the second lowest after MTI in estimated total expenditure over 1998. MTI's decrease was due to the acceleration of development expenditure in 1998 to boost the economy. In the same year, a number of projects, like the Girls' Home and the extension of Kwong Wai Shiu Old Age Home, had to be shelved due to shortage of funds. During current difficult times one would expect an increase in overall allocation for MCD, in particular development expenditure, due to increasing demand for services to cope with needy families and rising social problems. Not only had MCD's revised FY98 development expenditure showed 2.9% lower than the actual FY97 sum, the development expenditure for 1999 is budgeted with a further decrease by 15.4%. Has the development budget been axed to this low level by the Minister for Finance or is it because the Ministry of Community Development did not ask for more? And if MCD did not ask for more, why not? I seek clarification, Sir. For whatever reasons, this is sending the message that either community development needs are not a high priority, or that we have already arrived at such a near Utopian state that we do not actually need to spend more on community services. Yet, we can allocate for development expenditure 318% more than last year for MOM, 28% more for education - all of which I agree with, incidentally. Surely the Ministry of Community Development has many community projects in the pipeline which should be financed. I propose that the Minister take a longer view and build the institutions that the community will in time need. I also propose that we consider easing the financial burden of VWOs by increasing Government funding from 50% to 80% of total operating costs so that social workers can concentrate on delivering quality service. If money is scarce, and we do not think it is prudent to dip into our reserves, then I propose we seriously adopt cost-cutting measures at the operation level at all Ministries and donate the "savings" to worthy and needy community causes. Just like in the private sector, some companies did not send greeting cards for Christmas and New Year in 1997, 1998 and 1999 and instead donated money to needy community causes. We should look for innovative ways of saving money and giving it back to the community. I simply wish to reiterate here that while Singaporeans at all levels are mustering their mettle to uphold the "Singapore Spirit" to help our country ride through these difficult times, those in the job of governance must also make sure that we do not bend, distort and stretch this Spirit already malnourished without extending timely and appropriate help. Our long-term competitiveness, Sir, apart from the focus on the manufacturing and service sectors, which we all support, must include the nurturing of this positive Singapore Spirit, through concrete help, not only by persuasion or in words. Sir, allow me to recap. This is a prudent Budget. I applaud the Singapore Spirit among Singaporeans who have adjusted to the crisis by scaling down their expectations. We need to nevertheless identify the potentially poor, adopt a policy perspective beyond welfarism, by focusing the family as the primary unit for policy formulation. I propose the setting up of FAMILY 21 and call for more resources for strengthening the community, including the family, and the Singapore Spirit.

Resolved, That the debate on the Budget Statement be proceeded with beyond 4.30 pm and the proceedings thereon be exempted at this day's sitting from the provisions of Standing Order No. 1. - [Dr Lee Boon Yang].

Debate resumed. 3.42 pm

Mr Speaker, Sir, the Member for Potong Pasir, Mr Chiam See Tong, mentioned yesterday that for our economy to make the next leap, our people must be more creative and more innovative. Further, he said that for our people to be more creative and more innovative, Singapore should have more political freedom. Mr Chiam was right on the first point but, sadly, he was completely awry on the second point. He was right in saying that for Singaporeans to justify a higher income than others, we must provide higher value-added. There is a limit on the premium other people will pay for our better infrastructure, clean and more efficient government, etc. Ultimately, the differentiating factor is our products and services that people are prepared to pay more for. But if that is his point, then he is not saying anything new. Mr Inderjit Singh earlier has also mentioned how to create a more innovative and creative society. The whole emphasis on the Committee on Singapore's Competitiveness towards a knowledge-based economy is to inculcate creativity and the inclination to innovate in our young people. That is the reason why in this Budget the Government is providing more money for education despite the recession. It is regrettable that Mr Chiam was barking up the wrong tree by saying that we can only do so by having more freedom. I hope he is not equating greater chaos in the countries he mentioned with greater democracy. Perhaps he is advocating freedom to demonstrate and freedom to speak from the street corners as being more democratic. This, he believes, will lead to a more creative and innovative population. Unfortunately, there is a fallacy in his argument. The greater freedom he has advocated is meant for the adult population whereas creativity and innovativeness must be developed and inculcated when the individuals are still very young, maybe starting as young as pre-school kindergarten. Actually, we are talking about two different segments of the population. It is indeed a rare individual who will transform himself or herself into a more creative or more innovative person as an adult just by having greater freedom, ie, freedom of any kind, political freedom, personal freedom. We can verify that by checking with friends and acquaintances who have lived and worked overseas, for instance, in the United States, presumably the model country Mr Chiam is referring to. I have also lived and worked in US for a long time. I do not think I have become more creative and innovative by being there. In fact, there is a saying that one cannot teach old dogs new tricks. So Mr Chiam would have been right if he advocates reviewing our school curriculum to promote creativity and innovativeness. But then it would not be as headline grabbing, would it? Mr Chiam further mentioned that he would like to see a committee of businessmen and chief executive officers of major corporations to deliberate the issues faced by the Singapore economy and coming up with suggestions without the involvement of a Minister. Perhaps, he has overlooked that the various subcommittees of the Committee on Singapore's Competitiveness are chaired by captains of industries from the private sector. Only the main committee was chaired by two Ministers. The Feedback Unit had in fact conducted several feedback sessions on the report of the CSC. No one had ever complained about the involvement of two Ministers. On the contrary, they welcomed their involvement as an indication of the importance Cabinet has attached to the issue. Furthermore, the Feedback Unit convenes similar workshops involving notable persons from businesses and CEOs annually with regard to the Budget Statement. And these workshop sessions are typically chaired by Members of Parliament on the Feedback Panel. I believe the participants in those workshops also welcomed the involvement of MPs. They do not see as "control" by the PAP Government but as an assurance that their views will get an airing in Parliament as I am doing right now. This year, the Feedback Unit brought forward this discussion session ahead of the Budget Statement so that this feedback can be considered by the Minister for Finance. Mr Speaker, Sir, I would like to give a summary of the session chaired by me on 9th February this year. In that particular session, 41 participants from trade associations, Singapore Institute of Management corporate members, trade unions and feedback groups attended the session. Senior Government officials from the Ministries of Finance as well as Trade and Industry were also present. The mood was generally subdued as the Prime Minister had commented earlier that the Budget is unlikely to contain any more surprises or goodies. From the feedback, let me summarise. On corporate taxes, several participants requested the Government to consider permitting group taxation, or what we call inter-group offsetting, a subject that Mr Heng Chiang Meng has already touched on, by allowing the losses of one subsidiary to offset against profit in another subsidiary within the same group. In this recession, many companies are finding themselves in a very difficult situation where one subsidiary will be making major losses while the other subsidiary will have some profits. Furthermore, for property development industry, companies are required by law to set up a clean sheet single asset company for each project if they were to bid for Government land. In this case, the entire group is engaged in the same business but only because of the Government requirements, they have to form subsidiary companies. This is especially glaring in this period when the losses of some of those companies could be substantial. As Mr Heng has mentioned, Mr Speaker, Sir, this request has merits. As it stands today, the way we operate our tax structures is that the companies bear all the risks while the Government does not share the burden of business risks. The basic principle of group taxation, or inter-group offsetting, is basically sound. Companies could have achieved tax savings by not setting up subsidiaries in the first place. However, they are set up for many reasons, often times for efficiency and focus on management attention. Therefore, the current taxation regime penalises this division necessitated by business. While the concept is basically sound, the devil is in the implementation. It is possible that some companies might take advantage of inter-group offsetting to avoid paying their due taxes. Nonetheless, I think it would be better to tackle the issue head-on than to avoid it just because of implementation difficulties. The basic fact of the matter is that single group offsetting is a reasonable idea whose time has come as this will really help companies caught by the regional crisis. After giving vent to the concept of inter-group offsetting, it is inevitable that the matter of loss-making foreign subsidiaries was brought up in the discussion. Several participants mentioned that it was the Government who encouraged Singapore to spread a second wing by going regional in the first place. Now that these foreign subsidiaries are losing money, many are requesting that the losses in the foreign subsidiaries be offset against profits in the home company in Singapore. Many CEOs would like to see the Government as a partner in shouldering business risks, as I mentioned earlier. This concept is already in operation within one single company in the sense that losses in one year could be carried forward into the future against future profits. Inter-group offsetting is just taking this concept one step further. Several businessmen involved in the trading business pointed out the difficulties they are facing as a result of the regional crisis. Current tax structure on inventory receivables is based on estimates. This is problematic in these current years because of the late payment or non-payment of inventory already delivered to the customers, especially those in Indonesia and Malaysia. These companies are facing the cash-flow problems as a result of non-payment or late payment. Yet, they have to pay taxes on estimated profits. So they are asking the Minister to review the tax payable to reflect the actual payments received. Mr Speaker, Sir, many CEOs pointed out that because of our tax on profit remitted from overseas, many companies or individuals had parked their profits derived from previous years outside Singapore. Now that they are running into cash-flow and credit crunch problems in the current crisis, one participant called for a tax moratorium for several years to facilitate the repatriation of these profits. Everyone present in the workshop lauded the emphasis on the training of workers. However, they pointed out that there is a lack of incentives for the training of executives and managers. The contributions of these people to the economy is no less important. The participants seem to support a form of payroll taxes for all employees rather than the current SDF which only takes care of the lower income workers. On the other hand, most of the participants would like to defer any action on this idea until the economy has recovered. Participants also welcomed the reduction of property taxes but commented that property tax assessment by the Department concerned is fast on the upswing but sticky on the downswing. So they would like the relevant authority to be faster and quicker in responding to the market. Several participants pointed out that to provide and promote promising enterprises, perhaps the Government could provide tax break for smaller companies to allow them to grow into bigger ones. Some of them mentioned that UK has such a law and we could follow that particular model. On taxes on individuals, the 2% gap between corporate and individual tax ceilings attracted quite a number of comments. The question is when would the Government remove this gap as we have learned in the past that individuals would tend to corporatise themselves to take advantage of lower corporate tax rate. The other ever green topic is that tax relief for non-working spouse should be raised. It was pointed out that the tax relief for insurance premiums was insufficient. Most taxpayers are unable to claim tax relief for their insurance premiums as their CPF savings had exceeded the maximum. One participant pointed out the total sum of estate duties raised in the last fiscal year is relatively small. He called for its total abolition. The minimum income beyond which CPF contribution would be made was set some 30 years ago. To encourage more part-time workers to join the workforce, it was felt that these income ceilings should be revised upwards. Personally, I do not agree with this request because of our ageing population. If anything, my own sentiment is that all incomes should be subject to CPF regardless of its amount. Perhaps, the ceilings were set many years ago to reduce the hassle of implementation in the age when the use of IT and computers was not as widespread. Several participants pointed out that our current practice of paying taxes of last year's income in the current year is creating some difficulties. Especially in the current recession, some individuals have actually in the current year dramatically lower income, some have even lost their job. Therefore, many find it a burden to pay income tax. To avoid similar problems in the future, perhaps we should move towards a withholding tax system like many developed countries. And we can phase-in this particular structure over time to minimise the burden on the tax payable by people. One participant highlighted the problem of what they call high net worth bankrupts. At first glance, it sounds like a contradiction of terms. It turns out that these are individuals who have used their CPF savings to buy a high price property. As a result of the recession, because of their loss of jobs or income, they were forced to sell their properties as they no longer could service their mortgage loans. As we all know, CPF has the first claim on the proceeds for such sales. For some individuals, the balance left behind was so small that the banks have no choice but to sue them for bankruptcy. So as a result, these are bankrupts. But they have a lot of money in their CPF account. So the new term is called high net worth bankrupts. The participant asked for relaxation of the return of CPF funds to prevent unnecessary bankruptcies. While I am personally sympathetic with these high net worth bankrupts, my own opinion is that any relaxation of the CPF rules at this point of time is unwise. Individuals should have known the rules ahead of time and be prudent in their use of CPF funds in their investments. On the topic of bankrupts, it was felt that the restriction on bankrupts from holding any directorship for five years seems to be too harsh and reflects our society being intolerant of failure, which I think Mr Inderjit Singh has also touched on. Government assistance for small and medium sized businesses drew quite a few comments, and much of these I would bring up in the debate in the Committee of Supply. A few have suggested that TDB promote more missions overseas to explore new markets. I am glad to note that the Minister has already disclosed in his Budget Statement that TDB would do so. This concludes my summary of the Feedback Session on the Budget for FY99. I must compliment the participants for being very reasonable and realistic in their proposals. Everyone accepted that we should allow the cost cutting measures implemented from 1st January 1999 to work through the system before the Government evaluates again whether more stimulations are necessary. Mr Speaker, Sir, I would like now to move on to my own comments on the Budget Statement for FY99. As the last but one speaker, much of what I would want to raise has already been brought up by the 30-plus speakers ahead of me. So I find it quite difficult to bring up new ideas. Therefore, I would like to take a completely different tack and focus on the use of past reserves, this being the first budget deficit after the Presidential Elections Act was passed in this House. I am particularly interested in the interplay between the role of the President and the use of reserves as enacted in the Presidential Elections Act. Walter Fernandez of the Straits Times in his article "Spotlight on the $5 Billion Deficit" touched on a very pertinent topic, namely, the provisions of the Elected President and the use of reserves accumulated in the current term of Government. I was interviewed by Walter and basically gave him an outline of what I would be covering in this debate. Mr Speaker, Sir, since this Parliament was returned in January 1997, there are only three fiscal years so far, FY97, FY98 and FY99. Only in FY97, there was a surplus of $5.2 billion. Deficit in FY98 was $0.466 billion. FY99 is projected to have a deficit of $5.05 billion. So just looking at the total sum of budget surplus and deficit, the Government has already exhausted the surpluses accumulated in the current term of Government. Note that I use the word "surpluses" and not the word "reserves". Dr Lee Tsao Yuan, earlier in her speech, has also touched on this particular topic. One reasonable question to ask is whether the Government could have been more aggressive in stimulating the economy if it has accumulated greater surplus. The budget deficit of $5.05 billion is the largest in memory but only in dollar terms. In terms of percentage of GDP, it is 3.5%. On the other hand, the last budget deficit of a similar magnitude occurred in FY86 when the budget deficit at that point was $2.5 billion. However, in terms of percentage of GDP, it was 6.3%. Moreover, it was also followed by another year of budget deficit in FY87 of $1.16 billion or 2.6% of GDP. So, in terms of percentage of GDP, the budget deficit in FY86 would have a greater impact on the economy than the deficit that we are seeing in FY99. As Mr Inderjit Singh has said earlier, we should take bold steps. The question I would like to ask is: are we being bold enough in this particular Budget? We all remember the recession of 1985 and 1986 and those were indeed difficult years. The Government's budgets were in deficit for two consecutive years. Yet, was the recession of 1985/1986 more severe than the current one? Probably not, as the Prime Minister and Deputy Prime Minister have mentioned on several occasions that the recession in 1998 and 1999 is the worst since Singapore became independent. If we think that this is the worst recession ever, why are we only having a deficit of 3.5%? So the relative impact of our current deficit on the economy, I think, is only 56% of what took place in FY86. Let us assume that the Government wants to inject the same level of stimulants in the economy as in FY86, 6.3% would work out to be about $9 billion. Whether the economy needs or could take such a stimulus, I do not know. But at least we know if we were to achieve the same rate of recovery as in 1985/1986, the Government could have done more. Would we need to make provision for another year of budget deficit? Would we be short of reserves accumulated in the current term of government if we were needed to do so? When asked by the reporters on 5th March 1999 regarding the issue of past reserves, Prime Minister Goh Chok Tong mentioned that the Government has accumulated sufficient reserves since January 1997 to finance a deficit for another two years, if it is necessary to do so. Therefore, besides the budget deficit, the definition of reserves must have included other income sources for which the two major ones are investment income and land sales. Investment income was $3.8 billion in 1997, and $4.3 billion in 1998. Land sales were $14 billion in 1997 and $5.9 billion in 1998. If these figures are considered reserves accumulated in the current term of government, then it is absolutely true that there is a lot of money in the kitty. Even if these are considered part of reserves, it still begs other questions in my mind. Should not investment income derived from past reserves accumulated in the previous terms of government be considered part of the past reserves of the past government but not the reserve of the current government? Philosophically, I think part, if not all, of such income should be considered as reserves for the past government. My reasoning is as follows. A good fund manager could provide better yield but even a mediocre fund manager would yield a return not less than fixed deposit. Therefore, the measure of how good a fund manager is only the incremental improvement in yield rather than the total yield of the investment. Similarly, maybe only part of the investment income from past reserves should be credited to good governance of the current Government and not the total sum of the investment. Before I get all tangled up in this theoretical discourse, perhaps the Minister could give the House a definite answer. Mr Speaker, Sir, the same rationale, I think, applies to land sales. Could the proceeds from land sales be considered part of the reserves for the current government or is it part of the previous government? If it is considered so, then I have also two issues. State land is an inheritance held by Government in-trust for all future generations of Singaporeans. Other than reclaimed land which is created, all lands are an inheritance associated with the sovereignty of the Government at the time of independence. Land has inherent value and its value at the beginning of the current term of government can be assessed. Land sale to me is a process to realise the value of land or its lease in cash. It would seem reasonable to assume that the proceeds of a sale should not be considered part of the reserve accumulated by the current term of government. In my mind, one should not credit the entire sum of land sale to the current Government as such. Again, if land fetches better prices because of good government, perhaps only the enhancement of its value as a result of the performance of the current government can be considered accruable to good government. Furthermore, if these two sources of income - investment income and land sales - were considered part of reserves accumulated by the current term of government, then one would question seriously the effectiveness of the provisions of the Presidential Elections Act to protect past reserves. The Government of the day could always make use of these two instruments - sales of land and investment income - to raise the necessary funds to meet this budget deficit without ever going back to the President to exercise the second key. Whatever the definition of reserves, it would seem that Singapore's economy is a wonder machine. Why do I say so? Because in the current term of government, we have only one good year in 1997, two lean years in 1998 and 1999. Prime Minister Goh said that we could handle two more lean years. So taken together, the reserves generated in one year could handle four lean years without ever going back to unlock the reserves accumulated by the past terms of government. This reminds me too of a passage in Genesis relating to how Joseph interpreted Pharaoh's troubled dreams of seven fat cows devoured by seven lean ones and seven stalks of healthy corns devoured by seven swivelled ones. Joseph interpreted it as seven years of abundance followed by seven years of famine and advised the Pharaoh to make the appropriate preparations, a task which the Pharaoh had entrusted to Joseph. Mr Sin Boon Ann has already alluded to this particular passage yesterday. In the case of Egypt, it took one good year to prepare for one lean year. In the case of Singapore, one good year would have saved enough for four lean years. I think this is very impressive indeed. Mr Speaker, Sir, one should not compare any mortal with the biblical Joseph. But one cannot deny the strength of the Singapore economy after 33 years of stewardship by the PAP Government. If we look over the past decade during which the present Cabinet was in charge, there were indeed seven good years where the budget surplus exceeded 3.5% of the GDP. Indeed, we are very well-prepared for many lean years if it ever comes to pass. Singaporeans should be thankful that we have a Cabinet worthy of Joseph. On this note, Sir, I support the Budget.

Order. I suspend the Sitting and will take the Chair again at 4.45 pm. Sitting accordingly suspended at 4.10 pm until 4.45 pm

Sitting resumed at 4.45 pm

Debate resumed.

Sir, may I get a clarification from Dr Wang.

All right.

I did not know that I have a new marker who is taking me on. He says that I got it right when I said that we need more creativity and initiative to produce goods that are value added to justify our higher standard of living, compared to the neighbouring countries. And I got it wrong when I said that we need an environment of democracy and freedom to have creativity and initiative. He says that democracy would bring chaos and disturbance. Of course, I certainly did not mean that democracy is freedom to do illegal acts, but it is more a political philosophy. We accept democratic principles and principles of freedom. He further says that we can inculcate and teach our young creativity and we cannot do that for old or mature people, because he says we cannot teach old dogs new tricks. The fact is that if we teach people creativity, it is a contradictory term. The whole idea of having creativity is to have a system that will allow our children to think in unorthodox and unusual ways. If we limit them to certain parameters, we cannot have creativity. That is under an authoritarian system. I will give an example.

Mr Chiam, are you seeking a clarification from Dr Wang or are you making a new speech?

I am seeking a clarification.

I think you are embarking on a totally different matter. Could you go direct to the clarification you want from Dr Wang?

All right. I want to challenge him on what he said about teaching creativity to young people. I will give an example on the meaning of creativity.

Order. Mr Chiam, you cannot embark on a new speech when you rise to seek a clarification.

I would just give this example and ask a clarification from him.

Could you make it very quickly?

It is on whether we can teach creativity in our schools. A building is almost completed. The architect and the owner were in the building and they had a problem of putting a lift in the building. Because that was the orthodox thinking and there must be a lift inside the building. Then in came this despatch person who had no training in architecture. He said, "What's the problem? If you can't put a lift inside the building, you just put it outside." And that is how the bubble lift was started. That is what we mean by creativity. We do not need formal training to have creativity. The clarification is whether he agrees that in fact you need rather an environment of freedom and an environment of democracy to have creativity.

Mr Speaker, Sir, first of all, I am not a marker for Mr Chiam See Tong. In fact, we entered Parliament at the same time and we have also travelled together on Parliamentary missions. We are close friends but I am definitely not a marker for Mr Chiam See Tong. Secondly, if Mr Chiam is talking about promoting creativity and innovativeness of young people, we are on the same wave length. We completely agree with each other. My point is that he is saying that for an adult population to be more creative and to create more opportunities in high-tech enterprises, we need to have more and greater political freedom. Let us do a mental experiment. Let us take the key people that we are talking about and physically transport them to a more liberal society. Would these adults become more creative? I think most of us will agree that we cannot be that creative.

Sir, may I seek a clarification from Dr Wang? Would Dr Wang agree that these people who are transported to a politically more freedom area may not be creative, probably because in their old environment there was no opportunity for them to be creative?

Mr Speaker, Sir, that is precisely my point. If we have grown up in an environment and gone through an education system, we are what we are today. And no matter how we change the environment, we are not going to be very different. So the focus that we should be paying attention to is on young people.

Why do we not change the environment here?

Well, we can actually do a mental experiment and have Mr Low Thia Khiang transported to America with complete freedom and see whether Mr Low would become more creative!

(In Malay): Mr Speaker, Sir, at a time when our country is facing an economic crisis, we are fortunate because we have leaders who have the calibre, ability and honesty in discharging their duties. If it is not because of them, our country, which has no natural resources and also limited land area and having a population of less than 3 million, will be turned into chaos by demonstrations comprising unsatisfied citizens against the Government which they feel has not discharged its duties correctly, especially at a time when we have almost 28,000 retrenched workers and a large portion of them are still unemployed. But our Government has not faced this situation because our leaders have set up wise measures to overcome this problem. One other reason is that our leaders are calm and not panicky. They have always emphasised on understanding, tolerance and harmonious living among us. As citizens, we should also play our part in upholding the spirit of harmony. We should always cooperate with one another and respect one another. Economic stability also depends on such a harmonious situation. We should be wary when we listen and read the speeches of leaders of our neighbours. We should not react on the explicit or implicit intention in their speeches, especially when our workers are facing retrenchment. The Budget Statement for the year 1999 by the Finance Minister, generally, is accepted by the community, because they are conscious that the Budget Statement is based on an uncertain economic background. As Members of Parliament, we are thankful for the generosity of the Minister for Finance to grant rebates to the flat dwellers, and this is most encouraging. I hope this will be treated as a privilege and not regarded as a matter of right, because if these rebates were to be granted every year in this bad economic situation, it is a question which will not be difficult for the Minister for Finance to decide. But when the economic situation is unstable, it will be difficult for the Minister to make a decision. I believe the grant of these rebates has been fully considered. Despite that, I hope that the Minister will be able to consider my appeal. It all depends on whether we could meet the expenditure for this financial year despite the deficit of more than $5 billion. The 5% tax rebate for the Year of Assessment 1998 should remain. It will be able to assist the expenses of taxpayers. But if we take into account the unemployment situation where there are 28,300 retrenched workers, I believe some of them would still have to pay their income tax, and it would be onerous on them. Therefore, I hope the Minister for Finance will consider increasing the income tax rebate for 1998 from 5% to 10%. If it cannot be granted to all the taxpayers, it should be granted to taxpayers who are unemployed or who have remained unemployed till today. The Budget Statement for 1999 is good and has been expected. But once again this year, I will ask the Minister for Finance to consider the financial problems of those taxpayers who are taking care of their parents-in-law. This is the third time that I have raised this issue. And I would also urge the Minister to consider giving rebates for full-time housewives who are without income. I believe it is the duty of the children to look after their parents, even though they are not their natural parents. The duty to take care of their parents-in-law is also burdensome, especially in terms of the household expenses. I believe that the number in this category is small and it will not affect the expenditure of 1999. The moderate expenditure of 1999 is a surprise. Because in a situation where we promote savings and spending according to our ability, the water tariffs have suddenly gone up. I think in an uncertain economic situation, it is not proper to increase water tariffs. Therefore, I hope, and for the citizens of Singapore as a whole, water tariffs should not be increased at this time, but it could probably be implemented when the economic situation is stable or when salary increase and bonus are reinstated. I was given to understand that 6,000 motorcyclists were fined for offences in connection with entering the Restricted Zone, either intentionally or otherwise, in the last five months. For the whole year, this number may increase by two or three times. It also involves other vehicles like cars and lorries. The payment for entering this zone is aimed at reducing congestion. I am thankful to LTA for granting a road tax rebate. But it would be better if the road tax be further reduced so that motorists would be relieved of the expenses and use it for their children's school expenses and household expenses. I believe the Minister will say that Singaporeans are always not satisfied. When given a piece, they always want a bigger share. But this is the reality of life for Singaporeans. In fact, this is the time for us to ask the Minister for Finance to consider whatever problems that they face, especially relating to money. There is a saying, if you are fortunate, it will float, otherwise it will sink. In conclusion, for the first time, there is a budget deficit of $5 billion for the estimates of 1999-2000 and the measures that have been taken have not yet shown any result. What happens if the economy does not recover or becomes worse? Is the Minister for Finance ready to face such a situation? Although the Prime Minister has said that fellow Singaporeans should not be worried, because we are able to use the reserves of 1997 to face this economic recession, I hope the Minister for Finance will look for other means to use the reserves so that we need not be worried when we face a worse situation if it were to come. In conclusion, I support the motion in the name of the Minister for Finance.

(In Mandarin): Mr Speaker, Sir, this year's Budget is the second deficit budget since the independence of Singapore, and we are in a situation where our neighbouring countries are facing political and social upheaval and their stability is in trouble. Singapore is a small country, like a small boat in a sea of towering waves. We need a very capable helmsman to keep the boat under control. We also need the cooperation of all passengers on board the boat to balance it properly. In this way, we will be able to ensure that this small boat will sail through the towering waves to reach our destination eventually. So we must be prepared for all eventualities and face any unforeseen worsening of the situation. 1999 is a challenging year. At this very critical moment, the Government is able to give a 10% across-the-board rebate on personal and corporate income tax and also rebates on HDB rentals, utilities and S&C charges to lighten the burden of our people. For the business people, there is also a whole series of assistance schemes to help them, in addition to the $10.5 billion cost-cutting package announced in November last year. This year's budget is one in which the Government is sharing the people's hardship. This budget has the support of all the ordinary folks as well as the business community. On the budget itself, I would like to make the following suggestions: (1) We must have more tax rebates for donations to charity and social community services. I support Mr Lim Swee Say's proposal that the Government should give more incentives during these bad times. When we feel that money is not enough, we should make it possible for more enthusiastic charitable people to donate more money to charitable and community organisations. I believe and suggest that the Government would be able to give them double tax deduction for their donations, just like what we have done for the foreign maid levy. (2) We should revalue the commercial and residential properties more readily so as to keep in line with their market value. The Government is granting a 55% property tax rebate. I think it is a good policy. But some commercial properties were bought in the year 1995/96, when the property value was at its peak. Now that the property market value has dropped by about 30% to 40%, I hope the Property Tax Department will take a more realistic approach to revalue these properties, particularly commercial properties, to reflect their present market value and give them the proper tax rebate. (3) On GST, I also support Mr Lew Syn Pau's proposal that GST should be reduced from 3% to 2% for a period of two years. At present, businesses with annual business turnover of not more than $1 million are exempted from GST. I feel that the ceiling should be raised to $2 million. This will help the small and medium enterprises and the neighbourhood shops in HDB estates as well as the residents there. (4) Liberalise the rules on subletting of land and factory premises. Last year, I successfully proposed to the Minister to liberalise the subletting of JTC and HDB factories and shops. Factories are now allowed to sublet 50% of their space and those companies which are linked to the parent company are allowed to sublet up to 75% of the factory space. However, this rule applies only to factories which are in occupation of more than 5 years. In other words, only those who have been in occupation of the property for not less than five years can enjoy this kind of preferential treatment. I think JTC and HDB should repeal the 5-year limit to allow those who bought their factories at the peak prices in 1995/96 to sublet part of their premises so as to collect some rent to help them tide over these difficult times. (5) Financing for SMEs. Many small and medium enterprises managed to obtain bank loans in 1995 and 1996 through the help of EDB at low interest rates. This is a good policy. Many SMEs have benefited from this. However, because of the 1997/98 economic recession, the business of these SMEs is severely affected. At the same time, these companies have to pay interest to the bank at rates higher than before. During this critical period, can the Government consider setting up a two-year bridging loan at preferential rates to help these companies tide over these difficult times? Next, let me deal with the expenditure on education. This year, the Ministry of Education's budget is 3.2% higher than last year's. The idea is to train and educate more people so that they can serve society and contribute to the country. This is a long-term investment on our human resources so as to prepare Singaporeans to face the challenges of the 21st century. I believe all Singaporeans will support the bigger budget for the Ministry of Education. There are a few issues I would like to raise on Education. One, we must ensure that there are sufficient places in the universities for our own local students. I strongly believe that every Singapore citizen should be given at least 10 years of education in primary and secondary schools. Those with good results may go to junior colleges, polytechnics and even universities. At the moment, we have two universities - NUS and NTU. Every year, we are able to provide for 9,000 places, with 10% reserved for foreign students, ie, about 900 places for foreign students. According to the newspaper report this morning, the Ministry of Education intends to raise the number of places reserved for foreign students to 20% of the total enrolment each year. I would like to ask the Minister whether this extra 10% of places for foreign students will come from the existing 9,000 places or is the Ministry of Education going to create more places in the universities for foreign students without reducing the places for our local students, since our third university will only start to enroll students in the year 2004. There are still five years to go before 2004. During these five years, if we take away another 10% from the 9,000 places for foreign students, that means our local students' opportunities will be correspondingly reduced. At present, graduates from the polytechnics have to work for two years to earn some credits to qualify for admission to the university. I think this is a good idea. But polytechnic students who graduated in 1997/98, when we were facing a severe economic crisis, are experiencing great difficulties in finding jobs because many factories and companies are retrenching their workers. In these circumstances, many polytechnic graduates cannot get jobs, thereby jeopardising their chances of admission to the NTU. Those who can afford can go overseas to get their degrees, but those who are not so well to do will lose the opportunity to enter the university. In view of the economic crisis, this policy should be adjusted accordingly so as to ensure our students will not be deprived of the opportunity to enter the university. Next, I would like to deal with the problem of brain drain. Every year, we have only 9,000 places in the universities for our students. Many parents are telling me that their children cannot gain admission to the local universities and have to go overseas. To be able to go overseas for further studies is a good thing. SM Lee has also said that when students go overseas for study, they can mingle with students of foreign countries and establish rapport with them. After their graduation, they will be able to strengthen relations with other countries and contribute to the development of our nation. I have not been able to get the statistics from the Ministry of Education on how many Singapore students have to go overseas each year because they are unable to get places in our local universities. I was told that the Ministry did not have the relevant data. This gives me cause for concern. It is important that we keep track of the number of students who have to go to universities overseas because there is no place for them in our local universities. I would suggest that the Ministry of Education set up a special department to assist our students in finding places in foreign universities and to maintain contact with them. This way, we will be able to know when they have graduated from these universities, and find some way to make them come back, so that our good talents will not be lost. Our students who went overseas and do not come back after graduation are a loss to our society. We have invested at least 10 years of education on them. I would ask the Minister how much money we have invested on each student for the 10-year period from primary one to secondary four. Although the Budget this year is not particularly spectacular, it is not a bad budget either. If the Government and the people can work together to overcome our difficulties, we will be able to tide over the difficult times. We hope that at the end of the tunnel, we can see some light. On this note, I support this Budget.

Mr Speaker, Sir, may I seek your consent and the general assent of the Members present to move that the proceedings on the item under discussion be exempted from the provisions of Standing Order No. 45, so as to remove the time limit and enable the Minister for Finance to adequately reply to all the points raised by Members?

I give my consent. Does the Leader of the House have the general assent of Members to move the motion? Hon. Members indicated assent. Resolved, That the proceedings on the item under discussion be exempted from the provisions of Standing Order No. 45 in respect of the reply to be made by the Minister for Finance. - [Mr Wong Kan Seng].

Debate resumed. 5.20 pm

Mr Speaker, Sir, I would first like to thank all Members of this House who have spoken on the Budget over the past two days. Given the time constraint, I will not be able to address all questions and issues raised. So I will focus on major issues and leave matters of details to the Committee of Supply where cuts on these subjects have been raised. Since the release of the FY99 Budget, many have commented that it is prudent, and geared towards the long-term good of Singapore. However, some felt that the FY99 Budget is cautious and contained few new measures to stimulate the economy. Mr Speaker, Sir, the FY99 Budget should be seen in the context of the total response Government has made since the start of this crisis. When the economic outlook deteriorated after the FY98 Budget last February, we did not wait until the FY99 Budget to introduce the $2 billion off-Budget package in June, and the subsequent $10.5 billion cost-cutting package in November 1998. The Government has responded promptly and appropriately as the situation develops. As I have said in my Budget Statement earlier, we should let the cost-cutting measures work through the system first. The Budget therefore did not contain any new major cost-cutting initiatives. The Government will be monitoring the economy and external developments very closely. Let me share with this House Government's thinking behind the formulation of the FY99 Budget. The Government has consistently adhered to the wisdom of a prudent fiscal policy. We live within our means, accumulating surpluses in good years of strong economic growth and drawing down on our reserves only in years of economic downturn. Government has been able to maintain budget surpluses in normal years, not by overtaxing the people and businesses, but by spending judiciously and fostering economic growth. On hindsight, it is plain that Government has been correct in resisting the temptation to simply spend what we have when economic growth was buoyant. The accumulated reserves now give us a valuable buffer against the present downturn. The policy of spending what we need, and always with an eye to the future, is a fundamental pillar for Singapore's economic health, social stability and long-term security. For FY98, Government is expected to run a deficit of $466 million. After taking into account the impact of the tax benefits and rebates announced in my FY99 Budget Statement, the forecasted budget deficit for FY99 is $5.4 billion. FY 2000 may still be in deficit, given the carry-over effect of the cost-cutting measures, and the time lag in the increase in tax collection when the economy does turn around. Even so, it is important to bear in mind what the FY99 budget deficit will be incurred for. Firstly, Government has carefully prioritised its spending by focusing on developing long-term capabilities, with substantial increases in spending on social and community services, especially for education. Secondly, FY99 Budget introduces further tax incentives to help Singapore seize the window of opportunity to further develop certain economic activities. Thirdly, the Budget offers relief to individuals and households, both in tax rebates and household rebates. The Government wants to help our people tide over the current difficulties as best as possible, partly by alleviating costs with rebates, but even more so by miminising job losses through helping companies survive and prepare themselves for future competition. We must understand that Government cannot fully offset the impact of this recession, which is caused largely by the fall in external demand. Adjustment is painful, but unavoidable. We must adapt to changing circumstances. This may mean that many of us will need to tighten our belts or retrain for a new job, or that some companies may have to restructure or even close down. Mr Speaker, Sir, the present recession has forced us to focus on what the essentials are for building our future. It has exposed the areas which need improvement, and accelerated the pace of economic restructuring which we will need to undergo in any event to remain competitive in the long term. If we act wisely, we will emerge fitter than our competitors after the crisis. The crisis has also made us less complacent as a people, and to appreciate the significance of the fundamentals, like the upgrading of skills, maintaining competitive costs, having strong reserves, and most important of all, preserving social cohesion. This crisis is not merely a test of the Government's skills, but also a test of the resilience of Singapore as a nation and a people. Singapore must not just aim to survive the economic crisis. We must emerge from the crisis fitter for the race ahead. I have elaborated in my Budget Statement our five-pronged strategy, which is, cutting business costs, ensuring access to working capital, market diversification, investment promotion and capabilities building. This Budget, as well as the earlier off-Budget and cost-cutting packages, manifests these strategies. I will now turn to the specific concerns raised by Members of this House. First, I would like to thank Mr Lim Swee Say for his timely reminder that what the Government has done in the 34 years since independence has been focused not only on creating economic growth for its people, but more importantly, on the creation of a nation from the disparate parts with which it started. The latter is an imperative which is often forgotten by observers when they compare Singapore's circumstances with other countries. I believe that the Singapore of today, a unified nation, with its strong institutions, is perhaps the PAP Government's greatest achievement. Mr Lim has also pointed out that in moving into the next century, it is important that all sectors of the nation, public, private and individuals, must be prepared to change its collective mindsets, not to work in compartments, but to work collaboratively with a common purpose. I do not disagree. Mr Lim also urges the public sector to be cost conscious, and work on a new mindset of promoting knowledge-based companies through an incentive package. The latter point I will take up in the Committee of Supply. As for the public sector being cost conscious, we have various systems currently to ensure that we have a prudent public sector that is effective, efficient, responsive and enterprising. Thus, we have the Budgeting For Results framework to promote cost- consciousness and result-orientation, and the Public Service for the 21st Century initiative to promote continuous improvement. As a specific example, keeping costs low in the construction of Government buildings, like schools and hospitals, has always been a key consideration. We have in place a system of building norms as a measure to control costs. We also pay attention to other factors such as upgradability, and the need to maximise land use. I agree that our Government buildings should not be ostentatious, but neither should we go back to building plain old boxes. Where the architectural finishes will cost virtually the same, whether the architecture style is modern or dowdy, we should go for the modern style. In any case, the finishing of a building only forms a small part of the total cost, the most part being structural, mechanical and electrical works. Notwithstanding this, we are undertaking an exercise to review building norms. Although Mr Chiam See Tong does not often agree with the Government, this time he is correct in his assessment that the present recession is due primarily to external factors. However, he strays when he claims that Taiwan has coped better with the economic crisis because the country has become more democratic. He also says that the Singapore Government has been too paternalistic and this has stifled private sector initiative. In making these statements, he has taken a grossly simplistic view that more democracy always means better economic performance, hence, the Taiwan economy has outperformed Singapore. A quick look around the world should convince him that some of the world's most democratic countries are mired in economic problems. He himself has recognised that the Singapore economic performance has been dragged down by the external factors outside our control. Our exports of goods and services have been severely depressed by the economic collapse of our neighbours, whereas Taiwan's economy has been less affected as its export markets are largely to the US and China. Taiwan itself has not entirely escaped from the effects of the financial turmoil in the region. To pump-prime its economy, it has introduced a NT$194 billion, or about S$10 billion equivalent, stimulus package in August 1998. Mr Chiam's claim that the Government stifles private sector initiative is also contradicted by the International Institute for Management Development. In its 1998 World Competitiveness Yearbook, it rated Singapore top in three areas: first, Government economic policies, second, our political system being well adapted to today's economic challenge and third, the bureaucracy not hindering business development. I should also point out that CSC (Committee on Singapore's Competitiveness) and its various subcommittees were private sector driven and many of its recommendations have been accepted by the Government. I must also confess that I was grossly disappointed by Mr Low Thia Khiang's approach in criticising the FY99 Budget. His views are myopic. He claims that there is no need for a budget deficit. Since development expenditure accounts for 48% of total expenditure for FY99, excluding development expenditures from the Budget balance would automatically create a budget surplus. He has further said that the Government could have capped its development spending at FY97 levels to avoid going into a deficit. However, if we do as Mr Low suggested, we will lose out in the race to develop our human resources and build up our infrastructure to enhance our long-term competitiveness. In fact, Mr Speaker, Sir, not many governments can afford to spend more in the midst of a recession. Even if they do, the focus will tend to be more on relief measures or measures to pump prime the economy, rather than in the long-term development expenditure. The fact that we are able to spend 50% more on development expenditure in FY99 than in FY97 clearly shows that Singapore has the resources, the will and the confidence to not only overcome the current crisis, but to prepare for the post-crisis future. Mr Low has also said that the PAP should apologise to the people for the current economic slowdown. I find this request very strange, since even Mr Chiam has recognised that the economic downturn was brought about by external factors outside the Government's control. Astute foreign observers of the Asian economic scene have noted how Singapore has stood out in the region. Mr Low has also claimed that the special monthly S&C rebates ranging from $2 to $6 are piddling and of not much help to Singaporeans. His analysis is deliberately misleading. If he had added up all the various S&C rebates and grants in the Budget, he would find that households in, for example, 1- and 2-room flats would enjoy annual savings in S&C charges of $170 and $200 respectively. This means that they need only pay between 1/4 and 1/3 of their annual S&C bills respectively. In fact, the Government is passing back some $490 million to Singapore individuals and households in the form of tax and special household rebates. I would also refute Mr Low's point that the increase in water tariffs shows that the Government does not want to help the people. Water is a strategic and precious resource. It is precisely because the Government has in mind the future good of Singaporeans that the increase in water tariffs has to proceed as scheduled. However, the Government is mindful of the need to offset the increase for lower income households. A total of $114 million will be passed back to 1- to 4-room HDB households which will more than offset the water rate increase. The Member for Hougang has also questioned the need for the Programmes Central Vote in MOF. This provision is to enhance the Ministry's capacity in the current economic climate to meet high priority and urgent spending needs if and when they arise, and cater for new operating expenditures arising in the course of the year. The central vote is no blank cheque - it has a fixed ceiling. This request for some treasury flexibility amounts to a minuscule 0.4% of total expenditure or 0.8% of operating expenditure. Mr Jeyaretnam has criticised the disproportionate Budget allocation for defence. Mr Speaker, Sir, we are living in an uncertain world. A strong defence capability is the cornerstone for the development and well-being of Singapore. Without an adequate defence, it is not possible to continue our way of life. It is also not sufficient, as suggested by Mr Jeyaretnam, to rely on defence cooperation and support of international organisations. Ultimately, we have to rely on ourselves. We need to be prepared for all circumstances and for the worst. Therefore, to allocate funds for the defence budget only when we face a clear and impending threat to our security, as suggested by Mr Jeyaretnam, is foolhardy. Dr Wang Kai Yuen has asked if the budget deficit could have been bigger without the provisions on the protection of past reserves, and whether we would need to draw down on past reserves in FY2000. Mr Speaker, Sir, the Government's fiscal policy in this crisis has not been constrained by the Elected President's safeguards. The size of the cost reduction packages has depended only on what the Government judged was necessary, given the state of the economy and the prospects in the region. The Government has accumulated substantial reserves in its current term of office. It therefore does not expect the fiscal deficits in 1998, 1999 or 2000 to exhaust its current reserves, and make it necessary to draw upon old reserves. President Ong Teng Cheong has told Prime Minister Goh Chok Tong that if the Government needs to draw on past reserves to deal with the current crisis, he would support it. Mr Goh has thanked the President, but told him that the Government would try its best not to draw on past reserves. The Constitution protects the reserves that were not accumulated during the Government's current term of office. The reserves that are accumulated during the Government's term of office, and therefore are not subject to the Presidential safeguards, include the budget surplus, as well as net investment income (NII). Net Investment Income is defined as the Government's annual earnings from its stock of reserves. These are current earnings accruing from interest and dividends alone. They exclude capital gains arising from the sales of bonds and equity holdings from past reserves. NII is below-the-line item in our annual budget. As for proceeds from the sales of State lands, these have always accrued fully to past reserves even though these proceeds are treated as operating revenue in some countries such as Hong Kong. The present Government took office on 25th January 1997. Between 25th January 1997 and 31st March 1998, the Government generated an operating budget surplus of $6,273 million. After taking into account expected deficits in FY98 and FY99, we will still have accumulated surplus of $368 million as at 31st March in year 2000. If we were to add in the NII since 25th January 1997, the Government's current reserves would comfortably exceed this figure. This is because our investments have done well in recent years. Hence, I do not see any immediate need to draw on past reserves that will require the Elected President's approval. On Mr Chay Wai Chuen's and Mr Seng Han Thong's concern on the filtering down of the cost cutting effects on prices, most of the measures will flow directly to the companies and consumers, such as the CPF cut, reduction in foreign workers levy, rental reductions, transport and electricity tariff rebates, telecommunications tariff reduction and GST offsets. For the property tax rebate, public sector landlords, such as statutory boards, will pass on the rebates fully. Government also urges landlords in the private sector to pass on the rebates. A random survey of landlords conducted last year revealed that the majority of landlords are passing on at least half the rebate savings to their tenants. With the keen competition in the slowing market, rentals and consumer prices have eased considerably in recent months. Mr Inderjit Singh and Mr Ong Ah Heng have asked how the Government will keep track of the economy and the effectiveness of the cost cutting package. Being a small and open economy, Singapore's economic growth is heavily influenced by external developments. Even in good times, the Government is constantly interacting with businesses to obtain feedback and refine our policies. MTI uses a combination of hard and soft information in monitoring the economy. Hard information includes data on trade and industrial production, while soft information includes surveys of business expectations and regular meetings with industry players. While we try to be as accurate as possible in our forecast, Government recognises that we are in a period of discontinuity. Non-economic factors such as the confidence of international investors are critical in a state of uncertainty. For this reason, we have adopted scenario planning to complement conventional economic forecasting. Last month, Deputy Prime Minister Lee had outlined three economic scenarios Singapore would have to be prepared for. The world does not run according to our wishes: we must make our future by planning ahead and being able to respond in good time to develop any opportunities that come up even in the midst of crisis. Mr Tay Beng Chuan and Mr Zulkifli Baharudin spoke on the need to help SMEs. Mr Speaker, Sir, we know that SMEs are most vulnerable in economic downturns. The Productivity and Standards Board (PSB) has just issued a press statement last week which detailed how PSB has helped SMEs on five fronts in 1998 - access to finance, information and IT, technology and innovation, markets, and human resource development. Mr Speaker, Sir, there are already more than 60 programmes to help local enterprises in various stages of development, with the Local Enterprise Finance Scheme (LEFS) and the Local Enterprise Technical Assistance Scheme (LETAS) as the two flagship programmes. The Government recognises that the top concern of SMEs now is short-term cash-flow. Thus, LEFS has been expanded to $2 billion in June 1998 and enhanced further in September 1998 to cover more SMEs. From April 1998 to January this year, about 1,320 loans were approved under LEFS, amounting to $533 million, which is 32% higher than the amount approved from April 1997 to January 1998. Where feasible and practical, the Government will consider enhancing the scheme further. To help SMEs reduce operating costs and build up capabilities, LETAS is very flexible and can be used for any aspect of the business upgrading for qualifying SMEs. From April 1998 to January 1999, about 800 SMEs were assisted under LETAS, as compared to 643 companies from April 1997 to January 1998. To help SMEs upgrade the skills of their workers, SDF is positioned to place greater emphasis on skills such as those required in electronic-commerce while continuing to support training that caters to current needs. As at January 1999, about 230,000 places have been approved to support SME training. Mr Peh Chin Hua spoke on the need for local businesses to seize opportunities in the region, while Mr Ong Kian Min urged that we develop our local MNCs. Mr Speaker, Sir, the Promising Local Enterprises (PLE) programme, launched in 1995, targets to produce a pool of 100 PLEs with a turnover of at least $100 million each by the year 2005. Today, there are about 300 PLEs. Most PLEs were able to weather the regional crisis in 1998 as they served the OECD markets. Just last week, to help PLEs in both the manufacturing and hub services sectors, to be trim and fit for the race ahead when the economy recovers, EDB launched the 3Cs programme - Co-investment, Collaboration and Consolidation. Under this programme, a $100 million fund will be set aside for EDB to take short-term equity stakes of up to 30% in PLEs to support their growth for an appropriate period. Mrs Lim Hwee Hua has touched on the issue of the credit squeeze arising from the current crisis. Total credit extended by commercial banks moderated significantly through 1998, in line with the slowdown in the economy and a more cautious lending policy by banks given the increased risk environment. Our banks are accountable to their depositors and shareholders to act on sound commercial decisions, and Government cannot and should not put pressure on banks. Nevertheless, the Association of Banks in Singapore has advised its members not to take a short-term view of the viability of their clients' businesses, nor to pull back on loans that are being regularly serviced. Mr Heng Chiang Meng, Mr Ong Kian Min and Dr Wang Kai Yuen have raised queries on group offsetting and taxation of foreign income. As this is a complex subject, I would reply to their queries in the Committee of Supply. Mr Heng Chiang Meng has also asked whether we have inadvertently moved towards taxing capital gains, by taxing the recipients of dividends distributed out of capital gains. Whether or not a receipt is taxable depends on the nature of the receipt to the recipient. If the receipt is income, it is taxable. If it is capital gains, it is not. To the shareholders, dividends are returns on their investment and thus constitute income. This applies irrespective of whether the dividends are distributed out of the company's operating profits or capital gains. This tax principle of dividends being income in the hands of shareholders and thus taxable has been confirmed by Courts including those in the UK and Australia. Our tax treatment of dividends does not contradict our system of no capital gains tax. Mr Lew Syn Pau has asked when we will cut the corporate income tax rate to a long-term level. The Government has just given a 10% corporate tax rebate for Year of Assessment 1999. It is therefore too early to consider reducing the corporate income tax rate at this point. Mr Heng Chiang Meng may wish to note that the Ministry of Finance continually reviews our tax system, together with IRAS and economic agencies such as EDB, TDB, NCB and the MAS, to align tax rules with changing business environment. The views of the private sector have also been sought, such as through committees like the CSC and the Financial Sector Review Group. IRAS and the Ministry of Finance also have regular meetings with tax practitioners such as the Institute of Certified Public Accountants of Singapore (ICPAS). Mr Inderjit Singh, Dr Lee Tsao Yuan and Mrs Lim Hwee Hua have spoken on the need to promote entrepreneurship and technopreneurship by creating a conducive environment via a review of regulatory framework, the establishment of a development funding provider and promotion of venture capital funds. Mr Sinnakaruppan also spoke on how the tax treatment of stock options could help companies attract talents. I will address these issues in the Committee of Supply. I would also like to thank the many Members who have made suggestions on these various matters. Some, like Mr Inderjit Singh, have expressed disappointment with the Budget for not doing enough to encourage entrepreneurship. Time does not permit me to address the many suggestions that have been raised. However, Members of this House should be aware that the Technopreneurship 21 (T21) Ministerial Committee, chaired by the Deputy Prime Minister, Dr Tony Tan, has been set up, complemented by a private sector subcommittee led by Mr Sim Wong Hoo, the CEO of Creative Technology. They will be touching on areas mentioned by Mr Inderjit Singh, Dr Lee, Mrs Lim and Mr Sinnakaruppan. The recommendations of the T21 Committee will be announced this year. Many Members, such as Mr Seng Han Thong, Mr Lim Swee Say, Mr Sin Boon Ann and Mr Ahmad Magad, have spoken on the need to build up the software and step up workers' training such as via manpower development schemes, and a "Skillsave" CPF account. Mr Speaker, Sir, there is already an array of initiatives in place to promote lifelong learning and skills upgrading, including among the older and lower skilled workers. Retraining is critical, especially among the less skilled workers, to minimise the adverse impact on people from the transition to a knowledge-based economy. Let me elaborate on these initiatives. For FY99, the budget allocation for the promotion of manpower development is $150 million versus $58 million in FY97. The Skills Redevelopment Programme which aims to retrain the unskilled and semi-skilled mid-career workers has been expanded by $120 million, of which $20 million has been committed to set up a Skills Development Centre. For the Skills Redevelopment Programme, SDF and the Government defray up to 80% and 70% of the course fee support and the absentee payroll respectively. For manpower in leading edge technologies, we have the $800 million Initiatives in New Technology (INTECH) grant scheme, of which $50 million has been set aside for EDB's new Training and Attachment Programme. The Government has also given a grant of $9 million to the NTUC Education and Training Fund to support training by union members. Companies can enjoy tax deduction for their workers' training expenses. Government agencies also work with private training institutions to develop training programmes for the workforce. In recognition that the individuals will increasingly have to be responsible for their own employability, the tax deduction for qualifying educational expenses incurred by individuals has been raised to $2,500 in the FY99 Budget. The Manpower 21 (M21) Committee is studying what more needs to be done to support in-employment training and lifelong learning by individuals. The use of the "Skillsave" CPF Account is one option, but we have to ensure that the use of CPF funds will not deplete members' CPF savings. The M21 study will be finalised by the middle of this year. Mrs Yu-Foo Yee Shoon and Dr Teo Ho Pin have spoken on promoting IT awareness and use. I want to assure both Members that NCB aims to create an IT culture where people from all walks of life are comfortable with using computers at home, school, work and at play. First, NCB is already promoting awareness of the benefits of IT through computer roadshows at shopping malls, libraries and schools. Second, IT training and upgrading is accelerated and Government is reaching out to more than 300,000 workers, including mature workers, through the SDF IT Power training programmes. Also, the use of Internet and Singapore-ONE services is being stepped up. For instance, the mobile IT Coach has already reached out to 16,000 factory workers. Mrs Yu-Foo has also suggested that the Government should upgrade NCB to be an IT Power Ministry which will act as a central ministry responsible for overall IT planning for the nation. There is considerable merit in her proposal. Such a Ministry can bring together the functions of the NCB, TAS and SBA. IT is not only a major new basis of economic activity, but it is also a key capability for making Singapore a fully developed country. IT will change the way we live, how we study, work and enjoy our leisure. The IT, telecommunications and broadcasting sectors are not only growing rapidly, but are also quickly converging. The Government is actively studying how to streamline and consolidate the agencies concerned with regulating and developing these related sectors. Besides the principal agencies such as TAS, NCB and SBA, other agencies are also involved. For example, EDB promotes IT investments just as it promotes investments in manufacturing and other high value-added services. Some rationalisation is necessary, but we need to decide exactly what will go into the combined entity, and which Ministry it should come under. There are also a few grey areas that need further study. We hope to make a decision on these matters within a month or two. Creating a new ministry to supervise IT and telecommunications is a longer-term possibility, but to do so in the near future would be premature. Mr Kenneth Chen has suggested that GLCs should not be competing aggressively in the local market to give our local companies more breathing space. Whether or not a GLC should compete with businesses in the local market or venture overseas is a commercial decision which the GLC and not the Government should make. Also, many of our GLCs are publicly listed, and are accountable to their shareholders for their corporate decisions. More fundamentally, with the increasingly global business competition today and Singapore's relative free and open economy, it is wishful thinking that we can give our local companies breathing space simply by removing GLCs from the playing field, as new competitors will always be there. Where Government can help in a meaningful way, as has also been suggested by Mr Zulkifli Baharudin, is to facilitate our companies, whether GLCs, SMEs or PLEs, to compete successfully overseas, for example, by encouraging our local companies to form clusters or to tie up with GLCs under a Singapore Inc approach to maximise collective leverage. Mr Lew Syn Pau and Dr Wang Kai Yuen have talked about corporate tax grouping for property developers. For property subsidiaries which are required to be set up because of the prudential requirements in Government land tenders, they will be wound up after the specific project for the tendered site is completed. Unlike other companies, these property subsidiaries are therefore unable to carry forward their losses on the project. Mr Lew may wish to know that REDAS and IRAS are already in discussion on how to resolve this tax constraint arising from the prudential requirement of Government land sales. Dr Teo Ho Pin and Mr Kenneth Chen have asked whether more could be done to assist retrenched workers and families, such as allowing them to use their CPF savings or setting up a safety net. There have been many calls on the use of CPF savings such as for training and living expenses. However, we must not forget that CPF savings, are meant primarily for members' old age, basic housing and for medical needs. To help alleviate the difficulties these workers face to pay their mortgage loans, Government has already allowed them to use their Special Account savings from February 1999. The best way to assist retrenched workers is to help them seek re-employment as quickly as possible. Even before the regional economic downturn, the Ministry of Manpower had taken steps to expand its Employment Services Department (ESD) to help unemployed Singaporeans or Permanent Residents. When large numbers of workers were retrenched in 1998, MOM not only allocated more resources to ESD but also introduced several new initiatives, such as strengthening the partnership with NTUC, SNEF, CDCs, and self-help organisations, to extend the reach of the Government's job assistance services. On Mr Simon Tay's concern for the retrenched workers and their families in financial hardship, there are a number of assistance programmes which such workers can tap on. These include the community assistance programme administered by MCD, the CDCs, the National Council of Social Services, self-help groups and VWOs. MOE also helps to pay the educational expenses of the families' school-going children. The Ministry of Health's Medifund scheme helps to ensure that no one will be denied of basic health care just because they cannot afford it. Dr Vasoo and Mr Lim Swee Say have suggested more tax reliefs for those supporting their parents-in-law and dependants such as jobless spouses. The aged parents' relief, which also applies to parents-in-law, and the wife and child relief can be claimed by those who are supporting these two groups of dependants. We have only recently raised these two reliefs with effect from Year of Assessment 1998. For the aged parents' relief, if the taxpayer lives with his parent in the same household, he can enjoy an additional $1,000, on top of the normal $3,500 relief. As for the wife and child relief, it has been raised from $1,500 to $2,000. I would like to stress again that tax reliefs are not meant to fully defray the cost incurred for the maintenance of dependants, but rather serve as a form of recognition. In response to Mr Lew Syn Pau's and Dr Wang Kai Yuen's query, I would like to say that there is no need to reduce the top marginal personal income tax rate from 28% to 26%, in line with the corporate tax rate. Our individual income tax rates and brackets have been reduced over the years. The last change was effected in the Year of Assessment 1997. Our individual income tax burden is amongst the lowest in the world. For the 35% of the population who pay personal income tax, the effective tax rate is in fact considerably lower than 28%, because 28% is only the marginal top rate, and there are various reliefs and rebates which reduce the effective tax rate. Government is mindful of the impact on our people and has thus given a 10% tax rebate on personal income tax. On Dr Wang Kai Yuen's suggestion for the abolition of estate duty, I should point out that estate duty still has a role in helping to moderate the distribution of wealth in Singapore, despite the relatively small collection which is mainly due to our generous exemption limits. Countries such as Hong Kong, the United States and UK also have estate duties or inheritance taxes. Mr Ong Ah Heng has asked whether workers will have to go through another round of CPF and wage cuts. Mr Speaker, Sir, Government is fully aware and appreciates the workers' anxiety over further cost-cutting measures if the recession worsens. Government hopes that such a move is not necessary. We and the NWC urge companies to implement the flexible wage system, which will enable the companies to adjust their wage costs by varying the payment of variable components such as the annual wage supplement or the 13th month salary and bonuses without affecting the workers' basic wages. In this way, the reduction in CPF and basic wages can be avoided. To date, more than 70% of the companies have adopted some form of flexi-wage scheme with variable wage components. 16% of total annual wages are made up of variable components, averaging 2.3 months of basic salary. On Dr Vasoo's query of more pension for lower income pensioners, I should point out that pensions are calculated on the last-drawn salary at the time of retirement and the length of pensionable service, as provided under the Pensions Act, and are thus not subject to change. However, to help lower income pensioners cope with inflation, the Government had in April 1974 introduced an ex-gratia allowance called the Singapore Allowance. The Singapore Allowance was last revised in August 1997. Since then, the Consumer Price Index has dropped. Thus, there is no ground to review the Singapore Allowance at this time. Besides, to keep on raising the Singapore Allowance of pensioners may be unfair to other Government officers who had retired under the CPF scheme. Dr Lily Neo has appealed for more funds for the Ministry of Health. MOH's FY99 budget has been kept at a reasonable level, notwithstanding the tight fiscal position. MOH's FY99 operating grant to voluntary welfare organisations is $63 million, as compared to $44 million for FY98. MOH has also been allocated a block budget of $200 million to cover medical research and development for FY97 to FY2001. As for disease prevention programmes and training, the budgets have not been reduced. An inter-Ministry committee led by the Minister for Health is looking into the financing of old age medical needs. The Government is committed to preparing Singapore for an aging population and to maintain our lead as a regional medical centre. Having said all these, some issues which Dr Neo raised cannot be solved by more funds alone. Dr Neo has spoken on the need for giving free screening for mammography. However, in a recent study to establish the cost-effectiveness of mammography, less than half of the women accepted the free screening. Mr Yeo Guat Kwang has spoken on the funding for Medifund, CDCs and VWOs. The Medifund was established on 1st April 1993 with an initial contribution of $200 million. This will be increased by $100 million each year to reach $1 billion eventually. To date, the Government has already contributed a total of $600 million to the Medifund. No contribution is proposed for FY98 and FY99 as we do not expect budget surplus in these years. However, our assessment shows that the expected income from Medifund will be more than enough to meet disbursements for needy patients in FY99. Mr Iswaran has suggested riding on the CDCs to implement a more targeted approach for helping Singaporeans in need. Government gives CDCs a resident grant of $1 per resident per year. Government also gives matching grants of $3 for every dollar raised by the CDCs, and $4 for every dollar of residents' donations through the GIRO system. The total Government matching grant is presently capped at $24 million per year from FY98 onwards and will be reviewed every two years. For VWOs, the total Government FY99 funding is $129.9 million, as compared to $90.38 million in FY98. The Government has thus not cut back on its support for VWOs despite the tight revenue position. Mr Gerard Ee has commented that with only 1.66% of the budget being allocated to the Ministry of Community Development (MCD), a $10 million fund could be set up through a one-off contribution to provide a safety net to help families in difficulties until the economy turns around. Mr Speaker, Sir, Government believes that to build a resilient community, individuals ought to rely on family and self, then community, and only lastly the State for financial assistance. Nevertheless, Government has a fairly comprehensive safety net to help those in genuine financial difficulty, but without destroying the incentive for the individual to work hard. MCD's budget alone does not adequately reflect Government's spending in the social safety net. There are schemes funded by other Ministries or off-budget measures, eg, Service and Conservancy rebates reflected under the Ministry of National Development's budget; Medifund, Edusave Endowment Fund and so on. Mdm Claire Chiang has asked why MCD's budget has fallen for FY99. I want to point out that development expenditure is subject to fluctuations according to the progress on major projects. In the case of MCD, the drop of $25 million or 14% can be attributed to major projects nearing completion, such as the Singapore Boys' Home, Grassroots Recreation Clubhouse and the new sports facilities at Bishan and Jurong East. However, in terms of capital grants to VWOs, we have in fact increased the sum from $14 million to $16 million. As for operating expenditure, there was an 8% drop in MCD's allocation, primarily due to the 15% wage and CPF cuts, and not due to a scale-back in activities. In fact, transfers to various financial assistance schemes and operating grants to VWOs and self-help groups have gone up by about $20 million or 20% if we exclude the 3-year one-off advance for Mendaki Tertiary Tuition Fee Scheme from the revised FY98 estimates. Mr Speaker, Sir, I would like to sum up by reiterating the point made in my Budget speech that despite some initial signs of economic turnaround, there still exist many risk factors and uncertainties in our external environment. The health of the US and Japanese economies, as well as the socio-economic political developments in our neighbouring countries, will have a big impact on our economy. There are other uncertainties, as some Members of the House have rightly pointed out, that given China's strategic and economic weight, the performance of the Chinese economy could also impact on us. Faced with an uncertain environment, we will do well not to over-react before the signposts become clearer and at the same time, retain the flexibility to allow us to respond quickly and appropriately to the out-turn whatever it may be. The FY99 Budget has therefore adopted the approach of continuing with the economic fundamentals that have served us well in the past, develop the capabilities needed for our future growth, and be dexterous in dealing with change. With this approach, I believe that Singapore stands in good stead to capitalise on an upturn, and meet the challenges that we will face in the year ahead. [Applause]

Mr Speaker, Sir, may I have your permission to clarify part of my speech which was misinterpreted by the Minister for Finance?

All right.

Sir, I wish to clarify that I did not suggest in my speech that the Government should not incur a deficit in this Budget, nor did I suggest that the Government should cut back on development expenditure. I also wish to further clarify that there are basically two underlying messages in my speech in my attempt to analyse FY99 budget deficit. One is that the deficit is not alarming because the Government's revenue estimates are more than sufficient to cover the operating expenditure. Secondly, the deficit is the result of greater development expenditure and is not due to more schemes or expenditures to help the people weather the economic crisis.

I thank him for the clarification. The implication was that if we exclude development expenditure, then there is a surplus, which means we should not spend on development. Is that right?

That was not my intention.

Then who pays for development? That is the problem.

Sir, the point is that the revenue estimated by Government is sufficient to cover the operating expenditure. So, the question is how much do we want to spend. The Government has decided in this Budget to spend more on development expenditure, and that has caused the deficit of $5.1 billion. That was the point I made.

Precisely. And that is what we have said all along that we are spending heavily on development to prepare for the future.

I do not disagree with that.

That is fine. Thank you very much.

Question put, and agreed to. Resolved, That Parliament approves the financial policy of the Government for the financial year 1st April, 1999 to 31st March, 2000.

Resolved, That Parliament do now adjourn. - [Mr Wong Kan Seng]. Adjourned accordingly at Fifteen Minutes past Six o'clock pm.

Committee of Supply - Estimates of Expenditure for the Financial Year 1st April 1999 to 31st March 2000 (Cols. 303 - 306)