Hansard, 2001-02-23

Under the provisions of clause 2(d) of Article 46 of the Constitution of the Republic of Singapore, the following Members have been granted permission to be or to remain absent from sittings of Parliament (or any Committee of Parliament to which they have been appointed) for the periods stated: NameFromTo (2000)(2000) Dr Ow Chin Hock25 Feb28 Feb Mr Seng Han Thong24 Mar27 Mar TAN SOO KHOON Speaker, Parliament of Singapore

With the consent of Mr Speaker, and the general assent of Members present, Question put, and agreed to.

Resolved, That, notwithstanding Standing Order 88(2) which mandates that the business of Supply be taken at 2.00 pm, the Second Supplementary Estimates of Expenditure for FY 2000/2001 be taken after 2.30 pm today. - [Mr Wong Kan Seng].

asked the Minister for Finance whether the Government disclosed fully the reasons (including the Y2K issue) for the sale of Post Office Savings Bank to DBS Bank in 1998.

Mr Speaker, Sir, the sale of POSBank to DBS Bank was made known to the public at a press conference which I presided on 24th July 1998 and at the Parliamentary sitting on 12th October 1998. I explained the two reasons for the sale. Firstly, the rapid growth in world trade and globalisation of the world economy has led to vast changes in the banking industry. Corporate and individual customers now demand a wide range of sophisticated services. Increasingly, banks are evolving into financial supermarkets, and are no longer just deposit takers and lenders. These developments, together with the opening up of financial markets worldwide, have led to a spate of mega-mergers, as banks merge and consolidate their strengths in order to remain competitive. Size has become very important in the banking sector. It provides the leverage for the effective cross-selling of financial products and harnessing of costly technological changes. It also gives the banks the ability to reach deep into a range of markets that are increasingly being deregulated, and to take advantage of opportunities available in these markets. Bigger banks are better placed to cater to the discerning modern banking customers. This acquisition would therefore place DBS in a better position to face the competitive challenges that lie ahead. Secondly, the acquisition would enable POSBank to better serve its increasingly sophisticated customers and depositors. To meet competition from commercial banks and to retain its customer base, POSBank had to speed up the rate at which it was growing its range of products and services. However, organic growth on its own would be a slow process and the best way POSBank could grow quickly was to actively seek out complementarities with other banks. Y2K was not a reason why the Government sold POSBank. In fact, POSBank had commenced its system review on Y2K compliance prior to the sale and had plans to be Y2K ready. The Government is confident that POSBank would have been Y2K ready by 2000.

Sir, the Minister says that the divestment was to better serve POSBank's customers but it does not appear to be the way things have turned out. The question really is that at that time of the divestment, did the Government envisage that there will be severe cut-back of the services of POSBank by DBS? And secondly, why was DBS allowed to close bank branches when the existing DBS computer system could not handle POSBank's accounts? In other words, it appears to be very poor planning that was very badly implemented.

The Government is in no position to tell DBSBank what it should do with the purchase. When I said that the sale will make it better for the combined bank to service its customers, I mean to serve its more sophisticated customers. The bulk of POSBank's customers were small customers, together with a group of large depositors. This structure, it was foreseen, could not last much longer because it was losing money of its large depositors to other commercial banks. As to the quality of the service which POSBank has been able to render post merger, I believe DBS Bank has already made public statements on its services. The Member should ask DBS directly if more information is needed or put in another question on this particular issue.

Sir, Government is appropriately represented at DBS Bank, especially at the board level, is it not?

It is a commercial bank. I think it would be wrong for Government to impose conditions on how it should operate.

Sir, the Minister has said that the sale of POSBank was to serve the increasingly sophisticated needs of the consumers. But does he not know that there are a lot of unsophisticated consumers who have simple needs and therefore would actually need a very simple no-frills bank, and this may perhaps lead to the Government re-thinking this issue as the New Zealand government had done?

I do not want to reopen the issue of what POSBank is doing in serving its customers. It has come out publicly to explain why and, as I have said, if you think this is an issue which needs to be reopened, please submit a separate question.

asked the Minister for Home Affairs if he will furnish information over the last three years (i) the number of illegal immigrants arrested, by their countries of origin, and (ii) the number of employers and agents arrested for employing illegal immigrants compared to the number of landlords arrested for harbouring illegal immigrants.

Mr Speaker, Sir, last year, the Home Team arrested about 16,500 immigration offenders, comprising both illegal immigrants and overstayers. This represents a 3% decrease compared to the 17,000 immigration offenders arrested in 1999, and a 28% decrease compared to the 23,000 immigration offenders arrested in 1998. While the situation has improved over the past three years, the figure last year is still 18% higher than the 14,000 arrested in 1997. The immigration offenders arrested came from all over the region, mainly Bangladesh, China and India. The immigration offender problem is therefore still a serious one. As for harbourers and employers, there has been an increase in the number of arrests over the last three years. Last year, 590 people were arrested for harbouring immigration offenders, compared to 306 in 1999 and 166 in 1998. 572 people were arrested for employing immigration offenders. This is an increase over the 388 employers arrested in 1999 and the 270 arrested in 1998. There were 10 housing agents arrested last year for abetting to harbour immigration offenders, compared to three in 1999 and one in 1998.

Mr Speaker, if I heard the numbers correctly, it seems that employers are relatively few, 572, but the number of landlords seems to be quite high. Is it not clear that people will only overstay if they had a job and therefore should we not do more about the employers? Secondly, the number of agents arrested is 10. Is that not stunningly low compared to the number for landlords?

Sir, the first point on the relativity of the figures, the figures are in fact quite close. Because for last year, 590 people were arrested for harbouring immigration offenders whereas 572, just slightly down by 18 people, were arrested for employing immigration offenders. I agree with Mr Tay that we have to attack the problem on both fronts. In fact, we have made it very clear that we treat each category of people with the same approach in terms of enforcement action. This has been done. SIR, together with MOM, carries out enforcement raids at places where immigration offenders may be working or places where they are gathering. In terms of the law too, they are of the same parity. So under the Immigration Act, an employer who is prosecuted and charged successfully with employing an immigration offender also faces the minimum mandatory six months' imprisonment. Indeed, if he engages or employs more than five immigration offenders, he also faces mandatory caning. So there are no two ways about it. As I have said, concerted actions on all fronts. As for agents, the current law is such that when agents are charged, they are charged under the abetment provision. We have announced in this House that we are looking at changing the law so that the agents will also have to face the same requirement of due diligence. After all, they may be the ones who are in touch with the immigration offender. With the due diligence requirement of the harbourer or the employer, the agents will be subject to the same standards. So the low numbers are because of this fact, because they are charged for abetment and for abetment you have to prove knowledge. That is more difficult.

Sir, recently it was reported in the press that a few illegal immigrants, including a newly-born baby, were arrested in a makeshift shelter, actually a storm drain. I would like to ask the Minister of State whether such developments, ie, illegal immigrants going literally underground, are as a result of the tougher stance taken by the Ministry on harbourers of illegal immigrants and whether such developments were anticipated by the authority. Although we understand the rationale for the Government's action, I would like to know whether the Ministry has considered the hardship befallen such economic refugees as a result of the tougher action.

Sir, I think we should be careful about this because it is a serious problem. So when we look at the whole situation and make it more onerous for harbourers to harbour illegal offenders, one consequence will be the fact that it would be more difficult for them to find accommodation. That actually explains why in the months after the enhanced publicity, more were caught. More Singaporeans were also reporting them. This is an extreme case where this immigration offender was found with a child. In other cases, yes, they will have some difficulties in finding accommodation and finding employment. But that is the purpose of the law. So that also sends a deterrent message to other people who will know that if they come in illegally, they face difficulties. And at the same time, the fact that they have to come out from their quarters, and some will hide in the forest, that will also enable the Police, together with MOM and other agencies, to catch them.

I will come back to the point made by Mr Simon Tay that the number of employers arrested appears very disproportionate to the number of harbourers of illegal immigrants arrested. If so, if your Ministry agrees to this fact, whether tougher action will be taken against employers of illegal immigrants?

Sir, I think it must be so because Singapore is porous, so immigration offenders come. So the numbers are large. It must be so that more immigration offenders are caught than the employers because the places where they work in Singapore would be more limited. But, as I have said, the focus of the law is also on the employers and the law is already very harsh.

asked the Minister for Information and the Arts if it is appropriate to foster a media watch council to monitor and review newspapers in Singapore, given their recent proliferation.

Mr Speaker, Sir, there is already a Publications Advisory Committee (PAC), which provides advice on content in local publications, including newspapers. The Committee was set up in 1982 and now comprises a Chairman and 73 members drawn from a cross section of society. MITA consults the PAC on publication content that may have breached our guidelines. The PAC reflects the views of the public and helps MITA to maintain the quality of publications in Singapore. There is no necessity for a separate media watch council to monitor and review the newspapers.

Mr Speaker, Sir, may I ask the Minister, first, is it very apparent that the PAC is able to cope with the increased number of publications since more newspapers have come on board and they are daily affairs? Second, are the PAC and the Ministry actually quite satisfied with the veracity and guidelines of good judgement and morality shown by the new newspapers, particularly?

Mr Speaker, Sir, it is a fact that the Ministry receives very few complaints from the public about the newspapers. When complaints that violate the guidelines are received, we can refer these complaints to the PAC. So it has not been a problem so far. The system has worked well. As far as I can assess from reading the new newspapers, although there is increasing competition, with vigilance on our part, the Ministry's part as well as the PAC, the general quality has not gone down.

Sir, the Minister has said that the quality has not gone down. But I would like to ask him if it is not indeed time, even if it is just the existing committee, to be looking into issues like, as Mr Tay says, morality and ethics, and to stop this practice of newspapers, for example, putting out articles which appear to be investigative reports but which are really paid advertisements?

If the Member has specific complaints of cases, he can bring them to my attention. We are reviewing the process all the time and we are watching how the newspapers develop. Of course, with increasing competition, we realise that there is a tendency to publish, for example, photographs of women, which are more revealing. So we have to watch them all the time. But my general feeling is, with what is being done at the moment, the situation is fine and we need not over-react.

Does the Minister say he must watch them all the time? I hope he means the newspapers, and not the women. But, seriously, my concern is also about veracity, because to my recollection, one of the newspapers made a very unfortunate headline ---

Mr Tay, could you ask your question?

Yes, Sir. There was a particular incident, Sir, where a newspaper made a particular mistake over the tragic accident of the SIA crash and clearly, it deviated from the previous principle of better, slower but accurate, whereas they came up fast, but wrong. And I want to ask the Minister whether this has received a reprimand from the PAC, or the Ministry, or whether any action should be taken in future about this kind of reporting.

I cannot remember exactly what is this incident about the SIA crash that was inaccurately reported. But I am sure you have noticed that whenever the papers make mistakes, they are quite fast in correcting their errors. For example, when Ministries detect the errors, we will write to them and the correction will come out very quickly. So if there are instances where the public feel aggrieved about errors, they should write to the newspapers. And I am sure the newspapers will be careful about their professionalism and be clear about their credibility and accuracy.

asked the Minister for Education (a) if he is aware that polytechnics use "agents" to recruit foreign students; and (b) what steps are taken to prevent abuse.

Sir, all our four polytechnics have actively sought to create a more vibrant learning environment by recruiting good foreign students. Polytechnics have taken more pro-active marketing measures to recruit foreign students. And polytechnic staff have made visits to foreign countries for direct recruitment. However, my Ministry is aware that there are recruitment agencies that provide assistance, on a fee-paying basis, to foreign students who wish to apply to Singapore polytechnics. But the point is that our polytechnics do not engage these recruitment agents. And the most important point to remember is that admission into our polytechnics is by merit and applications submitted by these agents are assessed in the same manner as all other student applications. Our polytechnics have from time to time explained to potential students that the polytechnics do not employ agents. Students and their parents should exercise due caution in dealing with recruitment agents purportedly representing our polytechnics.

Mr Speaker, Sir, if the polytechnics do not employ these agents and the polytechnics tell the parents to be careful, then why are the polytechnics recruiting students through these agents? What is the role of these agents?

Probably, the best example of such agents is a Government body called the China Service Centre for Scholarly Exchange. This body would put up advertisements on polytechnic education opportunities. These are dissemination of information, and all polytechnics have used this in connection with their recruitment, but they do not employ the agents. The fees are not paid by the polytechnics. And I wish to reiterate the point that the admission to our polytechnics, like many things else in Singapore, is purely by merit.

Is there some process to ensure that the fees that these agents charge are not excessive or exploitative?

We cannot prevent people from paying what they wish to pay. But our understanding is that the fees charged by this particular body are in the region of 2,100 renminbi, which is about $400, and they are charged only for the successful applications. I wish to remind once more that success depends entirely on merit and any tests taken by these students and candidates are brought back to Singapore and assessed overall. They are not done on the spot.

Could the Minister also enlighten us on the processes that the other bodies use for other countries other than China?

There are some countries which are better established. China is in a sense new. Our second largest number of students is from Malaysia. So it is quite well established. In fact, applications are available on the Net, and there are a lot of applications as well.

asked the Minister for National Development (a) from July to December 2000, how many applications for new Housing and Development (HDB) flats have been cancelled by the HDB due to the applicants declining to proceed with their applications; (b) whether there has been any increase in such cases compared to that for January to June 2000; and (c) what are the main reasons for the applicants' decision not to proceed with the purchase.

Sir, under the Registration for Flats System (RFS), applicants for new flats are queued based on a first-come-first-served basis to select flats. RFS applicants may request HDB to cancel their applications at any time from application to before taking possession of the flat. The reasons for not proceeding with the flat purchase are varied. It could be that some are now not in urgent need of a flat or that some may have chosen to buy resale flats. The HDB does not require RFS applicants to give the reasons for cancellation of their applications. Between July and December 2000, there was an average of 1,100 cancellations of RFS applications per month. This represents a fall of 45% when compared to the average of 2,000 cancellations per month for the period between January and June 2000.

Sir, may I ask the Minister of State whether it is fair for HDB to force applicants to either select or cancel the flat at the time of selection? Also, can HDB allow applicants to keep their queue number for subsequent selection of flats?

Sir, under the RFS, applicants who have been shortlisted to select a flat are not allowed to stay on the queue. If they do not book a flat, when invited to do so, their applications will be cancelled. This is because HDB has committed the flat supply to them since the building contracts have already been awarded. Moreover, if we allow shortlisted applicants to hold on to their queue positions, many may do so in order that their queue positions will be ahead when good units in better locations are offered. So that is the reason why we require them to cancel their applications. And if they want to purchase a flat later, they would have to re-queue again.

Since the number mentioned by the Minister is 1,100, it is not really a big number. Why can the HDB not allow more flexibility because it is not fair for applicants to queue for three or five years because the number of flats offered at that time could be very few and might not be suitable, and if you cancel their queue positions, they have to go all the way back of the queue again?

Sir, for first timers, the waiting time is about one year to 11/2 years. The reason why we have so many dropouts, so to speak, is because during the boom period, 1996-1997, a lot of people queued up by paying a few hundred dollars and, because of the recession, they found that they really did not need a flat and they felt that the prices might not go up, so they dropped out of the queue. It is not fair to allow them to stay on the queue and deprive those who have genuine needs because these people simply, as I said, want to just wait until there are good units available before they select a flat. If there is none, they do not want to select a flat, but they want to retain their positions in the queue. I do not think that is fair.

Sir, the Minister of State mentioned good units. Does he mean there are bad units? And if so, are they cheaper?

Sir, choosing a unit is a very subjective matter. People choose according to floor level, location, maybe even feng shui, I do not know.

The following Question stood in the name of Mr Tay Beng Chuan - 6. To ask the Minister for National Development (a) whether any prompt action has been taken to address the over supply of Housing and Development Board (HDB) shops in public housing estates; and (b) whether a general downward rental adjustment of HDB shops can be effected to ensure their continued economic viability and competitiveness in the face of increasing fierce competition from the fast growing private shopping complexes and mega departmental stores/supermarkets within and outside public housing estates.

Question No. 6, Sir.

Mr Speaker, Sir, the Government is aware that traditional HDB shopkeepers are facing keen competition from big shopping malls, food courts and supermarkets. They have also been affected by a change in the shopping and marketing habits of Singaporeans. As I assured the House yesterday, the Government is currently working out a programme to help HDB shop retailers. And we will announce the package once it is finalized.

asked the Minister for National Development, in view of the drop in resale Housing and Development (HDB) flat prices and the large number of new HDB flats available, whether the HDB is considering adjusting the prices of new HDB flats.

Sir, HDB reviews the prices of HDB flats regularly to ensure that they remain affordable to Singaporean households. In pricing its flats, HDB does take the prevailing resale prices of comparable HDB resale flats into consideration. The other factors include the locations and attributes of the flats.

Sir, may I ask the Minister of State what is the frequency at which HDB revises its flat prices?

Sir, every quarter, when there is an offer of flats, we would review the prices.

Is there a case to consider more frequent reviews of flat prices, given that there is considerable volatility in the resale market?

Sir, the reason why we do quarterly reviews is because we offer the flats quarterly. The Minister has mentioned that we are looking into a more flexible and responsive system of allocation according to timing and location. So we will take the Member's concern into consideration.

Sir, the Minister of State did not answer my question on the prices for the "bad" units. I think if they are cheaper, more people may take up these units.

Sir, as I said, for the prices, we take into consideration the attributes of the flats. So, flats that do not have a good facing or are on lower floors in the same block and location, are generally cheaper. Flats that are not selected for, say, one to three years, would probably command a lower price too.

Sir, may I ask the Minister of State whether new HDB flats are still affordable to the lower-income group, bearing in mind that this group has been adversely affected by the recent economic crisis and might not have recovered in line with the subsequent recovery in the economy?

Sir, as I mentioned in my reply, affordability is a key consideration, and the Ministry is always mindful of helping the lower-income group. In fact, if Members can recall, not long ago, we introduced the Special Housing Assistance Programme (SHAP) for the lower-income group and people who are earning, say, $2,000 and below. They can now buy a 3-room buy-back flat and can get up to 95% in loans from the Government.

Sir, is it a concern that if prices of new HDB flats are lowered, it would then lead to a drop in HDB resale prices and, subsequently, a decline in the property market on the whole?

Sir, as I said, again, the key consideration is affordability. Everybody knows that the prices of new HDB flats lag behind prices of resale units and, I think, for good reason, because HDB flat prices do contribute to stability of the whole property market.

The following Question stood in the name of Mr Tay Beng Chuan - 8. To ask the Minister for Trade and Industry (a) whether his Ministry has conducted a critical review of the performance of Government linked companies (GLCs) and its impact on the Singapore economy; and (b) whether the strong presence of the GLCs in our domestic economy will impede our current efforts to create a pro-enterprise environment for businesses, especially the private entrepreneurs and the small and medium enterprises.

Question No. 8, Sir.

Mr Speaker, Sir, GLCs operate on a commercial basis, like private-sector companies. They do not receive any subsidy or preferential treatment from the Government, and are subject to the same regulations and market forces as private entrepreneurs and SMEs. The influence of GLCs on our economy is often over-stated. There is a perception that GLCs dominate our economy. Even a recent US Embassy report over-estimated that GLCs contributed 60% to our GDP. This is not correct. The Department of Statistics (DOS) has studied this matter and found that GLCs contribute just 12.9% to our GDP. This refers to companies where the Singapore Government has effective voting shares of 20% or more. In contrast, MNCs play a much bigger role, accounting for 42% of our GDP. The Department of Statistics will be releasing its detailed study soon. Although complaints are made from time to time, there is clear evidence that the presence of GLCs has not compromised the ease and attractiveness of starting up new businesses in Singapore. For example, Singapore was ranked 8th in the Startup Index of the 2000 Global Competitiveness Report. The number of new companies registered yearly have also been on the rise, with the number registered in the 2000 up 16% from five years earlier, and 70% compared to 1990. The Government will continue to ensure that our markets remain open and competitive, and that the playing field is level for all companies. It is not Government's policy to favour GLCs and, if there are valid criticisms, we will act on them. In fact, the Government is reviewing its rules and regulations to make sure that these rules and regulations facilitate, and not inhibit, private enterprise, especially for the New Economy. The question is: should we reverse-discriminate against GLCs in Singapore in order to favour private companies? If we do this, Singapore consumers will lose out. As long as their practices are competitive, we should not force GLCs out of the local market. In any case, our domestic market is small. To grow, Singapore companies have to look beyond Singapore and, for this reason, the Government encourages Singapore companies, including our GLCs, to venture overseas.

Sir, I think the Minister's revelations of the figures are quite interesting, given the feeling among many that it is not the case. Could I invite the Ministry to also reveal the figures according to sectors - manufacturing, etc - so that we can get a clearer picture? Additionally, would the Minister share his views about the possibility of having competition law in Singapore to ensure a level playing field for all, including GLCs?

Mr Speaker, Sir, I will ask the Department of Statistics to consider including the statistics which Mr Simon Tay has asked for, when it releases its detailed report on its study. As for whether we should introduce a competition law in Singapore, such as is found in some of the more advanced countries, we are still reviewing this matter in MTI. In fact, we are under some pressure to do this, in the course of our negotiations on Free Trade Agreements with other countries. But there are complications involved. We propose to do this step-by-step, and the Energy Market Authority that we are setting up, will be a first step towards the establishment of such a regime where, for industries which we identify explicitly, certain rules governing competition will apply. But as to whether we should apply this across-the-board in Singapore for all sectors, it is a step that we are not yet ready to take.

The following Question stood in the name of Mr Tay Beng Chuan - 9. To ask the Minister for Finance (a) whether there is any conscious and concerted effort in the public sector to optimise the use of manpower and other resources and eliminate wastage and inefficiency which will lead to accelerated increases in Government spending; and (b) how will he ensure that the large wage rise for the civil service will not lead to successive increases in Government charges, fees and taxes as in the case of the recent increases in Government hospital charges and university fees, and bearing in mind, Second Minister for Finance's assurance in Parliament, on 25th August 2000, that Government will not have to impose tax increases to pay for the wage rise for the civil service.

Question No. 9, Sir.

Mr Speaker, Sir, the Government's policy has always been to keep the public sector as small as possible, consistent with the need to deliver quality services to the public. This is to allow the private sector to retain the bulk of the nation's resources and serve as the engine of growth. To this end, there are built-in mechanisms to curb the growth of recurrent Government expenditures. Budgets for existing functions are allowed to increase at less than the GDP growth rate, and Ministries must, therefore, deliver the same services with constant productivity improvements. They must continually improve their efficiency and effectiveness in the use of manpower and other resources. To ensure good governance, the civil service must retain a fair share of good people. Civil service wages must, therefore, be reviewed from time to time to keep them in line with those of the private sector. In making these adjustments, civil service salaries will always lag, and not lead, their private sector equivalents. Hospital charges and university fees have to be adjusted upwards periodically not only to reflect rising wage costs but also to provide for increasingly sophisticated medical services and advances in university education. Both hospital charges and university fees are heavily subsidised and the Government will continue to do so. Patients in C class wards in restructured hospitals are subsidised at a hefty 80%, while those in B2, B2+ and B1 wards are subsidised at 65%, 50% and 20%, respectively. In our universities, undergraduates pay only about one quarter of actual costs. Finally, may I reassure Mr Tay that the Government will not raise taxes on account of civil service wage adjustments.

asked the Minister for Communications and Information Technology whether the Land Transport Authority has decided to construct a Light Rail Transit system to connect with the North East Mass Rapid Transit system in the area bounded by Hougang Avenue 1, Hougang Avenue 3 and Lorong Ah Soo.

Mr Speaker, Sir, the Land Transport Authority has drawn up a long-term Rapid Transit System (RTS) Master Plan to meet the transport needs of the nation up till the year 2030. The plan provides for a comprehensive network of RTS lines, and includes orbital RTS lines, which will provide direct connections between the residential estates, such as Hougang and other sub-regional centres. However, LTA needs to conduct detailed studies on each of these lines in the Master Plan before it is in a position to make a recommendation to the Government on whether and when to proceed with the development of each line. The detailed studies on the lines serving the Hougang estates have not been completed, but with the completion of the North-East MRT Line in 2002, the public transport system for the residents in the area defined by Dr Ker will be greatly improved.

"to provide for the issue from the Consolidated Fund and the Development Fund of the sums necessary to meet the estimated expenditure for the financial year 1st April 2001 to 31st March 2002", recommendation of President signified; presented by the Minister for Finance (Dr Richard Hu Tsu Tau); read the First time; to be read a Second time on the next available sitting of Parliament, and to be printed.

"to provide for making supplementary provision to meet additional expenditure for the financial year 1st April 2000 to 31st March 2001", recommendation of President signified; Dr Richard Hu Tsu Tau; read the First time; to be read a Second time on the next available sitting of Parliament, and to be printed.

"to provide for the repeal of the Control of Rent Act (Chapter 58 of the 1985 Revised Edition), the Premiums on Leases Act (Chapter 238 of the 1985 Revised Edition) and the Controlled Premises (Special Provisions) Act (Chapter 60 of the 1995 Revised Edition) and to provide for consequential matters related thereto", presented by the Minister for National Development (Mr Mah Bow Tan); read the First time; to be read a Second time on the next available sitting of Parliament, and to be printed.

Order read for consideration in Committee of Supply [Allotted Day].

3.00 pm

Second Supplementary Main Estimates of Expenditure for the financial year 1st April, 2000 to 31st March, 2001, contained in Paper Cmd. 2 of 2001. No notice of amendment has been received. Question, "That the sums stated for the Heads of Expenditure as shown in Paper Cmd. 2 of 2001 stand part of the Second Supplementary Main Estimates", put and agreed to. Question, "That the sum of $1,422,833,900 shall be supplied to the Government under the Heads of Expenditure for the Public Services shown in the Second Supplementary Main Estimates of Expenditure for the financial year 2000/2001", put and agreed to. Resolution to be reported. Thereupon Mr Speaker left the Chair of the Committee and took the Chair of the House.

Mr Speaker, Sir, I beg to report that the Committee of Supply have come to certain resolution. Resolution reported. "That the sum of $1,422,833,900 shall be supplied to the Government under the Heads of Expenditure for the Public Services shown in the Second Supplementary Main Estimates of Expenditure for the financial year 1st April 2000 to 31st March 2001 contained in Paper Cmd. 2 of 2001".

Mr Speaker, Sir, I beg to move "That Parliament doth agree with the Committee on the said resolution."

Question put, and agreed to. Resolution accordingly agreed to.

Mr Speaker, Sir, I beg to move, That this Parliament, pursuant to section 7 of the Civil List and Pension Act (Chapter 44), resolves that the Schedule to that Act be varied by deleting the figures "$2,232,000", "$104,300", "$2,177,200", "$1,000,130" and "$56,400" in the second column and substituting the figures "$2,391,600", "$113,000", "$2,653,200", "$945,600" and "$1,000" respectively. Sir, I propose that a provision of $2,508,200 be supported for Class I expenditure for FY2001. Class I expenditure would cover the President's salary, his entertainment allowance and the acting President's allowance. The higher provision for FY2001 is to cater for the salary revisions announced in financial year 2000 and a higher cost of hosting official functions. The provision for Class II expenditure is meant for the salaries of the Istana Personnel. The provision is higher at $2,653,200 mainly to meet the salary revisions announced in 2000, higher employer CPF contribution rate and other salary increases resulting from the NWC recommendations. A provision of $945,600 is required for Class III expenditure to meet the expenses of the Istana's household. The higher provision is mainly to cater for an increase in utilities tariffs. A budget of $1,000 is provided for Special Services for consultancy charges under Class IV expenditure. It is therefore necessary to vary the provisions in the Schedule to the Civil List and Pension Act (Chapter 44) as indicated in the Motion before the House. Sir, I beg to move.

Question put, and agreed to. Resolved, That this Parliament, pursuant to section 7 of the Civil List and Pension Act (Chapter 44), resolves that the Schedule to that Act be varied by deleting the figures "$2,232,000", "$104,300", "$2,177,200", "$1,000,130" and "$56,400" in the second column and substituting the figures "$2,391,600", "$113,000", "$2,653,200", "$945,600" and "$1,000" respectively.

Order. I suspend the Sitting and will take the Chair again at 3.30 pm. Sitting accordingly suspended at 3.03 pm until 3.30 pm. Sitting resumed at 3.30 pm

Mr Speaker, Sir, I beg to move, That Parliament approves the financial policy of the Government for the financial year 1st April, 2001 to 31st March, 2002.

Economic Performance in 2000 We are starting off on a good footing in the new millennium. Last year, our economy outperformed expectations and grew by 9.9%, a rate not exceeded since 1994. [The economic growth rate in 1994 was 11.4%.] All sectors enjoyed higher growth in 2000. In particular, manufacturing, wholesale and retail trade grew by a strong 15%. Financial and business services rebounded from marginal growth in 1999, to 4.1% and 6.6% respectively. The contraction of the construction sector continued, but was less severe than that in 1999, and showed signs of reversal. Strong external demand was the cause of growth. The world economy is estimated to have expanded by 4.7% in 2000, the highest growth rate in 12 years. In particular, the US economy was the key driver behind global demand. The bursting of the dot-com bubble did not stop the US from registering a stellar growth of 5.0% last year. Electronics, which was a major engine for the recovery in 1999, continued to take centre-stage in 2000. Global semiconductors sales surged by a remarkable 31%, up from 19% in 1999. This gave our manufacturing sector a strong boost, with major downstream benefits for many other sectors. Year 2000 was also a great year for investment promotion. Manufacturing investment commitments reached a record $9.2 billion. Many of these were in key knowledge-intensive industries like pharmaceuticals and high-end electronics that will position us well for future growth. EDB also secured $1.9 billion of commitments in total business spending for services last year. Against the uncertain political environment in Southeast Asia and competition from China, the achievements of EDB were especially remarkable. Our job market benefited from the strong economic growth in 2000. More than 110,000 jobs were created, far surpassing the 40,000 in 1999. Retrenchments tailed off, falling from 14,600 in 1999 to 11,500 last year. As a result, the seasonally-adjusted unemployment rate fell to 2.8% in December 2000. This strong economic performance was due not only to fortuitous external developments, but also to our sound economic policies and the hard work of Singaporeans. Full credit should go to our workers, who have patiently put up with the CPF cut. This was instrumental in retaining investor confidence and enabling our industries to stay globally competitive, as we rode out the Asian economic crisis. In recognition of the strong growth, another 4%age points have been restored to the employers' CPF contribution rate last month, bringing it to 16%. But while our overall economic performance was very good, not all businesses benefited. Besides the construction sector, some industries like wood and paper products, and retail segments such as watch, jewellery and neighbourhood shops, did not do well. Many SMEs were not able to benefit from the strong global demand. The robust growth was also not reflected in the asset markets. The STI ended 22% lower last year, while the residential property price index dipped 1.0%. Outlook for 2001 We cannot repeat the exceptional performance of 2000 this year. While the overall outlook for 2001 remains fair, we must be prepared for slower growth. External economic prospects have become less rosy. The US economy has decelerated quite sharply in the past few months. Poorer corporate results and weak stock markets have begun to feed through to slower consumption and investment. The chances of a hard landing have increased, prompting the Federal Reserve to cut interest rates by 100 basis points so far this year. The consensus is that the US economy will grow by only 2 to 2.5% this year. But if it turns out lower, we will be in for harder times ahead. The Japanese economy is expected to remain weak this year. In fact, its recovery is beginning to show signs of stalling. Household expenditure has remained anaemic due to job worries and continuing deflation. Japanese exports are already slowing on the back of weaker US demand. These could in turn dampen business investments. Fortunately, growth in Europe should be able to provide some support for the slowing external demand. Although growth in Europe peaked last year, it should remain healthy at about 3% in 2001, underpinned by robust consumption. Similarly, global electronics demand will moderate from its stellar growth of last year. Some industry watchers expect sales of semiconductors to slow significantly from the heady 31% growth last year to just 5-10% this year. But continued healthy demand in segments such as PCs and telecommunications products will provide some support for growth in the electronics sector. The slowdown in the US economy and electronics demand will affect the region. While Asia has, by and large, bounced back from the crisis, it has not yet been nursed back to full health. Asian banking systems remain weak, and there is still much restructuring to be done. In several Asian countries, internal political problems add to their complications. We need to keep a close watch on the dark clouds looming in the horizon. But there is no ground for excessive gloom. Domestically, the composite leading index continues to point to growth ahead. The business expectations survey shows that firms in the financial services, catering and hotel segments expect business to improve in the next 6 months. While manufacturers have turned cautious about growth prospects in the next 6 months, the new plants coming on stream this year in the electronics, chemicals and life sciences industries will help to buttress growth. The construction sector is also bottoming out and looks set to register positive growth this year. Although the global economy is likely to become more volatile, we are well positioned to ride out the fluctuations. Our restructuring efforts and upgrading over the years have paid off and we now have a more diversified and resilient economy. We have a strong manufacturing sector and a good spectrum of thriving services. Our domestic exports are fairly well spread out among the major markets of United States, European Union and Asia. Although we have a dominant electronics sector, we are steadily building up our chemicals cluster. Even within electronics, there is strong diversification. Semiconductors and telecommunications equipment have emerged as new growth drivers, as our production share of disk drives and PCs declines. The external wing of our economy is firming up and regionalisation efforts are paying off. Income from abroad has risen by more than 8% on average for each year between 1990 and 2000. This provides a supplementary source of earnings for our economy. It is this broad and robust economic base which has enabled us to emerge from the Asian economic crisis relatively unscathed. In fact, in relative terms, we have come out of the Asian crisis stronger and are able to start the new millennium on a solid footing. With this year's budget, the Government will continue to facilitate the upgrading and restructuring of our economy. For this year, taking all factors into account, the Ministry of Trade and Industry forecasts a growth of 5 to 7%. But if the external environment turns for the worse, it can have a substantial impact on our growth, given our very open economy. We will continue to monitor the situation closely.

Mr Speaker, Sir, I move on now to the Budget for Fiscal Year 2001. FY 2000 BUDGET OUTTURN Before I do so, I would first like to recap on the FY2000 Budget and touch on changes made to improve the presentation of the Budget in the Budget Book. When I presented the FY2000 Budget to the House last year, operating revenue was estimated at $31.4 billion and total expenditure at $29 billion, yielding a budget surplus of $2.4 billion. However, last year's GDP growth of 9.9% exceeded all expectations. As a result, revenue growth has turned out to be much stronger. On the other hand, total expenditure is expected to be about $1 billion lower at $28 billion. The lower expenditure is due to reduced development spending, partly offset by unforeseen compensation payments to Singtel and Starhub. In addition, last year, Government also announced several surplus sharing measures totalling $1.8 billion which included the CPF Top-up, the Medishield Scheme for the Elderly and contributions to the Eldercare Fund and the Lifelong Learning Endowment Fund. Taking into account all these changes, a budget surplus of $3.5 billion is now forecast for FY2000. However, this budget surplus cannot be directly compared with the forecast made in February last year because of several changes made to the presentation of the FY2000 budget. I will now explain the rationale underlying these changes. CHANGES TO THE BUDGET PRESENTATION In January this year, I moved the Constitutional Amendment Bill to require the Government to protect at least 50% of the Net Investment Income (or NII) earned from past reserves. The issue of whether or not to protect NII was one that the Government has carefully considered for a long time. Previously, NII used to accrue fully to current reserves and was all spendable. The composition of operating revenue has since been changed to include a new item called "NII Contribution". This is the portion of NII that is available for the government-of-the-day to spend. NII now also incorporates interest earnings from developmental loans which have been classified under the item "Others". The item "Others" is consequently much smaller. Government has also reclassified expenditure on land reclamation projects. These are projects which help to build up the nation's land bank for long-term use. They were previously funded as development expenditure using current revenues. This arrangement could be a disincentive for future governments to take on such projects as benefits would only accrue in the long term. While this Government has not shrunk from carrying out reclamation projects, we should make changes to address this potential problem to ensure that such projects continue to be undertaken by future governments. Land reclamation should be viewed as a long-term investment. From FY 2001, expenditures on land reclamation will be funded from capital receipts from land sales. Such expenditures are reflected as land-related expenditures in the Budget Book. In addition to the changes I have outlined above, refinements have also been made to the sectoral classification of ministries. The Ministry of Foreign Affairs has been shifted to the newly renamed "Security and External Relations" sector, while Ministry of National Development has been transferred to the "Social Development" sector. These changes have been made to better reflect the main functions of the two ministries. For the same reason, the sector "General Services" has also been renamed "Government Administration". ENTERING THE NEW MILLENNIUM: A PLACE FOR EVERYONE Objectives of the Budget Let me now move on to the FY2001 Budget proper. Budget time is a time to take stock of the economy and the Government's work in the past year. This year is an especially opportune time to look back and see how far we have come, as well as look forward to where we are headed for the future. Over the past 35 years, the Singapore economy has undergone many changes, as we continually adjust to global conditions in search of sustained economic growth. Because of the hard work, enterprise and unity of all Singaporeans, we have been able to seize new growth opportunities as they present themselves. We have created a resilient and prosperous economy that has weathered many storms. Today, the new millennium ushers in a new age in which ideas, knowledge and talent are the main drivers of growth. It is an era where it is the economies that are best able to generate and attract wealth-creating ideas, knowledge and people that will succeed. Therein lies great opportunity for Singapore - a country whose greatest advantages are its people, and its connectivity to the rest of the world. By positioning ourselves as a knowledge-based economy, and leveraging on our strengths, we can ride the waves of change, and continue to lift living standards in Singapore. Now, as in the past, the Government and people of Singapore must come together and make the necessary changes to our economy, to ensure that Singapore remains the best home for all. While we make these adjustments to anticipate and embrace global trends and changes, we must continue to be mindful of our local context: those who can run faster should pave the way for the rest; however, those who may be unwittingly left behind must not be left with no help. The Government realises that realignments of our economy have often meant displacement of jobs, or even disappearance of industries, but for every door closed, we have opened many others, leading to greater opportunities. We understand that it is not easy for workers to continually learn new skills and work in a new environment, or for enterprises to quickly change direction and pursue business prospects in new areas. It takes a great deal of courage to embrace changes, and take the steps to walk through new doors of opportunity. The transition often entails adjustments which are sometimes painful. But we want to help. We want to lessen the hardship for those who find it difficult to adapt to the changes. But change we must. And at the end of the day, we have to ensure that every Singaporean has a place in the Singapore of the new millennium. The main thrusts of this year's budget are therefore: at the macro level, to position Singapore for a new era of growth, by increasing our attractiveness not only to businesses as a place to invest in, but also to individuals as a place to live and work in. And at the micro level, to give every individual worker the wherewithal to weather this difficult but necessary period of transition to this new stage of economic growth, to assist promising business enterprises in getting established, and to help businesses in dying trades shift out to other industries. Projected FY2001 Fiscal Position I will now touch on the FY2001 fiscal position. Operating revenue for FY2001 is estimated at $34.3 billion, including a $0.9 billion contribution from NII. Operating and development expenditures are budgeted at $18.7 billion and $9.4 billion respectively. Total expenditure in FY2001 thus comes to $28.1 billion. Special transfers will total $1.9 billion. Based on these projections of revenue, expenditure and special transfers, a budget surplus of $4.4 billion [The figures are rounded to one decimal point.] is expected for FY2001. Once again, we are in the happy position of having a budget surplus. Having a surplus allows us to take measures to enhance our competitiveness, share with Singaporeans the fruits of the nation's success, and at the same time add to our reserves. Expenditure Priorities As in previous years, the largest share of the Government's FY2001 expenditure budget goes to the Social Development sector, which accounts for 43.4% of total expenditure. Education, Health, Community Development and Sports, Information and the Arts and Public Housing will all get substantial increases in their budget allocation. These increases are in line with the Government's policy of educating the young, and looking after the people's welfare, health, cultural and housing needs. The next largest sector is the Security and External Relations sector. We will continue to invest heavily in the security of our nation and in building warm ties with other countries. Although this sector takes up 36.6% of the total expenditure budget, it is money well spent, for without peace and security, we would not have secure homes and economic growth. Economic Development is the third largest sector. This sector takes up 15.0% of the total expenditure budget. It represents our continued investment in infrastructure, creation of new economic activities and comprehensive development of our workforce. The Government Administration sector remains the smallest sector, comprising 5.0% of the total expenditure budget. We will continue to keep this the smallest sector as our policy is to keep central administration small and let operational ministries have the bulk of the resources. POSITIONING SINGAPORE FOR THE NEW ERA OF GROWTH Creating a Framework to Stay Competitive The ideas and entrepreneurial spirit of individuals and businesses are the foundation of our new knowledge-based economy. Innovation and enterprise will be the key drivers of this new economy. More than ever before, positioning ourselves for the future can only be done in a broad way at the national level. Ultimately, it is up to companies and individuals to identify specific commercial opportunities and threats and respond accordingly. What the Government can and will do, however, is to continue to ensure an environment that is pro-business, encourages individual effort and the drive for innovation, and facilitates the blossoming of new ideas. At the same time, the Government will continue to create the conditions to attract and retain talented Singaporeans and foreigners to live in and contribute to Singapore. In the latest World Competitiveness Yearbook ranking, we retained our overall standing as the world's second most competitive economy after the United States. We were also ranked the country that was best-adapted for long-term competitiveness, and the economy whose companies and Government take the shortest time to adapt to changes in the economic cycle. However, rather than making us rest on our laurels, these positive showings in international rankings must spur us on to keep up and not fall back. The global challenge demands continuous effort. Country after country is pushing on, reducing taxes to be more competitive, cutting back on social expenditure they can no longer sustain, all wishing to build the next Silicon Valley. Studies such as that by the Political and Economic Risk Consultancy Ltd., or PERC, have pointed out that one critical area for improvement is the quality of manpower. We recognise that human capital will be our competitive edge for our next phase of economic development. We must develop our human capital pool to the fullest. Education and Training In order for Singapore to succeed in our next phase of economic development, we will require a different type of workforce - one that is able to acquire, apply and create knowledge in flexible and innovative ways to generate greater value. Based on the jobs that Singapore expects to create in 10 to 15 years, we require a workforce where 65% have at least post-secondary education. However, as of 1999, only 35% of our workforce have post-secondary education or higher. There is thus a risk of workers being structurally displaced if they do not upgrade or learn new skills. The Government is addressing this issue through a multi-pronged approach. First, we will continue to invest heavily in education to ensure that new entrants to the workforce are well-equipped to meet the challenges of the new millennium. Our students must be equipped with the right skill sets for the knowledge age, which include creativity and critical reasoning skills. For this, the Ministry of Education is allocated a budget of $6.3 billion, the second largest amongst all the ministries. Second, we will also be spending more than $30 million on the Manpower Development Assistance Scheme (or MDAS) and other initiatives that will help everyone in the workforce upgrade their skills and knowledge continuously. Third, to promote lifelong learning, Government has set up the Lifelong Learning Endowment Fund announced by the Prime Minister last August. The Government is contributing the first $500 million to the fund in FY 2000. I am happy to announce that the Government will contribute another $500 million to the Fund in FY2001. This will bring the Fund to $1 billion. This will equip our workers with the skills to take on existing and new jobs, create new products and services and capture new markets in this new stage of economic development. However, even as we try to maximise the potential of our people, we can never produce enough to meet all the talent needs of our economy. We must therefore continue to draw the best and brightest from around the world to our shores. Besides adopting a welcoming attitude to foreigners and talent-friendly immigration policies, we need to be attractive as a place to work, live and play. Deregulation - Priming Our Local Enterprises for the Global Economy We must continue to promote a competitive domestic market. Competition begins at home. Our firms cannot compete globally if they cannot compete locally. Local competition will spur them to be more efficient, creative and innovative. Besides, competition will benefit consumers by moderating prices, improving services, and increasing product choice. We will continue to deregulate our economy. We have opened up the telecommunications sector with a big bang. We are progressively liberalising the financial sector. We are gearing up for a full opening of the electricity and gas markets this year. We will refine these policies in the light of experience. We have made significant progress in the setting up of a new energy market regime since its announcement by the Government in March last year. Amongst other measures, for the electricity industry, the system and market operation functions will be transferred from PowerGrid to the Energy Market Authority of Singapore (EMA). The retail sector of the energy market will be liberalised in phases. Beginning later this year, the market for large consumers will be progressively made contestable. The retail market for the remaining one million consumers will only be opened up after 2002 as all households are affected and a detailed study will have to be done. The gas industry will be restructured in a similar way to support a competitive framework for the electricity industry. The ownership of the gas transportation system, which is a natural monopoly, will be separated from the contestable sectors of gas import, trading and retail. Managing the Restructuring of the Economy As our economy transits into a knowledge-based economy and a new stage of economic growth, we will promote growth sectors and high value-added industries which will help us move up the value chain. The Government will encourage the emergence of promising local businesses in such growth sectors. Businesses in sunset industries will be helped to move out to other more profitable sectors. The Government will continue to support R&D efforts in order to add value to industry and move the country towards higher value, knowledge-intensive economic growth. Our R&D efforts have produced positive results to date. They have helped workers in R&D companies increase the value they add to their jobs, and also helped raise the share of high-tech exports from Singapore - from 52% of non-oil domestic exports in 1990 to 66% in 2000. Over the years, the amount committed by Government has more than doubled, from $2 billion allocated for the first 5-year National Technology plan to $4 billion for the second 5-year Plan (NSTP2000). The next phase of our R&D plan is the $7 billion Science and Technology Plan 2005 (S&T 2005), which will last 5 years from 2001 to 2005. In FY2001, we will spend a total of $625 million in this area to support activities and programmes that will serve to strengthen industry R&D, develop R&D manpower capability, promote technopreneurship, enhance knowledge infrastructure and promote economically relevant international R&D. To promote life-sciences, EDB has set up a $1 billion R&D fund and a $1 billion investment fund to attract life-sciences R&D and start-up activities. A pharmaceutical park will be developed at Tuas, and space for life sciences facilities will be set aside at the Buona Vista Science Hub. Manpower capabilities for the life sciences are also being developed through various programmes. To raise the performance of local enterprises, the Productivity and Standards Board (PSB) will help firms to modernise management, adopt IT and increase efficiency. It will assist companies in restructuring and moving up the value chain, or moving into growing ones. This will help to rejuvenate the business scene and allow resources to be re-deployed efficiently. For those local enterprises that are promising, we will continue to help groom them into world-class companies. The existing Economic Development Assistance Scheme (EDAS) provides local firms with technical assistance and training, and helps them to adopt new technologies, amongst other initiatives. For businesses which are not doing well or facing shrinking business prospects, we want to help them cope with the change either by upgrading and modernising their operations, or shifting to industries with better prospects. The retail sector is an area the Government has looked into with relevant public and private agencies. The Singapore Productivity and Standards Board will be releasing a 10-year strategic plan titled Retail 21 shortly. This plan examines the challenges faced by the retail sector, and sets out new strategies for growth and expansion of the sector. The objective of Retail 21 is to double retail workforce productivity by the year 2010. We look forward to hearing the recommendations of Retail 21. One group of enterprises within the retail sector that needs particular assistance is the neighbourhood shops, markets and hawker centres in HDB estates. The Minister for National Development assured the House yesterday that the Government will lend them a helping hand. We will be announcing a programme that includes elements of upgrading assistance, incentives to help ease the retirement of operators who wish to do so, and re-training for alternative employment and trades. The focus of the programme is thus not just on short term remedies, but also on long-term restructuring for the benefit of all concerned. The Ministry of National Development will provide more details of this Assistance Programme during the Committee of Supply proceedings. All these efforts have a common goal - to facilitate restructuring, and help our companies move up the value chain and into growing industries. Connecting to the Global Economy Singapore has thrived by being plugged into the global economic network. In fact, we have just been ranked the most globalised economy in the world. Last year's total trade of $470 billion was about 3 times the size of our GDP. We will continue to strengthen our economic linkages with the rest of the world. So while Singapore remains committed to the launch of a new multilateral trade round at WTO, we are also pursuing deeper trade liberalisation initiatives with like-minded countries through bilateral Free Trade Agreements (FTAs). Our first bilateral FTA with New Zealand has already gone into operation. This year, we aim to conclude FTAs with Australia, Japan, Mexico and the US. We are also in exploratory talks with Canada, India and the European Free Trade Association (EFTA). Through these FTAs that span across regions and continents, we hope to anchor Singapore firmly as a global trading node. Closer to home, we will continue to work towards greater economic integration with our neighbours through the ASEAN Free Trade Area (AFTA), ASEAN Investment Area (AIA), and e-ASEAN initiatives. Deeper economic integration will enhance ASEAN's attractiveness as a destination for global foreign direct investments (FDIs). This is particularly crucial, given the rise of China and the inevitable diversion of FDI to Northeast Asia. Promoting global free trade and regional economic cooperation will help Singapore to continue to do well in the global economy. Public Services for the New Economy A forward-looking Government must continuously anticipate and welcome change, and harness the forces of change in the global environment. The Government must deliver services in a responsive and timely way. E-government is the Public Service's response to the increasing pervasiveness of ICT or info-communications technology. The advent of ICT has triggered rising public expectations of service standards. We are leveraging on ICT to build an e-government for the 21st century, and put Government services as well as intra-government transactions online. E-government will be a major transformation in the delivery of Government services. The Government will be able to provide services faster, more efficiently, and in a more convenient way. By the end of 2001, nearly two-thirds of all Government services will be available online in some form or other, making them accessible 24 hours a day. However, all these will be wasted time and energy if the public does not adjust to a different way of seeking and receiving the services they want. Public officers, too, must adjust to faster transaction speeds and the tearing down of organisational boundaries. Just as for other changes that are necessary for Singapore's transition into the knowledge age, the Government is the facilitator who will put into place the infrastructure to help Singaporeans improve their living standards, but ultimately it is up to individual Singaporeans to make the choice and take the necessary steps. In this case, it means acquainting themselves with ICT or overcoming mindsets about traditional forms of service delivery. Only then can we ensure that we get the most value out of the ICT revolution to improve our living standards.

Order. I suspend the sitting and will take the Chair again at 5.00 pm. Sitting accordingly suspended at 4.15 pm until 5.00 pm. Sitting resumed at 5.00 pm

Mr Speaker, Sir, let me now turn to the proposals for tax changes and other provisions.

Creating the Best Environment for Business A New Corporate Tax Regime The Government is committed to creating the best conditions for private enterprise to flourish, while adhering to the principles of fiscal prudence. Our aim has always been to keep business costs down wherever possible and to ensure that our corporate tax rate remains competitive. In recent years, many developed economies such as Germany, United Kingdom, Australia and Ireland have lowered corporate tax rates in order to stimulate and attract investments. We have to keep pace. Furthermore, in the New Economy, picking winners will become harder. Hence, while we will continue to provide tax incentives to spur the growth of strategic industries, we will also lower the tax rate generally so that new industries can mushroom and thrive. Last year, our corporate tax rate was reduced by half a percentage point to 25.5%. This year I have decided to reduce the corporate tax rate by a further one percentage point to 24.5%, to take effect from YA2002. This will help us maintain our tax competitiveness in an increasingly globalised world. It will also help lower the tax burden of businesses in Singapore in the coming year when economic growth is likely to be less robust. The Government also recognises that small businesses are an important component of the Singapore economy. To help such companies, I have decided to introduce a tax exemption scheme that will help them grow and get established. With effect from YA2002, three-quarters of up to the first $10,000 of a company's chargeable income, and one-half of up to the next $90,000 will be exempt from corporate tax. The remaining chargeable income will be taxed at the newly lowered rate of 24.5%. This means that many small and medium enterprises and start-ups will have their taxes reduced by more than half, for the same chargeable income. Based on current data, about two-thirds of taxable companies will be taxed at less than half the previous tax rate. Companies, most particularly smaller enterprises, can look forward to being able to plough more of their profits back to their businesses to exploit growth opportunities. All companies, not just the small and medium-sized ones, will enjoy the tax exemption. The benefits passed on to companies arising from the lower corporate tax rate under this new tax regime are estimated to amount to $680 million annually. This overall lowering of the tax burden is a demonstration of the Government's resolve to keep our corporate tax rate competitive globally, and our belief in the importance of creating a pro-business environment that is conducive to entrepreneurship. The tax exemption will not apply to Singapore dividends received by companies. Such dividends will be taxed at 24.5%. IRAS will release further details on how the new corporate tax regime is to be applied. Raising Productivity - the CSOP scheme In today's environment, the most successful businesses will be those that are able to motivate their employees to greater innovation and enterprise. Performance-linked compensation systems, such as employee stock option schemes, can be powerful tools to achieve this objective. As a special provision for start-ups, I introduced the Entrepreneurial Employee Stock Option Scheme last May where 50% of stock option gains is exempted from income tax for employees of such companies. At that time, I indicated I would introduce a separate scheme that would be available to the more established companies. Today, I am glad to announce the "Company Stock Option" scheme, or the CSOP scheme for short. Under the scheme, income tax exemption will be granted for up to $1 million worth of stock option gains arising from the exercise of the employee's options over a 10-year period. Out of the $1 million, the first $2,000 worth of gains each year will be given 100% tax exemption. This makes the scheme very attractive for the lower-paid employees. In addition, I have also decided to exempt from income tax 25% of the remaining gains. Coupled with the absence of capital gains taxes and our low personal tax rates, the taxation of employee stock option gains in Singapore will be very attractive. The CSOP scheme will be available to all companies that meet certain conditions. One key condition that companies have to satisfy before they can qualify for the scheme is that they will have to offer the stock options to at least half the employees in the company. This is to encourage companies to provide the benefits of the scheme to lower-paid workers as well. The scheme will be available to options granted with effect from 1st April 2001. Details of the scheme can be found in Annex 1. - [Cols. 56-7 - Company Stock Option Scheme]. ANNEX 1 - COMPANY STOCK OPTION SCHEME Exemption of Withholding Tax for Software Payments Technological advances have made the use of info-communications technology or ICT, and consequently software, increasingly widespread. We foresee a future in which almost all products and services will require the use of software either in their production or operation. We want to lower the cost of doing business in Singapore, as well as encourage our businesses to make the best use of technology. The Government is also committed to creating an environment that is conducive to the growth of e-commerce. With these in mind, and as part of our continuing efforts to enhance Singapore's competitiveness, I have decided that payments for the following categories of software made to non-residents will be exempted from withholding tax. These are: site licences, software downloaded from the Internet by end-users, and software bundled with hardware. This change will take effect for payments due on or after today. Writing Down Allowances for Intellectual Property Increasingly, intangible assets such as intellectual properties and their exploitation will be a significant source of competitive advantage in the Knowledge Economy. To enhance Singapore's competitiveness in this respect, I have decided to improve the current incentive scheme relating to patents and know-how. The improved scheme extends the scope of coverage to more categories of intellectual properties. Writing down allowances over a 5-year period will be granted for capital expenditure incurred on the following categories of intellectual properties acquired on or after today: (a) Patents; (b) Copyrights and Related Rights; (c) Trade Marks; (d) Registered Designs; (e) Geographical Indications; (f) Layout Designs of Integrated Circuits; and (g) Protection of Confidential Information. This improved scheme will also cover a wider range of industries. It will be administered by EDB and IDA. Details will be released by them shortly. Reduction of Property Tax Rate In order to reduce business costs, I have decided to cut the property tax rate from 12 to 10%. This will improve Singapore's cost competitiveness vis-a-vis other countries. The cut will apply to all properties: commercial, industrial and residential. It will cost the Government an estimated $336 million a year. The cut in property tax rate will take effect from 1st July 2001, when the 25% property tax rebate for commercial and industrial properties ends. The reduction will be particularly helpful to small businesses that are tenants of JTC and HDB properties. These businesses have been the main beneficiaries of the property tax rebate for industrial and commercial properties, passed on by the JTC, HDB and other landlords. The Government would like to encourage all landlords to pass on savings from the property tax rate cut to their tenants. Giving a Boost to Individuals Reduction in Individual Income Tax Rates To reduce the tax burden for individuals, as well as reward individual effort and enterprise, I have decided to cut income tax rates of all income bands with effect from YA2002. The tax rates of all bands will be reduced by between two and five percentage points. The top marginal tax rate will be reduced from the current 28% to 26%. All individual taxpayers will pay less tax, with the majority paying at least 25% less tax. In percentage terms, lower-income and middle-income taxpayers will benefit most. For example, an individual earning $35,000 a year will enjoy tax savings of about 30%. Taxpayers who earn $100,000 a year will enjoy savings of about 20%. In 1994, we introduced GST and at the same time gave taxpayers a $700 GST-related income tax rebate to soften the initial impact of GST. The rebate was lowered by $50 each year until it reached $500 in YA 1998. In order to streamline the individual tax structure, I have decided to reduce the rebate over time, and incorporate its benefits into the individual tax structure. To this end, the first $7,500 of an individual's chargeable income will not be taxed, and the $500 GST-related income tax rebate will be reduced to $250 correspondingly, as a first step. The net effect of all these changes to the individual income tax regime is to make all taxpayers better off. Cutting personal tax rates will lower the tax burden of workers and encourage individual effort. Competitive personal tax rates will also help Singapore retain its local talent and attract new foreign talent. The above measures will result in tax savings of $300 million a year for taxpayers. The new income tax rates are attached in Annex 2. (Cols. 58-9). ANNEX 2 - INCOME TAX RATES Raising the Tax Exemption Limit for CPF Contributions by Self-Employed Currently self-employed persons can claim tax relief for CPF contributions amounting to 20% of their income or $14,400, whichever is lower. Essentially this is only the employee's portion of the CPF contributions for employees of companies. In the knowledge-based economy, we can expect more people to be self-employed. They should be encouraged to save for their old age to the same extent as those who are employees. The self-employed is, in a way, both employer and employee. Today, he is granted tax deductions for CPF contributions up to what employees are required to contribute for their ordinary wages. This policy will be adjusted so that self-employed persons basically receive the same tax benefits from the CPF scheme as both employer and employee combined with effect from YA 2002. A self-employed person will get tax relief for CPF contributions amounting to 36% of his income, subject to a maximum income of $72,000. This way, entrepreneurs running their own businesses will not be disadvantaged. Self-employed persons will be more motivated to save for their retirement by voluntarily contributing more to their CPF accounts. The tax benefits they will gain from this policy change will amount to $6 million or more per year. This change will take effect for CPF contributions made from this year. Weathering the Transition The key to our ability to stay focused, act as a nation and make the necessary strategic changes in our economy lies in the unity of our people. We must continue to build on the social cohesion and political stability that we have painstakingly developed over the years. The Government will help those who are facing difficulties in the transition period as our economy restructures. In the short run, the Government will provide temporary assistance to those who need help to tide over hard times. In the long term, the best way to help them is to give them the means to help themselves, through education, training and retraining. Sharing the Budget Surplus This year's package of "share-outs" will be the most generous to date. This package is possible both because of our past adherence to the principles of fiscal prudence and the hard work of all Singaporeans, that have allowed us to build up a substantial surplus. Sharing the budget surplus is an important way by which everyone benefits from the nation's success. CPF Top-ups Eligible Singaporeans have, in January this year, received the first payment of the $500 to $1,700 CPF Top-up announced by the Prime Minister in August last year. The second payment, costing $1 billion, will be given within the next 12 months. The CPF Top-up is a tangible way of sharing the nation's success with Singaporeans. It was also unique in that it was the first time that a CPF Top-up was structured to give more to those in the lower income group. Personal Tax Rebate Because of the good performance of the economy in 2000, an across-the-board one-off tax rebate of 10% on individual income tax will be granted in YA 2001, up from the 5% for YA 2000. This is another way of sharing budget surpluses with taxpayers. It will save taxpayers a total of $485 million. Utilities Save As an extension of the utilities rebates given to HDB households from 1997 to 2000, the Government will be giving utilities rebates totalling $350 to households living in 1-to 3-room HDB flats, $300 to households living in 4-room flats and $250 to households living in 5-room flats. These will be given in 10 equal monthly payments from July 2001 to April 2002. There will be two months in the year in which households have to make full payments, so that they will be encouraged to save on water and electricity. As such, this scheme will be renamed Utilities Save. Households living in 1- to 3-room HDB flats will get $35 a month, those in 4-room HDB flats $30 a month and those in 5-room HDB flats $25 a month. Any unutilised amount of the Utilities Save given in any month will be rolled over to be used in the subsequent months. This Utilities Save scheme is more generous than the $100 and $200 utilities rebates given last year and amounts to a total of $226 million. S&C Charges and Rental Rebates The Government will extend and increase the rebates on HDB Service and Conservancy (S&C) charges and rentals granted over recent years to Singaporeans living in rented and owner-occupied HDB flats. The new package will be the most generous to date. Households living in 1-room flats will receive rental rebates of $12 per month, rebates for S&C charges of $8 per month, four months' net rent and five months' net S&C charges. Households living in 2-room flats will receive rental rebates of $8 per month, rebates for S&C charges of $7 per month, two months' net rent and four months' net S&C charges. Households living in 3-room flats will be given rebates of $4 per month for S&C charges and four months' net S&C charges. As for households living in 4-room and 5-room flats, they will be entitled to three months and two months of net S&C charges respectively. More details can be found in Annex 3. (Cols. 61-2). ANNEX 3 - Rebates for Service and Conservancy Charges (S&CC) and Rental Payments The estimated cost of the entire package of rebates is $107 million. Low-income households which do not live in HDB flats can continue to receive help from the Citizens Consultative Committees (CCCs) Assistance Scheme. The Singapore Allowance To help pensioners drawing low pensions cope with inflation, the Government introduced an ex-gratia allowance called the Singapore Allowance in April 1974. This ex-gratia allowance is an additional payment over and above the pensions that the Government pays to pensioners residing in Singapore. The Singapore Allowance was last revised in August 1997, when the quantum was increased by $10, from $130 to $140 per month, and the gross pension ceiling raised from $900 to $950. The government has decided to increase the Singapore Allowance further by $10 to $150 per month, and raise the gross pension ceiling from the current $950 to $1,050 per month. The revision will give an additional $1.7 million a year to pensioners residing in Singapore, of which there are about 12,100. The change will take effect from 1st April 2001. Encouraging Philanthropy - Tax Deduction for Shares Donation While the Government is taking the lead in ensuring that the fruits of success are shared with the less fortunate in society, we hope that Singaporeans who are better off will choose to give more back to society by way of time, expertise and donation. In addition to current tax deductibility for donations to qualifying institutions, I have decided to make the donation of shares tax deductible also. This opens up another avenue for charitable donations, and is a recognition of the fact that a rising number of companies are using shares as a form of remuneration for their employees. As a start, tax deductions will be granted to individuals who donate to Institutions of a Public Character (IPCs) shares which are listed on the SGX and unit trusts readily tradable in Singapore. The concession will apply to donations made from January 2001. Transfers $1 billion is being proposed for the second payment of the CPF Top-up of $500 to $1,700 announced by the Prime Minister in August last year. In addition, the Government is proposing to contribute another $500 million to the Lifelong Learning Endowment Fund, bringing the total to $1 billion. The ElderCare Fund was set up to help lower-income and lower-middle income households with the cost of nursing home care, while the Medical Endowment Fund helps lower-income individuals with their medical bills so as to ensure that no one will be left without access to medical care because they cannot afford it. To further build up the ElderCare Fund and the Medical Endowment Fund, the Government will contribute $250 million to the ElderCare Fund (bringing the total to $750 million) and $100 million to the Medical Endowment Fund (bringing the total to $800 million) in FY2001. MISCELLANEOUS TAX CHANGES Duties on Cigarettes As part of our continuing national effort to discourage smoking, especially among our youth, the excise duty on cigarettes will be increased from $150 to $180 per kilogram. Duties on cigarettes were last revised in February 2000. The change will take effect from today. The estimated revenue gain is $102 million per year. CONCLUSION The objective of Budget 2001 at the macro level is to position Singapore for the challenges of the global economy in the new millennium. The cuts in the corporate and property tax rates, the new corporate tax structure, and the exemption of withholding tax on software payments - these will all lower business costs, and help us maintain our international competitiveness as a business location. However, as the global economy becomes more knowledge-based, to maintain competitiveness, it is no longer sufficient for us to just cut costs, or wring the last bit of efficiency out of existing systems. Innovations and new ideas will play an increasingly important role in creating wealth for companies in Singapore, and consequently, for Singapore as a nation. This is why we are encouraging productivity and entrepreneurship, through the new corporate tax structure favouring small enterprises and start-ups, a more favourable treatment towards stock options for employees of all companies and not just start-ups, and raising the tax exemption limits on voluntary CPF contributions by the self-employed. At the same time, we will help our companies to move up the value chain and into growing industries by our $868 million spending in R&D and the Economic Development Assistance Scheme, and give assistance to local enterprises as they adapt to changing market conditions. Though businesses are important, even more important are the people. This is why we are investing nearly $7 billion in the education of our children and continuous training of our people, through our investment in educational institutions, the Manpower Development Assistance Scheme, and the Lifelong Learning Endowment Fund, among many other ways. At the same time, the Government will continue to create the conditions to attract and retain talented Singaporeans and foreigners to live in and contribute to Singapore. The objective of this year's budget at a micro level is, as I mentioned earlier, to help everyone in Singapore make a successful transition into the knowledge-based economy. Education and re-training are key. Adjustment takes time and effort. The lowly skilled are in greatest danger of losing their jobs. The lower-paid need the most help, but most of all they must want to help themselves. The Government can lend a helping hand in the process. We are therefore implementing a slew of measures to ease the financial burden on individuals, and share the economic surplus that we enjoyed in year 2000. We are cutting individual income tax rates significantly, giving a one-off 10% tax rebate on individual income tax, continuing with rebates on S&C charges and rents, and helping HDB households through the Utilities Save scheme. This package of measures has been intentionally designed to be progressive, to benefit the less well-off more. While we focus on enabling the economically active to adapt better in the new millennium, we do not want to forget the others. This is the reason for allowing the tax deduction of shares donation to IPCs to encourage philanthropy, as well as the Government's contribution of $250 million to the ElderCare Fund and $100 million to the Medical Endowment Fund. There is a place for everyone in Singapore, and everyone will benefit from good governance. It will take effort and even a fair amount of difficulty to reach where we, as a nation, want to get to. This Budget serves to encourage everyone to stay united and succeed together. [Applause].

The Question is, "That this Parliament approves the financial policy of the Government for the financial year 1st April, 2001 to 31st March, 2002." In accordance with paragraph (1) of Standing Order No. 86, the debate now stands adjourned. Debate to be resumed on what day, Dr Hu?

Monday, 5th March, 2001, Sir.

So be it.

Resolved, "That Parliament do now adjourn." - [Mr Wong Kan Seng].

Adjourned accordingly at twenty-seven minutes to Six o'clock pm to Monday, 5th March 2001.