PART I INTRODUCTION The sweeping changes of the last five years have fundamentally re-shaped the world. In 1997, the Asian Financial Crisis overwhelmed our region, abruptly ending three decades of peace, stability and economic development in Southeast Asia. The economic, political and security consequences of the crisis have yet to work themselves out. In 2001, economic conditions world-wide grew even more difficult as the world's three largest economies - the United States (US), Japan and Germany - experienced sharp, synchronised downturns. Singapore was directly exposed to these external shocks. Then came the September 11 terrorist attacks on the US. Fortunately, the initial fears of major economic dislocation and loss of confidence have not materialised. However, we in Singa-pore have learnt how real and close to home the terrorist danger is, rooted in the region and threatening our security. Last year, our GDP shrank by 2%, the worst decline since independence. Many Singaporeans lost their jobs. Fortunately, our strong social cohesion helped us to weather the storm. We are entering a very different world. Conditions are uncertain and volatile, competition is intense, change is faster than ever. Our ability to adapt nimbly and quickly will give us a valuable edge. In our personal lives too, we must expect change and disruption. Lifetime learning and training will be the norm, while a life-long career in one job will become less and less common. We cannot prevent the changes from happening. Instead, we must act decisively to restructure our economy, and prepare for the challenges ahead. We have the resources to do this, but we must start early. This is our best hope of staying ahead in the race, and creating jobs for our people. This Budget is constructed with these objectives in mind. A Different World The recent performance of the global economy and our economy reflects increased uncertainty and volatility. The business cycle has shortened and swings have become more extreme. For example, global chip sales enjoyed a boom year with 37% growth in 2000, but crashed in 2001, shrinking by 32%. Before 1997, Singapore enjoyed a decade-long boom with annual growth averaging 9.2%. Since then, our economic growth has averaged a very respectable 4.7%, but it has been a roller-coaster ride*. *Singapore's economic growth (1997-2001): 1997 (8.5%); 1998 (-0.1%); 1999 (6.9%); 2000 (10.3%); 2001 (-2.0%). In the recession last year, all the external engines of our economy sputtered. The fall-off in global demand quickly filtered through to all sectors of our economy. The electronics industry was the worst hit. Export-oriented activities, such as the entrepot trade and trade-related services were also badly affected. As a result, nearly 26,000 workers were laid off last year, and unemployment reached 4.4% by the end of 2001. 88,000 Singaporeans were out of work. To help our businesses and workers through the downturn, the Government responded promptly with two off-budget packages last July and October, that together amounted to $13.5 billion. We brought forward infrastructure projects and reduced business costs. We distributed New Singapore Shares, focusing on helping lower-income citizens. We expanded programmes to retrain workers and get those who had lost their jobs back into the workforce. We drew on the savings we had built up in good years to tackle the crisis in a way that few other countries could. Uncertain Outlook Global The external environment has picked up in the last few months. The US economy grew by a robust 5.8% in the first quarter of this year after growing 1.7% in the last quarter of 2001. Business confidence seems to be improving in the US, European Union (EU) and Japan. The global electronics industry is also bottoming out. Singapore's economy has improved in tandem with these developments. After three successive negative quarters, quarter-on-quarter growth in the fourth quarter of 2001 was plus 5.6%. The initial estimate of q-on-q growth for the first quarter of 2002 was plus 3.5%. This has now been substantially revised upwards to plus 7.7%. As a result, MTI is more optimistic that the economy will grow faster for 2002 as a whole. The original projection for 2002 was between 1% and 3% growth. This has now been revised up, to growth of between 2% and 4%. But we are not yet out of the woods. The strong growth of the US economy in the first quarter masks signs of weaknesses. For example, US March orders for durable goods fell 0.6% after 3 months of growth, and profit warnings caused US stocks to fall despite the strong growth. Moreover, the global economy is vulnerable to political and security risks. Recovery does not just depend on the confidence of US consumers, or how strongly the US economy picks up. The whole world is anxiously watching the ferocious war of terror and reprisal between Israel and the Palestinians. If this escalates out of control into a wider Middle East conflict, the consequences will be unpredictable. So too if the US moves against Iraq in its continuing war against global terrorism. The disruption of oil supplies and prices is only one of the possible side-effects. Already Iraq has stopped its oil production and called on other Arab producers to cut their oil production by half. A sharp rise in oil prices would adversely affect our markets in the developed economies, as well as Singapore directly. Even if oil prices do not spike, the prospect of war and instability will put off investors worldwide, undermine confidence, and set our economy back again. Regional The prospects for Southeast Asia are clouded. Economic conditions in these countries are reasonably stable, with some opportunities for profitable investments. But the region has yet to regain the full confidence and attention of investors, who are concerned about political and security risks. Extremist and terrorist groups in the region, which are linked to global terrorist networks, seek to destabilise regional governments and attack Americans and US interests everywhere. This will further erode confidence and hamper recovery. These factors make Southeast Asia less attractive than Northeast Asia. China is the biggest and most important new player in the global economy. South Korea is restructuring its economy, and recovering faster than the crisis-hit Southeast Asian economies. Singapore is still attracting good quality investments and business activities, but companies are feeling the pull of Northeast Asia, and some are relocating their activities northwards, particularly to China and Hong Kong. This global and regional backdrop makes it more urgent for us to make strategic changes now. We face an uphill task to bring to Singapore the economic activities that will provide Singaporeans with jobs. We must also attract top talent with their business ideas and activities to Singapore. In a world where knowledge and skills are key sources of wealth, this is just as important as bringing in high value-added investments. Our challenge is to make Singapore best for business and talent. Economic Roles of Government <>Macroeconomic Policies The Economic Review Committee (ERC) is fundamentally rethinking our economic policies, and exploring ways to promote enterprise and growth. It is the private sector that creates wealth. Hence, our strategy must be to develop a vibrant private sector: entrepreneurial, regionally and globally competitive, and profitable. We must attract more global talent, while upgrading our tertiary education system and maximising our own human capital. We must develop new areas of growth in both manufacturing and services. Outstanding domestic enterprises should be nurtured into significant international players. Internationally competitive local companies, led by entrepreneurial and innovative Singaporeans, will complement the multi-national corporations and make our economy more resilient and dynamic. The Government's role is to create a pro-business, stable environment in which companies can operate efficiently. We must pursue sound macroeconomic policies, including fiscal policy - the government budget; and monetary policy - the exchange rate. The tax burden must be kept as light as possible. We must rely less on direct taxes and more on indirect taxes. This will encourage people to strive and create wealth. On CPF savings, we need to review the balance between its different uses - healthcare, housing, and retirement. We also need to study the specific problems faced by older, less-educated workers, who have difficulty finding regular jobs that pay CPF. These are complex and sensitive issues, which affect many Singa-poreans. We will study them in detail, and have not yet reached any decisions. Any changes we make will be done very carefully, after full consultations and without causing disruptions either to CPF members or the property market. Government-Linked Companies The macroeconomic functions I have just described are common to governments in all free market economies. In addition, however, the Government in Singapore for historical reasons also participates in business through its interests in the Government-Linked Companies (GLCs), many of which have played critical roles in Singapore's economic development. The GLCs attract considerable attention, as well as a fair share of controversy, including from MPs. One possible reason for this is that the raison d'etre of the GLCs has not been explicitly spelt out and accepted. Minister of State Raymond Lim's ERC Sub-Committee on Promoting Entrepreneurship and the Growth and Internationalisation of Singapore-based Companies has been reviewing the role of the GLCs. They have given the Government their views and ideas, which we have taken into consideration. Our philosophy is to have the GLCs operate as commercial entities. The Government does not interfere with the operations of the GLCs. The companies are supervised by their respective boards of directors, who are accountable to their shareholders, including the Government. The Government will not favour GLCs with special privileges or hidden subsidies; nor will it burden them with uneconomic "national service" responsibilities. The GLCs are expected to compete on a level playing field, and frequently in a global environment. As global competition heats up, the GLCs, like other Singapore companies, will have to continually enhance their core competencies. Temasek Holdings is the holding company that owns the Government's shares in most GLCs. It is therefore Temasek's responsibility to help the GLCs under its charge grow into internationally competitive businesses. One issue of public interest is the Government's policy on divesting its shares in the GLCs. Where the activities are strategic and crucial to Singapore, such as aviation and the electricity grid, the Government intends to retain its majority or significant stakes. For those strategic activities that are still wholly-owned, the Government hopes to list them in future, if it makes sense to do so in order to help them grow and increase shareholder value. For other major businesses with global or regional potential, Temasek will grow them to the benefit of Singapore over the long term. If growing a GLC into a major player requires the Government to dilute its stake through new share issues, mergers or acquisitions, the Government is prepared to do so. As for the GLCs that are no longer relevant to the Government's or Temasek's objectives, the Government will divest or dilute its shareholdings in a controlled way. It will take a pragmatic approach, and pay close attention to prevailing industry and market conditions. For example, once the electricity market is operationally ready, we plan to divest our power-generating companies: Power Seraya, Power Senoko and Tuas Power. It is often suggested that if only the Government would sell off all the GLCs to somebody else, preferably cheaply, Cinderellas would magically become beautiful princesses. Alas, this only happens in fairy tales. There is no effortless shortcut to upgrading and developing the GLCs, and the Govern-ment cannot abdicate its responsibilities as a major shareholder. Temasek Holdings is currently working out a charter with MOF that will spell out Temasek's mission, role and responsibilities. Temasek intends to publish this charter soon to make it clear how the Government sees the role of the Temasek companies in the Singapore economy. Restructuring Taxes, Creating Jobs The ERC Sub-Committee on Taxation, Wages, CPF and Land ("the ERC Sub-Committee"), chaired by Senior Minister of State Tharman Shanmugaratnam, published a report on 11th April on "Restructuring the Tax System for Growth and Job Creation". It recommended that the Government make a significant immediate reduction in corporate and personal income tax rates, and that it lower both to 20% within three years. It also recommended that the Government raise the GST rate from 3% to 5% in 2003, and in parallel provide a comprehensive offset package to help cushion the impact of the GST increase on Singaporeans, especially lower-income households. The Government accepts these key recommendations of the ERC Sub-Committee. Our highest priority is to create good jobs for Singaporeans. To do this, we must continue to attract companies and talent to locate in Singapore and grow our economy. But companies and talent are highly sensitive to the taxes they have to pay, especially direct taxes on their income. We have to bring down our corporate and personal income tax rates to make ourselves more competitive. However, this will cause a large shortfall in Government revenue, which has to be made up one way or other. The most effective way to do so is by raising the GST rate. The Government will lower the corporate and top personal income tax rates to 20% by the FY 2004 Budget, as recommended by the ERC Sub-Committee. This is barring a major change in the economic and political climate, which unfortunately cannot be completely ruled out given the uncertain regional and global environment. The ERC Sub-Committee also made many other recommendations on tax. Several of these have been included in this Budget. Others are still being studied by MOF. All those found to be feasible will be included in the next Budget. Reducing Corporate Income Tax Reducing the corporate income tax rate from 24.5% to 20% is fundamental to strengthening our competitiveness. The corporate income tax directly reduces the income of a company operating in Singa-pore. When companies compare the relative attractiveness of investing in different countries, the corporate income tax flows straight through to the bottom line. If we set our tax rate too high, we make it harder for companies to make money, expand and create more jobs here. Over the last 15 years, the worldwide trend has been towards lower corporate and personal income taxes. In addition, countries often offer generous tax breaks, so that the effective tax rate that their companies pay is much lower than the nominal rate. For example, Germany reduced its corporate income tax rate last year from 40% to 25%; a huge 15 percentage point cut. In the US, the corporate income tax rate is nominally 35%, but various provisions and loopholes reportedly enable some corporations to reduce their effective rate to only 11%. Ireland, one of our competitors in Europe, plans to cut its already low rate to a mere 12.5% next year, supposedly without any tax breaks. Hong Kong's rate is only 16%. These examples show just how fierce the competition is. Unless we keep pace with our competitors, we will inevitably lose investments and business. In the past, we enhanced our competitive position by granting tax incentives that reduced or removed the corporate income tax on certain qualifying companies. For example, Pioneer-status companies enjoy a tax holiday for up to 10 years, while companies granted investment allowances may deduct up to twice their investment expenses from their taxable income. But this strategy has its limitations: (i) Firstly, it is harder to pick winners in a fast-changing economic environment. We need to encourage enterprise across the board, and not just in certain companies or certain sectors. (ii) Secondly, some sectors of the economy have benefited more than others from tax incentives. For example, our small and medium enterprises (SMEs), most of them Singaporean-owned, often find it hard to qualify for the tax incentives. (iii) Thirdly, our tax incentives are gradually becoming less effective. Our tax treaty partners are seeking to remove tax-sparing provisions from the tax treaties. As a result, the benefits that companies enjoy from our tax incentives are taken away by the other tax jurisdictions, defeating the purpose of the incentive. The Government will be rationalising the current system of tax incentives over the next few months. Later on in my speech, I will describe improvements to our tax incentives to encourage the development of certain industries. But we must complement these specific incentives with an across-the-board reduction in the corporate income tax rate, in order to make the tax burden on businesses in general as light as possible, and make it worthwhile for companies to grow and create jobs here. Reducing Personal Income Tax It is equally important for us to lower personal income taxes. The purpose is to reward effort and achievement, promote entrepreneurship, and attract and retain talent. Lower personal income taxes allow Singaporeans to keep more of their hard-earned income, and strengthen the incentive for people to strive, create wealth and improve their lives. Lower personal income taxes also encourage entrepreneurship. If people are to risk their personal savings on some business venture, then they must be allowed to keep more of the rewards of success. In business, the risk of failure is always there. What drives entrepreneurs to run the risk of losing their last dollar by launching new ventures? The creative urge and the personal drive to achieve something are certainly important. Beyond that, it is the prospect of large personal rewards if a venture succeeds. One important reason, though not the only reason, why the US has more entrepreneurs than Europe is that US personal income taxes are much lower. Finally, reducing the personal income tax rate will help Singapore attract and retain talent. In knowledge-intensive industries, such as financial services, the business is really the people in it. Where a business is located depends on where its key people want to live and work. If the people refuse to move to Singapore, then the company cannot come here. And when such people consider where to live, they calculate and compare how much tax they personally have to pay in each place. A low personal income tax rate is therefore crucial for us to stand a chance of attracting such people and businesses. Personal income taxes affect our home-grown talent too. In the globalised economy, talent is highly mobile, and doors everywhere are open to talent. If Singaporeans find their taxes too onerous, some of them will move elsewhere. Without talent, whether home-grown or imported, our economy will not hum, new businesses will not start, and the prospects for all Singaporeans will be bleak. Raising Goods and Services Tax Lowering corporate and personal income taxes will cost the Government a large amount of revenue. If we reduce the tax rates to 20%, in all, the Govern-ment will lose 9% of its annual revenue, or nearly 1.7% of GDP. We cannot afford this loss; we have to make up at least part of it from other sources. That is why we must increase the GST rate from 3% to 5%. Some Singaporeans have asked why we cannot simply accept this loss of revenue, and leave the GST rate at 3%. After all, we have been enjoying comfortable surpluses, and should be able to accept smaller, but still large, surpluses in future. The problem is we do not expect large surpluses in future. Growth will be slower and more volatile than before. Revenues will be less buoyant. But demands on the Government to do more and spend more are increasing. Even without any tax cuts, our surpluses are likely to shrink. With the large tax cuts, we face a real risk of ending up with a structural deficit. A structural deficit means we will have a deficit in most years, whether the economy is booming or in recession. This will have serious consequences. One key reason the Singapore dollar has been strong, and inflation has been low, is that we have run a prudent fiscal policy. The Government lives within its means, and spends no more than what it receives. If the Govern-ment starts spending beyond what it gets, and borrows or prints money to fund its spending, the Singapore dollar would go down. Inflation would go up. Then, Singaporeans' hard-earned savings would be worth less, including their CPF savings. Some argue that it is all right for us to run deficits regularly, because we can always draw on the reserves to make up the shortfall. But that is not what the reserves are for. The reserves are to see us through rainy days, to be used only in extremis, because Singapore produces no oil, timber or gold that we can fall back on. Furthermore, we must not be misled by the fact that all our previous recessions have been short-lived. We cannot discount the possibility that future recessions will be prolonged and deep in this new environment. If we draw on our reserves routinely, they will soon be gone. In any case, using the reserves requires the consent of the President, who will very likely say "No", and with good justification. This is not to say that we will never run deficits. In difficult years we will end up in deficit, as happened last year. But over the whole business cycle, we must aim to maintain a modest surplus. This is only possible if we accumulate surpluses in good years to cover the deficits of lean years. The Government therefore cannot operate on a tax-to-spend basis. Instead, we should build in a margin of savings, especially given the more volatile and uncertain environment in the years ahead. A third argument against raising GST is that the Government should instead cut back on its expenditure. We will certainly do our best to be thrifty, especially when times are hard. But our government expenditure is already very lean at 18% of GDP. In contrast, government expenditure in developed countries is typically much higher - 30% to 40% of GDP, double ours. Moreover, hard times are also times when Singaporeans want the Government to respond with generous helping measures. Nevertheless, we will maintain a tight rein on the cost of Government to ensure it stays below 20% of GDP. If we examine the Government budget more carefully, we will see how difficult it is to make deep cuts in expenditure. Education is a priority area. It takes up 4% of GDP. If we reduce this, we risk under-investing in our children. Even if we could economise on frills, we would still want to spend more on education. Indeed, MOE has many more worthwhile projects that it is keen to implement, if the money can be found. These include upgrades to schools, polytechnics, the Institutes of Technical Education and the universities. Our health spending will rise as our population ages, and as they demand higher standards of health care. MOT has multi-billion-dollar plans to upgrade our public transport infrastructure, especially the rail network. Public housing is yet another big area where a serious cut-back would adversely affect our quality of life. Finally, defence spending must be maintained if we are to continue to enjoy peace and security. These five critical areas - education, health, transport, housing and defence - together comprise two-thirds of the Government's expenditure. It is therefore not realistic to cover the deficit by cutting government spending without any negative impact on the lives of Singaporeans. That is why the ERC Sub-Committee recommended, and the Government has decided, to raise the GST to make up for the cuts in direct taxes. Increasing the GST rate to 5% will raise 0.8% of GDP, and make up just half the revenue lost from the corporate and personal income tax cuts. Overall, the Government will still end up revenue negative by 0.9% of GDP, or $1.2 billion per year. This is a not an insubstantial loss, but it should still leave the Government with modest surpluses over the medium term, provided we are careful not to increase expenditures recklessly. As for timing, the ERC Sub-Committee has recommended raising the GST in 2003. By then the economy should have recovered further from last year's recession. But whatever the state of the economy next year, the fact that we are coupling a comprehensive offset package to the GST increase means that the increase should not burden Singaporean households, choke off consumer spending, or impact the economy. Our approach is to help Singaporeans adjust to the new realities, so that we can make essential changes to our tax structure without delay, and forge ahead to build a stronger economy. Offsetting the GST Increase For Singaporeans who pay income tax, the reduction in income tax will offset, fully or partially, their increase in GST. However many Singaporeans pay no income tax at all, so the higher GST will increase their tax burden unless we do something. In the longer term, they too will benefit from the tax changes, because the changes will promote economic growth, create more jobs, and raise incomes across the board. If we do not bring down income taxes and raise the GST, our economy may stagnate, unemployment may rise, and the lower-income groups will be the hardest hit. But it will take time for the restructuring to create growth and prosperity. Meanwhile, the Government will implement a comprehensive offset package that will ensure that most households - of all income groups - are no worse off during a 5-year transition period. In other words, the package will offset completely at least 5 years' worth of additional tax payable by most households. Indeed, we will go further to promise that all lower-income households will receive at least 5 years' worth of offsets. No lower-income household will be left out. I will announce the details of this year's corporate and personal income tax cuts, next year's GST increase, and the offset package later in Part IV of my speech, when I set out the Economic Restructuring Package. Embracing the Future To thrive in the different world we are in, we must confront and accept the new realities. We must quickly adapt ourselves to the changed environment, and to many more changes to come. This Budget introduces changes that will help the Singapore economy to sustain growth over the long haul. The Government will do what it can to ease the transition, but Singaporeans must be ready to accept the changes. We have no other choice. At the same time, we must continue to look out for one another, and to strengthen our bonds as one people. In an uncertain and volatile world, these qualities are the best guarantee of a bright future for ourselves and our children. PART II THE FY 2002 BUDGET Mr Speaker, Sir, I will now turn to the Budget for the Fiscal Year 2002. FY 2001 Revised Budget Estimates First, let me recap the FY 2001 Budget. I refer honourable Members to the second column of the budget statistics table in Handout 1 (below). Budget statistics for FY 2001 and FY 2002 (figures in $ bn) FY 2001 FY 2001 FY 2002 Budget Revised Budget Estimates Taxes and Fees 33.4 28.8 26.8 NII Contribution 0.9 2.7 2.4 Operating Revenue 34.3 31.5 29.2 Total Expenditure 28.1 27.7 28.3 Special Transfers 1.9 5.3 0 Surplus/(Deficit) 4.4 (1.4) 0.9 When Dr Richard Hu presented the budget last year, operating revenue was estimated at $34.3 billion and total expenditure at $28.1 billion. With a provision of $1.9 billion for special transfers, the forecasted budget surplus was a comfortable $4.4 billion. However, as Members can see from the third column of the table, the sharp economic downturn reduced revenue from taxes and fees sharply by $4.6 billion to $28.8 billion. To make up for this, we raised the contribution from Net Investment Income (NII) from the budgeted amount of $0.9 billion to the constitutional limit of $2.7 billion. Despite this, operating revenue still fell by $2.8 billion to $31.5 billion. The revised total expenditure also fell, but by a smaller $0.4 billion to $27.7 billion. Special transfers, however, increased to $5.3 billion, mostly as a result of the two off-budget packages. Special transfers included $2.45 billion for the New Singapore Shares, $500 million to the Skills Development Fund, $500 million to the Eldercare Fund, and $200 million to the Community Assistance Fund. Even after tapping all revenue streams, we expect a budget deficit of $1.4 billion for FY 2001. However, this deficit will not cause a draw on past reserves, because it can be funded entirely from the surpluses accumulated over the term of the previous government. Projected FY 2002 Fiscal Position Let me now move on to the FY 2002 Budget proper, which is summarised in the last column of the table. The operating revenue for FY 2002 is estimated at $29.2 billion, including a $2.4 billion contribution from NII. This is $2.3 billion less than the operating revenue for the previous year. We expect taxes and fees to be lower than last year, partly because they will be based on last year's earnings, which were affected by the recession, and partly because of the rebates and tax reductions which were announced in the off-budget packages, but take effect in this financial year. This year, operating and development expenditures are budgeted at $19.5 billion and $8.8 billion, respectively. Total expenditure in FY 2002 thus comes to $28.3 billion, or $0.6 billion more than last year. Leaving aside, for now, any provision for special transfers and the impact of the tax changes to be discussed later, we can expect a modest budget surplus of $0.9 billion as our economy recovers. The Government is therefore not cutting back on expenditure even though revenue has fallen. This is to fund urgently needed projects and services, and not because a new Minister for Finance has loosened the purse strings. As a result, the budget is very tight. This underscores the critical importance of spending only on essentials, and eschewing frills and extra-vagance. My ministry has reminded all government departments of these constraints. I also urge honourable Members to bear them in mind when you request the Government to be more generous towards your cherished projects in the Committee of Supply. Expenditure Priorities Let me move on to the Government's expenditure priorities. I refer members to the chart in Handout 1 (below). Sectoral Shares of FY 2002 Budget As in previous years, the largest share of the Government's FY 2002 expenditure budget goes to Social Development, which accounts for 45% of total expenditure. Education, Health and Community Development and Sports will get substantial increases in their budget allocation. The increases support the Government's emphasis on human and social capital. These form the foundations for a strong, cohesive and resilient society. MOE will spend $2.6 billion in operating subsidies to educate our children at the primary, secondary, pre-university and junior college levels. Another $1.7 billion will be spent on university and polytechnic education, as well as on the Institutes of Technical Education. MOH will spend $1 billion on subsidised healthcare services at the 17 polyclinics, 64 voluntary welfare organisations and 13 public hospitals and healthcare institutions. These expenditures will be targeted more precisely at lower-income households through means-testing. Means-testing will also be applied to social assistance. The next largest sector is Security and External Relations. The September 11 attacks have reminded us that we cannot take our security for granted. Despite the defeat of the Taleban and Al Qaeda in Afghanistan, global terrorism is still an active force, with numerous cells and networks endemic in many countries, including in our region. Our regional situation is complex and unpredictable. We cannot afford to let down our guard. To preserve and enhance our capacity to defend ourselves, the Government will devote 38% of the total expenditure budget for FY 2002 to Security and External Relations. Economic Development is the third largest sector, at 12% of the total expenditure budget. Our expenditure in this sector will enable us to invest in world-class infrastructure to strengthen Singapore's competitive position as a compelling hub for global and regional businesses. MOT will spend $1 billion this year on road upgrading and rail projects, including the MRT Circle Line and the Sengkang and Punggol LRT. The Government will continue to deregulate sectors of the economy which have not been fully liberalised, for example, the electricity industry. This will sharpen the innovative capacity of Singa-pore companies, and make them more efficient and competitive. We will help Singapore-based enterprises, including SMEs, to upgrade their capabilities and venture abroad. We will also continue to encourage new investments and economic activities in order to develop new growth engines, and add depth and resilience to our economy. At the same time, the Government will outsource services to the private and people sectors wherever it is cost effective to do so. Government expenditure in the Economic Development sector will continue to emphasise worker training and upgrading. We have implemented many such programmes over the years. The second off-budget package last year enhanced employment assistance and training programmes, including the Skills Development Fund and the People-for-Jobs Traineeship Programme. Continuous skills upgrading is the best form of job security. The Government will not stint in its support for workers to upgrade themselves. In preparing this Budget, I reviewed the range of training and upgrading programmes to see whether more needed to be done. MOM and the trade unions told me that there was no shortage of money or training places. In fact, many places on the various training schemes still go unfilled. For FY 2002, there are 100,000 training places under the Skills Redevelopment Programme. MOM has also recently launched new retraining schemes, such as the WorkSkills Training Programme and the Self-Employment Training Programme. These should be sufficient. However, if existing programmes are filled, and the training places need to be expanded, MOF will be ready to fund them, the tight budget notwithstanding. Government Administration remains the smallest sector, comprising 5.6% of the total expenditure budget. We will continue to keep this the smallest sector in line with our policy to keep the central administration lean and trim, so that the operational ministries can have the bulk of the resources to deliver public services. We will improve service delivery through the E-government initiative. By the end of this year, all government services that can be delivered through the Internet will be available online.