Hansard, 2003-08-28

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 (2003)(2003) Mr Davinder Singh17 Aug24 Aug Mr Ahmad Md Magad20 Aug21 Aug NameFromTo (2003)(2003) Mr Cedric Foo23 Aug25 Aug 1 Sep7 Sep Mr Wee Siew Kim24 Aug29 Aug Mr Arthur Fong24 Aug28 Aug Dr John Chen26 Aug29 Aug Dr Yaacob Ibrahim28 Aug2 Sep Mr K Shanmugam 28 Aug28 Aug Dr Michael Lim28 Aug4 Sep Mr Zainul Abidin Rasheed29 Aug4 Sep 7 Sep12 Sep Dr Amy Khor 29 Aug29 Aug Dr Jennifer Lee30 Aug6 Sep 15 Sep18 Sep 5 Oct10 Oct Dr Mohamad Maliki bin Osman31 Aug4 Sep 7 Sep12 Sep Mr Yeo Guat Kwang31 Aug12 Sep Mr Raymond Lim1 Sep2 Sep Mr Charles Chong1 Sep5 Sep 7 Sep12 Sep Ms Indranee Rajah 1 Sep1 Sep RAdm Teo Chee Hean2 Sep3 Sep 9 Sep10 Sep 13 Sep15 Sep Dr Vivian Balakrishnan4 Sep6 Sep Dr Wang Kai Yuen5 Sep13 Sep Miss Penny Low5 Sep13 Sep Mr Zainudin Nordin7 Sep12 Sep 23 Oct26 Oct Mr Abdullah Tarmugi7 Sep12 Sep Dr Ong Chit Chung8 Sep12 Sep Mr Ong Seh Hong8 Sep18 Sep Mr Wong Kan Seng13 Sep15 Sep ABDULLAH TARMUGI Speaker Parliament of Singapore

asked the Acting Minister for Manpower what is (i) the number of people who use all their incoming CPF contribution to pay for housing loans monthly; (ii) the amount of cash each of these individuals is required to top up for their housing loans once the total CPF contribution rate is cut to 30%; and (iii) the estimated impact of this reduction in cash circulation to our economy.

Mr Speaker, Sir, as at 30th June this year, about 577,000 members (45% of total active members) serviced housing mortgage payments from their CPF accounts. Of these, 221,400 members (17.4% of total active members) had monthly mortgage payments that were equal to, or more than, their monthly Ordinary Account (OA) contributions. This represents the number of members who currently use all their incoming CPF contributions to pay for their monthly housing loan instalments. As for the Member's question on the amount of cash required to top up their housing loans once the CPF rates are cut and the estimated impact of reduction in cash circulation based on the CPF cuts, as the Prime Minister (PM) has yet to announce the changes, I will not be able to provide the specific details. I suggest to the Member that he may defer the questions after the PM has made the announcement.

asked the Minister for Trade and Industry since 1997 (a) how many companies have migrated from Singapore to lower cost countries each year; (b) what is the amount of investment outflow from Singapore to these countries; and (c) what will be the estimated investment in and outflow from Singapore if the employer CPF contribution rate is cut by 6%.

Mr Speaker, Sir, the Government does not survey companies that are set up overseas without a presence in Singapore. As companies cease operations for many different reasons, the number of companies that have left Singapore for lower cost countries is not tracked. However, information on relocations is obtained from survey data in the Labour Market Survey, which covers private sector establishments with at least 25 workers. According to this survey, between 1998 and 2002, an average of 66 establishments each year had retrenched workers due to relocation. However, most of these companies retained a presence in Singapore. Singapore Companies' Investments in Lower-Cost Countries Mr Steve Chia asked for the amount of investment outflow from Singapore to lower-cost countries. The stock of total direct investment by Singapore-based companies in China stood at $16.5 billion in 2001, an increase of $6.1 billion from that in 1997. For ASEAN countries, Singapore companies' total stock of direct investment was $26.8 billion in 2001, an increase of $8.1 billion from that in 1997. However, I would like to highlight that Singapore-based companies invest overseas for a variety of reasons, with cost-saving being one of them. A recent survey by IE Singapore suggests that, in addition to cost saving, much of the outward investment by Singapore-based companies is to increase sales by serving the growing customer base in these markets. Hence, investment outflows do not necessarily reflect `hollowing out' due to high costs. Often, it reflects the drive of our companies to internationalise. This drive will benefit Singapore firms in many ways - to expand into overseas market, to diversify their risk and revenue, and to upgrade their offerings of services and products. While some companies have scaled back operations in Singapore, there have also been investment inflows. For example, between 1997 and 2002, EDB managed to attract net investment commitments in the manufacturing sector worth $51.7 billion, of which $38.3 billion was foreign investment. Total business spending by foreign services firms was $7.4 billion over this period. As a result of these inflows, there has been a rise in the stock of net inward foreign direct investment. Mr Steve Chia, however, has raised a very important issue of the competition from lower-cost economies. Indeed, many new emerging economies, such as China and India, have improved their capabilities and the skills of their workers. Although our workers have better capabilities in many instances, if our costs are uncompetitive, many companies will relocate operations to lower-cost countries, and new investments would not come into Singapore. We would then eventually see a hollowing out of the Singapore economy. Jobs would be lost, and new jobs would not be created. It is therefore vital that we restructure our economy to meet these challenges. Impact of CPF Cut on Investments Mr Chia asked what the estimated investment in and outflow from Singapore would be if the employer CPF contribution rate is cut by 6%. A CPF cut alone will not ensure that Singapore stays competitive. Nor can we quantify the impact of a cut in CPF rates in isolation from other measures to boost investments. The Economic Review Committee has addressed a wide range of issues that impinge on Singapore's competitiveness. These measures include external measures to enlarge our economic space, as well as internal measures to build new capabilities, invest in our people through education and training, and to ensure that our overall costs are competitive. Several measures have already been taken to lower costs. These include cuts in corporate and personal income tax rates, competition in the energy market and a programme of industrial land sales to ensure that our land costs are kept internationally competitive. The corporate tax rate has been cut to 22%, and will be brought down to 20% by 2005. Last year, the price of industrial space fell by 8%, while industrial space rentals fell by 7%. Wages constitute, on average, over a quarter of total business costs excluding the cost of materials and purchases. A reduction in CPF would lower the cost of doing business here. It would be an integral part of the comprehensive strategy to attract and retain investments in Singapore. More importantly, it would make our wage system more flexible, thereby making it easier for employers to hire workers when conditions improve. Taken together, these measures will enhance Singapore's attractiveness to investors. This will lead to more and better jobs for Singaporeans.

asked the Minister for Trade and Industry (a) what is the breakdown of the number of households whose utility supplies have been disconnected in the last six months, by flat size and the average period and amount for which these households have been in arrears; (b) whether SP Services Ltd will work with the Community Development Councils (CDCs) in making a proper assessment of the family's situation before deciding to disconnect their utility supplies; (c) whether for genuine financial hardship cases as assessed by the CDCs and social service agencies, SP Services Ltd will consider deferring their payments for the arrears and allow them to only pay the current charges until their financial situation improves or a reasonable period of time has elapsed; (d) whether SP Services Ltd will consider introducing a stored value system like those in the US and Britain to help Singaporeans take personal responsibility for their utility usage.

Mr Speaker, Sir, for water utilities, PUB's policy, since late 2002, has been to thimble the water supply instead of disconnecting it. There have therefore been no disconnections for occupied households in the last six months. This practice will be extended until the economic situation improves. For electricity utilities, from January 2003 to June 2003, there have been a total of 24,786 cases of electricity disconnections. This works out to an average of 4,131 cases per month. The House would be glad to note that households in 1- and 2-room flats make up a very tiny proportion of these disconnection cases. In fact, they constitute only 0.06% of those that have been disconnected. This reflects the fact that such families are helped, to a very large extent, by the various community assistance schemes that are already in place and act as a safety net for them. On average, electricity accounts get reconnected after 12 to 15 days. This happens when households make arrangements with SP Services to pay up on their accounts. Households will get reconnected when they pay off their current bill. Previous arrears can then be repaid through instalments. Working with CDCs SP Services takes disconnection of the utilities seriously. Before disconnection, SP Services delivers at least two reminders (pink notices) and a final notice of intended disconnection. SP Services works very closely with the CDCs. When customers inform SP Services that they are facing financial hardship and are unable to make any payments, SP Services will recommend them to their respective CDCs for financial aid. Deferring Payment for Genuine Hardship Cases After CDCs or social agencies have assessed cases as facing genuine hardship, SP Services will not disconnect but allow deferment of payment of the arrears, up to a maximum of three months, until the household's financial situation improves. However, households must pay their current charges. This is to prevent a snowballing of debt. At the end of the day, the arrears in utilities charges have to be paid. The crux of the matter is that households in difficulty will have to make attempts to reduce their consumption of electricity and water. Those in hardship should seek assistance either from within their family circle or from the CCCs and CDCs. The Government has multiple schemes to help low income households in financial hardship to pay their utility bills. The Rent and Utilities Assistance Scheme (RUAS) helps households renting 1-, 2- and 3-room flats. The Interim Short-Term Financial Assistance Scheme (IFAS) is applicable to households owning 1-, 2-, 3- and 4-room flats. If eligible, the CDCs administering the schemes will help households pay for up to six months of the households' utilities. Stored Value Metering System The stored value meter system which Dr Maliki proposed has in fact been considered in the past. It is a very expensive system. The average cost of a normal electricity meter for individual households is $35. In comparison, a basic stored value metering system will cost about $500 per household. For stored value water metering system, a normal water meter costs an average of $18; a stored value water meter would cost more than $1,500. If the cost of the stored value metering were to be borne by only those households opting for it, it would be an expensive burden for them. If the cost is spread across the whole system, we will be raising the overall system cost and electricity tariffs will have to rise as a result. Nevertheless, we will continue to track developments on this and if there are other cost-effective solutions, we will certainly be prepared to re-consider.

Sir, point of clarification and supplementary question. The Minister of State mentioned that SP Services is prepared to defer payment of arrears by a period of three months if the cases are assessed to be in genuine hardship by the CDCs. The CDCs usually take an average of two months to process a case. Would SP Services withhold any action with regard to disconnection or impending disconnection until the CDCs have completed their investigations and assessments and made their recommendations?

Sir, once a household has made contact with the relevant agency and is being evaluated, SP Services will not rush in to disconnect. The crux of the point here is to ensure that efforts are being made to moderate usage and to restructure their finances so that this debt can be repaid. As long as genuine attempts are being made in that direction, SP Services has been and will continue to be very forbearing.

asked the Minister for Trade and Industry if he will elaborate on (i) his strategy and plans to bring in new investments and create jobs and (ii) the progress made so far.

Mr Speaker, Sir, the global economic landscape is changing dramatically. The rise of China, India and other emerging economies has created new challenges for us. The competition for investments has become more intense. But there are also many new opportunities not available to us before. We have therefore to reappraise our strengths and weaknesses in the light of this new situation and reposition ourselves. Our strategy to attract investments and create jobs has two components - the external component and the internal component. First, our external strategy is to work for the economic integration of ASEAN, strengthen our linkages to the advanced economies and develop new links to China, India and other emerging economies. To date, we have already signed Free Trade Agreements (FTAs) with New Zealand, Japan, the European Free Trade Association, Australia and the US. We are currently negotiating FTAs with Mexico, Canada, India and Jordan. We are also part of the negotiations for an FTA between ASEAN and China. We have commenced negotiations with New Zealand and Chile for a trilateral FTA. We are also likely to start negotiations with South Korea soon. Together, these FTAs expand our economic space, improve our connectivity to the major economic centres in the world, and strengthen our position as a major hub for manufacturing and services. Our FTAs complement our Investment Guarantee Agreements and Double Taxation Agreements and reduce the friction to trade and investment. The second component of our strategy is internal. There are many things that we have to do to upgrade our capabilities and to improve the efficiency of our economy. These were covered comprehensively by the Economic Review Committee. Let me summarise the four main thrusts. First, we must ensure that our infrastructure and factors of production are priced competitively. Corporate and personal income taxes will have to be reduced. Our CPF contributions should be restructured to reduce the statutory burden on employers while meeting basic retirement needs. Second, we will develop the services sector as a major growth engine of our economy. The services sector will create jobs both in traditional areas like logistics, ICT, financial services and tourism, as well as in new areas like healthcare, education and the creative industries. Third, we have to push for greater creativity and entrepreneurship. We have deep strengths, and our international reputation has never been higher. We need creativity and entrepreneurship to convert our strengths and reputation to economic value. We need many more Singaporeans and Singapore companies to exploit new opportunities in the region, China, India, the Middle East, Central Asia and Latin America. Fourth, we will upgrade our human capital by investing heavily in the education and training of Singaporeans, and by attracting global talent to Singapore. Mr Gan Kim Yong also asked about the progress made in our investment promotion efforts. Notwithstanding the competition and the uncertain global economic environment, EDB has managed to bring in last year manufacturing fixed asset investment (FAI) commitments of S$9 billion, and services total business spending (TBS) commitments of S$2 billion. These investment commitments would create 21,000 jobs when fully implemented. In the first half of 2003, EDB secured S$3.7 billion worth of manufacturing FAI commitments, and S$1.1 billion of services total business spending commitments despite SARS. These would create an additional 9,000 jobs. EDB is on track to bringing in S$7.5 billion of manufacturing investment commitments this year and S$1.9 billion of services total business spending commitments for the whole of this year.

The Minister mentioned that one of the strategies was to promote the services sector. Could the Minister give an update on the status of promoting the services sector in Singapore?

The three new areas that we identified in the ERC are education, healthcare and the creative industries. Recently, I made a media announcement on our moves to promote education as a growth sector. For healthcare, we will be doing so in the near future. For creative services, I believe MITA is heading this project and some presentations will be made. The services sector requires coordination across a number of Ministries, and DPM Lee Hsien Loong chairs a Ministerial Committee on the promotion of the services sector to ensure that coordination across Government Ministries and departments is well carried out.

Sir, could the Minister give an update on whether any services investments have been brought to Singapore?

I do not have the details now but I have just given the total numbers when I referred to total business spending for services investments. They refer to the investment commitments that we have gotten in the services area. We are not doing badly. We are achieving our targets.

asked the Minister for Transport (a) what are the competitive advantages of Changi Airport and (b) what plans and strategies are there for the Airport and its operators, to mount a pre-emptive programme to minimise the impact of competition from the region and to remain the airport of choice.

Sir, as I had informed Members late last year, my Ministry had reviewed and refined Changi Airport's competitive strategy. Our goal is to anchor our airline partners here, attract more airlines to use Changi Airport and position Singapore for the long haul. First, let me stress to Members that an airport does not exist purely on its own merits. What do I mean by this? Let me illustrate. If tomorrow, we are given permission to build an equivalent of a Changi Airport at the South Pole and we offer airlines all the airport services free of charge, can that airport automatically become a hub airport? I think the answer is obviously no. Airports succeed only when there is enough passenger demand in the locality that the airport is located. And airlines will always fly to airports where there are passengers to be served. Changi Airport has grown over the years because Singapore is a tourism centre and a regional business hub. The large number of MNCs located here, the significant number of Singapore businessmen and professionals who travel regularly to serve their regional customers, the many Singaporeans who travel abroad each year on holiday and the seven million tourists we attract every year, all add up to a huge base load of air travellers. As long as the base load is here, airlines will continue to serve us regardless of competition from other airports. The challenge is how to remain as a key hub airport for the region. Here, connectivity and quality of the airport are vital factors. International airlines that serve the region in a limited way will look for an airport that has a good base load and good connectivity to the key cities and attractions in the region. This allows them to fly into the selected hub airport and distribute their passengers through other airlines to the final destination in the region. They also look for an airport that their passengers will feel comfortable and happy transiting or transferring through. In terms of connectivity, Changi Airport ranks very high. Today, Changi Airport serves 63 airlines and is connected to 137 airports in the region and throughout the world. We will continue our efforts to increase Changi's connectivity, both in terms of attracting new airlines as well as actively working with them to serve more destinations. In terms of passenger comfort, Changi Airport enjoys significant competitive advantage through state-of-the-art infrastructure that is managed efficiently and effectively. Passengers using Changi find the speedy clearance, the shopping mall environment, the friendly service and the various passenger facilities provided a very pleasant experience. Many contrast this with the experience in other airports. We therefore coined the term "the Changi Experience" to describe our airport. Our lead in terms of comfort and service level, however, has been narrowed in recent years with the building of newer regional airports. We must therefore continue to upgrade our facilities, raise productivity, improve operations and enhance our customer orientation. As our competitors catch up, we have to learn from them as well. The Changi Experience is a unique one and we must continually revitalise and enhance it. To ensure that Changi remains ahead of our competitors, we have set up a 3-year S$210 million Air Hub Development Fund in January this year. Under the scheme, we have launched a number of initiatives targeted at our industry partners which will further anchor Changi's position as the premier regional air hub. For example, CAAS, the Singapore Tourism Board and various agencies are collaborating with airlines to further stimulate demand for air travel to, through and from Singapore. Sir, cost competitiveness is another relevant factor. We will keep our costs competitive by benchmarking internationally and regionally. Where the situation demands it, we have not hesitated to step in early. For example, CAAS was one of the first to introduce a S$45 million SARS relief package and, subsequently, a S$10 million air traffic development scheme. Both schemes help the industry to lower their operating costs. We will continue to look at our cost structure to ensure that our airline partners find it profitable to operate at Changi. We have also developed the Airport Logistics Park, or ALPS. Located strategically in Changi's Free Trade Zone, ALPS leverages on the excellent connectivity and superior handling efficiency of Changi Airport. This enables the logistics companies to enjoy rapid turnaround with minimal customs formalities thereby strengthening our position as a leading air logistics hub. In preparation for the longer term, I have tasked my Ministry to look at how we can further develop Singapore as an International Aviation Centre. Working with other agencies, our vision is to create a vibrant cluster of aviation and aerospace companies and activities. This will then provide another engine of growth for our aviation sector. I can therefore assure Members that my Ministry and the CAAS will proactively ensure that Changi retains its competitive position in the years ahead.

Sir, the success of Changi Airport, in short, boils down to satisfaction of passengers and our ability to connect with other airports and anchor airline partners. In the Minister's plan to continue to develop the vibrancy of Changi Airport, how does he propose to incorporate programmes that would continue to enthuse the service providers to continue to deliver excellent service, which is a very important factor in attracting tourists and passengers to come to Singapore?

Sir, the CAAS engages in close consultation with all their airline partners. From these consultations, they get a better understanding of what is needed by not just the airlines but the travel industry as well. So, by having all these dialogue sessions, we are able to formulate programmes to address areas where further improvements are needed. And I think that is how Changi Airport has managed to achieve continual progress, and we will continue to do that.

Sir, I understand that many domestic airlines in Indonesia and also some of the budget airline operators in the region would like to hub in Singapore. But they are complaining that the cost of hubbing in Singapore is too high. Are we reacting fast enough to ensure that we are able to attract them to hub in Singapore? Or are we going to wait until a situation arises like PSA where we lose the customers and then we take measures to attract them back to Singapore? I would like to get the Minister's input on this.

Sir, as I explained just now, if the passenger load is here, airlines will want to operate through Singapore. Mr Ravindran mentioned about low-cost airlines wanting to hub here. If he knows which of these airlines, please let us know and we will definitely reach out to them.

Sir, budget airlines like ValuAir said that they want to use Changi Airport as its hub. But how can they do it when, according to the CEO of that budget airline, the landing fees are so high, and that they actually need to use Paya Lebar Airport instead of Changi Airport. Can the Ministry clarify?

Sir, I do not know what he is talking about, because Paya Lebar Airport is not meant to be a civilian airport. We are in discussions with airlines that are interested in operating through Singapore. As I mentioned just now, Changi Airport serves over 60 airlines, and they have operated here very profitably. If the budget airlines are interested in operating here, I am sure they will find Singapore equally profitable for them.

asked the Minister for National Development (a) what is the number of one, two and three-room rental flats currently available; (b) how many appeals have been received by the Housing and Development Board (HDB) from single mothers with custody of children who have been barred from renting a flat from HDB arising from a sale of their flats due to divorce and how many of these appeals have been successful; (c) whether HDB will consider reviewing the income ceiling for eligibility for rental flats to take into consideration the total number of people in the household, such as the per capita income instead of a generic household income ceiling of $800; and (d) whether HDB periodically reviews the financial situation of tenants such that those whose incomes have improved significantly can be encouraged to purchase flats, thus making more rental flats available for those more deserving.

Mr Speaker, Sir, as at end July 2003, HDB has 3,100 1-room, 2,600 2-room and 1,800 3-room vacant rental flats which can be let out. 1- and 2-room flats are rented out to families earning $800 or less a month under the Public Rental Scheme; and 3-room flats to households with monthly incomes between $800 and $2,000 under the Rent and Purchase Scheme. The rents are heavily subsidised. Under the existing policy, HDB lessees who have sold their flats are not eligible to rent a flat from HDB for a period of 30 months from the date of sale. The purpose of this is to ensure that subsidised rental housing is targeted at those who are genuinely unable to afford home ownership. However, for cases where the flat is sold due to divorce, HDB will waive the 30-month debarment and allow the divorced mother who has custody of at least one child to rent a flat from HDB if she meets the eligibility conditions. Over the past three years, HDB has assisted about 1,000 divorced mothers who were granted custody of their children to rent flats. MND and HDB have just conducted a review of our rental housing policy. The review addresses, among other issues, the MP's questions on whether the current income cut-off of $800 per month is relevant and how to encourage rental tenants whose financial situations have improved over time to buy a home ownership flat. The outcome of the review will be announced shortly.

Sir, if there are more than 4,000 rental flats that are available right now, why is it that a lot of my residents keep telling me the response from HDB is that there is a long waiting list? Is there really a long waiting list? And would the cases of single mothers who have a tendency to live like nomads, unless they get housing, because they have been chased out of their homes, be given priority based on the circumstances that they face? If I get the Minister correct, the single mothers are helped. Under what circumstances are single mothers not given rental housing or told that they have been debarred, and some of them have been debarred permanently? For such cases, will HDB also consider their circumstances? The third question is with regard to single mothers who are permanent residents (PRs). I know the policy is that PRs are not eligible for rental flats, but some of these single mothers do have custody of their children and their children are Singaporeans. But yet, because of the policy, they are not allowed to rent those flats and they are still moving around looking for housing.

Sir, yes, there are 5,700 1- and 2-room flats which are available for renting. However, on the other hand, there is a huge number of Singaporeans who are also asking for such rental flats and they include not just the single mothers, which the Member talked about, but senior citizens who have been chased out of their homes by their children, and other Singaporeans who have sold their flats and because of financial hardship are not able to purchase another flat. So, there is indeed a long waiting list of Singaporeans wanting to rent flats from HDB. And that is the reason why some of the requests or appeals from Members may not have been acceded to. There are, of course, eligibility criteria which HDB applies in processing these appeals. For example, citizenship status, because we do make a distinction between Singaporeans and permanent residents, and household income. There are, of course, other disqualifying criteria, for example, debarring Singaporeans who have already benefited from two or even three housing subsidies from applying for rental flats. It is important and necessary for HDB to have these eligibility criteria and debarment criteria because subsidies involved in public housing are huge, and we have to be able to direct the subsidies to those people who require most. I hope the Member would understand why there is a need for such criteria and also why the supply of rental flats is less than the demand for such flats and for that reason, not all eligible Singaporeans can be given a rental flat immediately upon request.

Sir, given the long waiting list for rental flats, is there a case for increasing the number of rental flats, especially given the fact that there is an increasing number of downgraders as a result of economic hardship? Since the Budget debate, I have also asked for a review of the income ceiling of $800. And HDB had then informed me that it was already reviewing it. And, today, the Minister said that they just reviewed it. Can I have an assurance that HDB will announce the outcome of the review soon? Because many Singaporeans who are caught by this $800 income ceiling criterion desperately need a HDB rental flat.

Yes, the Member did hear me correctly. HDB is reviewing it, and I would like to ask the Member to be a bit patient.

Sir, the Minister has mentioned about the 1,800 units of 3-room flats. Are they rental or purchase flats and are they old or new flats?

These 1,800 flats are actually rental flats. They are actually for people under the Rent and Purchase Scheme. Under the Rent and Purchase Scheme, we rent these flats to families whose household incomes are below $2,000, with the proviso that over time we will sell them these flats at a discount, so that they can become home-owners as well. The 3-room flats for purchase are actually a separate matter.

Sir, may I clarify? On the 5,000-odd rental flats that are available, are these currently vacant flats?

No, available.

"Available" meaning they are already occupied or they are vacant and available?

No. They are available flats. Not all of them are occupied, but there is a waiting list for such flats.

Sir, can the Minister clarify if rental rates could be set according to a percentage of the applicant's household income like, say, 10%, instead of a heavily subsidised rate across the different income levels, so as to better manage and meet the demands from the long waiting list?

I am not sure whether the Member is aware of the rental rates that we are charging. If he has checked them out, I think he will find that they are actually much more generous than what he has mentioned. To follow his recommendation, I would be quite happy to consider. But I do not think it would be very well received.

I want to ask the Minister: if these rental flats are still available, why is there a queue?

Sir, it does not mean that all the applicants who apply will be given a flat straightaway. I am not sure whether the Member is aware of this. But I have come across such cases in my own meet-the-people sessions where a person is given a flat in Jurong, but he says, "I don't want a flat in Jurong. I want a flat in Bedok or Tampines." So we tell him that there is no such flat available. And he says, "No, I do not wish to have this flat." The flat is available for him but he does not want it. But, on the other hand, there are those who want the flat anywhere but are not eligible. So, as a result of this, there is always this mismatch between supply and demand.

Sir, I am sorry, I still do not quite understand. There are 5,000-over flats available. Does it mean that they are currently available in the market for applicants to apply to rent, ie, they are vacant, they are available, but not the total number of rental flats that HDB has? Am I right?

Let me start from the beginning. There are 3,100 1-room flats and 2,600 2-room flats. These 1- and 2-room flats, totalling 5,700 flats, are available for rental under the Public Rental Scheme. Not all of them are occupied, but there is a long waiting list for such flats. If tomorrow we say that everybody on the queue overnight would be given a key, then all of these flats will be taken up.

To rephrase or understand it, it means these 5,000-plus flats are the total number of flats that HDB has for rental. What proportion of it is currently available or vacant for people to rent? And, at the same time, can I also ask if the Minister can provide information on what is the size of the waiting list for us to know the extent of the wait that our residents will have to endure? Also, based on the waiting list, has HDB certain kinds of assessment criteria to look at the seriousness as well as the urgency of the needs of such families, for example, the single mothers who really do not have anywhere to go, except to rely on the sympathies of friends and the goodwill of others?

I do not have the exact number of flats that are currently vacant, but I will check up and give the Member the number. But I think that is not the point. The point really is that our rental scheme carries a heavy subsidy. And, because of that, not everybody who shows up at his meet-the-people session who asks for a rental flat will automatically be given one. That is not possible. However, there are those who are eligible. As I said, for those eligible and when they come to us, we will offer them these flats when their turn is due on the queue. So, there are two separate matters. One is the number of flats which are currently in stock under the Public Rental Scheme. There is a separate matter which the Member is alluding to, that is, we should change our criteria and we should be more generous in allowing, say, single mothers to rent HDB flats. I think that is a separate matter. It is a policy issue. I have earlier explained why we have to have certain criteria, and not everybody who sells a flat straightaway, or who is divorced and applies for a flat, will be automatically given a flat. Yes, a Singapore permanent resident with a child who is a Singaporean is in need of a flat. But under our current criteria, we would not give that family a flat automatically. However, if there are extenuating circumstances, if it is a matter of severe financial hardship, we would consider it on a case-by-case basis. But, as a general policy, the answer is no, we would not give.

May I ask the Minister whether he would also consider renting flats to those young couples who may not want to commit to buy new flats when they get married due to the trend of unemployment and the prospects of the present job market?

Sir, currently we do not cater to this group of people because our rental flats are subsidised flats and they are really meant for those in the lower income groups. However, I do recognise that what the Member has suggested is something that we should look into and HDB is looking into it, and we will be making some announcements.

Could I ask the Minister? Obviously, there is so much mismatch - there is a queue, there are vacant flats. Would HDB, in fact, be doing a review? Because the Minister is saying that right now there are certain criteria and because of that, we do not accommodate a lot of people. But it would appear that there is quite a need out there. Would there be a review done? Is there review in the works? If there is not, would he consider that it might be timely to do a review? I think for many of the criteria put in place in years past, circumstances have changed and society has changed to some extent. So, would a review not be timely?

Sir, I am not exactly sure what the Member has in mind when she talks about a review in terms of the eligibility criteria. We have certain very fundamental criteria. For example, the criterion on Singapore citizenship. I think that is a very fundamental point. Singaporeans enjoy significant public housing subsidies; permanent residents do not. That is a distinction that we have made and we are sticking to that distinction for good reason. What other eligibility criteria are we talking about? The 30-month debarment which many Members are familiar with. Why do we have a 30-month debarment? For the simple reason that we do not want to have somebody who is not deserving of this subsidy, or somebody who has just sold the flat, or somebody who has sold his private property and comes on to the HDB queue straightaway overnight. We say, "No. If you have sold your private property and you are eligible for HDB flat, you wait 30 months." I think that is a reasonable criterion. If there are any specific areas where the Member would like us to review, in terms of eligibility criteria, we would be pleased to consider it. But as it stands at the moment, the criteria are very simple. Over and above that, I have said many times in this House that HDB is always willing to look at specific cases where they pertain to individual hardship, or financial hardship, where it is due to unforeseen circumstances, or demise of a family member, etc. So there are no situations, as far as I know, where we have absolutely said no, where severe individual circumstances warrant us to look at those cases.

Sir, may I ask the Minister whether he will consider converting some of the unsold new flats, for example, in Jurong West area, as temporary rental flats for those Singaporeans who need to rent the flats?

Is the Member talking about subsidised or non-subsidised rentals?

Subsidised rentals.

In other words, it is an extension of the rental scheme. We are looking at some arrangement along these lines. If he could be patient, we will give him the answer.

Could I ask the Minister how many appeals have HDB acceded to where this 30-month waiver is concerned?

Sir, I do not have the number with me. But I can tell her that it is quite significant because I do come across individual cases where the case report was brought to my attention and HDB had recommended and the relevant committees had approved.

Sir, would the Minister look into allowing the establishment of a HDB rental market by relaxing the rules for rental of the whole HDB flat? This will increase the supply and lower rental cost and, indirectly, reduce the demand for HDB subsidised rental units.

Sir, this is one of the suggestions that we are looking into, so if the Member could be patient.

I think we have taken too long on this Question. I will allow two last questions by Dr Lily Neo and Mdm Cynthia Phua.

May I ask the Minister whether he will consider moderating our HDB home ownership as an enhancement policy due to our present changed circumstances that Singaporeans are facing?

I think the Member is talking about something else entirely. It is not about rental housing. Is she talking about upgrading?

It is rental flats per se. If you do not need to invest in HDB property, then you can provide more rental flats. It is related.

I think the Member has to be patient.

Sir, since the Minister is so generous, could he even consider the new 4- and 5-room flats as rental flats? I am just being realistic. Could he consider more 3-room flats to be rental flats?

We do not have 4- and 5-room flats for rental. Our rental schemes do not extend to 4- and 5-room flats. We have 3-room flats for rental, but they are specifically for those families whose incomes fall below a certain level, and they are meant to facilitate them to buy that flat in later years as their income levels improve. So we do not have 4- and 5-room flats for rental. I am not sure whether I gave the wrong impression to the Member just now.

asked the Acting Minister for Education (a) what is the rationale for rejecting our own proposal to open a fourth local university in view of the Economic Development Board courting such a deal with an international university; (b) how can the Government ensure that such international universities will be of equivalent academic standards as our own universities; (c) whether Public Service Commission scholarships and other Government scholarships will include these private universities in their eligibility list for such scholarships.

Sir, the idea of a fourth publicly-funded university was studied by the Committee to Review the University Sector and Graduate Manpower Planning, chaired by Dr Ng Eng Hen, as part of its overall review of the sector. The Committee, which completed its report earlier this year, concluded that there was a sufficiently large pool of good students to sustain a high-quality public university sector catering to 25% of our primary one cohort, higher than the 21% currently. However, the Committee also pointed out that a new fourth university will find it difficult to attract good quality students and faculty staff. The commitment of public funds is likely to yield far better results if we were to leverage on the value and reputation already created in our three existing universities - NUS, NTU and SMU. By expanding NTU to become a comprehensive university and by transforming NUS into a multi-campus university, we are setting out to achieve what the earlier fourth university proposal aimed to accomplish, that is, creating university capacity for 25% of our primary one cohort, while maintaining high quality. The Review Committee also supported allowing a few good quality private universities to provide undergraduate education in Singapore beyond the 25% cohort participation rate. The Government accepted these recommendations in May this year. The foreign university that EDB plans to attract is therefore not a substitute for the earlier fourth university idea. A foreign university, if established, will be privately-funded. It would provide access to university education in Singapore over and above the target cohort participation rate of 25% in our publicly-funded universities. And it will not detract from the initiatives that our own universities are taking to build excellence. Instead, a Singapore campus of a reputable foreign university, by expanding the choices available to students and faculty, can add to the vibrance of the university sector as a whole. To support this objective, MOE will work closely with EDB to ensure that only quality universities with good academic credentials are invited to establish a campus here. With regard to Mdm Ho's query on scholarships, PSC or MOE does not decide on the universities for our scholars. It is the scholar who decides where he wants to study. The scholar is allowed his choice provided the university is of good standing, known to offer sufficiently rigorous curricula to its students, and the courses pursued meet the needs of the organisation.

Will the Minister elaborate on what he meant by quality students and quality staff in the context of the analysis?

The Committee, in its study, had assessed the pool of students coming out from our schools and polytechnics and had concluded that catering to 25% of Primary 1 cohort will not diminish the quality we expect to see of our publicly-funded universities in Singapore. As for staff, it is a more fluid matter because the universities can attract staff from around the world. So the key criterion is really the students. Establishing quality undergraduate training in Singapore requires that you ultimately have students who are able to benefit from a rigorous university education and meet the graduate manpower needs of the economy.

I would like to clarify with the Minister. Since this university is going to be a privately-funded one, and we are also going to ensure that it is a university of quality standing, we could expect therefore that the students that would be drawn into this university would also be the better quality students who can afford to enter this university. What would be the outcome for us? Would we end up promoting a very elitist society?

I would not at all assume that the students who enter the campus of a foreign university would be superior in quality to those entering our existing publicly-funded universities. I do not have any reason to expect that. In fact, I do not expect that.

Sir, I would like to ask the Minister, in view of international universities coming in, together with our local universities, would there be an accreditation body for universities that will be set up so that we can regulate matters, like quality and curriculum? Otherwise, there will be some disparity over time and it is very hard then to try to make sure that we are of comparable standards.

Singapore is a small city. We have only a few universities. I think rather than set up an elaborate system for accrediting the quality of universities, it is more useful if, first, within our publicly-funded universities, MOE works with the universities to establish that they have a good quality assurance system in place. There is a high degree of transparency about the quality of degrees in Singapore. Employers know the universities, they know the different faculties in the universities. We have to ensure that we do not spare resources on ensuring continued improvement on quality within the universities.

May I seek clarification from the Minister? I believe we classify SMU as a private university, but yet we have subvention from the Government. Can I understand that this concept of the fourth university with international university would be truly a private university, in the sense that there is no Government subvention, or would there be any Government subvention of some kind?

MOE would not provide subventions to a privately-funded university, for instance, a foreign university attracted by EDB. Whether EDB provides some incentives for this university or any other educational institution that they seek to attract to Singapore is a separate matter. That is a broader matter of investment promotion and building Singapore as an education hub. MOE does not intend to subsidise the education provided by any private university or any private education provider generally.

asked the Prime Minister (a) what are (i) the reasons for keeping so many Ministers in the Prime Minister's Office and (ii) the duties and responsibilities assigned for each of these Ministers; and (b) whether the number of senior political appointments in Government can be cut to reduce Government expenditures.

Sir, there are seven Ministers in the Prime Minister's Office (PMO), excluding the Prime Minister. Each one has specific duties and responsibilities. (1) Senior Minister Lee Kuan Yew. The Cabinet taps Senior Minister's wealth of experience, knowledge and insights on a wide range of issues. Senior Minister is also the Chairman of GIC, the Government investment management company which invests Singapore's foreign reserves. (2) Deputy Prime Minister Lee Hsien Loong is the Minister for Finance and Chairman of the Monetary Authority of Singapore. He is under PMO because he also looks after the Public Service Division, which handles the personnel matters and policies of public officers. (3) Deputy Prime Minister Tony Tan is the Co-ordinating Minister for Security and Defence. We created this new appointment because of the grave threat posed by terrorism. The threat cuts across the work of many Ministries, and requires overarching supervision. Dr Tan chairs the Inter-Ministerial Committee on Security and Defence. Dr Tan is also in charge of university education. In addition, he chairs the Inter-Ministerial Committee on Developing Research and Professional Manpower. (4) Minister Lee Yock Suan, as Second Minister for Foreign Affairs, helps the Foreign Minister in policy issues as well as some of his many overseas travels and meetings. The Ministerial appointment in PMO is to reflect Mr Lee's status as a senior member of the Cabinet. It carries more weight when he represents Singapore overseas than the title of Second Minister for Foreign Affairs. (5) Minister Lim Boon Heng is the Secretary-General of the NTUC. Because of the important role our workers play in the economy, the NTUC Secretary-General holds an appointment in PMO. He reflects the views of workers to the Cabinet. In turn, he transmits the thinking of the Government on economic and labour-related issues to the unions. (6) For the same reason, Mr Matthias Yao Chih, Deputy Secretary-General of NTUC, is a Senior Minister of State in PMO. Lastly, Minister Lim Hng Kiang is Minister in PMO and Second Minister for Finance. Within PMO, he looks after the issues of aging population, marriage and procreation, and the attraction of international talent to Singapore. These population-related issues are crucial to the long-term survival and prosperity of the country, and they cut across several Ministries. Mr Lim also runs the day-to-day affairs of the Ministry of Finance. There are no immediate plans to reduce the number of senior political appointments in the Government. All of them have substantive responsibilities.

Mr Speaker, Sir, would the Deputy Prime Minister agree that there is a growing public perception that the Prime Minister's Office is the holding ground for older Ministers awaiting their retirement, and that something should be done to change that perception? It does not matter whether that perception is correct or wrong, but something has to be done to change the perception.

I am not aware of any such perception. If anything, people accuse the Senior Minister of being too active rather than waiting for his retirement, and I think that is not a bad thing.

Dr Maliki.

Question No. 9, Sir.

asked the Acting Minister for Education whether the incidence of pregnancies and abortions among school-going teenage girls are on the rise and whether his Ministry is evaluating the effectiveness of the current sexuality education implemented in schools to address the issue.

Sir, may I ask a supplementary question on Question 8?

I have already called for the next Question, Mr Low. Mr Shanmugaratnam.

Sir, the incidence of teenage pregnancy and abortion among school-going teenage girls is not rising. The number has, in fact, fallen slightly over the last three years for all females aged 17 and below, and remained fairly constant for those aged 18-19. The sexuality education provided in our schools aims to provide pupils with essential knowledge about sexuality matters, including consequences of teenage sexual activity, pregnancy and abortion. It equips them with the skills to make informed and responsible choices on sexuality matters. It also challenges teenagers to re-examine their values and attitudes on issues and persuade them to adopt a more value-based standard. Sexuality education in schools should help, but will not be a panacea. There are many factors involved in teenage pregnancy and abortion. They include a lack of family support and cohesiveness, sexual abuse and a lack of understanding of responsibilities in relationships. It is a complex issue. It is early days to assess the impact of the sexuality education programme. But teachers have reported that our pupils have responded well. Pupils' responses to pre- and post-programme questionnaires indicate significant increase in their understanding of sexuality matters, including the negative consequences of teenage sexual activity. We are also getting good support from our parents. Although parents have the choice to opt their children out of the sexuality education programme, the opt-out rate is less than 1%. We will continue to monitor the overall impact of the programme on pupils' sexual values and attitudes, which will take longer to ascertain.

Sir, I just wonder whether the sexuality education programme in the Ministry of Education includes information on the avenues that the girls can go to should they end up being pregnant. Secondly, are schools equipped to deal with such pregnancy situations, ie, if a girl gets pregnant and goes to the teacher, what does the teacher do? What kind of advice does the teacher give, and what happens to the girl? Is she allowed to continue schooling? If she wants to carry the pregnancy to full term, what are the avenues for such a person?

First, I should say that the teachers who are involved in teaching sexuality education are specially chosen and specially trained, and they are backed up by a cross-disciplinary team, including Ministry of Education guidance specialists, psychologists, medical and even legal professionals. Obviously, when it comes to a case of actual pregnancy, it is something which requires very specific counselling, and we do refer our students to counsellors who are trained for the purpose.

asked the Minister for Law whether he will take steps to ensure in cases of en-bloc development sales that (a) all owners of strata units in a development are informed (i) progressively and on a regular basis of the percentage of owners who have given consent for the sale prior to reaching the required approval percentage and (ii) of further developments on the proposed en-bloc sale regardless of whether they had given their consent or not; and (b) a maximum period for the required percentage approval to be obtained be specified, and where this cannot be obtained, a reasonable period should lapse before another attempt to obtain approval is made.

Sir, our ground feedback is that there are no serious problems with the procedures to secure consent for an en-bloc sale. By and large, the procedures set out in the Land Titles (Strata) Act have worked well. Nevertheless, my Ministry is reviewing the procedures on en-bloc sales, in light of experience gained, since the law was enacted in 1999. We will consider Mr Tan's suggestions in this review. While we are unable to state definitely now what will be the specific amendments which we will make, my Ministry is sympathetic to Mr Tan's call for greater transparency in the process of securing the required majority to get an en-bloc sale. We will also favourably consider his idea of fixing a maximum period for obtaining the required percentage approval.

Resolved,

"That, under Standing Order 10(2), the items of business for the Introduction of Government Bills as listed on the Order Paper for today, be taken now." - [Mr Wong Kan Seng].

"to repeal the Martial Arts Instruction Act (Chapter 171 of the 1985 Revised Edition)", presented by Minister for Home Affairs (Mr Wong Kan Seng); read the First time; to be read a Second time on the next available sitting of Parliament, and to be printed.

"to amend the Goods and Services Tax Act (Chapter 117A of the 2001 Revised Edition)", recommendation of President signified; presented by the Second Minister for Finance (Mr Lim Hng Kiang); read the First time; to be read a Second time on the next available sitting of Parliament, and to be printed.

Order. Before the Prime Minister makes his Statement at 3.00 o'clock, I suggest that we take a short break. Therefore, I suspend the Sitting and will take the Chair again at 3.00 pm.

Sitting accordingly suspended at 2.37 pm until 3.00 pm.

Sitting resumed at 3.00 pm

Mr Speaker, Sir, from time to time, a nation comes to a crossroads. The people must then decide which road to take, to continue the journey. One road may lead them up to the sunny highlands. The other road may go deeper into the gloomy valley. Singapore is at such a crossroads. Down one road, the view is familiar. We see, as part of the landscape, our present policies and practices and our high wage and CPF systems. This is the easiest road to take. Politically too, it is the most convenient. But maintaining the status quo means carrying a heavy load of costs, and relying on outdated models of economic growth. This will weigh us down. We will descend into the gloomy valley. To take the second road, which leads to the highlands, we will have to shed some of our load, through wage and CPF reforms and other measures. We will then be able to travel lighter, and move more nimbly. But shedding our load will involve sacrifice and pain. We may have to adjust our aspirations and lifestyles. Moreover, there is no guarantee of success. How we progress will depend on what our competitors do, and the state of the world economy. This second road of reform and restructuring is unpaved and difficult to travel. It will be an uncomfortable journey, even painful at times. But I know that taking the first road will lead us deeper and deeper into gloom. This is why I want Singaporeans to come along with me on the road of reform and restructuring. On this road, we stand a much better chance of economic recovery and sustained growth. Why are we in this tough spot? The reason is globalisation. Products and services, capital, investments, companies and people are moving across borders more and more freely. Globalisation has benefited Singapore immensely. We have attracted many MNCs to Singapore, created many jobs, and sold our products and services to the rest of the world. But these same forces of globalisation can also work against us. Globalisation is not just about exports. It is about producing goods and services wherever in the world it can be done most cheaply and efficiently. So when lower-cost players emerge, and we are not competitive, investments will flow into these places rather than to Singapore. The reorganisation of the global economy has been going on for some time. But the process has accelerated in recent years. Jobs are migrating from developed countries to developing countries faster than ever before. Singapore too has been affected. For example, Maxtor, a disk drive manufacturer, will be reducing its Singapore workforce once its China plant comes on-line in 2005. Maxtor will produce entry-level disk drives in the China plant, while keeping its production of high-capacity drives here. Maxtor's competitors, Seagate and Western Digital, have also reduced their presence in Singapore. Seagate has shifted its manufacture of low-end drives to China. Over the last five years, its Singapore workforce has been reduced from a high of 25,000 workers to 9,000 workers today. Western Digital shifted 2,500 jobs to Malaysia in 1998. It is not just blue-collar jobs that are moving offshore. White-collar jobs are also migrating to low-cost countries like the Philippines, Thailand and India. Our graduates and yuppies are feeling the heat. Last year, for the first time, more professionals, managers, executives and technicians (PMETs) were laid off, compared to production and related workers. PMETs form 43% of all local workers retrenched. Production and related workers form 34%, while clerical, sales and service workers made up the remaining 23%. The migration of white-collar jobs will pick up speed in coming years. Analysts expect many jobs in data entry, data reconciliation, call centres and other back-end functions to move to lower-cost countries. As you can see, our economy is restructuring rapidly, whether we like it or not, whether we are ready for it or not. It is, therefore, important for us to have some levers to pull, to influence the pace and direction of this restructuring. Then we can minimise the negative impact on Singaporeans. These levers include reforming our tax regime, moderating our land prices and rentals, investing in education and skills training, moving into research and development, constructing the Biopolis to nurture the life sciences and pharmaceutical industries, and developing other growth sectors like medical and educational services. But these changes will not be enough to stem the outflow of jobs. We will also have to keep our wage costs competitive, and not too far out of line with those in the region. Presently, for every manufacturing worker in Singapore, a company can hire 13 in China and 18 in India. For every accountant in Singapore, a firm can hire two in Malaysia and six in Thailand. The large wage differential will push jobs out of Singapore, and discourage new investments from coming in. This is why we must go beyond the recommendations of the Economic Review Committee (ERC), and make further changes to the CPF scheme. The CPF retuning will affect all Singapore workers. It will be painful, which is why I have decided to present the CPF changes myself. At the National Day Rally, I outlined the changes. Today, I will lay out the details. Social objectives The CPF is Singapore's most important social safety net. Its first and principal objective is to provide for the retirement needs of Singaporeans. Later, we added other social objectives like saving for home ownership and healthcare. These objectives remain valid today. In fact, the needs have grown. For instance, retirement expenses will go up because people are living longer. An article in the New York Times talked about the possibility of living to 600 years old, because of the promises of genetic medicine. It explained that our organs might break down. But scientists were now breeding special animals that could grow replacement human hearts and lungs. Scientists have also found a chemical in red wine - for those who love red wine, please note - which may slow down ageing. And gene therapy will allow us to conquer many previously incurable diseases. I do not think many people relish the idea of living to 600. Can you imagine having to face your enemy for 600 years? But I think most people would not mind living to 100. In fact, a good number of Singaporeans are already living to near a century. Today, 40,000 Singaporeans are over 80 years old. Of these, 5,000 are over 90! Prolonging lives will lead to new social problems, and certainly, a need to save more for a longer old age and higher medical expenses. So from the social perspective, the higher the CPF contribution rate, the better. Economic concerns But increasingly, we must also consider the impact of the CPF on our cost competitiveness. In the 70s, 80s and 90s, cost competitiveness was not an overriding concern. We had good growth year after year. During those 30 years, we grew by 8% annually. Our salaries too rose by an average of 8% every year. We could afford to put a lot into the CPF. Our business costs then were lower than those in developed countries. And we faced limited competition. Many of today's emerging economies were under communist regimes at that time. Others were highly regulated and protectionist. China and India, for instance, were not open and attractive to foreign investments. Singapore, in fact, was one of the earlier and most ardent advocates of an open, MNC-based economy. But times have changed. China and India, with a combined population of more than two billion people, have entered the economic race. So too have many other countries, like in Central and Eastern Europe. They are following our MNC-based strategy for economic growth. Their low cost of doing business is extremely attractive to investors. On the other hand, the cost of doing business in Singapore has reached First World levels, as has our standard of living. Cost competitiveness is a key worry for Singapore today. Therefore, from the economic perspective, we should keep the CPF contribution rate as low as possible. The lower we go, the less the pressure on companies to move out because of high wage costs. Wages account for as much as 20-30% of total business costs in certain industries. A new balance is needed This is why we need to retune our CPF scheme - to strike a better balance between our social objectives and our economic concerns. We will need to address four aspects of the CPF system: the contribution rates, the salary ceiling, the CPF and Medisave Minimum Sums and the withdrawal at age 55. CPF contribution rates First, the CPF contribution rate. The CPF rate is currently 36%: 20% from the employee and 16% from the employer. The Government had intended to restore the CPF rate to 40% when economic conditions permit. But looking forward to the future competitive environment, this is no longer advisable. It would price us out of the market. We would lose more jobs. We should give up the 40% target, to save jobs. The Government did not rush into this decision. We struggled between our commitment to restore the CPF rate to 40% and the economic reality. You see, the trust between the people and the Government is paramount. It is the basis upon which we have carried out many tough but necessary measures to improve the lives of our people. It is therefore not an easy decision for the Government to give up a commitment it has made. It risks breaking the trust between the people and the Government. But we have no choice. If investors think that we are going to restore the 40% rate in the future, they will factor this into their cost calculations. They may not come. Even those who are here may make plans to move out to cheaper locations. I hope Singaporeans understand why we are not restoring the 40% contribution rate. Our priority must be to save jobs for our people. Longer term variable rate of 30-36% The question is: what CPF contribution rate is appropriate? Nowadays, the world economy changes rapidly. It is not practical to try to identify a single number as a long-term rate. No one can be sure how the competitive situation will evolve. We must also expect our economy to run into rough weather from time to time. We should thus make our system flexible, so that we can put more into the CPF in good years and cut the rate in bad years. This will give us room to respond quickly to the changing economic environment. I feel, therefore, that it is better to set an upper limit and a lower limit for the CPF contribution rate for the long-term, instead of a single rate. We propose that this range of rates be from 30% to 36%. The employee contribution rate will be fixed at 20%. The employer contribution will vary between 10 and 16%. We will not have any formula to decide what the actual CPF rate should be at any point in time. We will look at the prevailing economic conditions, and assess accordingly. If there is to be a rise or cut in the rate, we will give as much notice as possible, to allow for advance planning. I do not envisage fine-tuning the rate every year. We will only adjust it from time to time, when conditions have changed significantly. Our analysis shows that even at a 30% contribution rate, the large majority of Singaporeans will still be able to save enough for their retirement needs, healthcare expenses and housing. For instance, a worker earning a 50th percentile income, or $2,000 per month, will be able to purchase a 5-room HDB flat. This is provided we tighten the withdrawal rule at age 55, as I will explain later. Long-term variable rate of 24-30% for workers aged above 50 to 55 For older workers, we will set a lower range of rates. Last year, the ERC established the principle that the CPF contribution rate for older workers should be lower than that for younger workers. This is to help older workers keep their jobs, and for those who are unemployed, help them find new jobs. For those aged 50 to 55, we will set the long-term range for the CPF rate at 24% to 30%. The employee contribution will be 18%. The employer contribution will vary between 6% and 12%. No change in CPF rates for workers above 55 We will not change the CPF rates for workers above age 55. The rates are already low. They are 18.5% for those aged 55 to 60; 11% for those aged 60 to 65; and 8.5% for those above 65 years old. I shall now ask the Clerk of Parliament to distribute a Table, and further Tables later on, showing the long-term target CPF contribution rates for the various age groups. [Copies of Table distributed to hon. Members.] Table 1: Long-Term Target CPF Contribution Rates Age Total Employee Employer 50 and Below 30 - 36 % 20% 10 - 16 % Above 50 to 55 24 - 30 % 18% 6 - 12 % Above 55 to 60 18.5% 12.5% 6% Above 60 to 65 11% 7.5% 3.5% Above 65 8.5% 5% 3.5% Immediate cut of 3% in employer rate Having looked at the long-term CPF rates, let us look at our immediate situation. Is our current CPF rate of 36% appropriate? Is it the best rate? Is that optimal? If not, what should it be? The Cabinet spent more than two months grappling with this question. We also brainstormed with the PAP Members of Parliament. Some Ministers and MPs felt that the current CPF rate of 36% should remain. They were of the view that the external outlook was brightening. Singapore companies were feeling more upbeat. Moreover, a cut in the CPF would not solve our immediate problem, which was the lack of demand. On the contrary, it would dampen domestic demand further. It might also have a negative effect on property prices. A second group of Ministers and MPs argued that our economic difficulties had dragged on for far too long. The competitive landscape had changed fundamentally. Our costs were now much higher than our competitors. Singapore needed to respond quickly and decisively. These Ministers were also worried that if our wage costs were too high, we might see a jobless recovery, like in the US. This is a situation where the economy grows, but few jobs are created. This second group of Ministers and MPs felt, therefore, that we should cut the CPF rate immediately to 30%. It would save many companies from going under, in particular, SMEs. It would draw in more investments. It would spur job creation. A third group of Ministers and MPs agreed that demand was the immediate problem. But they argued that cost competitiveness was a problem that we must also start to fix now. They felt that we should bring the CPF rate down to 33%, and even lower later, if necessary. After a vigorous debate, the Cabinet decided that the best way forward was a moderate cut to the CPF. It should be enough to help companies save costs, but not so drastic as to puncture domestic consumption. The Cabinet concluded that the more immediate problem was a lack of demand for our goods and services. This is the external demand for our goods and services. But cost competitiveness was also a problem, and it would get worse in the coming years. With effect from 1st October 2003, the CPF rate will be lowered from 36% currently to 33%. Employees will continue to contribute 20%. Employers will contribute 13%, 3 percentage points less than now. Table 2 shows CPF contribution rates for workers aged 50 and below. Table 2: CPF Contribution Rates for Workers Aged 50 and Below Date Total Employee Employer 1 Oct 03 33% 20% 13% For older workers aged 50 to 55, we will bring the CPF rate down to 27%, ie, 6% lower than for younger workers. But to cushion the impact, we will not do it immediately. Their CPF rate will come down to 33% on 1st October 2003, the same as for younger workers. On 1st January 2005, it will be reduced further to 30%: employee contribution will be cut by one point to 19%, and employer contribution by 2 points to 11%. On 1st January 2006, the contribution rate will be reduced by a further three percentage points: again, one point from employees and two from employers. This will bring the CPF contribution rate to 27%: 18% for employees and 9% for employers. Table 3 before you gives the details. Table 3: CPF Contribution Rates for Workers Aged Above 50 to 55 Date Total Employee Employer 1 Oct 2003 33% 20% 13% 1 Jan 2005 30% 19% 11% 1 Jan 2006 27% 18% 9%

The cut in CPF rate will save employers $1.3 billion a year. It will boost our efforts to draw in investments, and create jobs. Revised Special and Medisave Accounts Contribution Rates Next, the contribution rates for the Special and Medisave Accounts. The ERC had earlier recommended higher Special Account rates for CPF members. The proposal was 5% for CPF members aged 35 and below, 7% for those aged 35 to 45 years, and 9% for those aged 45 to 55 years, ie, three steps, 5%, 7% and 9%. This was to help members set aside more cash savings for their retirement. Higher rates are needed if we allow members to withdraw 50% of the Ordinary and Special Accounts at age 55. However, if we change the policy on CPF withdrawal at age 55, as I will explain later, we can afford to have the Special Account rates lower than the ERC target rates. The new target Special Account contribution rates will therefore be 5% for members aged 35 and below, 6% for those aged 35 to 45 years, and 7% for those aged 45 to 55 years. This is shown in Table 4. Table 4: Special Account Target Contribution Rates 35 and Below Above 35 to 45 Above 45 to 55 Old 5% 7% 9% New 5% 6% 7% Next, Medisave. The Medisave Account contribution rates will remain at 6% for CPF members aged 35 and below, 7% for those aged 35 to 45, and 8% for those above 45 years old. We had earlier planned to increase the Medisave Account contributions, up to the ERC target rates of 7, 8 and 9%, but we will now defer this move. The figures are given in Table 5. Table 5: Medisave Account Target Contribution Rates 35 and Below Above 35 to 45 Above 45 Old1 7% 8% 9% New 6% 7% 8% 1Existing contribution rates are 6%, 7%, 8% for respective age groups. The Government had earlier accepted the ERC recommendation to change to target rates of 7%, 8%, 9%. CPF Salary Ceiling Let me move on to the CPF salary ceiling. The ERC established the principle that the CPF scheme should focus on workers earning between the 10th and 80th percentile incomes. The lowest 10% of wage earners cannot rely on the CPF alone for their retirement needs. They will need other social support schemes. On the other hand, the top 20% of wage earners should be able to look after themselves. If they want to save more for their old age, they should do so on their own. We should not make it compulsory through the CPF scheme. Otherwise, it will add rigidities to our wage system, and impose additional cost burden on businesses. Lower Salary Ceiling to $4,500 Following the ERC review last year, we had already decided to reduce the CPF salary ceiling in two steps. First, from a monthly salary of $6,000 to $5,500 on 1st January 2004. Second, from $5,500 to $5,000 on 1st January 2005. However, $5,000 is still higher than the 80th percentile monthly salary, which is currently $3,700. We will, therefore, lower the salary ceiling further from $5,000 to $4,500 on 1st January 2006. It is $4,500 and not $3,700, and there is a reason for this. Assuming a reasonable rate of wage increase and inflation, by 2006, $4,500 will be just a little above the 80th percentile income. The phasing in of the CPF salary ceiling is shown in Table 6. Table 6: CPF Salary Ceiling Current $6,000 1 Jan 2004 $5,500 1 Jan 2005 $5,000 1 Jan 2006 $4,500 The salary ceiling for additional wages, consisting typically of bonuses, will be adjusted proportionately. Pensionable civil servants have lower CPF rates and a higher salary ceiling than non-pensionable workers. Their salary ceiling will also be adjusted. The original plan to reduce the CPF salary ceiling from $6,000 to $5,000 will save businesses $260 million a year. The additional reduction to $4,500 will save businesses another $137 million. In total, our businesses will save $400 million in wage costs annually, come 1st January 2006. Reward workers through variable pay Even in this difficult economic environment, some companies are doing well. The cut in the CPF rates and the lowering of the salary ceiling will give them windfall profits. I urge these companies to use the savings to reward their workers through the variable pay component. This could be in higher performance bonuses or monthly variable components. CPF and Medisave Minimum Sums The changes to the CPF rate and salary ceiling will give employers substantial wage savings. But they will mean less CPF savings for workers. This makes it even more important that the savings be used only for housing, healthcare and retirement expenses. To ensure that members have enough for healthcare and retirement, we must adjust the CPF and Medisave Minimum Sums, and tighten up the withdrawal rules at age 55. These are the third and fourth areas of change. Raise CPF Minimum Sum to $120,000 The CPF Minimum Sum gives CPF members a monthly payment after their retirement at age 62 a certain sum of money. It is the nest egg that will see them through their old age. The current Minimum Sum is $80,000. Half of this can be in a property pledge. So most CPF members have only $40,000 in cash in the Minimum Sum. This will fund a monthly payment of only $252 from age 62 to 80. It is a small fraction of most workers' last drawn pay, and is not enough for their basic needs. We will, therefore, increase the Minimum Sum from $80,000 to $120,000 in today's dollars. As before, half of this can be in a property pledge. The other $60,000 in cash will yield a monthly payment of $378. This is still not much, but more adequate than $252 presently. Table 7 gives the details of the phasing in of the Minimum Sum. Table 7: CPF Minimum Sum (in today's dollars) Current $80,000 1 Jul 2004 $84,000 1 Jul 2005 $88,000 1 Jul 2006 $92,000 1 Jul 2007 $96,000 1 Jul 2008 $100,000 1 Jul 2009 $104,000 1 Jul 2010 $108,000 1 Jul 2011 $112,000 1 Jul 2012 $116,000 1 Jul 2013 $120,000 The CPF Minimum Sum will be raised by $4,000 a year, and adjusted for inflation, starting 1st July 2004. It will reach $120,000 (today's dollars) by 2013. Today, the life expectancy of Singaporeans is about 80 years. We will, therefore, adjust the monthly payment amounts, to make the Minimum Sum savings last around 18 years for most members, from retirement at age 62 until they are 80 years old. Maintain purchasing power of Medisave Minimum Sum Besides the CPF Minimum Sum, there is also a Medisave Minimum Sum. This is currently $25,000. Minister Khaw Boon Wan will do his best to keep healthcare costs reasonable. But we should still expect costs to increase over the years. We will, therefore, adjust the Medisave Minimum Sum every year to take into account inflation of healthcare costs. This will preserve its purchasing power. Enforce Medisave Minimum Sum Next, under current rules, a CPF member who has less than $25,000 in his Medisave Account is not required to top it up to $25,000. This is the case even if he has excess balances in his Ordinary and Special Accounts which he can withdraw at age 55. The purpose of the Medisave Minimum Sum is to make sure that we have enough money set aside to meet healthcare expenses in our older years. As life expectancy increases, Singaporeans will spend more on healthcare. Furthermore, on average, someone aged 80 spends three to five times more on healthcare than someone aged 62. Each additional year of life adds considerably to healthcare expenses. It is, therefore, unsatisfactory to allow CPF members with excess balances in the Ordinary and Special Accounts to withdraw the money at age 55 without topping up the Medisave Minimum Sum. We will progressively require them to do so, as shown in Table 8. Table 8: Medisave Minimum Sum to be Topped Up Before CPF Withdrawal at Age 55 (in today's dollars) Current $0 1 Jan 2004 $2,500 1 Jan 2005 $5,000 1 Jan 2006 $7,500 1 Jan 2007 $10,000 1 Jan 2008 $12,500 1 Jan 2009 $15,000 1 Jan 2010 $17,500 1 Jan 2011 $20,000 1 Jan 2012 $22,500 1 Jan 2013 $25,000 From 1st January 2004, we will require CPF members to top up their Medisave Minimum Sum to $2,500, before they make any CPF withdrawal at age 55. Over the next ten years, we will increase the top-up requirement by $2,500 every year, adjusted for inflation. In other words, on 1st January 2005, Singaporeans must top up their Medisave Minimum Sum to $5,000; on 1st January 2006, it will be $7,500; and so on. By 1st January 2013, CPF members will have to top up their Medisave Minimum Sum to $25,000 (today's dollars), before making their CPF withdrawal. Withdrawal rule at age 55 The final area of change is the CPF withdrawal rule when a member turns 55. This is to ensure that Singaporeans will have enough for their retirement, healthcare and housing expenses, despite the lower CPF rate. Meeting Minimum Sums before cash withdrawal Presently, at age 55, CPF members can withdraw 50% of their combined Ordinary and Special Accounts balances. They can do so even if this leaves them with less than $40,000 in the CPF, which is supposed to be the cash portion of the current CPF Minimum Sum. The 50% withdrawal rule will leave many members with insufficient CPF balances to see them through their old age. Now that we have to lower the CPF contribution rate, the problem will be even more acute. We will amend this rule. We will still allow members to withdraw their CPF at age 55, but only after they meet the CPF and Medisave Minimum Sums requirements. However, CPF members will continue to be able to withdraw the first $5,000 in their CPF accounts, as is the case now, even if they have not met the Minimum Sums requirements. No change for next 5 years I know that the changes to the CPF withdrawal rule will upset many plans. Older Singaporeans are looking forward to a tidy sum of money at 55, to do what they have yearned for a long time. Some will use it to pay off outstanding mortgages, or their debts. Others will use it to go on a long holiday, or to invest in business ventures. Therefore, we will not make any changes to the withdrawal rule for the next five years. We will not upset the plans of those who are over 50 today. Phase out 50% withdrawal by 2013 We will start to phase out the 50% withdrawal rule only from 1st January 2009, and then do so over a further period of five years. This is shown in Table 9. From 1st January 2009, members turning 55 can only withdraw 40% of their Ordinary and Special Accounts, and then the remaining balances, if any, after they have met the CPF Minimum Sum and the Medisave Minimum Sum requirements. This percentage of withdrawal will go down by 10 percentage points each year. In other words, 30% in 2010, 20% in 2011 and so on. Table 9: Withdrawal of OA and SA Balances at Age 55 Until 31 Dec 08 50% (unchanged) 2009 40% 2010 30% 2011 20% 2012 10% From 1 Jan 2013 0% Come 1st January 2013, CPF members who reach 55 can withdraw the balances in their Ordinary and Special Accounts only after setting aside the CPF Minimum Sum and the Medisave Minimum Sum. This means that the first group of Singaporeans to be fully subject to the new rule will be those who turn 45 on 1st January 2004. Help measures I understand the worries of Singaporeans. From feedback, I know that they have been anxiously re-looking their finances since I announced the changes at the National Day Rally. Most Singaporeans will be able to cope. But many may have to do some belt tightening. The Government will help ease their adjustment pain. We have put together an assistance package. It will include measures to help homeowners cope with their loan repayment, which may be affected by the cut in CPF. The package will also contain further measures to help the low income and unemployed, and tide businesses over this period of slow economic growth. DPM Lee will announce the details later in the debate. There has been speculation whether the Government will postpone the implementation of the one-percent increase in GST scheduled for 1st January 2004. No, we will not. We will be proceeding as planned. We have delayed it by one year already. We should not delay the increase any further. The GST increase is part of our economic restructuring. It is to make up for the loss of revenue from our lowering of income taxes. The Economic Restructuring Shares will enable Singaporeans to offset the GST increase for several years. Conclusion - Teamwork Let me conclude. The changes I have announced are the most drastic we have ever made to the CPF system. They are necessary because we are seeing the most drastic changes yet in our external environment. China and India especially, pose formidable competition, with their abundant, skilled and low-cost manpower. We have to lower our costs to remain attractive to investors, even as we embark on a wider exercise to lift our economy to a higher plane. I know that Singaporeans are worried about the future. They wonder whether we can ever return to sunny days, given the strong competition. But remember, we transformed ourselves from Third World to First in just 38 years, against all odds. We have developed many strengths and advantages along the way - the common use of English, the rule of law, harmonious labour relations, excellent infrastructure, and a good reputation. These strengths will continue to stand us in good stead as we face stronger competition. Most importantly, we have a strong team, working together for the success of Singapore. For example, our workforce is first class. We have established companies that are well-run, financially sound and expanding. At the same time, we have entrepreneurs who are starting a variety of businesses and venturing beyond Singapore. Our grassroots and community leaders help keep our nation united. And our media plays a constructive role in helping our people understand our surroundings and challenges better. We owe our past success to teamwork - the people, the employers and the Government working hand in hand. As a team, we have won many matches for Singapore. If we continue to pull together as a team, we will also triumph over the upcoming challenge. But we must also alter our strategy and improve our capabilities, because the competition has become stronger. If we do not, we will surely not reach the highlands. In this regard, the changes to the CPF scheme are an important component of our wider re-strategising for the economy. They will go a long way to improve our cost competitiveness. We must implement the changes, and at the same time, help those who are affected to adjust. With the changes and your co-operation, I am confident that we will not revert to being a Third World country again. On the contrary, we will strengthen our position in the First World. [Applause.]

Sir, pursuant to Standing Order No. 42, I beg to move, "That Parliament do now adjourn." Question proposed.

Order. I propose that we take the break now. I suspend the Sitting and will take the Chair again at 4.10 pm.

Sitting accordingly suspended at 3.47 pm until 4.10 pm.

Sitting resumed at 4.10 pm

There are 54 speakers on my list and that excludes the Ministers. So I would appreciate it very much if Members refrain from making lengthy speeches. Mr Yeo Guat Kwang.

Mr Speaker, Sir, listening earlier to PM's statement, I am now more convinced that the changes to the CPF scheme are inevitable. This move will further enhance our labour market flexibility and thus help save jobs and sustain economic growth. I am happy that the Government has struck a good balance with structural changes in the long term and softer impact on workers. We are reassured by PM that most Singaporeans would be able to cope with the changes made to the CPF. And the fundamental objectives of financial security in retirement and home ownership would not be compromised with the proposed changes. Sir, I am sure that workers will applaud the Government's decision to take a gradual approach in implementing these changes. This is most welcomed as it helps workers to adapt to the changes and retuning of the CPF scheme. I am also pleased that the Government has also shown consideration with the implementation of changes made on the withdrawal age of 55.Those who are now 51 years old need not have to worry that their plans after 55 years old will be affected. I hope employers will respond positively to PM's call to plough back the savings, particularly for those companies which are doing well, to workers in the form of variable payment. Sir, the CPF changes this round would be most drastic. The changes will affect various groups differently. Based on the feedback I received from the union leaders, the main concerns across the entire workforce are that the cost of living is high and their commitment on housing will be affected. It is a very difficult transition for many people, a large part of it is emotional. Most people would require more time and more help to face this hard reality. Union leaders, in general, agree that the CPF reform is necessary at this point of time. But they hope more could be done to help those who face difficulties. In view of this, as we acknowledge the urgency to restructure our economy and reform wages and retune CPF, we also need a thorough review and reform in the way we address the social needs of the workers. The Government needs to commit and take concrete efforts in refining the social safety net as well. Grassroots and union leaders agree that wages are high. However, they feel that the cost of living is also too high and thus it would be difficult to make adjustments to the wages. Whilst workers are prepared to accept restructuring and CPF reform, what they have heard from the Government is: be prepared to pay more, particularly in areas such as public transport and healthcare. I am pleased that the Acting Minister for Health has recently announced that MOH will take steps to address the issue of medical cost. But there is still a strong perception that the Government had not done enough to bring the other cost components down. Take public transport as one example. The bus companies have to pay for the costs of maintaining the bus interchanges and terminals. But the advertising and rental revenue from these areas goes back to LTA. The public does not understand why this revenue cannot go directly to the operator to help defray part of the costs so as to bring public transport costs down. Today, the economic landscape is very much different from that of the 1990s. It is therefore timely for the Government to really consider doing another review to look into the cost of living again and the areas of key concern, such as health, education, transport and housing. More importantly, to seriously review Government policies, for example, rules and requirements, that have an impact on or are likely to become cost-driving factors to our cost of living. Sir, the changes to the CPF will also affect many Singaporeans who have.already made commitments on housing. We have to have something more concrete to help them. As the Government announces changes to the CPF system, some union leaders have also asked whether we can also make it easier for those who are affected by the economic situation to downgrade to smaller HDB flats. The lower income workers will need more help in such a difficult time. Members of the business community should do more, and we think they can contribute to and supplement the Government's efforts to help the needy. For example, NTUC FairPrice has given $1 million worth of vouchers to the Advisors of all the CCCs and grassroots organisations to reach out to their residents and help the needy. In 1999, the public transport operators gave a 5% rebate to the commuters. This time round, I would like to urge the public transport operators to consider sharing the savings from the CPF cut with families which are facing difficulties, especially those with school-going children, in the form of vouchers or rebates, either through the unions or grassroots organisations, for them to purchase their monthly tickets. Such CPF savings should not go to the shareholders. Sir, moving ahead, union leaders can play a part by advocating our workers to face the challenges, adapt to changes, and to opt for simplicity and affordability. The Government can further help by sending a strong signal that it cares. Our workforce is the world's No. 1 workforce. Thus, I am very confident that, together, Singapore and Singaporeans will make this transition and get through this difficult period to a better life.

Mr Speaker, Sir, this debate on the retuning of CPF is obviously very important as the policy statement itself is presented by the Prime Minister, and the Prime Minister has said that we are now at the crossroads. Firstly, I think the House should thank the Prime Minister for his decision to take personal responsibility to carry this burden of presenting the painful CPF changes to the people, and to see through its passage on implementation. The topic of CPF changes is an emotional issue because they impinge on the livelihood of the individual. The pain is therefore felt at the personal level by almost every person and his family members, because every wage earner is affected. However, at the national level, we unanimously agree that it is a crucial policy change that has a deep and long-lasting impact on the survivability of the country, in the face of fast-changing competitive pressures from huge low-cost countries like China and India. I would like to state that I support the proposed changes, as they are much needed to ensure Singapore's survival. Fundamentally, what are these CPF changes about? They are about remaining competitive, they are about survival and, ultimately, it is about jobs - keeping our jobs. Yes, it is painful to cut CPF, but I think it would be more painful if we have to cut jobs. Sir, after listening to the Prime Minister, I am very relieved. As widely anticipated by the press and many corporations, it was thought that the Government would implement a hefty 6% CPF cut. The Prime Minister has announced that there is a target of reaching the 6% eventually. But according to the table that he has circulated, there will only be a 3% cut in October 2003. It will be a great relief to the people, as a 6% cut would have a tremendous shocking effect on the need for people to adjust their housing mortgages and livelihood. This leads me to the next question. As the Prime Minister has said that the target is to lower the employers' CPF contribution to 10%, the question to ask is: when will be the next 3% cut, because there is in this Table 3 a mention of only one cut to 13%? I do hope that we would be able to survive the economic downturn to maintain the status that there would be no further cuts, if possible, that would affect the employees. The second question I would like to pose, Sir, is that looking at Table 3, for those aged between 50-55, there are actually proposed three cuts: (a) 3% in October 2003; (b) 3% in January 2005; and (c) 3% in January 2006. Therefore, I note that those in the older age group are probably worst affected. For age 50-55 group, they have to endure three cuts over the next four years. So, maybe the Government would like to look into how to help this group of older workers. What kind of reliefs and assistance could be given to them to relieve them of such burdens? According to the Prime Minister, there will be a saving of $1.3 billion, ie, savings earned by corporations, employers and the public sector. These are huge savings of $1.3 billion a year. In contrast with previous years, where the cuts are possibly one-time with a possibility of restoration, these are cuts forever - they stay with us. Therefore, in fact, the savings are not just $1.3 billion a year. If we take a 10-year timeframe and we multiply the $1.3 billion by 10, it is $13 billion savings for corporations and companies over the next 10 years. So, these hefty savings will definitely have a very stimulating effect on the economy. It is almost like an off-Budget measure, much like the stimulation measures that were introduced in the past when the domestic economy was in recession. On this occasion, I think not all companies are doing badly. In fact, some companies, such as those in the IT, electronics, banking and several other sectors, have been performing well. Speaking for workers in these companies, I would like to urge employers of such companies that have done well to share their savings, by giving back either in the form of variable pay or as year-end bonuses. Sir, the proposed CPF cut has the effect of taking about $1.3 billion per year away from the pockets of the people. This is not a puny sum. Naturally, many affected will feel the pain. I would like to suggest that besides putting the burden of economic recovery on the people, the load should be shared amongst the people, the Government and companies. What I mean is that, for the Government, there will be a need to look at the Government rates and fees so that there is a lowering of cost of doing business for companies. For companies themselves, they would also have to look at how to keep themselves lean and trim. So, they would also have to minimise their excesses and not call upon employees to share the burden of their inefficiencies. Sir, in this debate, I would like to focus a bit more on the impact of the CPF changes on older workers. I would like to speak for those in the age group of 50-55, because I am myself in this age group, ie, in my early 50s. I can feel for them. I empathise with them. Many of my friends and associates are in this age band. But this does not mean that I do not think that Singaporeans of other age groups, such as the younger workers, are not impacted or are of lesser concern to me. But I do feel that those in the 50-55 age group have suffered a lot in the last few years and, therefore, a CPF cut on them would make it worse. In fact, as I said earlier, they are going to suffer three cuts, not just one. Let me elaborate a bit further on these people in the 50-55 age group. They have suffered a lot in recent years. Some have lost their jobs because of retrenchments or companies closing down. At the same time, they have to have heavier property mortgages, the increase in the cost of their children's education as they grow older. Some of them even have to sell their houses or their assets to support their children through university. Now, their employers' CPF contribution will be cut, especially when they go beyond 50 years old. So, these CPF cuts are eroding their savings, and there should be a need for us to look into how to help this particular group of older workers. On the other hand, while the 3% cut would have a saving of $1.3 billion for corporations, I would like to caution about the dampening effect of this $1.3 billion being taken away from the pockets of the people. It is a bit of a plus and minuses. So, if we could help in introducing some kind of stimulating measures, such that at least the $1.3 billion dampener effect on consumer spending could be lessened, it would be helpful. Perhaps, some kind of Government spending or pump-priming of projects would be of help. Further to the 3% cut, for those workers who are affected and cannot manage their housing mortgages, I would like to propose that workers be allowed to draw from the CPF Special Account to top up their mortgage payments, if they have insufficient money in their Ordinary Account. This is one measure which can help them to overcome their difficulties. Sir, I would like to say that I support the Prime Minister that we should have clarity on our longer-term CPF rates. The rate has been stated as between 10% and 16% for the employers, and 20% for the employees. I concur that the lower rate of 10% for the employers is appropriate. It will also give us more flexibility that in good years we can urge the employers and introduce higher rates for employers, so that employees themselves can benefit in good years. Sir, in conclusion, I would like to express my keen support for these CPF changes. I earnestly appeal to the Prime Minister to look into some of the suggestions that I have made.

Mr Speaker, Sir, thank you for allowing me to join in this debate. Sir, the Prime Minister has said that Singapore is now at the crossroads and is making important decisions with regard to CPF. He also says that the CPF changes made are the most drastic to the CPF system. In the light of these comments, this topic that we are debating on is of course very important. May I commend that, in future, if we do have such important debates, Members of Parliament, especially the Opposition, have a look into the changes, so that we can be more prepared to debate them, and not be given at the last minute this table and we hardly know what it is all about. Sir, in 1954, the PAP, when it was in the Opposition, stated in its Party Manifesto, that it shall resist any attempt to pass on to the workers by way of wage cuts the burden of any economic recession. The Minister for Labour in the 1980s told this House that the CPF was sacrosanct. They were the wages of the workers and that the CPF rate could not be cut. He said that the cutting of CPF rate was tantamount to cutting the workers' salary. At that time, the CPF rate was 50% of the workers' salary. Many, including myself at that point of time, thought that the CPF rate of 50% was too high. I asked for the CPF rate to be lowered, with the hope that the take-home pay of the worker might be higher. I was roundly told off for recommending the CPF rate to be cut. It can be seen that the ruling party has said many things about preserving the CPF rate, but they have not been consistent with what they have said. Our problems in Singapore today are, one, high unemployment and, two, high cost of doing business in Singapore. The Government proposes to take the easy way out by slashing the CPF rate. The question is: can this help? Wage cut is only one component of the total cost structure. The Government should look at the other factors which keep costs in Singapore up. They are mostly due to Government policies. High wage cost, in the first place, was due to Government policy. It was thought in the early days that the Government should only attract higher value industries, but they did not come in the numbers expected. The costs in Singapore have remained high since then. Setting up business in Singapore is also high. Rentals, land cost, transport and utilities are all higher than our neighbouring countries like China, India or Vietnam. However we cut the CPF rate, we still cannot make our wages lower than the neighbouring countries. But this step of cutting the CPF rate can cause grave hardship to our workers and should not be implemented at one go. It should be made gradually. The Government should not again make our workers bear the full brunt of reviving the economy. The Government should seriously look at other areas of reducing costs, such as lowering of rentals, keeping land prices affordable and keeping transportation, utilities, administrative, legal services and other operational costs down. After the last elections in November 2001, there was a slew of price increases in rentals, transport, utilities, health and other operational costs. None of those price increases have been trimmed down at all, making the cost of doing business in Singapore prohibitively high. It is high time that Government relooked at those cost increases and trimmed them down whenever it can be done. GST is another high cost factor. The GST, as originally proposed, was supposed to be revenue neutral and not painful at all for the people to accept it. But it is now no longer revenue neutral. It has become a lucrative source of income for the Government, especially now that we hear the Government is going ahead to increase the GST by a further 1% next year. I am just wondering why the Government needs to build mountains of surpluses every year. The surpluses are supposed to be national savings for rainy days, but we are now seeing black clouds and showers thundering down on us. Still, the Government wants to accumulate wealth, all at the expense of our workers. Singapore's surpluses are purportedly estimated at about US$150 billion. If that is truly the case and Singapore is such a small country, it has the world's second largest surpluses - second only to Japan - which has about US$200 billion. It would appear that the Government's exercise of accumulation of wealth is for its own purpose, and not for the purpose of helping the people. I note that even the interests accrued from the net investment income are untouchable. SIA, DBS and SingTel all say that they shall benefit from the CPF cut. Their savings range from $18-$45 million. It would appear then that the biggest beneficiary of the CPF cut shall be the Government, since it is the biggest owner of Government-linked companies in Singapore. The Government must share its gains with the workers of Singapore. I hope that the Government-linked companies will pay good bonuses this year to the workers. A CPF cut, originally touted at 6%, shall not solve our cost problem. Someone wrote in the Today newspaper that a 6 percentage point cut in CPF would only reduce our wage rate by 2%. We still cannot compete with China, India or Vietnam. We have now heard that the Government is not implementing the 6% but only cutting it by 3%, from 36 to 33 percentage points, and also on a staggered basis. As regards the Minimum Sum scheme, I see that the cash component of $40,000 would eventually be increased to $120,000 by 2013. My feedback in this difficult economic climate is that, in fact, many CPF members are clamouring to have their cash component paid out to them. They said that they should be allowed to use their money, especially for legitimate purposes, such as for their children's education, to pay their debts or even to start a business. I hope something along this line can be considered. As regards the Political Economic Risk Consultancy Limited's (PERC) report, I think the Prime Minister should not be unduly disturbed by it when it says that Singapore's wage cost is higher than those of America and Australia. That report is not very accurate in that it takes into account the higher paid workers, ie, executives and white-collar managerial workers in Singapore. Those people are paid higher than the equivalent in America and Australia. But the pay of a general worker or a tradesman in America and Australia is, on average, much higher than those in Singapore by, at least, I would estimate, 30%. Those of us who have visited America and Australia know that the workers in those countries are definitely paid more than the Singapore workers. It is true that the cost of doing business in Singapore is high, but certainly not due to the alleged high cost of wages of our factory workers.

Mr Speaker, Sir, thank you for this opportunity to join in the debate. After PM spoke about more changes to the CPF at this year's National Day Rally, there has been much discussion and speculation on the ground as to the details. I have met with various groups of union leaders from different industries, and listened to their feedback. Clearly, the fear of job loss is topmost on workers' minds, as the economy continues to be weak. Many have been retrenched, or know of people who have been retrenched. Many have seen business being lost to lower-cost competitors. They know that if the situation does not turn around soon, more jobs will be at risk. And they themselves could be next in line to be axed. Hence, workers really hope that the Government would find ways to boost prospects soon, and relieve their anxieties. Union leaders understand the big picture. We know that unless jobs are saved, there will be no income for the workers and without an income, high CPF rates are purely academic. So the priority is to save jobs, and to foster an attractive environment to create new jobs. Lowering business costs is an important part of serving this purpose and we accept that lowering the CPF will form part of such a package. That said, no worker likes a pay cut, no matter how necessary or helpful it may be because it just goes against the grain to part with one's money this way, and they have their practical concerns and worries. And I would like to reflect these concerns. Some said that they may run into immediate problems with their housing mortgage payments, and they want to know how they can get help. Others wonder if they will be able to save enough for their retirement years after these cuts and caps. Yet others wonder how they are going to cope with the cost of living, because Singapore is a city, and being a small city-state, there is really no way to go into the countryside for a lower cost of living. Therefore, for lower-income people, I think they will find it harder to cope, and they keep hearing that companies must make good profits for their shareholders. There are also workers who fed back that payroll is not the only cost to business, but they have the impression that payroll is often targeted for cost-cutting. And they want to know what has the Government done about other fees and charges under its control, and what more it is going to do to reduce its cost burden on the economy. Workers feel that as the environment becomes more uncertain and volatile, people have to find ways of upgrading and downgrading more flexibly alongside their financial fortunes. So they ask that our policies, for example, in housing and medical services change faster to accommodate this reality. There may be a larger proportion of people who need rental housing, instead of bought housing. I think earlier, this House has gone into quite a bit of questions and answers on that point. Some others also feel that it would be good to make it easier for people, whose fortunes have waned, to downgrade to a lower class ward more easily within our hospital system. For those impacted by the across-the-board CPF rate cut, the lowering of the contribution ceiling and the consequential increase in taxable income, and that belongs to the upper-middle and higher income group, their feedback has been that they hope for some consideration to minimise the impact. But overall, workers want to know if their swallowing this bitter pill will really help to spur economic recovery and improve job security. Sir, just as companies and shareholders expect a good return on their invested funds, Singapore workers are also looking at these CPF cuts as a kind of investment in their collective security and prospects. They do not want this opportunity created by the CPF savings to be squandered by companies merely enjoying a pause in the pressure. They want to know, or at least have as good a sense as possible what the likely yields are going to be, and how these yields are going to be achieved by the companies. They have expectations of the employers. Workers want to know what are employers going to do to get more business because clearly, companies cannot be profitable in the long run just by cutting workers' wages. Secondly, they want to know what employers are going to do to restructure costs. Restructuring is not the same as merely cutting. It means finding new ways to organise cost drivers so that they are more responsive to changes in competitive landscape and market demand conditions. In this, they want to see more leadership and useful ideas coming out from the employers. Workers have also asked if employers are alert to new opportunities. Because being alert to new opportunities and being able to seize these opportunities is a critical quality for success. For instance, how many employers have plans to make use of the US-Singapore FTA and other FTAs that Singapore had signed to improve their business? According to a report in the Straits Times on 4th July, a certain chamber of commerce in Singapore did a survey among its membership. And of those companies who responded, 71% said that they could see no gains flowing from the US-Singapore FTA. The business community's response to the latest Singapore-India Comprehensive Economic Cooperation Agreement is not any more reassuring. A veteran businessman was quoted in a Channel NewsAsia report dated 26th August as saying, "This is a weakness in our system. Businessmen leave it to the Government to decide everything. They should be pushing for what they want. Some of them do not even know what they want." Sir, I am saying this not because of any other purpose than to say that this CPF cut gives us the savings so that we could improve our competitiveness, so that our economy can rebound. Workers hope for this to happen. But in order for this to happen, employers must play their part and go and get that business. Otherwise, it is a wasted opportunity and it is a high price that workers would have paid in vain. And we must not let such a thing happen to sink our hopes. Sir, we are in a no-holds-barred global and regional fight. We have to remove our gloves because our competitors are coming at us with bare knuckles, if not knuckle-dusters. If we lose, we will have to accept much lower conditions of living. We therefore have no choice but fight. So, I support these CPF changes, even as I feel the pain together with all workers. On the side of the NTUC, we will support constructive efforts to improve the competitiveness of companies because we want to save jobs and to attract the creation of new and better jobs for Singaporeans. And we will do so on the basis of fair play for workers. Here, I want to thank the Prime Minister for supporting the stand taken by NTUC in asking that companies that are doing well be fair to their workers and share the gains with their workers. NTUC cooperatives will continue to play their social role and help hold down the cost of living. On the part of the Central Singapore CDC, besides the usual assistance schemes, I will also set aside additional funding to reinforce the accounts of the Community Resilience Fund at constituency level so that our MPs on the ground can offer help more responsively as required. But most of all, I urge immediate and clear action from employers. Do not waste the opportunity and become complacent just because the CPF savings have bought some time and offered some reprieve. Show our workers that you have concrete plans, and are taking active, systematic and resolute action to improve the odds. I know that in these days of intense competition, employers have to watch their monthly and quarterly bottom lines like a hawk. But I want to remind employers that the best companies that triumph in the end are the ones who not only know how to make big money, but who also know how to treat their people right while making big money. Those who think that rewarding loyalty is out of date will pay a price for it when the market turns. The March issue of Fortune magazine featured a list of the world's "Top 50 Most Admired and Successful Companies" as compiled by the Hay Group. Among the characteristics of the winners is their encouragement of teamwork, loyalty and collaboration. Smart employers do not pay lip service to people development and loyalty. Workers are not stupid. They know whether their employers are treating them as valuable members of the company or as disposables. And they will reciprocate. Sir, as we set about implementing these difficult but necessary moves to energise our economy and job market, I urge everyone to keep our eyes firmly focused on achieving the common good and creating our shared destiny. And as we do, we will keep the trust and the respect of our workers and our citizens.

Sir, like Mr Chiam, I too did not have access to PM's speech. Therefore, PAP MPs do not have any undue advantage over Opposition MPs. Sir, since the turn of the new millennium, the world is now a different place. We may not have gone through the severe economic shock of the Asian financial crisis. But we have weathered perpetual storms in the form of September 11, global terrorism, SARS and the gulf war. The recent bombing in Jakarta, one year after the Bali tragedy, underscores the fragile and uncertain world in which we live. On the economic front, we face keener competition from the global marketplace. Singaporeans, in recent years, have had to face wage freeze, salary cuts and, most unfortunately, rising structural unemployment. The picture is indeed not a rosy one. Yes, there has been a pick-up in sentiment in the US and Japan economies, and the economic numbers following the slowdown in the second quarter of this year are starting to look up. However, we must not be complacent. Without clear and decisive actions to combat the costs of doing business in Singapore, or sending the right signal to the international business community, we run the risk that any nascent economic recovery may pass us by this time. In this regard, Sir, I feel that the proposed CPF changes, whilst they may appear untimely and harsh, are necessary. I agree with many Singaporeans that the CPF changes alone will not solve our high business cost problems and make Singapore competitive again. Wage cost is but only one cost component. Our other cost components, like land costs, rental, utilities, taxes and Government rates and fees, are also important. A simultaneous effort to review all these costs and reduce them is indeed necessary if we are to be successful in making Singapore competitive again. I therefore urge the Government to consider measures beyond CPF cuts and implement these reductions if we are to send a strong signal to investors. PM mentioned that in the course of this debate, DPM Lee will announce a package of measures to alleviate the adverse impact that the proposed CPF cuts may have on Singaporeans. I hope these measures will help Singaporeans rework their cashflow on their mortgages and yet leave them with sufficient disposable income to maintain a reasonable standard of living. Sir, on the CPF changes announced by the PM, I am glad that we stay focused on the retirement aspects of CPF in a way that there are enough retirement funds for Singaporeans as well as help reduce overall cost to employers. I support an immediate reduction of the employer's CPF contribution by 3% to send the right signal to companies and workers on the urgency of wage reforms. I also advocate the principle of flexibility in CPF contribution rates, as explained by the PM. While the workers' fixed salary's CPF contribution rate will now be capped at 30% with the proposed changes, I propose that we consider allowing a higher CPF contribution rate for the variable bonus. Indeed, we should encourage companies that are doing well and could afford to pay performance bonus to pay a higher CPF rate for their employees if they so choose. Sir, together with a more flexible CPF rate, I urge the Government to introduce tax incentives to encourage companies to implement a wider range of private "retirement" plan options for their valued employees. Through this arrangement, the CPF can stay focused on providing basic retirement needs, while employers should be encouraged to develop individualised programmes for their employees based on individual needs and abilities. Sir, coming back to CPF cuts, the proposal has the effect of reducing disposable income of Singaporeans. I would like to suggest that measures to reduce costs, to free up cash and improve cash flow for Singaporeans be implemented. By this, I refer to the need for the Government to review some of its rates and fees that affect household expenditures. One specific area would be the maid's levy. A reduction in the maid's levy may not fully offset the cash depletion impact of the CPF cuts, but will serve to offset the inelastic costs due to economic needs imposed on families. And in this case, the services of a maid. I am, therefore, proposing that perhaps the Government could consider at least a $100 cut in maid's levy to make up for the reduction in cash following the CPF reduction. This cut could be limited to one maid per household. This would certainly go some way towards the cash top-up for mortgages. Sir, besides the maid's levy, I urge the Government to also consider other measures to assist Singaporeans in cash top-up following the CPF cuts. I propose that the Government review its various rates and fees and taxes including utilities costs, property taxes, petrol taxes and road taxes. With the upfront cost of vehicle ownership already loaded in the COE system now, such reduction in petrol and road taxes would again free up cash for Singaporeans, who require vehicles as a means of facilitating business. For Singaporeans who rely on public transport, transport companies should be encouraged to pass on such savings to the consumers. Sir, we are aware that many of the Government rates and fees were imposed to achieve various social objectives. While we may have been successful in achieving these objectives, they have inadvertently resulted in higher costs of business and in higher cost of living in Singapore. And as PM has mentioned in his speech earlier, we need to strike a fine balance between the objective of economic survival versus social needs. I therefore suggest that it is perhaps timely that the Government reviewed some of its social policies that may have resulted in higher cost of doing business in Singapore today. Next, I would like to touch on the changes relating to raising the threshold of the Minimum Sum and tightening the rules concerning CPF withdrawal at the age of 55. I appreciate the Government's effort to phase out the changes so that it minimises the impact it will have on Singaporeans. Sir, whilst I support the need for Minimum Sum, I always question the need for lumpy adjustments to raise the Minimum Sum from time to time. Indeed, the concept of the Minimum Sum may be a useful one in that it attempts to set a benchmark for what an individual needs upon retirement. However, that magic number is also difficult to pin down, as different individuals have different choices and needs. The revisions to adjust for, say, longer lives of Singaporeans from time to time may be disruptive. Like the PM, I know of many Singaporeans planning to use their CPF money upon reaching the age of 55. Some are planning to start a business, some planning to use CPF funds for their children's tertiary education, some planning to invest their money in various investment instruments, some planning to go on a long holiday with their family, as the PM has said, some planning to go on a pilgrimage, and so on. The impact of this change on the CPF withdrawal plans on individuals may thus be more widespread than envisaged. I am however glad that the Government has decided to phase out the implementation of the higher Minimum Sum and tightening rules concerning CPF withdrawl at the age of 55. Indeed, I feel that the 10-year phase-in period is reasonable. But I feel that the proposed gradual adjustment of the CPF Minimum Sum of $4,000 per year appears high in the initial years, because this works out to an inflation rate of 5% per year, which is very high, given the record of our inflation in Singapore. I would prefer an automatic adjustment mechanism be built into the CPF system whereby the Minimum Sum is automatically adjusted based on future annual CPI changes. This will avoid lumpy adjustments from time to time as has happened in the past, and will certainly facilitate planning by Singaporeans on the use of their CPF funds upon retirement. Sir, in conclusion, I would like to point out that even with these CPF changes and assuming other business cost components, like land costs, utilities rates and fees are being lowered, we must continue to expect lower end company operations to continue to migrate to other low cost countries like India and China. We can never compete in those areas. If we do, we will forever remain a third world country, as the PM has said. What is important is for our Government to continue to provide a favourable environment to continuously attract new investments, create employment opportunities, and continue with our skills upgrading programmes. Sir, I support the CPF changes and urge the Government to consider my various suggestions on a flexible CPF rate and on measures to free up cash and improve cash flow for Singaporeans.

Mr Speaker, Sir, thank you for allowing me to join in the debate. I suppose I will never know whether the white wine will allow me to live up to 100. An hon. Member: Red wine!

Or the red wine. I do not drink either. But I do not know whether the non-alcoholic halal white wine or red wine will allow me to live to 90. But I hope maybe Mr Chiam will be able to use some of the palliatives rather than to keep asking the same questions about our reserves. Because I am glad that we have those kinds of reserves in Singapore. Otherwise, our currency and our assets would have been halved by now. Mr Speaker, Sir, I could not believe my ears when last night, a grassroots leader told me that he heard a friend using an old caricature in the 60s to express his anxiety about CPF changes and the gloomy economic picture. The caricature was about a lightning striking and cracking up a rice bowl. I think some of you of my age will remember that caricature. I do not know who did the caricature, but I guess it was done by the ruling Alliance Party then, which wanted to frighten voters from supporting the opposition PAP then. Well, we know the story. PAP went on to win handsomely. I guess this person must have exaggerated the position but, nevertheless, to highlight his anxiety and worries about the proposed CPF cut and uncertainties regarding employment and the economy. After all, many Singaporeans now realise that the days of the iron rice bowl, even in Government service, are over. So, as the Prime Minister said just now, he knows the feeling and thus the compromises made in fixing the CPF cut from what people expected to be 36% is now 33%. Singapore workers, I am sure, will feel very relieved. I do not know whether the private sector will react the same way. And I am sure they will say, "Cut not enough." But, I am sure, for most workers, "Money not enough" is more supreme. Sir, judging from the feedback and views expressed during the dialogue sessions Malay MPs held for activists and community leaders, the fears and concerns are real. Even though the recent announcement by the PM may be a relief, I am sure many are still asking, "What's next? And when is the next cut?" Many are simply frightened by what is to come. One even described the dreams of a Swiss standard of living Singaporeans were chasing for as a nightmare now. Obviously, that was an exaggeration too, as I believe Singaporeans have shown the steel they are made of and the best is yet to be. But no matter how much one hypes the mood or the challenges, it takes much more than promises to satisfy Singaporeans. Many Singaporeans' confidence regrettably has been shaken. But I am sure all is not lost. Singapore Government's track record of overcoming problems, the 1985 recession for one, must be the saving grace. Although it was a problem by itself, as Singaporeans have gone round to expect the Government to turn the economy as fast as it did a decade ago, the situation, as we all know, is not as simple as before. The effect of globalisation has cut deeper now. China and India threaten to blunt further Singapore's competitive edge. Cyclical changes and unemployment have gone structural, dumping thousands of our workers as irrelevant, unless they retrain and upgrade. Sir, even if we can convince and assuage Singapore workers to accept that this is the new order of the day, and change their mindsets, at peace with the need to make short-term sacrifices for the long-term gains, many Singaporeans feel they need help, at least for the short term. They fear the CPF cut will affect further their capacity to pay for their dream homes, and I do not mean just the landed properties and condominiums but, in fact, the modest `under one HDB roof'. Many also fear about what they see as escalating health and transport costs, meaning cost of living. Here, Acting Minister Khaw Boon Wan's strategy to look at the eight priorities, including cutting costs and making the medical care system more efficient and cost competitive, I am confident, will be well received. Sir, no matter how convinced the Government is about the need for the CPF retuning, the Government should not rush into the fast lane of changes, as the PM has announced today, to avoid unexpected ramifications that will upset the apple cart. Investors, I think, have always had tremendous respect for Singapore and the Government for its hard-nosed and hard-headed approach when faced with difficult decisions. Send the right signals we must, but phase in the changes so as not to make the effects too razor-like and in the process bleed many people unexpectedly and the consequences difficult to cope with. On this note, the phased changes announced by the PM will be welcomed by many. If the effect of the proposed changes in the mind of the Government is marginal or tolerable, Singaporeans need to be told so and in clear terms. Take some time to go to the ground through more dialogues and information sessions. I learned that the PM will also be having his own dialogue sessions with the ground. I think that is an excellent idea and I trust more people will understand further and appreciate those critical needs for change. Do not think only the lower 10-15% of the population will face the brunt of these challenges. I have heard some of the concerns of the middle income squeeze too. In fact, many of them feel that they are the ones who will suffer most, and without much help from the existing programmes mostly catered for the needy, which the middle income would not qualify. Mr Speaker, Sir, I support the proposed changes in the CPF but would like to urge the Government and all its implementing agencies to watch the follow-through developments closely and to give feedback that would help fine-tune the system further, if necessary. I realise that the Government has said repeatedly that most, if not all, of the cost-cutting measures have been taken, including reducing other cost factors such as land price, taxes and other measures, to help alleviate the interim pains felt by many, but the Government should go through with a thin comb the cost of Government and trim whatever else necessary. MOH's recent announcement to do so is a good example. This will reassure many Singaporeans that Government is not too cost-cutting happy elsewhere but indeed ready to work hand in hand with the people to overcome these challenges together.

Resolved, That the proceedings on the business set down on the Order Paper for today be exempted at this day's sitting from the provisions of Standing Order No. 1. - [Mr Mah Bow Tan].

Debate resumed.

Mr Speaker, Sir, first, allow me to thank the Prime Minister and his Cabinet colleagues for having a lower CPF cut by just 3%, and not all the way to 6%, and bringing progressive changes to other components in the CPF scheme. Sir, we have to accept the fact that under the current economic uncertainty and the increase in unemployment, any measure taken by the Government in order to save jobs and maintain our competitiveness and, in this instance, to cut wage costs through the CPF component, is done out of necessity. The workforce is fully aware of the volatile situation in the job market. We understand and fully comprehend how crucial it is to act now and, therefore, I sincerely endorse these recommendations. Yesterday night we had a discussion and a dialogue with our group of union leaders. We had a very frank discussion for two hours. At the end of the day, everyone realised how bad the situation was on the ground, and they realised that changes needed to be brought immediately, and they supported unanimously the changes. But they also highlighted a number of viewpoints. I wish to express some of my viewpoints and their concerns too: (1) It must be accepted that any cut in CPF would cause pain and hardship to workers. Workers are required to make sacrifices to save jobs and to help increase competitiveness. Workers understand these reasons and support the steps taken. But workers' sacrifice should not go to waste or just to increase the employer's profitability. Workers wish to see a drastic drop in the number of workers retrenched. To this end, the Government-linked companies and large MNCs must set an example in not resorting to retrenchment as far as possible. (2) The Government must go public on the full package of cost-cutting measures and introduce additional measures, if necessary, that it needs to put in place in order to maintain our competitive edge and not just highlight on wage cut, CPF cut and retrenchment only. The ground must be given a full picture, only then can they be convinced. (3) Employers, on the other hand, must not take advantage of the situation. They must acknowledge the sacrifice made by the workers during these hard times by compensating them equitably during good times. Employers who are currently profitable and accumulate additional gains because of the CPF cut, should give back to workers part of the additional gains in the form of special bonus or other methods. Profitable MNCs and Government-linked companies should publicly support this call, rather than giving lame excuses. In this context, I support and fully appreciate the Prime Minister's call for such companies to come forward to reward such workers in these industries. (4) The Government must give a clear signal to MNCs that they are really operating in our island state and to potential investors that it is prepared to look at all possibilities to help the companies maintain their competitiveness and that they have a stake in Singapore. Mr Speaker, Sir, it is very reassuring to hear that the Government expressly states that no Singaporean will lose his or her home or be denied of medical care because of the cut in CPF contributions, and that the banks have also stated that they will be flexible if it affects the servicing of the housing loans. The Government must introduce long-term help to those with mortgage loans rather than deferring the payments. Any deferment would cost additional expenditure in the form of interest. Government should consider the reduction of interest rates to mortgage loans of HDB, and I think this is within the capacity of the Government. The Government has always shown a lot of concern for our Singapore citizens. Sir, I now come back to the announcement made by the Prime Minister earlier on on contributions rates, especially for workers aged 50 to 55. In fact, at the National Day Rally, the Prime Minister had again made a call for employers to employ older workers. But I do not like to use the term "older workers" because sometimes that puts off a lot of employers also. And I also belong to that age group. So I would rather use the term "workers aged 50 to 55 and beyond". The problem here is not just cutting CPF. Because if you can cut CPF and bring results, we will support it. If you want to bring it lower, that is a three-step reduction for such workers. And if it brings the desired results, we will definitely go all the way. It is better to have a job than not to have a job, and a lower CPF does not matter. But the problem here is because a lot of employers have a cheaper alternative, that is, foreign workers. They give all kinds of excuses in employing them. One of the excuses is that they say the workers are choosy. That is not true for every worker. We should not just across-the-board label all Singaporeans as being choosy. There are many workers who are desperately in need of a job, and I have come across many in my work as a unionist. And it really pains me because there are a number of people requesting and pleading for jobs, and they are even prepared to work for $800 to $900. But many employers just give all kinds of excuses, and they just give them a very political answer, "We will definitely call you back." The answer is actually they are not going to call them back. So, I think Government needs to do something drastic rather than just make statements. I really support the Prime Minister's call. I know he feels for such workers. But feeling alone is not enough, he must do more than feeling. So we hope that he would do more than that. Coming to the Minimum Sum and Medisave Minimum Sum, I have a quick look at it. By year 2013, a lot of lower-income workers will not be able to draw any sum when they reach 55 - it looks like that - unless there is a hefty wage increase. For such workers, they depend a lot on age 55 to withdraw for their essential needs, and they actually postpone these essential needs until 55. So maybe the Government should look at how it could help them. I am not suggesting help for those who are going to Batam or squandering their money with another family. I am talking about those who really need the help. So I think they have to take a look, and maybe the Government can give projection figures - in 2013, how much will such workers be able to draw out. That will give them some level of comfort. So just figures alone would not be enough. I hope the Government will come up with more information in these areas. Sir, Singapore workers have stood by the Government through a number of crises, and that has been our greatest advantage in attracting investments and keeping investments in Singapore. And we will continue to do so. There is no reason that the workers will react differently. We have the ground feel and we know that the workers will rally behind us. But, at the same time, the workers would also like the Government to do whatever it can to ease their pain. It must look at the current costs of essential goods - medical cost, public transport, and the cost of education - and see how best it could be adjusted to defray the day-to-day expenses of the workers in taking care of themselves and their families. To what extent is the Government prepared to absorb such costs? This is what the public expects the Government to seriously think about. Sir, in conclusion, this is a very painful adjustment and Singaporeans will definitely rally behind the Government and the Government must equally give all the support. The employers must not be providing lip service but really clear-cut support to workers who are employed under their hands.

Sir, I would like to make two general comments relating to the CPF changes and discuss two specific implications. Firstly, as a supply-side measure - the CPF changes are blunt but effective. The PERC survey and other job data comparisons, regardless of how one would like to interpret or qualify the results, with anecdotes, such as what Mr Chiam has done, point to the reality that we have indeed priced ourselves out of the global market. Because of this reality, there are really no two ways about it in that we do not have the luxury of time. These changes would have an immediate impact on wage costs unlike tax cuts, which are contingent on corporate profitability. Yet, we must be fully conscious that this move to retune the CPF scheme is no panacea for the unemployment challenge; it merely seeks to mitigate further loss of both blue and white collar jobs from uncompetitive wage levels. Sir, as many of my colleagues have emphasised, we must also recognise that a holistic approach is needed, not just a restructuring of wages, which is inevitable, but a concerted effort to lower all components of business costs, including Government levies and charges and real estate costs, to complement the CPF changes and the tax cuts that have already gone before them. Specifically, the Government needs to address the rigid, seniority-based wage system for the public sector, beyond these CPF changes, since, firstly, the public sector competes with the private sector for manpower during tighter employment situations and, secondly, expenditure on manpower is a significant component and affords room for cost cutting by the Government itself. Secondly, dipping into reserves. Sir, many Singaporeans have asked why does the Government not dip into the reserves - does the present situation not constitute a rainy day? The Government needs to explain more. Having said that, unlike Mr Chiam, I recognise that the current unemployment challenge is more structural than cyclical. Hence, changes are needed rather than a dip into the reserves to help ride out the downturn. However, it is still necessary to have the package of measures to help cushion the otherwise harsh impact, especially for mortgage servicing. Sir, many Singaporeans have accepted the need for CPF cuts not because they are not going to be adversely affected but because they see the wisdom of taking short-term pain for a long-term benefit, which is ultimately the survival of Singapore. But they are also asking, if these changes are not sufficient and do not help to lower the unemployment rate, what is next? Another three percentage point reduction to 30%, and then what else? What other levers can we pull? Sir, it is important therefore to rally Singaporeans behind every effort and for the Government to continue to instill confidence through a clarity of purpose for each and every move. Let me, Sir, talk about two of the more significant implications of these changes for Singaporeans. Firstly, the threat of negative equity for property assets and, secondly, financial sufficiency for old age. Negative equity and structural erosion of affordability. Sir, unfortunately, many Singaporeans have based their property investment decisions on assumptions which were drawn up during the heady growth phase of the 1990s, where we had a steady 5% to 10% wage increase every year, continuous employment and frequently more than one income stream. We now know that for any of these assumptions to fail, some Singaporeans may no longer be able to hold on to their property. Wages have not only not risen, many have actually been cut - and these lower CPF contribution rates would aggravate the situation. Besides, with retrenchment and contract work being increasingly the norm, Singaporeans now have to factor in periods of no income in between contracts. The measures that the Government would be announcing would hopefully help many, even if they have currently negative equity on their property, that is, where the loans they have taken out far exceed the current market price, if they were to sell the property on the market now. However, the larger issue is whether there is a real threat that we would end up with negative equity for property, like Hong Kong or Japan. If so, these are not just problems for the affected Singaporeans, they also spell challenges for our banks as well. Sir, what about those who have made the wrong assumptions and who have found their purchasing or servicing ability so impaired that they simply cannot continue with ownership? For those who have borrowed from banks, I guess this is an issue that banks have to address. I hope the Deputy Prime Minister will address the situation for those who have, for example, purchased bigger HDB flats from the resale market at the peak and who have simply no means of servicing these loans right now. Secondly, the implication on financial sufficiency for old age. Sir, before these changes, we were already concerned with there being financial insufficiency post-retirement, especially in the context of our ageing population against a longer life expectancy. These changes would simply mean even less CPF contributions on an overall basis, be it in the Ordinary or the Special Account balances, unless income levels climb substantially. But we know that that is unlikely because competitiveness will always check any steep rise in our income level. Despite all the radical changes to the CPF scheme, we have, if I may suggest, one more sacred cow to be slaughtered, that is, the management of the CPF balances. Sir, the Government has shied away from managing CPF balances, preferring to allow individual Singaporeans to decide their own risk levels and allocation strategies, down to picking their own stocks. Thankfully, we no longer allow investment gains to be withdrawn. But there are still some gaps and I would like to elaborate on these. Firstly, by guaranteeing a minimum interest rate on both Ordinary and Special Account balances, the Government is already managing CPF monies by default. Secondly, there is sufficient anecdotal evidence to suggest that a balanced portfolio, including all the different asset classes, would generate, on average, a higher return in the longer term. Sir, we need to grow the nest egg, not through higher contributions in good times, or distributions of New Singapore Shares, but through the compounding effect of a higher rate of return. In addition, a diversification across different markets would reduce the incidence of double jeopardy in the event of a slowdown in Singapore. Currently, individual Singaporeans do not have the motivation to attempt any diversification as they have a risk-free alternative and they simply have no scale. And neither do fund managers have the scale to mount such aggregated products as they have no assurance that CPF members would want to take the risk. Hence, I am proposing once again that Government seriously consider, firstly, managing CPF on behalf of members, enlisting the help of fund managers where necessary, and, secondly, over time, to have the minimum interest rate more reflective of prevailing market trends. If we do not proactively ensure that CPF balances return attractively, lower contribution rates would almost certainly aggravate our ageing challenges. To conclude, Sir, I am optimistic that the changes will send the right signals, boost Singapore's competitiveness and investors' confidence in our resolve to tackle economic challenges. Already, analysts have applauded the move and are expecting on average an encouraging 1%-3% point boost in margins, to as high as a 10% jump in profits for the manpower-intensive industries. The move will also better position Singapore for the economic recovery, signs of which, though patchy, are nonetheless encouraging. On that note, Sir, I support the overall intent of the CPF revisions.

Mr Speaker, Sir, the scenario painted by our Prime Minister a moment ago at the introduction of his speech in this House and also the report in yesterday's Straits Times where DPM Tony Tan registered his alarm about the PERC report citing Singapore's labour costs being ahead of the United States and Australia are clear indications that we really have a wage cost burden that needs to be very quickly addressed. Not taking immediate action will be irresponsible on our part as it would mean that more jobs would eventually be lost as our cost competitiveness further erodes.

5.26 pm I am therefore of the view that a number of drastic measures need to be taken quickly to bring down our overall business costs, including wage costs, to remove rigidity so that the market can more flexibly find its equilibrium. This understandably includes retuning our CPF contribution rates along the lines which the Prime Minister has outlined. Based on several dialogue sessions which I attended and also conducted, I believe this message has sunken in among Singaporeans and they understand that we must act quickly to prevent more job losses. However, Sir, Singaporeans have been nervously and keenly awaiting for the final prescriptions of what they are expected to swallow, the extent of bitterness and how this is going to impact on their livelihood. It pains me to think about citizens who have gone through thick and thin with us all these years, perhaps more of the thin side of things these last few years who will be impacted by the CPF changes. As we act for the collective good of Singapore and all of us, it is imperative that we provide lifelines and help for those who are particularly going to be affected by what the Government finally decides. Since there are many MPs who are speaking on this subject, allow me to just focus on two points with respect to the imminent changes to the CPF model. My first concern is the ability of Singaporeans to meet the obligations of housing loans as a result of the changes. The measures proposed are a necessary requirement in our quest for competitiveness internationally. However, the trade-off on a social scale would be quite onerous. Our Government must balance its move with one that will help reduce the hardship our residents might potentially face. As mentioned by the Acting Minister for Manpower earlier in this House today, a large number of our active workforce, 577,000, or approximately 45% of them, service their housing loans through CPF contributions. From this, there will be a sizeable number that will find it difficult to meet their monthly obligations although the 3% imminent cut is not as drastic as anticipated. I would like to suggest, Sir, that a tax relief be considered for home owners on interest paid on mortgages on homes used as a primary residence. This will supplement the burden on existing home owners affected by the CPF changes while encouraging potential buyers to also not distance themselves from the market. A tax relief would not only encourage home ownership but also help spur growth in the property market. Tax relief of such nature is not new and exists in countries, such as the United States. In implementing the CPF changes, our society should gradually move from dependence on a managed retirement plan that was started in the late 50s to one that is tailored individually. Perhaps, there is a lesson from our early years of self-government and nationhood when the CPF rate was a mere 10% as we struggled to find a balance between savings and competitiveness. Times have changed, but our commitment to our citizens remains steadfast. In helping them overcome the double blow of lower CPF rates and higher Minimum Sums, I would like to propose the consideration to include monies saved in individual retirement schemes as part of the overall pool of savings to meet the requirements of retirement and old age. Doing so could perhaps justify a review of the need to progressively raise the Minimum Sum from the current $80,000 to $120,000 by 1st July 2013. The Supplementary Retirement Scheme (SRS) is a part of our Government's multi-pronged strategy to address the financial needs of a growing population, which was highlighted in the report of the Inter-Ministerial Committee on the Ageing Population released in November 1999. As it stands, the SRS complements the CPF. As we know, the CPF savings are meant to provide for housing and medical needs and for basic living needs after retirement. Unlike the CPF scheme, however, participation in the SRS is voluntary. Participants can contribute a varying amount to the SRS, subject to a cap at their own discretion. The contributions may be used to purchase various investment instruments, and it also offers attractive tax benefits as it defers tax payment upon retirement. In addition to this, there are retirement plans that are offered by insurance companies, banks and independent financial advisers that work on the same principle. Unfortunately, awareness of the SRS is low. As of December 2002, there were less than 17,000 SRS account holders. Our citizens have depended excessively on the CPF to finance their retirement needs and have not seen the incentive for alternative planning. We can do more to encourage this and other schemes to highlight the benefits along with the risks of independent financial planning. With the change in our CPF model in the push to encourage greater self-reliance, I suggest going further to fine-tune the SRS as well, to enable greater participation. On that note, Sir, I support the Government's proposal to retune the CPF.

Mr Deputy Speaker, Sir, Singaporeans intuitively understand that their wages are high in comparison with the countries that are competing with us for the same investment dollars. Singaporeans are a rational lot. They travel to the neighbouring ASEAN countries, China and India. They know that, like water seeking the lowest point, investments go to the location yielding the best returns. They know that we have a high standard of living not simply because Singaporeans are by nature somehow better or cleverer than others. We managed because we have a better Government in Singapore. The Prime Minister had earlier mentioned about India and China, and why these countries were not competing in the world a decade ago. Now that these countries have adopted identical strategies that we had pursued successfully in the past, the competitive scene has changed completely. So, Singaporeans accept that, one way or another, the cost base for doing business in Singapore must be reduced. This is reflected in the findings of the Feedback Unit. 70% of a group of respondents, representative of the Singapore population, supported the idea of restructuring the wage system for Singapore to remain competitive. 71% supported the idea of setting a range of CPF rates to allow for flexible adjustments in response to changing economic conditions. 61% agreed that the CPF system should be changed to help Singapore remain competitive. 64% agreed to the retuning of the Singapore CPF system to save jobs. Only 56% agreed that in order to keep business costs low, CPF should be cut. In other words, Singaporeans are in support of retuning the CPF to remain competitive and to save jobs. However, to keep business costs low, most believe that more than just a cut in wages is needed. The need to go beyond a CPF cut has been raised by those who have spoken ahead of me. They have also touched upon how to deal with the difficulties Singaporeans will face in their housing mortgages as a result of these cuts. I am confident that the Government would have considered all these and would have counter-measures in place to deal with them. Sir, I would focus instead on the question of what we are trying to achieve in this cost-reduction exercise. Are we, firstly, attempting to stem the tide of job losses? Or are we trying to turn around the job losses and try to entice industries that have already left for cheaper locations to come back to Singapore? Or are we trying to prepare ourselves to catch the wave of the recovery when it surely would eventually come? In any event, the proposed reduction in the employers' CPF contribution rate from 16% to 13%, an effective reduction of only 2.6% of the payroll burden, is, by itself, unlikely to swing things one way or another. While this small reduction is a relief to all workers in Singapore, I must confess that I am not too clear what the Government is trying to achieve with this reduction. Let me paint a scenario. Consider a gymnast on a trampoline. In order to reach a higher point, I think the gymnast would press the spring harder, go down lower, so that, on the rebound, he would reach higher. So, let us assume that Singapore needs a system-wide reduction of at least 10% to make the world sit up and take notice. Where would the balance come from? That is a billion-dollar question. Could we have done something about land cost, which is of course, as we all know, a major cost of doing business in Singapore? The Government has already indicated that if we were not careful in our attempt to reduce land cost, we could bring about asset deflation. As we know, more than 80% of Singaporeans are home-owners. Asset deflation would surely adversely affect all of us. Already, bankruptcies have hit an 18-year high, as reported in the news media. If asset deflation were to happen, the evaporation of billions of dollars in the value of assets will surely put our economy into a tailspin. Sir, while we profess that we could not readily reduce high land cost, I thought it would be useful to point out that the Government's land sales in the past have actually accumulated some surpluses from the high value of land. In fact, if we recall, Government land sales were timed to maximise revenues. By our budgetary process, the proceeds from these land sales are below the line when the Budget is presented to Parliament every year. Therefore, it becomes part of our reserves. After the dissolution of every Parliament, these land sale proceeds could no longer be touched without the second key. However, the impact of these sales at a high value lingers on, as leaseholds of these lands are either 30, 60 or 99 years. Thus, we pay in advance for the use of land and we are now living with the aftermath of high land cost. Sir, it is my view that the way we manage our surplus from the land sales puts an unnecessary constraint on the way we manage the economy. The life of every government is at most five years, but property cycles are typically 10 years. The economic cycles are shorter at three to four years, but they are not in sync with our political cycles. Thus, what we put away in boom times, we cannot use in lean times. Even if there is a willingness today in the Government to explore means to help businesses to deal with high land cost, the Government might not have the means to do so, as it is reported in the press that we are encountering a Budget deficit of close to $3 billion for the first six months of this year. Sir, this Government is known to loathe using the second key, unless the situation is truly desperate. I would like to ask the question: is it possible that we have forsaken some policy options that could help in this recession because of this budgetary constraint? For instance, have we considered capital allowance for commercial properties? Capital allowance is now only granted to plants and machinery that generate income for a company. Except for hotels, most commercial properties do not qualify for capital allowance. On the other hand, if a company uses a commercial property to operate its business, then it claims rental expense as a reduction in its tax computation. Furthermore, Sir, recent corporate governance guidelines also require diminution of the value of commercial properties be provided in the profit and loss statement. With the decline of the property market since 1997, this has been a drag on the performance of all companies owning commercial properties. In this respect, if we do not deal with the drag of high land cost on our economy, we are like a boxer jumping into the boxing ring with one arm tied behind our back. I must hasten to add that I am not suggesting that we raid the reserves the moment we run into trouble. I am just pointing out that the unnecessary constraint we put ourselves into by locking away the reserves every four or five years while the other components affecting our economy have longer life cycles. During the times when our economy enjoyed 8-10% per annum growth, that was not an issue. But, today, I believe, it stares us in the face. Sir, the Prime Minister has also touched upon the various aspects of changing the CPF scheme affecting older workers. At this point in our recession, an immediate issue of addressing how we can help the long-term unemployed, ie, people who have been unemployed for nine months or more and have very little prospect of finding a job in the immediate near term, we might have to face the fact that jobs would be hard to come by for a while, especially for these older workers, even though there are those who do not like the words "older workers". At the moment, our assistance to these long-term unemployed is through providing training opportunities and, if they do show up at the MPS of PAP Members, we will provide them through some cash disbursements using our welfare schemes. The question many of these affected persons have been asking is: why can they not draw on their CPF money to make ends meet if they have already enough savings in their accounts to look after their old age? Since we are changing the CPF scheme - quite drastically I must say - maybe we should consider this one change. There is this provision of a Minimum Sum in the CPF scheme and which is being adjusted upwards year by year. For those few individuals - I am not sure if there are many of them - but for those few who have amounts larger than the Minimum Sum, maybe we should look at the possibility of allowing them to withdraw the balance from their CPF scheme before reaching the age of 55 years old. This will alleviate their pressing needs when they hit a long period of unemployment. To prevent abuse, we could put a limit to the amount withdrawable or consider this withdrawal as deferred income from previous years and render them liable for income tax. If we are truly prepared to let Singaporeans take greater ownership of their own lives, as the Prime Minister has urged in his National Day Rally speech, perhaps we should consider this one option. I do not think it is a withdrawal of their old-age savings if they have met their Minimum Sum requirement. Sir, even as the world recovery takes place and the Singapore economy returns to positive growth, together with this recovery, we should take the challenge that we face today as the harbinger of things yet to come. The world has been changed by IT and the Internet. The historical hurdles preventing free flow of knowledge and services such as time, distance and geography have been rendered irrelevant. By allowing the individuals to tap into the world market, even Government is becoming less of a consideration. Witness the success of the Indian IT industry despite the same old Indian political system that hampers the other aspects of the Indian economy. So, in the case of Singapore, while having a good Government allows us to enjoy a premium, I believe that the quantum of this premium is reducing and diminishing rapidly. Good government remains important, but in exploring new frontiers, the individual is now the key motive factor. I am glad to note that the Prime Minister, in his National Day Rally speech, has indicated that his Government is now prepared to change to a new mindset. He said that only what is prohibited in the future is not allowed. Everything else is fair game. While the Prime Minister did not use the term "No U Turn Syndrome" or NUTS, in effect, this is what he was talking about. However, Sir, in my view, we must go beyond getting rid of NUTS. We must become a fun city with creativity and vibrancy. Only then would the Singapore goods and services command a premium in the world market. I think the Government must relax and allow our people to have more fun. The uncertain response of the various regulators on the issue of bar-top dancing indicates that the old mindset dies hard. I call this old mindset of the civil servants, the "NO VOWels After S (NOVOWAS) on licence plates syndrome". Let me elaborate. Did Members notice that as our car licence plate numbers changed, running through the series of "SDZ", the next series actually started with the letters "SFA"? What has happened to the "SEA" series? The answer is that years ago, we changed from the SY series to the SBA series, skipping the SAA series. This was presumably because someone in the decision-making position had decided that there should be no vowel after "S" on our licence plates. The question is: why? No reason was offered except perhaps the civil servant in charge, or even the Minister in charge, looked into the future and decided that it was no good to have "SEX" on the Singapore licence plates. So to avoid the fuss of having to deal with SEX, it was decided to do away with all the vowels after S. In so doing, the decision has deprived Singaporeans some opportunities to have fun with our licence plate numbers and it has also deprived the LTA some opportunities to make some money from selling some interesting licence plates. For instance, some vehicle owners will be very willing to pay a high price for a licence plate such as SEX 999. Sir, while this is not a life and death issue, it does represent the mindset in the civil service and maybe even ultimately, in the Cabinet itself. Is it possible that this mindset in our decision-makers has deprived Singapore of innumerable opportunities to take our place in the sun, because we do not want to deal with one or two possible occurrences of unpleasant events? If we truly want a breakthrough into the next phase of our development, not only do we need to get rid of NUTS, we also need to get rid of this "NO VOWels After S (NOVOWAS) syndrome". Let us start by putting back the vowels in our licence plates and have SADs, SEXs and SOBs on our vehicles running around in our city roads. When that happens, we could shake off the straitjacket that we have strapped on ourselves and truly liberate the creativity and energy in our people. Mr Deputy Speaker, Sir, this recession presents daunting challenges to the Government. On the other hand, it is comforting that the same Feedback Unit survey indicates that eight out of 10 Singaporeans believe that Singapore can overcome the current challenges. 67% have faith in the new team of leaders and 69% are upbeat about the Singapore future. Therefore, Sir, if this Government could provide the leadership, our people would rally around and Singapore will come through this valley of gloom. The retuning of CPF is just the first step in this journey of recovery.

Mr Deputy Speaker, Sir, thank you for the opportunity of allowing me to participate in this debate. When I considered the CPF cuts, I asked myself: would I support it? After some thought, the answer was yes. The reason is that doing nothing is not an option. If doing nothing is not an option, then the question is: how do we move forward? My position on the CPF cuts is that I support it, but wish to sound a cautionary note and to say that CPF cuts are not the be-all and the end-all. There are other things that have to be considered and I would touch on that in a moment. Just coming back to the cautionary note, when we started off with the CPF scheme, its original purpose was for social security - savings for retirement, home ownership, medical expenses and, to some extent, education. That was its original purpose and remained so for a long time until the mid-1980s when we had to make the first CPF cut. In the 1980s, because of the difficulties of remaining competitive, we had to do a cut and, more recently, in the late 1990s, we had done it again twice. But the significance of the Prime Minister's announcement today actually marks a fundamental shift in what we have done before. By saying that CPF rates would be a range between 30-36%, we are formally endorsing the use of cutting our CPF rates or using CPF rates as a macro-economic tool. It may move from its original purpose of purely social security to an economic calibrator. The two purposes are very different and they serve different purposes. I do not oppose the usage in the new way simply because circumstances have changed and we are plugged into the global economy. And because the global economy moves so quickly and it is so volatile, we have to be able to react quickly. But what these changes mean is that, in good times, the savings function of CPF takes precedence because you put in more, but in bad times, the macro-economic function takes precedence because you try and retune the economy. These have certain consequences for the average Singaporean in the street because he is at the receiving end of this. At the Government level, when we tune the economy using CPF, we can see from an economic level why it is necessary. But from the poor guy in the street, it is very difficult for him to adjust to this because, going forward in the long-term, it is difficult for him to plan. So the consequences would be the difficulty in long-term planning. It also means that when a Singaporean buys a property, he should never use the maximum amount allowable because he must always provide for a buffer, as he cannot tell, going forward, whether or not this rate is going to go up or down. That message needs to go out to Singaporeans because for decades, they have planned on the basis of a reasonably certain rate. But now, going forward, he is not certain and he must allow himself a buffer. The next consequence of this is that, given that the rate is fluctuating and given that in 10-20 years, the amount that you have in CPF is subject to inflation, the $30,000 today would not be worth $30,000 in 10 years' time. There is then an urgent need for Singaporeans to understand the importance of financial planning. In the past, they have depended on their CPF and looked to that as something that would take them through their old age. Now, this is no longer possible. CPF would take care of some part of it, but they certainly have to see how they can provide for themselves in terms of financial planning. We would think that this is an obvious thing and that Singaporeans understand that. Let me tell you that some Singaporeans understand it, but many Singaporeans do not see the importance, or understand the urgency or need for it. All Singaporeans are equal citizens. All Singaporeans have equal rights under the law, but not all Singaporeans have equal understanding of the economy, the financial consequences of what we do, or the importance of financial planning. It is very important, therefore, for the Government to get this message out, especially to younger Singaporeans, and make them aware of the importance of it. I would go so far as to suggest that the Ministry of Education actually look to introducing this as a subject, but not as an examinable subject, as students have enough on their plate, to make students understand the importance of this, going forward, so that we educate an entire new generation of Singaporeans on the need to supplement their CPF savings. I move on now from the consequences of this to some of the feedback that I have received in respect of the proposed CPF changes. I spoke with my grassroots leaders a couple of days back in anticipation of this debate. The first and most important piece of feedback that came in was that it is really the middle income group, especially the lower-middle income group, that would be affected. I think my Parliamentary colleagues have already touched on the points about housing loans and repayment of mortgages. So it would not be necessary for me to elaborate on that. But I would just like to highlight that this is a strong feeling on the ground. The other strong feeling on the ground is the cost of living. Singaporeans, as a whole, can accept the need for CPF cuts. As a general rule, when faced with a problem, Singaporeans will rally round together. But in order for them to feel that they are really part of the team, they also need to feel that if we are asking them to accept the pain of CPF cuts, why is it, at the same time, the cost of living is not going down but, in fact, it seems to be going up? A few days back, in the Straits Times and, I think, in Streats, it was reported that the Consumer Price Index has reported a jump. One of them reported a 0.4% jump in prices and the other a 0.6% jump in prices. I am not sure which indicators they were referring to, but it is clear that there has been a jump in prices. The feedback from the grassroots leaders is whether the Government can look at the costs of utilities, transport and rentals to see whether these can be brought down. When we talk about the cost of doing business, there is also an urgent need to see whether the cost of rental of commercial properties can be brought down. Generally speaking, at the end of the day, if Singaporeans feel that they are being asked to make a sacrifice, they can appreciate that, but they would also appreciate it if something can be done to alleviate the pain. In this connection, I would like to mention that I applaud the announcement by the Acting Minister of Health, Mr Khaw Boon Wan, about cost cutting measures for the Ministry of Health in order to reduce the cost of providing healthcare. That was a very important message to send to Singaporeans that at least one Ministry is looking at reducing costs. What about the other Ministries? We have not heard anything from them. It may well be that the other Ministries are looking at cost cutting. If they are, Singaporeans need to hear it, and if they are not, then they should hurry up and do it straightaway. There is an urgent need to have intelligent cost cutting that would translate into savings that can be passed on to the average Singaporean in the street. Not all cost cutting is good. If a Ministry spends on a project which results in a contract being awarded, the contractors get the job, the contractors' employees get jobs and they get their salaries, income is generated, that is fine. That is why I say there is an urgent need to look into intelligent cost cutting. It should not just be the average man-in-the-street who pays this price because it should be a collective effort. Employers, obviously, need to play their part. They should pass on the savings that they get from the CPF cuts. The banks and HDB should seriously look at what can be done to either convert payments to only interest payments or deferment of repayment of instalments in cases where there is difficulty in making repayment. Going forward, I would just stress that the CPF cut is only one part of a much wider issue and a much wider debate. The wider issue really is how to make Singapore more competitive, how to generate business, how to generate jobs. The CPF cut is not, by itself, going to be the magic formula that immediately solves all our problems. There are obviously many other things that we have to do. And one of the things that I would suggest is that there be a new policy introduced across-the-board for all the Ministries, which I call the common sense policy. Basically, how it works is: when in doubt, use common sense. Let me just take an example. I read in the newspapers the other day that there was this company called Wash Wash that had applied to the HDB for a corporate licence to do car washing in a HDB multi-storey car park. When they first broached the idea to the HDB, it was reported that HDB rejected them giving, among the list of reasons, "no such licences have been given before." What kind of reason is that? If we use that kind of reason, we will never be able to do anything new. And there was also, "car washing is only permitted at the car washing bay." I really like this one, "the detergent run-off will weaken the concrete". It was only after the owners of Wash Wash appealed to their MP, Dr Vivian Balakrishnan, who is also the Minister of State of MND and the Government pro-enterprise panel, that they eventually succeeded in getting their licence. My point is this. It should not take all this convulsion of effort in order to get a licence. The bottom line is: every Ministry, every statutory board, every Government agency should have a policy that if an idea generates jobs, if an idea can generate business, if an idea can do something to boost the economy, it should be given serious consideration. Do not make the poor guy jump through so many hoops and hurdles before he eventually gets to it. But, of course, we are happy to say that in that case, there was a happy ending. And I read in the newspapers that 128 licences have been issued. At the end of the day, CPF cut is only one part of it. There are many other things that we have to do. Singaporeans need to feel that we are all part and parcel of the common enterprise. When we fought the battle against SARS, everybody had their part to play. I think the average Singaporean in the street needs to feel that he is not the only one bearing the brunt in the battle to revive the economy. The average Singaporean needs to feel that he is part of the team. He will feel that he is part of the team if we hear that the Ministries are doing various things, if we hear that Government and other agencies are doing various things, if we also know that employers are on board, if the banks are on board, if the property owners are on board. And if we can do this, there is no reason why we cannot pull ourselves out of our economic doldrums.

Mr Deputy Speaker, Sir, thank you for allowing me to speak. Looking at the number of speakers, I would just deal with two or three points. Sir, understandably, many employers I spoke to welcomed the CPF cuts, although I am sure they were hoping for a 6 percentage point reduction as opposed to 3. But to them, I have this message. I urge employers to utilise the forthcoming savings in a responsible manner. To companies who are doing well, I urge them to return their savings, or at least a part of their savings, to their workers - this return made in the form of bonuses, higher budget for upgrading or retraining or other schemes that suit the peculiar needs of their workers. Sir, with such savings, I also urge companies to refrain from resorting to retrenchments. I do appreciate that some companies do have to downsize notwithstanding the CPF retuning. But I do hope that retrenchment is done only where it is truly unavoidable. I believe these points were raised by speakers before and, in fact, even by the Prime Minister himself. Sir, I think employers owe it to the country and to the workers to do their part in this exercise. If employers do not act responsibly by utilising the savings in a responsible manner, they would undermine the efforts of the Government and the sacrifice of the workers. We need to remind employers of this obligation. According to a report in a recent edition of the NTUC News, union leaders call on employers to share the benefit of savings with their workers. And I understand that union leaders would continue to remind employers of this call. I applaud this effort and I ask the Government to use its influence and good office to remind the employers of their role in this process. To the workers, I have this message - the unions hear you, your MPs hear you, your Government hears you. And I am sure the Government and all of us will do all we can to help where it is proper to do so. But such help does not mean that all the workers' problems will be solved. That certainly is not the intention and it should not be. In this exercise, no one escapes completely unscathed. The reduction of the CPF contribution by 3 percentage points is not that devastating to most people. And even as of now, various schemes are already in place to assist Singaporeans who are in need, and I urge the Government to ensure that these schemes continue. In addition, there is the HOPE scheme, which will be of great help to poor small families to get out of an otherwise intractable poverty situation. Sir, I also urge workers to maintain their productivity in spite of the CPF retuning. If workers respond otherwise, ie, they slacken because their CPF contribution by employers is reduced, then it renders this exercise futile, as there would be no real advantage for employers or investors to come in. All workers - and, of course, this includes those working in the Government - have to moderate their expectations and adjust their lifestyles. Already we are reconsidering our attitude towards work. We are replacing the concept of life-long employment with life-long learning. With this CPF retuning, we have to rethink our retirement plans. Sir, the CPF retuning is perhaps the most widely and drastically felt among a slew of reforms undertaken by the Government in the last couple of years. The rapid changes strike fear and worry among the people. The uncertainty is quite disconcerting. Speakers before me have elaborated on the kinds of uncertainty that workers face. The people need to be reassured that although there are many things uncertain, that in spite of the rapid changes, many things will remain the same. Ironically, perhaps many things need to be changed so that we can ensure the more fundamental things remain the same. And among the things that ought to remain the same and have to remain the same and are intended to remain the same by these steps are: (1) That our system of governance and Government will remain, ie, we have a Government that listens, that has foresight and that acts responsibly. (2) That the future of our country and our economy remains in our hands, even though it is hot at times. There is a Malay saying that goes: gengam para api, biar sampai jadi arang. It means that when we hold burning ember, we have to hold it until we snuff out the fire, until it returns back to charcoal. If we let it go, it will continue burning and become ash, which will not be of much use to us anymore. (3) Our country will remain a safe and peaceful place for us to live in, even if we are going to be less cash rich. (4) Our families will remain strong and that pro-family policies are firmly upheld. (5) That we will continue to help those in need and there will be policies remaining in place to ensure that every Singaporean matters and every Singaporean is cared for. On that note, Sir, I am in support of the proposals tabled by the Government.

(In Mandarin): Mr Deputy Speaker, Sir, I support the retuning of our CPF system. Although the medicine is bitter, it has to be swallowed. The proposed changes to the CPF may bring financial pressure to our people. But if we tighten our belts, this new system will help us to maintain our competitiveness, save jobs, and even create more job opportunities. Because of the high labour cost in Singapore, even higher than that in the United States and Australia, we must make quick adjustment to adapt to the investment changes in the international market. However, I hope that the Government will avoid making too many changes to the CPF system in future. Although flexibility in the CPF system will enable us to deal with the investment trend more nimbly, frequent changes to the CPF system will send unclear signals to the business community and the investors, making it difficult for them to make long-term plans. This would also cause confusion to the investors, and give them an unfavourable impression of Singapore. As a matter of fact, our CPF system has been subjected to many rounds of adjustments over the past few years. Ultimately, salaries and remuneration should be decided between the employers and employees. The CPF contribution rates do not make any distinction in the industries and companies. The performance of each industry, company and employee is not uniform. If you cut the contribution rate of employers, it will amount to a pay cut to the employees. This is unfair to the workers. Not many employers will tell the employees who have performed better that, "This time round, your CPF contribution rate is reduced, let the company pay you cash every month to compensate your losses." Whatever the CPF contribution rate may be, the employer has already provided for it in his budget. Any change to the contribution rate can only bring more procedural work to the employers. I would suggest that the CPF contribution rate should be maintained at a low but reasonable level, so that the employees will have enough savings to look after their retirement and healthcare needs in their old age. I also hope that the Government will encourage those companies which have done well to give more bonuses to their employees, through the grant of some tax incentives. The persuasive power of our leaders is not enough. To many companies, the appraisal of their shareholders on them is of paramount importance, and the remuneration of workers is secondary. To make sufficient provision for old age is the responsibility of the individuals rather than that of the Government. Although I understand that the Government wants to maintain relatively high CPF contribution rates to ensure that every citizen has enough savings for his old age, this has caused our labour cost system to be inflexible. Let me give you an illustration. A long time ago in ancient China, there was a rich merchant who made every effort to cultivate his son and prepared him thoroughly for the Imperial Examination. Unfortunately, when this son of his sat for the examination, he failed to make the grade. The rich merchant asked to see his son's answer sheet, and was shocked to find that there was no writing on the sheets, except for some watermarks. It happened that in the past the father would always grind the ink slab to make the ink for the son to write with his brush-pen. At the examination, the father was not there to grind the ink slab, so the boy did not know how to generate the ink from the ink slab, and he simply wetted his brush with water and wrote his essay. Thus, a blank paper was submitted as the answers were illegible. Singaporeans should set aside part of their monthly salary as savings, and not depend solely on the CPF savings for their old age. I believe the package to buffer the impact of the CPF retuning exercise will be adequate to help our people deal with the changes. I hope that the Government will help the poorer Singaporeans, particularly in their housing, transportation and healthcare needs. I would like to take this opportunity to express my appreciation to Minister Khaw Boon Wan for his announced intention to cut healthcare costs in Singapore. I hope that other Ministries will also do their best to cut down the various charges to lighten the burden of the people in meeting the high cost of living. 6.15 pm

Sir, since the Prime Minister is here, let me first congratulate him on an outstanding National Day Rally speech. It was very heart-warming and inspiring and, indeed, many had commented that it was his best speech ever. As was like good wine, he gets better with age! Businesses and investors, of course, wanted to hear the Prime Minister's views on the economy and the signals that he was trying to send out. So, it is not surprising that the PM concentrated much of his speech on the present economic difficulties. Yes, very true, our landscape has changed dramatically. Yes, we took away jobs from others. But, today, that fantastic economic strategy is increasingly and ferociously being followed by even more lower cost regimes in the region, and specially India and China. Their economies are so large that they can impact other economies in such a big way and in a very adverse way as well. Being a small economy, we just cannot escape the onslaught. Other skill gaps and advantages have also been eroded. We seriously need to address our competitiveness and revive our economy. Therefore, the warnings of multi-national corporations, like IBM, cannot go unheeded because they are very real. In my business too, I see our global clients disappearing, either scaling down their operations or just pulling out. It is not because they do not find us attractive anymore. It is just that globalisation has made it unnecessary for them to be here. This tide of globalisation is very real, very strong and very powerful. And those of us who can ride this tide will prosper with this trend, and those of us who cannot will simply struggle against the current. Therefore, we need to change, and the business community really welcomes the proposal to retune our CPF. Up until the Prime Minister's National Day Rally speech, the business community thought that it would just be a maintenance of the rate. And after the PM's announcement, there has been great debate - how far will this go? Of course, everybody has expected a 6% reduction but the PM has just announced that it will be a moderate 3%. We respect the decision, and we appreciate that move. The Prime Minister also touches on the part of home-owners, what will this do for their mortgage payments. And then there is also the worry about consumption and its effect on other sectors of the economy, calls for cuts in Government fees and taxes, and also even for the size of the civil service to be reduced. I think that all these are not frivolous comments, and I am sure the Government will take all these in its stride. And, in fact, the PM had said that the CPF cut is just part of a large package of business costs which the Government will be seeking to reduce. I do not wish to add to this debate. But I think it would be helpful and valuable to recognise that the PM's proposals are really steps in the right direction, and we should fully support the proposals which have been made. The Prime Minister did mention Jack Neo twice in his National Day Rally speech. So I might paraphrase Jack and say, "Prime Minister and the Government not stupid". Indeed, the Prime Minister's track record has been a very excellent one, although we cannot say that it is entirely flawless. It is not possible to achieve a flawless track record as well. This move to modify the CPF system is, in fact, a recognition that the high wage policy has contributed to our present economic difficulties. Also, many commentators have remarked that the Government has played too big a role in our economy, too big a role in our society, and that is why Singaporeans are by and large very reliant on the Government and run to it for solutions to all problems. But, of course, this is easy to say with the benefit of hindsight. The high wage policy did serve us well for a long time, many aspects of it, and benefited many Singaporeans as well. Likewise, many Singaporeans feel very comfortable to be hand-held, to be led and to be molly-coddled by the Government. But the circumstances, as said by so many people, have changed dramatically, and it is also time for us, Singaporeans, to assume new mindsets, new attitudes and really be much more entrepreneurial, much more self-reliant and also to understand the real meaning of adding value. It is also enlightening to note that the Government too has changed - heeding feedback, looking at shortcomings and being ready and willing to correct them. I am quite amazed at how quickly the PM changed his stance on bar-top dancing. A lot has been done - undoing red tape and bureaucracy; taking away cumbersome and stifling regulations. Of course, we continue to gripe that it is not far and fast enough. But it will be fair to say, at least, all these measures are being taken seriously and there is no pretending that it does not exist. This CPF retuning is a classic example of a good solution - breaking down the rigidities, making it flexible, and taking away the statutory burden on businesses and also not putting our older workers at risk. Of course, it will produce uncertainty, but we live in a very uncertain world. Just the last six months alone, we had been wrecked by so many crises, SARS included. So, we need just to recognise that certainty is a luxury which we cannot take for granted. But the CPF retuning will produce a lot of adverse results because it is so linked to many aspects of our lives. We are glad that the Prime Minister has said and recognised that this retuning is just not about re-scaling of dreams but it will bring about real and considerable hardship to many. We are all looking forward to hear additional assistance measures that DPM would be announcing. Just a few remarks about the HOPE programme which has been said to be comprehensive, and yet there was a Straits Times' report about a family with an income of $680 who was not able to qualify because they had two "0" levels too many. So, here again, because we live in exceptional times, it is important that the bureaucrats exercise flexibility and, as Ms Indranee has said, common sense in the implementation of policies. A lot has been said, but I would like to commend the Government for the courage shown, to take on difficult and unpopular decisions, and this retuning of CPF squarely falls into it. It will cost you votes if you have an election tomorrow. Fortunately, we are not having an election tomorrow. It will not be until a few years' time, by which time, the benefits of all the changes which are being proposed would have been felt. We have used a lot of tools already, but these tools have to be relooked, like the tools relating to taxes, levies and so on. But the CPF is one far-reaching tool that will have immediate effect. On hindsight, again, perhaps we were too hasty in restoring the CPF cuts which were introduced before. As I said, it is a blunt instrument but it is a very effective instrument. It will produce a whole range of adverse effects and new solutions have to be found. I do not think we can tackle all problems at the same time. Some have to be put in the parking lot. The main thing is that there must be a recognition that we have a problematic situation here and there is a need to change, and new solutions got to be found. The original objectives of the CPF cannot be fully met by the old model. So there must be a transition from the old model to the new model and help needs to be injected here. The future is never going to be certain. But there have been a lot of debates already, and a lot of time spent on debating about what our future should be and the solutions needed, like the Remaking Singapore, the ERC, and the debates in this House. I am confident we do have a blueprint for the future which looks promising. In businesses, we always say that our competitors are also not stupid. We all have the same strategies. At the end of the day, the team that comes together, the team that executes well, is the team that wins. So, let us execute together and support the Prime Minister and the Government.

Mr Deputy Speaker, Sir, thank you for allowing me to join in the debate. The CPF cuts are bitter but necessary medicine and, in some ways, I believe that we can take this bitter medicine analogy a little further. The challenges we face are not going to be a simple flu. Recovery can only come when the patient, that is our people, acknowledges the problem and takes steps to address the problem. After acknowledging the problem, the bitter medicine may need to be taken over a period of time, and there may need to be more than one medicine with a bitter after-taste, no matter how sugar-coated. And after that, the patient may still need rehabilitation and physiotherapy to recover the use of flabby muscles, stiff joints and maybe a flabby mind. Some medicine may appear to be less painful but may not be so effective. Just as no physician can do a good job if he has an uncooperative patient, I fear that the Government's fiscal measures and CPF retuning will not bear fruits unless Singaporeans acknowledge that we as a people and a country need to recognise we have a problem in competitiveness and take all necessary steps to address the matter. Other MPs have spoken about the steps that the Government may need to take, but I would like to focus a little bit differently and say that the onus is now upon our people - our workers - to recognise the steps that the Government has done and to take their own steps to recognise the problem. My grassroots leaders still keep telling me how difficult it is to recruit waiters and waitresses, even when the pay is $1,200 a month. Singaporeans, it seems, are not prepared to put up with split shifts and having to work on weekends. Other grassroots leaders tell me about difficulties with recruiting for shipyards, even when they are prepared to offer training. And when our Town Council decided to employ more Singaporean workers for cleansing operations, residents started complaining that actually local workers were spraying water and not scrubbing, unlike some of the foreign workers. When the water dries up, the corridors are still dirty. As we upskill the younger and more educated workers, I think the only way for us to maintain low unemployment for older and less educated workers is for them to accept the manual service and less convenient jobs that are currently being taken by some of our foreign workers. I think we need to relearn the dignity of honest manual labour. We can outsource a lot of jobs, but certain jobs cannot be easily outsourced and have to be done in the country and onsite. I do not think there is any shame in honest labour, even when some aspects of the job may be a bit demeaning. As doctors and healthcare professionals, this is the creed which doctors and nurses have to learn to accept - unpleasant sights and smells, and sometimes unreasonable behaviour of people who are ill and need our help. I do not think people think any less of our profession for the fact that we have to deal with all these unpleasant things. I call upon the Government to have a campaign to change societal values, to re-emphasise the dignity of labour, the principle that any job is better than no job, and it is better to be at least partially employed and to receive some help financially than to look out for handouts alone. We manage to change Singaporeans' attitude to a military career, and I think we can do the same for manual labour and service sector jobs. Having misplaced pride and a handout mentality would not be good for us in the long term. The effect of CPF cuts would be to lower our labour cost and make our labour more competitive. However, cost alone is not only the issue. Our products, as a whole, as a country, have to be cheaper and better, or at least give better value for the price. Factories in China, India and the former Eastern bloc have found out that when cheaper and better quality foreign goods started appearing in their markets, discounting obsolescent product lines alone did not ensure sales. As a potential employee, if what you have to offer is a set of old-fashioned and limited skills do not expect an easy time on the market for new jobs. Singaporeans like ai pea ai chi. Your potential employer is also looking for a better, cheaper, more reliable labour product, just as you want to have it cheaper and better. Many of our citizens decry the fact that many employers would like to have people to have facility in Chinese or other languages. Others find that employers want to have good looking frontline staff. Instead of complaining that people are discriminating against you, perhaps we should learn to give employers what they want. If you read in today's papers, people in the call centres are now learning how to speak American English so that they are actually able to do a better job even when they are far away from sight. In the same way that many older workers embrace computers to deal with marketplace realities, I think the CDCs can help non-Chinese Singaporeans get a working knowledge of Mandarin to make them more employable. The MPs who are not so good in Mandarin manage to learn a bit more too. If you want a frontline counter job, you might want to attend a course that helps you project the pleasant personality and good inter-personal skills and also gives tips on dressing right. If you look frumpy and you sound grumpy, do not blame people for not giving you the job. Again, CDCs can help in this regard. The last bit is just a suggestion for HDB. As we have asked the people to cut their cloth as they are able to afford it, and cut their clothes according to what they can afford, perhaps now we are actually asking people to live more within their means. People who are downgrading and unable to service large housing loans need to be looking at cheaper alternatives. Between a highly subsidised rental market with arguably lots of necessary restrictions and the free market, I think a lot of people in distress would really look forward to an alternative where HDB will have minimally subsidised rental flats which are maybe a bit bigger but which would fill the need or gap, much in the same way that NTUC FairPrice supermarkets manage to moderate prices. Perhaps, that is one practical measure that would help many hard-pressed Singaporeans. On this note, Sir, I support the statement.

Mr Deputy Speaker, thank you for allowing me to join in this debate. We were geared up this afternoon to hear drastic changes to CPF. It was thus a great relief to hear from the Prime Minister that the changes would be phased in. It is very reassuring that the Government leaders understand and acknowledge the pain and sufferings attendant with the CPF changes and have taken these concerns into consideration and ameliorated them. Although the pain and sufferings are reduced, they are not entirely eliminated. I therefore urge the Government to look into ways to help those who are affected to overcome these problems. Bear with me while I repeat a point made by other hon. Members. The CPF is used by many to pay their housing loans. I hope that the Government can, for instance, work with the banks to extend the repayment period and lower the monthly repayment in line with the reduction of the CPF contributions. I look forward to hear the measures that DPM Lee Hsien Loong would announce shortly on how they can help the people who are affected. However, this should not distract us from the seriousness of the challenges that we face as a nation. We must therefore brace ourselves for the needed changes to remain competitive in a very fast changing world. It beholds us to realise that Singapore is a small place where the margin for errors is also small. If we miss the boat, it may be a long while before the next arrives or, worse still, it never comes. I thus urge all Singaporeans to understand the gravity of the problems that confront us, to support the Government and to do whatever needs to be done to ensure that Singapore continues to prosper so that Singapore will have a home not only for us, but also for our children and their children as well. Sir, on that note, I support the proposed changes to the CPF.

(In Mandarin): Mr Deputy Speaker, when the Prime Minister made the announcement in his National Day Rally that the CPF rates would be reduced, many Singaporeans were worried. When I spoke to my grassroots leaders, they said jin cham meaning "Terrible!" But today, having heard what the Prime Minister announced, I called them up and they said heng-ah, or "Phew, lucky!" Generally, Singaporeans understand the purpose of the CPF reduction. I believe this would be supported and accepted by the people in general. Sir, the reduction in CPF contribution rates, I hope, would help to reduce the business costs in Singapore. On the one hand, this would help save our jobs and prevent further retrenchments. On the other hand, we would be able to attract more foreign investments here, and thereby creating more jobs for our people. Sir, a policy may be good, but it has to be implemented effectively so as to obtain the best results. First, I would suggest we set up a nation-wide unemployment register. We can make use of all the community centres and community clubs in our 84 constituencies to effect a nation-wide unemployment registration exercise. By so doing, we would be able to better understand how many people are genuinely unemployed and what are their needs and requirements. Then, we can make a study of it and come out with the appropriate measures to effectively help them. The unemployed will have better chances of getting jobs that are available and suitable to them. In this way, we can achieve the best results in combating unemployment. We should also help those unemployed workers who are in financial difficulties. We could perhaps give them a once-off unemployment benefit of, say, $2,000 or $3,000. Apart from that, we should also try to reduce the other costs of living, such as PUB charges, and rentals. Only then, can we effectively help our workers to settle their problems while making every effort to attract foreign investors to come in and create more jobs for them. Secondly, we should step up our efforts to promote Singapore overseas. Here, we must commend our Minister for Trade and Industry, BG George Yeo. Under such a gloomy global economic climate, he has still managed to attract a lot of foreign investments to Singapore. We should have some good incentive packages, and encourage more civil servants to go overseas to promote them to the prospective foreign investors. Nowadays, a lot of people go to China to invest. The reason is that many leaders from China came to Singapore to promote the various investment opportunities in China. I think we should learn from them, and encourage our senior civil servants to go overseas, particularly to China and India, to promote our incentive packages to the entrepreneurs so that they will come to Singapore to invest. Then we will be able to create more jobs for our people. We should work like the bees. Even when the weather is bad, the bees do not stop working. If the immediate vicinity is no good, they will fly further away to collect more pollen from the flowers there to make more honey. I think we should also learn from them. We should go overseas to promote our incentive packages. Only then, can we link up with the foreign entrepreneurs, persuade them to bring their investments here, and create more job opportunities for our people. Thirdly, we should adapt to changes. No industry can prosper forever and in every industry, there will be ups and downs. Prior to the 60s, Singapore's main output was in farming and agricultural produce. In the 60s and 70s, we promoted industrialisation and concentrated on labour-intensive industries. In the 80s and 90s, we moved towards high value-added industries which paid higher wages, and our people enjoyed better standard of living. That has resulted in a very high wage level in Singapore today, where the labour cost is significantly higher than the other countries in this region. I think we should make use of this period of economic downturn to change the mindset of our people. In the meantime, we have to seek avenues for our businessmen to expand overseas. Next, we should look into the field of education. We can promote our universities so that we can become a hub for higher learning and cultural activities. Our educational standard is the envy of many countries in the world. I think our NUS and NTU should cooperate to provide more opportunities for students to study here. According to a report, the President of the Singapore Management University, Mr Tan Chin Tiong, mentioned that it would cost a Singaporean some $70,000 to $80,000 a year to study in a university in the United States, whereas he needs to pay just $6,000 if he studies in either NUS or NTU in Singapore. At this time of economic recession, we should encourage more Singaporeans to study in Singapore. That would help to solve the financial problem. Secondly, attraction of foreign students. We should develop Singapore into a hub for higher learning and attract foreign students to study here. In this way, we can earn more foreign exchange too. Recently, I was in Ganzhou City, Jiangxi Province. I had the opportunity to speak to some high school students there. I asked them where they would like to go for further studies after their graduation. They named four destinations - Canada, United States, England and Singapore. Singapore has a very good brand that is well known overseas. We should make use of this foundation to expand and improve our university education. We should seize this opportunity. We should not wait. I think for our economy to prosper, we should resume the old name of Nantah for our NTU. The Nantah spirit is very important. With the new President, Prof. Su Guaning at the helm, we should be able to make further progress. Now, let me turn to tourism. Tourism is a very important component of our economy. The development of tourism will bring more business for the hotels, restaurants, transport and retail business. These are all inter-linked and tourism will provide more job opportunities for Singaporeans. The Government should try to establish more tourist attractions in Singapore, make use of our surrounding environment and improve the service quality of our workers in the tourism industry. Fourthly, with this announcement of CPF cut, some people will naturally be worried. Now, the repayment period for HDB loan is for only 30 years, and the lessees have a rather short repayment period for the mortgage loan they took. I think we should grant them longer repayment period, say, 35 or even 40 years. With this downturn, many HDB lessees could not service the loan for their present flats. Many of them wish to downgrade to smaller flats. The HDB should consider building more 3-room flats to satisfy their needs. As mentioned by the Prime Minister just now, the 3% cut in CPF amounts to a hefty $1.3 billion for the employers in Singapore. If we convert this to Renminbi, it amounts to five Renminbi for every one of the 1.3 billion people in China. This is indeed a huge sum of money. Those companies which are doing well, the 3% saving in the employer's CPF contribution is a windfall. They should make full use of these windfall savings to help their workers. So, I suggest that those companies which are making profits should set aside at least 1% as a training or welfare fund for the workers. This would enable the workers to share the windfall. Fifthly, we should change the work attitude of our workers so that they can keep up with the times. According to the Ministry of Manpower, some companies are still having difficulty recruiting workers. For example, now there are about 4,600 jobs where there is no taker. Yet, we have 80,000 people who are unemployed. I think we should change the attitude of our workers. In any job, there is always dignity and professionalism in it. Nowadays, there is still a good number of jobs which are shunned by Singaporean workers. As a result, the companies have no choice but to employ foreign workers. For example, more than 30% of our bus drivers are foreigners. Most of the Town Councils' conservancy works are also taken up by foreign workers too. Even in the hawker centres and factories, it is the same. So, I think our workers should be more realistic. They should enrich themselves and make some compromises and be more flexible. Only then can they survive in this ever-changing environment and be self-reliant. Let me quote an example. When I completed my secondary school, I wanted to go to the university. I was worried that my family could not support me for my university education. So, I worked in a provision shop in Taman Jurong to earn some money before I joined the university. While in the university, I spent my vacation working in a plywood factory. My employer told me that the only vacancy was in the sawmill which was the most dirty and dusty part of the factory, and I had to do night shift. I took the job. My nightshift was from 11.00 pm to 7.00 am. The proprietor of the plywood factory was a Taiwanese. He was in the habit of visiting the factory in the middle of the night to check if the workers were working. At that time, I was a young man who needed the money desperately, I dared not play truant and was always working. The proprietor saw that I was a conscientious worker and was also an undergraduate. He recognised my efforts and promoted me to be a quality inspector, and my wages were raised from $2.50 to $3.50 an hour. So, if you are prepared to work hard and earn our keeps, there is no need to feel ashamed. As the Prime Minister said, we would not die when we lose face. It is only when we cannot breathe that we will die. So, when a job is given to us, we should take it. We should not think that it is a lowly job and refuse to take it. Every job is sacred, so long as it is a good and proper job. This is what we call the "Nantah spirit", the spirit of self-reliance.

Order. I intend to stop here. Mr Wong.

Resolved, "That the Debate be now adjourned." - [Mr Wong Kan Seng].

Debate to be resumed on what day?

Tomorrow, Sir.

So be it.

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

Adjourned accordingly at Nine minutes to Seven o'clock pm.