Hansard, 2004-02-27

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: Name From (2004) To (2004) Mr Davinder Singh 09 Feb 10 Feb 12 Feb 19 Feb Ms Irene Ng Phek Hoong 10 Feb 10 Feb Mr Low Thia Khiang 10 Feb 23 Feb Dr Warren Lee 10 Feb 21 Feb Mr Goh Chok Tong 11 Feb 20 Feb Mrs Lim Hwee Hua 11 Feb 14 Feb Mdm Halimah Yacob 13 Feb 17 Feb 21 Mar 27 Mar Miss Penny Low 13 Feb 15 Feb 21 Feb 26 Feb Dr Vivian Balakrishnan 14 Feb 21 Feb Mr Lim Boon Heng 15 Feb 16 Feb Dr Tony Tan Keng Yam 15 Feb 19 Feb Mr David T E Lim 16 Feb 20 Feb 16 Mar 21 Mar Mr Inderjit Singh 16 Feb 18 Feb 23 Feb 24 Feb 01 Mar 07 Mar Mr Ong Ah Heng 16 Feb 28 Mar BG George Yong-Boon Yeo 17 Feb 22 Feb 02 Mar 03 Mar Mr Arthur Fong 18 Feb 20 Feb Mr S Iswaran 18 Feb 21 Feb Mr Yeo Guat Kwang 18 Feb 21 Feb 25 Feb 26 Feb Dr Michael Lim Chun Leng 20 Feb 23 Feb Mr Mah Bow Tan 24 Feb 24 Feb Column: 405Dr Mohamad Maliki Bin Osman 24 Feb 29 Feb Mr Zainudin Nordin 24 Feb 24 Feb 29 Feb 04 Mar Mr Ong Kian Min 26 Feb 27 Feb 02 Mar 05 Mar Mr Raymond Lim Siang Keat 26 Feb 02 Mar Mr Gan Kim Yong 29 Feb 04 Mar Mr Ang Mong Seng 01 Mar 04 Mar Mr Tharman Shanmugaratnam 01 Mar 04 Mar Dr Ahmad Mohd Magad 18 Mar 26 Mar Mdm Cynthia Phua 21 Mar 26 Mar

Dr Mohamad Maliki Bin Osman

ABDULLAH TARMUGI Speaker Parliament of Singapore

The following Bills were assented to by the President of the Republic of Singapore on the date stated:

21st February,2004 (1) Statutes (Miscellaneous Amendments) Bill (2) Fire Safety (Amendment) Bill (3) Accountants Bill (4) Accounting And Corporate Regulatory Authority Bill (5) Companies (Amendment) Bill ABDULLAH TARMUGI Speaker Parliament of Singapore

[Mr Speaker in the Chair]

1. Ms Irene Ng Phek Hoong asked the Prime Minister (a) what new measures are being considered to check the falling birth rate; and (b) what lessons can be learnt from other developed countries which have been successful in checking this trend.

Mr Speaker, Sir, falling birth rate is a serious problem. It is not a new problem but it is a complex problem. As Deputy Prime Minister Mr Lee Hsien Loong said, he will address this issue in his Budget Speech later on. I would like to urge Members to be patient, listen to DPM's speech, and I am sure we will have ample opportunities to debate this issue during the Budget debate as well as during the Committee of Supply.

2. Dr Lily Neo asked the Acting Minister for Health what are the steps taken or will be taken by his Ministry to help contain the healthcare costs in the public sector.

Mr Speaker, Sir, managing medical inflation so that healthcare costs do not run wild is one of my Ministry's priorities.

It is, however, not possible to eliminate medical inflation and keep healthcare cost constant. This is because healthcare is both labour and capital intensive and it will not be realistic to expect healthcare workers to have no wage increases.

However, it is possible to manage healthcare costs with a view to keep medical inflation within affordable limits. But it requires major and continuous efforts, from all the stakeholders in the healthcare sector: doctors, hospitals, patients and their loved ones.

To understand this phenomenon, we need to first know the key drivers behind medical inflation. There are several. But I will highlight three: shortage of skilled manpower, rapid introduction of new medical technology and rising expectation from patients.

While skilled manpower and new medical technology have led to significant improvements in medical outcome, the results come with a large price tag. At the same time, increasing affluence of Singaporeans and greater awareness of technological advances in medicine have led to higher expectations from patients in terms of the care and kind of treatment they should receive.

Against this backdrop, the challenge is to keep pace with medical advancement, but at a rate which the society as a whole is willing to pay. Inevitably and realistically, some sort of rationing has to be done and patient expectations need to be managed.

It is little wonder that rising healthcare cost is a global phenomenon. Indeed, relative to many other developed countries, Singapore has fared not too badly.

I will not be able to give a comprehensive account of all our steps in managing medical inflation. But broadly, I will group them into six major thrusts.

First, emphasise personal responsibility in healthcare. Government can only provide healthcare services, but good health has to be attained by individuals.

The most effective way to manage medical inflation is to keep Singaporeans healthy. That is why it is so important for all Singaporeans to lead a healthy lifestyle, thus avoiding illness and hospitalisation. On this score, as Members of Parliament, we have an important role to play. I think we should walk-the-talk and be shining examples of what healthy lifestyle is all about. Incidentally, this Sunday, I will be taking part in a 5-km run to raise money for SSO. Mr Speaker and our colleagues, especially those in the GPC on Health, are most welcome to join in the run. We will kill several birds with one stone - promote health and support the arts and sports.

Second, increase supply of skilled manpower, especially specialists and nurses, to match rising demand. Without this, any prolonged shortage must inevitably lead to excessive wage increases. We are thus expanding our training capacity, but meanwhile we will mount external recruitment to augment our local supply.

Third, our healthcare providers, especially the hospitals, must squeeze as much productivity as they can out of their resources. They must strive to produce more with less. This is a continuous endeavour.

Some examples of their recent effort: the clusters have consolidated their IT systems management and support, reducing IT manpower requirements by 15%. TTSH and NUH have combined their Central Sterile Supplies Department (CSSD) services at TTSH. If I am not mistaken, I recall reading the Hansard record when a few years back, Dr Lily Neo indeed made such a suggestion about combining CSSD to reap the economies of scale. I am pleased to announce that her suggestion has been put into practice. This has saved $600,000 in capital expense and $130,000 a year in operating expense.

Other consolidations such as Finance are being explored. Further savings are expected from outsourcing of services, such as catering and maintenance/engineering. I also encourage them to consider cross-border outsourcing where it makes sense.

Fourth, I have urged the clusters to collaborate for mutual benefit. The objective is to avoid dysfunctional competition and costly duplication.

One example. The clusters have derived significant savings in the procurement of medical supplies, drugs and services through group procurement. The aim is to source for lower cost alternatives and achieve better economies of scale through product standardisation and consolidation of purchase volumes.

Fifth, the doctors are reviewing their clinical practices. The aim is to maximise health outcome with minimum resources. This includes efforts to ensure that care is rendered at the most appropriate setting.

One example. My Ministry has been working with the clusters to develop the Singapore National Asthma Programme that aims to reduce hospital admissions and move treatment to the primary care level.

The clusters have also actively sought to decrease the length of stay in hospitals by promoting day surgery, same day admission for surgery as well as a seamless transition to step down care.

Other examples. The clusters have introduced prescribing protocols that encourage the use of generic drugs. The increasing use of electronic medical records would further help to save costs by avoiding repeat tests being carried out on the same patient as the hospital doctor

can then access test results already done in the polyclinic and vice versa.

Finally, moderate public expectations. Patients and their loved ones quite naturally will demand the best possible care. While we will always do our best, we must be realistic about our ability to match rising expectations and demand, especially if the patients are unwilling to pay for the incremental cost of service enhancement.

The best way forward is to ensure a range of services available at different prices and to push out such information into the public domain. That is why my Ministry has since last year published hospital bill size statistics for common medical conditions on our website. By promoting greater transparency of hospital charges, hospitals are now able to compare the effectiveness of their cost management initiatives, not only against their own historical costs but also against that of other hospitals. As I explained to the House recently, this allows the hospitals to ask intelligent questions if their charges are significantly different from others, and take proactive steps to cut waste and reduce costs.

In summary, we will continue to strive to cut inefficiency and frills without compromising the quality of medical care. We must, however, be realistic as to the extent to which hospitals can keep cost down while continuing to maintain healthcare standards. If we expect the best treatment and diagnostics, short queues and good service, costs will increase and patients must be prepared to bear part of the cost for it.

I would like to assure Singaporeans, however, for essential services, no Singaporean will be denied such care because of their financial status.

May I ask the Minister whether our present policy of

encouraging competition between hospital clusters and sectors is effective in controlling healthcare cost inflation? Should there not be a review to favour more centralised control over healthcare resources for better control of healthcare patients?

Mr Speaker, Sir, I recall making a fairly extensive speech last year about this whole topic. Obviously, the solution is not the extreme - either complete centralisation, going back to the good old days of the Ministry of Health when I started my career as a young officer, or to go all the way to compete and duplicate. Like all things, take the middle path and pick the best of both worlds. There are values in centralisation but there are also values in competition.

My challenge to the clusters is: compete by all means but compete to produce more with less. But where it makes sense to collaborate, please do so. Recently, when SingHealth cluster started a public cord blood bank, I sat tight to see what was the reaction. Not bad. A few days later, I received an email from the other cluster saying that they would back this project, instead of duplicating a second cord blood bank.

May I ask the Minister on the reasons why public hospitals compete against one another for patients and market share? Has this resulted in supply-induced demand for services in our public hospitals? Are public hospitals too focused on cost recovery and is it correct for public hospitals to spend money branding themselves to attract more patients?

Mr Speaker, Sir, in the same speech that I talked about a few minutes ago, I also covered this topic. I think I should send the speech to Dr Lily Neo.

The competition for market share has to be taken in its right spirit. I advised the clusters that, stretching the argument, I would clap hands if their workload shrinks, but not if their workload expands. Of course, provided they achieve this not because of lousy service or unsafe standards when everybody runs away from them, like SARS. But, if despite giving good service and, let us say, all the parliamentarians help me out in promoting healthy lifestyles and after a while, illnesses drop, so that patient load comes down or if good economic management leads to strong growth, and more and more people can afford unsubsidised private hospitals and would rather not spend time waiting in the queue of public hospitals, and our market share shrinks, I clap hands. That is the spirit I bring to this whole issue about market share.

Sir, in a competitive environment, I would like to ask the Minister who decides when he collaborates and when he competes. Presumably, it is the Government and if the Government decides finally who competes and when you collaborate, can you effectively have free market forces operating in the healthcare industry in such a context?

It is for the players to decide. It is not possible for the Ministry of Health, or Parliament, to micro-manage and decide, "Ok, you do this, you do that." The communist countries tried to do that and, of course, they discovered that they could not achieve the desired outcome through that way. What we can do is to make sure that at the macro level, we have the right parameters in place. What are those parameters? How much subvention am I prepared to give to the hospitals? What are those expectations about fee increases? And, of course, as shareholders of both clusters, our expectations are that they must balance

their accounts. You cannot chalk up and build up losses perennially.

That is why last year, I sat down with them and said that it was a bad time to raise fees, although I knew they were under a lot of pressure because they would otherwise be losing money. I said, "No. Learn to live within your means. Cut your costs." In any case, we are no longer providing them with very small sums. As you know, the Ministry of Health's budget is now more than $2 billion. I put out this paper last week where it showed a subsidy of more than $1 billion. This is not chicken-feed. So the question is, as a trustee of taxpayer's money, our job is to decide how best to stretch this budget. The way to do so is to make sure they spend their money properly and if they can collaborate to bring their costs down, do so. If they can outsource to private players in Singapore or even outside of Singapore, do so.

The other day I met a pathologist from Tan Tock Seng and he was telling me that our storage cost for pathology samples cannot beat Johor Baru. I do not know exactly what he is talking about. But he seems to make sense. He said that we could store them in Johor Baru where land cost is low. So there are possibilities of that kind. I think we should let the players decide, they are paid to do so, to balance their accounts, provide the best possible service with the budget that they have, to stretch the budget as much as they can to produce the outcome that the society needs.

rose -

May I remind Members we have 16 Questions to deal with today. Dr Neo.

Thank you, Mr Speaker. Following the Minister's early mention on

subsidies, may I ask the Minister on this subvention to Government hospitals? Has there been a decrease in subvention in relation to hospital admissions? Is it correct that in the years 2000 to 2003, public hospitals received less amount of subsidies but they had greater numbers of hospital admissions? Do public hospitals pass on the imbalance of subsidies and operating costs to patients, thus raising the burden for patients in healthcare expenditure?

The short answer is no. I think subvention has increased from $759 million in 1998 to $1.187 billion in 2002. This is the total quantum. As compared to volumes, I do not know. Healthcare is complicated because it is not just numbers. Every year, the case mix is different. Every patient is different. I witnessed my wife's three pregnancies and I was with her when the babies were delivered at the labour ward. Every delivery is different, although the same woman, the same husband. So let alone, illnesses. Yes, last year, we had 10,000 admissions; this year, 10,000 admissions, but if the case mix is different, the outcome and the resources needed would be different.

3. Mr Iswaran asked the Acting Minister for Education in light of the recent incident at Kent Ridge Secondary School, where students were found with pornographic VCDs and the incidents were reported to the Police, what guidelines on how to handle such incidents have been issued to schools by the Ministry.

Mr Speaker, Sir, MOE has given schools broad guidelines on the approaches and actions they could adopt in managing student discipline. These guidelines set out the

positive, proactive approach schools should adopt in handling discipline, as part of their broader efforts to help our young become responsible, thinking citizens.

The guidelines recommend the development of a coherent, whole-school framework for managing discipline. This comprises measures ranging from the preventive to the corrective - in other words, from educating the students to counselling them and to taking disciplinary actions. The guidelines provide schools with examples of programmes and strategies that they can adopt to manage discipline in their schools. They also advise schools on how they can work in partnership with parents, and obtain the assistance of external agencies, such as the VWOs, self-help groups and the Police.

While the MOE guidelines help achieve a broad consistency of principles and approaches in managing discipline amongst our schools, each school has to decide on its own specific approaches. This will depend on the nature of its student body and the history of student discipline in the school.

Schools also have to decide on the actions most appropriate in each situation, such as counselling the students involved, disciplining them within the school, referring them to other agencies for further counselling and help, or reporting the matter to the Police. In particular, a decision on whether to call in the Police has to be made by the principal, and that will depend on the severity of the offence, the scale of the problem, and the willingness of the students involved to cooperate. These are ground decisions that the principal is in the best position to make.

Mr Speaker, Sir, the guidelines from the Ministry would probably set the broad parameters and depending on the experience of the

principals (including new principals coming in), what additional guidance is given so that they have an idea of how to operationalise those guidelines? Otherwise, I think maybe it is a situation of not having opportunities to learn from each other and, although principals are trying their best, it could be a hit-and-miss affair.

Mr Tharman Shanmugaratnam: First, the guidelines themselves are actually quite useful. We provide examples of the types of problems and offences within the school that perhaps the school can handle on its own and how it should go about handling them. We also provide the examples of the more serious matters which would be referred to external agencies, including the Police. I think we prepare our principals, including our young principals, quite well. They all go through not just training on how to be a good school leader, but we also engage them in a fair bit of sharing of best practices. They meet often with their cluster's Superintendent, and with the people in the Ministry. There is a fair bit of sharing within the community of principals themselves. Young principals do not come in totally fresh. They have already been acquainted with the ways of leadership in a school and once they are in leadership, they are able to tap on views and perspectives from others within the school leadership community.

Sir, I accept the Minister's explanation that we entrust considerable discretion and responsibility in the hands of our principals. That is quite correct. But the corollary is that there will be some variability in the way that discretion is exercised across schools and we can accept that to a limit. But on matters as serious as Police reports, can the Ministry perhaps be more prescriptive as to the steps that the principals must take before taking such a serious decision which can have a lifelong impact on the students?

Variability is what is to be expected because, as Mr Khaw Boon Wan says, every birth is different. Every school is different. Student population is different, the history of the problem is different and each instance is different. So I would not want to constrain schools with too prescriptive an approach. We already provide very useful guidelines, with lots of illustrations on how to handle the problems. But the principal is the person on the ground and he or she has to decide. The Ministry is not in a position to prescribe how each and every situation should be decided upon. It is just not possible. Not only is it not possible, it is not desirable either.

If we want strong schools with strong leaders, we cannot have them referring to a detailed rule book each and every time something happens, we cannot have them second guessing the Ministry, we cannot have them calling up the Ministry to ask: what should I do in this instance? We do not get strong schools and strong principals if we do that. We now have strong schools and, by and large, we have very good principals. I think to keep it that way, we have got to leave the decisions on these matters with them. These are the ground decisions they are in the best position to make. If they make decisions that are quite unreasonable, then the Ministry will intervene. But in this instance, the decision was not unreasonable, and that is why the Ministry supported the decision of the principal.

Can I ask the Minister then, since we do believe that principals must have the autonomy to exercise what they feel is the best ground decision, how are principals chosen, perhaps what kind of track record do we look at to ensure that we have got a good principal who knows how to use discretion in such matters?

There is no cookie-cutter approach to selecting a principal. This is like leadership in other areas that we are familiar with, how you spot a person with leadership abilities. It is also, in the school context, about people who know what teaching is about, what nurturing students is really about, people with a certain sense of care and compassion. Our principals are basically people with a good sense of how young individuals grow. We take great pains to identify potential school leaders early in their careers and we check our assessments as they go through their careers. We go to great lengths to do so and put them through various projects and courses where we can also come up with further assessments as to who would make a good principal. It is not a perfect process, but it is not working too badly.

4. Mr Ang Mong Seng asked the Acting Minister for Education whether there are any regulations or guidelines on fund-raising projects for school principals to follow in order to spare students from committing too much of their study time, effort and money to such projects.

Mr Speaker, Sir, principals are responsible for deciding on fund-raising activities of their schools. They can decide on the type and timing of the fund-raising activities. However, MOE does have guidelines to ensure that students are not committed to too many of such activities. As a guide, each student should not participate in more than two fund-raising activities a year, and that is in addition to Sharity Day for primary school students and Youth Day Collection for secondary school students, both of these collections are meant for the Community Chest.

Can I ask the Minister of State whether he can enlighten the House in the years 2002 and 2003, the total number of fund-raising projects and the total sums we had raised, and how many are for school projects and how many are for outside the school projects?

As I said, principals are responsible for deciding on fund-raising activities of their schools. The Ministry does not require them to seek approval from the Ministry before they proceed. All they need to do is just observe the general guidelines. So I am afraid we have no figures on how many fund-raising activities overall and how much has been raised. But we do believe that all these activities are for the benefit of the schools.

5. Mr Chiam See Tong asked the Minister for National Development if he will state (i) the number of flats in HDB estates, except those at Circuit Road, which have been upgraded and which have problems with the windows installed; and (ii) how many of these windows need to be repaired or replaced.

Mr Speaker, Sir, HDB adopts the Singapore Standards, which are set by Spring Singapore, for the installation of windows in HDB flats for its building and upgrading contracts.

From 1987 to 1998, aluminium rivets were used for the installation of casement windows in HDB flats. This was based on the prevailing industry standard at that time. HDB switched to the use of more durable stainless steel rivets for casement windows from 1998. The industry standards were revised in the year 2000

to specify the use of stainless steel rivets for casement windows.

There are to-date 20,600 flats in 22 precincts which have undergone the Main Upgrading Programme (MUP) and where aluminium rivets were used in the installation of casement windows. Between 1999 and 2001, HDB checked and replaced

damaged or defective aluminium rivets with stainless steel rivets for 10,300 upgraded flats. For the remaining 10,300 flats, HDB had found the rivets to be in good condition at the time of inspection and, hence, did not change them.

Following BCA's announcement last week on measures to enhance window safety, HDB has included the remaining 10,300 flats under a new goodwill rivet replacement programme. Under this programme, HDB will co-share half the cost of replacing the aluminium rivets with stainless steel rivets for aluminium casement windows in these flats.

Can the Minister please name the 22 precincts?

I do not have the full list here, but I have some of the precincts which are involved in this programme.

Some of the precincts include Jalan Bahagia, Jalan Bukit Ho Swee, Taman Ho Swee, Circuit Road, Toa Payoh Lorong 1, Marine Drive and Woodlands Street 32.

Mr Speaker, Sir, my questions to the Minister are:

1) Will the Ministry be putting up legislation to make it compulsory for all home owners to inspect their windows?

2) Of the 43,000 flat units which are affected by falling windows, the

replacement cost is 50-50 sharing and there is a cost involved in the inspection of these affected windows. As they need to be replaced, there is no need to inspect them to have them replaced. They just have to replace the aluminium rivets to stainless steel ones and make sure that they are safe. So, there is no need to pay for inspection. It is part of the work of the replacement. Can the Minister consider that?

3) For rental flats, can I just clarify that the HDB will pay 100% of the cost of replacing all the affected casement windows?

4) I understand that the HDB has called for tenders to replace the aluminium rivets and that the rate of replacement is about 60 units per day, which means it will take about nine months to replace all the rivets for the 43,000 flats. Can the Minister consider expediting this programme for safety reasons?

Mr Speaker, Sir, first of all, yes, BCA has been considering legislation to deal with the problem of falling windows. Let me just emphasise to the House how serious this problem is.

We live in a very densely-populated high-rise environment. Over the last few years, and particularly in the last few months, the incidence of falling windows has risen quite sharply. In the last four months of 2003, for example, we had a total of between 12 and 15 cases, ie, about three cases a week. I do not need to tell the House how serious this problem can be. I shudder at the thought of what would happen if one of these windows were to fall on somebody's head. The consequence of such an incident would be horrendous. We have been lucky so far. There have only been three reported cases of somebody being hurt by falling windows over the last few years out of a

total of over 160 cases. One was a boy who was hurt when he was hit by some glass fragments as the window fell down; another was a woman who was actually hit on the arm, but not very seriously. In fact, it was brought to my attention that in Hong Kong, the same problem has arisen. Two people were killed in Hong Kong in January alone this year. One was a 70-year-old woman; another was an 87-year-old man.

So, this is a problem that we really need to treat very seriously. We ought to do something. BCA has been studying the problem. Essentially, the problem of falling windows is one that spans several areas of responsibility, starting from the design of the windows to the installation and, finally, of course, to the use of the windows, because it is something that residents use very frequently. So, wear and tear is also an issue. We have the upstream responsibility of designers, installers, manufacturers, and we have the downstream responsibility of residents. As a result of this problem arising recently, BCA has decided that we have to do something and it is proposing several pieces of legislation.

The first one is to legislate to have a minimum standard of safety for design and installation of windows. So far, we do not have such legislation. HDB installs windows according to the minimum safety standards. But this is entirely an initiative on HDB's part. There is nothing in the legislation to force, say, a private contractor or a private developer to do the same. We intend to change that. We intend to enact legislation to make that a minimum safety standard, and not just for the design, but also the installation. So this will take care of the so-called upstream problem.

The second aspect we are considering is whether we should mandate the retrofitting of existing windows, because while the existing windows are safe, they

could be made safer. So, the question is whether we should make this mandatory, and this is also something that BCA is considering.

The third aspect that BCA is considering to ensure that there is a minimum standard of safety in the existing windows, is to require home owners to check their windows, and to have a periodic mandatory check. I think this is what the Member was referring to. The idea behind this really is to establish a certain minimum standard of safety for all the windows that have currently been installed.

I understand that some members of the public and also Members of this House have expressed some reservations about this, whether it is necessary to have this level of check at the downstream end. What I will do is I will ask BCA to consider whether there is another way of achieving that minimum standard of safety, say, self-checking on the part of the residents. But I want to emphasise that what we are looking for is a certain minimum standard, to allow us to have some assurance that home owners are accepting responsibility for keeping their windows in good condition. So, yes, we will relook the need for such legislation and whether there is a necessity to mandate periodic inspections of windows. We will look at various other options as well.

On the question of 50-50 cost sharing and, therefore, no need to inspect, I think there is a rationale behind doing away with the need to inspect. BCA will take this into consideration when it enacts its legislation. I will be bringing legislation to the House to allow us to enact certain laws which will enhance the safety of windows, and I welcome all views from Members when we debate it in this House.On rental flats, yes, I can confirm that as HDB is the landlord for such rental

flats, the HDB will change the windows that need to be changed to comply with the new safety standards and will foot the cost of such retrofitting.

Lastly, on the tender. Yes, HDB is now in the process of calling for tenders for retrofitting of windows and I will see whether we can shorten the period of retrofitting and we will expedite the exercise.

Sir, it was reported in the papers that windows from HDB flats have been falling in the last two years or so. If the HDB had noticed it, did the HDB do anything in regard to those reports, eg, asking the flat owners to better maintain their windows or to replace them? As regards self-inspection, is the HDB asking flat owners now to self-inspect their windows? For the more obvious cases, there is even a need to replace them now. It is obvious that if they are already hanging, about to fall ---

Mr Chiam, your question, please?

Yes. So, is the HDB asking the flat owners or helping them to replace the windows in such dangerous cases? As regards compulsory checks, I read in the papers that a casement window is like a sail catching the wind. So, the wind load is probably heavier for those flats that are on the upper floors. Is the HDB considering banning casement windows, say, from the 10th floor and above, and replacing them with sliding windows?

The problem of falling windows came to the notice of HDB and to the Ministry recently when the trend was, as I said, rising at an alarming rate. There have always been cases of windows falling, but to a very minimal extent. But in 2003, the number of cases shot up quite dramatically. For example, in 2003, there were 97 cases

for HDB and nine cases for private flats, compared to, say, 2002 when there were 39 HDB cases and nine in private flats. In 2001, there were about an average of 17 to 18 cases. So, you can see that the trend has been increasing sharply.

Last year, HDB mounted an exercise to zero in on this problem of maintenance, particularly of windows. In November 2003, the HDB launched a handbook which was distributed to all homes to educate residents on what to look out for and how to look after their windows. They also conducted roadshows at various housing estates. Unfortunately, the statistics since then show that there has been very minimal impact. After the launch of the handbook in November, there were about 15 cases in December, nine in January, and February up to now, so far there have been about three cases. After the press conference when there was massive publicity about falling windows, touch wood, so far there has been no case.

Yes, we have been aware of this and this is what we have been doing about it. I would like to say to members of the public that this is something that should be the responsibility of all of us. Residents should check their windows. They should not wait for legislation, they should not be caught up in this current debate, but they should act now, check their windows, make sure that they are safe and do not fall down and hurt somebody or, worse still, kill somebody. If they are in doubt about the safety of the windows, please call the HDB which will give them a list of the contractors who can fix the windows for them.

Finally, on whether we should replace casement windows with sliding windows, the casement windows have been installed in HDB flats for the last 20-odd years or more. Before that, there were

also casement windows. However, they were not aluminium casement windows but mild steel casement windows. So I do not think that there is a case per se to say that casement windows are more dangerous than sliding windows, or louvred windows for that matter. In fact, our statistics show that there are sliding windows that have also fallen, although to a lesser extent. There, the problem is slightly different, but the point I want to make is that all windows, even the ones that are built according to the latest standards, are subject to wear and tear, need to be inspected, checked, maintained and, if they are not in good condition, changed.

So, there is no evidence to suggest that we should be changing all casement windows to sliding windows.

6. Dr Amy Khor Lean Suan asked the Minister for Trade and Industry (a) what is the impact, if any, on the Singapore economy and employment situation in the short to medium term from the trend toward outsourcing and off-shoring of jobs to lower cost countries; (b) how will this affect Singapore's oft-repeated role of being a bridge to the recipient countries like India and China, particularly in the light of the possible backlash in USA from anti-globalists; and (c) what strategies are there to counter any negative impact of this trend.

Mr Speaker, Sir, the market for Business Process Outsourcing (BPO) has seen

explosive growth since the 1990s. Gartner estimates that the global BPO offshore market was worth more than US$120 billion in 2003 from virtually zero in the early 1990s, and still growing rapidly.

Much of this business is coming to Asia. To date, India has emerged as the hub for BPO activities, capturing about two-thirds of the offshore market. Besides China, Malaysia and the Philippines, Singapore too has seen such services coming our way.

However, lower-end business processes in Singapore are also being outsourced to lower-cost countries. There are no reliable statistics on the size of these flows. What we need to do is to position Singapore to benefit from the global trend towards outsourcing. Over the medium-term, if Singapore can capture just a tiny percentage of the global BPO market, it would create many good jobs here.

Singapore's role as a bridge to India and China can become more important if we position ourselves well for the new flows. In the case of India, we are becoming part of the BPO value chain. Let me cite some recent examples.

Earlier this year, Tata Consultancy Services unveiled plans to embark on a pilot programme with several global financial services companies that are willing to co-locate their mid- and back-office activities in Singapore and India respectively. Singapore would get the higher value added mid-office activities, which would comprise an estimated 25% of the total activities outsourced.

Another example is Scandent, which has made Singapore its strategic base for global business process operations. This makes good economic sense, as Singapore is home to a base of more than 6,000 MNCs or potential clients. Scandent has a business continuity centre in Singapore to perform higher-end consulting such as business process analysis. Like the case of Tata, Scandent's operations here would complement those in India.

We are hopeful that this trend would continue. To date, all of the top 20 Indian IT companies have set up offices in Singapore. As their operations expand, Indian IT firms would provide more well-paying jobs for Singaporeans. While anti-globalists would try to stop outsourcing, competitive pressures would eventually force governments to open up because their companies would otherwise be at a disadvantage. Just earlier on, we have heard Mr Khaw Boon Wan saying that our hospitals should consider cross-border outsourcing in order to lower their costs.

Dr Khor also asked what strategies we can pursue to counter the negative impact of this trend. While we cannot stop some lower-end processes in Singapore from being outsourced to lower cost destinations, we should compete to attract higher value-added business processes here. These include activities such as risk management, disaster recovery, content development, design and engineering. They require a stable political environment, good public administration, human capital, technology and infrastructure, all of which are available here in Singapore. We provide an attractive front end for BPO businesses. Our FTAs also provide some protection against protectionist pressures in other countries. For example, even if the US were to legislate against the outsourcing of government work to foreign countries, under the US-Singapore Free Trade Agreement, companies with a substantial presence in Singapore will still be eligible for such work.

We also need to ensure that our costs in Singapore are competitive. For software, in particular, we need to bring in more employment pass holders with the requisite skills. MTI is now working with MOM on this. Recent measures to lower employers' CPF contributions and promote a more flexible wage structure will also help to improve our cost structure.

7. Ms Olivia Lum Ooi Lin asked the Minister for Trade and Industry as the wholesale electricity price has fallen some 30% and as the Energy Market Authority (EMA) has set the vesting price for the current quarter at $94/MWh and the competitive wholesale price at $64/MWh, a difference of some 27%, (a) how will consumers benefit from this pricing formula; (b) when can consumers expect the EMA vesting price to better reflect the competitive price; and (c) whether EMA will publish data showing how vesting price is calculated.

I declare my interest as the CEO of Hyflux. Question No. 7, Sir.

Mr Speaker, Sir, in Singapore, the three large generation companies control about 90% of the generation capacity. With their capacity, the generation companies have market power. After approximately two years of deliberations and industry consultations, EMA introduced vesting contracts to control market power and this commenced on 1st January 2004.

Vesting contracts place an obligation on generation companies to sell a specified minimum quantity of electricity. This is about 30% of each generation company's capacity. Generation companies receive the vesting price for these quantities.

The vesting price is set at the Long-Run Marginal Cost (LRMC) of the most efficient generation technology in the system. Currently, this is the combined cycle gas turbine. By setting vesting price to LRMC, we allow the investor in the

generation plant to recover the costs required to develop the plant, the costs to finance the investments and the costs to operate the plant, including fuel cost. The vesting price for the 1st quarter of 2004 is approximately $94/MWh.

The Member has also referred to "the competitive wholesale price of $64/MWh". For clarity, let me term this the "pool price". Before the vesting contracts were put in place, the wholesale price was the pool price. It was identical. The average pool and therefore the wholesale price last year was $93/MWh. However, after vesting, the wholesale price is now a weighted average of the vesting price and the pool price. For January 2004, the weighted average wholesale price was $84/MWh.

Mr Speaker, vesting contracts have brought market power under control. With market power controlled and the presence of significant excess capacity in the market, competition between generation companies has caused pool prices and therefore, wholesale prices, to fall. Compared to the average wholesale price last year of around $93/MWh, the current wholesale price of electricity has fallen by about 10%.

A lower wholesale price means it costs less to buy electricity at the wholesale market. Consumers who buy directly from the wholesale market would be better off today. However, they are exposed to price volatility as the wholesale price can fluctuate with changes in market conditions. Retailers who have bought on contracts with generation companies and consumers who have bought on contracts with retailers will continue to be governed by the existing contracts which they had entered into and signed.

In the long term, a competitive wholesale price will ensure that retailers

offer competitive retail prices to consumers. If the retailers do not do so, they will risk losing market share since consumers can also buy from the wholesale market. However, consumers who buy from the wholesale market will have to take the risks of volatility in wholesale prices.

The final part of the Member's question was on whether EMA will publish data showing how vesting price is calculated. The procedures for calculating the components of vesting price are published at EMA's website and the actual vesting price for each quarter is posted by SP Services on its website. For the Member's reference, that is at www.mssl.com.sg.

I understand that the vesting contract price is used to protect the consumers, because 90% of the power is being generated by the four generation companies (gencos). But, at the same time, it is also used to protect the gencos because these vesting contracts are calculated based on their minimum cost of operation. I would like to ask the Minister of State whether, under this regime, there will be more incentives for the gencos to further improve their operations so that they can bring down these operating costs.

Mr Speaker, Sir, the vesting contract price is pegged at the long-term running costs of the most efficient technology currently available. If and when technology changes and there is more efficient technology in the system, the LRMC price will come down. Generation companies with less efficient technology will be at a disadvantage. Indeed, this has already happened to companies which have older technology, for instance, the steam plants which are not as cost-effective as the combined cycle gas turbines. There are strong financial pressures on companies to adopt

the latest and most efficient technology available.

From the website, we can only find the formula. With regard to my third question, I would like to know whether EMA can publish the data showing how these vesting price formulas are derived.

Mr Speaker, Sir, I cannot make a definitive statement as to the extent of data which will be published because some of these are obviously commercially sensitive. However, let me give an assurance to Ms Lum, and indeed to all the big power consumers in Singapore, that if they need further advice, EMA will provide them with all the advice necessary, so long as we work within the rules of the system and we do not give any one party any unfair advantage. We have spent the last two years consulting industries. We have started another round of consultations in order to explain and inform, so that all the stakeholders will be fully cognisant of the facts before they enter into contracts or make commercial decisions. But ultimately, the responsibility for making these choices must lie with the companies. We cannot run their business for them. We can provide them data and information. They have to make an informed choice and take the market risk accordingly.

8. Mdm Ho Geok Choo asked the Minister for the Environment (a) if he will update the House on the number of markets and food centres that have undergone Hawker Centres Upgrading Programme (HUP) in the last five years;

what types of programmes are in place to enforce housekeeping and hygiene standards of hawkers in Singapore versus successful programmes in other countries; (c) whether his Ministry is satisfied that there has been overall compliance with the benchmark standards set for hawkers, for example, Singapore's OK and the grading system for hawkers; and (d) what more can be done to improve the overall image of our hawkers.

Mr Speaker, Sir, the Hawker Centres Upgrading Programme (HUP) was launched three years ago in 2001. To date, 25 hawker centres have been upgraded, with another 19 centres undergoing design and construction. This year, another 15 centres are selected for upgrading, bringing the total number of upgraded centres to 59. This accounts for 52% of all centres eligible for upgrading under the HUP.

To maintain a good standard of hygiene and housekeeping, hawkers are required to undergo a food-handling course conducted by NEA. NEA officers also make regular inspections to enforce standards. Sir, the overall standards of hygiene and cleanliness have improved over the years. The number of stallholders attaining 'A' or 'B' grades under NEA's grading system has increased from 40% in 1998 to 51% today. For the upgraded centres, the figure is much higher at 89%.

Last May, the Singapore's OK campaign was launched to further improve the cleanliness and hygiene of not only the individual stalls, but also the entire hawker centre. Within a short period of nine months, 85% of the cooked food centres and 63% of the wet markets have met the benchmark of the Singapore's OK campaign. This is indeed encouraging.

For the remaining centres, NEA is working with them to improve the standard of housekeeping. Besides educating the hawkers on good housekeeping, NEA encourages the Town Councils and hawkers to do regular spring-cleaning three times a year. Cleaners are also being trained under the National Skills Recognition System. Some hawker associations and grassroots advisers have also convinced their hawkers to don aprons and caps to project a neater, more hygienic and smarter image.

Sir, in conclusion, we will continue to upgrade the physical environment of our hawker centres. At the same time, we will work with Town Councils and hawker associations to improve and maintain good hygiene and cleanliness standards. This will improve the overall image of our hawkers and, at the same time, enhance the public's overall impression of our hawker centres.

Sir, from what I understand, there are still several hawker centres that are under the purview of the HDB. Can the Minister throw light on when these other hawker centres will be taken over by NEA and whether at this point, these hawker centres actually come under the same housekeeping guidelines as the hawker centres under NEA?

Sir, in terms of housekeeping standards, it does not matter whether the hawker centre is under the purview of HDB, NEA or JTC. Every hawker centre is subjected to the same standard of housekeeping and enforcement.

With regard to the overall management of the hawker centres, I am happy to say that with effect from 1st April, all the HDB hawker centres will come under the management of the NEA as well. This means we will have one

agency to be responsible for the overall management of all the hawker centres.

Sir, with reference to enhancing the overall image of our hawkers, is there any long-term plan to enforce the wearing of uniforms and caps so that we will actually bring up the standard of our hawkers in Singapore?

Sir, earlier, Mr Khaw Boon Wan said that every birth is different. Later on, Mr Tharman said that every school is different; every principal is different. Here, I am saying that every hawker centre is different; every hawker is different.

Over the last couple of years, we have encouraged the hawker associations to project an enhanced and yet different identities for their hawker centres. I am happy to say that the grassroots advisers, the community leaders and the market associations have been most responsive. Today, if you were to go to the hawker centres at Ang Mo Kio, Mr Seng Han Thong has introduced aprons and caps there. When he introduced caps, the hawkers said that it was too warm to wear a cap in a hawker centre. So, Mr Seng Han Thong got a designer to design a half cap. The cap covers only the front but not the back. I think these are the initiatives and innovations that we would like to see in the hawker centres, so that when the public goes to different hawker centres, they will see different images as well as different quality and standard of service. There will be a variety. This is what we would like to see.

On the whole, the role of the NEA is to make sure that the minimum standard of hygiene and cleanliness is being achieved and maintained, and to progressively improve this minimum standard. But in terms of differentiating the image and the identity of hawker centres, we would rather leave it very much to the various grassroots

organisations and grassroots advisers.

9. Mr Wee Siew Kim asked the Minister for Community Development and Sports (a) how many children under the age of 18 have been detected by social workers and medical personnel to be victims of physical and sexual abuse in 2002 and 2003; (b) how many, if any, had died; and (c) whether there are new measures introduced to protect them.

Mr Speaker, Sir, I thank Mr Wee for his concern. I would like to assure him that the safety of every child is the paramount factor in my Ministry's work in child protection.

In Singapore, the Children and Young Persons Act provides the legal framework for the protection of a child or young person up to the age of 16 years.

The Ministry of Community Development and Sports received 193 reports of alleged physical and sexual abuse cases in year 2002, and 205 cases in year 2003. No child has died among the cases reported to MCDS. However, according to the cases recorded by the Police, there was one death from physical abuse and one death from sexual abuse in year 2002. In year 2003, there were three deaths resulting from physical abuse. All five cases were aged below five years old.

When a case of alleged child abuse is reported, an investigation is conducted by the child protection officer. This is to ascertain the risk to the child and, where necessary, to allow us intervention to safeguard the safety of the child. The

care plan for the child is discussed by a Child Abuse Protection Team, comprising child protection officers, paediatricians, psychologists and the educational staff where appropriate. A Care and Protection Order is usually issued by the Court to ensure that family members receive assessments, support services as well as counselling. To prevent child abuse, MCDS carries out on-going training on detection and early intervention to ensure that professionals and those in regular contact with children can raise alert even on potential abuse and not wait till after abuse has taken place.

The protection of our children requires a "Many Helping Hands" approach. MCDS and our partners have implemented various initiatives that focus on the prevention and protection of our children from abuse. I will just highlight two recent initiatives.

Project Seed

Project Seed is a programme of the Singapore Children's Society where teachers and social workers identify school-going children who may be at risk of being abused by their families. The help extended to the family is preventive and effective in improving parent-child relationships.

Handbook for Teachers on "Managing Children At Risk"

This handbook was produced by MCDS and the Ministry of Education to help teachers, principals and school guidance officers to identify and help children at risk of abuse.

I must emphasise that parents or family members who require assistance in parenting or child behaviour management must seek help. We would also urge any

member of the public who knows of or suspects child abuse to report the case. They can approach any Family Service Centre near their homes or call the Child Protection and Welfare Section's toll free line at 1800-258 6378.

Sir, the Minister of State says that the Ministry has a handbook for teachers. I would like to ask him whether the Minister has a handbook for parents to educate them on where the Government draws its line on physical child abuse. Because, very often, it is not uncommon to have parents giving a spank on the buttock of a child for mischievous behaviour. Will that, in the eyes of the Government, be considered as abuse?

The handbook for teachers is basically on how to manage children at risk and probably to look for possible signs and evidence of abuse. To issue a handbook on how to do parenting, I think, is something very basic. I suppose we can consider it.

Sir, I think the Minister of State missed my point. If we are going to have a law that punishes parents for child abuse, there is obviously some concern on the part of parents that if one resorts to physically punishing a child, he may have crossed the line and broken the law. If the Government's policy is really one of concern of child abuse, then where does chastising a child end before it begins at abusing a child? And this obviously requires some level of public education.

Sir, I would say that every family is different. The question of whether corporal punishment is allowed is also a matter of opinion. But if we are talking about causing serious injury, it is a clear case of abuse. For rational parents, I think they would know what constitutes an abuse, if that is what Mr Sin is talking about.

Sir, the Minister of State talked about early intervention. Could he enlighten the House how many cases of early intervention have been disclosed by the social workers that have been brought for early investigation?

I am afraid I do not have those figures with me at the moment, because the Member asked about alleged abuse cases, rather than early intervention cases. If he is interested, we will try and look up the information for him.

Sir, the Minister of State mentioned that there were five cases of deaths and they were all children below five years of age. Is it because of the failure of early detection, especially among this group of pre-school children who were not in any kindergarten or child care centre and therefore they were missed out and not detected earlier? That being the case, could the Minister of State tell us what has been done or will be done to improve the situation, so that we can detect all these very young children who are being abused at an early stage before death results?

Sir, I would like to say that all these five cases were purely criminal cases. Early detection is not really the issue. There was a case of a 21-month old baby abused by the father and the baby died. The father was sentenced to 10 years' imprisonment. There was a 6-month-old baby girl who died after being sexually assaulted, and the perpetrator has been sentenced to death. There was a boy who was abused by the baby-sitter and who has been charged for murder. There was another case of a 2-year-old boy physically abused by a domestic worker, who is to be charged for murder. There was a 4-year-old boy abused by the mother and her boyfriend. Both were released on police

bail under a charge of voluntary causing grievous hurt under the Penal Code. All these are criminal cases.

Sir, in terms of preventive measures, could I ask the Minister of State what kind of collaboration takes place with doctors or the Ministry of Health, especially for young children, in reporting of such cases and what action takes place after that?

Sir, as and when doctors come across cases of suspected abuse in their clinics, they are duty bound to report the cases to the Police or maybe to MCDS. And we will follow up from there.

10. Assoc. Prof. Chin Tet Yung asked the Minister for Home Affairs (a) whether offences relating to the abuse of Singapore passports are on the rise; and (b) what steps are taken to deal with such offences.

Mr Speaker, Sir, the number of cases of abuse of Singapore passports rose from an average of about 50 cases a year from 2000 to 2002, to a high of 116 cases last year. This partly stemmed from the stepping up of enforcement by officers from the Immigration and Checkpoints Authority (ICA) as well as closer cooperation between ICA and their foreign counterparts.

A number of these abusers were found to be involved in human smuggling activities. They made use of their passports to travel overseas to escort foreigners to enter other countries illegally, or act as intermediaries between

trafficking syndicates and these illegal migrants. Others tampered with, sold or gave away their passports.

Sir, my Ministry takes a serious view of this matter. Singapore enjoys a high reputation internationally. As a result, the Singapore passport is well regarded internationally. This is evident from the visa-free entry that Singaporeans currently enjoy in many countries. We cannot allow a small number of Singaporeans who misuse their passport for selfish gains to undermine the Singapore Passport, thereby inconveniencing the many other Singaporeans travelling overseas for legitimate purposes.

To maintain the integrity of the Singapore passport, we take a tough stance against those who are found to have abused their passports. Anyone who misuses his Singapore passport will be denied passport facilities for 10 years. They may also be charged for offences under the Penal Code and Passports Act.

The Police and ICA regularly exchange information with their foreign counterparts on cases of passport abuse, and the modus operandi and trends of human smuggling activities. Timely information sharing enables us to take swift action against such abusers.

Sir, in addition, to stay ahead in our fight against syndicates involved in forgery and tampering of our passports, we introduced a new passport with enhanced security features in October 1999. We are currently exploring biometrics technology with a view to further enhancing the security features of our passports. This will make it even more difficult for anyone to abuse the Singapore passport.

In summary, Sir, we will come down hard on those who abuse their Singapore

passports. I am sure that the vast majority of Singaporeans who travel for legitimate purposes will agree that this is a necessary measure to protect their interests.

Sir, because the penalty is quite a serious one - 10 years' ban - may I ask whether the officers who assess these cases do so very carefully to make sure that those who genuinely lose their passports, and not abusers of passports, have a chance to get their passports back as soon as possible?

Sir, every case is carefully considered. In fact, many of these cases are based on actual convictions, admissions or confessions, or official statements recorded made to agencies overseas which are verified by ICA. For lost passports, that is another matter altogether. Of course, we have also introduced steps to ensure that Singaporeans do not lose their passports. And I am glad to say that over time, the number has come down.

Sir, may I just confirm with the Senior Minister of State that only in cases where there have actually been a thorough investigation and a conviction for abuse of passports, for example, under the Passports Act, that there will be such a ban for 10 years?

Sir, as I have said, every case is carefully considered. Not all are based on convictions; some are based on actual confessions. Because you may have a situation where the person is caught overseas, and that happens because the offender is escorting, for example, foreigners from one country to another country, you are actually apprehended overseas. But even then, the agency overseas would have investigated and the offenders are sent back to Singapore. So,

in these cases, again, they are considered and we act accordingly.

Sir, I have one meet-the-people session case whereby a Singaporean lost his passport, and when he applied for a replacement, he was refused. Under what circumstances are replacements of passports refused to Singapore citizens?

Sir, in all genuine cases of loss, a Singapore passport holder will be given a replacement. Of course, he has to pay some fees. But I would expect that in that case, if this is really true, then ICA would have done their investigations, and it is not a genuine case of loss. Because we have got people who would make false loss reports. Very often, some of them will sell or give away their passports. Some of them, because they have borrowed money, will give possession of their passports to these illegal moneylenders. So, that cannot be condoned. In cases where after a full investigation and it is discovered that they are not genuine cases, there will be no replacements.

Sir, in that particular case, that applicant admitted to me that he had a drug record. So, is that one of the reasons for refusing a replacement of passport?

Sir, in that case, Mr Chiam must check the facts. Probably it is not a matter of not replacing the passport but his inability to travel. If one has a drug record, CNB will have a debarment period for travelling. So, there is a difference there.

Sir, what is the debarment period?

Sir, it depends on the offence that is committed, whether it is possession or trafficking. It

can range from two to three years or more. Whatever it is, I think these guidelines are also looked at, and there are good reasons for doing this. Let me assure Mr Chiam that the use of passports is something that all of us want. But, like I have said, it is very important to protect the integrity of the Singapore passport. And whenever abuse is discovered, we will ensure that such abuse must be discouraged.

11. Miss Penny Low asked the Minister for Information, Communications and the Arts as many households are not enjoying cable television due to the prolonged dispute over access to existing fixed line telecommunications network, (a) what is the status of the dispute; (b) whether there is a deadline for the dispute to be resolved; (c) what is his Ministry's policy on fair competition and access to such network; and (d) is there a deadline set out in the licence granted to Starhub Cable Vision to complete the roll out of its services to all sectors of the public.

Mr Speaker, Sir, a decision on the appeal lodged by SingTel against the InfoComm Development Authority's ruling on the dispute between SingTel and Starhub Cable Vision (SCV) was reached in July 2003. This dispute arose from differences in interpretation of key terms in a contract between SingTel and SCV. The decision set out the principles for the resolution of the dispute in a way that fulfilled the consumers' need for cable connection while ensuring that the commercial interests of both parties to the private contract were not compromised.

A Working Group comprising senior management from SingTel and SCV with the InfoComm Development Authority playing a facilitative role was formed to guide the implementation of the decision.

The Group meets regularly to discuss details of implementation and to resolve the practical and other difficulties they encounter in carrying out their contractual commitments.

My Ministry closely monitors the developments at the Working Group and we are satisfied with the progress and results achieved by the Working Group, even if not all issues have been completely resolved at this stage. We note that the Working Group has enabled SingTel and SCV to exercise greater flexibility on operational procedures and interconnection matters. This collaborative approach adopted by the Working Group has enabled 30,800 homes to be connected. The Working Group will continue to ensure that the remaining unconnected homes can be cabled up in the most expeditious manner. The Group has updated my Ministry that this number is around 20,000 homes as at 30th January 2004.

Regarding the deadline for the completion of cable roll-out, the initial target of nationwide cable roll-out was attained by SCV in September 1999, as stated in its licence. Moving forward, stipulating a fixed deadline as a condition in SCV's licence is not practical as there will be a constant flow of new HDB and private developments being completed.

On my Ministry's policy on fair competition and access to networks, it is important to take note that unlike in the past, our telecommunications licensees are now operating in a highly competitive environment. In line with the overarching goal of enhancing Singapore's economic competitiveness, pro-competition policies and approaches should be allowed to prevail whenever viable. Hence, we must bear in mind that the issue at hand is fundamentally a contractual dispute between two commercial firms.

Therefore, ideally speaking, such disputes should be best left to the contracting parties and market dynamics to resolve.

However, we also acknowledge that competition alone does not always assure us efficient delivery of services. There are situations when Government regulatory intervention may be needed. But even then, it is imperative that the level of regulation used be judiciously calibrated to achieve policy objectives. In doing so, we must guard against tendencies to fall back on heavy handed regulatory intervention at the first instance. In the rapidly changing and still evolving infocomm sector, excessive regulation could distort commercial operations, stifle enterprise, and even undermine consumer interests in the long run. Hence, it is necessary to strike a balance between regulatory intervention and respect for private contractual arrangements.

In conclusion, let me assure the House that my Ministry and the InfoComm Development Authority will continue to work with SingTel and SCV to ensure expeditious provision of cable services to residential properties.

Sir, I thank the Minister for his very comprehensive answer. During the SARS outbreak itself, there were a number of national messages which were carried through the cable vision, and some of these broadcasts via cable were quite necessary because they involved teaching people how to wash hands and wear masks, and so on. But those households without access to cable vision had no access to such messages. How do we ensure that if there are other such national messages to be broadcast, that these currently 20,000 households will not be left out of such messages broadcast?

Mr Speaker, Sir, even if a household does not have access

to cable vision, it does not mean that it is deprived of access to television broadcast. In fact, homes that have no access to cable vision can still access free-to-air channels through the terrestrial broadcast. So, there is nothing to stop us from conveying important messages through the free-to-air television channels which are available to all Singaporean households.

In the case of the special SARS channel, it may well have been - I am not sure - put out as a free-to-air-channel which is accessible to anybody who is connected to cable vision. Those homes that do not have the connection may not have access, but the messages can also be conveyed through the other channels or free-to-air terrestrial broadcast, radio and, of course, the printed media, the newspapers. So, it is not as if cable vision is the only channel for us to communicate important public information and messages to our people.

I am heartened to note that there are other channels which the Ministry will use in future if such a situation does arise. During that period of time, a number of my residents, especially in the town of Punggol 21, who are affected ---

Miss Low, we are running out of time. Your question, please.

My question is: how many households in new towns, like Punggol 21, still do not have access to cable, and when can they expect to be able to access the cable service?

Mr Speaker, Sir, I do not know whether the number that the Member asks for, covering Punggol New Town, is exactly the same category as I have here. I have asked my staff to provide me with some information and

they told me that in Punggol, there are 3,377 homes that are connected. There are 4,082 homes that are yet to be connected. There are another 1,032 homes that have not received the temporary occupation permit, and once the permit is granted, it would then be studied whether the homes can be connected or not. In nearby Sengkang, there are also about 1,737 homes that are connected, and the unconnected homes in Sengkang are 1,110 homes, with another 2,265 homes that are pending TOP. So, in total, in the areas of Punggol and Sengkang, there are altogether about 5,192 homes that are not connected or another 5,114 homes that are already connected.

The Working Group, as I said earlier on, will actually be putting a lot of effort and spending a lot of time looking at the homes in Punggol and Sengkang to ensure that they can be cabled up as soon as possible.

12. Dr Amy Khor Lean Suan asked the Minister for National Development (a) how many studio apartments for the elderly have been built by HDB since the introduction of the scheme; (b) how many have been taken up; (c) whether his Ministry intends to continue to provide this form of housing for the elderly; and (d) what other measures will be introduced to cater to the housing needs of the elderly.

You have one minute.

Mr Speaker, Sir, since the launch of the Studio Apartment (SA) scheme in 1998, HDB has built a total of 936 studio apartments (SAs) in standalone blocks under the pilot

phase. About 96% of the units are currently occupied. The remaining units were returned to HDB by their former owners. HDB will re-offer them for sale to eligible applicants.

In view of the favourable response to the pilot batch of SAs, HDB will be building new SAs to meet the housing needs of the elderly. These new units will be integrated with other HDB flat types in the same block to encourage more social interaction between the elderly and younger residents. 300 such units are being built at Selective En-bloc Redevelopment Scheme (SERS) replacement sites in Geylang, Bukit Merah and Queenstown. They are currently being offered for sale to SERS lessees and the balance units will be offered to the public at the end of 2004. HDB will gauge the response to these new integrated SAs before deciding on its future plans for SAs.

3.00 pm

Order. End of Question time.

[Pursuant to Standing Order No. 21(3), Written Answers to Question Nos. 12 and 14-16 on the Order Paper are reproduced in the Appendix*. Question No. 13 has been postponed to the sitting of Parliament on 8th March 2004.]

*Cols. 505-12

"to amend the Economic Expansion Incentives (Relief from Income Tax) Act (Chapter 86 of the 2001 Revised Edition) and to make consequential amendments to the Income Tax Act (Chapter 134 of the 2004 Revised Edition)",

recommendation of President signified; presented by the Minister for Trade and Industry (BG George Yong-Boon Yeo); read the First time; to be read a Second time after the Committee of Supply debate on the Estimates of Expenditure for FY 2004/2005, and to be printed.

"to amend the Singapore Totalisator Board Act (Chapter 305A of the 1999 Revised Edition) and to make related amendments to the Banking Act (Chapter 21 of the 1985 Revised Edition)",

presented by the Second Minister for Finance (Mr Lim Hng Kiang); read the First time; to be read a Second time after the Committee of Supply debate on the Estimates of Expenditure for FY 2004/2005, and to be printed.

"to provide for the issue from the Consolidated Fund and the Development Fund of the sums necessary to meet the estimated expenditure for the financial year 1st April 2004 to 31st March 2005 (both dates inclusive)",

recommendation of President signified; presented by the Deputy Prime Minister and Minister for Finance (Mr Lee Hsien Loong); read the First time; to be read a Second time after the Committee of Supply debate on the Estimates of Expenditure for FY 2004/2005, and to be printed.

"to provide for making supplementary provision to meet additional expenditure for the financial year 1st April 2003 to 31st March 2004 (both dates inclusive)",

recommendation of President signified; presented by Mr Lim Hng Kiang; read the First time; to be read a Second time after the

Committee of Supply debate on the Estimates of Expenditure for FY 2004/2005, and to be printed.

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

Supplementary Estimates of Expenditure for the financial year 1st April, 2003 to 31st March, 2004, contained in Paper Cmd. 2 of 2004.

No notice of amendment has been received.

Question, "That the sums stated for the Heads of Expenditure as shown in page 4 of Paper Cmd. 2 of 2004 stand part of the Supplementary Main Estimates", put and agreed to.

Question, "That the sum of $102,117,340 shall be supplied to the Government under the Heads of Expenditure for the Public Services shown in the Supplementary Main Estimates of Expenditure for the financial year 1st April, 2003 to 31st March, 2004 contained in Paper Cmd. 2 of 2004, put and agreed to.

Resolution to be reported.

Question, "That the sum stated for Head M as shown in page 6 of Paper Cmd. 2 of 2004 stand part of the Supplementary Development Estimates", put and agreed to.

Question, "That the sum of $22,460,000 shall be supplied to the Government under the Head of Expenditure for the Public Services

shown in the Supplementary Development Estimates of Expenditure for the financial year 1st April, 2003 to 31st March, 2004, put and agreed to.

Resolution to be reported.

Thereupon Mr Speaker left the Chair of the Committee and took the Chair of the House.

Mr Speaker, Sir, I beg to report that the Committee of Supply have come to certain resolutions.

First Resolution reported -

"That the sum of $102,117,340 shall be supplied to the Government under the Heads of Expenditure for the Public Services shown in the Supplementary Main Estimates of Expenditure for the financial year 1st April, 2003 to 31st March, 2004 contained in Paper Cmd. 2 of 2004".

Second Resolution reported -

"That the sum of $22,460,000 shall be supplied to the Government under the Head of Expenditure for the Public Services shown in the Supplementary Development Estimates for the financial year 1st April, 2003 to 31st March, 2004, contained in Paper Cmd. 2 of 2004".

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

Question put, and agreed to.

Resolutions accordingly agreed to.

Mr Speaker, Sir, I beg to move,

That this Parliament, pursuant to section 7 of the Civil List and Pension Act (Chapter 44), resolves that the Schedule to that Act be varied by deleting the figures "$2,391,600", "$113,000", "$2,653,200", "$945,600" and "$1,000" in the second column and substituting them for the figures "$2,126,000", "$116,000", "$2,376,300", "$941,600", and "$11,500" respectively.

Sir, I propose that a provision of $2,245,600 be supported for Class I expenditure for FY 2004. Class I expenditure would cover the President's salary, his entertainment allowance and the acting President's allowance. The lower provision is to cater for the wage cuts which have been applied to the Privy Purse since November 2001 with the agreement of the President and which are in line with the wage cuts for political appointments.

The provision for Class II expenditure is meant for the salaries of the Istana personnel. The provision is lower at $2,376,300 because of wage cuts and a further reduction in the CPF contribution rate for employers from FY 2004.

A provision of $941,600 is required for Class III expenditure to meet the expenses of the Istana's household. This provision is slightly lower than the amount required in FY 2003. A higher provision of $11,500 for IT-related expenses is required for Class IV expenditure.

It is therefore necessary to vary the provisions in the schedule to the Civil List and Pension Act (Chapter 44) as indicated in the Motion before the House.

Sir, I beg to move.

Question put, and agreed to.

Resolved,

That this Parliament, pursuant to section 7 of the Civil List and Pension Act (Chapter 44), resolves that the Schedule to that Act be varied by deleting the figures "$2,391,600", "$113,000", "$2,653,200", "$945,600" and "$1,000" in the second column and substituting them for the figures "$2,126,000", "$116,000", "$2,376,300", "$941,600", and "$11,500" respectively.

Order. I will take the break now. I suspend the Sitting and will take the Chair again at 3.20 pm.

Sitting accordingly suspended

at 3.10 pm until 3.20 pm.

Sitting resumed at 3.20 pm

Mr Speaker, Sir, I beg to move,

That Parliament approves the financial policy of the Government for the financial year 1st April, 2004 to 31st March, 2005.

Positive Note

In the last six years, the Singapore economy experienced more volatility and uncertainty than it had encountered over the previous 30 years. Beginning with the Asian Financial Crisis in 1997, a series of external shocks buffeted our economy and ended a decade of uninterrupted growth. We were all hoping for a quick turnaround last year, as our economy had bounced back quickly from previous downturns. But SARS and the war in Iraq dashed our hopes. We had a very difficult first half.

But the economy showed clear signs of turning around towards the end of the year. In the fourth quarter, GDP expanded by 4.9% compared to the previous year. On an annualised quarter-on-quarter basis, GDP grew by 11%, with the manufacturing sector expanding by 17% and the services sector by 11%. This brought growth for the whole year to 1.1%. The recovery was reflected in increased exports, investments and employment.

Both manufacturing and services benefited from an increasingly favourable external environment. As the recoveries in the US, Europe and Japan gained momentum, their appetite for imports increased. Our non-oil domestic exports grew by 15% in 2003, driven by pharmaceuticals, chemicals and semiconductors. Strong external demand also caused the wholesale and retail sector to grow by 6.7%.

Foreign direct investments (FDIs) began to return to the region as the fears and uncertainties from SARS and the Iraq war subsided. Last year, Singapore attracted $7.5 billion of fixed asset investments in the manufacturing sector and $1.9 billion of annual business spending in the services sector. These investments will generate $8.6 billion in value-added each year for the economy.

Employment also improved. More jobs opened up as companies regained the confidence to start hiring again. About 12,000 jobs were created in the second half of 2003, partially making up for the 30,000 jobs lost in the first half. The seasonally adjusted unemployment rate dropped from the peak of 5.5% in September to 4.5% in December 2003.

Macroeconomic policies helped support the economy. MAS maintained a neutral policy stance for the trade-weighted exchange rate of the Singapore

dollar, after re-centering the policy band at a lower level. The Government introduced two off-budget fiscal packages to support the economy, and help households and businesses tide through a difficult period. We had a SARS relief package in May, and another package to accompany the CPF changes in September. These prompt measures helped to maintain confidence, buffer the shocks, and boost economic activity. In the absence of support from monetary and fiscal policies, GDP growth last year might have been flat instead of 1.1%.

Momentum

Our recovery is picking up. There is a palpable optimism among Singaporeans and businesses. The December Straits Times Consumer Confidence Index surged 82 points to 294, bringing it close to its levels in 2000, when the economy was growing strongly. Retail sales in December rose by 21% month-on-month and 10% year-on-year.

We have revised our growth forecast for this year upwards to 3.5-5.5%. But we have to look beyond the cyclical pickup in our growth rate, and achieve sustained long-term growth by transforming our economy. That will depend on our ability to carry through our economic restructuring, upgrade our industries, and create new and better jobs to replace the old jobs that are being phased out. Our commitment to restructuring is a key reason why analysts and investors are confident about Singapore's long-term prospects, and why MNCs still want to put their projects in Singapore.

The Economic Review Committee's recommendations, the CPF changes, the cut in direct taxes, and wage reform lay the foundations for a globalised, diversified, and entrepreneurial economy. These fundamental changes reflect our

resolve to stay relevant in an increasingly competitive world. Let me review our progress in restructuring, and what more needs to be done.

First, we continue to grow the manufacturing and services sectors. We are strengthening our position as a global business hub and one of the most attractive places in Asia for investments and talent.

Singapore remains competitive as a manufacturing location, especially for high-tech, high value-added activities. In the past year, many MNCs have either committed to expand their existing activities, or to establish regional headquarters in Singapore. For example, Hewlett-Packard recently decided to invest another US$1 billion in the next five years to expand its operations. ST Microelectronics has announced $425 million of new investment commitments; Seagate Technologies announced a $200 million investment in recording media and $300 million in high-end hard disk drives; and Agilent Technologies has committed to another $156 million of investments.

However, overall the manufacturing sector is not likely to generate many more jobs. MNCs are shifting to higher value-added, less labour-intensive activities, and will increase output per worker rather than hire more workers. So to create jobs for Singa­poreans, we also need to put strong emphasis on the services sector. We are developing established services such as trading and logistics, info-communications technology, financial services and tourism; while fostering emerging services such as education, healthcare and the creative sector.

More so than manufacturing, a vibrant services sector depends on

people - including foreign professionals, executives, businessmen, technicians, tourists and consumers - being able to travel in and out of Singapore with minimum hassle. In particular, we must facilitate travel for visitors from ASEAN, as well as from China and India.

Singapore does not require entry visas for visitors from most countries. The Immigration and Checkpoints Authority (ICA) has reviewed our remaining visa requirements. As a result, we lifted visa requirements for visitors from Cambodia, Laos and Vietnam last year. We have also made it easier for businessmen to obtain long-term Multiple Journey Visas (MJVs), valid for up to five years. We will allow reputable Chinese and Indian companies to recommend their own staff for MJVs. Social visitors from the PRC are now granted visas valid for up to five weeks compared to three weeks before, while the period of stay granted is now up to 30 days, double the previous 14 days. Similar facilities are also granted for visitors from India, Myanmar and the Commonwealth of Independent States. Since the beginning of this year, we have proliferated the visa application points for PRC travellers, from 67 branch offices operated by 3 appointed travel agents, to 322 branch offices operated by 43 appointed travel agents across China. ICA is exploring other innovative measures, such as on-line visa applications, to facilitate the entry of bona fide visitors to Singapore.

The easier visa rules will attract more tourists here. Visitor arrivals have already recovered to pre-SARS levels. This year, STB expects 7.6 million visitors, up from 6.1 million last year. STB is stepping up marketing efforts to regional countries such as China, India, and ASEAN. Last year saw the largest foreign direct investment in a visitor attraction in Singapore - the $200 million "Singapore Flyer". Sentosa Development Corporation has also drawn up a 10-year, $8 billion

plan to revamp and refresh Sentosa. It has been aggressively drawing in projects and has already attracted about $500 million of new investments, half of them from the private sector.

We have also done well promoting other service industries. Globally, many MNCs are centralising and outsourcing their corporate functions. To save costs and ensure business continuity, banks are relocating many functions, traditionally performed in New York, London and Tokyo, elsewhere in the world. India is attracting many call centres and business process outsourcing (BPO) operations. Singa­pore is not a competitive location for call centres, but we are an attractive site for support centres hosting higher-end activities, particularly for financial institutions. Over the past year, 10 banks, including Credit Suisse First Boston and Barclays Capital, have centralised their regional and even global processing operations here.

Outside the financial sector, we attracted over 30 shared services and BPO projects last year. For example, Europe's largest software company SAP chose Singapore as the launch market for its Shared Services Centre in the Asia Pacific. Polaris and IBM have set up disaster recovery operations here. Toyota Tsusho, ExxonMobil and DFS are all using Singapore as a centre for shared services and business continuity activities.

In healthcare, EDB has launched the Singapore Medicine initiative to develop Singapore into a leading destination for healthcare services. Singapore Medicine will bring together the efforts of many public sector agencies, including MOH and STB. One pre-condition to make Singapore a regional medical hub is to have enough doctors, particularly specialists, who can practise in Singapore. To ensure this, MOH has expanded the list of recognised foreign universities and

medical schools from 24 to 71. To alleviate the shortage of nurses, MOH will continue to recruit nurses from diverse sources, and streamline the recognition of nursing qualifications from the Philippines, Myanmar, China and Indonesia. In addition, MOH will relax many current restrictions on advertising by healthcare institutions so that they can promote themselves in the region. A new set of Publicity Rules will be gazetted within the next few months.

Market Reforms

The second strategy we are pursuing is to reform our labour market so that companies and workers can respond to fast-changing business conditions. The CPF changes and the ongoing push for wage reform are important parts of this effort. They will help to preserve existing jobs and create new ones for Singaporeans.

CPF Changes

We made major changes to our CPF scheme last year to maintain our cost competitiveness. Employer contribution rates were reduced, and the CPF salary ceiling will be brought down in steps. This has lightened the burden on employers and made Singapore workers more competitive. At the same time, we are raising the CPF Minimum Sum and tightening withdrawal rules at age 55, so that Singaporeans will be better prepared for their retirement needs.

Wage Flexibility

The CPF changes are long term structural adjustments, not tactical responses to transient conditions. They will strengthen our competitiveness, but we still cannot be sure that our wage levels will never become too high again one day. Should this happen, we should

not bank on another large cut in CPF rates to restore our competitiveness, as we did in 1985 and 1998. The CPF is a blunt tool for cost reduction. And now that we have reduced the rate to 33%, there is less room for further reduction. This makes it more important to have flexible wage structures, so that companies can respond quickly to changes in the business environment. This will help companies stay viable and preserve jobs in a severe downturn, while giving them the confidence to reward workers and increase employment in good times.

I am happy that the tripartite Taskforce on Wage Restructuring has given strong backing to wage reform. Its report explains clearly how companies can implement wage restructuring for greater flexibility and competitiveness. Achieving wage flexibility will require strong commitment from employers, unions and workers. Employers must put in place schemes that link remuneration to individual and company performances. Unions must take a broad long-term view of workers' interests, and persuade them of the benefits of these changes. Finally, workers must recognise that in a more volatile and competitive environment, flexible wage structures offer the best chance of job security. We must make a concerted effort to achieve our wage reform targets.

Training and Upgrading

Even as the economy recovers, we must not let up on retraining and upgrading our workers. This will enable our workers to seize new opportunities and adapt to the changing needs of the economy.

The Singapore Workforce Development Agency (WDA) will strive to upgrade the skills of workers, especially those with secondary education or less, so that they

can stay employable and take on new, higher-skilled jobs. WDA will launch new training programmes, and make it easier for workers to enrol in them. There will also be programmes for professionals, managers and executives, so that they can support the upgrading of their industries.

These programmes are partly financed by the Skills Development Fund (SDF), which employers contribute to through the Skills Development Levy (SDL). The 1% levy applies to all workers with a gross monthly salary of $1,500 or less. The current levy rate and salary ceiling are not enough for the SDF to cover its annual commitments. Had the Government not injected $500 million into the SDF in 2001, the fund might have been exhausted by now.

Over the next five years, WDA estimates that the SDF's annual commitment will rise from $120 million for 600,000 training places in FY03 to $176 million for 766,000 places in FY08. MOM will therefore raise the SDL salary ceiling from $1,500 to $1,800 with effect from 1st July 2004. The levy rate will stay at 1%. This will increase SDF's income by $22 million per year.

Foreign Workers

When the Asian Crisis struck, the Govern­ment reduced foreign worker levy rates temporarily, to save costs for employers. As the economy recovers, the Government needs to progressively adjust levy rates to reflect the prevailing market conditions.

The levy for skilled Work Permit holders is currently $30, reduced from $100 previously. As part of the changes to the foreign worker scheme for the construction sector, MOM increased the construction skilled worker levy to $50 with effect from 1st July 2004. In line with this, MOM will also raise the skilled

worker levy rate to $50 in all other sectors, with effect from 1st July 2004. The levy rates for unskilled workers will remain unchanged.

For our economy to grow, companies must be able to recruit skilled workers. The higher value and skill-based industries we are attracting all depend heavily on skilled workers, technicians and professionals. A particular concern is manpower at the diploma and post-secondary level. If we lack these middle-tier skilled workers - whether local or foreign - we will choke off the growth of these industries or drive them elsewhere. The shortfalls are already evident in healthcare where there is an acute shortage of nurses, in the IT industry where we lack computer programmers and IT technicians, and in aerospace and pharmaceuticals.

MOM will modify the current work pass system to meet this demand for middle-level skilled manpower. We will introduce a new category of work passes, called 'S' passes, to replace the current 'Q2' passes.

The main criteria for an 'S' pass will be a minimum salary of $1,800 and an acceptable tertiary qualification. MOM will supplement these two criteria with a system of points, to take into account experience, skills and job type when assessing eligibility. The 'S' pass will be subject to a quota, to begin with 5%, as well as a levy, initially set at $50. The scheme will be implemented from 1st July 2004.

A third major strategy is to boost entrepreneurship. This process takes time, because we are not just changing Government rules, but seeking to shift mindsets. The Government is doing its utmost to foster a conducive environ

ment for entrepreneurship. The Action Community for Entrepreneurship (ACE), chaired by Minister of State Mr Raymond Lim, is nurturing entrepreneurship, pursuing entrepreneurship promotion programmes, and acting as the interface between the private sector and Government.

A key hurdle facing start-ups is financing. The Government is helping start-ups gain access to financing. EDB's Start-up EnterprisE Development Scheme (SEEDS) helps early-stage start-ups with equity financing. Every dollar raised by a start-up from third-party investors will be matched by EDB up to a maximum of $300,000. In two years SEEDS has raised nearly $59 million - $27.3 million from Government and $31.6 million from the private sector - to support 103 innovative start-ups. We also recently established Deal Flow Connection, an online portal that helps link up entrepreneurs with financial institutions, venture capitalists and angel investors.

The Government is also helping our entrepreneurs to venture beyond our shores. We have negotiated many FTAs, including those with key economic partners like the US and Japan, to improve access to these markets. Our businessmen can now tender for projects contracted out by the governments of our FTA partners, on an equal footing with their local companies. IE Singapore actively promotes the development of Singapore's external wing. It helps local enterprises take advantage of government-to-government agreements, such as air services agreements, investment guarantee agreements, and avoidance of double taxation agreements. IE Singapore also recently launched the iPartners Programme to encourage companies to band together when venturing overseas. Already, this programme has helped three consortia of Singapore companies to venture into East Asia, Africa and the Middle East.

To bring in entrepreneurial talent, MOM launched the EntrePass Scheme. Entrepreneurs can set up operations in Singapore on the basis of their business plans, rather than academic qualifications or salary.

The Government is also reviewing its rules and licensing requirements to ensure that bureaucracy does not stifle enterprise in Singapore. To date, the Pro-Enterprise Panel has reviewed 1,080 suggestions, of which it has accepted 57%. The Rules Review Panel is also making headway. In the past year, the Panel reviewed 2,913 rules, 23% of the total. It removed 373 rules, updated 772, and re-affirmed the remaining 1,818. By 2005, public agencies will have reviewed all their existing rules, to remove outdated ones and streamline the rest. It does not mean that the job is then done. Thereafter, it will be time to start reviewing all the rules again. Our plan is to review all rules regularly, on a rolling five-year cycle.

However, the Government can only do so much to create a Best for Business environment. Ultimately, entrepreneurs need to take their own risks and develop their own ideas, in order to create and seize new opportunities in overseas markets. Entrepreneurship is, ultimately, a challenge for our whole society.

A fourth major strategy is to promote competition and free markets in all sectors of the economy. Competition spurs firms to be more efficient and innovative, and more responsive to customer needs. It prepares our firms to be internationally competitive and to hold their own in the region. Consumers enjoy wider choice and better products and services, and often lower prices. The economy as a whole gains from higher productivity and more efficient allocation of resources and,

in the longer term, also from more innovation and job creation.

This is why our basic economic stance is pro-competition. Right from the start, Singa­pore was a free port. For trade in goods, when we first began industrialising in the 1960s, we did impose entry barriers and import tariffs to protect domestic industries, but we soon abandoned this infant industry argument and shifted to an open competitive regime.

For services, we pursued the same policy of open competition in wholesale and retail trade, IT and business services. In other industries like telecommunications and power generation, we used to operate vertically integrated state-owned monopolies, like many other countries. But in the last 10 years, we have moved a long way from that model. We privatised statutory boards, deregulated the industries and opened them up to competition. In the financial sector too, we have liberalised and freed up, causing a major transformation of the industry.

However, fostering competition is not always the same as taking a passive, hands-off approach. Sometimes, we need to intervene to structure the industry to allow competition. Otherwise, instead of healthy competition, we may end up with one or two players wielding monopoly power to the detriment of consumers.

Take the telecommunications industry as an example, which is now fully liberalised. Competition in that market has increased significantly, especially in mobile and wholesale international call services. But IDA still needs to act as a referee, because several segments of the telecommunications market are not or cannot be effectively competitive, as in the case of "last mile" access infrastructure. IDA's role is to guard against abuses of market power, and to

set rules which help smaller players connect to infrastructure provided by larger players. IDA's regulations seek to keep the market contestable, and ensure that competition produces benefits for consumers over the long-run.

Or take the power industry. Singa­pore Power was an integrated monopoly operator, generating, distributing and selling electricity and gas to every home and factory. To introduce competition, we first had to split up Singa­pore Power into several different companies, create the right regulatory framework and set up the Energy Market Authority (EMA) to oversee the industry. We made each power plant a separate generating company (genco), competing against other plants. We created a sophisticated mechanism for the gencos to bid to sell electricity into the grid, called the pooling and settlement system. As for the power grid, which is a natural monopoly, we made it a separate, tightly regulated company. Only then were we ready to have different suppliers compete to sell electricity to consumers, starting with the large consumers. The process has taken eight years, and is still not quite complete.

Our small domestic market is an important practical constraint to promoting competition in industries where scale is important. So we have only three local banks, two media groups and two public transport operators. Our market simply cannot support more players. We cannot manage such industries in the same way as we would the retail trade with thousands of players. We have to accept that in these circumstances, limited competition or even sometimes a single operator is the best arrangement, and find other ways to prevent the companies from exploiting their position or becoming inefficient and uncompetitive.

The container port business is such an industry. In this case, the relevant market

extends beyond Singapore. Today, transhipment is an international business. Within our neighbourhood alone, Tanjong Pelapas, Port Klang and Laem Chabang, are all vying to replace PSA as the hub port for Southeast Asia. Competition in the port industry is not really domestic but takes place on a regional or even global stage.

The Govern­ment is determined to consolidate Singa­pore's status as a hub port. The Maritime and Port Authority (MPA) has approved PSA's application for land to build five new berths at Pasir Panjang Terminal to support its growth in container traffic. This will allow PSA to strengthen its competitive position in the international arena.

Jurong Port will continue to operate at its existing facilities in Jurong, where it can handle one million containers a year. Given the intense regional competition, Jurong Port will not for now expand its container capacity by building additional berths at Pasir Panjang, but will review this decision when conditions change.

However, MPA has not granted PSA a monopoly on container operations in Singa­pore, nor will it do so. The port industry is dynamic. If and when industry conditions make greater local competition necessary, and new operators judge it viable to enter the business, the Govern­ment will not stand in the way.

This year, MTI will be proposing to Parliament a competition law covering most sectors of the economy. To complement the liberalisation and deregulation of our economy, we need a means to stop companies from engaging in anti-competitive behaviour and undoing the benefits of efficient and innovative markets. The competition law will adopt a pragmatic approach. It will take into account differences in the various sectors, in terms of their industry structure and stage of market development. It will not

burden businesses with unnecessary regulatory costs. Such an important initiative will need inputs from businesses and the public. A draft version of the law will be released soon for public consultation.

We face formidable challenges in restructuring and upgrading our economy, and coping with shocks and uncertainties in our external environment. But our capacity to overcome these challenges is much greater than ever before. Our financial resources are larger. Our infrastructure and physical assets are better developed. Over the years, our workforce has become better educated and more highly skilled.

As we develop new capabilities and strategies, we must continue to build on and make the most of our strengths. Three fundamentals have been the pillars of Singapore's success and will allow us to sustain our growth and prosperity. These pillars are:

i. Effective Government. A Government that delivers sound public finances, responsive fiscal policies that help to stabilise the economy, and good financial practices that ensure value for money in public spending.

ii A Strong Society. A resilient and cohesive population, and a strong social compact between Government and the people that helps see us through good and bad times together.

iii A Land of Opportunity. A place where every individual has the chance to be the best he can be, a home where people want to raise their families, an economy which attracts talent and investments, and a centre for businesses to pursue new and exciting opportunities.

The Government's financial and budget policies will bolster these three fundamentals.

of Sound Public Finance

One of the most important contributions any government can make to economic growth and resilience is to put public finances on a sound footing. A balanced budget and a trim and efficient public sector will make for stable macroeconomic conditions and a pro-business climate. Only then can the private sector grow and create wealth for the people.

Fiscal prudence has been a hallmark of Singa­pore's economic management. Some people accuse us of being too prudent, but we must continue to maintain fiscal prudence, despite stronger spending pressures and tighter budgets. We will spend more in a downturn if we need to, even if it means going into temporary deficit, as we have done in the past two years. But we must never fall into the trap of structural budget deficits, with a permanent shortfall of revenue. On average, over the course of the business cycle, we aim to accumulate a modest surplus, putting aside something in good years so that we have some savings to draw upon in bad years.

Means

In order to live within our means, we must keep Government expenses in check. This means confining the Government to essential functions and preventing the bureaucracy from bloating up. This will also free up talent and resources for the private sector, and create space for private initiative and enterprise.

The Ministry of Finance (MOF) controls the budgets of Ministries by

capping their spending as a percentage of GDP. To provide some stability in spending from year to year, the budgets are pegged to a six-year average of GDP growth. And to provide flexibility, MOF allows ministries to take advances from future years' budgets, and accumulate and carry forward unused funds to subsequent years. This way, ministries can plan on a multi-year basis instead of being limited by yearly expenditure limits.

MOF will also extract 'productivity dividends' from the operating budgets of all ministries, with effect from FY04. Instead of allowing ministry budgets to grow at the same rate as GDP, MOF will reduce the ministry budgets by a percentage equal to the productivity growth rate, and collect the sums into a central pool. The aim is to encourage ministries to improve their productivity by at least as much as the private sector, and to free up resources to fund new priority projects. For example, MOE will receive additional funds for preschool education and special needs education, while MITA will receive funds to develop the creative industries.

I will now review the FY03 Budget. I refer Members to the second column of the budget statistics table on the screens and in your handout*.

*Cols. 519-20

When I presented the budget last year, I estimated operating revenue at $26.6 billion and total expenditure at $29.9 billion. With Special Transfers of $600 million to provide for the ERS and Net Investment Income (NII) Contribution of $3 billion, the projected deficit was $900 million.

As the third column of the table shows, the revised operating revenue and total expenditure both turned out about $1 billion less than budgeted. There was also a $1 billion shortfall in NII

Contribution. The revised Budget Deficit is $1.8 billion or 1.1% of GDP.

The revised FY03 expenditure is $1.1 billion or 0.7% of GDP lower than the budgeted amount, mainly reflecting lower expenditure on development projects across-the-board. This was due to lower contract costs and construction delays, as well as cancellation or deferment of projects. The more significant items of under or deferred expenditure are MND's SERS programme ($59 million), the Singa­pore Management University campus (about $60 million) and the new Supreme Court building ($58 million). While about $600 million worth of construction projects were brought forward in the September 2003 off-budget package, most will start only in FY04 and have thus not led to an increase in spending in FY03.

The revised FY03 budget estimates also include supplementary estimates of about $125 million for six Heads of Expenditure, the bulk of which goes to MTI ($61 million) for the Utilities Save scheme, which was extended in the September package.

The Government faces a very tight fiscal position in FY04. Operating revenues should rise, but so will spending needs. Despite the improved economy, we still project a budget deficit.

To reduce the revenue shortfall, I am permanently cutting by 2% the budget caps of all ministries except MINDEF, from this financial year. This will save about $450 million a year. More importantly, it will instill financial discipline by encouraging ministries to reprioritise their projects and cut non-essential expenditures.

I am treating MINDEF differently from the other ministries because defence

provides the peace and security that Singapore needs for economic progress. Government has therefore for many years been prepared to spend up to 6% of GDP on defence. In practice, in recent years defence spending has been 4.5% to 5% of GDP. I will maintain this policy.

The 2% expenditure cut will trim the projected FY04 budget deficit to $700 million, smaller than the $1.8 billion deficit in FY03. This is not inappropriate, as the economic recovery is still in its early stages. But I intend to balance the budget by FY05, assuming the recovery continues on track.

It would therefore be prudent for all ministries to assume that their budgets will continue to be tight, and that they will need to find more economies and do more with less. Barring exceptional conditions, next year (FY05) I intend to apply a further across-the-board cut of 2% on average in the budget cap of each ministry, except MINDEF. I am confident that ministries will make full use of this early notice to adjust their plans and work within the resources available.

Let me now present the FY04 Budget, which is summarised in the last column of the table.

Projected operating revenue is $28.3 billion or 16.6% of GDP. Receipts from GST are estimated to increase by $700 million as a result of the increase in the GST rate from 4% to 5%. Collection from property taxes is also projected to increase by $400 million because the concession period for rebates ended in December 2003, while statutory boards' contributions in lieu of tax are projected to increase by $776 million.

The total supported expenditure is $30.4 billion or 17.9% of GDP. This is an increase of $1.6 billion or 5.6% from the

FY03 revised expenditure. Larger budgets for MINDEF and MOT account for two-thirds of this increase. MINDEF has to incur additional expenditure for new functions that need to be undertaken due to the current security situation. MOT requires additional funds to finance the construction of the Circle Line and the Kallang-Paya Lebar Expressway.

The sectoral distribution of the budget* remains largely unchanged, with the largest share of the budget still going to Social Development (44.0%), followed by Security and External Relations (37.0%), Economic Development (13.4%) and Government Administration (5.6%).

*Cols. 521-2

After Special Transfers of $900 million, mainly for the third tranche of ERS, and NII Contribution of $2.3 billion, we expect a Budget Deficit of $700 million or 0.45% of GDP.

It is not enough that we restrain our overall expenditures to live within our means. We must also extract maximum value for money in what we spend. We do this through three initiatives: Best Sourcing, the Cut Waste Panel, and Economy Drive.

Best Sourcing

Last year, I announced that MOF would introduce Best Sourcing for new services. Best Sourcing requires public sector agencies to undertake "market-testing" so as to compare the cost of providing their services in-house against the cost of having private sector vendors provide the services. If the private sector vendor can deliver the services more economically, it will be engaged to do so. The public sector agency will then discontinue the function, and either redeploy or release the affected staff.

The services that are being market-tested include facilities management, IT services, business investigation, enforcement, and procurement functions. Agencies which have started Best Sourcing include MOH, URA and HDB. The functions that they have "best sourced" and subsequently contracted out in FY03 resulted in $17 million worth of contracts for the private sector. The annual cost savings from outsourcing these functions are estimated to be $1.8 million per year. The numbers are still small, but it is an encouraging start.

In FY04, we will extend the Best Sourcing programme to non-core functions. An overall target of 5% of the value of non-core functions will be market-tested this year by ministries, Organs of State and statutory boards. Public sector agencies are understandably cautious, but MOF will encourage them to be bolder and move faster, so as to benefit earlier from Best Sourcing, without affecting the smooth delivery of services to the public.

Cut Waste Panel

The Cut Waste Panel was established last year to seek feedback from the public on how the public sector can reduce wasteful practices, remove frills and reap savings in the delivery of public services. The response has been overwhelming. So far we have received more than 2,200 suggestions. I am not sure how many are from the MPs. The Panel, chaired by the Head of Civil Service, agreed with almost 85% of the suggestions and feedback. Many suggestions had already been implemented earlier though the public may not have been aware of them. But we also received valuable new suggestions. For example, one writer pointed out that even after late payments for foreign worker levy had been cleared, the Work Permit Department was still sending reminders via registered mail, which was a waste of money. The Department has

responded to this suggestion by developing a more efficient tracking method to ensure that once a late payment is settled, reminders are no longer sent out. This has saved $187,000 a year. The Cut Waste Panel is an on-going effort and we look forward to more suggestions from the public.

Economy Drive

The Cut Waste exercise and Best Sourcing programme are but parts of a wider Economy Drive for the whole public sector, launched in May last year.

Public officers at all levels have contributed ideas. The aim is not to cut expenditure arbitrarily but to inculcate a stronger 'value for money' mindset in the public sector. The Economy Drive is critical in this new era of fiscal constraints. The only way to meet future challenges and afford new programmes is to get more out of every dollar we spend.

The Economy Drive has produced some encouraging results. For FY03 up till December 03, it had achieved savings of about $475 million. Let me give you some examples.

MOE saved about $30 million in FY03 by revising the norms and standards (such as space requirements and design features) for school buildings.

MINDEF saved about $24 million in FY03 by revamping the training system for NSmen to achieve a reduction in In-Camp Training days without compromising the operational readiness of the SAF.

MOF and its statutory boards have saved about $19 million by re-configuring IT infrastructures, freezing headcount, and restraining rise in wage costs.

The Economy Drive will not compromise the effectiveness of public

service. Agencies will continue to deliver quality public services. However, excessively high standards inevitably lead to unnecessary costs. Every dollar saved is a dollar that can be released to meet new and pressing demands. Hence, we will review public programmes and expenditure more critically than before, and scale back or remove those which are less useful or not cost-effective.

A cost efficient way of delivering many public services is through electronic means, or e-Government. The $1.3 billion 2nd E-Government Action Plan (EGAP-II) from 2003 to 2005 will build on the success of the first plan. Practically all 1,600 public services that can be delivered electronically have become e-services. EGAP-II will provide the public even better and faster online public services by integrating different agencies' processes. For example, a common bill payment website will be implemented, where the public can pay both Government and private sector bills online.

For those who have difficulty using online services, there is an e-Citizen Helper Service available in 22 e-Clubs found at community centres, community clubs and void decks. The Government will extend this Helper Service to ensure access for all Singaporeans. Other e-Citizen outlets already in operation include 8 NTUC Income premises and 2 Office1 Cybermarts.

For businesses, the Government has also developed an online portal - Business eTown (www.business.gov.sg). This is a comprehensive repository of G2B content and e-services that will be especially helpful to SMEs that lack administrative resources. The portal will provide links to Government services such as licence

applications, and information on tax incentives, assistance schemes, and business opportunities with the Government and abroad.

The Government will also make greater use of e-Government as a channel for public consultation. We have established an online consultation portal where public agencies post consultation papers to seek feedback and ideas. From there the public can see, at a glance, all the on-going discussions.

Keeping Government lean and trim also means divesting activities that are no longer core or strategic to the public sector. I announced last year that the ministries would conduct a review of their companies every three years, so as to determine which should be retained, and which can be divested. The ministries have completed the first review. A number of statutory board companies, for example HDBay and Cleantech Services, have been identified as no longer relevant to the ministries and have been divested. More will be divested within the next few years.

The Temasek Charter spells out the raison d'ªtre of Temasek Holdings and its companies. The role of Temasek is to grow companies with international or regional potential, provide stewardship for companies that the Government needs to own for strategic reasons, and divest those which have no international growth potential or are no longer strategic.

In 2003, Temasek fully or partially divested its stakes in 12 companies. SingTel has divested 69% of its wholly-owned subsidiary, SingPost, through an Initial Public Offering (IPO). Other divestments include the sale of CPG Corp (formerly PWD Corp) in April 2003, and

Temasek's remaining 10% stake in 98 Holdings in October 2003. In January this year, Temasek completed a $2.1 billion placement of SingTel related securities, thus reducing its shareholding in SingTel by up to 5%. Annex A* lists the divestments by Temasek over the last year.

Temasek will continue to consolidate and rationalise its stable of companies. It will divest those that are no longer relevant to its mission, at the right time, at a fair price, without unsettling the market, and after installing a competent team to manage the companies after divestment.

*Cols. 525-6

Enterprise

As much as the Govern­ment strives to be lean and effective, we must recognise that the state by itself cannot create wealth or jobs. Neither can it force citizens to adopt an enterprising mindset. But the Govern­ment can and will create the environment for private enterprise to flourish, for investments to take place, and for individuals to realise their dreams. This in turn will create jobs and wealth.

Ultimately, our success will depend on the flexibility, nimbleness and fortitude of all Singaporeans. The Government will put in place policies and measures to equip and prepare us for the challenges that will come our way. But each of us must seize the initiative to pursue and realise our aspirations.

The last few years have shown how uncertain and volatile a world we live in, but also how much difference resolute leadership and cohesive response makes. Despite the severe storm, we avoided any social or political unrest. Instead we pulled together, restructured our economy and prepared for the next wave of growth.

The next crisis, and there will bound to be one, will be very different from the

last. But I am confident that when it happens, we will again muster the resolve, cohesion and the ingenuity to overcome it.

Order. I propose to take a break now. I suspend the Sitting and will take the Chair again at 4.35 pm.

Sitting accordingly suspended

at 4.12 pm until 4.35 pm.

Sitting resumed at 4.35 pm

Order. On behalf of hon. Members, I welcome Speaker Dr. Katalin Szili, and her delegation from the National Assembly of the Republic of Hungary, who are present in our Gallery today. [Applause.]

Society

Mr Speaker, Sir, after effective government, the next important fundamental for Singapore's survival and success is a strong society. Stable families, social cohesion, racial and religious harmony, secure homes and streets - these make Singapore a strong society and an attractive place in which to live, work, and play.

A strong society is marked by a high degree of self-reliance, resilience and social responsibility. The migrants from

China, India, and the Malay archipelago who built modern Singapore relied on themselves, their families, and their communities to make a living against great odds. These values of self-reliance and social responsibility will become even more relevant in future. Local communities and the people sector must launch more self-help initiatives, and take on a larger role in society.

Government will provide a safety net for those who cannot help themselves and cannot find help elsewhere. We walk a fine line here. If we offer too much protection to citizens, it weakens their resilience and saps their spirit to survive on their own. Our social safety nets must therefore be carefully targeted, and must not undermine our will to work and to improve ourselves. Subsidies should focus on those who need them most, and in areas which yield the most public good. Means testing will therefore become an important feature in providing public services and social assistance.

Let me elaborate on our social policies in four areas:

˜ Achieving excellence in higher education;

˜ Keeping healthcare affordable;

˜ Building the next generation; and

˜ Ensuring adequate finances for retirement.

Our education system has enabled a growing number of our citizens to benefit from higher education. 35% of our working adult population now have either a university degree or a polytechnic diploma, triple the 12% just 10 years ago.

Today, 60% of each cohort graduate from a local polytechnic or university. As our schools improve, more students will qualify for university admission. The proportion of each cohort entering local universities will increase from 21% today to 25% by 2010.

However, good university education is not cheap. One-quarter (24%) of our education budget goes to the university sector. More students entering university, more good professors, and more overseas attachments for students can only mean more spending on university education. The Government's total spending (operating and development expenditure) on universities has already grown from $1.11 billion in 1998 to $1.56 billion in 2002, a 41% increase in five years, mainly because of larger student enrolments. If this trend continues, we will be forced to squeeze resources from primary and secondary education in order to fund university education.

This is not desirable. From the economic point of view, universal primary and secondary education benefits society much more than it benefits individuals. Society as a whole is better off when everyone is literate, equipped with basic skills, and able to become a good citizen. He can be a good colleague, good neighbour, good fellow national serviceman. The whole society gains. Hence it is sound public policy to subsidise primary and secondary education heavily. In contrast, the benefit of a university education accrues mostly to the individual. A rigorous and relevant university degree will make the graduate more employable, and enable him to earn much more during his working life. Furthermore, only the top 25% of the cohort will make it to university, unlike schools, polytechnics or institutes of technical education. The argument for funding university education heavily from general taxation is therefore much weaker.

From the universities' perspective, it is better for them to be less reliant on the Government for funding. The more universities raise their own funds from fees and donations, the more autonomous they will be, the more flexibly they can respond to student needs and market demands, and the better placed they are to achieve academic excellence. This has been the experience all over the world. In the UK and Europe, universities are funded mainly through Government grants, and the result has been mediocrity and declining standards. In contrast, US universities have to compete actively for both state and private funding, on the basis of quality. American students pay higher fees, and take student loans to a much larger extent than European students. The US universities have produced peaks of excellence unmatched in any other country, and higher standards overall. The US is a large country and its multi-tiered model of state and private universities cannot be replicated here. But we should move in the direction of greater competition and self-reliance to allow our universities to achieve excellence.

It is therefore fair to ask undergraduates to pay for a larger part of their university education themselves. They do not necessarily have to pay while studying, but can do so later when they are working and earning stable incomes. With this approach, no student should miss a university education because he cannot afford it. We will make sure of this through generous scholarships to outstanding under­graduates, bursaries for those from low-income homes, and student loans readily available to all who need them. That we can promise.

Our current formula is for undergraduates to pay 25% of the operating costs of university education. The Govern­ment pays for the remaining 75%, and also bears in full the

infrastructure costs of our universities, which is substantial. Going forward, we need to establish a more sustainable and equitable cost-sharing formula between the state and university students.

There will be no university fee increases this academic year. However, MOE and the universities are reviewing the basis for setting university fees in future, and expect to reach some conclusions this year.

Affordable

Our publicly funded hospitals provide quality care to all Singaporeans, at an affordable cost. But advances in medical technology, while enhancing healthcare, continue to push up its cost. For example, in 1990, the standard treatment for blocked heart arteries was angioplasty. By 2000, it had progressed to angioplasty with stents. This has lowered the recurrence of blood vessel blockage but has tripled the cost of treatment from $1,300 to $3,500.

Our ageing population will put further pressure on the healthcare system and on our ability to finance good healthcare for all Singaporeans. MOH will do its best to contain medical inflation. This requires cooperation and understanding from all stakeholders in the healthcare system. Providers have to cut out inefficiencies and frills. Patients have to be realistic in their expectations. And all Singaporeans should adopt healthy lifestyles.

Ultimately, Singaporeans have to be responsible for themselves and not rely on the Government to provide for every need. Our healthcare financing framework, based on the 3Ms - Medisave, MediShield and Medifund - has fostered an ethic of self-reliance, kept healthcare spending down, and served us well.

Medisave for Self-Employed

Originally the self-employed did not fall within this 3M framework, because they did not contribute to Medisave. But in 1992 the Government amended the CPF Act to require self-employed individuals who earn above a certain salary - currently $6,000 a year - to make compulsory contributions to their Medisave accounts. We wanted to make sure that the self-employed regularly put aside savings for their health needs and not expose themselves to unnecessary financial risk when they or their families fall ill.

However, compliance has been patchy. Only 47% of self-employed CPF members have paid their full Medisave contributions. Another 36% have made partial payments, while 17% have not contributed at all, which means that about half of the self-employed are storing up bigger problems for themselves in future by not contributing fully to their Medisave.

Henceforth, the CPF Board will enforce Medisave contributions more strictly for self-employed Singaporeans, just as it does with other employers and employees, to ensure that self-employed Singaporeans set aside enough for their health needs.

Health Insurance and MediShield

With medical costs increasing, so will the risk that large healthcare expenses will exhaust one's own savings. Health insurance schemes can help stretch our Medisave dollars through better pooling of risks. We should therefore supplement Medisave with health insurance schemes which are properly designed to avoid the "buffet-lunch abuses" so common in other countries. This will help us to realise portable employer-provided medical

benefits. MOH is also examining how we can enhance the coverage of MediShield, to give Singaporeans better protection against large bills from catastrophic illnesses.

Means Testing

Besides relying more on medical insurance, we also need to target our healthcare subsidies more precisely, to reach those who need them most. Nationally, one-third of the total healthcare expenditure is financed by the Government. In hospitals, many services are subsidised even more. For example, all patients in Class C wards are subsidised 80% of the cost of their stay.

Currently, we link the level of subsidies to the class of ward. We do not take into account the patient's ability to pay. A poor patient in a Class C ward enjoys the same 80% subsidy as a high-income patient, even though he needs the subsidy much more.

If we continue subsidising healthcare this way, one of two things will happen. Either the Government will have to spend a lot more on healthcare - which means raising taxes, or it must lower the quality of healthcare provided to all Singaporeans. Neither is desirable.

The Feedback Group has proposed pegging the amount of subsidy to the financial status of the patient rather than the class of ward, in other words, means testing. It will be more difficult to implement, as we will have to assess the financial means of each patient. But means testing is ultimately more efficient and equitable as it will enable us to focus subsidies on those who need them, and so make the most of our healthcare budget.

Means testing is not new. We already practise it in the step-down care sector. In community hospitals, nursing homes

and home nursing, patients' incomes are assessed to determine the subsidies they receive. Means testing is also used for primary care services for the elderly who seek treatment in private clinics, through the Primary Care Partnership Scheme. Eligible patients pay the same fees as they would if they had visited the polyclinics. These schemes have been well received and accepted.

MOH is studying how to extend means testing to general hospitals. MOH will proceed cautiously, so as to gain more experience with means testing and give patients time to adjust. It will need to determine where best to start, because hospital services span a wide range, from inpatient care to day surgery to specialist outpatient care.

Even with means testing, a high-income patient can opt for B2 or C class treatment, and pay less than for A or B1 class treatment. But when he does so, he will be subsidised less than a poorer patient getting B2 or C class treatment. And I think that is fair.

Medisave and Medifund Top-ups

Even with means testing and enhanced medical insurance, some older Singaporeans will face difficulties in coping with increased medical expenditure and paying their MediShield and Eldershield premiums. Older Singaporeans were midway through their working lives when the Medisave Scheme started in 1984. As a result, they have lower Medisave balances than younger workers. Furthermore, workers aged 50 to 55 will face deeper CPF employer contribution rate cuts in the next two years.

I have therefore decided to top up the Medisave accounts of Singaporeans aged 50 and above. The amount ranges from $50 to $200, and will vary based on age of the recipient and his existing Medisave balance, as shown on the screens*. This

will cost the Government $104 million.

*Cols.523-4

I will also be injecting an additional $100 million into Medifund to help needy patients who cannot afford to pay their hospital bills even after subsidies. This injection will bring the total size of Medifund to its targeted size of $1 billion.

Our children embody our hopes for the future. Singapore's birth rate is way below replacement level and falling. This is a serious problem. A declining birth rate will sap the vitality and resilience of our country.

Over the years, we have introduced many measures to encourage and support parenthood. After our first package in 1987, the total fertility rate (TFR), which reflects the number of children a woman is expected to have during her lifetime, jumped up to 1.96, as seen in the chart*. This was partly because 1988 was a "Dragon" year, but the impact of the package was felt through the first half of the 1990s. Unfortunately the effect seems to have worn off over time, and the underlying trend of a falling TFR has reasserted itself. By the next "Dragon" year in 2000, the TFR had declined to 1.

60. I am not sure what the next dragon will be. It may be a lizard! The Baby Bonus scheme and further generous tax incentives introduced in 2000 have failed to reverse this trend. We give out over $200 million annually in tax reliefs and rebates, and more than $100 million has been disbursed under the Baby Bonus scheme. Yet the TFR for 2003 dropped to a historic low of 1.

26. This is one of the lowest birth rates in the world. Only 36,000 babies were born last year, far fewer than the 50,000 babies we need to replace ourselves.

*Cols. 523-4

The accelerated decline in TFR since 1998 was partly caused by economic

uncertainty - these were the years of the Asian financial crisis and the two recessions. But the underlying downtrend in birth rates is real and will continue unless we take decisive steps now.

Our existing measures are not enough. We must take a more comprehensive approach to solving this problem. We must encourage young people to marry and marry earlier, and make it easier for young couples to start and raise a family. And we have to take a long-term view. The impact of our policies on birth rates may not be felt immediately, because changing attitudes, mindsets and practices take time and patience.

We need to shift social attitudes towards having children, even while we recognise that having children is a very personal decision which couples have to make for themselves. There is no single magic solution. The approach must be both holistic and coherent, addressing parents' concerns from childbirth through the years of bringing up their children. As these are complex issues that require thorough discussion and deliberation, the Government will study them in depth over the next few months, before deciding on the most effective set of measures. Today I shall set out the principles that will guide our thinking.

Firstly, the aim of our measures must be not just to produce more children, but to produce the next generation of Singa­pore citizens. We want to grow the total population of Singa­pore, but equally important, we also have to reproduce and maintain the core group of citizens who will build and defend our country, and without whom we would not be a nation. Thus our measures must focus on encouraging more Singapore citizen babies.

Secondly, the problem is more serious for the mothers who are more educated and earn higher incomes. The higher the woman's career attainment, the less likely she is to get married and the fewer children she is likely to have. This is true not just of graduates, but also of women with secondary education. It is understandable because the more a woman is able to earn a living, the heavier the opportunity cost to her of having children. Therefore while our measures must cover all families, we must especially make sure that the incentives are effective for the better qualified women.

Thirdly, while encouraging procreation is critical, realistically it will be very hard to raise our TFR back to the replacement level of 2.

1. Even other countries which have managed to reverse falling birth rates have not achieved replacement fertility. We therefore need to boost our population through other ways. In particular, we need to open our doors to immigrants who can contribute to Singa­pore. After getting them here, we need to help them settle down and integrate into our society. We need the right policies to encourage them first to become permanent residents (PRs), and then to take up citizenship. This means treating PRs and citizens differently, so that PRs have incentives to take up the privileges and responsibilities of being Singaporeans.

As for specific measures to encourage procreation, a comprehensive approach should include adequate support facilities such as infant and child care arrangements, better balance between work and family life, and of course financial help measures.

To start with, we have to consider the issue of maternity leave. We have hitherto been reluctant to increase statutory maternity leave. But many working mothers feel that the current two

months is too short. A major worry of working mothers is that they will have too little time with their children, particularly in the first few months after birth which are crucial to bonding mother and child. We may need to extend the period of maternity leave, but without overburdening employers with added costs.

Next, when the mother returns to work, she will often want to put her child in affordable and reliable child care facilities. The Government already subsidises child care, but infant care is more expensive. We will therefore look into providing more financial help for infant care.

Next, we need to strike a better balance between work and family life. Many couples cite the lack of family time and flexible working arrangements as an impediment to having more children. As an employer, the Government will review civil service work arrangements, without affecting essential public services. We will set a clear example to companies of how employers can create a work environment that is supportive of families.

Finally, while families should not have babies just because of financial incentives, tax reliefs and rebates for parents and working mothers appreciably lighten the financial burden of bringing up children. We need to simplify and enhance the existing tax incentives, to make them more accessible and attractive to couples. In fact, I find them quite hard to understand too. I think my wife has figured them out.

Two civil service teams visited Europe recently to study how other countries are tackling their falling birth rates. One went to Italy, the Netherlands and France, and the other to Norway and Sweden. Norway and Sweden have one model. They are both welfare states and they have succeeded in bringing their birth

rates up. Netherlands and France have succeeded in bringing their birth rates up. Italy has not. We wanted to know why one worked and the other did not. We will study the lessons drawn and come up with our own measures. As several ministries are involved, I have tasked Mr Lim Hng Kiang, Minister in the Prime Minister's Office, to take charge and to make specific proposals. He will be assisted by an inter-ministry civil service Working Committee on Population chaired by Mr Eddie Teo, Permanent Secretary in the Prime Minister's Office. I have asked the committee to complete its work before National Day.

With the ageing of our population, we have to ensure that working people put aside enough resources to support themselves in their old age. Today, most of the elderly in Singapore receive some financial support from their children. But longer life spans, rising singlehood, and low fertility rates are making it harder for old people to rely on their children for support. There is a pressing need to make sure that Singaporeans are self-reliant and financially independent in their old age.

Under the CPF Minimum Sum Topping-Up Scheme, individuals are allowed to make top-ups to the CPF Retirement Accounts belonging to themselves, their spouses, parents and grandparents. They can make top-ups in cash or out of their CPF Ordinary Account, up to the Minimum Sum in the Retirement Account. Currently, individuals making such cash top-ups enjoy a tax relief of up to $6,000 per year.

With lower CPF contributions and the higher CPF Minimum Sum, we want to encourage more people to voluntarily top up their own or their family members' Retirement Accounts. I am therefore raising the tax relief ceiling on cash top-

ups from $6,000 to $7,000, with effect from YA 2005.

Non-working spouses, such as full-time housewives, may also be financially vulnerable in their later years. At present, individuals are not entitled to any tax relief when they make cash top-ups to the Retirement Accounts of their non-working spouses. We should encourage individuals who have the means to contribute to the financial security of their non-working spouses to do so. I will therefore be extending the tax relief to individuals making cash top-ups to non-working spouses who are 55 years old and older, and who earned not more than $2,000 in the preceding year.

I hope these steps will help bolster the financial resilience of Singaporean families.

LANDOF OPPORTUNITY

Singapore a Land of Opportunity

Singapore is what it is today because it has been a land of opportunity for enterprising people from all over Asia. Our attractions are unique. We are at the crossroads of East and West, a modern, cosmopolitan city connected to the world of finance and business, yet rooted in the ancient cultures of our forebears. We offer a vibrant economy where people can earn a good living, a stable society where they can raise strong families, and opportunities for all to build a brighter future. And now with Asia on the rise, we must remake Singapore as a land of opportunity.

Competitive Tax Regime

Reducing Corporate Income Tax

A key element of our efforts to remake Singapore is a globally competitive tax

regime. Lower direct taxes encourage businesses to make new investments and individuals to work hard and achieve. In 2002, Government accepted the ERC's recommendation to lower the corporate tax rate to 20% by Year of Assessment (YA) 2005 and as the first step, brought it down to 22%.

I have decided to reduce the corporate income tax rate to 20% with effect from YA 2005. This is expected to cost the Government $800 million annually. It will make Singapore a more attractive business hub, encourage new investments, and spur entrepreneurship.

Deferring the Reduction of Personal Income Tax

The Government had also set the target of lowering the top personal income tax rate to 20% by YA 2005. While this remains our target, the unexpectedly difficult economic conditions in the last two years have forced us to reconsider the timing of the reduction.

First, our spending commitments have increased, as I explained earlier. To balance the budget by next year, we not only need to tighten our spending, but also to husband our tax revenues.

Second, the delay in raising the GST rate to 5% has dented Government revenues. The extra year taken to phase in the GST increase cost $700 million in revenue foregone, more than the $425 million that would be lost annually if we reduced the top personal income tax rate to 20%.

Third, while we expect stronger growth this year, we are not certain if this will be sustained into FY05 and FY06. Should the US economy slow down after the Presidential election, our growth and fiscal position will be affected.

I have therefore decided to defer lowering personal income taxes for the

time being. However, a 20% top personal income tax rate remains the Govern­ment's goal. The Government will watch the budgetary position and economic outlook carefully, and will reduce personal taxes as soon as conditions permit.

Exempting Individuals' Foreign-sourced Income

Currently, foreign-sourced income received in Singapore by Singapore resident individuals is subject to tax unless specifically exempted. Last year, I announced a foreign-sourced income exemption regime under which foreign dividends, branch profits and service income are exempt from tax. This mainly benefits companies, with individuals benefiting only insofar as they earn dividends or service income from abroad.

The ERC had recommended that all foreign-sourced personal income remitted to Singapore be exempted from tax too. This would encourage Singapore resident individuals to remit their offshore funds to Singapore for investment and management. This in turn would boost our private wealth management industry.

I have therefore decided to exempt from tax all foreign-sourced income received in Singapore by resident individuals from YA 2005. With this change, Singapore will now tax individuals on a purely territorial basis.

Exempting Individuals' Singapore-sourced Investment Income

I have also decided to exempt from tax all Singapore-sourced investment income derived directly by individuals from financial instruments. This will help ensure that the exemption of foreign-sourced income does not bias individuals against investments in Singa­pore

instruments. More importantly, it will align the tax treatment of different kinds of investment income, and encourage individuals to save and plan for their retirement.

The tax exemption for all financial instruments other than standard deposits, for example bonds, annuities and unit trusts, will take effect from YA 2005. For standard deposits, last year I announced a partial tax exemption on interest income for YA 2005, to be followed by full exemption from YA 2006 onwards. These arrangements still stand.

These two changes - exempting individuals' foreign-sourced income and exempting Singapore-sourced investment income derived by individuals - will cost the Government about $42 million each year. Details of the scope of both exemptions are set out in Annex B*.

*Cols. 527-30

Singapore as a Business Hub

Regional HQ incentive

To be a land of opportunity, Singapore must continue to be the choice location in Asia for MNCs to base their HQ operations. But we face increasing competition from within and outside the region. I have decided to extend the maximum duration of the existing Regional HQ scheme from three to five years, with immediate effect. Companies that have already been here for more than a year will now also be eligible for this scheme. This will strengthen Singapore's reputation as a prime location for HQ operations and attract more HQ companies to Singapore.

Pioneer Incentive

We must also attract and root new MNC activities in Singapore, to create

new jobs and opportunities. This is why, even as we diversify our economy and build up our domestic sector, we must stay attractive to MNCs. But competition for MNC investments has increased in the last decade, making EDB's task more challenging than ever.

Our response is two-fold. First, our workforce must have the skills and expertise to undertake more knowledge-intensive and higher value-added activities. Second, the package of tax incentives that we offer to MNCs making large investments in Singapore must remain attractive. To this end, I have decided to extend the maximum duration for the pioneer incentive from 10 to 15 years, with immediate effect.

Withholding Taxes on Royalty Payments

Exploiting new knowledge and ideas is important if Singapore companies are to compete internationally. As our economy upgrades, more Singapore companies will develop their business by exploiting Intellectual Property (IP). Much IP is held outside Singapore and our companies have to pay royalties to the IP owners to be licensed to use them. Withholding taxes on royalties is a business cost that will discourage Singapore companies from exploiting IP.

I have therefore decided to lower the withholding tax on royalty payments from 15% to 10% with effect from 1st January 2005. This will be of greatest help to smaller businesses that are not enjoying any of the existing incentives for royalty payments. Withholding tax is usually an item for negotiation in avoidance of double taxation agreements, but we are taking a unilateral step in our own interest to spur our transition to a knowledge-based economy.

Tax Exemption for New Companies

New companies represent our hopes for a more entrepreneurial economy. Government will give these start-ups every opportunity to thrive and succeed. I have therefore decided to fully exempt from tax the first $100,000 of normal chargeable income (excluding Singapore dividends). This exemption will apply to new companies for each of their first three years of assessment that fall within the period YA 2005 to YA 2009. This, together with the current partial tax exemption feature of our corporate tax regime, underscores our commitment to keep statutory costs on entrepreneurs as low as possible. Details of this scheme are provided at Annex C*.

*Cols. 531-2

Financing for Start-Ups

One of the key pre-occupations of new enterprises is access to financing. Currently, the Technopreneur Investment Incentive (TII) encourages private angel investors to fund high-tech start-ups. But not all successful start-ups need to be high-tech. Some succeed by selling mundane items, from coffee, sushi to hamburgers, in innovative ways. I have decided to expand the current Technopreneur Investment Incentive (TII) to include all forms of start-ups and not just high-tech start-ups. The TII will be renamed Enterprise Investment Incentive (EII). Investors in start-ups awarded the EII will enjoy tax deductions for losses incurred if these companies fail, or if they have to sell their shares at a loss. The EII is expected to cost Government $36 million each year.

The Government will also embark on a SME loan securitisation project this year to help a wider pool of SMEs gain access to financing.

Financial Services

In financial services, we have a unique opportunity to become the private wealth management centre of Asia, serving high net worth individuals from the region and beyond. The industry estimates that there are 1.8 million high net worth individuals in the Asia-Pacific region, with private wealth totalling US$5.7 trillion. This wealth will grow even more, with the rapidly rising incomes and high savings rates in the region. Our strong economic fundamentals, socio-political stability, efficient legal infrastructure, and sound regulatory regime place us in a good position to service their needs.

We have done well so far. Existing private banking players have expanded their activities in Singapore. We continue to attract new players, who bring a diversity of new products and business models that have added depth and range to our financial markets. Employment in this industry has nearly doubled over the past three years. The tax exemption of individuals' foreign-sourced income and Singapore-sourced investment income that I have just announced will make Singapore even more attractive as a wealth management hub.

As financial sector activities are continually changing and ever mobile, we have updated our existing incentives to keep them relevant and help maintain Singapore's attractiveness as a leading financial centre. Among other changes, I have decided to enhance our incentives to promote the short-term debt market, the structured finance market, processing services for financial institutions, commodity derivatives trading, secondary loans trading, and SGX trading. (Details are at Annex D*.)

I have also decided to expand the scope of income that will be exempted for

Designated Unit Trusts (DUTs) and the tax exemption schemes for foreign investors and foreign trusts. Examples of income covered by this expansion in scope are rental and discount income derived from outside Singapore and received in Singapore. (Details of these enhancements are at Annex D.)

*Cols.533-8

Approved International Shipping Enterprise Scheme

To retain and attract international ship owners and operators to operate from Singapore, the current Approved International Shipping Enterprise (AIS) scheme will be expanded. Currently, the onshore charter income of an AIS company is not tax exempt, except when the charter income is received from another AIS company. With effect from YA 2005, all onshore charter income received by an AIS company will be tax exempt.

Streamlining the Processing of Estate Duty

I am streamlining the processing of estate duty. For deaths occurring on or after 1st January 2005, the first six months from the date of death will now be an interest free period. Administrators/Executors will now have six months to file a complete return before interest starts accruing. Also, after the Notice of Assessment has been issued by IRAS, a grace period of 30 days will be provided for payment of estate duty where no penalty is levied. The penalty only kicks in after the grace period expires. This new arrangement ensures that administrators/executors are not unduly penalised if they co-operate with IRAS to file complete returns and make payment promptly.

Motor-Vehicle Taxes

To lower the upfront costs of car ownership, I have decided to reduce the Additional Registration Fee (ARF) from 130% to 110% of Open Market Value (OMV). This will apply to cars with COEs obtained from the first COE bidding exercise in March 2004 onwards.

Taxis and cars have previously been taxed differently. Our policy has been to progressively harmonise the ARF and Excise Duty (ED) that they pay. Thus I am raising the ED for taxis from the current 10% of OMV to 20% of OMV, the same rate as that for cars. This will be effective today. Taken together with the ARF cut, new taxis will still enjoy a net reduction in upfront taxes of 10% of OMV.

Liquor Duties

To rationalise our liquor taxes and to bring them in line with our international obligations, I am raising the excise duties on certain types of liquor and reducing them for others. The new rates will take effect today and are set out at Annex E*.

*Cols.539-40

Currently, Singapore Customs assesses the duty on liquors based on standard sizes. Most liquors are sold in standard sizes, but brandy, whisky and sake occasionally come in non-standard size bottles. Singapore Customs will therefore stop the practice of assessing liquor duty based on standard bottle sizes, and instead assess liquor duty based on exact volume. The removal of standard sizing will save the liquor industry about $3.7 million in duties each year.

Tobacco Duties

A local study by NUS shows that healthcare, absenteeism and loss of productivity stemming from smoking-

related diseases cost between $700 million and $800 million in 1997. I have decided to further raise the excise duties on all tobacco products with effect from today to discourage smoking, especially among our young. Excise duty on cigarettes will go up from $255 per 1,000 sticks to $293 per 1,000 sticks. I am also harmonising the excise duties on other tobacco products with cigarettes. The new duties are at Annex F*.

*Cols. 541-4

Mr Speaker, Sir, this Budget will deliver $1 billion of tax savings and Medisave and Medifund benefits for businesses and individuals. It will support our economic recovery this year. More importantly, these measures will build long-lasting competitive advantages for the economy, enhance our capacity to deliver good public services particularly in healthcare and education, and provide more help for families with dependents. The tax changes and incentives I have announced will increase the deficit from the $750 million projected in the FY04 Budget Book to $1.35 billion. The Government is able to finance this deficit from funds accumulated in its current term and will not need to draw on past reserves.

2003 was a tough year, but we emerged from it stronger. Our response to SARS demonstrated our resilience as a people. We are well-placed to ride the upturn in the global economy this year. Most importantly, we have what it takes to sustain Singapore's dynamism and growth over the long term.

But we must also be prepared to encounter more shocks and uncertainties. Fresh terrorist attacks could undermine confidence in the region. New diseases more dangerous than SARS or avian influenza may emerge. China and India

will pose fresh challenges as they continue to open up to the world.

Our strategy in this environment of growing competition is to keep our economy open and continually enhance our competitiveness. This means upgrading our skills, making our wages more flexible, encouraging entrepreneurship, and promoting free markets. We must not seek to shield ourselves from competition but to meet it and excel.

We are on the right track. We are lowering taxes, spending only on essentials, and maintaining a prudent fiscal position. We are creating the conditions for new businesses and enterprises to flourish while building on our strengths in manufacturing and services. And we are creating opportunities for enterprising Singaporeans, while targeting social safety nets at the truly needy who lack other means of support.

Looking ahead, there is much to be hopeful about. We are at the heart of a resurgent Asia, midway between the booming economies of China and India. Opportunities abound in the region and beyond. The Government will play its part to make things possible. And I have every confidence that Singaporeans will seek these opportunities, grab the openings and create new possibilities for ourselves. We will adjust to change, overcome adversity, and confront

challenges courageously and imaginatively. We will press on with confidence, and reach out for success. Together, as one Singapore, we will build a future of opportunity for ourselves and our children.

Mr Speaker, Sir, I beg to move. [Applause.]

The Question is, "That Parliament approves the financial policy of the Government for the financial year 1st April, 2004 to 31st March, 2005." In accordance with paragraph (1) of Standing Order No. 86, the debate now stands adjourned.

Debate to be resumed on what day, Mr Lee?

Monday, 8th March, 2004.

So be it.

Resolved,

"That Parliament do now adjourn to Monday, 8th March, 2004." - [Mr Mah Bow Tan].

Adjourned accordingly at Twenty-three

Minutes past Five o'clock pm