Hansard, 2004-03-11

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 K Shanmugam 11 Mar 11 Mar Ms Olivia Lum Ooi Lin 11 Mar 11 Mar Mr Cedric Foo Chee Keng 16 Mar 18 Mar Dr Mohamad Maliki Bin Osman 16 Mar 18 Mar Dr Vivian Balakrishnan 19 Mar 21 Mar Dr Ng Eng Hen 20 Mar 30 Mar Mr Khaw Boon Wan 24 Mar 28 Mar

ABDULLAH TARMUGI Speaker Parliament of Singapore

Order read for consideration in Committee of Supply [2nd Allotted Day].

Mr Chandra Mohan is not here.

The sum of $562,880 for Head D ordered to stand part of the Main Estimates.

The sum of $10,900 for Head D ordered to stand part of the Development Estimates.

Role of Public Sector in Economic Growth

Sir, I beg to move,

That the total sum to be allocated for Head U of the Main Estimates be reduced by $100.

It is heartening to hear the Deputy Prime Minister reiterate yesterday the importance of having a pro-enterprise civil service. Sir, this importance cannot be overstated, given our need to grow beyond the domestic economy, and amidst intensifying competition.

Sir, our civil service has come a long way and is renowned for its integrity and efficiency. The Government has taken pains over the years to ensure that there is sufficient talent within the public sector as effective policy formulation and execution will help ensure our economic survival.

The current push is for an enterprising Singapore with local companies that can be engines of growth along with the MNCs. But we all know that the push for globalisation is not solely a private sector issue. The public sector bears a heavy responsibility in providing the essential hardware and even software. The demands of growing beyond Singapore are very different from those relating to satisfying a domestic market.

Talent may no longer be defined in the same way it was in the 60s and 70s. If the public sector is to support enterprise, then its employees have to know what enterprise is.

Sir, it has become increasingly common for criticism to be directed by the business sector, especially the entrepreneurs and SMEs, at the bureaucrats, that they are a breed of scholars not tuned into the realities of life. They are variously described as "young punks, big shots but clueless about real life business", or sometimes as "impatient young people wanting to act according to their textbooks", or worse still, as "people not interested to think beyond their Ministries, let alone beyond Singapore."

Many scholars are periodically channelled into the different Ministries upon graduation from prestigious universities abroad. They have no working experience whatsoever, apart from the limited internships they might have done abroad.

Sir, some of these comments are perhaps unjustified but the challenge remains very real - that of having compatible or complementary skills and talent within the public sector, to facilitate the growth of local enterprise beyond Singapore.

I would, therefore, like to ask the Prime Minister two questions:

what long term plans are in place to ensure that the quality of human resources for the public sector keeps pace with the changing requirements; specifically, will the infusion of scholars continue; and

what steps are taken to ensure that sufficient commercial experience is brought to bear on policy formulation and execution?

Service Quality

Sir, I would like to ask for an update of the state of our public services. The Government now intends to further

improve public services with increased use of the Internet and the web. But many of the public still use the telephone to interact with the Government. Furthermore, the telephone services, especially those provided with automated systems, have caused much anguish. Many people find them most unfriendly and difficult to use. Does the Government still consider the telephone as an important mode of public access to Government services? If so, does it intend to improve the services, and how?

Morale of Civil Servants

Sir, the general economy drive in the civil service, the 2% budget cut of Ministries, and the close check on Government expenses, if not properly managed, would create a morale problem amongst civil servants. This, if not addressed, would impact on the level of public services and hinder the drive towards effective Government.

I would like to ask the Prime Minister if the Government is ready to face this challenge and whether its personnel policies are geared to address these concerns. What measures are in place to boost the morale of civil servants?

Medical Benefits

Sir, I know the DPM said yesterday that the issue would be discussed at the Working Committee for Procreation, but I thought it would be timely to list down the reasons why we should change the MSO scheme for civil servants. As we know, under the MSO scheme, a male civil servant is entitled to a subsidy of 60% for his dependants for outpatient treatment but a female civil servant is not accorded the same outpatient benefits for her dependants, unless she is divorced, widowed, legally separated and has custody of her children.

We have raised it in the House several times, many years and, last year, the Government said this difference was effectively removed in 2001 when the Government decided to transfer any unused balance in the annual cap of $350 to the officer's Medisave account at the end of each year. The Government said then that the difference is effectively removed because both male and female officers can then use their Medisave for themselves and for their dependants. But an objective review of the matter would show that the difference still exists and that it is not effectively removed, although it is narrowed.

Sir, I would like to list five reasons why the change is now timely and, hopefully the answer will be more positive by August. First, it does make a material difference to female civil servants, especially given the rising trend of medical care at the outpatient level and the fact that currently Medisave cannot be used for the majority of outpatient expenses. Second, of course, given the call to be family-friendly, the Government should send a strong signal of support for both men and women in shouldering their family responsibilities. But, on a more fundamental level, this is the third reason, the unequal treatment contradicts the basic principle of equal pay for equal work. It also contravenes the Women's Charter, which states that the husband and wife have equal rights and duties to the family. Fourth, being a signatory to the UN Convention on the Elimination of All Forms of Discrimination Against Women, the Government is also obliged to remove any policy or practice that discriminates against women. Fifth, Singapore has also recently ratified the International Labour Organisation Convention 100 on Equal Pay for Equal Work, which seeks to promote and ensure the application of the principle of equal pay for men and women for work of equal value. Sir, this is an international convention we have signed and having

ratified it, it is all the more necessary and all the more timely and relevant to review and withdraw such a policy which will draw adverse international attention to an otherwise impressive record of progress made by our women in an otherwise outstanding meritocratic system.

First, let me thank the Deputy Prime Minister for announcing yesterday that the Government will look into the possibility of giving equal medical benefits to women in the civil service. This is a very important signal. If the Government wants private sector employers to be pro-family, it has to show the way. And, it can do so by changing its stand on medical benefits for women, which everyone agrees is discriminatory as this policy has nothing to do with the performance of our women, but everything to do with their gender. It is good that the Government has agreed to review this policy, otherwise it cannot project itself as a model employer.

I will not repeat everything that my parliamentary colleague, Ms Irene Ng, had said, but I want to say that the Government, if it does not review this policy, will also be in violation of ILO Convention 100, which she has also alluded to. When the Government discriminates and withholds certain pro-family benefits from their own female civil servants, it has less moral authority to tell private sector employers not to do so. And I agree entirely with Ms Irene Ng that there is scope for us not to just wait for the Committee's work, but to start looking into the MSO scheme.

As we all know, all civil servants under the MSO scheme are given $350 to pay for their

outpatient medical expenses. However, while male employees are allowed to use this subsidy for the outpatient medical expenses of their spouse and children, female employees are not allowed to do so. This is a gross anomaly and does not really make sense because, at the end of the year, if there is any unused portion, this will be transferred to the female civil servant's Medisave account. This change, Sir, will not result in any cost to the Government and can be easily implemented. So I hope that the Government will seriously consider it.

As at December last year, Sir, out of 34,221 female civil servants, 20,274 women are on the MSO scheme. Hence, any change to this would be significant to the women. Sir, we have tried to slaughter many sacred cows. I would like to urge the Government to slaughter this sacred cow which has become not only diseased, but so diseased that it is even worse than the mad cow disease.

Thank you, Sir, for allowing me to make my presentation on this cut too.

Since 1976, this issue has cropped up from various Members of Parliament and various Presidents of women's groups too. In a 1994 parliamentary speech, the then Finance Minister said, "It is the husband's responsibility to look after the needs, including the medical needs. This is how our society is structured. It would be unwise to tamper with this structure." Today, it is 2004. The social climate is changing and we have to make amendments and slaughter, not a sacred cow, but perhaps a sacred bull - that man is the head of the household! As long as this fundamental is in place, the civil service will be led by that. The civil service needs to lead by example, and such archaic policies, such as the 1994 Medisave-cum-Subsidised outpatient scheme policy which favours the male civil service officer over the female needs to be revamped. The reality is here -

33,000 or 54% of our civil service officers are women. So just by having this policy, we are actually discriminating against the majority.

Admittedly, 28 years later now, the space for discrimination against female civil service officers is getting smaller. However, I still get the impression that we are maintaining a status quo on this and the civil service cannot afford to lag behind the private sector. A check with some private companies already shows that they are far ahead in this field. DBS Bank, for example, has got no such discriminatory policy on medical benefits.

What is beyond my understanding here, and I need some clarification, is why are we tenuously clinging on to this policy and have to wait for August for a review through the procreation committee. Why can we not do it now, because it is staring in our face whether we should still be having this policy that so obviously discriminates against female civil service officers?

11.15 am

Lastly, I would just like to say a big thank you to Dr Maliki for being one parliamentarian who has stood up for women.

Child Sick Leave

Sir, presently, civil servants are entitled to five days of child sick leave per child. Originally, this was extended to only women, and I spoke on this before to ask that it be extended to men as well. I understand that, recently, this was extended to male civil servants as well, and I would commend the civil service for this step forward.

In making the change, it signals that both men and women have an equal

responsibility in caring for their children. But there seems to be this bungee jumping, home brewery syndrome, because there is an old mindset that still prevails. Because under the current policy, if both husband and wife work for the civil service, they will have to split the child sick leave among themselves. They are not each entitled to the five days of child sick leave for each child.

This policy should be changed for two reasons. First, as a matter of principle, equal pay for equal work would also apply for the men. This benefit is like medical leave or other benefits that come with the employment contract and it comes with the employee. It is not industry practice that it is out of place to say if both husband and wife work for the civil service, then they have to split the benefits among themselves. We are also moving towards more portable benefits, ie, the benefits that an employee gets are carried like a backpack on the employee. The benefits go with the employee and are not tied to who that employee is married to.

Second, is the practical aspects of it. It places a disproportionate burden on the woman and does not encourage the man to share the responsibility of caring for their sick child. We have to be realistic. Given our patriarchal system, there are no prizes for guessing that if the husband and wife were asked, "OK, between the two of you, one of you has to choose who is going to take child sick leave." No doubt, it will be the woman who says, "I'll be the one." And the wife cannot say to the husband, "Look, you are entitled to your own share of child sick leave. So, it's your turn now." If we want to encourage women to have more children, such policies should be changed. And we should see the husband and wife as playing an equal role, as separate individuals with equal responsibilities to the family.

Family Leave

Sir, Singapore's population will age rapidly over the next 30 years. In 1999, about 1 in 15 of the resident population were aged 65 and above. This is projected to increase to 1 in 5 by year 2030. The dependency ratio for the 65 years and above will triple, from 1:10 to 3:10 over the same period.

I am pleased that the Government has always adopted a pro-family stance. PM Goh, in his recent Chinese New Year speech, lamented the erosion of family values, and noted that strong and stable families make for a strong and cohesive society. DPM Lee has also reinforced this in his Budget speech.

With an increasingly aging population, more and more of our workforce will be buckling under the strain of caring for both the young and old. While we hope that the procreation measures to be announced in August will reverse this, our singles population is also set to increase. An emerging trend is that the singles tend to end up being the ones to look after their aged parents, since most of them would be living with their parents.

I would thus like to ask the Prime Minister to consider repositioning the child sick leave to family leave, and extending this leave to civil servants who need to look after their elderly parents and young children when they fall sick, regardless of the marital status.

Ex gratia Payment

Sir, my concern is over the issue of ex gratia payment to staff of statutory boards or the Government when a corporatisation takes place. PSA corporatised in February 1996. The staff were split into two

groups. One group was transferred to the PSA Corporation and the other group to the Maritime Port Authority.

At the time these employees were transferred, there was a Ministry of Finance circular which provides for ex gratia payment. It states that when a statutory board or Government entity is corporatised, the employees will be paid an ex gratia payment. This payment will be made both to the employees who move to the privatised company as well as those required to remain in the board to regulate the privatised company. The Government said that this payment will incentivise employees to remain in their respective organisations and is a reward for the contribution to the development of the statutory board. On time of payment, the circular said that it can be made at any time after the corporatisation of the statutory board or Government agency and before the IPO of the privatised company.

Sir, it has been more than eight years now since the employees were transferred. Many had since left service. For instance, as at 2001, out of 347 employees who were transferred, 67 had left service due to death, retirement, medical boarding out or other reasons. Many more would have left by now in both MPA and PSA Corporation.

If the promise of an ex gratia payment were to have meaning at all, the payment cannot be delayed for too long, as otherwise there will be no one else left to pay. This may be unfair to those staff who have put in long years of service and for whom this benefit was intended.

So, my question to the Prime Minister is whether he could give some indication as to when the employees who were transferred to MPA and PSA Corporation will be paid this ex gratia payment. After

all, the Finance circular had clearly stated that payment can be made at any time before the IPO listing. Staff had also pointed out that there was a precedent in the case of the PUB when payment was made even before Singapore Power was listed.

Mr Chandra Mohan is not here. Mrs Yu-Foo Yee Shoon is also not here. Ms Braema.

Civil Society

Thank you, Sir, for allowing me to speak on this subject.

I would like to make some observations on what constitutes civil society today, and ask for greater openness and trust among the three main stakeholders - the Government, the private sector and the people, which include societies, voluntary welfare organisations and civil society groups. If one were to look at our short history, we were never short of examples of the people taking ownership to improve things around them - the clan associations that were set up to help each dialect community among the Chinese; the Malays who were very organised along the principles of gotong royong, the spirit of mutual self help. The Indians too formed associations along ethnic lines or language-based discussion groups.

Then we had a blend across cultures as societies and voluntary welfare organisations were formed to help the less fortunate among us. In politics too, the then women's movement under Mdm Chan Choy Siong helped the PAP to get rid of polygamy and also won some women's votes for the party in the early days.

With globalisation, the private sector too is now becoming more accountable and is looking to corporate social

responsibility as its own selling sector. Companies like Shell, Hong Kong and Shanghai Bank, Singapore Press Holdings, MediaCorp are all trying to contribute to the good of society.

The third sector - people. Many of us want ownership too to make a better society. Often, due to the lack of experience or the fear as perceived, it does curtail some of these aspirations. If we really want to create a vibrant society, we need to engage our people more in the decision-making process or as enablers towards the decision. Our people must step out of the so-called fear zone. And in this discussion, I will just cite a few examples where I feel sometimes mixed signals are sent to the people that sometimes they do not know which way to go or they step out of this process altogether.

Role of the CDCs. This organ is great for community bonding and for funding. But, at times, it subsumes quite a number of initiatives that come from the ground in its ever expanding umbrella. In fact, I fear sometimes that the ownership can transfer from the citizens straight into the CDC fold. I recently heard of one case of a CDC now giving out all-rounder awards to school children with certificates and money awards. I wonder what is happening to the schools' ownership in this instance.

You are running out of time, Ms Braema. Please wrap up.

When does Sintercom become political and when does it remain a civil society? Lastly, I would like to ask for clearer and more consistent signals so that we can get more ownership from the citizenry.

Mr Chiam See Tong is not here. Dr Jennifer Lee is also not here. Mr Ahmad Khalis.

Immigration

Sir, I think that not many Singaporeans are fully aware of the implications if our TFR remains as it is. Recently, a friend of mine, a professional, wondered whether the ex-Minister for Health did not handle SARS well enough, such that he has to be relegated to handle a much simpler and smaller portfolio. I spent about 15 minutes, much more time than I have in this cut, to explain to him about the dire consequences of low TFR coupled with an aging population.

The anecdote brought up by my hon. Friend, Mr Ong Kian Min, on Monday is worth repeating. He recounted how the one-child policy in China had affected a young couple. They have to support eight aged grandparents in addition to their one child. I hope the Government would do more to educate the public on the dire consequences of low TFR coupled with an aging population. For instance, can we not disseminate information on the experiences faced by other countries, past and present, in this regard?

Sir, getting more people to have more children and getting Singaporeans to accept immigration as a plausible solution is not a simple task. However, if the rationale for it is constantly borne in mind and if the consequences of not taking the necessary action is fully appreciated, I believe Singaporeans would be more amenable to making mindset and even lifestyle changes.

In this connection, I also urge the Government to be careful of the signals that get transmitted to the people, for example, as regards welcoming foreigners. Ms Ong Ling Lee gave some examples. She wrote to the Straits Times that currently, the 2-month maternity leave does not apply to the third child onwards; higher accouchement fee to the hospital for the delivery of the fourth child

onwards; Medisave cannot be used to offset medical cost for delivery of fifth child onwards, and so on. The Government may say that these are to reward families with three children or less. But in the light of our current TFR, and in the light of the Government being willing to consider even inviting immigrants, the above policies need to be reviewed. I believe the number of families with more than three children - mine is one of them - is not that large. I believe that allowing the fourth and subsequent children to have the same benefits as the first three would not upset the Government's policy on TFR growth so much. On the other hand, it will pass a more correct signal that all Singaporeans receive the same special welcome and that we care for what we have. A Malay saying goes, kejar kera di hutan, bayi mati di gendong keciciran, which means chase the monkey in the forest, lose the baby in the arms. We should avoid this, Sir.

Mdm Ho Geok Choo is not here. Mr Gan Kim Yong.

Citizenship

Sir, I agree that we must make a strong distinction between the privileges of permanent residents and those of our citizens. We must create value for our citizenship. I hope the Prime Minister's Office will look into the benefits to be reserved for Singaporeans only. But I think we need to go beyond just financial benefits.

I visited a company in India earlier this month and I had a chance to meet some of its young employees. I asked them what motivated them to join this company. They told me that the main motivation was not the pay but because they were proud to be part of the company. They explained that the company was not just a commercial entity. It provides housing, healthcare,

education and even provides utilities for the employees and also for the community around the company. The employees have developed a strong sense of loyalty to the company.

Sir, genuine loyalty does not depend on financial benefits alone. We must continue to make Singapore a land of opportunities, not just financially, but also for arts, sports, fun and also a good place for bringing up our family. At the same time, we must also review the process of conversion from permanent residence into citizenship to make it easier. In particular, the requirement for younger males to serve national service may be a deterrent. Of course, national service is an integral part of a citizen's duty. However, the idea of national service may be quite alien to these foreigners. For them, to overcome the apprehension may not be easy. It may help if we can consider relaxing some of the requirements somewhat for the first generation PRs.

Sir, PRs should also be given a definitive timeframe, say, five years, to decide whether they want to become a Singaporean. If not, their PR should be revoked and they can still continue to work under the Employment Pass and contribute to the economy.

Sir, at last year's Budget Statement debate, I said, "Singaporeans must have greater privilege than non-citizens so much so that highly talented foreigners will queue to sign up for citizenship, and that membership in Singapore must have its privileges. There must be strong economic and social reasons for Singaporeans

to be proud to want to remain as a Singapore citizen."

11.30 am

I thank the Government for listening to this plea - to recognise the importance of treating PRs and citizens differently. This

will only mean extending greater benefits and privileges to citizens, while reducing the current benefits accorded to PRs. I would like to ask the Government: what are some of the greater incentives to be introduced to make PRs more willing to commit towards citizenship? At the same time, what are some of the disincentives for them to stay on as PRs perpetually? Does the Government realise that many PRs want the best of both worlds, and are not willing to commit towards Singapore citizenship?

Permanent residency cannot go on forever. There must be a time limit whereby the PR must be forced to make a hard choice of whether to continue as a citizen or to revert to employment pass. If we do not force the PRs to make a decision, there will never be a decision and they will take it for granted to enjoy the best of both worlds. When a national crisis comes, we will see them take flight in large numbers, and this will actually worsen our national crisis further.

I therefore propose that the Government limit the PR term to five years, after which the PR will have to make a considered choice of whether he or she wants to continue to work and enjoy life in Singapore as a citizen, or to revert as an employment pass holder. They cannot have the privilege of enjoying the best of both worlds when our citizens have only one world to live in.

I would also like to ask the Government if there are also any plans to reduce the push factors, pushing our citizens to consider emigration, or plans to increase our pull factors to attract our citizens back.

If one of the key privileges of citizenship is the right to exercise our vote at an election, does the Prime Minister hope to allow more citizens to exercise that vote by encouraging greater political competition by making sure that more

than 50% of the contested seats at a general election are allocated to single member constituencies? In this way, the special voting privilege of citizenship becomes real, and not just in name only.

Sir, I thank the Members who have spoken. Let me deal with the issues they have raised one by one.

First, Mrs Lim Hwee Hua talked about a pro-enterprise civil service. I absolutely agree with her that it is very important that the public sector also understands what enterprises are about and is able to formulate and create a framework which fosters enterprise in the private sector. We need very able people who understand not just business but also policy. It is not easy to find such people. If we ask the public sector what is the problem, they will say the private sector does not understand policy. But, of course, if you ask the private sector what is the problem, they say the civil servants do not understand the business. And we need to find people who have some appreciation of both, or we need some private sector people within our organisation.

First of all, I think we need able people in the public sector, that means, good quality people - talented, committed, imaginative, have drive, ideas, willing to take risk, willing to make decisions. It has to be a high quality public service where people are well-treated, they see career opportunities and personal fulfilment, and they want to go and do something for themselves and also for their country. That is what we have been trying to build in the public sector.

Secondly, we have to make sure that it is a competitive career. Whether you are in the public sector or in the private

sector, if you do well, the monetary rewards should not be too different, and that is why we have had a policy of competitive wages in the public sector and we will continue to maintain that policy, even though in the last two years, because of the downturn and the special circumstances, we have had to freeze and, in some cases, cut salaries.

Thirdly, we need people with commercial experience in the public sector. Mrs Lim is right that when officers come in, they are new, they do not have experience. But this experience can be acquired. One of the things we have done is to have a gap year for the people who are on the Management Associates Programme, who are on the track to join the Administrative Service. That means, when they graduate, before they start work, they are given six months or a year to spend either with an MNC or with a supernational corporation, like the IMF or the World Bank, or to be in an emerging economy like China or India, and gain some real experience to see how things are done, before they come in. I think it will change their mindset. It would not make them all into bankers and businessmen, but at least they will know how things are done and what it is like to be the receiving end of instructions and directives. That is a new programme, but I think it is going to help.

Fourthly, we have schemes to second our civil servants out to the private sector and spend a year with a company, work there, and then come back to the public sector. We have officers who went to SIA and to Shell. MAS has officers gone out even to the financial institutions, some of them to the Wall Street investment banks. I think that also helps.

Fifthly, we want to recruit people into the public sector from the private sector - mid-career, people who have spent time, who have established themselves, who have some feel for how things are done in

the private sector, who can come in and will be able to contribute a different perspective. We do not hope to make them into bureaucrats. But we hope that by being different from the rest of the civil servants, they will contribute something valuable. We have been trying to do this for several years now. We have a few officers come in. The successes have not been many, because it is quite a difficult hurdle to cross. The officers who come in do not feel comfortable as they are in a different environment, they are used to a bottomline environment, chasing projects, closing deals, and getting things done. Here, you have to deal with policy papers and intangibles. You need a change of mindset, and yet you do not want them to change so much that they become just like all the other civil servants, and then their uniqueness is lost. So, it is a challenge. We will continue to do this, and when we bring people in, we make a special effort to look after them so that we foster their adjustment and integration into the civil service.

The British also have the same preoccupation. Prime Minister Tony Blair recently addressed their civil service and set out all the things which they need to do to change. One of them is the need to have greater interchange and flow with the private sector. In their case, about one-quarter of the Director-Generals had come in from the private sector. So they seem to have had more success than we have had so far, but we will continue to learn and improve.

I understand the difficulties which the private sector has in understanding the public sector's imperatives. I sympathise with them. I also thank Mrs Lim for being very polite in expressing them. I should say that it is both ways. The private sector sometimes feels that it would like this done and why can it not be done. And, often, there are good reasons. But, often, there are also good reasons why the public sector wants something done

even though the private sector does not want it. It is necessary to have some meeting of minds. One of the ways which we can make this meeting of minds takes place is to have people who have worked in the public sector, go out, and then eventually go into the private sector. And, hopefully, while they are there, they will retain some of their old perspectives and values, but now understand issues from a different position, and have a clearer idea how policies have to be modified or maybe give us valuable feedback. I know Mrs Lim herself is one such person. She used to be in the Administrative Service, and now she is with Temasek, which is in the private sector. And I am sure there are many others too who are out there, and this gives us valuable links.

Dr Tan Boon Wan asked about service quality. He asked for an update on the state of public services, eg, interface with the general public, promptness in answering phone calls, quality of counter service, and so on. He specifically raised the question of the automated answering system being unfriendly, and he asked what we are doing to improve the service. We are quite committed to improve the service quality all the time - it is an unending task. We have what is called the Service Improvement Unit Political Supervisory Committee, which monitors the service quality very closely. One of the things they track is the feedback - brickbats and bouquets. For FY 2002, which is the latest data we have, we found that the ratio of compliments to complaints, ie, bouquets to brickbats, was 13:1. That means 13 bouquets for every brickbat. This shows that the quality of service is good, but I know there is always room for improvement. When we meet people at the meet-the-people session, they will often explain to us how they have had to see many departments and have to run around and maybe finally may not even get the problems solved. Sometimes we can help them solve the problem. But what we need to do is to

solve the problem through direct interface with the civil servants. So that they can solve it and they do not want to depend on the MPs' intervention or even the Ministers' intervention to fix things.

One of our initiatives to improve the service quality is to establish guidelines on the desired level of customer service for all public servants. Last year, we started and conducted what we call a "mystery customer" audit on all the Ministries and statutory boards to ensure that the guidelines are observed. Telephone service standards have been included in the audit and the results are currently being compiled.

Another way is to make use of technology. Dr Tan complained about the automated system being unfriendly, but it is a fact of life that if you want a 24/7 service and you want to provide it on a mass basis, an automated phone system is of some help. And if the phone system cannot deal with your problem, then some person will deal with it. The Government, of course, has a jargon for this. We call this "interactive voice response (IVR)", or sometimes we use the Internet. There have been complaints, like Dr Tan's, but, overall, I think that they serve a good purpose and we will try to make the system more user-friendly. I read recently that there is some research going on in America where the computer system can recognise the tone of your voice. And if it hears that you are getting angry, then it will transfer you to a real human being. So the problem now is people may pretend to get angry just to get the real human being! But we will explore all these technologies.

I would also say that the web interface on the Internet is important and all the Ministries have web pages. We have the e-Government websites, and a lot of business can be done on the

Internet. Students can apply for universities, examinations, and so on from the Internet. Many of the transactions with HDB and CPF may take place on the Internet. So, it is very important to have a good Internet interface. As one of the "mystery customer" auditors for the Internet interface, once in a while when I have time, I visit it, and it is not always completely convenient. Because from the point of view of the agency doing it, they know where they want to go. So they know that you click down there, there, there, and then after five clicks, you arrive at where you want. But for the person going in for the first time, it may not be so easy to navigate. So when I find something not quite right, I give them some feedback and try and fix it. But I hope that other people who use the interfaces also do that. Then it will be easier for them to improve.

Of course, the basic thing in a good customer service is there must be that motivation to serve and to look after the person, to solve his problem and to smile at him. And this is an on-going exercise and it will be continued to be a key area of focus under PS21.

The next subject pertains to medical benefits for female civil servants. I stated our position yesterday which, I think, was after the cuts were filed. But the three lady MPs (Ms Irene Ng, Mdm Halimah and Ms Braema) have given further cogent reasons why this matter should be studied, and I am quite sure that Mr Lim Hng Kiang's committee will take them into consideration and reach a sensible conclusion. I hope that August is not too long for Ms Braema to wait.

11.45 am

Ms Irene Ng asked about child sick leave and she said that there should not be a cap of five days for both parents per child, because the cap should apply to individual employees. But I would say that

the Government recognises that parenting is a joint responsibility of both parents and that is why we have extended the child sick leave provision to fathers. It used to be that only the mothers were allowed to take child sick leave and look after the children. But we said, no, let fathers and mothers be equal. And the fathers, if they are working in the civil service, are also entitled to five days. But if both parents are working in the civil service, actually our principle is to grant child sick leave not based on per parent but per child. So whether you have one parent who is a civil servant working or two parents who are civil servants working, the child probably would fall sick for about the same number of days. And so our principle is five days per child and if you have two parents, they have to decide among themselves which way to split it. I think that is logical.

I would say that the unrecorded child sick leave, of course, has contradiction in terms - unrecorded, but five days. So there must be some record somewhere. But it is called that because it is over and above the normal vacation leave provision. And, on average, civil servants have been taking 3.3 days of child sick leave per year. So, generally speaking, five days are adequate and a joint cap does not seem to have affected people. In fact, I should say that, as a general backdrop to this request for more leave, the civil service has been very generous in its leave provision. We want to be pro-family, we want to cater to parents who have to look after children, or look after aged parents. We cannot just add more and more days of different kinds of leave. The basic principle which the civil service tries to adhere to is that the civil service salary and benefits should keep in line with, but should not lead, the private sector. So we have to study private sector practices and look at how the private sector manage their leave, to see whether we need to review the leave provisions, so that we can meet these

new needs and, at the same time, not just balloon the leave entitlements.

So that is the answer also to Ms Braema. I am sympathetic to her concern. I know many officers have aged parents at home and it is a considerable burden financially, of course, but also physically, because they got to look after the parents. If he or she is ill, you got to bring him or her to the polyclinic or hospital, or you got to visit her at the old folk's home, and some emergency pops up, you got to run down. These are exigencies which we all know. And I think that we have to make these adjustments. But how do we do this without having more and more days of leave and less and less days of work? So it is something which we have to consider.

Mdm Halimah raised a question of whether the staff of Maritime and Port Authority (MPA) will be paid ex-gratia payment. This was paid to the staff who were retrenched from PSA. PSD has discussed this issue with the PSA, and PSA's position, which we agree with, is that the PSA ex-staff who are now in the MPA will receive the ex-gratia payment at the same time that PSA Corporation pays its own staff. Because it is not tenable for the MPA staff to be paid before the PSA staff are paid. The people who were paid so far were retrenched. So we had to settle with them because they did not leave voluntarily, and PSA had to make a special arrangement for them. But the majority of the PSA staff who are working in the PSA have not been paid. And the basic reason, I think, goes back to how this payment got conceived in the first place. Our original arrangements were no payment. But when a statutory board got corporatised and when the shares were floated, employees were given shares at an employee price. And in some cases, there were big windfalls. So in order to reduce the windfall and control it, we introduce this scheme so that it is a finite

amount. We pay you this, you can use it to buy shares at market rate, just like everybody else. So it is really linked to the privatisation and flotation of the company. If the company does not privatise and has not floated yet, then the question of the payment really, in principle, should not arise. In PSA's case, unfortunately, we were planning to privatise and then force majeure supervened and we were not able to follow through. So we postponed the privatisation for the time being. But the plans are still there. I am afraid Mdm Halimah may not be fully satisfied with this answer. But it is one of those disappointments which we have to live with and to manage and to explain. And I think that over time, this problem will be cleared.

Ms Braema talked about opening more space for civic society. There have been mixed signals and she asked for clearer signals. I think our signals are getting clearer and clearer. An evolution is a gradual process and it is something where we have to feel our way forward, as Deng Xiao Ping said, "crossing the river one stone at a time and you feel for each stone as you cross the river."

I have stated my position in a speech at the Harvard Club in January. I think the other Ministers have also stated their position in their own ways. We had the Remaking Singapore Committee which I think Dr Vivian will give an update on later. The position today is quite different from what it was five or ten years ago. It is continuing to evolve and we have to find our balance and progressively adjust.

The role of the CDCs is one issue which we have to consider. The purpose of having the CDCs of course is to expand the space for civic society because we would like to bring in professionals who are not already in the grassroots

organisations at the constituency level, and who are not part of the Government, in order to contribute at this intermediate level. They can organize activities and whether it is welfare programmes, scholarship programmes, or community work, the CDCs is another avenue where they can participate. But there is a balance, because a lot of things happen at the constituencies and the CDCs have to work together with the constituencies and if everything is put under the CDC's umbrella, then where does that leave the grassroots organisations, the CCCs, RCs and their advisors? So a balance has to be struck. This is something which the Government, the Mayors and the grassroots organizations are working on.

The CDCs have certain advantage because they have scale, they have some resources, they have the PA's support. So it is easier in some ways for them to launch some activities. If you want to organise a big activity and you want many constituencies to help you, then it is better to do it at the CDC level and you involve a dozen constituencies at one time. But if it is only done at the CDCs, then there is a certain distancing of the relationship. Why? Because at the grassroots level, you are looking after your own little group of people. The warmth and rapport are easily developed at that level. It is not so easy when you are talking about a dozen constituencies.

Sintercom, whether it is political or not, I do not think that is a big issue. We are not preventing the website from operating. We just say, register yourself as a political website so you take responsibility for what you are saying. The organisers decided not to, it is their prerogative. I think this is a game which will continue to be played, if I may be quite candid about it. Because we want civic society, we want public discourse, but we also need accountability and responsibility. And one of the games is: how do I participate in this and be able to

have the maximum freedom to operate while exposing myself to the minimum extent to counter points, rejoinders and rebuttals? And the tactic is: I claim that I am not political, I am participating, please do not treat me as political. I have no intention to challenge you. But of course once in a while I will stick a pin when you are not looking. I think it is a process which we will manage, as I have explained. We are not going out narrowing the ground. We are prepared to allow some greyness at the edge. But it cannot be a complete free-for-all and some rules have to be established. And Sintercom, we asked them to register as a political site, they said, "No." It is up to them. But the signals will get clearer over time.

Next, on pro-family measures. Mr Ahmad Khalis proposed that we educate the population on the consequences of lower TFR. We are trying to do that. It is not easy because it is not just a matter of understanding the big picture. It is a matter of persuading people that their own personal priorities and their own personal well-being are related to how they make their family arrangements. It is very hard because these are things which people want to decide for themselves. We had a long discussion over the last three days. So I do not want to belabour this point. We will continue to try to educate people. But it is not the full solution.

On the issue of fourth child and above having the same benefits as the first three - this is an issue which we will have to study very carefully. It is a legitimate point to raise in this debate. But it is a change which will have quite far-reaching consequences and we have to consider very carefully.

Mr Gan Kim Yong and Mr Steve Chia asked about PRs and citizenship. Mr Gan Kim Yong said that pride and loyalty are important. It is not just financial

incentives. And he described how the young Indian people he met were proud of themselves and were out to do great things. I agree with him, and I have the same experience in January in India when I visited them. They are young, they are confident, they are ambitious, they have seen how their own lives have started changing and they are quite determined to press on and conquer the world. And some of them will come up with world beaters. Our people need some of that confidence too. The clouds may be greyer and we may hear the thunderstorm outside, but we have confidence to cope with that and the sun will shine again. And we will make the sun come out again.

As for setting a time limit on people being PR, it is not a practical idea. There are many reasons why people become PRs and why we might be happy to have people remain PRs. Some of them we would like to have taken up citizenship. Some of them we are happy to have them stay as PRs. They may be businessmen in other countries in the region, but they want to be PRs because maybe one day they need to come here. So why should we say after five years, you must take up Singa­pore citizenship? It does not mean that the PR is somebody who is about to flee Singapore. It may be somebody who wants to come to this place when there is a tight moment. And I think that we should be a haven for people of talent, of ability. He may be in Hong Kong, he may be in South East Asia, he may be in Asia, or he may even be somewhere further afield. But he wants to be associated with Singapore. That is fine. We have had PRs who have been PRs all their lives. Mr Dennis Bloodworth is a PR. He has lived here, I think, probably for about half a century. Do I want to force him to become a citizen? What for?

We have to have an inclusive approach towards the Singapore family. The core are the Singapore citizens, we

have the PRs, then we have the employment pass holders and others who are friends of Singapore. There must be gradations. The citizens should be treated better than the PRs, and we will make the distinction clearer. We will study how to do this without disincentivising people from becoming PRs. Because if you send the signal that you do not want people to be PRs at all, then they will just go away and, far from becoming citizens, they will not come to Singapore at all, which is counter-productive. So, we will have to study how to do this, such as in healthcare, education, housing privileges and other areas, and make sure that we encourage them to come in, we welcome them to be PRs and, having made them PRs for some time, we ask them to consider becoming citizens. I do not think the financial incentives alone will ever be enough to make them become citizens. But it will help them to think about the matter and, if they become citizens, then we expect them to be equal, proud, committed and loyal, just like all the other citizens in Singapore.

12.00 noon

Sir, DPM has not touched on the morale of civil servants.

I apologise I missed that. Mr Chew Heng Ching asked about morale of the civil service, because the civil service has been on an economy drive and we are watching the headcounts, and we have had to restructure.

This is something which we monitor very carefully. Overall, there is no problem. The morale is good, because our people have a mission. They know that we are looking after them and, under

pressure, we see them performing. We have had SARS. A lot of civil servants were under great pressure, eg, in the Ministries of Health, Home Affairs, Environment, and HDB, across-the-board, but they delivered. We have had the economic downturn. The economic agencies have been under great pressure, but they still delivered investments to create new jobs. But our missions have also been evolving. Our public housing programme has been at a low-key rate over the last few years. We have had to restructure the HDB, and these are changes which are not easy for people to accept. But we have tried very hard to explain to them to make sure that they are properly looked after and to hold people's hands through a difficult transition period.

Overall, the civil service has done well, and I would not say that their morale is low. In the organisations which have been directly affected by change or which are concerned that there may be changes, we have had to pay particular attention because if we do not explain what we are going to do, and we do not have good communications with the staff early, then rumours spread and fears grow. HDB restructuring was a big exercise involving a few thousand people. PSA, of course, is outside the Government. But I think, in a broad sense, Mr Chew would think of them as Government too. There are other adjustments which we have had to do. IRAS has to make some restructuring and there may be retrenchments and job losses next year. It is a long time to work for one year and have this thing to worry about. There are a few other organisations which have to make adjustments, smaller ones. And each time there is one, we have to communicate very early with the staff, to explain to them and to make sure that they know what is happening, because if we do not tell them, and they hear of it or if a newspaper report comes out and it is not

quite right, or even if it is right and they do not hear from us first, it is very bad.

Restructuring is a difficult thing to do even for the private sector. For the public sector, it is harder, because we have had less experience and less practice doing it. But it is a reality of life that we have to restructure, reorganise, recruit, lose people, etc. We will try and place people in other jobs where they can still make a contribution. It is only in extremis, when we really have no alternative, then we say, "Well, it cannot be helped. We have to part. You have to go, but you have to go on fair terms, and the fair terms follow what the tripartite recommendations are." We will continue to manage this in the public sector.

Sir, on a point of clarification.

Yes.

DPM has not answered my question about having more political openness by increasing the number of single-seat constituencies to let citizens have the benefit of exercising the privilege of citizenship, ie, to vote.

Sir, I think it is not the Government's job to help the Opposition put up more candidates. The reason for the GRCs is not to disincentivise people from fielding teams. It is to achieve a very important objective, which is to ensure minority representation in Parliament. So, the solution to this does not really lie with the Government. It is desirable to have many more GRCs contested. The last time it was less than half. But I am surprised that the Opposition should be asking the Government to help to make this happen.

Remaking Singapore

Sir, in the year 2002, the Prime Minister set up the

Remaking Singapore Committee to remake Singapore in the social, cultural and political dimensions to ensure that Singaporeans will lead full and fulfilling lives in a Singapore that they are proud to call home. Last year, in June, the Remaking Singapore Committee had submitted its final report to the Prime Minister and, in coming out with the recommendations, it has consulted more than 10,000 Singaporeans over more than one year for their ideas. Many Singaporeans have expended much time and effort to put up the report. So, it means much to Singaporeans whether their effort is in vain or worth their while at the end of the day. Sir, I just want to make two points.

First, there was a parallel committee, the Economic Review Committee, which also looked at the ways to remake Singapore in the economic realm, and the Government has moved very quickly on the Economic Review Committee. In fact, it was debated in Parliament, it was given a very high signature in the sense that DPM also pushed through the recommendations. But if we look at the Remaking Singapore Committee in terms of the social, cultural and political dimensions, the pace seems to be slower and the urgency does not seem to be there. That is the perception. But, to be fair, I am happy to note that the Government has implemented some measures, such as relaxing rules for busking to allow artistes to perform without donating all their proceeds to charity, and also modifying the school ranking system to go beyond just academic performance and, yesterday, the decision to harmonise citizenship privileges. These are some moves, and it is a plus for the Remaking Singapore Committee's report although, when we made these changes, we do not refer to the report.

I also want to make a second point, which is their other recommendations. I

thought it is useful to point out that among the recommendations in the Remaking Singapore Committee is one that says, please harmonise the medical benefits of female and male civil servants and also the 5-day work week. These are also part of the Remaking Singapore Committee's report, and it seems a bit ironic that after a committee sat on it for more than one year and put up a nice report, we gave it to another committee called the Working Committee for Procreation to look at the recommendations which had already been put up by another committee.

Sir, I hope that this is not the way that we will be looking at recommendations put up by Singaporeans in a holistic report, and would ask for a progress report on the implementation of the Remaking Singapore Committee's recommendations. I also hope that the fate of all the other recommendations will not be similar to the ones on the 5-day work week and female civil servants' benefits in being passed over to another committee, although it is more hopeful than a straight no.

Sir, I would like to thank the Member for raising her questions.

First, let me state categorically that there has actually been very much progress made in accepting and implementing the recommendations put up by the Remaking Singapore Committee. We presented the report to the Prime Minister in July last year. So far, about 50 of the recommendations have been accepted, either in whole or in part. Let me just cite a few examples. Ms Irene Ng has given some herself. Yesterday, DPM announced that the Goverment intends to amend the

Constitution so that children born overseas to Singaporean women will be citizens by descent. The PMO and MITA have also accepted recommendations on relaxing guidelines for the use of national symbols like the flag and the National Anthem. The Ministry of Education has made several changes which have been announced over the last few weeks and months, including making changes so that the institutes of higher learning will have greater flexibility in admitting students. In October last year, MOE also announced that it would review the ranking system, and those of you who have seen the "O" and "A" level results will know that there is a significant change in the ranking system. In addition, the CCA points system has also been expanded to include activities outside the schools.

Another cluster of recommendations relates to enlarging space for expression, experimentation and also encouraging greater participation in public life. The National Arts Council has accepted the recommendation to consider performance art and forum theatre for funding. Such performances will still be subject to requirements, but the $10,000 bond will no longer be mandatory. MITA has also set up two advisory committees for arts entertainment: one to help them evaluate the arts entertainment project itself and its suitability for public performance, and the second committee to advise the Minister in cases of appeal. In addition, MITA will no longer pre-vet play scripts, except where the content is about sensitive issues like race, religion, or could undermine core values or national interests. The MDA is also working out the guidelines for scripts that need to be pre-vetted. MITA has also accepted that the rules on busking will be relaxed, as Ms Irene Ng has herself mentioned.

Another key Remaking Singapore Committee recommendation was to promote greater citizen participation, and one of those things we suggested was

that there should be a code for consultation. DPM Lee himself, in his recent speech to the Harvard Club, elaborated on a set of guidelines which the Government will try to uphold in its consultation process. We also asked that the Government introduce philanthropy awards, and this is being implemented by the National Volunteers and Philanthropy Centre.

There are many other recommendations which I do not have time to go into. Even as we discuss during the next few days in the Committee of Supply, let me assure Members that the Ministries will be making announcements, and some of those will relate to the recommendations which we made last year. I will give a fuller report after the COS debate in April, so that, as Ms Irene Ng mentioned, we will be fair to all those thousands of Singaporeans who had participated in this exercise. I want to emphasise that, yes, it may be a lower profile that we have adopted. But the direction in which we are moving, the importance of the recommendations and the implications on Singapore society downstream are no less profound. I also want to emphasise that it is not just a matter of the Government saying yes to these recommendations. In fact, the fact that such an overwhelming majority of recommendations had been accepted proves the point that we need Singaporeans to remake our own society, Singaporeans to create a more self-reliant, vibrant, cohesive and confident society, and a home that we and our children will cherish. So, I am very, very optimistic, and I would encourage all of you to continue the good work which has been put in.

Overseas and Electronic Voting

Sir, we have in place legislation to provide for overseas and electronic voting. In fact, in the last parliamentary elections, we were

supposed to have overseas voting in five cities. But because of September 11, it had to be cancelled. I am quite sure the Minister will agree that even more Singaporeans are studying, working and living overseas, and many of them want to exercise their right for voting overseas. I would like to ask the Minister what are the steps that the Elections Department has taken, with a lead time to the Presidential election and the next general elections, to provide for overseas voting. I would also like to ask for an update from the Minister as to what steps the Elections Department has taken to ensure that we can have electronic voting for the next Presidential and general elections.

Mr Chandra Mohan is not here. Mr Steve Chia, you have two cuts. You can take them together.

Elections Department

12.15 pm

Thank you, Sir.

Last year, Mr Wong Kan Seng, Minister for Home Affairs, argued persistently that there is no need for an elections commission or

for the Elections Department not to be under the Prime Minister's Office. He said that nobody can guarantee that there will be no fraud, no vote rigging or that the system will be free and fair even with an elections committee.

Yes, Sir, I agree that we cannot guarantee that there will be no fraud, no rigging, no excesses, etc, even with an independent elections commission. Yes, we may have an Elections Department run by civil servants with high integrity, which is fair and balanced and who may carry out their work objectively and fairly in a transparent manner. But the fact remains that their immediate boss is the Prime Minister who is the leader of the

governing political party and their career ladder and rice-bowl are deemed to be at stake if they show signs of great independence or fairness that may disadvantage the bosses' political party. This is unnecessary stress or coercion on the civil servants at the Elections Department.

But by having an independent Elections Department, every Singaporean can at least be 100% certain that any accusation about the governing party manipulating or gerrymandering at the electrol process is nonsense and invalid. The person spouting such accusation is talking rubbish. That is more important than saying that nobody can guarantee anything and then refusing to make it an independent entity.

As often said, "Justice must not only be done, but seen to be done." I want to add that "Elections must not only be fair, but seen to be fair." Therefore, I will urge the Government to set up an independent Elections Department or commission away from the jurisdiction of the Prime Minister's Office.

On another matter, I would like an update on the training to be given to the 15,000 election officers. How has the training been? And how many have been trained so far? Will parliamentarians be invited to better understand the training process and the new systems to be involved?

Electoral Boundary Review Committee

I understand from the Hansard that the electoral boundaries are reviewed from time to time, following population shifts arising from housing developments. And that it is a practice of every Electoral Boundary Review Committee to release its report in the form of a White Paper as soon as it is ready.

I would like to ask the Prime Minister the following questions:

Has the Electoral Boundary Review Committee been constituted?

If not, when does the Prime Minister intend to constitute it?

Will Parliament and the public be informed when the Committee is to be constituted?

Who will be the Committee members? Will any independent persons other than civil servants from the Elections Department be appointed to the Committee?

What will be the instructions and mandate to be given to the Committee in carrying out their work?

How long will it take for the Report to be out?

Will the Prime Minister undertake an assurance that the Report will be out for at least four months before he decides to call for the dissolution of Parliament?

With these seven questions, I thank the Prime Minister for his answers in advance.

Mr Chiam, you can take both cuts together.

Election Rules

The election laws after the 1984 elections were changed to introduce Group Representation Constitutencies (GRCs). The purpose was to ensure that there shall always be minority representation in Parliament. But I am asking why the need to have a GRC comprising six candidates when two or three should be enough. In fact, two or three were first mooted. Then they found that it was advantageous and

the Government increased the number from three to four, to five and then to six.

In a truly democratic system, there is a one-man-one-vote system. The one-man-one-vote system envisages the vote is to be cast for one candidate. This is the essence of democracy. A citizen is given the right to choose the person to represent him in Parliament. In Singapore, the ruling party preaches multi-racialism. All races are asked to unite. We are supposed to be all Singaporeans, regardless of our race. But in practice, the ruling party says that eventually, we shall remain loyal only to our own race. We shall vote a candidate of our own race. The minority races on their own shall never get elected. A Malay or Indian candidate can never get elected to Parliament on his own merit. That is the reason for the GRCs which I myself do not believe. I have pointed out in previous debates on the formation of GRCs that our first Chief Minister, Mr David Marshall, was not a Chinese but a Jew. I do not believe that Singaporeans are racialists. Singaporeans shall still vote for a fellow Singaporean regardless of his race if that person is credible and a qualified candidate.

If I still cannot persuade the hon. Prime Minister that Singaporeans are not racialists and that they want only to vote candidates of their own race, there may be a twinning of candidates or, at least, three candidates should be enough. I hope that the GRCs could be made smaller in number and not made bigger in time to come.

Opposition MPs

Sir, I would like to speak on the unfairness of treatment to Opposition MPs. Once, at a function on the grounds of Istana, a PAP MP asked me, "Hey, Chiam, why did you not bring your grassroots along today?" That PAP MP

thought that I did not have any grassroots members to bring along to that function. I did not want to embarrass him by telling him that, in fact, my grassroots members were not invited to that function although PAP MPs' grassroots were invited.

Yes, Opposition MPs are treated differently from the PAP MPs. I think it is appropriate that I speak out on this matter to educate PAP MPs on the matter. I have already complained that I do not get a proper room to hold my MPS. I have to see my constituents in the open at the void deck. I do not mind doing so, but the only problem is that sometimes, I do not have the privacy to discuss some sensitive matters with the people who come to see me with a personal problem. When working in the open, I am always subject to the elements. Void decks, somehow or other, are very windy and I have difficulty holding my pieces of papers together.

When I was first elected MP, the situation then was even worse. I was not even allowed to plant one tree. Today, of course, I can plant as many trees as I like in my constituency or on the land under the jurisidiction of my Town Council. Things have improved a little for me, but on very basic things like application for Government grants, CIPC funds, I still have to apply to the person whom I defeated at the last election, and I believe he shall be competing against me at the next election. In the circumstances, I wonder how I can ever get the support of my rival to support me in getting CIPC funds which would lessen his chances of getting elected. I would probably think that the answer shall always be never.

My constituency, in a way, has been subjected to scare tactics at election time. They have been threatened that should they vote for me, they shall never get upgrading of their flats, kindergarten facilities shall be scaled down, the MRT

station shall never be opened and any precincts that give 50% votes to the PAP shall get upgrading.

Another thing is that I was not even allowed to make a speech at my own constituency dinner. I am bringing up the above matters with the hope that all Opposition Members in Parliament in Singapore can be given their due respect and not treated shabbily.

Sir, Mr Ravindran asked for an update on what the Elections Department has done with regard to overseas voting for Singaporeans who are now overseas, and in particular, in preparation for the Presidential Election in 2005. Members would know that the Presidential and Parliamentary Elections Act were amended to provide for overseas voting in April 2001. The intention then was to implement overseas voting in five of our missions abroad. As preparation was underway, unfortunately came September 11, and as a result, due to security concerns, we decided to stop that process of providing for overseas voting for overseas Singaporeans. But we have not stopped looking at it. Of course, other than the five missions already announced, the Elections Department will now also consider several other missions where we have a consular representation to enable overseas Singaporeans to vote. We hope that when the time comes for the Presidential Election and if there is a contest, we will have more missions abroad where Singaporeans can go and vote, provided they have registered to vote.

As regards electronic voting, we also earlier on wanted to try out electronic voting in two single-member constituencies during the last General

Election. While the process of authenticating or certifying the system was still going on, election had to be called. As a result, we ceased the effort of certifying that system. We have to start all over again at the next election. But having considered the cost of doing this electronic voting and the changing technologies in the years ahead, the Elections Department decided to defer this process of electronic voting to some future date until we see what others have done with regard to electronic voting and learn from their examples. For the next Presidential Election, should there be a contest, we are not likely to have electronic voting.

I come now to Mr Steve Chia's question about an independent election commission, a subject which he raised before and he has now found a new reason for asking the Government to do so. Again, I will have to say that whether the Elections Department is under the Prime Minister or an election commission to be an independent one or not really does not matter. We know that for years, the Elections Department has conducted elections fairly. While the Elections Department is under the Prime Minister's Office and the civil servants have a career, they also need to make sure that they do a good job. The Prime Minister does not directly decide on their career.

There is a civil service system to ensure that civil servants are appointed and promoted according to civil service rules. No Minister, not even the Prime Minister, can say to the PSC or to the Special Promotion Board, or any particular Promotion Board within the civil service, that this particular person should be appointed, promoted or demoted because the person has not been listening to him. That has never been the case in our system. So our system has separated the political leaders from the civil servants who will have to do an impartial job in

carrying out their duties diligently without fear of interference from the political leaders.

12.30 pm

If we have an Elections Commission separate from the Prime Minister, then I think today Mr Steve Chia would not be able to raise his question here because there will be no one who will represent the commission to answer his question in Parliament. Now, at least he can raise this question every year, and he can get an answer from the Minister. But, having said that, let me stress that the Elections Department has conducted the elections fairly. And it has applied the same rule to all the candidates. I am not telling you a secret if I tell you that even PAP candidates have complained about the strictness or the toughness of election officials that they were not allowed to do this or to do that; whether to hang a poster or whether to get near a polling station, and so on. So the Elections Department officials have conducted their duties in a way that is expected of them, that is, without fear or favour, and that they have treated both Opposition and the PAP candidates in the same way.

I want to inform the House that our Elections Department has sat down with their officers who have experience in conducting elections and they have come up with a code of conduct for election officials. This code of conduct has been formalised and the officials would be reminded about the behavioural norms expected of them when they conduct an election. The code lays down the following seven principles to guide the conduct of election officials, namely: neutrality and non-partisanship; voting in secret, incorruptibility, transparency, accuracy, serving the voters, and professionalism. Any breach of this code will subject the official to appropriate disciplinary action. This will further enhance our people's confidence and trust

in our Elections Department, the officials, as well as our electoral system.

Mr Steve Chia also talked about the Electoral Boundary Review Committee and he has a series of questions. Let me state at the outset that the appointment of an Electoral Boundary Review Committee is not a requirement under the law. He may have misunderstood that there is such a legal requirement that the Prime Minister appoints such a committee. There is none. There is no such requirement under the law. In fact, dection 8 of the Parliamentary Elections Act empowers the Minister-in-charge, and in this case, the Prime Minister, to decide on the number, names, boundaries of the electoral divisions for the purpose of election in Singapore. But, in practice, the Prime Minister appoints the Electoral Boundary Review Committee to review the electoral division boundaries and recommend changes to him. The Electoral Boundary Review Committee is made up of a number of senior public officers who are guided by a set of terms of reference for their work. The review will take into account the population growth, the population shift arising from housing developments since the last boundary delineation exercise, etc.

As to whether or not there are election officials in the Electoral Boundary Review Committee, the only official on the committee is the Secretary, who is the Head of the Elections Department. He is there because he needs to perform the secretarial work for the Committee. That is all there is to it. The people who are appointed to it are senior civil servants who know about the number of voters, the population changes, housing changes, and so on. These are key officials who know about population shifts and statistics of our demographics.

Mr Chia asked whether or not the committee had been appointed, when will the report be ready, what are the terms of

reference and whether or not the report can be published early. As of now, I do not know of any Electoral Boundary Committee having been appointed. So I cannot give him the rest of the answers. So I cannot tell him whether or not the Committee has finished its work.

I come to Mr Chiam's question about the GRC. After 16 years of operation of the GRC - we had our first election based on the GRC system since 1988 - we are still talking about the GRC system. Unfortunately, even after 16 years, Mr Chiam is still contesting in a single constituency and has not gone into a GRC. Maybe if he had led a team to the GRC he will then know how he can win a GRC.

Do you want me to be in the GRC?

Sure. Mr Chiam just asked me whether I want him to be in the GRC or not. He is the leader of a party, he should really decide. And, being the leader of a party, he should lead the charge and not leave it to others to lead the charge for him and he just follows behind and says it is very good.

But to be serious, there is a reason why we have GRCs, as the Deputy Prime Minister explained earlier on in answer to another question concerning the GRC. The reason is that we need the GRC for multi-racial representation. But whether a 2-man, 3-man, 4-man, 5-man or 6-man GRC is to the disadvantage of the Opposition or not, I think it is the same to both the Opposition and the PAP. The PAP would need to put up candidates whether it is a 2-man, 3-man, 4-man, 5-man or 6-man GRC. And so do the Opposition. But the fact that since the Opposition cannot put up enough candidates that surely cannot be the fault of the GRC system.

That is not the only reason.

That is the fault of the Opposition, for not being able to get enough people to contest for them. Otherwise they would be there in the GRC. And Mr Chiam had the by-election effect strategy, which says that he would rather not contest in all the constituencies. I think that is a very good reason to give for not being able to get enough candidates to contest in an election. But that is very clever.

Ask him if he would like Potong Pasir to be part of a GRC.

If Mr Chiam says he would like Potong Pasir to be part of a GRC, the Prime Minister just told me that he might ask the Electoral Boundary Review Committee to consider this.

Ask again. Get an answer.

Does he want it?

Potong Pasir to become a GRC.

Give us time.

Now, and we will tell him the answer.

Better record this, Kan Seng.

It is in the Hansard. Mr Chiam will know that. But, again, more seriously, whether it is a single-member constituency or a GRC, really it is up to the candidates themselves whether they can convince the voters to vote for them. It does not depend on whether it is a 2-man, 5-man or 6-man GRC.

On Mr Chiam's points about treatment of Opposition MPs, his first point was about his experience at the Istana party where somebody asked him where were his grassroots leaders. I do not know what grassroots leaders he has. I know that Potong Pasir grassroots leaders were invited. Maybe not his grassroots leader but, as far as the Government is concerned, the grassroots leaders are the ones who serve in our CCC, RC, CCMC and so on. We did not consider Town Council as part of the grassroots, otherwise the PAP Town Councils would also be involved.

His other complaints about not having a room, having to work at the void decks, not being able to plant a tree, not being able to have CIPC funds, not being able to speak at a dinner, and not getting upgrading in his estate, etc, I think we have been through all that before. Mr Chiam now finally finds a piece of ground to plant the tree, and the reason being that, as he said, that piece of land is managed by the Town Council. But in the public housing estate, the HDB owns the land and, therefore, it is up to the landowner to decide who plants the tree. And every year, we have the tree planting campaign and, therefore, the Advisor is the one who is allowed to plant the tree. We have been doing this for the last umpteenth year since we have the tree planting campaign. This is not something new.

On the conducting of the meet-the-people session, the PAP MPs do not have a room either. The PAP MPs make use of the PCF centres. The PCF is a foundation with $5 million or more of paid-up capital. They set up kindergarten education classes, etc. And, because of the relationship between the PCF and the PAP, the PAP was able to pay a rental to the foundation to make use of one room for our once-a-week meet-the-people session.

On CIPC funds, I am not sure why Mr Chiam brings up CIPC funds because, as far as I know, from what I was told, Town Councils already get grants from the Government and that is for the residents But CIPC funds are for improvement of the whole constituency and therefore it is disbursed through the CCCs, and if they have projects, they can apply to the CIPC for funds. From what I was told, Potong Pasir residents have not been deprived of CIPC project funding. In fact, in 1998, CIPC funds were used for back-lane lighting of Jalan Wangi and Upper Aljunied Road. In 2002, CIPC funding was available to build covered linkways in Potong Pasir Town, but because Potong Pasir Town Council failed to come up with its co-share of cost, the project could not be implemented. Why is this so? I do not know. Only the Potong Pasir Town Council can answer. But as far as PAP Town Councils are concerned, when the CCC gets funding for CIPC projects, the Town Council would have to chip in to pay for part of the cost. It is not completely free, it is not completely at Government's expense.

On the issue of not being able to speak at his constituency's dinner, I thought Mr Chiam must have known by now that the Police has relaxed the rules to allow MPs to speak at constituency functions.

In the past.

He is talking about history. But we are in the year 2004 and this rule was changed in the year 2001/2002, I think we must move on.

Mr Speaker, Sir, I thank the Minister for all his answers except one which is not answered. Will the Prime Minister undertake an assurance that the Electoral Boundary Review Committee's Report will be out for at least four months before he decides for a dissolution of Parliament? We hope not to have a case like the last election where

Parliament was dissolved one day after the report was out, but at least we can have an assurance that it would be out for at least four months.

From the records I read, I know that whenever the Electoral Boundary Review Committee submits its report to the Prime Minister, the Prime Minister will, as soon as it is possible, get the report published. That is the standard practice.

As soon as the Electoral Boundary Review Committee's Report is published, and depending on the timing as decided by the Prime Minister, he may call for election three months after that, or he may call for election three weeks after that. This is the prerogative of the Prime Minister, and this practice remains.

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Sir, is it very difficult for the Prime Minister to give an assurance or at least a certain timeframe?

If the Prime Minister gives the assurance now and he fixes a particular date or a particular period and timeframe, he may not be able to fulfil it. One should not bind the Prime Minister's flexibility in making such a decision.

Mrs Lim, are you withdrawing the amendment?

Sir, I would like to thank the Deputy Prime Minister and the two Ministers for their comprehensive answers to almost all the questions except for the issue of medical benefits for female civil servants. I would like to let the Deputy Prime Minister know that we are waiting with bated breath and in anticipation of positive changes to come.

With that, Sir, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment No. (2), Mr Chiam.

Election Process

Sir, I beg to move,

That the sum to be allocated for Head U of the Main Estimates be reduced by $10 in respect of Code UA 1500.

Sir, this is on the election process and the four points I want to bring up are: the Electoral Boundary Review Committee's Report; the date of the election; the deposit candidates will have to pay; and, election sites.

As regards the election process, I think they should be fair. "Fair" means that it must have openness, which means transparency of the election process.

The Electoral Boundary Review Committee's Report is an important report, in particular, to the Opposition, because it will tell which are the boundaries to be contested at the elections. I would call upon the Prime Minister please to issue the Report as early as he can. Of course, he will say it is his prerogative. But to be fair to the Opposition, I think the Report should be published at least six months before the election date. Because if we do not know what are the constituencies to be contested, we got no chance to work on the ground in those constituencies. There was a case where an Opposition member was about to win a single constituency, and when the Report was published, that constituency was no longer in existence. I think this is the classic case of Braddell Heights constituency. The Opposition

member there, if I am not mistaken, in 1991, obtained nearly 50%, and he was hopeful that he may have a chance to win the next round. But when the next round came, his constituency disappeared. It was absorbed by Marine Parade. The only difference is that Marine Parade has got a seafront. Braddell Heights has got no seafront. It became part of Marine Parade constituency. Sir, I call on the Prime Minister to publish the Report of the Electoral Boundary Review Committee at an early date.

Sir, the other matter is the election date. In America, everybody knows when the President is going to be elected - every four years, on a fixed date in November in the fourth year. This is really called openness. As far as the PAP is concerned, they keep their cards very close to their chest. We do not know when the elections will be called at all. We have rumours and whether or not to believe in the rumours. Often, a snap election is called and that catches everybody by surprise. Sir, I hope the election date can be given at an early date.

The third matter is on election deposit. The election deposit currently stands at $13,000. To PAP candidates, $13,000 may not be a large sum but to many other candidates, $13,000 is a large sum. I think we should not deprive people who want to stand for election just because they cannot afford the $13,000 to disbar them from standing. If the election deposit can be announced at an early date, it will give a chance to all citizens in Singapore who want to stand for election to prepare for this sum of money so that he can stand for election.

You have one more minute, Mr Chiam.

My fourth point is with regard to election sites. I would call on the Prime Minister to ask the Elections

Department to make sure that there are more than one election sites in one constituency, especially in a single seat constituency. At the last elections, Potong Pasir had only one election site, and there was a scramble for that site from the two candidates.

Sir, Mr Chiam asked that our election process be fair, open and transparent. Our election process is really very fair, very open and very transparent. As far as the conduct of the election is concerned, I think the same rule applies to all. There is no particular part of the election process that is not known to the Opposition but which is known to the PAP. We all know that and we have all been through the elections, and we know what an election entails.

As regards his specific request on the publication of the Electoral Boundary Review Committee Report, I have answered Mr Steve Chia on this question. It is published as soon as the Prime Minister receives the Report. But to ask the Prime Minister to fix a date and say, "I'll have this particular date", the Prime Minister cannot do so, firstly, until he has appointed a Committee, and until the Committee has completed its work. Even then, he will have to think carefully about when to call for an election. So, if you ask the Prime Minister now, it is just as difficult for him to answer the question as it is impossible for me. So, we really do not know when will be the election date.

Mr Chiam made the point that in the US, election dates are known, but that is the American system. In the parliamentary system, it is different. In the Westminster system like in the UK, Australia, Malaysia and New Zealand, the Prime Minister has the prerogative to fix a date for the election. There is no particular date that he has to fix for the election.

As regards Mr Chiam's question about the deposit being too high, the same deposit applies to all the candidates, and it is a certain percentage of the MP's allowance for the preceding year before an election. So, while it might have been $13,000 the previous time, and over the last few years, the MP's allowance had been reduced, the deposit may not be $13,000 at the next general election. At the next election, whether it will be $13,000 or not, it depends on what would be the MP's allowance in the preceding year before the election is called.

The election deposit is not something that would definitely be lost. It is not like going to a casino and he puts his money down on the table on one colour or the other, one number or the other, and then he loses the $13,000. The threshold for reclaiming the electoral deposit is not very high. It is only a small percentage of the votes. And if a candidate cannot marshall the percentage of votes and as a result lost his desposit, then, in the first place, he should think carefully whether he should participate in the election.

On election sites, I am not clear what Mr Chiam meant by election sites, unless he refers to rally sites.

Yes.

As far as rally sites are concerned, this is a matter under the police, and not under the Elections Department. I am not speaking for the police now because they decide on this. The police choose a site to ensure that safety and security, law and order can be considered. We know that from past experience, outdoor open areas near housing estates are not areas that would be favoured. They would prefer to have

enclosed areas like a stadium. In the case of Potong Pasir, because there is no nearby stadium, there was a site available. I do not know whether it is still available or whether it has been built up now. There was a site available in Potong Pasir but, unfortunately, on that very day, there was a clash. The PAP candidate happened to book the site earlier as it was allocated on a first-come-first-served basis. As a result, Mr Chiam went to a different site. But he might also know that at that site, there were a lot more people than could have been accommodated at the Potong Pasir site. But in the end, what was the result? The result was that he won the election. And there was trouble at the site that he went to. So, can he imagine if that particular rally was held within Potong Pasir, there could be no end of trouble.

Sir, I have a point of clarification for the Minister. He said that the Prime Minister's hands should not be tied on the announcement of the election date. Can the Minister give a good reason?

That is not a clarification. It is a question. Mr Chiam, are you withdrawing your amendment?

Sir, I am still unhappy with the answer given by the Minister. I thought that he would at least give some concessions to have the election process really open and transparent. Nevertheless, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The sum of $155,233,550 for Head U ordered to stand part of the Main Estimates.

The sum of $46,986,300 for Head U ordered to stand part of the Development Estimates.

Head M - Ministry of Finance. Mr Leong Horn Kee, amendment No. (1).

Overall Tax Structure

Sir, I beg to move,

That the total sum to be allocated for Head M of the Main Estimates be reduced by $100.

Sir, I wish to ask DPM and Finance Minister what is the ideal long-term overall tax structure for Singapore. He has covered some aspects of Singapore's tax structure in his Budget round-up speech yesterday.

The total tax revenue was $21.59 billion in FY03, and estimated to be $22.05 billion in FY04. However, there are no details of the breakdown between direct and indirect taxes in the Budget document. The Government has stated its intention to achieve a balanced budget by FY05, whilst actual deficits were incurrred in FY01 and FY03. A budget defict is expected for this FY04.

What is the current share of direct and indirect taxes? Corporate tax will be lowered by 2% and the intention is to reduce personal income tax by 2% some time in the future. I am concerned that the shift of direct to indirect taxes will be greater with these cuts in direct taxes. There is the spectre or fear that this could lead to further increases in indirect taxes, such as GST. If not, how is the Government going to achieve a balanced budged in future, not just by 2005, which is actually next year? If we impose more on indirect taxes, it implies a heavier tax burden on the lower income group. The

lower income group normally pays no or low personal income tax.

I would like to ask whether our current tax structure with 20% corporate tax and 5% indirect GST tax is a competitive tax regime. How do we compare with Hong Kong and other countries that we compete with, eg, Malaysia, Thailand, Indonesia, China and Taiwan?

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We cannot just compare the main taxes, but have to evaluate the entire tax regime, inclusive of tax and non-tax revenues. Have studies been done to compare the entire tax structure of direct and indirect taxes and the non-tax revenues? How do we evaluate and conclude that Singapore has achieved an efficient and the most desirable tax regime? Have we considered whether it is desirable to adopt a flat tax structure of 16%, like in Hong Kong?

Sir, on a tax related matter, I would like to commend DPM Lee on his decision to waive tax on remittances of foreign income of individuals. This waiver is well received. It will encourage a substantial influx of funds into Singapore. It will help create a healthy market for wealth management. I would like to ask DPM Lee whether the Government would also consider extending this waiver to remittances of foreign income back to Singapore by companies.

Wind up your speech, please, Mr Leong.

Yes. This would be a very welcome move by local businesses, as they will be able to deploy the moneys earned overseas in expansion projects locally. This will also be beneficial to wealth and employment creation in Singapore.

Corporate Taxes

Sir, this is not a new plea but one that bears repetition as there is a need to help facilitate the expansion of local enterprises beyond Singapore or, simply, to give them the 'leg up'.

The Government has taken a step, a very small step many would say, to allow a loss transfer system of group relief since Year of Assessment 2003. However, there are two conditions. This will only be allowed for 75%-owned subsidiaries and only for those that are incorporated in Singapore.

Foreign losses may not be transferred for the purpose of group relief, the reason being that a subsidy of foreign ventures by domestic tax revenue could effectively result.

Sir, whilst I do not disagree with the rationale, I do think that the Government can err on the side of being liberal, or even generous. Otherwise, this will not square with the push by Government for local companies to go offshore. The feedback is that a super-majority stake is not always possible, let alone subsidiaries that are incorporated in Singapore but for offshore businesses. Many have lamented that the current concession offers no effective tax support for start-ups, which would be a strain on capital for the parent who will be paying a high effective group tax rate.

I would, therefore, like to ask the Minister for Finance if he would be prepared to, firstly, review the current concession with a different mindset, not just merely from a direct comparison of the different tax regimes (for example, how Singapore compares with Hong Kong), but also from the perspective of providing meaningful incentives for local companies to expand offshore; and, secondly, lower the threshold to a simple

majority of just over 50%, and allow foreign losses to be transferred. The belief is that after years of start-up losses, the Singapore parent will reap the due benefits of the profitable subsidiary via dividends or other distributions. The tax revenue for the Government will then rise in tandem.

Net Income from Investments

Inderjit Singh (Ang Mo Kio): Sir, my cut is on the net income from investments (or NII), particularly the performance. I have noticed that the NII performance over the years has been quite erratic. Based on the information I could get from the Budget books in the last six years, I notice that the numbers have varied quite a lot, ranging from $3.1 billion in 1999, hitting the highest of $3.68 billion in 2002, and it is budgeted to go down to $2.29 billion this year.

I would like to ask for more details as to how the NII is derived. What investments qualify for the NII which are included into the Government accounts? How did the investments perform compared to industry performance and other large funds managed around the world? Is the performance stated above considered good or bad? Particularly, since there was a big drop from 2002 to 2003, perhaps the Minister can let us know what caused this. Finally, is the $2.29 billion budgeted for 2004 a conservative estimate, given that the global economy seems to be headed for good growth and the fact that we did well in the year 2002?

Tax on Dividend

Sir, in the budget for FY 2002 and 2003, the corporate taxation system had changed into a one-tier tax system. Dividends from companies are now taxed at corporate tax rate. And unlike the past system prior to that, individuals now

cannot claim a tax credit from these dividends if they belong to a lower tax bracket. While such one-tier system is efficient for the IRAS, it is unfair for the lower income earners to be taxed at the same rate on their dividends as the top earners. In particular, retirees who have saved their nest-egg in high yield shares are unduly disadvantaged. They will see a sudden jump in their tax rates, from maybe next to zero to the corporate rate of 20%.

Surely, we should not expect retirees who are not so well-off to be effectively paying the same rate of tax as our top earners. This cannot be right. It is also against one of the basic precepts of taxation, that is, taxation should be progressive. This, coupled with the increasing GST, has affected the finances of retirees. Savings which have already been taxed are now taxed again through GST, when the savings are spent during retirement years. Now the proceeds from the savings are being taxed at the top rate if you happen to invest in shares. Does this not contradict our efforts to educate our people to invest wisely, to become shareholders and to become more entrepreneurial?

I urge the Government to re-examine the one-tier corporate tax system and, if possible, revert to the previous system where tax credits may be enjoyed from tax dividends.

Supplementary Retirement Scheme

Sir, the quality of life has increased and people live longer. We thus need to save more for old age. The CPF and the Supplementary Retirement Scheme (SRS) are two main means for saving for retirement. We can understand the need to reduce CPF contributions to reduce business cost in order to save jobs. But I do not understand why the allowable amount of

SRS savings is reduced in parallel. Employers do not contribute to SRS savings. It does not add to business cost. In fact, the Government should be doing the opposite to make up for the reduction of CPF contributions.

I would like to ask the Minister for Finance to reconsider the decision to reduce the amount of allowable SRS savings. It could mean a lot to everyone who uses the SRS to save more for their old age.

Road Tax

Andy Gan Lai Chiang (Marine Parade): Sir, there was a significant change in the motor vehicle tax structure when the Electronic Road Pricing was introduced in April 1998. A package of road tax rebates was given and the ERP went into effect. Motorists accepted the change as it reduces the cost of road taxes to them. For FY 2003, total revenue from motor vehicle taxes has increased to $1.8 billion, the bulk of which (or about 61%) was derived from the additional registration fees, and 35% was from road tax. Come FY 2004, there is a moderate projected increase of 14%.

I put forth to the Minister to elaborate on the usage of this significant harvest in motor vehicle tax collection for FY 2003. My concern stems from the notion that such huge collections must, first of all, be channelled to making transport more affordable to the community at large. The increase in motor vehicle revenue does not stop a parallel increase in usage of our roads. This, in turn, would mean a greater toll and strain on our road systems. I maintain that the revenue from motor vehicle taxes be rightfully channelled to fund construction of highways, tunnels, roads, pavements and to provide for their maintenance, specifically perhaps to make our road network more disabled-friendly as well.

Making our roads safer for pedestrians is often ignored as we seek to find ways to improve the flow of traffic in order to save travelling time, instead of preparing the road system to make it more user-friendly to the aged and handicapped.

Overhead bridges can be improved to ease pedestrians crossing from their homes to, say, MRT stations and bus stops. Besides making the roads safer for drivers and pedestrians, the funds can be used to improve public transport such as the MRT network. Thus, I advocate that the Government should try to link road taxes and the use of such funds to improve public transport.

Tax Relief

Leong Horn Kee: Sir, at present, a married woman could claim tax relief of twice the amount of foreign maid levy paid, up to a total of $8,280 a year against her earned income. However, this relief cannot be claimed by the working husband. I think this rule is unfair for both the working husband and the family as a unit. Normally, both husband and wife bring up and support the family together. If it so happens that the husband is working and the wife is not, then this relief cannot be enjoyed by the family.

In the interest of promoting more families and more babies, I would like to sincerely ask the DPM to reconsider this foreign maid levy relief. I suggest that either the working husband or wife can claim this relief. Currently, only the wife can. This is one instance where the woman has more rights than the man.

Sir, on another relief. In his Budget speech, DPM Lee announced that he will extend tax relief to individuals making cash top-ups for non-working spouses who are 55 years old and above, and who

earn not more than $2,000 in the preceding year. Though I wish to commend him for introducing this tax relief, I would like to urge him to be not so tight-fisted, and maybe to be a bit more generous.

As the money is put into the non-working spouse's CPF retirement account, and it is entirely voluntary, I propose that the Government allow this tax relief to start earlier, for example, when the non-working spouse is younger, say, 40 years old. Starting earlier will enable the voluntary contributions to accumulate gradually over a longer time, rather than start so late in life when the spouse is already 55 years old. Moreover, the income limit of $2,000 for the non-working spouse is too low. It amounts to only about $166 per month. Even a menial odd-job labourer earns about $600 per month nowadays.

Sir, I would like to ask the Minister for Finance to review the policy that singles do not enjoy tax relief on the maids they employ to look after their elderly parents or their handicapped siblings, so that they can continue in the workforce. The first time this was discussed in Parliament, the then Second Minister for Finance's response at that time was that the tax relief was only meant for married women. Now that he is also the Chairperson of the procreation committee, I hope this can be reviewed so that singles can contribute both to the workforce and the family.

The manpower statistics show that 7% of employers of foreign domestic workers are singles, and 3% are divorcees. If we take the relief at $8,000 per employer, we have a total of 9,800 singles due for enjoying this relief or an annual sum of $800,000. I think this is not such a big sum in the scheme of things but a great boost to the status of singles who are contributing both to family life and to the workforce.

Ms Braema, can you go on to your next cut?

Goods and Services Tax

Mathiaparanam: On goods and services tax, I am also asking the Finance Minister to reconsider why there is the need for GST to be levied on structures built for the disabled and items bought by the disabled. Quite a number of VWOs are right now in the process of building new buildings for their disabled communities that they look after. One incident is that they have to go back to the community to raise about $200,000 to pay for the GST taxes. It comes back again for the community to pay for the GST. Could this, please, be reviewed?

Tax on Sports, Arts and Cultural Groups

Sir, the IRAS taxes sports, arts and cultural groups under section 11(1) of the Income Tax Act. This section stipulates that if this type of organisation receives less than half of its income from its members, then such organisation is deemed to be carrying on a business and its surpluses are treated as profits and taxed accordingly.

Sir, this group is usually set up by like-minded people to promote the specific sports, arts or cultural activities that they love, and are non-profit in nature. They play a very important role in the development and promotion of their respective sports, arts or culture. They also bring sports, arts and cultural events to Singapore and help add diversity and enrich the life of Singaporeans. They are not businesses as such. Most of this group depend on Government grants through statutory boards or agencies such as the Singapore Sports Council, National Arts Council, Tote Board, Singapore Pools and Singapore Tourism Board. They also raise additional money through sponsorships, donations, performances,

matches, to augment their income. It is rare that their membership revenue will be more than 50% of their total income as the membership fees for these organisations are usually kept low, in order to attract members and encourage participation.

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Those of us who are involved in these organisations know that it is difficult to get Government funding and just as difficult to raise funds from the public, as we have to compete with other organisations that require funding as well, such as

charity, even CDCs and other groups. Sometimes, the timing of inflow of funds versus the plan of activities, the need to save some money for bad times could also lead to surplus or deficit. To tax their surplus could also lead to a culture of waste and encourage unnecessary spending before the financial year ends.

DPM in his Budget speech spoke about allowing Ministries accumulate and carry forward unused funds to subsequent years. Perhaps, we could also allow similar flexibility to this group without taxing them. Many of them are puzzled why Government grants or subsidies could attract income tax. And why if they work hard to raise additional funds and save some surplus for the future, they also attract tax. These groups are usually run by volunteers and serve a very useful role to Singapore. They are not businesses with a profit motive. I would therefore like to urge DPM and Finance Minister to consider exempting them from tax.

Economic Restructuring Shares

Sir, Singaporeans are generally very appreciative of the ERS, especially during this period of a weak economy. But the poor and old have difficulties topping up their CPF accounts.

The Government must be credited for the efforts to remind those who have not made their top-up before the deadline. The Government had also arranged for the old to use the existing savings in their CPF accounts for the top-up. But this still leaves out the poor who do not have the money for the top-up. What can we do to help these people? For example, can we allow the CCC to lend money from its welfare fund interest free for the top-up and this amount should be deducted from the respective individual CPF account and return to the welfare fund without infringing laws, such as the Money Lenders Act? This will enable the CCC to assist the needy residents without depleting its funds which can then be made available for other welfare purposes or the next round of top-ups.

Sir, I see little relevance and, in fact, quite a bit of bureaucracy in the way we are trying to distribute the ERS shares to the elderly who are 65 and above. Again, some 84,000 have missed out and some of them cannot afford, like my other colleague has said earlier. I think if we factor in the volunteers' resource time as well as the administrative duties that go into trying to distribute the ERS shares, perhaps it would be good to review the original intent of why we embarked on this, which is to primarily give some top-ups back to the elderly, and just give it to them without the top-up itself.

On another note, I would also like to see if we can do something more for the old. We have a very small group of people who are 80 and above, who are destitute, who live in homes, or like the samsui women on their own, and I think we have no clear official record of how they have actually contributed to our society in the early days. I would hope that we can do something for them on National Day and make them feel good. It

should not come from the community as a charity dollar, but from the State. And this is beyond the ERS so that they can really feel that they have been valued for all the contributions they have done to our country.

Government Subsidies

Sir, in the years ahead, as our nation rapidly progresses into the new era, there would be men who may become displaced due to structural unemployment. There must be adequate economic safety net to help these people, especially the older ones, who will find difficulty to retrain. As the need for more and more subsidies arises, our national budget will become stretched if we do not become more targeted and coordinated in our subsidy programmes. Sir, I would like to ask the Finance Minister, going forward, whether the Government will conduct an overall review on its subsidy programmes. Will means testing be extended to other subsidies, besides healthcare, to ensure that subsidies go to those who need help in order to optimise our resources for social assistance? And finally, will policy regarding S&C and utility rebates change in time to come?

Charity Status

Mathiaparanam: Sir, there are many groups appealing for donations for a variety of causes. Most Singaporeans and non-Singaporeans are very generous. In 2002, according to a Straits Times' article, $400 million was donated to non-profit organisations. It is good news that, the governance of the Institution of Public Character (IPC) has been formed with the primary objective of setting common standards of governance so that the donors would be more informed on how this money is used. My concern in raising this here pertains to the criteria used to assess which organisations are worthy of the charity

status and how they go about raising money. I have checked on the website of the IPC which shows an exhaustive list that includes a diverse group, such as the Chinese Opera Society, EDB foreign university education fund, Eunos CCC education and welfare fund, Adventist Home for the Elders. While this diversity is good, because it shows that we respond to different needs, perhaps greater clarity is needed and needs to be shared with the public. I understand that there are 13 central fund schemes, such as the Health Endowment Fund, the Education Endowment Fund, and organisations that have similar objectives can come under this umbrella. Yet, we also have stand-alone organisations that do seek charity status. Sharing the criteria schemes will be useful to organisations that are in need of becoming a charity.

Lastly, when the Charity Bill was tabled for Second Reading by the then Finance Minister, Mr Hon Sui Sen, in 1982, one reservation raised by a Member of Parliament at that time was how can we limit the fund raising where the organisations are concerned. I raise this with respect to a recent newspaper report where the Independent Society of the Blind tried to raise money by tagging on its mailer to the Singapore Power bills. There is a loophole here in the sense that if the society went out into the streets, then it has to apply for a permit. But when you tag on to a mailer, there is no permit. So could there be greater clarity on how funds are raised and also on the criteria used for IPC status?

Charities

Sir, I share the sentiments expressed by my colleague earlier in relation to a call for greater clarification in relation to which monies are raised, and how these monies are spent. I understand that there is a council formed to look into this area.

However, I think there is an absence of a definitive code like the one you have in relation to the conduct of directors in companies. Perhaps, if the Government could consider a stronger regulatory environment in relation to the governance of charities, guiding these charities in the way in which they raise monies, the way in which monies are spent and the way in which these monies may be held to be more accountable to people who dig deep into their pockets to fund some of these voluntary organisations.

Sir, let me respond to the various issues raised. First, Mr Leong Horn Kee asked about the overall tax structure. I do not think there is any ideal long-term overall tax structure. I think we have to make the assessment as we go along, comparing the needs of our country together with our competitive position with other countries. What has happened over the last 10 years is that we have decided that there ought to be a better balance between the indirect and direct tax and therefore there has been a move since 1994 when we first introduced the GST to move the sharing between direct tax and indirect tax.

So over the last 10 years, the proportion has gradually moved from 60/40 to about 54/46 today. With the reduction in the 2% corporate income tax and when we eventually reach 20% personal income tax, then we expect the mix between direct and indirect tax to be closer to about 52/48 or 50/50. This fits our circumstances and we are very comfortable with this position. We think, overall, the tax burden on Singapore companies and Singapore individuals is light compared to other countries. If you look at Hong Kong, for example, the tax structure there is more heavily weighted on direct tax and the mix there is probably something more like 80/20, compared to our 54/46 because they do not have GST. Other countries, like Malaysia and Taiwan,

do have the equivalent of a sales tax, or GST, and therefore the balance is more on the indirect tax. So we do consider this situation regularly. As DPM said yesterday, we are very comfortable with our position today. We think we have a very simple and very effective tax regime. But we have to continuously monitor the situation and if indeed the circumstances require us to readjust, then we will have to readjust. DPM explained yesterday that if we have to readjust by lowering further the corporate income tax or the personal income tax, we will have to look for other sources of revenue. But this is something that we will address when we have to cross the bridge. Among the review that we have to do is, of course, to look at the other tax structures like the flat tax structure in Hong Kong, which the Member also described. Sir, I would like to assure Members that we will continue to review our situation.

The other point which the Member raised is whether we can extend the exemption of foreign sourced income from individuals to companies. I think Members are aware that for foreign sourced income received by companies, we exempted qualifying foreign sourced dividends, branch profits and service income at the last Budget. This exemption effectively covers 90% of total foreign sourced income remitted into Singapore. And for those other incomes which the companies do not have the exemption, they can continue to claim foreign tax credit for this foreign sourced income that is not covered by this exemption. The reason why we are reluctant to extend foreign sourced income to companies is because of the tax avoidance concerns. As you know, tax avoidance by companies in businesses is much easier through devices like transfer pricing and round tripping through jurisdictions with significantly lower tax rates in Singapore. So this is still a big

concern and the tax loss through such a tax avoidance is a very significant amount. So that is the reason why we are reluctant to extend exemption of foreign sourced income from individuals to companies.

Mrs Lim Hwee Hua asked about corporate taxes and group relief. I think she also understands the reasons why we have to be initially cautious in our implementation of group relief and we start off by saying that this is extended to subsidiaries which are 75% owned by the parent company. She asked for this to be extended to 50% ownership. We have looked at other tax jurisdictions and 75% is already fairly competitive. But of course we will keep reviewing our situation and if we can do so, then of course we will be prepared to make it more generous and move it down to 50% ownership. But as at today, at 75% ownership, we are already fairly generous.

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The second rule is that these companies or subsidiaries should be registered or incorporated in Singapore. As you know, Singapore has a territorial and remittance

system. So, we tax income which is earned in Singapore and we tax foreign income only when it is remitted to Singapore. Foreign income is not taxed, unless it is remitted to Singapore. It goes to reason that if we do not tax the foreign income, then it will not be right to allow foreign losses to be allowed. If we do so, then of course we are subsidising foreign operations, compared to local ones. But we do agree with Mrs Lim Hwee Hua that we do want to encourage and facilitate our local companies to go abroad. The way we go about it is not through a general tax scheme like what Mrs Lim proposed, but more targeted incentives and grant schemes. Under this approach, we have several arrangements or facilities. For example, under the overseas investment

incentive, an approved Singapore-based company can defer its income taxes due from its profitable operations in Singapore for two years, if its approved overseas investment incurs operating losses during the first three years of the investment. So, this is a direct benefit. In addition, IE Singapore administers other various schemes which encourage and facilitate companies to go abroad. Examples would be like the regionalisation finance schemes. This gives us the opportunity to be more targeted rather than a blanket arrangement.

Mr Inderjit Singh asked about the performance of NII. He described the returns as erratic. I would prefer to describe them as a little volatile over the last five years rather than erratic. But you notice that the NII has ranged from about $2 billion to $3 billion over the last five or six years. So, even in the most volatile financial situation that we have experienced since 1997/98, our NII has been around $2 billion to $3 billion. In the difficult years where there is low interest rate globally and where the global economic growth is low, then of course our returns are lower. This is because the NII, as you all know, is defined as the dividends, interest and other incomes that are received by the Government from investing of reserves and also interest on loans that the Government gives out. Then, we have to net off the expenses that we have to incur on the investments and also the debt servicing costs, ie, the interest that we have to pay out on the loans that we take.

So, if you look at this definition, you will notice that there is interest income and dividend income. The interest income would depend on the interest rates around the world. Dividend income would then depend on the performance of the global economy. If the global economy is doing well, companies are doing well, then of course profits are up and they will declare higher dividends. So, it is quite clear. For

example, in 2001, when there was a global recession, our NII dropped to slightly below $2 billion. When we were budgetting for FY2003, we originally estimated an NII of $3 billion because we expected the global economy to recover. Unfortunately, because of the Iraqi war and the uncertainties, the global recovery in fact did not take place till the latter part of 2003. In addition, many big companies were intent on repairing their balance sheets and they were very conservative. So, even though the companies did well, the dividends policy was very conservative, and that is the reason why, instead of $3 billion, the NII came down to $2 billion.

Going forward, we think the global recovery is gaining traction and, as you can see, the results of the companies are doing well. Therefore, this year we projected the NII income to be around $2.3 billion. This is not very much different from the year 2000, where we managed to get $2.24 billion from our NII. Our projection for this fiscal year is the same as the year 2000, where Members will remember, the world economy was doing well, the stock market was doing well. So, it is not an under-projection of what we expect to receive this year.

Mr Inderjit Singh asked how is the performance compared to benchmarks. As you know, when we designate GIC and the various companies to invest the reserves, we also set for them international benchmarks like the MSCI and other benchmarks for bond funds. Compared to these benchmarks, our performance has been fairly good. But, basically, our overall philosophy in investing our reserves is a very prudent and conservative posture and, therefore, we cannot expect our returns to be very extraordinary. If we want returns to be extraordinary, then we have to take a higher risk and that, I think, is not the approach in investing our national reserves.

Let me next turn to Dr John Chen's question on the tax on dividends. This was discussed a couple of years ago when we decided to move from the imputation system to the one-tier system. I think the reasons for having to make this move still remains today. If we have kept to the imputation system, we would have to have many, many very complex rules to make sure that the imputation system is correctly carried out and the companies would have been very greatly hampered in their approach. They would find difficulties in executing share buy-backs, share redemption, capital reduction. There will be higher compliance costs because, under the imputation system, we have to make sure that the dividends are issued out of income and not out of capital gains. We have to have all kinds of rules to prevent anti-dividend streaming provisions like dividends being targetted at people with much lower personal income tax than the average shareholders.

So, over the years, all these rules have accumulated, and the assessment from the business community is that we ought to go to a one-tier system. It is simpler, more direct, the compliance cost is lower and makes us more competitive. Hong Kong, for example, runs a one-tier system, and that is the reason why we have done so not so long ago. Of course, this affects certain groups, eg, the retirees, as Dr John Chen raised. But it is not true that we are taxing them twice. When the retirees pay GST, it is not paying out of savings. It is paying out of expenditure. So, when the retirees pay GST, they pay like every other Singaporean, ie, only when they spend on goods and services.

Let me next turn to the SRS. I think Dr Tan Boon Wan brought up a valid point, ie, what is the appropriate posture we should take with regard to the SRS? If we want to encourage people to set

aside more money in the SRS, then of course we should not have any caps. On the other hand, if we are too generous with the SRS, then this is a very big tax advantage for wealthy individuals. So, our current posture is that we encourage Singaporeans to set aside money for retirement, but we use the CPF salary ceiling as the cap for such contributions, so that the tax advantages of such savings are limited or capped to the CPF salary ceiling. So, when the CPF salary ceiling was brought down, correspondingly the SRS ceiling caps were also brought down. But I think Dr Tan Boon Wan brought up a valid point. Beyond a certain level, if we keep tying these two together, then we will defeat the purpose of the SRS as a complementary or a supplementary scheme to the CPF. So, for the time being, since the reduction is not a very big one, it still makes sense to peg it, but we will have to examine this. It cannot be an automatic peg. In the end, we have to reach a balance, ie, how to encourage people to save more and at the same time not giving them such a big tax advantage in doing so. So, we will continuously review this linkage.

Mr Andy Gan suggested that we should target the tax collection from road taxes towards transport expenditure. As a general rule, it is not good financial management to pre-allocate tax collection to a particular purpose, because the chances are that resources will be misallocated. We collect taxes on cars primarily because we are a very compact urban city and we have to control the car population. So, the tax collection is for that purpose. On the other hand, we incur quite heavy expenditure both on road building and on mass transit systems, based on our assessments of the needs. I would like to assure Members that we will continue to spend appropriately when necessary on road building, on mass transit, to improve safety for pedestrians and to improve the

entire traffic and pedestrian walkway system. But this should be assessed based on its own merits and not because we have collected "X" amount from road taxes and, therefore, all this money should be channelled to road construction.

This year, for example, the budget for the Ministry of Transport is in fact raised from $1.5 billion last year to $2.2 billion this year. So, because of the higher costs incurred, particularly through the construction of the Circle Line and the Kallang Expressway, the funding has gone up. Where there is merit, we will continue to support the building of such systems.

Let me now turn to foreign maid levies. Again, when Members look at certain tax schemes, I would appreciate it if they understand the purpose of the tax scheme. The foreign maid levy relief was put in place with the primary purpose of encouraging working mothers to return to the workforce. As you know, our labour force participation rate for women is not very high compared to the other OECD countries, and we do want to encourage working mothers to return to the workforce. So, the foreign maid levy relief was designed for that purpose, ie, to encourage the working mother to return to the workforce and, at the same time, we allow relief from the foreign maid levy. But when we start looking at this particular arrangement and you look at it from the objective of procreation or of looking after aged parents, then of course you will say that this is not adequate. But, for the other purposes, we have other schemes and arrangements for them. For procreation, for example, we have the Enhanced Child Relief, special tax rebates and the further tax rebates. For looking after aged parents, we have the Aged Parents Relief, which amounts to $5,000 per parent. If you have both parents living with you, you can claim a total parent relief of $10,000, which is much more than the foreign maid levy

relief which is capped at $8,280. So, we have other schemes targetted or meant for other social objectives.

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But in this debate on marriage and procreation and since foreign maid levy has been raised as one of the 50-odd suggestions, my Committee will take a look at them. For the purposes that it was designed, it should have been appropriately named as "Working mothers' tax relief".

Next, let me turn to GST. Our approach to GST is that it should be a broad-based consumption tax and that it is not wise for us to differentiate between different groups of people. If we say that we should give exemption to the disabled, then I think another group could make an equally cogent case for exemption for education, exemption for babies and exemption for all different groups. In the end, we will end up with a very complicated GST system, like what we see in many countries. When we embarked on the GST in 1994, we did a very comprehensive study. We decided that in the long term, it is better to have a clean GST system, like what they have in New Zealand, rather than have a very complex system with all kinds of exemptions and then we have to constantly make rulings whether this exemption is allowable. For example, if milk for babies is exempted, we will have to differentiate milk for adults. We do not want to run into all these problems. It raises compliance cost. Our GST tax rate at 3% when we started, and 5% now, is very low and if we have all these exemptions and complications, the cost of administering the GST will be much higher.

Mr Ng Ser Miang put up a very persuasive case for sports organisations. Let me try and put it in a broader context. I think the problem arises because sports

organisations are not defined as charitable organisations. We have less problems with the arts and cultural groups because many of them can be classified as charitable organisations and if they are registered as charities, and if 80% of the funds raised is used for the purpose for which they are set up, then they are exempt from tax. The problem is therefore not as comprehensive as Mr Ng painted out. I think it is more acute in the case of sports associations because the National Sports Associations do not qualify for charity registration. Notwithstanding that, we do take a fairly benign approach, for example, capital grants and donations from the public to sports organisations are not taxed. The basic problem which Mr Ng Ser Miang raised is that some of the other rules, for example, the 50% income rule, that 50% of income must come from members. This rule is necessary because we want to differentiate a business or an organisation that collects revenue by providing services to others, in which case, it is more akin to a business than an association meant for the benefit of its members. That is why we have the 50% rule.

The second rule is that only Government operating grants which are given to the sports associations are taxed. The way we see it is that the operating grant is treated similarly like revenue for the sports associations and, therefore, this is treated in the context of a revenue and is taxable.

Mr Ng Ser Miang brought up the point that sometimes, because of timing and prudence, these Government grants are not spent for a particular fiscal year and for us to tax it may encourage the sports associations to spend them just before the end of the financial year. For that particular aspect, I will get the Ministry officials to examine this and see whether

they can come under the same rule as we do for the other Ministries.

Let me turn to the ERS raised by Ms Braema and Dr Tan Boon Wan. I think we have learnt from our first exercise. In this particular exercise, in fact, we do not require the elderly to put up the $50 top-up. All they need to do is sign the form authorising us to deduct $100 from this year's ERS, and that means they will qualify for this year's ERS as well as next year's ERS. It is a simple exercise. They just sign the form and we do not require them to put up the $50 cash. It is already a great improvement. The reason why we do want that act is to make sure that people are around to put up their hands and say that they do qualify for the money. As we discovered, out of the nearly 80,000 who did not qualify for the ERS this year, nearly 24,000 have invalid addresses. The bulk of these people with invalid addresses are people who left Singapore before the 1995 identity card conversion exercise. Many of these people could have died overseas. It is important for us, in going through this exercise, that we discover such situations. Otherwise, we would have been merrily paying out all this money and it has been collected by I do not know who. What we have done is the right thing.

But, at the same time, we are looking at all the various categories and if we can improve the implementation and make sure that those for which the ERS is targeted at, do receive the shares. Members will know that we have mounted a very big exercise by getting the grassroots leaders to visit the 1- and 2-room flats. We have reached out to the old folks, the long-stayers in the hospitals and in the nursing homes. We have reached out to those in the prisons. I think we have made a more concerted effort in this exercise. We are constantly reviewing our performance. For the next

exercise next year, we hope that this number will be further brought down.

Ms Braema suggested recognising samsui women in the National Day Parade. I will pass that suggestion to MINDEF which is in charge of National Day parades.

Dr John Chen asked whether we will conduct an overall review of safety nets and Government subsidies. I think he has pointed out a very important challenge facing us. As the economy matures, as the population gets much older, we do need to constantly review our safety nets. I think that is what the DPM sets out to do in putting out the philosophy and the approach towards university education and healthcare expenditure because these are the two areas which will grow in the long-term.

On whether we will extend means testing beyond healthcare, we are increasingly doing so. In the many MCDS financial assistance schemes, these are all targeted. "Targeting" means that we need to do case management, we need to look at the situations of the people and see how deserving they are of the assistance. The more deserving cases will then be given higher assistance.

Finally, let me turn to charities. From the questions raised, clearly there is a need for us to explain our whole approach to charities. Let me just try to do so in a very quick way. There are two groups. The first group is charities where the income is exempted from income tax. Then there is another group called the Institutions of Public Character where the donations are exempted from income tax or they get double tax deduction. We have many organisations which are registered as charities. We have about 1,600 registered charities. The Commissioner of Charities, when he accepts a particular organisation as a

charity, has certain rules, ie, the objective is charitable purposes, 80% of the income should be spent on the purposes that are set out, their charity is meant for Singaporeans and not for overseas because we do not want organisations to be set up in Singapore, raise funds and then remit the funds overseas. There are certain rules put in place by the Commissioner of Charities. I take the Member's point that we should review the regulations on how charities are allowed to raise funds and how these funds are spent, that there should be better transparency so that people who donate to these charities can be assured that their money is put to the right purpose. This is what we are progressively trying to do. The starting point is to insist that they put up their accounts on the Internet so that anybody who wants to donate to these charities can look at their past years' accounts and see how they have spent the money.

When it comes to the next group of institutions, called the Institutions of Public Character, I think this group comes under a stricter regime because the donations enjoy double tax deductions. The way we go about it is to set up a framework so that not just IRAS confers this IPC status but, in fact, we have 11 central fund administrators, each for different sectors, whether for the arts, for sports, for community service, etc, because these fund administrators understand the sectoral demands much better than IRAS. This is how we administer the IPC regime. The council that we recently started - the Council on Governance for the IPC - again, it is meant to look after the IPC. But we will not stop there. Once we set out the rules of governance for the IPC, we will be in a better position to see what part of these rules is also appropriate for the charities. Then we will progressively extend these rules of governance to the charities as well.

I take in Mr Sin Boon Ann's point that there ought to be a code of governance and we are progressing along that path. The council will set out the rules and we will implement these rules first for the IPCs and increasingly, where these rules are relevant, we will be able to codify these for the other group of charities.

Sir, I think I have answered all the questions.

Sir, may I clarify? What I meant about the old people was not that they should take part in the National Day Parade. That will be too taxing on them. Rather, we should create some kind of scheme as a National Day recognition for their contributions.

The Minister did not answer my question, which is on the new tax relief for individuals who top up the non-working spouses who are 55 years and above. I would like to ask whether it can be earlier so that they can have an earlier top-up and more cash accumulation.

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My apologies. I missed that out. I think that is a good suggestion. As you know, the way the Government proceeds is when we introduce a scheme we start off reasonably conservatively. We see how it goes and, if there are merits for extending the scheme we will look at it. So I will take in his suggestion and pass it on to my staff.

As to whether to recognise and designate a special day for the samsui women, I think that is something that we have to study very carefully.

Government-Linked Companies

Sir, DPM Lee has announced that about 80 GLCs have been identified to be divested in his Budget round-up speech. I am glad to hear that. My GPC colleague, Mr Inderjit Singh and I have said many times in this House that GLCs, TLCs and NLCs - I am referring to NTUC-linked companies - do occupy part of the business space in Singapore.

Singapore is already a very small market. The competition from GLCs has a severe impact on the operational and business opportunities left for local SMEs. If we wish to see private enterprise as the engine of growth in the future, then more business space should be given to the private sector. Hence, I would like to hear more details on the Government's plan to divest the non-strategic business of the GLCs. During the divestment process, I would particularly like to see opportunities given to Management Buy-Outs (MBOs) or Management Buy-Ins (MBIs) which is to participate with external investors. In this way we can encourage GLC management to start businesses on their own through participation in the divested GLCs. It will also create a larger pool of local entrepreneurs in future. GLCs are larger and stronger and well-placed to compete overseas. They help to develop the external wing. This is a very important charter of the GLCs. There have been many suggestions in the past that GLCs can lead and work with local SMEs in jointly working together to vie for overseas businesses and contracts. Sir, I feel this way the GLCs can also play a useful role in cooperation with SMEs.

Sir, I hope that the Minister for Finance would bear with me for bringing this up repeatedly, but I think the issue is that it remains a source of concern not just for Singaporeans and Singapore companies, but also, as we

saw it, when we were discussing or negotiating the FTA with the USA. This was a big source of concern for USA too in concluding the FTA. In fact, it was left as one of the last thing to be resolved. So, therefore, it does say that the perception out there is that we have not done a lot of work particularly in the area of divestment of the GLCs or TLCs and, therefore, I was quite glad to note that, if I am not wrong, DPM mentioned that there were about 90 companies like that identified for divestment.

I would like to suggest that the Government provide a strong push to accelerate the overseeing of this divestment activities for the reasons that Mr Leong Horn Kee just mentioned. The approach that we have been taking right now is to leave it to the Government agencies and also leave it to Temasek. I think this is the area where I would ask for Government's more dominant role as opposed to lesser role in other areas. I also suggested last year that we create competition for Temasek. While recently we have heard Temasek revealing some of its results, the question is: how does it compare benchmark performances elsewhere? In this respect, perhaps an alternative to divestments could be creating more vehicles like Temasek - maybe not 100% Government-owned, but joint ventures with private funds that could provide some competition for Temasek.

The third area is in the area of prompt payment. The Action Crucible for Financing, which I am chairing, which is part of ACE, has worked on this one item of trying to improve cash flow among SMES. And we identified that prompt payment by bigger companies is an issue for SMEs. In this respect, the Minister for Finance has done an excellent job in sending a directive to all Government agencies to pay promptly. I would like to see whether we could find a way to also encourage TLCs and Government-linked

companies to become the leaders in prompt payment in the private sector. This will go a long way in helping the cash-flow issues that our SMEs are facing.

Mr Ong Kian Min is not here. Mr Chandra Mohan is also not here.

Corporate Compliance Costs

Sir, the Accounting and Corporate Regulatory Authority (ACRA) was recently established, combining the Registry of Companies and the Public Accountants Board into one single body. The aim is to achieve synergy between the monitoring of companies' compliance with disclosure requirements, as well as the regulation of public accountants performing statutory audit.

Sir, as a self-funding statutory board, ACRA is obliged to raise its own funds through the provision of its services as it would not depend on the MOF for any grants. It will have to use its own accumulated surpluses to finance its own operations as well as development projects. I note that while Government-funded statutory boards are not to make any profits from the fees and charges they impose, self-funded statutory boards like ACRA are not similarly obliged to do so. In theory, they are expected to use market rates to determine the fees and charges. But ACRA is essentially a monopoly, so it has been suggested that its rates must be competitive with those in other countries. For example, company registration fees were recently reduced from $1,300 to $300 in order to be commensurate with the rates of other countries. However, Sir, for many years this was not the case and it was not corrected.

I would therefore like to ask the Minister for Finance, if, firstly it might be

prudent to prescribe certain minimum standards of service to be delivered by ACRA, as really companies have no alternative service provider. Secondly, whether MOF would annually review the rates and charges imposed to see if they are excessive. Thirdly, whether MOF could periodically review the surpluses of ACRA, again, to see if they are excessive. And, if so, if the cost of its services can be lowered. Finally, if there are checks and balances against excessive compliance related costs given the self-funding nature and monopoly of ACRA in the provision of such services.

Corporate and Accounting Scandals

Sir, as Singapore aims to become the financial centre of Asia, we must have rules and processes that ensure greater accountability and transparency of corporate activities, especially those of GLCs and public companies listed on the Stock Exchange of Singapore. I propose the Government should look into enacting the equivalent of a Sarbanes-Oxley Act like in the United States. This is to ensure that management undertakes personal responsibility for establishing and maintaining an adequate control structure and procedures for financial reporting. We must ensure that large-scale corporate and accounting scandals like Enron, Tyco and Worldcom, etc, involving any of our listed companies cannot and must not be allowed to take place here.

Under such an Act, auditors are required to certify not only the company's financial statements but also the financial processes that produced those statements. This means that auditors must fully understand these processes and believe that they have been executed without variance. All public companies listed on the Stock Exchange (SGX) must

also have a compliant reporting mechanism in place that allows employees to report, whether anonymously and confidentially or otherwise, questionable accounting practices, financial misconduct, or suspected illegal activities, directly to the company's audit committee or other company management who has the authority to investigate and discover misconduct or to terminate other employees for such misconduct.

Sir, doing everything possible to identify suspected fraud, accounting abuses or other illegal acts not only prevents problems from escalating into legal action, it will also minimise the damage when such illegal acts occur. This should not be just a matter of good business practice, it should be part of the law of our land to safeguard the public and the investors from the greed of unscrupulous management and CEOs.

Totalisator Board

Mr Ngiam Tong Dow, our former top civil servant, in a recent public speech, said BG Yeo, as MITA Minister appealed to the Prime Minister concerning the funding for the Esplanade project. The public is now informed that the Prime Minister then decided to bypass official protocol and procedure and decided that the Totalisator Board should finance the capital expenditure of the Esplanade outside the budget, below the line.

I would like to ask the Finance Minister:

How can the Prime Minister decide on such a matter, considering that he is not in the Ministry of Finance, nor a member of the Totalisator Board?

Has the Prime Minister over-stepped his power, position and authority in deciding on this financing matter?

Is there genuine transparency and proper accountability from the distinguished board when external influences are brought to affect its decision-making process and expenses, considering especially that the board in effect is acting as an agent of the Ministry of Finance? Its revenue was to be credited to MOF at the end of the financial year.

How can such a large expenditure of about $500 million be approved by the decision of one person without passing through Parliament?

I hope the Finance Minister can give us a satisfactory explanation of the questions.

Statutory Boards

Mrs Lim Hwee Hua: Sir, over the years, companies have become increasingly alive to the notion on the cost of capital and the return on capital. In the case of Singapore, where we do not have natural resources, and where we need to undertake capital-intensive infrastructural projects, it is only appropriate that the public sector operates on a similar mentality as well. Of course, there is a challenge in terms of measuring the return on capital, as it is frequently for the public good, which may defy any attempt to quantify the benefit. For example, beyond deciding that an expressway is required, how does the Government fund the construction? Previously, this was entirely cash. Now, perhaps bonds can be part of the equation.

Take another example: how does a statutory board decide if it should construct its own building or continue to rent? If there is a notion of capital, the discussion will no longer centre on a one-off development expenditure item, which draws heavily on capital, but a recurrent expenditure.

It is thus commendable that the Ministry of Finance has addressed this need. I understand that the Ministry has raised this consciousness amongst statutory boards by, firstly, introducing a notion of capital injection similar to shareholders' funds; secondly, encouraging statutory boards to source for alternative funds such as issuing bonds to the public; and thirdly, imposing a value-add consideration when evaluating performance.

I would like to ask the Minister for the status of this capitalisation exercise, and his assessment of the results thus far, in terms of internalising a profit-and-loss discipline, a curbing of potential wastefulness and the measurement of statutory boards' effectiveness.

Government Procurement Policies

Sir, the Government seeks to achieve an open, fair, transparent and competitive system through well-defined procurement policies. There is no quarrel with such prudence.

I am also heartened to hear the DPM recount yesterday the volume of tenders which has been secured by the SMEs. This is indeed encouraging.

However, there is still feedback that the requirements as imposed by the Government departments are often-times the main hindrance to more participation by smaller suppliers, rather than the need to compete with the larger suppliers. For example, some contracts require a minimum level of capitalisation by the service provider, well in excess of what is reasonable for the services to be tendered for. And worse still, evaluators themselves may favour the better-capitalised companies for greater comfort or insurance against default or failure.

Yet others require a track record of a certain length. These impositions are sometimes so overly stringent as to preclude the smaller suppliers from having a fair chance. As we know, if you are never allowed to build up a track record, how can you ever have a track record in order to qualify?

Hence, my question to the Minister for Finance is one of asking him if, firstly, he could ensure that the bar is not pushed up unduly high by overly conservative requirements, and secondly, that he will advise all Government agencies to review their procurement requirements so as not to unwittingly favour the larger suppliers. In short, set the bar at the right level. The SMEs are not asking for a lopsided bar.

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First, on the questions of Government-linked companies. In his Budget speech, DPM

gave an Annex of the companies that Temasek has divested its stakes, a total of 12 companies in 2003.

In his round-up speech, the DPM explained the process that the MOF has undertaken to review Government-owned companies. We have asked all the Ministries and statutory boards in Government to look at the companies that they have set up within their control, and to review them and see whether such companies should continue or should be divested, etc. Although this exercise is still on-going, we have already identified 80 companies which we will scrutinise in greater detail and we will ask the Ministries to justify why these companies should be retained.

Let me clarify that these 80 companies are not GLCs under Temasek.

These companies have been set up by the Ministries and the statutory boards.

On the oversight of Temasek, we have discussed and debated this many times in this House over the last few years. We have set out the Charter for Temasek. We have set out the benchmarks. I think if Members look at Temasek, we can look at it in different categories.

The first category is those companies which are strategic to Singapore for which the Government will continue to have an interest. The role of Temasek in such companies is really to maintain a stewardship role. As Members would know, many of these companies are listed on the Stock Exchange of Singapore. They all have their separate boards. They all have their separate managements. And it is not the role of Temasek to micro-manage these companies or to run these companies. Basically, Temasek just maintains a stewardship role and make sure that the shareholders' interest, ie, MOF's interest, is well looked after.

There is a separate mission for Temasek and that is to grow our companies into regional and international companies. This is very important for Singapore in the long term, and this is where the energies of Temasek are currently directed.

So, when we look at the divestment process of Temasek, I think it is going at a good pace. All those companies which are not strategic or do not have the potential to grow into regional or international companies, Temasek would eventually divest them. I think Temasek would do so as and when the market is right. I do not think it is correct for us to set them a schedule or to identify these companies and give a very strict deadline, because that will not be the right way to get the best fair value for Government in divesting these companies.

On the approach for the divestment, again, we will leave it to Temasek and to the market, whether it is through management buy-outs or buy-ins. I think we will find the best method to make sure there is a strong management to run the company after it has been divested, and to make sure that we have fair value for the divestment process.

Mr Leong Horn Kee proposed that the GLCs work with the SMEs in overseas ventures. Again, this is indeed what Temasek is doing. But I would urge that this be done on a commercial basis. We all agree that there is value in partnerships between GLCs and the SMEs, but this should not be national service. It is best that Temasek goes about its mission with a clear mandate, and that if we want to do national service, this be done as we are currently doing by Government agencies - the EDB, SPRING and IE Singapore. Temasek should just be given the task to run the companies on a commercial basis.

Mr Inderjit Singh proposed a competition for Temasek, and suggested that we create more vehicles like Temasek. I think we have enough problems with many Members here with one holding company. If we create more holding companies, there will be more accusations that we are elbowing the private sector in the market.

To put this in perspective, the entire GLCs and Temasek-linked companies constitute only 13% of our GDP. So, it is not that Temasek companies take up such a big segment of the GDP. Our GDP is largely generated by multi-national companies. They constitute 42% of GDP. The entire Temasek GLC stable only provides 13% of the GDP. So it is not true to say that Temasek is crowding out the private sector. I think there is a role for the MNCs. There is also a role for the big companies, of which Temasek is a part, and there is also a role for the SMEs.

In fact, the SMEs are a very significant group in terms of employment and also in terms of GDP generation.

Sir, as I explained earlier, the running of the companies in Temasek is done by the various individual companies, and not by the holding structure in Temasek. So there is very little value in creating more vehicles.

Mr Inderjit Singh also requested that the bigger companies undertake prompt payment as a way of helping out the SMEs. I think that is a fair request based on commercial terms. If the contract calls for payment by 90 days, then I think the companies ought to abide by the contract and pay by 90 days. There is no reason for them to use their muscle and delay payments. I think that is good corporate practice.

Mrs Lim Hwee Hua raised the issue of ACRA. As a starting point, we do not see a need to provide operating grants to ACRA, and that is the reason why ACRA is set up as a self-financing statutory board, meaning that ACRA should be able to finance its activities through cost recovery of the services that it provides. As Mrs Lim Hwee Hua pointed out, in fact, the company registration fees have come down. She suggested several things that we can do to make sure that ACRA does not become a monopoly and raise fees and increase the cost for the business community.

First of all, I would like to explain that the regulatory fees put up by ACRA will need to get the approval from the Ministry of Finance. So there is check and balance. The other suggestion that she pointed out is that there should be an annual review of these rates. I think we can do that. There should be periodical review of the surpluses and that there should not be excessive compliance cost. I think MOF will do all these as the parent Ministry supervising ACRA. But more

importantly, is that the mindset of the management of ACRA is aligned in that way. The board of directors of ACRA will include members from the business community and members from the private sector. At this level, the board can oversee the management and make sure that we do not have excessive compliance cost and that the business community's inputs about best practices are incorporated. And if there are any surpluses by the board, that these are not excessive and do not accumulate over time. I think we have in place sufficient checks and balance for ACRA.

Mr Steve Chia suggested that we annex something akin to the Sarbanes-Oxley Act. Let me assure the House that most of what is in the Sarbanes-Oxley Act are actually available in Singapore. We have a variety of checks and requirements aimed at ensuring accountability and transparency. But these are not all in one Act. They are in different Acts. Currently, they serve our purposes adequately.

As for the implementation of the Sarbanes-Oxley Act it is still early days. If you talk to different groups of people, not everyone thinks that that is the best legislation to go about ensuring best governance. But we will monitor the implementation of that Act. ACRA will look at the Act as well as the practices and, together with the business community, we will see whether elements of that Act are applicable to Singapore. So we are not ruling it out, but we have not come to the conclusion that that is the best model for us. The verdict is still not there yet.

Whether we should have safeguards for corporate whistle blowers, which is one of the key features in the Sarbanes-Oxley Act, I think this is something that we also have to study very carefully.

Mr Steve Chia also asked about the funding of the Esplanade and the version given by Mr Ngiam Tong Dow. Let me just explain that Mr Ngiam is a very respected ex-civil servant. But sometimes his recollection of what happened may not be totally correct. It is like being an ex-SAF officer, many times we gather together over beer. We talk about old times and relate what we call war stories. As you get older, the war stories add more colour.

What actually happened was that in June 1991 - and this was way back in 1991 - Cabinet approved the construction of the Singapore Arts Centre, the old name of the Esplanade, at an estimated cost of $780 million. That was a big decision made by Cabinet. As you know, the Government makes its decision at several levels. First, the Cabinet gives its in-principle approval. Then we have the DPC Committee which looks at the project proposal and see whether the funding is appropriate. The project funding came up to the DPC in May 1994. The DPC Ministers approved a lower sum of $623 million for the Arts Centre. But the Minister for Finance then felt that this is a big sum to be funded on budget. So he tasked the MOF's staff to look into other ways of financing such a project. The staff had several meetings - MOF staff, MITA staff, Totalisator Board and Singapore Pools - and they came up with different ideas, like financing the Esplanade through a special lottery. They tried to think of different ways of raising the funds. So, everybody was in it - the Totalisator Board, Singapore Pools - how to go about building the Esplanade.

In July 1994, MOF put up a paper to Cabinet and recommended that the Esplanade be built in phases, and not in one big go, so as to stage the expenditure. That was agreed to by Cabinet. Subsequently, PM met BG George Yeo and they discussed how this

should be implemented after the Cabinet's decision. So, based on this record of what happened, that we pulled together from our files, I think Members can see that the procedures were followed. There was a Cabinet's decision, DPC's decision and then it went back to Cabinet to see how it could be implemented. We are all very happy that the Esplanade has been built. The way to fund it through the Totalisator Board and the Singapore Pools was an appropriate way of funding, because these agencies have the mission of funding the arts, sports, community services, charities, etc. Because it was a big sum, we had to bring in both the Singapore Pools and the Totalisator Board in this exercise.

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Mrs Lim asked about the running of the statutory boards and how they can have a better sense of profit and loss discipline, and that they understand the use of capital more appropriately. This is a big challenge for us in the public sector. Even though we

set up the statutory boards to try and run them as close to private companies as possible, sometimes, as Mrs Lim Hwee Hua herself put it, it is very difficult to measure profits, revenue or return on capital. But this is something that we are constantly trying to do, to come up with proxy performance indicators which resemble private sector norms and private sector parameters as closely as possible.

So on this use of capital, in the past, what would be done was the Government would give a grant to the statutory boards and that may not be the best way to inject discipline. So what we have done is we have introduced debt equity financing structure for statutory boards, instead of just financing them only through the grant. So by injecting capital into the statutory boards, either as equity or as debt, I think the management and

the board of directors will be more aware of the cost of capital and also on the efficient use of capital. So far, we have done so for the Singapore Land Authority and this makes the SLA the second statutory board to have equity after the Monetary Authority of Singapore (MAS). And we have plans to inject capital into other statutory boards when there are major investments justifying such injections.

I think with such a measure, of course, the statutory boards would be under greater pressure to make use of the capital appropriately and they will also realise that there is a cost to capital. If they raise capital through bonds, I think that cost will be very clear to them too. We have had other exercises to try and inject this concept of value-add. The private sector has EVA, in the public sector, we modify the concept through the NEV. Again, the exercise is part of the ongoing process of getting the public sector to work more like the private sector and to understand how their performance will be measured.

Next, let me turn to Government procurement policies. Our procurement objective is straightforward. We want to get the best value for money through an open and transparent procurement system that is competitive. The objective is clear. The problem is how to get there and how to strike the right balance. As they say, the devil is in the details. And many times, if Government agencies do not specify their requirements properly, they may be tilted in favour of a specific established vendor, or they may be tilted in favour of the bigger player. So it is very important that when Government agencies specify their requirements, based totally on their needs, bottoms-up, and these specifications of the tender must be generic, they must be performance-related and they must not be tilted towards a certain product, or certain vendors.

Mrs Lim Hwee Hua also raised the issue of the minimum level of capital required for the suppliers and also their track records. Here, we have to strike a balance. I think as a purchaser, you want to have some confidence that whoever succeeds in the tender can deliver the products on time and according to the price. To do so, you want the company to have some capital basis. At the same time, they must have some track records so that it gives you confidence. So where do we draw the line? We will have to constantly review this to make sure that the bar we set is not unrealistic. Realistically, what will happen is that the smaller companies would have to start with the smaller contracts and they will build up their track record and credentials, and then they go on to bigger and bigger contracts. That must be the way they have to go. I think there is no short cut. What we are trying to do is to make sure that we do not impose unnecessary hurdles in their progression up this ladder.

Order. I would like to take the break now.

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

Order. I suspend the Sitting and will take the Chair again at 2.55 pm.

Sitting accordingly suspended

at 2.35 pm until 2.55 pm.

Sitting resumed at 2.55 pm

Debate in Committee of Supply resumed.

Head M (cont.) -

Banking Sector

Sir, I would like to ask the Minister for Finance for his views on the current state of the consolidation and merger of local banks. Now, we are left with three major local banks. There is a constant market rumour that one bank is waiting to be acquired by another. Finally, we could be left with only two large local banks. There is a genuine concern that the reduction to only three, and eventually maybe two, local banks does restrict the number of banks that local businessmen and individuals can approach for loans and other banking services. Imagine if you are down to two local banks, if one bank rejects your loan, you are at the mercy of the other. In the past, a company needing a business loan, or an individual needing a housing loan could approach five to six local banks and a large number of finance houses. Now, there are only three local banks and a small number of finance houses to go to. Getting a loan seems more difficult nowadays, especially for SMEs.

It is often quoted that Switzerland has also only two large banks, that is, the UBS and Swiss Bank Corporation (SBC). However, we know that Switzerland has many provincial and cantonale banks as well. Yes, in Singapore, there are many foreign large banks which are given full banking licences.

However, these foreign banks do not cater to small businesses and individuals. Their sights are set at the large clients. Moreover, our experience is that foreign banks tend to be fair weather friends. During rainy days, they are more likely than not to take away their umbrellas. Not the fault of their local management business, as the pressure is often exerted by the overseas headquarters. This is indeed the experience of many Singapore companies during the Asian financial crisis. Foreign banks are amongst the

first to pull their loans during that difficult financial period.

Sir, therefore, I would like to ask the Minister for Finance what are the impact of the local banks consolidation and his Ministry's plans to ensure that both local and foreign banks here cater for the small SMEs and individuals.

Sir, as Mr Leong Horn Kee has elaborated, the banking sector in Singapore has undergone extensive consolidation and restructuring over the past few years. Banks have merged and many have folded their finance operations into the banks proper. We now have fewer and hopefully better placed financial institutions with the scale to compete globally.

Coinciding with the consolidation within the financial services sector is the economic downturn. Thus, risk assessment has sharpened and the risk appetite checked by business failure. The plight of the smaller borrowers, including the SMEs, is one of a double whammy effect. SMEs figure less in the larger banks' radar screens. A company which used to have credit with two merging banks finds out very quickly that, upon merger, its total credit is not the aggregate, but a much smaller number. The principle of single borrowing limits may have been applied a little more stringently to the smaller borrowers. The second whammy comes in the form of assessed higher risk, and therefore a reduced amount of credit again. The consequence is one of tightening cashflow,

and some may have been prematurely decimated as a result of reduced credit, and not necessarily bad business.

3.00 pm

Thus, the SMEs are not simply asking for new support for entrepreneurial initiatives. They are really seeking some respite from a structural change, ie, the

consolidation, as well as from the cyclical effect, ie, the downturn.

As the structural change is permanent, I would like to ask the Minister for Finance to review the whole concept of risk-sharing financial assistance for the SMEs, with a view to closing this gap arising from the consolidation. It would appear that the banks are not so keen on this form of lending.

Small Business Banking

Sir, I can understand the Government's move to compel the local banks to merge to allow them to compete with the more liberalised and globalised financial sector. It was the right move to create one or two local banks which can become global banks, headquartered in Singapore. However, the unintended effect, as my colleagues have mentioned, is the reduction of options for our companies operating out of Singapore. I am sure that having big local banks and having small banks in Singapore are not mutually exclusive outcomes. I, therefore, would like to ask the Minister to consider the following suggestions:

First of all, make it easier for smaller banks to be set up in Singapore by making the licensing more liberal and by reducing the costs involved. I was told that in the Silicon Valley, banking licences are a dime a dozen, which means it is quite easy to get those licences, and it is up to the private companies to take the risk to decide whether they will be viable or not. Therefore, while we continue to promote big banks, why not allow smaller banks which feel that they can set up base in Singapore to do so?

Secondly, perhaps MAS can give greater flexibility to some of our local finance companies to operate as limited banks. Many of these finance companies are already significant lenders, but there

are still too many restrictions which make it difficult for such finance companies to service a wider group of companies. For example, can finance companies be allowed to operate checking accounts with the clients that they are already lending money to? The intent here is that the finance company will have the possibility of monitoring the finances of the company and, therefore, give them more confidence in lending to these companies.

Sir, thirdly, the Minister for Finance talked about the benefits or incentives for asset securitisation. I have been working on this project, and I would like to ask the Minister to help clear any legislative restrictions or any impediments that may arise, because I think this form of financing will actually create virtual banks for us here in Singapore, and they will open up many more opportunities for local companies to raise financing.

Banking

Sir, I would like to talk on banking and sharing of wealth in Singapore.

The issue of a bank licence in Singapore by the Monetary Authority of Singapore is done, I am sure, with great care. Very few people benefit as directors of companies issued with bank licences and, as indicated earlier, there are very few in Singapore with a bank licence that is local. No doubt, there are market forces, and it is left to individuals to be directors of banks and, very often, we find quite a lot of family members of certain banks where there is a continuous flow of these members coming into the picture.

I would like to suggest, Sir, whilst directors of banks may remain directors

for a long time, there should be some sort of rule or regulation regulating the number of years a person can be a director of a bank so that there is a spread of directorship and, therefore, the spread of wealth amongst citizens of Singapore. Some of these directors may remain for decades. Is that fair when there is the issue of licence being issued by the state to a restricted number of companies? Therefore, it is very difficult for ordinary people to gain an access into directorships of banks. They may be shareholders, and that is the other issue I would like to raise, ie, the issue of shareholding amongst individuals and citizens in Singapore, whether there should be a cap on the number of shares that can be held by directors of companies owning banks, so that there would be a spread of wealth in the form of the spread of shareholdings amongst citizens. Very often, we find in banks that the major shareholders are actually the directors of banks. Therefore, if this can be looked into so that there is a better spread of wealth, it is something our citizens would appreciate. It may be a difficult task, but it is something perhaps we can consider and come out with some guidelines.

Consumer Protection

Sir, the number of complaints against financial institutions has increased drastically over the years. According to the Consumers Association of Singapore's records, the number of complaints related to financial services were 221 in 2001, 497 in 2002 and, in 2003, the number had gone up to 1,915, of which 40% are complaints related to the "critical year" issue. There is also the issue about pressure selling of investment instruments by banks to consumers who are clearly not in a position to protect their interest when they put money in such investments. Consumers also complained about the high interest rates charged on outstanding balances in credit card accounts, and the

cartel-like manner in which banks seem to come together to support one another to maintain the interest at 24% a year when all the other financial borrowings incurred annual interest rates of less than 5%.

All the above issues were highlighted quite prominently in the local media, and consumers were quite concerned that such unfair practices were allowed to perpetuate. The general perception is that the authority is not taking action against the institutions concerned or the agents flouting the rules. For example, the public perceived that MAS took a low profile in the initial stage of the "critical year" issue and came out with an advisory only subsequently. This led to the public perception that the authority is taking such issues lightly and prefers to leave the matter to the market players to sort it out. To the consumers, they believe that the market players will drag their feet to rectify the unfair practices at the expense of consumers' interest.

I think the MAS needs to clarify its role in addressing lapses in the financial marketplace and in consumer protection. The public will prefer that the MAS be more visible as a regulator.

Sir, I am glad that the insurance industry has put in place Insurance Dispute Resolution Organisation (IDRO), which is an alternative available to all consumers to take their problems to. IDRO has enjoyed a good image among consumers. It is generally perceived to be impartial and will deal with insurance disputes fairly. This is because IDRO has tripartite representation and policies in IDRO are made clear to the various stakeholders. I understand that, to date, IDRO has handled more than 400 cases, and the resolution rate is 100%. It is very encouraging.

On the other hand, however, for the banking sector -

Mr Yeo Guat Kwang, can you wind up your speech, please?

- consumers perceive that there is no clear dispute mechanism, and would like to know whether MAS will facilitate the industry to strengthen its dispute resolution mechanism in the banking sector.

Credit System

Sir, currently, for overseas purchases using credit cards, the banks convert the foreign currency purchases into Singapore dollar at an exchange rate they decide and charge the Singapore dollar amount to the account holder. They are not obligated to disclose the basis of the selected exchange rate nor fees added by the bank, Visa or MasterCard. This violates the very principle of fair transaction. I am not against the charging of fees, but consumers have the right to know the basis of the calculation of the cost before, and definitely not after, the using of the credit cards.

A Straits Times' reader last year compared this to "hopping into a cab and enquiring about the fare ... and being told that all charges vary daily and they cannot be disclosed to you until after you have arrived at your destination ... If cabbies cannot get away with such non-disclosure, why should banks be allowed to?"

Visa International and MasterCard were taken to task over this in America, Canada, United Kingdom and Australia last year. In the US last year, a California judge had ordered Visa and MasterCard to refund US$800 million in fees charged to customers. He ruled that they should better disclose conversion fees in the future.

As a leading financial centre, it behoves our financial institutions to be transparent and accountable in all their transactions. May I thus recommend that, in the interests of our reputation and to protect our consumers, the credit card issuers in Singapore be required to state clearly and unambiguously the basis of the selected exchange rates used and the details of any additional fees charged.

Sir, Mr Leong Horn Kee asked about the current state of consolidation of the local banks. In 1999, MAS introduced a 5-year programme to liberalise access by foreign banks to Singapore's domestic banking market. We realise that we have to open up the domestic banking market and we are doing so gradually, so as to give the opportunity for our local banks to consolidate and build up their capacity to face this competition. The idea is that, through competition, our local banks would grow and develop and be strengthened, and that we will provide Singaporeans with higher quality banking services and build up Singapore as an international financial centre.

Our local banks have responded well to this change. They have been building up their capabilities, and they have been seeking opportunities to expand their presence in the region. So, what used to be five local banking groups have now become three larger ones. Any further consolidation would be a decision for the banks and their shareholders to make, taking into account the evolving comparative environment in which they operate. MAS will continue to monitor the progress made by our local banks before considering further liberalisation measures.

Mr Leong Horn Kee also raised the difficulties that SMEs and small depositors face because of this consolidation

process. Singapore is a significant financial centre. We have altogether 580 local and foreign financial institutions offering a wide range of financial products and services. At the same time, SMEs constitute a wide spectrum. There are start-ups which do not have access to some of these financial services. At the same time, there are very well established, very capable SMEs which enjoy this full range of financial services, like trade and project financing, loans, etc, or they can tap the capital markets for their financial requirements. So, our job is to try and build up the full capacity and the facilities provided by the financial sector, and then leave it to the SMEs to tap into whichever services or facilities that best meet their needs. It is not true that the consolidated banks and the foreign banks go for big companies and not the small SMEs. You will know from the market that a few of the foreign banks in fact target the SMEs as a very important business clientele.

As for small depositors, Members will remember that the Association of Banks in Singapore (ABS) introduced the Basic Bank Account (BBA) package in December 2002. This Basic Bank Account sets out a minimum package of banking services, and eight major retail banks in Singapore are committed to provide such services to small depositors and, out of these eight banks, the foreign banks are also represented. So, it is not true that the foreign banks do not provide services to the SMEs or the small depositors. But we do realise that a segment of the SMEs may have difficulty accessing the financial sector for their funding needs, and this is where the Government comes in with a wide range of financing facilities for the SMEs. We have the Local Enterprise Finance Scheme run by SPRING. We also have the Loan Insurance Scheme, and I think some Members here are spearheading the SME loan securitisation project which will allow a wider pool of SMEs to gain access to such financing.

We are always looking at different ways of encouraging the market to meet the needs of the SMEs.

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I remember, last Budget, Mr Inderjit Singh also raised about other models of SME lending. Our approach to all this is that we will always look at such proposals. If they are feasible and suitable, if they are commercially viable, we will allow them to grow. Specifically, any institution that only wants to engage in financing activities, including specialising in SME financing, does not need a licence from MAS. A banking or finance company licence is only required if the institution also collects deposits. MAS is open to admitting banks with specialised expertise in SME financing, so long as they meet our prudential requirements for licensing.

Mr Inderjit Singh also suggested that we should allow the finance companies to extend the range of services, particularly servicing the SMEs. This is something we do encourage. MAS will study the proposals put up by the finance companies. We assess the capabilities of the finance companies in doing so because it is important that the finance companies that want to provide such extension of services are able to do so prudentially.

Mr Inderjit Singh asked the Government to facilitate asset securitisation. I think this is very much in line with what we are trying to do. We are trying to build up the breadth and depth of the capital market and we see asset securitisation as one of the important areas by which the financial market can provide a fuller range of services. There are some requirements on asset securitisation for the different players. We have to look at these requirements carefully. We cannot dispense with these requirements because

certain prudential requirements have to be met. I take his point that we should constantly review these requirements to make sure that we do not hinder the growth of asset securitisation.

Mr Chandra Mohan puts up some unusual suggestions about spreading wealth through the banking licence. I am not so sure I got the drift of his suggestions. We should not see a banking licence as a licence to print money and, therefore, a way that everybody should get a chance and is a way of spreading wealth. Banking is a very serious business. The banks are in the business of taking deposits and granting credits. When we give a licence to somebody to take deposits, we have to make sure that that entity is well-capitalised, have strong management, a proper board of directors to oversee its operations, because these are deposits of all Singaporeans we are talking about. Before we give out a licence, we have to make sure that all these are in place.

Secondly, banks play a very important role, not only in the financial sector, but in the economic well-being of Singapore. They are what we call systematically important institutions. A bank failure is not just a failure of one company. It has implications on the entire financial sector and also on the economy. We have to set very stringent prudential requirements on the setting up of banks. The appointment of bank directors also carries very heavy responsibilities. It goes beyond just the responsibilities of directors of any companies because of the import of banks to our economy. So we have to make sure that the appointment of the bank directors is done appropriately. All directors nominated for appointment are subject to review and endorsement by the board nominating committee before their appointments are approved by the shareholders at the annual general meeting. I think there is a due process and there are very strict prudential

requirements for the appointment of bank directors. I think it is very odd to say that we should spread bank directors around as a way of spreading wealth. Our main concern is whoever sets up a bank in Singapore must be well-capitalised, must take in deposits carefully, look after the depositors' interest, ie, when they lend credits, they must do so with proper credit assessment, because it is not just the health of the bank that is important but it is also the implications to the whole economy.

Mr Yeo Guat Kwang raised the concerns about consumers and the increasing number of complaints against financial institutions. He asked why MAS has not played a bigger role in intervening on behalf of consumers to settle the commercial disputes with financial institutions.

First, let me clarify that the aim of MAS' market conduct regulation is to ensure that the financial institutions deal fairly with the consumers. To achieve this objective, MAS undertakes three main functions. First, the MAS sets and enforces strong sound market and business conduct standards, including disclosure of material information to the consumers. Second, the MAS has a role as well in helping consumers to understand the products that they are buying through financial education. And third, the MAS also facilitates consumer redress against market misconduct. Let me assure the House that MAS takes seriously any conduct that is in breach of our regulations and will take appropriate action against a financial institution that is found to be in breach. MAS' dealings with individual financial institutions are not disclosed. However, MAS does not consider its role to include directly settling commercial disputes between financial institutions and their customers.

Let me now turn to MAS' philosophy towards market conduct regulation and how this was done in the critical year dispute. First of all, we ensure policy holders have clear, complete and comprehensible information that will enable them to make an informed decision on what course of action to take. That is very important. If the financial institutions do not provide complete and clear information, then we will insist that the disclosure is done correctly. Next, we issue a policyholders' guide to help the affected policy holders to understand their own policies and the options available to them. We do realise that sometimes, some of these options are not so easily comprehensible by the consumers and, therefore, we took it upon ourselves to make sure that these are set out in clear, simple language and people understand what are the options available to them so that they can make the right decision.

We also support the access by consumers to bodies, such as the Insurance Dispute Resolution Organisation (IDRO) because we believe in providing consumers an avenue for seeking redress for their grievances. In fact, the critical year issue illustrates very well how MAS sets about its role. First, to make sure that regulations are correct and the financial institutions abide by these regulations. Second, to make sure that there is good disclosure of information so that consumers can make an informed decision on the options available to them. Third, to make sure that consumers understand what is available to them because if it is not clear or too confusing, consumers may not be able to make an informed decision. Finally, to provide the avenue for redress that is fair and equitable for the consumers. I think the critical year issue illustrates how MAS goes about its responsibilities. I think Mr Yeo Guat Kwang himself also commended IDRO for the way it is able to handle the disputes in the insurance sector.

For the banking sector, the Association of Banks (ABS) also has in place a similar mediation process. There may not be a specific body but the process and the principles behind the redress and the mediation is similar to IDRO.

Mr Yeo also questioned the high interest rate and the late payment penalties charged on credit card balances. Dr Chong Weng Chiew also raised a similar point. Basically, MAS does not interfere in the setting of interest rates and other prices set by the financial institutions. This is between the financial institutions and the consumers. It is not desirable for the MAS to prescribe how these products should be priced or what terms and conditions should govern commercial transactions. We leave it to the financial institutions. But what we do is to make sure that the regulatory framework provides for the necessary disclosure and the proper business conduct standards to be undertaken so as to ensure that the consumer is fairly treated.

For the specific issue that Dr Chong raised about credit card charges for foreign transactions and the exchange rate used, the ABS, in their code of consumer banking practice, do try to set out in clear and plain language the type of interest rates, the fees, the charges, and the penalties associated with the products put up by their members. The ABS also tries to encourage their members to make sure that this information is disseminated and consumers understand what they are getting into whenever they buy such products. On the disclosure of foreign exchange rates used by banks for credit card transactions overseas, Dr Chong's view is that these transactions and the rates used for the processing should be made more transparent. I think we can suggest to ABS to see how this particular issue can be addressed when they update their practice code. But we have to be

aware that there are limits to the amount of disclosure that a bank can provide and in the end, the consumer must understand what he is buying and what are the charges that he is getting into with the particular credit card company that he has enrolled.

Members of the public must be aware of these charges and the basis of these charges that is imposed by their banks. As part of the consumer education process perhaps Mr Yeo Guat Kwang, through CASE, can also help the consumers by doing comparisons of such rates, practices and fees that are charged by the different credit card issuers as CASE has done for the other consumer products. This is part of the joint effort that all of us can take to make sure that consumers are well-informed in their decisions.

Sir, I note DPM and Finance Minister Lee has taken a bit of rest and left all the questions to be answered by the Second Finance Minister, Mr Lim Hng Kiang. I think DPM deserves a rest for the last few days of very hard work. I would like to thank Mr Lim for his very clear and elaborate answers. I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

Amendment No. (2), Miss Penny Low. You can take both cuts at the same time.

MoneySense Programme

): Sir, I beg to move,

That the sum to be allocated for Head M of the Main Estimates be reduced by $10 in respect of Code MA 1500.

Sir, first, let me declare my interest in the financial service industry. After great efforts to get Government to spearhead

and sponsor public financial literacy programmes, I am very encouraged by the introduction of the MoneySense programme. This is testimony that the Government listens. I would appreciate it if the Minister could give an update on the progress of this programme.

3.30 pm

There was also feedback that only educational programmes that address the general public, regardless of age and gender, are given the green light and qualify for co-funding under this programme.

Others that target specific groups, eg, senior citizens, couples, etc. will not fall within the radar screen of the MoneySense programme, even though they may be given due consideration selectively. Sir, I am puzzled by this. Financial planning and literacy means different things to different people. For example, a single's financial plan would differ significantly from that of a married couple's. And a married couple with kids will have very different concerns from, say, a retiree. Hence, while a seminar that explains a specific investment instrument like share investment or bonds could have general appeal, those aiming at helping a person to draw up a budget plan, or a financial plan, which is the first step to financial accumulation, must be made relevant to the participants' lifestage and even gender. This calls for a customised programme for each target audience. Hence, to build both breadth and depth into the programme, could the Minister consider extending the MoneySense programme to:

address the specific needs of different market groups;

kindly detail and enlarge the network in which MoneySense co-funds, in other words, the participants and the vendors. I was told that only VWOs and NGOs are allowed as legitimate entities to provide such courses, and many actually do not have the expertise; and

to detail and enlarge the scope of programmes that is eligible under this scheme, that is, beyond that of talks and seminars.

Maximum for Supplementary Retirement Scheme

Sir, with the reduction in CPF contribution and the cumulative problems of an ageing society, the issue of retirement funding has gathered pace. CPF alone is clearly insufficient. Hence, the introduction of the Supplementary Retirement Scheme (SRS) in the mid-90s was an apt one. However, from the start, the SRS has various limitations that made it unattractive. Hence, I hope that the Minister would review the SRS and fine-tune it to incentivise people to invest in this scheme. Some suggestions include that of what my colleague said earlier, a review of the contribution ceiling, which is currently pegged to the CPF contribution rates.

Although Minister Lim said that it runs the risk of becoming a very big tax advantage for wealthy individuals, the question is: how big is this risk? It is clear that nobody, especially the really wealthy, will put all eggs into one basket. In addition, why do we want to disincentivise savings for retirement purposes, which is what the SRS is built for? The rich may not always remain rich. When they get old they will still need some form of savings that is there. I suggest that the limit allowed for SRS contributions be revised upwards.

Two, make it tax-free instead of tax-deferred instrument. The SRS is at present a deferred tax scheme for 50% of contributions. Perhaps the requirement to pay the tax after retirement has dampened the popularity of the scheme. The last thing we want to do is to encourage people to save for retirement and then tell them that they will be taxed when they make their withdrawals to fund their retirement. Hence, in view of the recent announcement to exempt tax on a list of investments like annuities, standard deposits and certain unit trusts, I suggest that we err on the side of generosity and make SRS either wholly tax-free or more obviously tax advantaged.

Three, to allow voluntary employers' contribution. The SRS should be expanded to allow employers to contribute as well. Employers may find it advantageous, eg, to declare bonuses in the form of voluntary SRS contributions if it may be treated as a relief, as opposed to a deduction, for company tax purposes. With this relief, employers may even be able to declare higher bonuses out of the tax savings. Perhaps this proposal could be carefully studied and incorporated as part of a portable company-sponsored pension plan.

Four, to allow non-citizens or permanent residents to contribute to SRS and root them to Singapore. By design, the SRS attracts mainly the higher income earners. It may also attract the non-Singaporeans who may have been here for a long time, and who intend to stay here in the long term. The fact that there are costly early withdrawal penalties in the SRS would already exclude those who are looking for short-term tax relief. In other words, the anti-selection issue is already taken care of. This would ensure that those who ultimately stay behind would also have their retirement nest-egg and perhaps also serve as a tool to attract the desired migrants.

I hope the Minister would consider the above suggestions favourably.