Hansard, 2005-02-18

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 (2005) To (2005) Dr Loo Choon Yong 24 Jan 28 Jan Assoc. Prof. Dr Yaacob Ibrahim 28 Jan 29 Jan 21 Feb 24 Feb Mr Heng Chee How 31 Jan 02 Feb 20 Feb 25 Feb Assoc. Prof. Koo Tsai Kee 31 Jan 02 Feb Dr Tony Tan Keng Yam 31 Jan 02 Feb Mr Charles Chong 01 Feb 03 Feb Mr Chay Wai Chuen 01 Feb 02 Feb Mr Gan Kim Yong 01 Feb 02 Feb 03 Feb 04 Feb 22 Feb 26 Feb Mr Tharman Shanmugaratnam 01 Feb 05 Feb Mr Lawrence Leow Chin Hin 04 Feb 07 Feb 14 Feb 19 Feb Mr Loh Meng See 04 Feb 06 Feb Mr Zainul Abidin Rasheed 04 Feb 14 Feb Ms Eunice Elizabeth Olsen 06 Feb 11 Feb 15 Feb 17 Feb Mr Leong Horn Kee 07 Feb 08 Feb 24 Feb 26 Feb Column: 589 Mr Chan Soo Sen 09 Feb 10 Feb Mr Abdullah Tarmugi 10 Feb 11 Feb Mr Hawazi Daipi 10 Feb 11 Feb Dr Warren Lee 10 Feb 14 Feb 17 Feb 19 Feb Mr Zainudin Nordin 10 Feb 10 Feb Mr George Yong-Boon Yeo 19 Feb 28 Feb Mr Goh Chok Tong 20 Feb 25 Feb 01 Mar 01 Mar Dr Ahmad Mohd Magad 21 Feb 23 Feb Mr Wee Siew Kim 22 Feb 24 Feb 13 Mar 26 Mar 02 Apr 08 Apr Mr Lim Swee Say 25 Feb 27 Feb Mr Teo Chee Hean 26 Feb 28 Feb 12 Mar 16 Mar Mr Inderjit Singh 01 Mar 02 Mar 20 Mar 28 Mar Mr Khaw Boon Wan 25 Mar 28 Mar Mdm Cynthia Phua 26 May 03 Jun

ABDULLAH TARMUGI Speaker Parliament of Singapore

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

3rd February,2005 (1) Securities And Futures (Amendment No. 2) Bill (2) Financial Advisers (Amendment) Bill (3) Appraisers And House Agents (Amendment) Bill (4) Stamp Duties (Amendment) Bill (5) CISCO (Dissolution) Bill (6) Parks And Trees Bill (7) Limited Liability Partnerships Bill (8) Diplomatic And Consular Relations Bill (9) Parking Places (Amendment) Bill (10) Telecommunications (Amendment) Bill ABDULLAH TARMUGI Speaker Parliament of Singapore

Order. I have to inform hon. Members that I have on 15th February 2005 communicated to the President the Address agreed to by Resolution of this Parliament on 20th January 2005.

1. Dr Amy Khor Lean Suan asked the Minister for National Development (a) if HDB is aware of "cashback" deals for its resale flat transactions that are reportedly rampant; if so, (b) how many cases has the HDB come across so far; (c) whether this has artificially inflated resale prices and raised financing risk for the buyers; and (d) what HDB has done or is considering to do to prevent such illegal

deals and protect gullible and cash-strapped buyers.

Mr Speaker, Sir, HDB is aware that there are so-called "cash-back" arrangements in the market. In such an arrangement, the buyer, seller and housing agent agree to over-declare the resale price. As the price is usually supported by a valuation that is on the high side, the buyer would be able to obtain a higher housing loan from the bank and withdraw more CPF savings than is actually needed for the flat purchase. The buyer pockets the extra cash, and some of it may also be given to the other parties involved in the deal, such as the housing agent and seller.

"Cashback" arrangements are illegal and my Ministry takes a serious view of them. HDB will not hesitate to take action and report the matter to the police, if anyone is found practising or abetting cashback practices. The penalties for buyers and sellers who give false information to HDB are stated in the standard HDB resale contract. The penalty is up to 6 months' imprisonment and/or a fine. HDB may also cancel the transaction and debar them from buying another HDB flat in future. The penalty for housing agents who make a false statement in their Statutory Declarations, which are required to affirm the transacted resale price, is up to 3 years' imprisonment and/or a fine. If the housing agent is from an agency under HDB's Listed Housing Agents Scheme (LHAS), HDB may also delist the agency.

As a further measure to curb cash-back practices, the CPF Board will be implementing a new ruling for HDB resale flat purchases from 1st April 2005. HDB resale flat buyers who wish to take bank loans and use their CPF savings in the flat purchase and servicing of the loan, will have to furnish a valuation from an HDB-assigned private valuer. This ruling

I would like to advise buyers and sellers that it is not in their interest to enter into a cashback arrangement. Not only is the arrangement illegal, it also exposes buyers to greater financing risks through higher loans and erodes their retirement savings. Moreover, buyers incur higher stamp fees and legal fees. Sellers may also be liable for a higher resale levy if they buy a second subsidised flat from HDB.

currently applies to HDB resale flat buyers who take HDB loans. The CPF Board and HDB will release more details of the new ruling soon.

Sir, I would like to ask the Minister, besides the case that was prosecuted in court, whether HDB has actually come across any other cases because it has been reported that such cashback deals are rampant and, if it was so, how HDB can ensure that the valuations that have been made are not inflated because of such cashback deals.

Another question I would like to ask the Minister is: in the same way that HDB will be requiring valuations to be done only by the panel of valuers, would the Ministry also consider only allowing real estate agents from firms which are on HDB's panel of real estate agents to undertake resale flat transactions? I understand that it is not required that only real estate agency firms which are on the LHAS can actually undertake resale flat transactions?

Sir, in so far as the number of cases is concerned, yes, there are media reports that indicate that the practice is rampant but there is no hard evidence that this is in fact so. As far as HDB's complaints are concerned, apart from the case that was cited by the Member just now, there have been two other cases that have been brought to the attention of HDB. In fact, complaints

As to whether the valuations are inflated, yes, this is part and parcel of the cashback arrangement that the valuations are higher than what they should be. We do not know how rampant these practices are and therefore we also do not know how much the prices have been inflated. It is extremely difficult unless somebody spills the beans and actually makes a report, for HDB to now step in and change the valuation.

As for the last question whether we will only restrict the transaction of HDB flats to LHAS' real estate agents, I must point out that the LHAS is not a compulsory scheme. Some real estate agents are licensed by IRAS and there are others who are not on the scheme. Having said that, most of the real estate agents would be involved in this scheme. I do not think it is necessary for us to restrict it at this point in time. I would also like to point out that there are some transactions that are carried out without having a real estate agent involved. They are able to do so on a "willing buyer, willing seller" basis, using the facilities that HDB provides them through the Internet and, of course, personally at HDB. So I do not think at this point in time, it is necessary for us to make this condition that it is only to be carried out through LHAS' agents. I believe that the changes that are going to be made by CPF Board and HDB will curb this cashback practice to a large extent. I would like to inform the House that HDB and the other authorities will be monitoring the situation

have already been made and these cases are currently under investigation. In total, there are three cases that have been brought to HDB's official notice. Having said that, of course, one must recognise that it is very, very difficult to detect instances of cashback arrangements if all the parties involved collude and do not blow the whistle as it were. closely to make sure that, if there is a need, we will refine the scheme further.

Sir, as I strongly support the requirement for valuations to be undertaken only by valuers on HDB's panel of valuers, I would like to ask the Minister to seriously consider only allowing agents on HDB's panel to undertake resale flat transactions simply because the real estate agency firms actually take a part of the agent's commission and they purport to train and guide the real estate agents and therefore, there should be some onus and responsibility on these real estate agency firms to ensure that their agents do not get into illegal and unethical schemes such as the cashback deals from time to time, and thereby protect gullible and cash-strapped buyers.

I would also like to ask the Minister if he would forward the names of the real estate agents as well as the real estate agency firms to IRAS who is currently the licensing authority of the real estate agency firms and if HDB would also be working with IRAS, the licensing authority, to look into how to further regulate individual real estate agents because, currently, only the firms are licensed by IRAS. It would probably be more administratively efficient to penalise errant real estate agents through the licensing scheme than via the courts.

Cashback arrangements involve necessarily a few parties and I think the real estate agent is one of the parties involved. I will take the Member's suggestion into consideration when we review the scheme further, if necessary, as I mentioned earlier. But I would like to assure the Member that, yes, we will be forwarding the names of the recalcitrant agents to IRAS for further action and one of the measures that we are going to take would be to deregister them, both from IRAS as well as the LHAS, in addition to all the other penalties

involved if they are found guilty of such an illegal transaction.

2. Dr Amy Khor Lean Suan asked the Minister for National Development if his Ministry will (a) set out some guidelines under which the sinking funds of Town Councils can be used for the Lift Upgrading Programme (LUP); and (b) consider including low-rise walk-up flats in the LUP since the programme is being speeded up.

Mr Speaker, Sir, the Prime Minister has announced that to meet the needs of our ageing population, we will speed up lift upgrading and try to complete the programme in 10 years for all eligible blocks. He also announced that Town Councils will be allowed to use part of their sinking funds to carry out lift upgrading works, subject to guidelines which MND will announce later. As with HDB's Lift Upgrading Programme, residents will be required to poll and co-pay for the lift upgrading works done by the Town Councils before they can be carried out.

MND will announce the details of the Town Councils' Lift Upgrading Programme during the Committee of Supply debate. We are currently studying the implications of providing lift upgrading for low-rise blocks. Members will be informed if there are any changes to this policy.

rose ---

Dr Khor, keep your supplementary questions short, please.

Thank you, Sir. I have just one question for the Minister. I would like to ask the Minister, in view of the ageing population and thus the increasingly imminent need for lifts, if

the Ministry will consider SERS for those four-storey walk-up flats where the installation of lifts simply does not make economic sense due to design and other constraints.

The SERS programme is a very valuable programme both from the point of view of the State as well as from the residents because the State benefits by being able to maximise the use of scarce land and the residents benefit because they are able to enjoy another subsidised flat plus all the other benefits such as a new 99-year lease and so on. As far as possible, where a site is viable for SERS, we will certainly carry it out, especially where there are low-rise blocks because obviously the intensification in areas where there are low-rise blocks will be that much higher. So the answer is yes, we will certainly do so. But I must caution that not all sites with low-rise blocks are viable for SERS because in some of these areas the low-rise blocks are actually interspersed with high-rise blocks. So we have to be selective about SERS.

Sir, while the Minister is reviewing the scheme, could he also consider the cut-off period for the eligibility of lift upgrading as well, because this has been set for quite some time and some of the lifts are quite old?

In effect, we will not be having any more age criteria for lifts because all the flats that were built before 1990, which do not have lifts on every floor, will become eligible. So it is no longer a consideration.

3. Mr Leong Horn Kee asked the Minister for National Development if he will (a) state the existing policies on resale

levy for HDB flats; and (b) consider updating and revising these policies to be more equitable, such as to charge the levy based on the net profit of the sale of the flat rather than on the resale price.

Mr Speaker, Sir, the resale levy is paid only by those who buy a second subsidised flat from HDB. As these second-timers would already have enjoyed a subsidy for their first flat, the resale levy is to ensure that they do not consume more than their fair share of public housing subsidies.

In setting the levy rates, we recognise that lessees of smaller flats have a greater need to upgrade. Hence, they pay a lower levy rate as a percentage. The resale levy ranges from 15% for 2-room flats and 20% for 3-room flats, to 25% for 5-room and larger flats. In this way, families who are upgrading from the smaller flats to larger flats still find it worthwhile to do so even after they pay the resale levy.

Owners of larger HDB flats have a lesser need to upgrade to another subsidised HDB flat and can consider other housing options, such as private housing or a resale HDB flat. In such cases, they will not need to pay the resale levy.

Flat owners, who do not buy a second subsidised flat from HDB, can keep the full sales proceeds from their first subsidised flat and need not pay the levy. The resale levy is not intended to be a capital gains tax to cream off the profit made on the first flat.

Home ownership is an important facet of our public housing policies. Our property market conditions may have changed, but the resale levy is still necessary to maintain an equitable distribution of home ownership subsidies

and ensure that they go to those who have a greater need for them. We will however review the resale levy regularly to ensure that it remains relevant and meets with our overall objectives.

Sir, I would like to ask the Minister of State for some clarifications. When the resale levy is imposed at the point of purchase of the second flat, it does mean that there is a levy imposed on the first flat. That is what I understand it to be. Therefore, technically, if the resale levy is based on the price of the sale of the first flat, a person could actually have incurred a loss because his selling price would be lower than his actual cost price plus the renovation that he had spent on the flat. On this basis, this formulation does make it inequitable for those who happen to sell during poor market conditions, maybe forced by financial circumstances and, therefore, incur a loss and have to pay a levy at the same time.

Sir, as I have said, the resale levy is to ensure that the second subsidy that a person gets is reduced because he had already enjoyed the first subsidy. Basically, the Government's position is this. We give you one subsidy to buy your first subsidised flat. When you buy it, how large a flat you choose, how long you stay in it, how much first subsidy you receive and whether you make a profit at the point of sale of the first flat are not so relevant to the allocation of the second subsidy. What the resale levy seeks to do is to reduce the second subsidy when you come back to have a second 'bite of the cherry', in other words, to enjoy the market subsidy of the second HDB subsidised flat which you intend to buy. So as a proxy, we have used the resale value of the first flat and take a percentage of it so that this amount would be subtracted from the market subsidy which is implicit in the sale price

of the second subsidised HDB flat. That is the purpose of the resale levy.

Sir, my question also links to the fact about cashflow and the availability of funds because the present formula requires the person to pay a levy at the time when he buys a second flat from HDB. Very often, some of them may not have the money to pay for the levy because they do not have the cash to pay for it. They may have sold the first flat sometime ago and could well make a profit, but since then, the money has been spent for other purposes. Many of the residents who came to see me actually cannot afford to pay for the levy because of this formulation. Could we review this formula so that residents who are faced with this problem can have an alternative way to deal with the levy problem?

Sir, let me repeat the policy intent of the resale levy. As the Member would agree, there is a limited amount of public housing subsidy that the Government would give out each year. Our first priority is for the first-timers, those who have not enjoyed any subsidy from the Government to start with. Therefore, those who come back for the second bite of the cherry, we must ensure that they are not allocated more than their fair share since they have already enjoyed one subsidy. If we were to entertain the Member's suggestion, ie, if you make a loss, you do not have to pay the second levy, that means you will get another big bite of the market subsidy for the second subsidised flat that you are buying. Using such a basis would really be quite inequitable.

In the extreme, I think those people who are forced to sell are those who have over-leveraged - they have bought homes larger than they could afford. In the event that they make a loss on the first home, if we take the Member's suggestion, they

will be entitled to another second bite again. I do not think we want a policy that will encourage people to speculate and to over-consume. So I think the most equitable way is to let the flat owners take personal responsibility and make prudent financial planning for their first subsidised flat. And for those who are living in smaller flats who have not enjoyed a big subsidy, to start with, to encourage them with this graded resale levy system for them to upgrade and have a second small bite of the cherry. We should not treat how well they have invested as a condition to allocate the second subsidy. I think that will not be consistent with the policy intent.

Sir, I am afraid that the Minister of State has not really answered my question, because my question is whether it is equitable to charge on the basis of sale price or on profitability. As he has said, the sale of a flat to a resident is for him to enjoy subsidised housing. But if it happened that he did not manage to enjoy any benefit in the sale of the property, how can we charge him, on top of his loss, another levy charge again? When he buys a second property, he has no cash to pay HDB for the levy - he cannot even afford to have a roof over his head because he cannot afford to buy a second flat.

Sir, for people like that, there are many other options available to them. In other words, we should not confuse that with allocating more subsidies specifically for this group of people, who have, in many instances, speculated. For example, they have the option of buying a smaller resale flat where they do not have to pay for the resale levy at all. And in extreme cases, of course, under our universal housing policy, rental housing is also an option for them. I do not think we should confuse how we allocate the second subsidy with how we want to help this particular group

of people because there are other options open to them.

Sir, I would like to ask the Minister of State: would not the subsidy for that particular flat have been computed based on the purchase price of the flat at that point in time when it was purchased and the market price then? Therefore, if you were to impose a levy on the subsequent resale of the flat, would it not be more equitable to actually impose the levy based on a percentage of the price then because the subsidy was tagged to the differential between the market price and the flat price at that point in time?

The resale levy is not to take back the original subsidy. The original subsidy was given to the flat owner who bought the first subsidised flat. He decides when to buy and what to buy. Whatever profits he makes, he can keep all of them. Actually, the Government has no intent to recoup the first subsidy. What the resale levy does is to reduce the second subsidy for those who come back, after having enjoyed one subsidy, to have another bite of the cherry again. Therefore, the original purchase price is not relevant.

Following from what the Minister of State has said, would it not be simpler to have a new formulation whereby you do not impose a levy for the first purchase but give a lower subsidy or no subsidy for the second purchase, so that you avoid the whole complication of paying a levy on the first purchase which gives rise to all these issues? Just simply do not impose a levy on the first purchase.

Sir, we want to give a subsidy for all first-time

homeowners, which is one of the key objective of our housing policies. So I would not agree that we will not give a subsidy for the first flat. We will not impose a levy on the first flat either, as I have said before, only unless they come back for a second subsidised flat.

Can the Minister of State consider lowering the percentage of the resale levy? I understand that when the property market is good, HDB increases the resale level for 3-room flats from 15% to 20% and for 4- and 5-room flats from 20% to 25%. In view of the poor property market, can we go back to the resale levy of 15% for 3-room and 20% for 4- and 5-room flats?

Sir, as I have said in my answer to the Member, we will review the levy rates regularly to ensure that they will not be higher than the market subsidy that we will be giving for the second subsidised flat, particularly for those who are living in smaller flats, which is consistent with our objective that we want to encourage those who live in smaller flats to upgrade. So we will review those rates regularly.

4. Mr Zainudin Nordin asked the Deputy Prime Minister and Minister for Law, in view of efforts to encourage our citizens especially the young to be involved in outdoor recreational activities and sports, why are there still prohibition signs or boards on open state land even though these lands are not earmarked for projects for long periods of time.

Sir, before dealing with the matter of signboards, let me say that over the last few years, the Singapore Land Authority

As for the signboards, the Singapore Land Authority has gradually been replacing the "No Trespassing" signboards within housing estates and recreational areas with "Enter at your own risk" signboards. Such signboards are now found in 153 vacant state land sites that are within close proximity of housing estates and in the city area, easily accessible to the public. As a result, on weekends or even weekday evenings, Singaporeans gather at these vacant lands to play football and other games. These signboards are necessary because they serve to remind the public that they have to be conscious of and responsible for their personal safety.

However, "No Trespassing" signboards have been retained at state land sites such as forested land and sites which face the risk of illegal or unauthorised activities such as dumping and occupation by illegal squatters. In housing estates, HDB has retained some "No Ball Games" signboards in response to residents' feedback. While we would like to open up as many pieces of land as possible for games, we have to balance this with the interests of different groups of residents.

In any case, if the Member has any state land sites in mind which he thinks should be made available for use, I will be happy to ask SLA to consider his suggestions.

has been proactive and has made available more vacant state land for social and recreational use by Singaporeans, in some instances, partnering various agencies to make this possible. For example, SLA partnered the Singapore Sports Council in making available playfields at Marina South and Dunearn Road. Many Members have also informed me that they are happy that more of the open spaces in their constituencies have now been converted to hardcourts and playfields for their residents' use.

Sir, may I ask the Senior Minister of State what is the difference between a state land that has fence and those which are not fenced up even though they have similar signs?

I have got to, in turn, ask the Member this question: who put up the fence? Somebody must have put up the fence. It could have been fenced up because a TOL for the land has been given to the grassroots organisations for footaball. So those are not the vacant state lands where anybody can come on to the land. These are the lands that we were talking about - 153 sites - where previously, we had very prohibitive signs like "No Trespassing", "No Dumping", "No Entry", etc. But now, we feel that since Singaporeans, in any case, go on to a land to fly a kite or play ball, we should actually make it more friendly. But because these lands are not maintained as playfields, when they go on to the land, they should take care.

Sir, I would just like to let the Senior Minister of State know that there are some fields that have been fenced in my estate. For example, the market that has been vacated is fenced up. There was a former army camp and it is now vacant but it is also fenced up and residents could not use it.

What is your question, Mdm Phua?

Can the Senior Minister of State also consider, while reviewing the signboards, removing the fence?

Let me look at the particular instances in question. We have to ask who put up the fence, for what purpose and whether or not the purpose is still present. Certainly, we all agree that, as far as possible, let Singaporeans have more space to play on.

Sir, I would like to ask a supplementary question on the access to land for sports and other recreational exercise. There has been a spate of articles in the papers with regard to the access of the new canopy walk in MacRitchie/Pierce, the central catchment area. As has been mentioned, the access to the canopy walk is longer now because Singapore Island Country Club, which has the land on lease, has closed off that particular area with a ---

Sorry, Dr Geh Min, I do not think that question can be directed to the Ministry of Law.

Okay. I stand corrected.

5. Mdm Halimah Yacob asked the Minister for Foreign Affairs (a) if he will give an update, now that Aceh affected by the tsunami is entering into the reconstruction phase, on how the aid, which the Government had pledged to Aceh, will be channelled to it; and (b) whether it will be used for building of infrastructure or other specific projects.

Mr Speaker, Sir, Indonesia was the country hardest hit by the earthquake and the tsunamis. The worst affected areas were in the west coast of Aceh province. As a close friend and neighbour, Singapore has been doing its part to help the people of Aceh. Our efforts are focused on Banda Aceh and Meulaboh. In the case of Meulaboh, the SAF was the first to arrive at the scene of the disaster. Over the ensuing few weeks, the SAF worked with the TNI, the armed forces of Indonesia, local authorities and other relief agencies in distributing relief supplies and providing medical attention

to the displaced. At the peak of our relief efforts, we deployed more than 1,000 personnel, supported by the SAF's helicopters, landing ship tanks, medical, engineer and the civil defence teams.

Our in-theatre assets also provided heavy lift capabilities to the UN and other relief agencies in ferrying aid and medical supplies to the disaster areas.

This relief effort is by far the biggest we have ever mounted. Our total Governmental contributions to the tsunami-stricken areas will amount to nearly S$70 million. The bulk of this S$70 million comprises our initial pledge of S$5 million for immediate relief, US$10 million (or S$16.5 million) pledge for reconstruction, and S$44 million being costs of the deployment of assets and personnel in affected countries.

Sir, in addition, the response from the non-government sector has been tremendous, overwhelming indeed. Donations to the Singapore Red Cross Society has reached S$75 million as at 11th February 2005. The Singapore Red Cross Society now leads a committee comprising representatives from various NGOs to ensure that these funds are properly disbursed for the reconstruction phase. Private companies and associations, such as Hyflux and Network Indonesia, have also donated equipment such as water generator sets, power generators and handphones for our volunteers. Other religious and people sector organisations have been actively raising funds for the tsunami victims. Many Singaporeans with specialised skills, such as doctors, nurses and pharmacists, also stepped forward to volunteer their services. For example, Mercy Relief is providing medical relief in Banda Aceh and Meulaboh. Medical volunteers from Alexandra Hospital have operated at the Zainal Abidin Hospital in Banda Aceh, while those from the Raffles Medical Group have helped provide medical relief in Meulaboh. Many other

Singaporeans have shown that they have a big heart when it comes to helping their neighbours in distress. But the task is far from over as we move from emergency relief to rehabilitation and reconstruction.

On the question of how aid will be channelled to Aceh and what will it be spent on, we will continue to help countries badly hit by the tsunami, such as Indonesia, Sri Lanka and the Maldives, following our pledge of US$10 million. In the case of Indonesia, Singapore volunteer groups such as Mercy Relief, City Harvest Community Services Association and the Singapore Red Cross Society are on the ground helping in the transition from relief to rehabilitation. Our NGOs have also set up a liaison office in Medan to facilitate other volunteer groups who are currently in Aceh, or planning to go to Aceh. This liaison office will work closely with the Tsunami Reconstruction Facilitation Committee led by Singapore Red Cross Society to support our NGOs that are participating in the reconstruction efforts. The SAF continues to maintain liaison teams in Meulaboh and Banda Aceh to facilitate the work of our volunteers.

Given the extent of the disaster, the Indonesian government is in the process of assessing its reconstruction needs. It has recently drawn up a three-phase relief, rehabilitation and reconstruction plan for Aceh. Singapore will work closely with the Indonesian government and Singapore Red Cross Society to identify the projects in the reconstruction phase, such as the building of a barge pier, polyclinics, a hospital and a school. We will also help in the training of administrators and healthcare workers to run some of these facilities.

Sir, the recovery and reconstruction phase will take several years. Many countries are helping. We will do what we can to be helpful within the limits of our capabilities. In the end, it is the courage and resilience of those afflicted which will enable them to rebuild their lives and communities and we are seeing abundant signs of that. I think the Honourable Member, the Deputy Speaker and a few other Members of this House were also in Banda Aceh and Meulaboh this month, and we have seen for ourselves the resilience and the spirit of the people of Aceh and the people of Indonesia. We are very happy for them that they will be able to do their best to rebuild themselves, and we will be there to work with the Indonesian government in its reconstruction efforts.

volunteer groups including Ren Ci, YMCA, Code-4, Touch Community Services and Singapore Soka Association have also sent teams to Aceh and other affected countries to provide medical relief and assist in the distribution of relief supplies.

Sir, with regard to the $16.5 million, the Senior Minister of State's explanation was that details will be worked out according to the needs of the Indonesian government. With regard to the $75 million raised from Singaporeans, will the Government also provide some guidance or supervision in terms of how these funds will be channelled into reconstruction aid in specific projects in Indonesia?

On the question of disbursement, the Singapore Red Cross Society has set up a Committee (Tsunami Reconstruction Facilitation Committee) to support their work. I think the Committee has met four times since January and they have, in fact, received 14 proposals from seven VWOs and NGOs. They have given in-principle agreement to provide funding support to several projects. The Singapore Red Cross Society has issued a press release yesterday and we should see the details in the media soon. Some of the projects which have been approved include Habitat for Humanity for low-cost housing, the Singapore International

The Singapore Red Cross Society is appealing for VWOs and NGOs to come forward to put up their project proposals that require funding and other forms of support in the reconstruction phase. So it is still work in progress. Much has been done but much more, in fact, will be done in the few years ahead.

Foundation's proposal for Sri Lanka to help restore the livelihood of fishermen, and support the rehabilitation of affected communities through the construction of communal facilities and provision of nutritional programmes. These are some examples to show that, in fact, work is in progress and there is movement. In fact, the Indonesian government only yesterday, if I am not mistaken, has given in-principle approval for the barge pier where they will form a joint committee and will work out the technical details.

Sir, I am sure Singaporeans do not begrudge this generous donation to Indonesia. But can I ask how the Ministry came up with the figure of $16.5 million? This is particularly useful since there may be other calamities in the region, and we need to know on what basis we decided on the amount.

Sir, we have our own criteria of giving financial assistance. In fact, from past experiences, we have given something like US$50,000 or more to earthquake calamities and floods in China and Turkey.

After giving the initial S$5 million for relief work, it dawned on all of us that the scale of the disaster caused by the tsunami was really unimaginable. If Members have been to Meulaboh and Banda Aceh, it is really unimaginable to think that waves could really cause that kind of devastation. We thought that it required more in terms of financial

So if we look at the total approach taken by Singapore, it is beyond the S$5 million, or beyond the US$10 million. In fact, it may reach something like S$150 million altogether put in by Singapore. As the whole episode unfolds, I am sure we will be incurring even more.

We have to judge each calamity on its own merits, and I think the tsunami disaster deserves that kind of support.

assistance. In fact, more than financial assistance, Singapore took the initiative to call for an international conference in Jakarta.

Sir, I would like to ask the Senior Minister of State whether a statement of account can be produced from time to time, so that the public is also aware of how the money is being channelled with regard to the funds of the Singapore Red Cross Society.

Sir, we will convey the sentiment to the Singapore Red Cross Society. As Members know of our Singapore style, we are very transparent. So the Member can be rest assured that we will be able to give as much information as possible.

6. Mdm Halimah Yacob asked the Minister for Education (a) what is his Ministry's policy with regard to students who dropped out of school but subsequently wish to return; and (b) what programmes are in place to counsel, assist and encourage such students to return to school.

Mr Speaker, Sir, the number of pupils who dropped out of the school system up to the secondary level is small. Nevertheless, much effort is put in to ensure that pupils stay in school.

The intervention measures that schools adopt include counselling of potential drop-outs. Besides teachers, schools engage the services of professional counsellors in these efforts. Schools also work closely with parents to help them to play a more active role in the education of their children and to provide the support at home that is usually critical in sustaining the pupils' interest in school. That is why schools make home visits quite often.

Schools also have arrangements with external agencies such as the self-help groups and family service centres and other agencies like SANA, which has a very useful programme to prevent students from dropping out and getting involved in drug abuse.

If students insist on leaving school despite all the measures taken, schools will encourage them to continue their education in other institutions such as the Institutes of Technical Education or the Vocational Training Centres. Schools also engage external agencies to work with these premature school leavers to counsel, assist and, hopefully, encourage them to return to schools. Some examples of such programmes are YMCA's Project Bridge and Fei Yue Community Services' Project 180.

Mdm Halimah also asked about our policy on a student who wants to return to school after having dropped out. MOE

MOE also looks into all referrals for readmission from parents, MPs, welfare organisations and the community. We make every effort to assist students who are seeking readmission to find places in suitable schools. Generally, students who have dropped out are able to be readmitted to our schools. No student is deprived of a place in school if the student shows interest and is willing to put in the effort to learn and complete schooling to the best of his/her ability. Once the pupils are back in the school system, schools will render the necessary support to help them adjust and continue their schooling.

These efforts include both proactive measures to reduce the likelihood of behaviour that may lead to dropping out as well as intervention measures which address problems that do arise. The proactive measures that schools adopt include the pastoral care and life-skills programmes which are aimed at helping pupils to build up confidence in school and develop purposefulness in life, and to take responsibility for their actions. has procedures in place to assist these students. The students may, in the first instance, approach their schools or any school directly to seek readmission.

Sir, I would like to ask the Minister how many applications has the Ministry received from students, or their parents, who have dropped out and want to go back to school, and what is the success rate of such applications. Secondly, how long does a school take to respond to a parent's or a student's request to go back to school? Because I have a case where I had to write two letters before I got a response from the school, and after one and a half months of taking up the matter, I have yet to receive a confirmation whether or not the student will be accepted back into school.

Sir, I am afraid I do not have the exact numbers of pupils who applied for readmission. It would certainly be in the tens. Almost all cases of students who have sought readmission and show sincere interest in wanting to take schooling seriously are successful. They find a place either in their original school or in another school. The circumstances will vary. We have situations where students are offered places in a school but feel that it is too far

from their home, and we try our best to find another school that is more convenient. Sometimes, if you talk about secondary school students where they have unusual subject combinations which can be catered for in one school but not in another - in fact, there are a few cases - it takes a bit of time, but we will try our best. When you have difficulty, let the Ministry know and we will try our best to facilitate. We, in fact, do that.

Sir, I appreciate the explanation and assurance given by the Minister. But I think we will be even more assured if the Minister could give further assurance because we do see different standards in different schools. Some schools are more receptive to giving students, who have dropped out, a second chance, whilst other schools are not so receptive. So, if the Minister has a policy to assist parents, and particularly students who want to be given a second chance, I think that will be good. So I hope that assurance can be given, Sir.

Let me, first, say that readmission to school after he has chosen to drop out is not meant to be a breeze. He has to show sincerity, he has to show a willingness to accept what it takes to be serious about his studies and wants to be a member of the school community. So, it is not intended to be entirely frictionless where he drops in and out of the system at will. The schools have reasons why they interview students and their parents, make sure that they are truly keen on coming back, and I would not want to discourage them from that process. MOE is always there to make sure that schools are taking seriously all such requests. So, I do not think there is difficulty, in practice, in coming to the Ministry, if parents find that there is particular difficulty in getting an early reply from a school.

Sir, the problem of out-of-school youths (OSY) has been looked into by SANA in the last five years. Every year, there are about 1,100 to 1,400 student drop-outs. The Minister some time ago mentioned that he would want to put a counsellor in every school. The question is: when will the Minister be putting this into action? Because we believe that that is the real solution. Less than 20% of the students want to go back to school. Most of them actually want to work, take up a trade, or whatever. So if we want to keep children in schools, the counselling programme will be useful, and we hope the Minister will bring it forward as soon as possible.

I would like to thank Dr Loo for his question. He is also the Chairman of SANA. Incidentally, the figures have been improving. In fact, last year, we had less than 1,100 drop-outs in total for the whole system for the first time in several years. We are recruiting counsellors and putting them through training, because we really do not want to rush this process and put untrained counsellors in schools. By 2006, we expect that every secondary school will have a full-time counsellor. By 2008, we expect that all secondary schools, Junior Colleges and Central Institutes will have a full-time counsellor. Counselling will involve, as mentioned, career guidance as well, making sure students understand that it is in their own interest if they want to work, earn a good income and keep their jobs. It is in their own interest to stay in school, in the first instance, and then go on to post-secondary education.

Sir, the Minister in his main answer says that almost all students are readmitted, which means that there are some students who are not admitted. I would like to know under what circumstances these students are not readmitted to school and what are

I would also like to know what is the Ministry of Education's broad guidelines to the schools in terms of readmitting students back to school.

the criteria which the school would assess the students whether or not they will be readmitted to school.

I do not have the exact data on the numbers who have not been readmitted, despite coming forward and saying they want to be readmitted, but it is a very small number. I can assure Members of that. There will be such cases of people who have not genuinely turned over a new leaf, whose parents feel that they should come back to school although the student has not reformed his behaviour. Some of the cases of students who dropped out of school - for that matter, students who are expelled from school - are cases where they would pose a danger to the rest of the school community and would pose disruption to the rest of the students if they are in school. So, we have got to be very clear as to whether they are suitable for readmission to the school - have they changed, are they serious about their studies, are they willing to conform to school rules and to be a responsible member of the school community. Those are not trivial questions. Fortunately, the numbers of students who want to come back and are unable to gain readmission are very, very few. Sometimes, it is difficult to go back to their old school community because of what had happened before, but we will find them another school.

Sir, there are students who dropped out of school, either because they do not wish to go back to school or they are not readmitted, but yet, they may not have the essential qualifications to go into ITE or other such programmes. Are there any other programmes available presently to hold

such students in the event? I think it is essential that we ensure they have some basic skills, whether it is skills for employment, lifeskills or whatever. Is there a bridging programme or other programmes for them?

Yes, first, we still have the vocational training centres and we do refer a few of such pupils to those centres every year. Second, some of the external agencies do conduct not just counselling, in a general sense, but work skills counselling as well to help prepare them to get on with life and try to do well despite circumstances.

7. Mr Wee Siew Kim asked the Minister for Education (a) how many households with school-going children have a per capita income of $300 or less; (b) how many households with young school-going children have retired parents; (c) what are the current assistance schemes available to them; and (d) has there been any study to show the performance in school of such needy students compared to the performance of the Singapore students in general.

8. Prof. Ivan Png Paak Liang asked the Minister for Education if his Ministry will publish from now on all general examination results, including Primary Six, GCE "N", "O" and "A" levels, analysed by family income or, if by family income is not possible, by type of housing as well as by race.

Sir, may I take Question Nos. 7 and 8 together, on behalf of the Minister for Education?

Yes.

Since 1988, MOE has been releasing data on educational performance of students of the various ethnic groups annually. This is in response to the requests from the various self-help groups that conduct targeted education programmes for students from the respective communities. It also provides a useful gauge for the different communities on how their children have performed in the national examinations.

Prof. Png has asked for MOE to publish examination results according to the family income group of students, or, as a proxy, by housing type. The Ministry does not collect data on the family income of students. We do have data on the housing types of students. As is to be expected, there is some correlation between academic performance of students and housing type, taken on average. This is not surprising because housing type tends to be related to parents' education levels, particularly amongst our younger families. In fact, parents' education correlates more strongly with academic performance than housing type does.

MOE does not plan to publicly release the annual examination results according to housing type or other socio-economic indicators on an annual basis. However, MOE releases information on the educational performance of students based on various socio-economic indicators to the self-help groups where they find it useful in planning their programmes and determining the kind of support they should give to targeted groups such as underperforming students and potential drop-outs.

Studies and evaluations by MOE and schools suggest that many factors affect the academic performance of a pupil, including the support he receives from the family. Most important of all, however, is his aptitude and his attitudes or desire to achieve. This is consistent with findings in studies in many other countries.

Mr Wee Siew Kim had also asked about young students with retired parents. MOE survey data indicates that less than 0.1% or 50 Primary One students have a retired parent.

We will continue to help every child, through our schools, self-help groups, CDCs and VWOs, regardless of his family background. The MOE Financial Assistance Scheme grants students from low-income homes waiver of school fees and exemption from miscellaneous fees. Students under this scheme also receive free textbooks. Needy students can also receive additional financial support from the School Advisory/Management Committee (SAC/SMC), the Community Development Councils (CDCs) and Family Service Centres. Many School Advisory Committees and School Management Committees provide needy students with pocket money, bus stamps, free meals, stationery and uniforms.

Sir, a lot of our schemes of help from different Ministries actually target at specific groups, like young parents with small families or young parents with very low education and hoping that the secondary generation gets help. But there are two groups that sometimes fall out of all these benchmarks: one, people who entered parenthood late and they have very young children - there are only 50 of them, as mentioned - and, I guess, the other group is young parents with very large families and a very large number of children. Sometimes, there is no proper way to address this problem, and I hope that maybe the Ministry can look into ensuring that these children have enough resources so that they can stay in school.

Thank you for the suggestion. As I said earlier, there are already many schemes offered by schools, Ministry of Education, as well as voluntary organisations, and CDCs to help pupils

I would say, generally, that there are already a lot of schemes out there in the community by self-help groups, and CDCs and families can pick up some of these assistance schemes suitable for them and where they are eligible.

who come from poorer families. For pupils who come from families which may not be able to support them academically, there are already national programmes in school so that they can learn at their own pace, they can pick up language skills in an environment in which they can learn comfortably, so that they would be able to proceed up to primary level, complete primary education and proceed to secondary level.

Mr Speaker, Sir, I thank the Senior Parliamentary Secretary for responding to my question. The Senior Parliamentary Secretary has told the House that, in fact, the most important factor in determining students' education performance is not race, it is not housing type; it is parental educational qualifications. In that case, why are we publishing statistics based on race? Why do we not publish the statistics based on parental educational qualifications?

I ask this question, Sir, because every year we see these "A" level results, "O" level results, "N" levels, Primary Six, and so on, published based on race. It gives the impression that certain races are not doing as well as other races. But if the real reason is that for certain races, parents are not as well educated as other parents, let us make that the focus of the reporting and then let us make that the focus of our policy efforts; or else people will get the wrong impression that it is a race problem.

Sir, as a matter of policy, the Ministry of Education will help every student, including those who come from poorer families, to succeed in

education and to enjoy learning. We publish information on educational performance based on race because self-help groups, which help their own particular communities, think that it is useful for them to have the information so that they can target their assistance schemes for the various groups within their own communities. Yes, generally, the performance of students correlates with the academic background of their parents. But that is a known fact almost everywhere in the world. But what we have done is to help self-help groups to assist their own community, children in their own community, with the information that we have released to them.

Sir, with respect to the recent media focus on foreign students doing well in our education system, ie, primary and secondary levels, would the Ministry consider publishing the results and analyse them with respect to the nationality of the students?

Sir, I am not sure whether that will be useful. Then there may be requests for information about performance of students in Ang Mo Kio and various other districts. Is there any significance to that? What we have generally seen is that Singaporean students have benefited from the competition that they have faced in the classrooms and schools, as a result of the presence of non-Singaporean friends. I am not sure whether it will benefit them. We will consider this if it is useful.

Does the Senior Parliamentary Secretary agree that what is deemed not useful or beneficial from the point of view of the Ministry may be useful and beneficial to others who are interested in the subject, in terms of statistics?

I would generally say that what we think is beneficial would be

beneficial to the students and people that we serve in our schools. We release information on the students' performance by race because the self-help groups would be able to help reach out to them with targeted programmes so that the students would be able to improve. That is useful. But if the information can give a wrong impression that, for example, foreign students are performing better at the expense of local students, then I do not think it will help anybody at all. I am just citing an example of how information may be useful or not useful.

Sir, the Senior Parliamentary Secretary has responded to my supplementary question by saying that self-help groups have asked for this race-based information. But this is a somewhat circular argument because self-help groups were set up precisely because it was thought that race was the major factor in poor education performance. If indeed it is not the major factor, then I feel that the whole basis of this argument falls apart.

Sir, I do not think we are here to argue whether race is a major factor affecting students' performance. Race may correlate with educational backgrounds and socio-economic status of the families. But race may not necessarily be, and I believe it is not, the major factor affecting the performance of students in school. So I do not see any reason why we need to argue about this, and by association, we should release information based on the educational backgrounds of the parents.

9. Mr Ong Ah Heng asked the Minister for Manpower whether his Ministry has

any plans to encourage employers to employ and retain older workers as well as to increase their work opportunities.

Sir, Mr Ong has asked whether my Ministry has any plans to encourage employers to employ and retain older workers as well as to increase their work opportunities.

Let me, first, say that, as a matter of principle and this is a consensus from all three social partners - the tripartite consensus - that workers should be hired based on their ability to do the job regardless of age, gender, race or other attributes which are not related to their performance on the job. However, we also recognise that as our population grows older, we will need to facilitate opportunities for Singaporeans to work longer.

Based on these two considerations, we, together with NTUC, have actively pushed for workers' skills upgrading and job redesign. In other words, the strategy is, yes, we need to be non-discriminatory in hiring practices and we need to skill up, especially those who are vulnerable. Between January and November 2004, the Skills Redevelopment Programme (SRP) supported close to 35,000 training places out of which approximately 60% of the people trained under this programme were aged 40 and above.

The Singapore Workforce Development Agency (WDA) will continue to expand our targeted training and skills upgrading programmes to help older workers pick up new skills in order to stay relevant in the changing workplace.

We will also continue to promote Flexible and Performance-Based Wage Systems that reward workers based on their output. The Seniority-Based Wage Structure works against older workers and makes them more prone to retrenchments

Members will remember the People for Jobs Traineeship Programme (PJTP) which was launched and in that programme, more than 20,000 older workers benefited because this incentivises employers to employ older workers. As announced by the Prime Minister, we will replace this with a more focused programme on vulnerable workers called the Re-Employment Assistance Programme (REAP). Under REAP, the Government will spend about $35 million over the next two years to assist 15,000 unemployed, less-skilled Singaporeans, and these will include older workers, find new employment. REAP has two components - firstly, a national job redesign initiative spearheaded by NTUC and, secondly, re-employment assistance for job seekers who face the risk of structural unemployment.

To study how the employability and job opportunities of older workers can be further enhanced, my Ministry will set up a tripartite committee, comprising key representatives from the Government, employers and trade unions, in the first quarter of this year, ie, next month. The committee will study workplace practices and relevant issues which include the restructuring of jobs, wage and benefit systems, and the changing of employers' perception towards the hiring and retention of older workers.

in a downturn as they were relatively more costly to keep than younger workers performing the same job.

Does the Ministry have any strategy against employers who continue to discriminate against older people, despite the fact that they have the skills and experience and they are prepared to accept lower wages?

I do not think it is quite fair for the Member to tarnish all employers with a single brush. That is certainly not the case. But I do accept

So the first point is that, on a systemic level, I do not think we should assume that employers are discriminating against older workers. We have to study in detail, and this is what the Tripartite Committee for Older Workers will look at, in other words, what are the problems they face. Sometimes, it is just work practices. For example, Members of the House will know that certain employers change particular practices. McDonald's did, for example, lower the shelves so that when people put the stored packages, it would be easier for them, and older workers applied for those jobs. It is multifactorial. It would be wrong and misleading and, in fact, it would work against us if we start from fixed assumptions. So let us examine the problem and let us look at why older workers do find it harder to get re-employed and come out with solutions that are workable.

that older workers do have a lower re-employment rate. Our data suggest that they are not at a higher risk of being retrenched. In other words, of those who are retrenched - sometimes it works against us to say older or younger - if we use the age of, say, 50 and above, in terms of proportion of representation, it will be equivalent to what their share is in the workforce. So in terms of retrenchments, they are not more vulnerable. But they are more vulnerable to re-employment, in other words, once they lose their jobs they find it hard to get re-employed. And there are many factors for this, not necessarily, across-the-board, just employers' discriminatory practices.

May I ask the Minister whether there will be more incentives, such as tax incentive for rebates, to encourage employers to employ older workers? Is it time to review the various retraining schemes to expand the effective ones and to make them available to the majority? Will he make it more attractive, especially in

terms of financial needs, to attract more people to take up the retraining opportunity? Lastly, is it correct that the lesser take-up rate of retraining was due to a lack of suitable matching job placements? Therefore, will he put a system in place to get greater success rate?

Sir, all the above points that Dr Lily Neo has brought up are worthy of consideration. Let me just address them broadly. Yes, we need to improve our results, especially when there are employment opportunities that come about as our economy goes on an uptake. And as I said, there are many factors why the older workers have a lower re-employment rate, some of it may be due to a lack of skills, training or aptitude. We will address these. I do not think it is so much the financial aspects, which deter older workers from going for training. In fact, our data suggest that they do go for training. But the Member is quite right that some of them may not want to go for training because they do not see the benefit at the end of their training. And this is something that we want to address. In other words, we used to go towards what we call "Train and Place". We train you first and then place you in the job. We found that it is not as effective as "Place and Train". We put you into a job and you recognise your skills mismatch. There is more motivation because you know that there is a job waiting for you at the end of it. We think that is more targeted and that would be generally the direction which our programmes are placed.

On top of that, as I mentioned, under the Re-Employment Assistance Programme, we will incentivise these workers to stay on the job by giving them adjustment allowances as they stay longer in their jobs, whether it is three or six months. The idea is that if we can get

you over the initial hurdle, the psychological barrier, the workplace adjustment, over the first three months, you are more likely to stay and therefore reduce your retrenchment risks. So that would be the general direction that the REAP programme will go. We will redesign the jobs so that the older worker feels that he can do the job. And my officers on the ground tell me that is an important psychological aspect. Many of them leave the workplace not because the employer tells them that they are not doing the job properly but because they feel that they cannot contribute. So we need to redesign certain jobs, whether it is through mechanisation or review of work processes, so that the older workers feel that they can give the economic value-add and we will train them to be productive on the job as well.

Sir, I would like to thank the Minister for his explanation and I was not making a general statement. I was asking whether a strategy is in place on the part of the Ministry. Specifically, I would like to ask: if a complaint is received from an older person that he is being discriminated against, despite having all the required attributes, what specific action can the Ministry take in order to assist him?

Sir, the Member is a seasoned unionist and she attends these international forums, and she will recognise that even if we put in place legislation against so-called discriminatory practices, it is very hard to prove at the workplace. In other words, if someone does not want to hire you or someone fires you, there could be a multitude of reasons that they can put forth. So the solution, I think, needs to be beyond legislation. The retirement age, as we have already indicated at some point of time, will need to be raised to support these measures. But even in countries with a higher retirement age, the effective retirement age is much lower than the

statutory retirement age, which means that at the marketplace it does not quite work flow-through, and this is where we need to focus. This is where the Tripartite Committee on Older Workers will have to work very hard to look at these factors. Yes, it would also involve, for some employers, the changing of mindset so that they are not biased against older workers. It will also mean job redesign. It will also mean certain financial aspects. It may mean certain incentives. We will look at all of these. The Committee is given a timeline of about six to nine months for it to complete its job.

Let all the social partners come together to work out an adequate roadmap for us to change this, because this is a long-term problem. We are all growing older as a population. This will be with us for a long time. This is not a one-off exercise, and it is not a trivial exercise. It will significantly impact our competitiveness down the road. This is a major problem that we will have address, ie, how we can continue to be cost-competitive, even as our population ages.

May I ask the Minister when will he raise the retirement age or implement flexible retirement age to enable workers to work beyond the age of 62?

Sir, this is one of the aspects we will allow the Tripartite Committee to debate upon. We have already indicated that we want to raise the retirement age. But the point is that legislation can help but it is not a panacea. It will not solve all our problems. As I said, there are many things that we need to do, so let us get cracking, and retirement age will be one of them.

10. Mdm Halimah Yacob asked the Minister for Manpower (a) how many

workmen's compensation cases were filed last year; (b) whether the number is increasing; and (c) how long does it take to process a claim for compensation under the Workmen's Compensation Act.

Sir, a total of 15,274 cases were filed in 2004. For the past five years, there is no increasing trend. On average, about 15,000 cases or 740 cases per 100,000 employees were reported each year although there was a slight rise of 7% from 14,304 cases in 2003, which is the lowest in the period of five years, to 15,274 cases in 2004. On average, my Ministry takes about nine to ten months to process and settle a case. Fatal cases constitute about 1% of total cases. In 2004, the average processing time for fatal cases involving local workers was five months, and 13 months for foreign workers. About 80% of the fatal cases were settled within six months.

Sir, could the Senior Parliamentary Secretary give an explanation to the House as to why there is a big difference in terms of the time taken to settle a case between a local worker and a foreign worker, ie, five months and 13 months respectively?

Sir, because this may be raised again in future, let me read from my notes, so that we understand this better.

There are several processes involved in bringing a case to conclusion, namely, screening, investigation, assessment, conciliation and adjudication. At each point, there would be problems. At the screening and investigation stage, we need to establish the facts pertaining to the accident and the liable party for the injury. In cases involving multiple layers of contractors, these could be complicated and could take longer. The Ministry relies on medical assessments by medical

When the Commissioner makes an assessment, all parties involved, ie, the injured worker, his employer and his insurer, are given the opportunity to raise objections. Further investigations or medical reassessments would be required should an objection be raised. If settlement terms cannot be reached through conciliation, the case would be referred to the Labour Court for adjudication. Pre-trial conferences and hearings would then be conducted by the Labour Court to assess the compensation and to order the liable party to pay the compensation.

For fatal cases involving foreign workers, time is also needed to establish and locate their dependants. In cases where the documents establishing the relationship of the dependants are written in other languages, translation work is needed. This will add to the processing time.

practitioners when assessing the amount of compensation for cases involving permanent disablement. It is a practice of medical practitioners to give an assessment on the percentage of permanent incapacitation only after the injured worker's condition has stabilised. So a medical report is filed after the permanent incapacitation has stabilised, and that may take time. Serious injuries will take a longer time to heal and, hence, the injured worker has to wait longer to get an assessment.

Sir, can the Ministry try to expedite the process, particularly for foreign workers, although I understand the steps that are needed to be taken. Because of the hardship that it causes to the worker, he has to remain in Singapore without any means of sustenance. If at least the process is shortened and more efforts are made to try and process their claim much faster, I think that will reduce their hardship.

Sir, I can assure the hon. Member that the Ministry officers always do that. They will try their best to expedite. There is no reason to delay the compensation or settlement of the claim. But we will do more than that. The entire process, we understand, takes a long time, and it is quite tedious. The Ministry is reviewing this process and, if necessary, we will amend the Workmen's Compensation Act to make the process more efficient, without compromising fairness to all parties concerned.

11. Prof. Ivan Png Paak Liang asked the Minister for Manpower if his Ministry will publish statistics on the employment of foreign workers by industry sector, occupation, and employment status (employment pass/work permit), for the benefit of our citizens planning job moves and for the benefit of researchers.

Sir, MOM published a paper on "Employment Trend and Structure" in May 2004 providing statistics, by broad sectors, on local and foreign workers' employment changes, as well as employment levels. The Ministry will update the data for release on an annual basis. The 2004 data will be released in the upcoming Labour Market Report on 15th March 2005. This will add to the wide range of statistical information on the labour market that MOM publishes regularly.

For job seekers, the Singapore Workforce Development Agency (WDA) publishes the Job Seeker's Guides and JobsWatch, which contain information on employment prospects for different sectors, and highlight occupations in demand. All these reports are available on MOM and WDA's websites.

12. Mr Ong Ah Heng asked the Acting Minister for Community Development, Youth and Sports what plans his Ministry has to (i) improve the social and physical well-being of our growing numbers of older Singaporeans and (ii) raise the social standing of older people in Singapore.

Mr Speaker, Sir, let me first assure Mr Ong that older Singaporeans are doing well, both physically and socially. A survey conducted in 2003 showed that more than 90% of our elderly lead active lifestyles. Similarly, another survey showed that 80% of elderly have strong intergenerational ties, and about 15% of those above 65 years of age are active volunteers.

In preparing for our old age, it is important that we start early, to enhance our well-being in later years. For example, keeping healthy during our younger days will help delay the onset of the need for care or physical support later on. Similarly, building up our social network of friends and family and other contacts will also provide a reservoir for emotional and psychological support later on. It is also important to build up sufficient personal savings for financial independence in later years.

Mr Speaker, Sir, there are three principles that undergird our policies with respect to older Singaporeans. First, we recognise that senior citizens are valuable members of our society. Second, the family must remain the cornerstone of support for senior citizens. Third, all sectors of society are collectively responsible for the care of senior citizens. We believe in a many helping hands and integrated approach.

Mr Speaker, Sir, we will maximise opportunities for our senior citizens to lead active lives through:

Facilitating economic participation wherever possible;

Enhancing social involvement in order to widen support networks; and

Working towards a barrier-free environment to facilitate movement and access by all people.

These and many other issues would be addressed through the Committee on Ageing Issues which will look at ageing issues by collaborating with various ministries, in an integrated and holistic manner. Let me give you a few examples.

You have heard the Minister for Manpower describe the efforts of MOM to increase the employability of senior citizens. MND and its partners are working to reduce the barriers in the environment. MOH will study healthcare facilities and make them more accessible, and also to provide more secure sources of financing. At MCYS, we also have to ensure that there is a smooth continuum of services and facilities for the elderly and, just as important, for their families.

Under the Eldercare Masterplan for FY2001-2005, a comprehensive network of community-based support services and programmes have been put in place to enable the elderly to remain physically, mentally and socially active, and also to support the families in caring for their older members. These programmes include the Neighbourhood Links, Active Seniors Programmes, Befriender Services and Community Case Management Services.

For active ageing, our seniors must be encouraged to optimise opportunities for

Enhancing the scope for seniors' involvement in a range of community-based programmes, including activities organised by Neighbourhood Links, especially those which adopt an intergenerational approach; and

Nurturing the growth and development of Seniors Organisations and Networks.

Mr Speaker, Sir, it is also worth noting that the People's Association itself has 433 Senior Citizens Clubs, and the total membership of these clubs exceeds 212,000 members.

Sir, in conclusion, let me reiterate that we need to inculcate a positive attitude towards ageing and older people. My Ministry is also undertaking a systematic year-round public education programme, and we will continue to collaborate with the various agencies and non-Government organisations involved in order to conduct more public and professional forums, media campaigns and the production of resource materials on ageing issues.

the promotion of their physical, social and mental well being. We will continue to develop more avenues and opportunities for their engagement and participation in the community via the following programmes: (1) Expanding the Active Seniors Programme which focuses on promoting senior volunteerism;

13. Mr Zainudin Nordin asked the Acting Minister for Community Development, Youth and Sports (a) how many Singaporean couples have applied for child adoption in the past five years (2000 -

2004); (b) what is the success rate of their applications; and (c) how many of these children are from foreign countries.

Mrs Yu-Foo, you have two-and-a-half minutes.

Mr Speaker, Sir, in the past five years (ie, 2000 to 2004), 3,276 Singaporean couples applied for child adoption. The average success rate is 98%. Of the children put up for adoption, 2,196 were from foreign countries.

14. Dr Lily Neo asked the Minister for Health whether the Government will consider providing assistance to those who cannot afford the premiums for MediShield.

Sir, when designing the MediShield scheme, one key consideration is to ensure that the premiums will be affordable to the vast majority of Singaporeans. As benefits have to be funded by premiums, we have to manage the desire for maximum benefits against the need to keep premiums low.

The final package that I announced last month is what I believe to be the most optimal, taking into account the need for such trade-offs. That is why I have to resist the demands for MediShield to kick in at lower deductibles, or to offer loyalty discounts to younger policyholders.

Nevertheless, there may be some elderly Singaporeans who find the premiums unaffordable, especially if they had not contributed regularly to their

Medisave Accounts in the past. To help these people, the Government has, from time to time, topped up the Medisave balances of Singaporeans, with higher amounts to the older citizens. We will continue to do so if the budget position allows. In fact, this is one of my budget wishes for this year. I hope I will be lucky!

Sir, in the recent MediShield revamp, there was no change to the age limit claim for MediShield. Will the Minister consider raising this age limit claim beyond the age of 80, in view of our ageing population?

Ten seconds, Mr Khaw.

We do review the maximum cut-off age every now and then. I think it used to be 70, then raised to 75 and, a few years ago, to 80. As life expectancy increases, we will take that into account. But in the market place, there are insurance policies which cover beyond 80. NTUC Income is one of them, and I would rather let the elderly people decide. At that age, they should be quite wise to decide for themselves whether they want to pay extra high premiums, because some of these products are not cheap.

3.00 pm

Order. End of Question Time.

[Pursuant to Standing Order No. 22(3), Written Answers to Question Nos. 16-17, 23-24, 26 and 28-29 on the Order Paper are reproduced in the Appendix*. Question Nos. 15, 18-22, 25, 27 and 30-32 have been postponed to the sitting of Parliament on 28th February 2005.]

* Cols. 701-710.

"to provide for the issue from the Consolidated Fund and the Development Fund

recommendation of President signified; presented by the Prime Minister and Minister for Finance (Mr Lee Hsien Loong); read the First time; to be read a Second time after the conclusion of proceedings on the Estimates of Expenditure for FY 2005/2006, and to be printed.

of the sums necessary to meet the estimated expenditure for the financial year 1st April 2005 to 31st March 2006 (both dates inclusive)",

Resolved,

That, notwithstanding the Standing Orders, the debate on the Budget Statement shall resume on Monday, 28th February 2005. - [Mr Wong Kan Seng].

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

First Supplementary Estimates of Expenditure for the financial year 1st April 2004 to 31st March 2005, contained in Paper Cmd. 1 of 2005.

I shall deal first with the head of expenditure in respect of which an amendment stands on the Order Paper Supplement.

Head L, Ministry of the Environment and Water Resources. Prof. Ivan Png is not here.

Question, "That the sums stated for those heads of expenditure which appear in the last column of the Schedule of Total Supplementary Main Estimates of Expenditure shown in Paper Cmd. 1 of 2005 stand part of the First Supplementary Estimates", put and agreed to.

Question, "That the sum of $1,072,432,070 shall be supplied to the Government under the heads of expenditure for the public services shown in the First Supplementary Estimates of Expenditure for the financial year 1st April 2004 to 31st March 2005 contained in Paper Cmd. 1 of 2005", put and agreed to.

Resolution to be reported.

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

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

Resolution reported -

"That the sum of $1,072,432,070 shall be supplied to the Government under the heads of expenditure for the public services shown in the First Supplementary Estimates of Expenditure for the financial year 1st April 2004 to 31st March 2005 contained in Paper Cmd. 1 of 2005".

Mr Speaker, Sir, I beg to move,

"That Parliament doth agree with the Committee on the said resolution."

Question put, and agreed to.

Resolution accordingly agreed to.

Order for Second Reading read.

Mr Speaker, Sir, on behalf of the Senior Minister, I beg to

Trust services are growing in importance globally, as part of the wide array of wealth management services offered by financial institutions. Private bankers often advise their clients to use trusts for investment and wealth planning purposes, such as for succession planning.

In Singapore, the trust services industry has expanded steadily in recent years along with the robust growth in the private banking and wealth management business. Singapore's standing as an internationally reputable financial centre has prompted global players to locate their trust administration business here.

There is currently no single set of internationally endorsed standards for the regulation of trust companies. But given the growth and increasing sophistication of the industry, there has been increasing pressure for trust companies to be regulated, so as to foster high standards of professional conduct and discourage illicit activities. The Financial Action Task Force, an international, inter-governmental body that recommends standards to combat money laundering and terrorist financing, has extended its recommendations to cover the trust services industry. The Financial Stability Forum, a grouping of regulators of major financial centres including Singapore, has recently expressed its concern that the migration of trust companies to unregulated jurisdictions presents significant risks.

MAS has also received feedback from reputable trust companies that a sound framework for the regulation of the trust services industry will attract top professionals and their clients to do more trust business in Singapore. It will give Singapore a premium. In other words, as in all other areas in the financial industry, good regulation leads to good growth.

Singapore does have a framework for regulating trust companies. However, no major changes have been made to the Trust Companies Act over the last two decades.

For the reasons I have just set out, MAS and the Ministry of Finance consider it timely to update and strengthen the regulatory framework for trust companies operating in Singapore. Regulation of trust companies will be transferred from the Accounting and Corporate Regulatory Authority (ACRA) to MAS. This transfer of responsibilities will allow a single regulator to supervise the complementary activities of trust services, private banking and wealth management.

MAS consulted the industry and public on the proposed new framework for trust companies and a draft of the Bill. We have considered and incorporated the comments received, where appropriate, into the Bill. MAS will also be holding consultations on the regulations, notices and guidelines required to implement the new regime for trust companies.

Scope of Trust Companies Bill, Trustees Act and Business Trusts Act

It may be useful to explain how the Trust Companies Bill relates to the Trustees Act and Business Trusts Act.

The Trustees Act is the centerpiece of trust law in Singapore. It provides the basic legislative framework for trustees of trusts established under Singapore law. The Trustees Act sets out the default powers, duties and obligations of trustees, the powers of the Courts and matters relating to appointment and discharge of trustees. The Trustees Act was extensively reviewed by the Ministry of Law and the MAS and amended by Parliament in October last year, to bring it in line with developments in trust law and the use of trusts in financial and business transactions.

The Trust Companies Bill likewise seeks to update and modernise the legislative and regulatory framework for companies that are in the business of providing trust services. The Bill applies to companies providing trust services in Singapore regardless of whether the trusts are established under Singapore law or other law. The Bill defines the business of trust services as comprising any of the activities of creating a trust, acting as a trustee, arranging for another person to act as a trustee, or providing trust administration services. For example, giving advice on how to set up a trust, and managing and distributing trust assets, are activities that would fall under the Bill. A company providing trust services in Singapore must adhere to the standards of governance set out in the Bill and the accompanying supervisory framework, just as financial companies providing wealth management or private banking services are required to meet appropriate standards of conduct.

On the other hand, the Business Trusts Act, which Parliament enacted in October 2004, introduced a specific governance framework for business trusts. Business trusts have the distinguishing feature of being engaged in the management of an operating business, for example, infrastructure services. The Trust Companies Bill will not apply to trustees of business trusts.

Mr Speaker, Sir, I will now go through the key provisions of the Trust Companies Bill.

Key measures under the new regulatory framework and Bill

Mandatory licensing

A key policy change in the new framework is the shift from voluntary registration to mandatory licensing. Under the current Trust Companies Act,

As the trust business is defined broadly, however, the Bill and the Regulations that will accompany it will contain exemptions from licensing, or will have lighter regulation, for certain companies. The exemptions will be granted where the risks of abuse or inadequate professional standards are low, or to avoid duplication with other regulations. For example, private banks, which are regulated by MAS, will be allowed to carry on trust business without needing an additional licence as long as they do not act as trustees themselves, advise on trusts or make significant decisions affecting a trust. They can, for example, arrange for a third party to act as trustee, explain the features of a trust, and facilitate the execution and completion of relevant documents, as part of their private banking services without requiring an additional licence under the Trust Companies Act. MAS will also work out exemptions from licensing or lighter regulation for other entities in the forthcoming Regulations. These will include lawyers and accountants; private trust companies, which act as trustees for a single private group, typically a high net worth family; and overseas persons visiting Singapore.

The enabling provisions for these exemptions are provided in the Bill, but the scope of the exemptions will be set out in the forthcoming Regulations. The Regulations will include conditions that will apply on exempted entities, the

Exclusions

The Bill will also provide exclusions for entities that technically fall within the scope of the Bill, such as advisors on wills, executors and administrators of the estates of deceased persons, bare trustees, and managers and trustees of business trusts. The Bill is not intended to regulate these entities, as the trusts involved are not actively used for investment and wealth planning purposes.

Requirements for resident managers

The Trust Companies Bill requires licensed trust companies to obtain MAS' approval for the appointment of their resident managers. MAS intends to set out in Regulations that a licensed trust company has at least two resident managers. Requiring the managers to live and work in Singapore ensures that the persons managing the affairs of the company are in the position to exercise effective day-to-day control of the business. The requirement for at least two managers is also a useful check against a single individual engaging in undetected illicit activity.

MAS' approval for directors and significant shareholders

The Bill also requires a licensed trust company to obtain MAS' approval for the appointment of directors and for persons and entities wishing to become significant shareholders, since they are in a position to influence the management of the licensed trust company.

Financial soundness requirements

The Bill gives MAS powers to prescribe minimum financial requirements for a licensed trust company. The aim is to ensure that each licensed trust company is of sound financial standing, with sufficient capital to operate smoothly and to serve as cushion against unforeseen events. It should also have adequate insurance to cover negligence claims. This is just as we have prudential requirements for other providers of financial services such as fund managers. Licensed fund managers have to satisfy a minimum capital requirement of $250,000 if they conduct fund management on behalf of accredited investors. MAS is considering similar capital requirements for licensed trust companies. We will decide on the financial soundness requirements for licensed trust companies after consultation on the Regulations.

Supervisory powers

The Bill will give MAS supervisory powers over licensed trust companies similar to those it has over other financial institutions. MAS will require licensed trust companies to submit annual audited accounts and other information for supervisory review. MAS will conduct regular inspections and have powers to investigate when needed. MAS will also have powers to restrict the operations of a licensed trust company, revoke its licence, or petition the court for its winding-up.

Anti-money laundering and countering the financing of terrorism

MAS will set out in a notice the measures that licensed trust companies have to take to counter money laundering and terrorist financing. The measures would be similar to those imposed on other financial institutions, which are in line with recommendations by the Financial Action Task Force.

Systems and processes for good business conduct

MAS will also require trust companies to install systems and processes for good business conduct in areas such as record-keeping, compliance with regulations, complaints-handling and continuing professional development.

Conclusion

Sir, to conclude, the new regime for trust companies is an important new piece in the framework for regulation of financial services in Singapore. It will position Singapore as a leading global trust domicile, and contribute to the growth of the private banking industry. It will help us stay in the forefront as a sound, well-regulated and internationally competitive financial centre.

Sir, I beg to move.

Question proposed.

move, "That the Bill be now read a Second time."registration of trust companies is voluntary. Under the new regulatory framework, licensing will be mandatory for anyone engaging in trust business. Mandatory licensing will foster high standards of probity, professionalism and business conduct across the entire industry. Exemptions limitations on the types and extent of trust services they can conduct, and how due diligence with regard to anti-money laundering has to be conducted. MAS will consult the industry and public on these Regulations and consider their comments before finalising them.

Mr Speaker, Sir, I stand in support of the Trust Companies Bill 2005.

The Trust Companies Bill extensively revamps the present Trust Companies Act (TCA), and the proposed new provisions of the Trust Companies Bill (TCB) strengthen the present regime of the TCA by giving it

a purposive and compulsory regulatory framework, which aims to provide better security and safeguards against potential abuse and proliferation of monies entrusted to the trust companies, as explained by the Minister.

Trust business in Singapore

As pointed out by the Minister, trust business has grown in Singapore in tandem with wealth management and private banking industry in Singapore.

Trust business can be lucrative. The Bermudas, Guernsey, Jersey, the Cayman Islands and the British Virgin Islands, for example, are well known for having financial services providing trust business.

Singapore, however, is well placed to attract trust businesses for the following reasons:

we have an excellent legal framework and infrastructure for trusts to be created and for any disputes to be speedily and efficiently dealt with by the courts;

we have excellent accounting practices where trust companies may be assured of correct practices; and

we have major local and international banks for which the trusts may be banked with.

With such advantages, we must be mindful that too much regulation should not be allowed to hamper or hinder any interested potential trust companies from wanting to set up shop in Singapore. While regulation as a means of transparent control is good, the MAS has to weigh the rigours of regulation and that of incentive measures to make Singapore an attractive financial hub for trust companies to park.

Apart from Hong Kong, Singapore is the other significant country that is well poised to handle trust businesses and, given our existing financial services infrastructure, Singapore can become a trust business hub in Asia.

With this in mind, I would like to raise some matters of concern on the TCB.

Scope of TCB

Firstly, I am concerned about the scope of the TCB as set out. Please let me elaborate.

Clause 3(1) of the TCB provides that, subject to certain exempted persons as specified in the Second Schedule, no person shall carry on any trust business or hold himself out as carrying on any trust business in or from within Singapore unless that person is a licensed trust company.

A licensed trust company is defined as "a corporation holding a trust business licence". By virtue of clause 5 of the TCB, a trust business licence can only be granted to a company incorporated under the Companies Act or a foreign company duly registered under Division 2 of Part XI of the Companies Act.

Next, "trust business" is defined in the TCB as follows:

the provision of services with respect to the creation of an express trust;

acting as trustee in relation to an express trust;

arranging for any person to act as trustee in respect of an express trust; and

the provision of trust administration.

In comparison, the Labuan Trust Companies Act defines "trust business" as the "business of carrying on any economic activity by a company as a trustee, agent, executor or administrator pursuant to the objects of the company ...".

Section 9(3) of the Trusts (Regulation of Trust Business) Act 2001 of Bermuda defines "trust business" as the "provision of services of a trustee as a business, trade, profession or vocation."

The Vanuatu Trust Companies Act defines "trust business" as the "business

Given the wideness of the definition of "trust business" as set out by the TCB, it appears that the following persons may be adversely affected by the implementation of the TCB when it becomes law:

the family trust type of trust companies that were specifically formed for the purpose of creating a family trust; and

lawyers and accountants who, as part of their professional practice, may be instrumental in the creation of trusts or the arrangement of persons to act as trustees.

Clause 15 of the TCB exempts specified persons from obtaining a trust business licence but is nonetheless regulated by the provisions of the TCB. As it stands, only banks licensed under the Banking Act and merchant banks approved as financial institutions under the Monetary Authority of Singapore Act are exempt from obtaining a business trust licence.

The family trust

I would now like to touch on family trust. Under the present regime of the TCA, a family who wishes to set up a family trust could do so by incorporating a private limited company, with themselves as directors and for the company to hold monies and/or property on trust for their children.

They could seek advice from their lawyers who, more often than not, would draw up the necessary documentation and set up the appropriate trust to suit the purposes of the family. The pecuniary amounts to be held on trust could range from small to large. Likewise with the size of immovable property. The cost for

These family trust types of trust companies do not have to submit themselves to be registered under the TCA, as the TCA only provides for public companies to voluntarily submit themselves for registration, if they meet the registration criteria as provided for in section 3 of the TCA and if they comply with the objects set out in section 8 of the TCA.

With the advent of the TCB, the existing family trust type of trust companies may find it difficult to obtain a trust business licence for the following reasons:

The family trust type of trust companies may not be able to meet the minimum financial requirements imposed by the MAS.

The directors of the family trust type of trust companies may not satisfy the MAS in terms of their financial standing, educational qualifications or experience.

The requirements on control of voting powers and shareholdings imposed by Part III of the TCB may render the companies or directors incapable of obtaining the requisite approval, given the obvious familial connections and relationships of the shareholders and directors.

With the advent of the TCB becoming law, the common people wishing to set up family trusts will have no alternative but to turn to licensed trust companies, banks or merchant banks to avail themselves of such services. Given that these licensed trust companies, banks or merchant banks are commercial entities (as opposed to family trust types of trust companies), a family who wishes to set up a family trust may find the cost of engaging or hiring a licensed trust

There may be concern that such family trust type of trust companies may engage in undesirable activities such as money laundering or terrorist financing or that some of the directors or officers may misuse the funds entrusted to them without the safety net of a regulatory network. It is suggested that the type of trust companies be exempted from licensing but have regulations tailored to govern their activities, eg, a requirement that they notify the MAS of the extent of their activities, the members of the company and its directors and officers. Conditions for exemption may include limiting the family type of trust companies to hold moveable properties not exceeding a prescribed amount, eg, S$100,000 in cash and/or to limit their holding of immoveable properties of values not exceeding S$500,000. An example of this may be seen in section 11 of the Bermuda Trusts (Regulation of Trust Business) Act 2001 which allows for limited and unlimited trust licences, where limited trust licences authorise the licensee to hold trust assets up to a specified amount and not to act as sole trustee.

Without an exemption for these family trust type of trust companies, the present family trust type of trust companies may have to be wound up, resulting in the ordinary people not being able to create family trusts to benefit their children.

Lawyers and accountants

Next, I would like to touch on lawyers and accountants. The other difficulty concerns lawyers and accountants whose practice may include arranging for trustees or in the creation of trusts. These types of work are done by either lawyers or accountants as incidental to their practice.

Given the wideness of the definition of trust business, if they are not included as specified persons in the Second Schedule to which the TCB will not apply or included as exempt persons under clause 15 of the TCB, lawyers and accountants may be excluded from performing these types of work which they have been doing as work incidental to their practice. In order for them to render any advice on the creation of express trusts or to arrange for trustees, they would have to incorporate a company and obtain a business trust licence. The obligation to set up a company and to submit themselves to the rigours of licensing may mean that it may not be worth their while to engage in trust law advice. The danger then is that only commercial bodies, such as banks or trust companies, would be the only parties who would be able to advise and execute express trusts, as lawyers would not be able to render any legal advice in respect of the creation of an express trust or the legal issues in the appointment of a trustee. Accountants would not be able to advise on monetary and tax issues in relation to the creation of trusts.

It is noted that in the original draft TCB of 2004, clause 15 specifically

Some practical considerations

Clause 5(2) of the TCB provides that a trust business licence shall only be granted if the applicant meets such minimum financial and other requirements as the MAS may prescribe. Presumably, the minimum financial and other requirements would be set out in the subsidiary legislation, regulations or directions.

It is noted that unlike the TCA, the requirement to place securities with the Accountant General has not been incorporated into the TCB. It is suggested that this requirement be included for the practical reason that if monies belonging to the trust have been misused, misappropriated or pilfered, then there is some measure of recovery by the beneficiaries against the licensed trust company.

It is also noted that unlike section 25 of the TCA, the present TCB has no provisions to limit or regulate loans to directors. It is suggested that there be regulations governing such loans to directors. It is noted in the draft TCB 2004, Part V, clause 27 provides a comprehensive regulatory framework for such loans.

In conclusion, Sir, the Bill presented to Parliament ought to be complete in the sense that all material regulations must be stated in order for the Bill to be properly debated. By having material omissions to the Bill, the public is left to second guess what these regulations would be.

of acting as trustee, executor or administrator".setting up such family trusts was also not prohibitive.company to be prohibitive. It is noted that nowhere in the TCB are limits or ceiling set on remuneration to be paid to the licensed trust companies. It is not inconceivable that these commercial entities will levy a fee or charge for services for the creation of trusts, the appointment of trustees, cost for administering the trust, miscellaneous administrative charges and other charges like photocopying charges, correspondence charges and consultation charges. An example of control in this regard may be seen in section 22(29) of the Labuan Trust Companies Act 1990 which empowers the court to review all commissions, fees, charges or expenses levied by a trust company and, if necessary, to reduce the same. exempted lawyers and accountants from the requirement to hold a trust business licence. This was fortified in the Explanatory Brief on the TCB 2005 by the MAS issued on 25th January 2005. It is suggested that, for the sake of efficacy, lawyers and accountants be included as exempt persons under section 15 of the TCB.

It is noted that underlying the changes to the TCA, protection of the beneficiaries and social conscience is apparent. Given the foregoing, it is suggested that unless the aims of the TCB are to benefit all persons, a change to the TCA with the implementation of the TCB may not be useful to the wealth management sector of our economy.

Sir, I shall try to answer the Member's questions quickly. First, the reason why the Bill only specifies exemptions for banks and merchant banks is because these are the clear-cut exemptions. They are already regulated by the MAS. We intend to exempt a range of other players through regulation. There is no intention to limit exemptions only to banks and merchant banks and to limit this business only to these large institutions. For instance, lawyers, accountants, private trust companies, a range of other exemptions will be provided for, but there will not be categorical exemptions across the board.

Mr Andy Gan raised a common example where a family trust is being set up - father sets it up for the son, gets the uncles and aunts to act as directors. They are not in the business of providing trust services, so they will not fall under this Act. The lawyer who advises them could potentially be in the business of offering trust services, and that is where the exemptions will come into play. These exemptions are best set out in regulations rather than the Act. That will enable us to finetune them as we go along, consult and get feedback from the industry over time, to see whether there is a need for changes to regulations. Lawyers are a group of players who already have a traditional trust law business, and there is no intention of stifling that. Lawyers who are providing trust services that are incidental to their trust law business will be exempted.

It will be unwise though to have a categorical exemption because not all players in these affiliated industries have the necessary skills to be able to do due diligence for anti-money laundering and other regulatory requirements. Even exempted entities will have to follow certain procedures specified in this Bill, in particular for anti-money laundering requirements.

As for loans to directors, MAS will restrict loans to directors just like for officers and employees. These are unsecured loans. We will restrict unsecured loans to directors, officers and employees to no more than one year of emoluments.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Mr Tharman Shanmugaratnam].

Bill considered in Committee; reported without amendment; read a Third time and passed.

Those who are providing the full range of trust services, but on a limited scale, will be provided with limited exemptions. We are consulting the Academy of Law and the Law Society before setting on the details.

Mr Speaker, Sir, I beg to move,

That this Parliament, pursuant to section 7 of the Civil List and Pension Act (Chapter 44), resolves that the Schedule to that Act be

I propose that a provision of $2,512,900 be supported for Class I expenditure. The increase of $20,200 over the FY 2004 Class I expenditure is due to the restoration of cuts in the President's salary and higher provisions for the President's National Day reception.

For Class II expenditure, I propose a provision of $2,588,200. This is an increase of $163,100 over the FY 2004 Class II expenditure and reflects normal salary increments, filling of vacant posts, and the decentralisation of personnel budget from the Public Service Division.

For Class III expenditure, I propose a provision of $1,055,800. This is an increase of $152,200 over the FY 2004 Class III expenditure and it is due to IT and security-related initiatives.

For Class IV expenditure, I propose a provision of $8,000. This is a decrease of $19,000 from the FY 2004 Class IV expenditure for FY 2004 and reflects reduced purchases of equipment.

It is therefore necessary to vary the provisions in the Schedule to the Civil List and Pension Act (Chapter 44) with effect from 1st April 2005, to reflect the budgeted FY 2005 provisions, as indicated in the Motion before the House.

Sir, I beg to move.

Question put, and agreed to.

Resolved,

That this Parliament, pursuant to section 7 of the Civil List and Pension Act (Chapter 44),

varied with effect from 1st April 2005 by deleting the figures "$2,373,100", "$116,000", "$2,425,100", "$903,600" and "$27,000" in the second column and substituting them for the figures "$2,392,300", "$117,000", "$2,588,200", "$1,055,800" and "$8,000" respectively. resolves that the Schedule to that Act be varied with effect from 1st April 2005 by deleting the figures "$2,373,100", "$116,000", "$2,425,100", "$903,600" and "$27,000" in the second column and substituting them for the figures "$2,392,300", "$117,000", "$2,588,200", "$1,055,800" and "$8,000" respectively.

Order. I propose to take the break now. I suspend the Sitting and will take the Chair again at 3.45 pm.

Sitting accordingly suspended at 3.38 pm until 3.45 pm.

Sitting resumed at 3.45 pm

Mr Speaker, Sir, I beg to move,

That Parliament approves the financial policy of the Government for the financial year 1st April 2005 to 31st March 2006.

The Singapore economy rebounded strongly in 2004. It grew by 8.4%, one of the fastest in Asia. This was the result of a strong recovery in global demand, supportive monetary and fiscal policies, and our efforts to restructure the economy. The manufacturing sector grew by nearly 14% and the services sector by 7.5%. The growth was broad based. On most indicators - investment commitments, tourist arrivals, consumer confidence - we have bounced back to or exceeded pre-SARS levels. However, a few sectors still lag behind - for instance,

Most importantly, employment has gone up. Last year, the economy created more than 66,000 jobs. The total number of persons employed reached a new high of 2.2 million in December 2004. Job vacancies are at a three year high. Unemployment has also come down: the seasonally adjusted unemployment rate stood at 3.7% in December 2004, compared to 4.6% the year before and 5.5% at the trough of the slowdown.

Since my last Budget Speech, the Government's fiscal position has improved significantly. Last year I projected a deficit of $1.35 billion for FY2004. Now our revised position shows a surplus of $160 million. This is not because operating revenues exceeded our estimate; in fact they came in slightly lower. However, lower spending by ministries and higher Net Investment Income (NII) from our reserves helped to improve the budget position substantially. Members can refer to the new Budget Highlights document that will be distributed at the end of the Budget Statement for more details of the revised budget position in FY2004.

This year, the US is likely to enjoy steady growth of around 3-3.5%. While the huge US current account deficit poses risks to both the US and the international economy, this is a medium term issue. China's economic growth will moderate from its recent blistering pace, but will still be strong enough to boost the rest of Asia. India, with whom Singapore is negotiating a Closer Economic Cooperation Agreement (CECA), is also continuing to deregulate its economy.

In Southeast Asia, consumer and business confidence is up. In Thailand,

There are some downside risks - a sharper than expected downturn in the global electronics industry, another spike in oil prices, or a terrorist incident in the region that shakes confidence - but overall I am cautiously optimistic.

MTI expects the Singapore economy to grow by 3 to 5% this year. This is a moderate rate of growth compared to 2004 when the economy was still recovering from a low base. But it is in line with our economy's sustainable rate over the medium-term, and will continue to create jobs for Singaporeans.

The positive economic outlook augurs well for our fiscal position. In FY2005 we project a budget surplus of $940 million or 0.5% of GDP before taking into account the tax changes and special transfers I will announce later. We expect operating revenues to grow by nearly $1 billion, or 3.4% over FY2004, to $28.8 billion. This is due largely to higher personal income tax collection as a result of the higher incomes in 2004. Total expenditure in FY2005 will come in at about $29.7 billion, just 1.6% higher than in FY2004.

We again expect total expenditure to exceed our operating revenue - that is, the revenue from taxes, fees and charges. This has been so for the last three fiscal

While we remain alert to short-term economic cycles and event risks, we must continue to focus on our longer-term goal of remaking Singapore to meet the challenges of globalisation. This Budget will therefore aim to promote an economy brimming with opportunity and to foster a stronger sense of community among Singaporeans.

The best way to make Singapore a land of opportunity is to grow our economy, to generate the resources to realise our aspirations. That requires us to continually adapt to the changing world, upgrading and restructuring ourselves in order to stay competitive. Only then can we create good jobs, realise our dreams, and provide a better future for our children.

Singapore is not unique in facing pressures to restructure. In this era, constant change is a necessity for every country. Germany has been, for half a century, a bastion of state welfare. Yet now a socialist government is trying to cut back benefits and reduce wage costs. Even the opposition acknowledges publicly the necessity of this. Angela Merkel, the leader of the opposition Christian Democrat Party recently said, "the discussion now is whether Germany needs more far-reaching reforms. The world around us is changing fast and we cannot afford to stand still. I think more and more people in Germany recognise that we can only maintain our jobs and our prosperity if we can offer conditions to companies

comparable to conditions

In the United Kingdom, the old left-wing Labour Party has morphed into a left-of-centre new Labour Party. In government, New Labour has pressed on with the structural reforms and market-oriented policies that began under the Conservative government of Margaret Thatcher. As the British Chancellor of the Exchequer Gordon Brown said recently, "in this new global economy there is no escape from uncompetitiveness by resorting to loss-making subsidies, artificial barriers or protectionist shelters. Indeed, in every part of the world, rigidities, inflexibilities and lack of competitiveness €¦ are now fully exposed in the era of global competition. €¦ We will only maximise the benefits of globalisation by becoming more efficient, increasing productivity, and pushing ahead with the necessary structural reforms to increase the flexibility of our labour, capital and product markets." He said this in May last year. They are going for elections in May this year. But this is the truth for them too. (Speech at the CBI Conference on Competitiveness in Europe-Post Enlargement, 12th May 2004).

In Australia, protectionist policies and labour market rigidities have given way to a bipartisan consensus - beginning with Labour Prime Ministers Bob Hawke and Paul Keating, and continuing with the current Liberal Prime Minister John Howard - that Australia needs to gear up for the knowledge-based competition of globalisation. Tariffs have been cut, taxes lowered, budgets tightened, state-owned businesses privatised, and labour markets made more flexible. Today, the OECD describes Australia as the best performing economy among the rich countries. But the Australians are not sitting still. As

If other countries can change and adapt, so can Singapore. Our industries have always competed internationally. Our people are used to constant change and are fully prepared for it. Our unions understand what is at stake, and are working closely with employers and the Government to help workers cope. And we have the resources to invest in our future, and to ease the transition to a more flexible and dynamic economy.

Economic restructuring is unsettling and painful for the people who are affected. Even as opportunities blossom in the new economy, in financial services, pharmaceuticals, IT, and biomedical sciences, old jobs are lost in declining sectors through retrenchments and cutbacks. Workers have to upgrade their skills and equip themselves for the new jobs that are emerging, but not all will find it easy to do so.

We must tackle this problem with vigour and realism, and avoid tempting but ultimately self-defeating strategies. Slowing down our restructuring will not work, because we cannot slow down the changes taking place around us. If we put off inevitable changes, we will only fall further behind and make our problem worse. Alternatively, we could try to shield certain sectors of the economy from global competition, in order to protect and reserve jobs for citizens. But as more service industries become globalised and outsourced, our room for doing so will diminish.

The best solution is to press on with restructuring, but to give extra help to those who are struggling to keep up, for example older and less educated workers, or workers who cannot find jobs after being retrenched. We should help to tide them and their families over difficult

We must provide this support in a targeted and sustainable way, working together with community organisations and the people sector. We must not breed a culture of entitlement, encouraging Singaporeans to seek Government support as a matter of right, whether or not they need it. Instead, we must foster a culture of opportunity, encouraging Singaporeans to see Government support as a chance for them to concentrate on acquiring new skills and jobs, and get back on their feet again.

Beyond looking after groups affected by restructuring, we want to make sure that all Singaporeans benefit from our success. As we forge ahead, nobody should be left behind. Everyone should have the opportunity to contribute, and should make the effort to do so; and everyone's contribution will be valued. This will be a land of opportunity for all.

In promoting economic growth and taking care of our social needs, Government plays an important role, by being small but active, lean but capable. The public sector needs to be trim, in order to keep our tax burden light and free up resources for the economy. And the Government must be effective, directing resources to the most critical areas, and taking initiatives that are essential to our survival, security, and success as a nation.

The initiatives in this Budget will therefore address three areas:

i. A Dynamic and Entrepreneurial Economy;

ii. A Lean and Effective Government; and

iii. A Caring and Inclusive Society.

the construction industry and small retailers. Prime Minister Thaksin Shinawatra is pushing vigorously for economic development and growth. Vietnam's economy will continue to take off and offer new opportunities. With Malaysia, our economic cooperation is intensifying. Indonesia under President Susilo Bambang Yudhoyono is starting to tackle the country's micro- and macroeconomic problems, such as fuel subsidies and the fiscal deficit, and is wooing foreign investments, especially in infrastructure projects. years, and will continue for the medium term. We are able to reduce this deficit substantially and run modest overall budget surpluses only because of the NII contribution. Without it, we would either have to cut back on the level of public services, or raise taxes, fees and charges significantly. elsewhere." She is in the opposition. She wants to win elections. But she is saying these hard truths. (Germany's opposition leader faces foes in own party, Straits Times, 9th February 2005).John Howard has rightly warned, "the process of economic change and economic improvement is never completed." times, and more importantly, equip them with the skills they need to find new jobs.

Our first priority is to make our economy more resilient and dynamic, and to help private enterprise flourish. We need to do this at three levels. First, we must make the overall environment conducive to business. Companies must be free to compete with one another; entrepreneurs must be able to pursue their visions and build their businesses; and workers must have every incentive to work hard and earn more. This means a free market economy which operates with maximum flexibility and minimum distortions. It also means keeping the tax burden low, and having a competitive tax structure which encourages enterprise and effort, and attracts talent to live and work here.

Second, we must foster the growth of important sectors of our economy. We have done this very successfully with manufacturing, through the efforts of EDB and JTC, applying judicious tax incentives such as pioneer status and investment allowances. We have also done this for specific service industries such as financial services. The objective is not to protect a sunset industry, but to give an extra push to an industry which has good potential. Our tax incentives are effective because they reward success rather than subsidise failure.

As our economy restructures and diversifies, services will be an important source of jobs and growth. We therefore need to promote key service industries, particularly those which strengthen our position as a regional hub. We also need to support small and medium enterprises (SMEs), because not only do SMEs employ many workers, but start-up companies are also an important avenue for entrepreneurship.

And third, we must prepare workers for the needs of the new economy. We want not just an efficient and productive economy, but also a workforce that possesses the skills to hold good jobs. We need to help workers to acquire new skills, paying particular attention to lower skilled, less educated workers. Then they can stay employable as the economy restructures, and earn their fair share of the fruits of growth.

This Budget contains measures to achieve these three objectives.

A key reason businesses find Singapore conducive is the low tax burden on the economy. The Government's operating revenues are only 16% of GDP, one of the lowest tax burdens in the world. This frees up resources for the private sector to invest and to grow. We have also restructured our taxes, to shift from direct to indirect taxes. The Economic Review Committee had recommended that we increase the GST from 3% to 5%, and reduce the headline corporate and personal income tax rates to 20%. We have already done this, except for the personal income tax rate, which has only come down to 22%.

Reduce personal income taxes across-the-board

At last year's Budget, I had deferred the decision to reduce the personal income tax rate further, because of the uncertain economic outlook and our tight fiscal position. I am happy to announce that we are now ready to go ahead.

I will lower the top personal income tax rate to 20% in two steps: first from 22% to 21% in Year of Assessment (YA) 2006, and then to 20% in YA2007. The marginal tax rates for all the other income brackets will also be reduced, so that all taxpayers will benefit. The new schedule

* Cols. 717-718.

of personal income tax rates for YA2006 and YA2007 is at Annex A*.

With this change, Singapore will have one of the most competitive personal income tax regimes in the world.

I have decided to lower the tax rates in two steps for reasons of fiscal prudence. It will also give us a little more revenue over the next two years to implement schemes to help Singaporeans cope with economic restructuring during this crucial period of transition, when the economy is growing but workers are still concerned about their jobs.

These reductions will save taxpayers more than $150 million in YA2006, $310 million in YA2007, and about $3.3 billion over ten years. They will benefit all tax-paying Singaporeans and make us more attractive to internationally mobile talent.

Build on core competencies in manufacturing

We must continue to build on our strengths in manufacturing, which continues to be a key pillar of our economy. Despite fierce competition, we remain one of the best locations in Asia for high value-added manufacturing activities. Last year, we attracted $8.3 billion in fixed asset investment in manufacturing. China and India have eroded some of our lower end activities, but this has not blunted our core competitiveness as a manufacturing hub. One reason is that MNCs are locating not just their production operations here, but also their regional headquarters, taking advantage of our international connectivity, excellent communications infrastructure and financial services. Even Chinese and Indian companies have established regional headquarters in Singapore.

Many regional headquarters include a financial and treasury centre (FTC). We will enhance our position as a premier location for regional headquarters by expanding the tax incentive for FTCs. Associated companies of the FTC in Singapore may now qualify as approved network companies. The scope of the qualifying activities and services will be expanded to include Singapore-dollar denominated transactions. The income derived by the FTC from these enhancements will also qualify for the concessionary tax rate, with effect from today.

Leverage on our hub status to grow services

Our services industries have great potential because of our hub status in the Asia-Pacific region, the high quality of our workforce, world-class infrastructure, and a conducive regulatory environment. We have developed a wide range of services - headquarters and professional services, info-communications activities, creative industries, an international financial centre, tourism, and logistics. This has diversified our economy and created many jobs.

In this Budget I am taking specific measures to grow financial services, logistics, and tourism. All three industries benefit from, and contribute to, Singapore's hub position.

Enhance our status as an international financial centre

The financial services industry has been transformed over the last decade. We have taken major steps to open up the industry to greater competition, adopt a risk-focused regulatory regime, deepen the talent pool, strengthen the market infrastructure, and encourage leading financial players to hub their regional

international financial centre, with a sound and dynamic banking system, a quiet reputation for wealth management, and liquid and efficient capital markets.

My measures will focus on promoting wealth management, and deepening and broadening our capital markets. I will just highlight the key changes; MAS will announce the details shortly.

First, we aim to be a premier wealth management centre. Singapore already has a thriving asset management industry, with over 230 firms employing about 1,000 professionals and managing over S$450 billion of assets. To further grow this industry, we will provide new incentives for specific areas like start-up fund managers and philanthropic trusts.

- A thriving wealth management centre is characterised by a vibrant mix of more established players and start-up fund managers specialising in niche products. To encourage more start-up fund managers to locate in Singapore, I will make it easier for them to qualify for tax exemption under our incentive scheme. Start-up fund managers will have a 12-month grace period before they have to meet the requirement that

80% of the value of their funds must come from foreign investors.

- Organised philanthropic giving is another promising activity to broaden Singapore's wealth management offerings. With rising affluence in Asia, our reputation for stability and our good infrastructure, we are well placed to attract philanthropic trusts to locate here. I will therefore create a new tax incentive to exempt all qualifying foreign charitable trusts from tax on specified income. This will be similar to the

treatment under the Scheme for Exemption of Income of Foreign Trusts, but without the

The second focus is to deepen and broaden our capital markets. To deepen our capital markets, we must enhance secondary market liquidity.

- We will encourage more institutions to participate in securities borrowing and lending activities, by conferring a 10% tax rate on the income earned by approved companies, including intermediaries, in securities borrowing and lending arrangements. This 10% tax rate will also apply to income from borrowing and lending local securities.

To broaden our capital markets, we will continue to encourage the development of Real Estate Investment Trusts (REITs), Islamic financial products, and exchange-traded commodity derivative trading.

- We will strengthen Singapore as the preferred location in Asia for listing REITs. Promoting REITs will help enlarge our capital market, grow our local fund management business, and benefit other areas of the financial sector. While we have made good progress, Australia, Malaysia and Hong Kong are all actively developing their REITs markets. We therefore need to do more.

To attract more REITs listings, I will waive stamp duty on the instruments of transfer of Singapore properties into REITs to be listed, or already listed on the SGX, for a five-year period. Most of the qualifying conditions for tax transparency will also be removed.

To attract foreign non-individual investors to participate in our REITs market, I will lower the withholding tax on REIT distributions from 20% to 10% for a five-year period.

- Secondly, there has been a surge in demand globally for Islamic financial products in recent years, with global Islamic finance growing by 10-20% annually. To make our tax system more conducive to Islamic financial products, I will remove the double imposition of stamp duties incurred in Islamic transactions which involve real estate. I will also accord payouts from "Islamic" bonds the same concessionary tax treatment that is currently granted to interest arising from conventional financing.

- Lastly, in recent years, exchanges have increasingly been used as platforms for derivatives trading, because they provide greater price transparency and better risk management. To encourage exchange-traded commodity derivative trading, I will enhance the Commodity Derivative Trading incentive by conferring a 5% concessionary tax rate on qualifying income from exchange-traded commodity derivatives.

Strengthen our position as a logistics hub

In trading and logistics, our excellent infrastructure and connectivity are key competitive advantages. Companies have established regional distribution hubs here for all kinds of goods, ranging from construction equipment to medical systems, healthcare products, and luxury products. LVMH Fragrances & Cosmetics - distributor of Dior cosmetics among other high-value items - recently set up its Asia-Pacific regional warehouse in Singapore through its logistics service provider SDV. Our strategic location, round-the-clock logistics capacity, and simple customs procedures were key factors that helped LVMH to decide on Singapore.

Strengthening our logistics services sector will not only entrench our position as an important hub in global trade flows, but also give our export-oriented

First, I will expand the Bonded Warehouse Scheme, under which GST is suspended on goods imported into, and traded within, designated bonded warehouses. We will lift the 80% export percentage requirement for qualifying operators, and provide them greater flexibility in storing and moving goods between pre-approved warehouses. This will improve cash-flow and reduce administrative costs for logistics companies and other importers of goods. This will take effect from 1st January 2006.

Second, I have decided to extend the scope of the Approved International Shipping Enterprise incentive to ship leasing companies from today. This will offer shipping companies more flexibility in managing their fleets and help grow our ship financing sector. Third, I will widen the scope of the Global Trader Programme (GTP) by extending the existing concessionary tax rates to trades denominated in Singapore dollar transactions from YA2006. This will encourage GTP companies who want to use the Singapore dollar as the transacting currency in their trades to carry out more trading activities here.

Rejuvenate the tourism and retail sectors

Another services sector we are actively promoting is the tourism and retail trade. The Asia-Pacific tourism market is growing rapidly. The middle classes in China and India are expanding. Their incomes are rising, and they are increasingly travelling abroad. This, plus

But competition for tourists has also increased. Many of our key attractions now also exist in other countries, often on a larger and grander scale. For instance, when the Singapore Zoo built the Night Safari, it was a world's first and became an international success. However, a night zoo - many times larger than ours - has since been developed in Guangzhou, and another night safari will open in Chiang Mai later this year. Their philosophy is anything you have, I will have better. Likewise, when we built our Underwater World in Sentosa, it was one of the few in this part of the world. Today, Shanghai has its Aquaria 21 and Beijing its Tai Ping Yang Underwater World.

To look at the bright side, these developments show that many of our attractions were trend-setters. Our continued success in tourism lies in constantly coming up with new, innovative offerings to maintain the interest of visitors and enlarge our market share. Only then can we attract more visitors to Singapore - both first-time and repeat, and entice them to stay longer, and spend more.

First, we need to revitalise the retail, food and beverage and entertainment sectors, to reinforce Singapore's attractiveness as a shopping and lifestyle destination. Orchard Road already enjoys a reputation as a premier shopping district. To build upon Orchard Road's international appeal, the Singapore Tourism Board (STB) will invest $40 million over three years to enhance its landscape and upgrade its infrastructure. These initiatives will help improve Orchard Road's accessibility, its street-life, and its 'hip factor', to draw visitors from across the world.

Second, we need to constantly refresh our appeal to tourists and come up with

Third, we need more world-class events and activities to diversify our offerings. I will therefore grant event companies a concessionary tax rate of 10% for qualifying tourism events approved from 1st April 2005 to 31st March 2010.

Finally, we have been actively studying the feasibility of an Integrated Resort (IR) in Singapore. The integrated resort will expand our offerings in Singapore and bring in new tourists.

We have invited interested investors to submit concept plans for the integrated resort project. The concept plans will give us a better sense of what an integrated resort entails, and what economic benefits it is likely to bring. If the investors intend to include a gaming component in the development, ie, a casino, they will have to adhere to a set of social safeguards. These will restrict access to the casino by Singaporeans, and help to protect our work ethic and social values.

The signs are that there is serious investor interest in the project. The deadline for submission of concept plans is 28th February. The Government will carefully assess the proposals, and weigh the benefits and consequences of having an integrated resort with a casino. We will consider not only the economic costs and benefits, but also the likely social impact and the intangible consequences of a casino on the ethos of our society. We will also take into account the views that have been expressed in the public debate, for and against. The Cabinet will then make a decision whether to proceed, based on the merits of the issue. This will

operations here. These efforts are bearing fruit. We have enhanced and consolidated our position as an restrictions on expenditure levels or where the funds may be spent.industries an edge over competitors in other locations, because they can distribute their products more cheaply and quickly to markets all over the world. We will introduce three changes in this Budget to support the growth of our logistics sector.the emergence of low-cost carriers, presents our tourism sector with new, exciting opportunities. new and innovative offerings. One way to do this is by attracting investments in flagship concept projects in retail, food & beverage, and entertainment. I will therefore extend the existing Investment Allowance incentive scheme to such projects approved from 1st April 2005 to 31st March 2010.most likely be within four to six weeks, ie, by mid-April.

Support small businesses

Small businesses are the backbone of many economies. They support the MNCs and larger local companies as part of an integrated production network and provide jobs for a large part of the population. They are also often key sources of innovation and buzz. We too must ensure that our SMEs thrive and grow in our competitive economic landscape. I have announced several measures in previous Budgets to help the SME sector. This year, we will introduce further measures.

First, we will introduce a package of measures to help revitalise the retailers in HDB estates. Many of them are struggling because of an over-supply of shops (especially in the older HDB estates), changes in the shopping and dining-out habits of Singaporeans, and growing competition from shopping malls and supermarket chains. These trends are likely to persist and grow stronger over time. To help these small businesses in our HDB heartlands, the HDB will implement measures that will help them relocate, restructure and upgrade if they wish to stay in business, or facilitate their exit if they wish to retire. Details of these measures will be announced in the Committee of Supply.

Second, we will provide tax relief for small businesses to help them cope with cash-flow problems, especially in a cyclical downturn. Our corporate tax system already allows companies to carry forward business losses to offset future tax liabilities. In other words, if you lose money this year, you can carry the loss forward and you can offset it against the profit you make next year. So next year, you can reduce the tax you have to pay. For large companies, this is usually adequate support as they have the reserves and the cash-flow to weather a

To provide more timely relief for small companies, I have decided to allow a one-year loss carry-back for corporate taxes, subject to a cap of $100,000 in losses. The losses can be carried back for one year, and any losses that exceed this limit can still be carried forward. This will take effect from YA2006. Details of the one-year loss carry-back feature can be found in Annex B*.

* Cols. 719-720.

few years of losses. But for small businesses, next year may be too late. Small businesses, however, lack financial ballast and are likely to run into cash-flow problems quite soon even if the businesses are viable over the longer term. Loss carry-forward may not help them in a timely way. Smaller companies have often asked for a loss carry-back feature in our corporate tax system to help them cope with downturns, and position them for growth when the economy recovers. In other words, if they paid tax last year, and they lose money this year, can they recompute and claim back some of what they paid last year? And we decided to agree to that. [Applause].

Third, we will help SMEs by lowering the cost of doing business with the Government. For example, suppliers who currently quote or tender for Government business need to pay an annual fee of $320 per account to subscribe to GeBIZ, the Government's e-procurement portal. Many SMEs have complained that this adds to their cost. I am pleased to announce that with effect from 1st April 2005, all suppliers will have one account free when they subscribe to GeBIZ. This will benefit all GeBIZ suppliers, especially the 88% who only have one account, practically all of whom are SMEs. I hope to see more suppliers come forward to participate in Government procurement projects.

The third pillar of a dynamic and entrepreneurial economy is a skilled workforce. As our economy restructures, we must make sure that our workers are able to do the jobs which will become available. We have brought the unemployment rate back down below 4%, and will strive to reduce it further. This will not be easy, as unemployment in developed countries is typically 5% or higher. We must therefore make an extra effort to help Singaporeans get jobs and stay employed.

Top up Lifelong Learning Fund

First, we will ensure that every vulnerable worker has adequate resources for retraining - to keep himself employable and to cope with economic restructuring. To support our initiatives for worker re-skilling and upgrading, the Government will provide a $500 million top-up to the Lifelong Learning Fund, to be funded out of the FY2004 budget. The top-up will increase the size of the fund to $2 billion, nearer our target of $5 billion. It will also raise the annual interest income of the fund by $20 million to $80 million, allowing the Workforce Development Agency (WDA) to embark on more programmes and intensify its efforts to help job seekers.

Re-design jobs and re-skill workers

Second, we will retrain workers to equip them with relevant skills, and re-design jobs where possible to ensure that our workers can take on these jobs. I have previously announced the Re-Employment Assistance Programme (or REAP). REAP will help less-skilled job seekers transit successfully into new jobs and avoid falling into long-term unemployment. Our vulnerable workers will benefit from REAP's two components: first, a nation-wide effort to re-design

Fine-tune foreign worker policy

Third, we will fine-tune our foreign worker policies. By allowing a controlled inflow of foreign workers, we indirectly create more jobs for Singaporeans. Foreign workers sustain many sectors of our economy. Without them, many activities would not be viable in Singapore - our factories would be short of workers, we would have no wafer fabrication plants, our financial services sector would not have enough skilled

professionals, and virtually every sector would run short of IT personnel. In all these cases, foreign workers help to create jobs for locals. But we have to manage the numbers: too many foreign workers and we depress wages of Singaporeans; too few and we choke industry's growth. We need to find the right balance, and constantly review and refine our foreign worker levies and rules.

We reduced the skilled foreign worker levy substantially during the economic downturn, to help companies cut costs and tide over the crisis. We raised this levy back up modestly in July last year - from $30 to $50. It was a very small step. With the economy recovering, it is timely to gradually restore the levy to a more realistic level. MOM will therefore raise the skilled foreign worker levy from $50 to $80 with effect from 1st July 2005, and further to $100 from 1st January 2006.

At the same time, we need to adjust the rules for employing foreign workers. We presently operate a complex combination of quotas and levies, coupled with

We will therefore allow companies in both the manufacturing and services sectors who urgently need more foreign workers to employ more of them beyond the present dependency ceiling, up to a higher limit but at a higher levy, which we will initially set at $500. Companies which are below the present dependency ceiling will not be affected. This will give companies more operational flexibility, and encourage them to expand their operations here. MOM will announce the details later.

These changes to the foreign worker levy and rules should not increase the number of foreign workers here. Their purpose is to increase flexibility for companies, not to loosen the overall limits on foreign workers. We will monitor closely the impact of the new rules on foreign worker numbers, and make further adjustments if necessary.

Mr Speaker, the measures I have outlined will help develop a dynamic and

jobs, combined with training to help workers take up the re-designed jobs; and second, a financial support scheme to encourage job seekers to take up and stay in new jobs. REAP targets to assist at least 15,000 job seekers within a two-year period.limited administrative discretion. Many companies have told us that the rules are too rigid. For example, they often cannot seize new business opportunities which require more workers, because they cannot find Singaporean workers and yet cannot employ more foreign workers because they have reached the dependency ceiling. We need a price-based mechanism which is more transparent and efficient. Companies which urgently need more foreign workers should be able to get them, by paying a higher levy. And if the overall numbers grow too rapidly, we should be able to tighten up on the supply simply by raising the levy. Then foreign workers will go to companies which can use them most productively and we will get the best use from the foreign workers here.entrepreneurial economy, and a skilled and adaptable workforce. But Government can only put in place the enablers. Ultimately, it is the private sector that creates wealth. The success of our efforts to transform our economy depends on businesses creating and seizing new opportunities, and people daring to take risks in pursuit of their ideas. It is not the role of Government to pursue specific business opportunities; but rather to create a conducive environment and the right incentives, and then let the private sector forge ahead.

Order. I propose to take the break. I suspend the Sitting and will take the Chair again at 4.50 pm.

Sitting accordingly suspended

at 4.33 pm until 4.50 pm.

Sitting resumed at 4.50 pm

Mr Speaker, Sir, the Government plays a key role in creating opportunity and building community. It provides the preconditions for economic growth, ensures that citizens are equipped to look after themselves and their families, and fosters a sense of belonging which makes us a society. Achieving these objectives requires a Government that is not only lean and efficient, but also capable and effective - making the right strategic decisions, anticipating change, and meeting new challenges flexibly and innovatively.

Every dollar which the government spends has first to be earned. The lighter the burden of government, the better the economy will perform, and the more the people can enjoy the fruits of their efforts.

Therefore as far as possible, the public sector should minimise the resources that it requires. It must continually seek efficiency gains, minimise waste, find more cost-effective ways to deliver services, and benchmark itself against the best private sector practices. These imperatives are familiar enough to the private sector, especially in this age of intense competition. But they apply equally to the public sector, even though its bottom line is often more intangible.

Singapore has one of the most efficient public sectors in the world. But we cannot stay still. We need to continually raise productivity, do more with less, and restructure as needs and priorities change. Let me review our progress in these areas over the past year.

Further Budget Cut of 3%

Last year, I announced a permanent 2% cut in the budget caps of all ministries except MINDEF. I am happy to report that the ministries have generally been able to absorb this cut, while fulfilling their missions and maintaining service levels. To keep up the discipline for ministries to economise and to raise productivity, I will apply another 3% cut in the budget cap of each ministry, again except MINDEF. This makes a total reduction of 5% in their budget caps. However, Ministries will still enjoy an increase in absolute dollars in their budgets this financial year. This is because ministries' block budgets are set as a percentage of nominal GDP, which has increased significantly. MOF believes that by cutting waste and operating more

Economy Drive and Cut Waste Panel

The Economy Drive initiatives implemented by public agencies in FY2004 produced nearly $500 million of savings. A good example of a project that has both saved money and improved service is MINDEF's shared services centre. This was set up in April 2003 to provide services ranging from pre-enlistee services to finance, human resource and training services. The centre employs 530 staff, servicing a customer base of 85,000 active personnel as well as another 300,000 NSmen and 65,000 employers for NS payment matters. The shared services centre has transformed the way MINDEF performs common administrative services, and created new value and convenience for its customers. By bringing together the various services into a single centre, MINDEF has improved service standards, and saved or avoided $4 million in costs in the first one and a half years.

We plan to roll out to the rest of the public sector this idea of aggregating common services. We should centralise the common administrative support services of different ministries. Public sector agencies are already aggregating their demand for common goods and services to get better prices. For instance, 30 public sector agencies recently aggregated their demand to procure their electricity supply for 2005 and will realise savings of $8 million.

The Government's Economy Drive is supported by the Cut Waste Panel, which receives feedback and suggestions from the public. To date, the Cut Waste Panel has received over 3,100 suggestions and agreed with 85% of them. One writer had suggested that monthly CPFIS statements were too frequent and should be reduced.

Best Sourcing and Public Private Partnerships

To stay lean and efficient, the public sector must continually examine which services it should deliver itself, and which ones are better outsourced to the private sector. Under the Best Sourcing initiative, the Government will market-test non-core functions, and outsource those that the private sector can deliver more cost-effectively, so that the Government can focus on its core functions.

So far 2.4% of non-core functions in the public sector have been market- tested. These functions include IT infrastructure services in the CPF Board, valuation of industrial properties in IRAS, and the provision of survey services under JTC. Of the 82 projects that have been market-tested, 52 were eventually contracted out, resulting in $57 million worth of contracts for the private sector and $9 million in annual savings for the public sector.

This is just a very modest start. In FY2005, public sector agencies will be encouraged to market-test more non-core functions so that by the end of the fiscal year, at least 20% of non-core functions in the public sector will have been market- tested. The agencies will ensure that Best Sourcing does not affect the smooth delivery and quality of these services. They will also work closely with the unions to give public officers affected by outsourcing as much early notice as possible. The affected officers will be offered redeployment if possible, or else released on equitable terms. They will be treated fairly, not just to keep up the

The Public Private Partnership (PPP) initiative is an extension of the Best Sourcing concept. PUB recently awarded a PPP deal to the private sector to design, build and operate the new Ulu Pandan NEWater Plant. Other PPP projects we are exploring include the development and operation of a new Incineration Plant and an Integrated IT platform for Trade and Logistics. We expect to close these PPP deals in FY2005. The public sector is also studying the use of PPP for other large projects, such as the new Sports Hub and new student housing and ancillary facilities at the National University of Singapore. The Government will consider the PPP approach for new infrastructure projects where the private sector can add value.

The Government must deliver services efficiently, but efficiency alone is not enough. The Government must ensure that its policies are effective - by implementing the right policies, and devoting resources to the right priorities. This means consulting widely on its policies, adopting the right regulatory approaches, and responding flexibly to new challenges.

Consult actively on public policies

Consultation and feedback are essential to formulating successful public policies. Wherever possible, the Government will consider the views of those affected by its policies, and those who have expert knowledge of the matter.

For example, MOF recently conducted a public consultation on whether to move

MOF felt that there were macroeconomic as well as cash-flow benefits to making the switch. With current year assessment, when earnings go down, income tax payments will go down at the same time, rather than one year later. This would provide fiscal support to the economy in a downturn, while helping companies and individuals with their cash-flow. However, many respondents in the public consultation exercise highlighted the administrative burden and compliance costs of the proposed system. In view of this, the Ministry re-examined the benefits of its proposal against these costs, and concluded that it was not worth the imposition on businesses and individuals to restructure the tax system in this way. MOF has therefore decided not to implement the current year basis of assessment at this stage. More details of how MOF came to this decision can be found in the Budget Highlights document.

Feedback is an important part of policy formulation, and not just for fine-tuning policy implementation. The public consultation on whether we should have a current year basis of assessment highlighted issues and concerns that helped MOF to assess the overall benefits and costs of the proposal. It has strengthened the MOF's intention to test new ideas with the public as a matter of practice, so as to design better policies.

However, a commitment to consult and seek feedback does not mean government by referendum. Government decisions cannot always be guided by popular preference or straw polls, nor should they be swayed by organised interest groups. The Government must always decide based on an objective and

Adopt a risk management approach to regulation

An important way in which Government can promote enterprise is by easing its regulatory restrictions. In the first cycle of rules review, which will be ending soon, we reviewed almost 9,600 rules, of which we deleted 1,200 and simplified another 2,300. So I think now it is time for us to start the cycle and begin again, because this is a task which we have to do repeatedly. Often the key is to take a perspective of managing risks instead of trying to eliminate them. Let me give an example. Previously, all employment pass holders had to undergo X-ray checks for tuberculosis every two years when they renewed their employment passes. MOH reviewed the number of cases of tuberculosis infection detected by these checks and decided that we could stop screening at renewal without compromising public health. This has saved the public as well as the Government both cost and inconvenience. Respond flexibly to new challenges

We also need to respond flexibly to new challenges to be effective. For example, under the block budget system, a ministry's budget is set as a percentage of GDP, and reviewed every 3-5 years to ensure that the caps move in line with changing needs and priorities. The block budget system gives the ministry a greater degree of certainty, and allows it to plan on a multi-year horizon. The trade-off, however, is less flexibility for the

To remedy this, MOF extracts from ministries' budgets a "productivity dividend" tied to the national productivity growth rate. It pools these dividends into a Reinvestment Fund. Ministries can bid for financing from this fund to launch innovative projects and develop new capabilities. This way we can re-prioritise and re-allocate resources across ministries from year to year, while still preserving the advantages of the block budget system.

In FY2005, about 50 projects will receive funding from the Reinvestment Fund. One is the Ministry of Health's HealthConnect pilot project, which will use IT to link up healthcare providers - such as restructured hospitals, polyclinics and GPs - to treat patients in a patient-focused manner. This will make our healthcare system more efficient, reduce costs for patients, and improve their quality of care.

Another project that will receive Reinvestment Funding this year is STB's multi-language way-finding project, which will help visitors from Indonesia, China, and Japan find their way around in their own languages. Over time, the project will tie together all tourist facilities into a single network for navigation, providing greater convenience for visitors and making us a more attractive tourist destination.

efficiently, ministries can live within these caps without compromising service levels.The CPF Board has therefore started to issue such statements every six months, saving nearly $0.5 million a year. Such suggestions help to keep the public sector efficient and on its toes, and I encourage the public to submit more. morale of other officers, but also to fulfil our moral obligation to those who have served loyally and well, often for many years. to a current year basis of assessment for income tax. Under the current year basis of assessment, income tax is payable on income as it is earned, instead of being based on income earned in the previous year, which is the practice today. well-informed assessment of whether a particular course of action is in the long term interests of Singaporeans. And this is as true of current year assessment of income tax as it is of whether we should have a casino. This is a responsibility which the Government cannot abdicate.Ministry of Finance to respond promptly to changing priorities and needs.

Mr Speaker, Sir, beyond economic opportunity and a capable government, it is ultimately a sense of community that makes us truly a nation. We must be a society that is harmonious and united, caring and inclusive. As Singaporeans, we have a shared responsibility to help the less fortunate

Singaporeans are a generous people. The outpouring of support in the wake of the recent tsunamis disaster is testimony to this. We must strengthen this sense of social responsibility - of helping those less fortunate than ourselves. The Government will make it easier for individuals, businesses and civic groups to take an active role in helping others. We will continue to target our financial assistance at the truly needy, and ensure that lower-income Singaporeans and their children have the opportunities to move up in society. Social mobility is a cornerstone of our social compact.

We also want to be an inclusive society, where people feel they have the opportunities to actively contribute and make a difference. Valuable contributions can come from talents in the arts, sports, or social work arenas, and need not be purely economic in nature. Everyone, including the disabled and elderly, has something to offer, and should be encouraged to live up to his or her potential.

I intend to distribute some of the projected budget surplus this year back to Singaporeans to foster a caring and inclusive society. This Budget will:

- help Singaporeans cope with changes;

- encourage savings for retirement;

- support families; and

- promote community involvement and philanthropy.

Top-ups to Edusave Accounts

First, helping Singaporeans cope with changes, beginning with education. The young are the future of our country. We invest heavily in them, especially in their education, because we rest all our hopes on them, to inherit this country and take it to greater achievements. To develop our young, I will make a special, one-off top-up of $100 to the Edusave account of every eligible primary and secondary school student. This is over and above the Edusave contributions given annually

Top-ups to Medisave Accounts

Second, Medisave. Many Singaporeans are very concerned about healthcare costs. Our healthcare financing framework - based on a combination of savings, insurance, and government subsidy - is fundamentally sound. It has enabled the vast majority of Singaporeans to have access to good, affordable healthcare, while keeping national healthcare spending low. But we need to constantly adjust it, so that Singaporeans can continue to afford good healthcare as our population ages and medical costs increase. The Ministry of Health is revamping MediShield, to give better coverage for large hospital bills. This means raising MediShield premiums, as well as raising the deductibles which the patients will have to pay out of their own Medisave. Most Singaporeans can afford the premium increases, which will not exceed $135 per year. However, some may face difficulties, especially older Singaporeans whose premium increases are larger and who are no longer working. The NTUC has asked the Government to consider topping up the Medisave accounts of Singaporeans, to help them adjust to the new premiums. And I am happy to say we will do so.

The Government will give Medisave top-ups to adult Singaporeans. It will pay between $50 and $350 into each Medisave account, depending on age. Older Singaporeans will receive larger top-ups. Members can see the figures on the screen. If you are 60 and above, you get the largest top-up ($350). The quantum of the top-up will be enough to cover at least two years of premium increases. This top-up will cost the Government $320 million.

Age as at 1st January 2005

21-39

40-49

50-59

60 and above

Top-Up Quantum

$50

$100

$250

$350

Top-up to Medifund

Third, the Government will be injecting another $100 million into the Medifund,

Top-ups to CPF Special/Retirement Accounts of older Singaporeans

Fourth, we will top up the CPF accounts of older Singaporeans. This group has made many contributions to building today's Singapore. Now, many of them are doing less well as they have lower skill levels, earn less, and have more difficulty finding new jobs when they lose their existing jobs. The deeper cuts in the CPF contribution rate for those aged 50 to 55 will also have an impact on the retirement finances of this group.

To help older Singaporeans aged 50 and above save more for their retirement needs, I will top up the CPF Special or Retirement Accounts of Singaporeans aged 50 and above by $100. This will cost the Government $80 million.

Utilities Save Scheme

Fifth, we will provide more support to lower-income households. I have decided to top up the utilities accounts of households under the Utilities Save Scheme. Households in 1- and 2-room HDB flats will enjoy $200 in rebates in 2005; those living in 3-room HDB flats will get $100 in rebates; those living in 4-room HDB flats $80; and those living in 5-room HDB flats $60. The rebates will be paid in two instalments in July 2005 and January 2006. They will cost the Government $62 million.

Top-up to the ComCare Fund

Sixth, the ComCare Fund. As I have previously announced, the Government will create a ComCare Fund, starting with $500 million, with a target size of $1

A ComCare Supervisory Committee will be set up to formulate new programmes and streamline existing schemes. It will be chaired by Mrs Yu-Foo Yee Shoon, Minister-of-State in the Ministry of Community Development, Youth and Sports. The Committee will also include Mayors of CDCs and leaders of VWOs. ComCare intends to work through CDCs and in collaboration with VWOs, to ensure that help reaches the needy, so that any Singaporean in genuine need will know where to go to for help.

Increase CPF voluntary contribution cap and tax relief cap for the self-employed

To encourage Singaporeans to save more for their retirement, we will make changes to the CPF contribution and the tax relief caps. With immediate effect, the CPF voluntary contribution cap will be raised to, and aligned with, the mandatory contribution cap of 17 months of the CPF salary ceiling. Similarly, the contribution rates will be aligned with the actual contribution rate of 33%.

I will also raise the tax relief cap on voluntary CPF contributions by the self-employed to align it with the tax relief cap for employees. This will take effect from YA2006. These measures send an important signal to self-employed indivi

Relax the CPF Minimum Sum topping up criteria

To encourage Singaporeans to set aside savings for their parents and non-working spouses, I will also liberalise the criteria for CPF members to make top-ups to the Retirement Accounts of their parents and non-working spouses aged 55 and above. Currently, to do a top-up, a member must have a regrossed CPF balance of more than twice the prevailing CPF Minimum Sum. Additionally, the member's net balances in his Ordinary and Special Accounts must be more than twice the prevailing Minimum Sum cash component. CPF Board will now allow an individual to top up his parents' or spouse's account as long as the net balances in his Ordinary and Special Accounts, including amounts withdrawn for investments, are more than 1.5 times the prevailing Minimum Sum. The limit on the amount of top-ups that can be received will also be enhanced. Details will be released by CPF Board later.

Simplify Supplementary Retirement Scheme

For those who wish to set aside additional savings outside of CPF, I will simplify the rules on the contribution caps of the Supplementary Retirement Scheme or SRS. Instead of capping the amount of SRS an individual can contribute at his income level and having separate caps for employees and the self-employed, we will now apply a common absolute cap of 17 months of the prevailing CPF salary ceiling. This will take effect from YA2006. This will allow Singaporeans who earn below the CPF income ceiling and those who are self-employed to contribute more to their SRS accounts.

The family is the basic building block of society. In my National Day Rally speech last August, I announced a comprehensive package of measures to support marriage and parenthood. In this year's Budget, I will enhance the Baby Bonus Scheme to make it more flexible for parents, and help families offset the costs of better quality maids.

Enhance the Baby Bonus Scheme

Many parents have told me that they appreciate the changes we made to the Baby Bonus Scheme last year, when we extended it to the first and fourth child, and to disburse the cash gift over two, instead of six, years. They also suggested more ways the scheme could be made more flexible. Parents said that they liked the co-savings element of the Baby Bonus, but indicated that they are sometimes not able to save up to the maximum of $1,000 for the second child or $2,000 for the third/fourth child every year. They wanted flexibility to save more in years when they can afford to, and to use the co-savings in more ways for their child's educational and developmental needs.

We agree with this feedback. I have decided to liberalise the co-savings portion of the Baby Bonus, so as to encourage parents to save more for their children's developmental needs. Parents can now choose to save more in one year and less in another, subject to the total co-savings limit for six years.

Presently the Baby Bonus co-savings can be used for infant care, child care and kindergarten. I will widen the permitted uses to include health insurance and early intervention programmes for children with special needs. The details of these and other enhancements to the Baby Bonus Scheme will be announced at the Committee of Supply.

Reduce the foreign domestic worker levy

Maids are a great help to families which have young children or elderly parents to look after. To raise the average quality of maids working in Singapore, MOM has instituted higher entry requirements and raised the minimum age for maids. But better maids will cost more. To offset the higher wages, the Government will lower the monthly foreign maid levy for all employers by $50 with effect from 1st April 2005. This will save employers $600 per year and will cost the Government $90 million. MOM will announce the details later. The concessions in the foreign maid levy to support marriage and parenthood which I announced at last year's National Day Rally will continue to apply on top of the reduced maid levy.

members of our community. The better-off must help the poor and disadvantaged - the sick, the elderly, the disabled, and the unemployed. In many developed countries, the state takes on this responsibility, but this is invariably financed by high taxes and levies on businesses and those who are working. Our social compact is rather different. It is based on personal responsibility, with the family and community playing key roles in supporting people through difficulties. The state will provide a safety net, but it should be a last resort, not a first resort, and should focus on the minority who need help the most. We thus avoid state welfare, which will erode our incentive to achieve and sap our will to strive. Our social compact enables us to keep taxes low, and lets people keep the fruits of their labour and businesses the rewards of their enterprise. And when we do well and have budget surpluses, we can distribute some of them back to Singaporeans. by the Government. This top-up will cost the Government $50 million. to build it up from $1 billion today to the target fund size of $2 billion, as I have already announced. This will help lower-income Singaporeans or older people who are not covered by MediShield, to meet their healthcare expenses. This will be funded out of the FY2004 Budget.billion. This fund represents our commitment to do more for needy Singaporeans, to ensure that nobody will be left behind. The income will be used to fund three activity groups: ComCare Self-Reliance to help needy families get back on their feet; ComCare Grow for children from needy families, especially for their educational and social needs; and ComCare EnAble for senior citizens and others who need longer term assistance such as the disabled.duals that they too must take active steps to put aside enough for their medical needs through Medisave contributions and set aside more retirement savings in their CPF accounts.

Taking care of the less able and less fortunate should not be the sole preserve of the Government. A culture of volunteerism and philanthropy will strengthen our collective social responsibility and build stronger community bonds. The Government recognises the good work of our non-profit organisations and people sector in helping Singapore become a land of opportunity for all. We will put in place a package of incentives to encourage more Singaporeans to come forward to volunteer, set up new charities or give to charitable purposes.

Recognise sports as a "charitable purpose"

First, I will expand the definition of "charitable purposes". Currently, the Government recognises four broad charitable purposes for charity status:

- the prevention and relief of poverty;

I have decided to recognise the advancement of sport as a fifth charitable purpose, where the sport advances the health of individuals. Because this recognises the importance of sports in promoting a healthy lifestyle for all, we will only extend it to sports that require physical skill and exertion. Qualifying sports groups will be eligible for income tax exemption from YA2006.

Recognise explicitly "other purposes beneficial to the community"

Second, I will explicitly recognise as charitable purposes several purposes that we now group under "other purposes beneficial to the community", to encourage the groups undertaking these activities, as well as encourage Singaporeans to donate to these groups. The purposes are:

- the advancement of health; - the advancement of citizenship or community development; - the advancement of the arts, heritage or science; - the advancement of environmental protection or improvement; - the relief of those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantage; and

Third, to encourage more charitable giving among individuals and corporations, I will equalise the tax treatment of donations between those that involve naming opportunities and those that do not. At present, donations with naming opportunities get single tax deduction instead of double tax deduction. So if you fund a school hall, you will get double tax deduction. If later on, your name is attached to it, after-tax deduction comes back. I do not think we have to calculate so nicely and precisely. From YA2006, we will grant double tax deduction for all donations to Institutions of a Public Character (IPCs) and other approved beneficiaries made on or after 1st January 2005, whether or not they involve naming opportunities. We hope this will encourage more donors to come forward, to give larger donations, and to cultivate lasting relationships with the beneficiaries they have lent their names to.

Extend Computer Donation Scheme to IPCs

Fourth, there is a computer donation scheme today to encourage IT research and training in our educational and research institutions and to develop IT literacy for all. Donations of computer hardware and software to approved institutions under this scheme are granted double tax deduction. I will extend this Scheme to all IPCs for donations made on or after 1st January 2005, to encourage IPCs to improve their administration and manage their programmes more effectively through the use of IT.

Higher excise duty on tobacco

Let me touch briefly on other tax changes. No budget is complete without

* Cols. 721-724.

- the advancement of education; - the advancement of religion; and - other purposes beneficial to the community. - the advancement of animal welfare. Grant double tax deduction for donations with naming opportunitiessome mention of sin taxes. Smoking contributes to nearly 2,500 deaths annually in Singapore. To curb smoking especially among younger Singaporeans, I have decided to further raise the excise duties on all tobacco products with effect from today. For instance, excise duty on cigarettes will go up from $293 per 1,000 sticks to $352 per 1,000 sticks. The new duties for tobacco products are at Annex C*. This rise in duties is expected to increase revenues by $158 million.

Changes to horse betting duty

The Government will change the horse betting duty from 12% of each bet to 25% of gross betting profits - that is, bets less winnings paid out. This will allow the Singapore Turf Club to offer better odds and lower prices to their customers to compete more effectively with illegal gambling operators. The UK has made similar changes to their horse betting duties, for the same reasons. I should add that this change is totally unrelated to the issue of whether to have a casino in Singapore.

Greater scope of relief from stamp duties

We will also change the rules to provide a greater scope of relief from stamp duties. Currently, prospective property buyers are generally required to pay for stamp duties even when their sale and purchase agreements are subsequently aborted. To provide relief to bona fide aborted transactions, the Government will now remit the stamp

New relief for estate duty

Lastly, death duties. The Government will introduce a new relief in estate duty for deaths in quick succession. When individuals die within a short period of time of each other, and the assets pass from one to another, these assets are currently taxed on each death. This is an added burden on bereaved families. For deaths from 1st January 2006, the Government will allow the estate duty paid on the earlier death to be deducted from the estate duty payable on the same assets assessed in the beneficiaries' subsequent deaths. The relief will start at 100% if the deaths occur within six months of each other, graduating to the full estate duty payable if the deaths are more than two years apart.

For successive deaths occurring within

Estate Duty Relief

< 6 months

100%

7-12 months

75%

13-18 months