Hansard, 2006-03-01

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 (2006) To (2006) Dr Ahmad Mohd Magad 07 Mar 07 Mar Mr Leong Horn Kee 16 Mar 20 Mar

ABDULLAH TARMUGI Speaker Parliament of Singapore

[Mr Speaker in the Chair]

1. Mr Steve Chia Kiah Hong asked the Deputy Prime Minister and Minister for Home Affairs (a) how easy is it for people to sneak into Singapore by using fake or stolen passports; (b) how did the Immigration and Checkpoints Authority fail to detect (i) a Filipina who returned to Singapore 12 times using a different passport; (ii) a China woman who returned to Singapore twice using a different passport; (iii) the Croatian war criminal, General Ante Gotovina, who sneaked into Singapore thrice undiscovered in 2003; and (c) how do all these security breaches portend our homeland security's ability to guard against terrorist infiltration.

Mr Speaker, Sir, last year ICA cleared more than 130 million people through our checkpoints. Sir, given the sheer volume of travellers, it is not reasonable to expect ICA to be able to pick out every single mala fide visitor. Indeed, Sir, no country has achieved such standards based on current technology. ICA takes an approach that balances security imperatives with clearance efficiency, adopting a multi-layered people clearance framework to sieve out and prevent the entry of undesirable persons.

We currently require foreigners holding certain travel documents to apply for visas before they arrive in Singapore. ICA would only approve the application if ICA assesses that their visit to Singapore is bona fide. The traveller's particulars, facial image and visa information will be transmitted to ICA's checkpoint clearance system prior to his arrival in Singapore. This helps to detect travellers who attempt to enter Singapore with a tampered passport, or without a valid visa.

At the checkpoints, all travellers, arriving or departing Singapore, are subject to face-to-face immigration checks and passport screening. ICA has developed an integrated people screening system known as Matrix. This system is capable of high speed, accurate travel document detection and counter-forging capabilities. The travellers' particulars will also be checked against our records. In addition, ICA officers will conduct risk profiling by asking them questions on why they are visiting Singapore and observe their reactions. Should a traveller fail to meet our entry requirements, react suspiciously or if his purpose of entry is doubtful, he will be referred to the Duty Officer at the checkpoint for more in-depth checks.

Sir, last year, ICA detected about 1,000 foreign visitors who attempted to enter Singapore using dubious travel documents. Another 78 foreign visitors were detected attempting entry by impersonation, that is to say, using passports that belong to someone else.

For travellers suspected to be ex-immigration offenders or persons of security interest, ICA will run their fingerprints through the Biometric Database for Immigration Clearance (BDIC) System which was introduced in June last year.

Sir, as for the three cases of illegal entry that Mr Steve Chia mentioned, the Filipina and Chinese woman had used genuine passports issued by the proper authorities under a different identity to re-enter Singapore. Therefore, it is not just Singapore that must ensure that only bona fide travellers are allowed in. Other countries must also play their part to ensure that their passport issuance procedures and controls are robust. Combating this modus operandi was one of the main reasons for introducing the BDIC system. In fact, it was the alertness of the ICA officer to take and screen the Filipina's fingerprints through this system that she was caught. As for the Chinese woman, she was eventually detected by the Police's crime database upon her arrest.

Since the implementation of the BDIC system, ICA has detected more than 700 ex-immigration offenders and other persons on record attempting to enter through our checkpoints by using false identities.

As for the stolen passport used by the Croatian war criminal, at that time, our checkpoints did not have real-time access to Interpol's database.

Sir, there is a limitation to the number of lost and stolen foreign passports that can be blacklisted in our database. We understand that Interpol currently has more than 10 million lost or stolen passport records in its database. Obviously, it is not practical for any country to simply store all these into its database. As such, ICA had to prioritise in deciding which lost or stolen passport information should be listed in its blacklist. Now even if ICA were to increase its capacity to store information on lost passports, it can only store a fraction of the number of passports reported lost or stolen by Interpol. It is for this reason that ICA is actively engaging Interpol on how ICA can have access to the new Mobile Interpol Network Data (MIND) system that will facilitate real-time screening against Interpol's database during immigration clearance.

The false identity in the passport used by the war criminal was also unknown and unavailable at the time of his purported travels in Europe and the region, including Singapore in 2003.

Sir, whilst it is impossible for ICA to detect every single mala fide traveller, what we can do is to make it as difficult as possible for undesirable persons to slip into or out of Singapore. That is why when we discover shortcomings or gaps in our systems or procedures, we will analyse what went wrong, and take prompt corrective action.

In this regard, ICA is pursuing several new measures to deter and detect foreigners who attempt to use fake or stolen passports to enter Singapore. For example, apart from listing lost or stolen foreign passports, including blank passports, in ICA's clearance system whenever it receives such information from its foreign counterparts, ICA has been beefing up its intelligence capabilities. ICA works closely with Home Team agencies and its foreign counterparts to issue regular intelligence alerts to frontline officers on the latest modus operandi of passport abusers.

In addition, ICA has been actively engaging Interpol to share information on lost and stolen passports. A project, expected to be completed by the end of this year, will leverage on Interpol's database system to allow online checks at the checkpoints for passports that have been reported lost or stolen.

ICA is also studying enhancing the BDIC system to make use of facial and photo recognition technology to enable real-time screening of travellers against a database that includes known terrorists and wanted persons during immigration clearance. This will help us detect any person assuming a different identity or using a different passport to gain entry into Singapore.

Also, later this year, ICA plans to start issuing biometric passports and will equip the checkpoints with scanners that can read biometric passports. As more countries issue biometric passports, this will further restrict the space for terrorists' movement by tightening passport controls.

In summary, Sir, ICA will continue to review and enhance its multi-layered people clearance framework to deter undesirable persons from using fake or stolen passports to enter Singapore.

I thank the Senior Minister of State for his long and comprehensive reply. I have two supplementary questions. First of all, how can other countries issue new passports to their citizens under a different name for them to come to Singapore? Something must be done, especially with our Asian counterparts, to send the message to them.

The other point is, with all these new securities that are being added, with Interpol and biometric scanning, are we going to expect zero case now or minimum? What kind of assurance can we get that there will be no more such breaches in security?

Sir, in this age of interglobal travel, cooperation amongst countries is important. So Mr Steve Chia is right in that other countries must also tighten up their system. So really, in this case, it is up to the Filipino and Chinese authorities to recognise that something went amiss and to ensure that the passport issued to a person is the correct person.

The other question, I think nobody can give an assurance. But the assurance that I can certainly give is that MHA officers will do their best. That is why I gave a comprehensive answer - to reassure Singaporeans that security is foremost in our minds. And even as we will ensure clearance efficiency - I think that is the point Mr Steve Chia and others have also brought up - nevertheless, with training, proper technology and upgrading of equipment, we will ensure that a proper balance is struck.

Sir, a point of clarification. Did the Ministry report or complain to the Chinese and Philippine governments about these breaches in their system? Should we not report to them that something is wrong with their system?

Sir, I think these breaches are known facts. This happens also with other countries. So, it is a matter of tightening up the system. In time, hopefully, with the biometric system, these breaches would be a thing of the past.

2. Mr Steve Chia Kiah Hong asked the Minister for Education (a) if he will provide a list of all approved tuition fee increases for the National University of Singapore and Nanyang Technological University since 1990; (b) how much have tuition fees gone up now, compared to the fees payable in 1990; and (c) whether the jump in the tuition fees payable since 1990 has been higher than the annual rate of inflation.

Mr Speaker, Sir, undergraduate fees at NUS and NTU have been increased regularly since 1990. The exceptions, where fees were kept unchanged, were during two periods. These were the two periods that followed years in which the economy was going through a decline, namely, 1999-2000 and 2002-2004. With the exception of these two periods, we have had fee increases each year. I am circulating a table in response to Mr Steve Chia's request.

Undergraduate fees in the two universities increased by an average, if I take the averages over that period of years, of 8% per year in the 1990s, and an average of slightly less than 2% per year since 2000, in other words, 2000-2006, including the forthcoming academic year. For the period as a whole, if one takes 1990 up to this forthcoming academic year of 2006, fees have increased by an average of 5% per year. This includes, as you can see from the table, a large increase of 45% in 1991. After 1991, fee increases have averaged 3% per year.

Mr Chia has asked how this compares with the rate of inflation. The most relevant benchmark of inflation or cost pressures for a university is wage inflation. This is because universities are essentially human enterprises, with 70% of their costs, at least, coming from manpower.

From 1990 to 2005, wages went up nationally by an average of 5% per year. As we know, wage increases for professionals are under greater pressure. They are increasing faster, not just in Singapore, but globally.

In short, fees have been increased regularly in our universities. These fee increases have allowed the universities to meet cost pressures while improving on the quality of education they provide. However, the fees at our universities remain competitively priced, compared to overseas universities of equivalent quality, such as in Australia, the United Kingdom and the United States.

The Government remains committed to substantially funding the costs of undergraduate education. The universities will continue to exercise prudence in their expenditures and keep costs in check. Together, the Government and the universities will work to ensure that university education remains affordable and that Singapore students who are admitted to our universities can enjoy a top-quality education.

I thank the Minister for his reply. Looking at the figures, the average was 5% fee increase a year. That actually is a lot for the HDB heartlanders who are mostly earning below $3,400 (60% earning below $3,400). That is a lot of money. Can the Minister comment whether this constant university fee increase is spiralling out of control, out of reach of our HDB heartlanders? Is this spiralling also due to the universities' heavy dependency on expatriates? Sixty percent of the teaching population are expatriates with their families. Is it because of that, that our costs are escalating out of control?

First, let me say that tertiary fee increases all over the world exceed the rate of inflation as reflected in the consumer price inflation. Our fee increases in Singapore have, in fact, been modest, compared to comparable countries. Just to give you a feel, if you take year 2000 up to now, where we have increased by slightly less than 2%, in the United States, if you take public universities, and I am not even talking about private universities, the increase has been about 9.5% per year or cumulative increase of 57%, seven times the increase that we have seen in Singapore. In Australia, the increase has been about 4% per year, or cumulative increase of 24%, three times the increase we have seen in Singapore over that period. It is a global phenomenon.

Maybe to help Mr Steve Chia understand it, because I think his question is genuine and he may not understand the way in which universities function, they are fundamentally different from normal business enterprises. In a normal business enterprise you can have a wage increase for your workers but you try and offset it through some technological or productivity improvement - produce more output for the same input so that your price does not need to go up so much,

not as much as your wage increase. That is why, nationally, we find wage increases are always higher than CPI and price increases.

But in the universities, it is different, because we do not want to compensate for faculty wage increases by increasing the number of students per faculty. In fact, on the contrary, we want, over time, to reduce the number of students per faculty, so as to be able to improve quality. Universities are in the business of producing quality graduates. Students must leave the university better educated, better prepared for the workforce, high income profile over time and, hopefully, better citizens.

Universities have to compete for faculty. They have to pay market rates in order to deliver quality students. When they think of the facilities they want, they have to provide high quality facilities, so as to ensure that students benefit from access to the latest technology. They are not in lecture rooms that are overcrowded, so that they are able to spend quality time with lecturers and even with the assistants of lecturers. This is the way to go if we want to deliver an affordable but top-quality education to Singaporeans.

If we look at the models out there, there are basically two models. One is the European model. It is highly affordable - very heavily subsidised - but it is affordable low-quality education, overcrowded lecture rooms and a consistent brain drain year after year in the Sciences and Engineering, even in the Humanities, from Europe to the United States, and Britain benefiting to a minor extent from the brain drain from Europe.

That is not the system we want. Providing affordable low-quality education will be a disaster for Singapore and for our economic strategies. What we want to do is to provide an affordable top-quality education. It is also what the Americans, the British and the Australians are trying to do. But where we differ from them is that we have a substantially higher public subsidy for our universities. And that is why the Australian universities have increased fees by three times more than Singapore universities in the last six years. That is also why the American public universities have increased fees by seven times more than Singapore in the last six years, because we have retained a very high commitment of public funding for our universities. As we discussed it extensively in last year's COS debate, and as I mentioned very explicitly, over the medium term, we want to move towards the Government funding 75% of the total cost of undergraduate education. Currently, we are still funding a little more than 75%. We do not intend to move there immediately but we will move there gradually. But that is still substantially higher public funding than any comparable country that is seeking to provide an affordable top-quality education, not an affordable low-quality education.

I think it is also the most equitable system to address Mr Chia's concern. If we want to subsidise universities more, where do we get the money from? I do not think we want to raise taxes. So it means taking it from the polytechnics, ITEs and schools. I do not think that is right for two reasons. The main reason is that university graduates in Singapore, as is the case all over the world, will earn a premium over graduates from other institutions of education. That is well known. We all know that. It is obvious the starting salaries and expected life-time earnings are higher. So it is not equitable to subsidise them more and more, not just keep a high level of subsidy but increase their share of the educational subsidy. It is just inequitable.

Even at current levels of subsidy, we are subsidising university students substantially more than ITE students. So I think we have got to maintain a sense of perspective about this. First, how can we deliver top-quality education? I have explained that. We do not want the European model and we can do a better job than the Americans, the Australians and the British.

Second, what is equitable? I think what is equitable is that we put that extra dollar into our polytechnics, ITEs and schools where there is the Opportunity Fund or extra technology, improving the quality of our ITEs so that they can become centres of excellence in technical education, not increasing the share of subsidy going to our universities. So this is sensible from the point of view of human capital development, and it is also sensible from the point of view of being equitable.

One supplementary question, Prof. Ong.

Sir, I would like to raise a supplementary question and I have to first declare my interest. I am an academic at the National University of Singapore.

I agree with the Minister that the graduates earn a premium when they start to go out to work. The increase in the starting salary of a fresh graduate did not increase at an average of 3% a year. I would like to ask the Ministry to consider increasing the gross income ceiling for applications for financial assistance scheme for the students, so that they can apply for a financial scheme to help them with their loans.

I must remind Members that we only have half-an-hour today for Questions.

Indeed, Mr Speaker, Sir, NUS, NTU and SMU have revised their financial assistance schemes. They revised it in two ways. First, they have substantially jacked up the total amount of funding that will be available for financial assistance - more than 50% increase. Second, they have also revised their criteria so that more students can benefit. If I can simplify, I would say that a median student, who comes from a family that is around the 50th percentile of income, does not have to come out with any cash to get a university education in Singapore. Through a combination of a loan or bursary, the median student does not have to come out with any cash for the duration of his university education.

Last supplementary question, Sir.

No, we only have half-an-hour today. Prof. Ong, your next Question, please.

3. Assoc. Prof. Ong Soh Khim asked the Deputy Prime Minister and Minister for Law since the year 2000 (a) what percentage of bankruptcy cases each year are in the age groups of 21-30, 31-40, and above 40; (b) what are the main causes of bankruptcy for the age groups of 31-40 and above 40; and (c) how many of the bankruptcy cases in these age groups have since been discharged.

Sir, Prof. Ong asked for statistics from the year 2000. The Official Assignee captures statistics for age groups only from the year 2003. In 2003, new bankrupts between the ages of 21 and 30 years made up 7.1% of the total number of new bankrupts that year. In 2004 and 2005, the figures were 9.4% and 9.9% respectively. As for those between 31 and 40 years old, the percentage was 35.4% in 2003; 34.7% in 2004; and 33% in 2005. For those above 40 years old, the percentage was 57%, 55.6% and 56.5% in 2003, 2004 and 2005 respectively.

Sir, the main causes of insolvency for bankrupts who are 31 years old and above were default in repayment of credit card debts, which is the main case, and other credit facilities, standing as guarantor and business failure. 242 bankrupts, or 2.1%, from these age groups and who were made bankrupts from the years 2003 to 2005 have been discharged.

4. Mr Steve Chia Kiah Hong asked the Minister for Manpower (a) what percentage of our workforce are foreign workers; (b) whether this figure is high by international standards; (c) what is the breakdown of the number and mean wage of foreign workers holding (i) employment passes; (ii) 'S' passes; (iii) work permits for maids; (iv) work permits for construction workers; (v) work permits for non-construction workers; (d) whether availability of foreign workers has helped to depress the wages and take-home pay of our low-end local workers; and (e) whether the Ministry expects the worker's average wage to rise in the next 12 months, and if so, by how much.

Mr Speaker, Sir, flexible labour market policies, including the access to foreign workers, have enabled our economy to remain competitive, because many companies use foreign workers to meet skill shortages or to lower costs to compete for business. This has allowed our economy to capitalise on growth opportunities which, in turn, has created jobs for Singaporeans. Let me give Members the numbers. Last year, the economy created 110,800 jobs, and 61,000 of these jobs, or about 55%, went to locals. 61,000 is the highest annual employment created for locals on record, even surpassing pre-Asian financial crisis levels. I want to remind Members that every year, Singapore only produces about 31,000 new labour entrants. So we have created twice the number of jobs for locals.

Foreigners currently comprise 29% of the workforce, or about 670,000 persons. This percentage is lower than in some previous years.

Mr Steve Chia asked for a comparison. First, it is not meaningful to compare the percentage of foreigners in the workforce, because it depends on factors such as population growth, economic and industry needs. For instance, if you want a comparison, the United Arab Emirates has 90% of foreigners in their workforce. So it is really what your economy needs.

We have about 90,000 Employment Pass holders, including approximately 25,000 S Pass holders. There are about 580,000 Work Permit holders. Of these, 160,000 are foreign domestic workers, and 135,000 in the construction sector.

Mr Chia has asked for wage data for foreign workers. We do not have the specific data, but we have wage data across sectors and occupations which we publish regularly.

Mr Chia has asked whether foreign workers lower the wages of low-wage workers. First, we have to understand that foreign workers, as a composite of flexible labour market policy, have created jobs for Singaporeans. As our economy is largely export-driven, wages in Singapore are also affected by wages of workers in other countries, such as China and India. For example, if we did not have the foreign construction workers, we will not complete our projects on time. The supervisors, safety officers, architects, quantity surveyors and engineers, who are mostly Singaporeans, will not be able to take on new projects. So it is not meaningful to look at the wage equation only as a function of whether they are foreign workers or not. In the first place, as I said, our economy has created jobs and given jobs to Singaporeans. If Singaporean workers continuously upgrade themselves and acquire the skills needed and increase productivity, they will enjoy higher wages. In fact, in 2005, they did enjoy higher wages. It is not true that wages did not rise. Average nominal monthly earnings rose by about 3.5% - real earnings by about 3%, because our CPI index for inflation was 0.5%. With the economy projected to grow by 4%-6% this year, wages of workers are also likely to rise this year.

In summary, our flexible labour market policies have allowed us to be competitive, grow the economy, create jobs for Singaporeans and increase the proportion of Singaporeans as professionals, managers, executives and technicians with good-paying jobs.

5. Assoc. Prof. Ong Soh Khim asked the Senior Minister since the official launch of the Credit Counselling Singapore (CCS) in 2004 (a) how many indebted consumers have approached CCS for assistance; (b) what is the distribution of these indebted consumers in terms of age groups, monthly salary, amount of unsecured debt, number of debtors and race; and (c) how many of these indebted consumers have signed up for debt management programmes to structure their repayments to the banks.

Mr Speaker, Sir, Credit Counselling Singapore (CCS) is a non-profit organisation which helps consumers recover from serious debt problems by providing them with credit counselling and, where applicable, helping them to work out a debt repayment plan.

CCS is registered as a Charity and is a member of the National Council of Social Service. It is not a Government agency. So we do not have detailed data profile of the borrowers. However, MAS understands from CCS that they counselled over 1,100 individuals between August 2003 and December 2005. We also understand that CCS facilitated debt restructuring programmes for about 600 individuals over the period.

Any supplementary questions? We still have one minute more.

I have a supplementary question for Question 3, Sir.

No. We are on Question 5 now. If none, end of Question time.

Resolved,

That, notwithstanding the Standing Orders, the debate on the Budget Statement and the Estimates of Expenditure for FY 2006/2007 be taken today. - [Mr Mah Bow Tan].

Resolved,

That, notwithstanding the Standing Orders, the second and third readings of the Supply Bill for FY 2006/2007 and the Supplementary Supply (FY 2005) Bill for FY 2005/2006 may be proceeded with immediately after the conclusion of the proceedings on the Main and Development Estimates for FY 2006/2007. - [Mr Raymond Lim Siang Keat].

Order read for Resumption of Debate on Question [17th February, 2006],

"That Parliament approves the financial policy of the Government for the financial year 1st April, 2006 to 31st March, 2007." - [Prime Minister and Minister for Finance].

Question again proposed.

Mr Speaker, Sir, thank you for allowing me to participate in this debate.

I applaud the Prime Minister on his Budget Statement. Many people have told me that there is nothing substantial in this Budget. I suppose they are disappointed in that the PM did not announce further tax cuts nor did he abolish estate duty, to the disappointment of some living and some dead. But I see it differently. I see this Budget as further consolidating our economic restructuring. I am appreciative of the Progress Package. I believe this is necessary if we are to distinguish ourselves as a society and if we are to encourage young Singaporeans to grow deeper roots in our society.

I agree that globalisation will widen the income gap. And I fully support the Government's efforts to help those in the lower-income group, those unemployed and those less fortunate. I believe that this willingness to help the less able and less fortunate amongst us is, indeed, a hallmark of a great society. I note the concern of some colleagues in this House, that some people may take advantage of our kindness, our Progress Package, our Workfare Bonus, etc. I agree. There will always be some who will take advantage of others. However, I urge us to have that generosity of spirit, the magnanimity to see the relief that our assistance brings to those in need.

I have many personal experiences to tell me that many Singaporeans have actually such a strong sense of pride and self-esteem that they will decline assistance unless they are actually in quite poor shape. So, let us never become a nation that knows the price of everything but the value of nothing. I have always believed that it is more blessed to give than to receive. On 22nd August 2005, Business Times interviewed a Mr Tom Huzell, head of Ikea's retail operations in Singapore and Malaysia. He is a Swede and Ikea is an international home furnishing company founded in Sweden. When he was asked how the Swedes could live with an average income tax of 40%, and higher earners pay about 50%, a VAT or GST of 25% with extra taxes on liquor and petrol, he replied that most Swedes found it very nice to live in Sweden. He went on to say that the quality of life was, indeed, very high and the Swedes were very egalitarian people. He shared that the high rates of tax meant that they had very little hierarchy and everybody was equal. Many Swedes I know share this sentiment, and they value their egalitarian way of life.

The Prime Minister has said that Singapore cannot follow the Nordic high-tax and high-spending model. He would like to pursue a low tax and tight expenditure model. I fully agree, and the low tax part gives me great personal relief. However, we should admire and emulate their egalitarian and communitarian attitude. I certainly hope that the low tax and tight expenditure policy, coupled with compassionate assistance to the less fortunate, will encourage more Singaporeans to pay their taxes cheerfully.

I also hope to see Progress packages continuing year after year and not only coincidentally just before the elections. This is because we will always have the poor with us. There will always be some Singaporeans who fall between the cracks - some dysfunctional families, some maladjusted individuals, some unfortunate sick. These packages could take different forms, targeted at different needs. Perhaps, instead of only giving Progress packages where there are higher budget surpluses, the PM may wish to make it his priority to set aside, say, $1 billion every year for the Progress Package targeted at those Singaporeans. When there are surpluses, then even more can be done.

Some members of the public have some reservations about cash handouts. Most societies do it through free or highly subsidised welfare services of one kind or another. Sir, this old fashioned welfarism presupposes that the government is the most efficient producer of goods and services. That has been an article of faith of planned economies. And we now actually clearly see that after 50 years, the greater efficiency of the market economy shows that not to be the case. So I believe that cash bonuses will enable recipients to decide what goods and services they need to buy and from whom. Besides, the bonuses from the Progress packages are more targeted and, therefore, less open to abuse and misuse. I am in support.

Sir, I am appreciative of the welfare assistance, the many job creation and workers' training programmes. I believe that helping the unemployed, finding him a job, is much better than giving him handouts. I am happy to note that last year, 110,800 new jobs were created and unemployment rate is a low 2.5%. These new jobs bring cheer to many families, enable many young stomachs to be filled. With more people in jobs and progressively better-paying ones, we will need less Workfare and assistance, and future Progress packages can be even more targeted and, therefore, more effective.

Sir, I am interested in the big question of how do we build a competitive, growing and yet sustainable economy. Having been in Parliament for one year, I have learned to be dermatologically more fortified. Even after 45 other colleagues have spoken before me, I still feel that I have to ask this question again this year. I applaud the Government's effort to invest in R&D to help us become a knowledge hub. The setting up of a R&D Trust Fund, the RIEC, the NRF are all good things. Spending 3% of our GDP on research and development by 2010 will bring us closer to the R&D's spending level in the Nordic countries. However, I hope that the RIEC and NRF will try their best to ensure that a progressively greater portion of these R&D expenditures are spent together with the private sector and in the private sector. This is because the Nordic countries actually spend 60% of all their R&D expenditures in the private sector. Ours is about 40% only.

I believe that because of this, there is better choice of research projects, earlier commercialisation of discoveries, and in all a better payback of their R&D investments. They build great knowledge industries as we all know. The private sector cannot afford and does not believe in the pure pursuit of knowledge. And with our increase but still relatively modest R&D expenditure, we really must try to get more bangs for our bucks. I therefore propose that RIEC and NRF, besides seeking to raise the R&D expenditures to 3% of our GDP by 2010, set as their goal to involve and partner the private sector, so that 60% of the R&D expenditure will be used and spent in the private sector.

Sir, besides increasing our spending on R&D and creating a safe and reliable environment for the protection of IPR, I believe there is yet another way to grow our knowledge-based economy. There is an observation that quite a lot of intellectual property is trapped in the public sector. This was noted in the deliberations of the ERC's Sub-committee on Services Industry in 2002 of which I was a member. It was noted that we have structural problems because the public sector is not mandated to grow their organisations via revenue from external sources. We are aware of the many advances and innovations made by our defence scientists in DSTA, system engineers in LTA, researchers in MOE, universities and hospitals. Some public agencies have acquired this IP in the course of their work when they tender for this and that project. Of course, there have been delightful stories of successful privatisation of PWD and SingTel. One recent story is that of former HDB's Architects and Town Planners Department, now reorganised as Surbana, designing a great motorcar showroom and racing track in Abu Dhabi. It would not have been possible or conceivable have they still been part of HDB.

I like to share with you that the Sub-committee recommended that we push on with corporatisation and privatisation of Government agencies; designate an agency to collate the inventory of such IP and sell or license them for commercialisation; incentivise research institutions and universities to consider licensing their IPs; and support technology and skills transfer from Government IP owners to Singapore-based companies as well as co-develop technology with them. I hope the Government will implement these recommendations so that Singapore-based companies can commercialise their IP and build profitable businesses with them. This proven IP should provide quicker returns than doing new projects. It will enable us to further broaden and deepen our capabilities, strengthen and grow our economy.

Sir, as we upgrade our manufacturing sector, I have been told that Singapore needs to have a total manufacturing eco-system environment. It appears that because of our costlier environment, manufacturers of small parts cannot survive in Singapore. Unlike China, Taiwan and Vietnam, we do not have these downstream and often low-tech, low-cost industries. I suppose they like to see the situation of a little town outside Shanghai - I believe it is called Wenzhou - where most of the world's cigarette lighters and maybe cigars flame-throwers are made. Different brands, different styles, different qualities, different costs. And there are companies that supply millions of flint grinders. Some people make millions of these little gas fuel casings and gas nozzles, and many other parts that are needed to make cigarette lighters. I wonder what has happened to our efforts to promote Batam and Bintan industrial parks. I think Johor could make a good partner with cheaper land and labour. Together with them, we can perhaps provide this eco-system that manufacturers like to have. With the return towards stability in Indonesia and our improved relationships with them and Johor, it is perhaps time to revisit and reinvigorate this win-win strategy.

On the service industries, I agree that we cannot afford low cost as an attraction. But we can surely offer trust, quality and service. At this juncture, I would like to declare my interest as Chairman of Raffles Medical Group. In healthcare, we can offer patient safety, professional reliability, service consistency, cost predictability and institutional governance to foreign patients.

I am heartened to note that in 2005, we received, as a nation, 374,000 foreign patients who came here to seek treatment. At the growth rate of 20%, we will reach our target of 1 million patients by 2012. I am sure the public and private sectors will continue to move together to make Singapore the leading healthcare hub in the region.

Sir, despite my optimism, I still have a few concerns about Singapore being the logical and default service hub for the region. Others are trying to compete with us to do the same. My concerns are that some of the excellent and insightful recommendations of the ERC Sub-committee on service industries have yet to be implemented. With your indulgence, may I quote from the Report, paragraph 5,

"Nevertheless, in many services, the exportable component seldom exceeds the local demand. It is therefore natural for the regulator to put priority on regulation to address social, political concerns of the domestic demand ahead of industry development. Powerful regulations often end up hindering the growth of the exportable component."

Paragraph 6:

"In some sectors, Government inevitably gets deeply involved in the services sector beyond being a mere regulator to become a dominant player. When it also tries to be a promoter of exportable component, it becomes largely ambivalent."

Sir, four recommendations were made. Recommendation No. 1: regulator cannot be the promoter. But the regulator must be sympathetic to the industry's development. Recommendation No. 2: regulator must not also be a player. In other words, Government should actively outsource such services to local enterprises wherever possible. Recommendation No. 3: promote regional and global demand. I am glad this has been done by agencies, like STB and EDB. Recommendation No. 4: stimulate sophisticated local demand. I believe some stimulation is done like placing out reserves for private fund management. I hope the Government will revisit these observations and recommendations and implement them across all service industries. I believe we can even exceed our targets, if we have the conviction to follow through these recommendations.

On land pricing, as property prices move upwards, we can all see that the Chief Valuer is not wasting any time. He is vigilant and has revised development charges upwards steeply. I expect he will have adequate justification. I certainly hope he will just be as quick to revise these charges downwards when the property market dips.

Sir, rising property prices make everyone feels good. Banks lend more money at better rates, non-performing loan (NPL) portfolio becomes smaller, professional services do well and the Government collects more stamp duties and fees. I like to remind us to be careful about our land prices. We must never allow ourselves to be priced out of the market and become an uncompetitive economy. We must be prepared to make exceptions for industries and sectors which will bring greater economic benefits downstream to Singapore.

A high land price for such industry is equivalent to taking a one-time capital gain upfront. Alternatively, we can have a lower land price but take the economic benefits like jobs, reduce assistance pay-outs and more taxes over the next few years. One outstanding example is the land around Changi Airport. We all know that Changi Airport is the only international gateway into Singapore, unlike other countries that have many cities and airports. When airlines bypass us, many tourists, businessmen, investors, private banking clients, foreign patients would be lost to the Singapore economy. The Government has rightly said that the survival of Changi Airport is more important than the survival of SIA, our national carrier. That was the rationale for allowing and encouraging low-cost carriers into Singapore.

I would like to see Changi Airport land price zero-rated. I would like to see the key performance indicators of CAAS to be those of the number of flight arrivals and departures, number of passenger throughputs, number of cities and regions to which Changi Airport is connected. I would be less interested in how much money CAAS makes. Yes, we can keep that as a score, to measure the efficiency. Instead of collecting higher landing fees and charges, I would rather the Singapore economy benefits along the way as tourists, shoppers, private banking clients, businessmen, foreign patients, patronise our banks, hotels, retail outlets, restaurants and hospitals. This multiple effect not only makes financial sense but it is also more likely to create the kind of jobs our older and less educated Singaporeans will be able to have and do well in. Singapore still collects the fees but over a longer period and downstream, instead of at the top, upstream. I believe Dubai has taken this approach and their thriving busy airport has brought people from many lands to a once sleepy desert town, and Dubai Inc. has benefited. Their approach may be less rational and disciplined. But it has worked for them.

Sir, on growing human talent, I am appreciative of what has been done in recent years by MOE. I am also very glad to hear that 25% of each cohort will go to publicly funded universities. In my time, which was slightly less than 40 years ago, it was 10%-11% only. At this juncture, I would like to declare my interest as an SMU Trustee and RJC Board member. We all know that this has been a great factor in our society, spending more on education, creating more places for people, and this has helped us to have the kind of upward social mobility. And actually, many of us in this House have benefited from our own publicly funded university.

I am glad that PM has given emphasis to investing in and developing our own people, whether talented or not, whether they are talent or no talent. Yes, we must grow our own timber for our own saplings will grow deeper roots in Singapore soil and hopefully withstand monsoons and typhoons. The PM quoted Peter Drucker and I agree that Singapore must actively attract talent from everywhere. America has been the beneficiary of successive tides of talent migration. We must do likewise.

Sir, unlike businesses that Drucker referred to, they can relocate their domicile. We are a nation and we certainly cannot relocate our domicile. As the late Mr Rajaratnam asked in the television clip I saw, "Where can 2.5 million Singaporeans go?" So I hope we will always reassure our own people that regardless of whether they are considered talent or not, we will invest in them and help them to realise their potential. I am glad we now have many routes to success and many paths to glory.

Sir, may I congratulate the PM on setting up the Opportunity Funds to provide more enrichment opportunities for needy students. This will certainly help these students to develop and compete better beyond subsidised school fees, and so on.

Finally, Sir, I agree with the PM that this Budget aims to build a vibrant economy where opportunities abound and an inclusive society where no one is left behind. I am proud to be a Singaporean.

I support the motion, and I will pay my taxes cheerfully.

12.55 pm

Mr Speaker, Sir, it is indeed very challenging to be the last speaker to respond to the Budget Statement. However, this time I did not cut my speech, although I have seriously considered doing it after two days of speeches.

Mr Speaker, Sir, thank you for allowing me to speak in this debate. Sir, the Budget 2006 financial package will certainly resonate well among the majority of heartlanders, especially the lower income and the elderly. At the core of this Budget is not just what the Government is giving out to the people. Rather, it is the principle behind the handout that is important. Just as it is easy to be distracted by the glitter in a diamond, the discerning buyer will look at it with the eye of a gemologist. She will examine the precious stone, not for its glitter, but its cut, grade, colour and clarity. I believe today Singaporeans are knowledgeable, mature and well-read to be able to appreciate that this is a Government that has the people close to its heart. It shows that the many feedback sessions, dialogue sessions and face-to-face engagement between the people and the Government at the constituencies and elsewhere did not fall on deaf ears. In difficult times, the people are called upon to tighten their belts. When there is a good harvest, the Government shares the harvest with the people. Our financial policy is effective because it is coherent, consistent and as predictable as it is possible, while maintaining scope for flexibility and the use of judgement as and when the situation requires.

Over the past few years, there has been a shift in the global economic landscape which saw the emergence of India and China among the leading economies in Asia. We have to adjust our economy to keep pace with the tectonic movement in the global economy. As a result, a percentage of our population, particularly the older and less skilled workers, is displaced. While the devastation they face is nowhere compared to the thousands who lost their homes and livelihoods from natural disasters as earthquakes and landslides, the sufferings they face deserve our full support and assistance. Indeed, the Government has acted promptly and put in place many schemes, including the latest measures announced in the Budget.

I have three concerns. Older workers, however, thus far the efforts to help these workers navigate the terrain to get back to the mainstream workforce have not yielded sufficient numbers. The momentum has to pick up so that we can attract more to come forward and pick up new skills the way the infectious Latin America drum beats draw the crowds to the dance floor. For these older workers, the cost of living has moved up and those without jobs will find themselves still swimming in turbulent waters though they now have a lifeline thrown to them. Some of the retraining programmes require them to undergo classes to gain some literacy in English and Arithmetics. We have to recognise that these workers, some in their 50s, 60s and illiterate, will find it very difficult. I urge the Government to consider the mindset of these older generation of workers and to set up an inter-Ministry body to look at how we can better understand and motivate them, how we can come out with solutions that fit into their minds. I always believe that they want to help themselves. But what they want to do is not always what the civil servants and MPs think what they should do.

They will remain obdurate to classroom learning no matter what you offer them. The idea is not to put oneself in a position where we find ourselves and the workers in two opposite polar positions. If there is no way to bring them to the classrooms, can these older workers pick up other skill sets, like simple vocational skills training? Help them to adapt without going through the ABC route. Teach them the skills that they may be well more suited to. For example, mend shoes, repair clocks and watches, repair the new dual flush cisterns where Environment is going to make it compulsory as a water saving device, make handicraft, prune shrubs and landscape gardens, polish furniture and repair leather upholstery. With these skills, they can go out and either work for someone or set up their own little businesses. Offer them some seed funding and give them the stall licences and let them move on with life without having to agonise learning ABC. Limit the options to those who are without any primary qualifications and are above 50 years old. Provide the seed money for them to set up their own business. Offer them the second chance to be their own boss, and it may rekindle their interest to take up the challenge.

In similar context, we have helped the older workers and the lower skilled workers in their 60s and 70s by the direct allocation of stalls in the markets and hawker centres. We saw how they were able to bring up their children and many have since progressed and done well in life. For example, I know of a hawker in Toa Payoh who brought up three sons. All of them graduated from universities and are doing very well. There have been concerted efforts to help this strata of people which today we are seeing in numbers again because of the globalisation of economies.

In addition, some of these retraining courses are very long. I am currently arranging for our market and hawker stallholders to attend GEMS courses, introduced by Minister Raymond Lim, taking advantage of the coming market and hawker centre's two-day closure for washing. NTUC's Learning Hub has helped me to organise this session together with our grassroots leaders, as we believe that GEMS courses

would help them to improve their services to our fellow Singaporeans.

Although we are not in Orchard Road, we are now just a neighbourhood hub, downgraded from a town centre status by both the Minister for National Development and the Minister for Transport with the stroke of a pen in the town planning and the route of the transport system. We will conduct the course in Mandarin, with direct interpretation for our Malay stallholders. WDA insisted that the session must be for eight hours before the necessary funding can be made available. For these hawkers and stallholders, to tie them up for one whole day of the two-day closure means a lot to them. The second day closure is meant to be spent cleaning their stalls to get them ready for the next day's operation. Hence, it is a lot to ask them to spend one whole day for training. I really cannot understand WDA's rationale. I would have to raise funds for these people to attend the classes if I am not able to convince and persuade the stallholders to spend one whole day with me for the GEMS. This would mean that I would not be able to tap on the Government's funding of about $40 million of the Budget, ie, not benefiting from it.

The agency implementing these training programmes must understand the mindset of the people. They must recognise that there are times when you can only make small gains but, yet, this is important, rather than try to attain the summit and never reach it. They must be flexible in the administration and implementation, so that the training budget, painstakingly set aside by the Prime Minister and Minister for Finance, is within the reach of the people to whom they are meant.

Next, portable medical insurance. This was highlighted five years ago. However, it has remained a written paper on someone's desk waiting to be adopted. This scheme is gravitating itself as a very important factor in the employment of older workers. For the past few years, many senior workers have realised that there is no longer life-long employment, not even in statutory boards. When there is life-long employment, the company's medical insurance premium would average out in a worker's working life. In current times, when there is no life-long employment, the cost of medical insurance is very expensive on the individual person if he needs to cover himself at age 41 and above. The cost of medical insurance for the individual or the new employer is tripled at least for a person aged 41, compared to a worker aged 30 and under. This has resulted in the reluctance of companies to employ workers above 41. This is definitely much more than looking at the white hair, as mentioned by Senior Parliamentary Secretary, Assoc. Prof. Koo Tsai Kee.

At this point, I must congratulate and thank our Minister for Health for redesigning and giving each Singaporean a basic medical insurance coverage in our hospital care, ie, our MediShield. The question here is: is this basic medical hospital insurance sufficient to cover the active working life of an individual and also through his old age? Many do not think so and have to buy many other medical insurance policies on top of this basic coverage and also request for the employer to cover their medical hospital insurance. For the many who could afford, it is fine. But for the senior worker who is looking for a job and has no sufficient insurance coverage for himself, he would have to bargain hard with his new employer. With that, many would not be able to find suitable employment.

The Ministry of Health strongly believes that the comprehensive coverage without co-payment is not a sound insurance scheme for the people in the long term, which I fully agree. Once there is no co-payment, there will be abuses of the system not only at the insurance pay-out, but also at the medical care providers. The question is: how is the 41-year-old going to pay for his medical insurance premium if the insurance premium tripled and on the increase for a person aged 41 and above looking for employment? I am proposing the use of the 1% of the insurance premium, as set by the Ministry and Government agencies which pay to the civil servants' Medisave accounts, as a guided percentage to be paid by the employer. In addition, I would like to ask the Ministry of Health to allow for additional insurance premiums to be paid out of the individual's Medisave account, not for comprehensive coverage but with a cap for sufficient coverage in the working life of a person.

Thirdly, I am appealing to the Prime Minister to put in more money in the Medisave for these older workers to be able to pay for the insurance premium, made portable as his personal insurance. The other issue is that the insurance company, as a business, would not take up this senior worker above age 41. We need the help of the Ministry of Health to tie on this additional insurance with the basic MediShield, firstly, to minimise the over-coverage and also to allow the insurance company a big base to average the higher risks of these senior workers so that it is at a reasonable cost to the worker or his employer to make it portable to him. I would like to appeal for the good working tripartite relationship between NTUC, employer associations and Ministry of Health to relook at the paper lying on someone's desk and make the medical insurance scheme portable for a person when young so that the medical insurance that covers himself could continue to be with him wherever he works and whenever he needs to retrain and change jobs to suit his skill and age.

We must start now. Even if we need to cut off at an age group, we would have to do so, as in the case of MediShield. This would enable our younger generation not to face the same situation as our senior workers now are facing. The employers will be more willing to employ the white-hair workers and let skill be the determining factor rather than the higher insurance cost, which would then be taken care of by the workers themselves, with the help from the tripartite relationship of the Government, employer associations and NTUC.

On inter-Ministry approach, on a broader level, I note that we are moving towards a more inter-Ministry approach as we search for solutions, especially on policy formulation, from health issues to the focus on managing the effects of casino gambling. I have called for the setting up of more inter-Ministry bodies and committees to tackle the implementation of this Budget in the earlier part of my speech. Why? Because, for many people, from residents to even MPs, it is very time-consuming, tiring and frustrating having to deal with inter-Ministry issues. All too often, each Ministry will push to the other. The most classic example I have come across recently was when I asked for an additional lift for Kovan MRT Station. There is only one lift serving the residential estate but more to the market and hawker centres. The answer given was that there is no budget allocation from the Ministry of Finance. Sir, I am appealing for more budget for such essential amenities where many of our older residents use these lifts daily. Commuters go to the market and hawker centres daily. How do we justify spending millions on the artifacts beautifying our MRT stations but our residents have to struggle to get from one point to another?

We have made progress in cheaper lifts for our HDB estates. So please do the same for our MRT stations. Hundreds and thousands use this transport system daily and we need to encourage them because of our limited land for private cars. I hope the Government will tap this inter-Ministry approach for some operation and implementation measures and to problem-solving on the ground issues.

We used to have ZIP, the "zero in process" for the Government agencies and Ministries. However, this is not heard of in the present time. I have been receiving complaints from the residents of Government agencies pushing to one another, especially so now that many agencies have also outsourced their routine maintenance works.

One other example is the clogging of open drains in the private estates. Mr Speaker, Sir, the issue is very complicating. If the drain has potholes or big holes, the agency in charge to repair is PUB, and the cleaning of drains is under the National Environment Agency (NEA). So the problem of clogging of drains cannot be resolved until both agencies work on it, ie, get the potholes repaired and then clean the drains. The residents are confused and would not be able to understand the fine differentiation of duties. So, in the meantime, the drains remain clogged with mosquitoes, and our residents are left at the risk of being bitten.

I understand that in one medical centre, the doctors from different disciplines meet regularly to exchange views on their patients' case files in a holistic approach to patient care. Therefore, it would be good if this practice is expanded at ministerial level even more. This inter-Ministry committee offers not only a multi-disciplinary and multi-perspective approach to a problem. It also cuts out the argle-bargle when Ministry officials have to deal with each other later on. The complexities of today's economic, political and social environment demand more collective effort to be put in by officials from the different Ministries, either in policy formulation or implementation and operation measures.

To conclude, I applaud the Prime Minister for his generosity towards the needy and the lower-income workers. The principle of sharing the goodies with the people is a policy that we will always adopt as part of our inclusive approach to achieve prosperity for all. Go the extra mile to help our older workers to get back to the job market and to help the lower-income workers. Enable the medical insurance to be portable, to be able to encourage our employers to engage our older workers. Adopt an inter-Ministry approach while we search for solutions to complex issues. We must similarly adopt the same approach in solving the ground operation issues. History will measure and judge the distance that we have gone in building up a prosperous and harmonious community and in making Singapore our best home.

With the consent of Mr Speaker and the general assent of Members present, Question put and agreed to.

Resolved,

That the proceedings on the item under discussion be exempted from the provisions of Standing Order No. 48(8) in respect of the reply to be made by the Prime Minister and Minister for Finance. - [Mr Mah Bow Tan].

Debate resumed.

1.15 pm

Mr Speaker, Sir, I thank all the Members for their views and suggestions, especially all those who have spoken in support of the Budget. I have heard all of them, including Mdm Cynthia Phua, and we will take up their views and act on them wherever it makes sense to do so. The specific issues which they have raised will be dealt with by respective Ministers during the Committee of Supply. In this response, I will just focus on the broad thrusts of the Budget.

Let me start by addressing a question which many have asked - some rhetorically, others seriously. "Is this an Election Budget, given its generous package of incentives?"

I am glad that many Singaporeans and MPs are happy with this Budget. The provisions and measures, which we have taken, have received wide support. But this is not a Budget merely for the purpose of distributing hongbaos to get votes.

It is a Budget with its feet on the ground and with its eye on the future. It is the result of consulting broadly and taking views from many people. We have had many committees - the Low Wage Workers committee, RECORD; Mdm Halimah Yacob and other Members of Parliament have participated in many of these sessions and worked hard to come up with initiatives which will achieve our social objectives, address problems and stand us in good stead for the long term.

This is a Budget:

to support our ongoing efforts to restructure the economy;

to ensure that all Singaporeans can benefit from growth and can manage the impact of globalisation; and

that will maintain fiscal prudence and long term sustainability.

These schemes and initiatives have to be sound and sustainable. To make promises and to give money away - that is easy. But, to improve lives, to give hope, to provide opportunities, to have schemes which will lead to the objectives which we have set out, and not to the opposite of what we intend, to be affordable over the long term - that is much more difficult. This Budget makes the right long-term commitments so that the Government wins not just the next election, but also the mandate to govern over successive terms.

We are not issuing cheques thinking that maybe we will not be here after the elections. This is a Budget which we are taking responsibility for, because we have to answer for the outcomes.

The Budget supports our efforts to restructure and upgrade the economy, and sustain economic growth over the long term.

The restructuring over the last few years has not been easy. It has been painful. In 1999 and 2000 before the recession, we had about 13,000 retrenchments a year; more or less steady. But over the past few years, the retrenchment numbers went up sharply to as high as 26,000 in one year - 2001. This is real pain because every person in these numbers is a worker with family, with responsibilities, with a future, with worries. The retrenchments are now back down to 10,000.

It has been a painful experience but we have become stronger. Overall, we have become much more competitive. We have to press on with our restructuring and not to fear change. If you look at our companies, you can see that. PSA, which restructured and retrenched 600 workers, is now competitive again; able to hold its own, not just against Tanjung Pelepas, but Dubai Port, and many other competitors in the world. SIA, working with unions, has made major changes to cut costs and to operate more flexibly.

But, we must never think that we have arrived. Mr Tan Soo Khoon made a very good speech yesterday pointing out that we live in a world where trade and political tensions still exist and will continue to simmer. He listed out the places where there is no level playing field. SIA - you want to open - there is obstruction. Each time you want to move, a new challenge comes up and we have to deal with it. That is the reality of the world. We accept it as it is. But, having come here and having strengthened ourselves, we have now to gird ourselves to tackle all those problems: to deal with a world which is changing at an ever increasing pace, to watch the trends, and to move quickly and decisively to respond to them.

The competition in the future is not just going to be about lower cost, but increasingly about higher value. I think we are well-placed for this competition. We have explained this in many ways. We now have one fresh way to present this, that is to look at four core strengths, CORE -

Connected. Plugged into the global market, moving around goods, people, and information; through our seaports, through our airports, telecommunications, and our FTAs.

We are Open. Open to ideas, capital and talent. Open to enterprise. Set up as a knowledge hub and a land of opportunity.

We are Reliable. We enjoy a great reputation for trust, quality and consistency, and generally a very high reputation in Asia and around the world.

We are Enterprising. With a flexible mindset and the ability to anticipate, to learn, to adapt, and to move quickly.

So CORE competencies. We must build on these strengths to stay ahead of the competition and keep the economy growing,

to differentiate ourselves as a trusted centre for quality and service;

to invest more in innovation and R&D, and become a key node in the global network of people, ideas and businesses;

to support entrepreneurship and enterprise; and

to maintain a tax system that is best for business, and will enable us to grow.

Let me deal with these one by one.

Going the extra mile for service

First of all, setting ourselves apart from our competitors through good service. Service excellence is a critical competitive advantage and it is as much about attitudes as it is about skills. If you are sitting on a production line and you scowl at the computer chip, it will not scowl back at you and it will not run away from you nor tell its friends about you. But if you are a shop attendant, an airline attendant, a waitress in a restaurant or a banker, and you scowl at your client or customer, you do not just do yourself harm, but also do the whole business and Singapore's reputation harm.

If we think about the IRs (Integrated Resorts), service quality is critical. One of the foreign bidders for the IR at Marina had HR executives who visited WDA (Workforce Development Agency) to find out what schemes we had to train workers and help them to find jobs. WDA asked the executives: "What can we do to help to prepare the workers, help to prepare Singaporeans to support the IR, to take up the jobs there?"

These HR executives replied that they will have in-house training to impart specific skills to the workers - how to turn the roulette wheel, how to dish out the cards, how to rake in the chips; these, they will train. There is no need for WDA to do that. But the most valuable training which the WDA can provide is to prepare Singaporean workers for service jobs in general - to know how to serve, to want to serve and to go the extra mile for good service.

This is not just about the IRs, it is about all our service industries: tourism, retail, food and beverage, finance, and healthcare. Service quality matters. Even in community centres (CCs), service quality matters - the PA (People's Association) staff running our CCs must provide five-star quality service. It is an outfit which is for the mass market, but the quality of service must be first class.

That is critical to Singapore's future, to our ability to earn a living in a competitive world, and it is a national challenge. That is why I got Minister Raymond Lim to spearhead the GEMS Movement, Go-the-Extra-Mile-for-Service.

GEMS has created a buzz. A lot of people have written to Mr Raymond Lim to ask to join the movement and we have involved many private sector executives, businessmen, and entrepreneurs in this effort. They have started initiatives, TV and publicity ads to promote great service, training programmes and leadership seminars. They have got service indicators to benchmark our service level with other countries, "Thank You" cards which customers are supposed to give to the service provider to show appreciation - to show that the good service has been noticed and has been recognised with appreciation.

I think we are beginning to see a difference. The employers are showing more commitment to service excellence. Metro has reported a doubling of compliments for the staff and a 20% reduction in complaints since it participated in the Customer Centric Initiative. The senior counter manager for Estee Lauder at Metro, Ms Joanne Liu, was interviewed by CNA and she explained why. She said: "For example, when customers came back for goods exchange before, we were unwilling to do it. But now, we accept the changes and we do it on the spot willingly". It is a mindset change. The Government is fully behind this movement. We are allocating $63 million to support this movement.

Fundamentally, what we are trying to do is to achieve a change in behaviour, in social norms, and make Singaporeans focus on courtesy and graciousness. We want to transform our society into one where people who serve do so willingly and with passion, and people who are served show respect and appreciation for those who serve them.

It is not going to happen overnight. It will take time. We have to start in the schools, practise in the community and transform the workplace. But we can do it. Over the years, we have changed many aspects of Singaporeans' behaviour - no spitting, no littering, no messing up public toilets, speak English more properly, (that, we are still trying), accept other races and religions, keep fit and so on. So, many efforts, but cumulatively they have made a difference. Singaporeans today - I do not say we are beautiful Singaporeans, but less ugly than we used to be. We must continue to make an effort to be less ugly, not just in Singapore, but when we go overseas. I think the changes with GEMS are within our reach, because deep within each one of us is a desire to be appreciated and to be respected. What we need to do is to develop the habit of putting ourselves in the other person's shoes and 'do unto others as we would like others to do unto us'.

Investing in R&D, becoming a knowledge hub

Second, investing in R&D and becoming a knowledge hub. This Budget underscores the Government's commitment to invest in R&D and to become a knowledge hub. We will inject $5 billion into an R&D Trust Fund over the next five years.

R&D is about experimentation, taking risks, venturing into uncharted territories - some failures, others successes. It means that we must be ready to support good people, to support good projects, to be hard-headed about what we do with our money, where we spend it, and in assessing whether projects are getting somewhere or whether we are getting nowhere.

We have to be patient. We cannot expect results overnight. We have to spend some time. So, I am heartened that MPs like Dr Teo Ho Pin, Dr Ong Chit Chung, and Dr Loo Choon Yong support this effort to secure our long term economic future and have offered many good suggestions which we will follow up on.

Prof. Ivan Png has cautioned against being overly driven by a target like raising national expenditure on R&D to 3% of the GDP, which he points out is an input target rather than an output target. His point is well-taken. I fully agree with him that what counts is output, not input, and we must get the appropriate performance measures, because how you measure influences what people will do. But, we do need inputs to get the desired outputs. If you look at countries like Sweden, Finland, US, Japan and Korea, they have shown that high levels of R&D investments are strongly correlated with the level of innovation there - in terms of the high-tech start-ups, new products and processes, patents and finally, dynamism and prosperity.

So we do need the money. We will not spend it blindly. We must make sure it is well spent. This means we must have robust processes to review and evaluate R&D proposals, using local and foreign experts to help us. We must focus on building up core R&D capabilities and talent, and not just on funding projects.

The National Research Foundation (NRF) and the Research, Innovation and Enterprise Council (RIEC), which I chair, have been formed to drive this overall effort. I am glad to tell Members that eminent academics and leading corporate figures have agreed to serve on the RIEC and on the Scientific Advisory Board of the NRF. These include Dr Susan Hockfield, who is President of MIT, Professor Clayton Christensen from the Harvard Business School, Dr Thomas Connelly, Chief Science and Technology Officer at Dupont, and Kenji Fujiyoshi, President of Mitsui Chemicals. They are experienced, very capable people. They know we are taking it seriously, and their participation shows that they have confidence in what we are doing. They will advise us on key areas of development and on how to assess and direct funding for R&D.

Prof. Low Seow Chay has recommended a higher private share in total R&D spending. I agree with him that greater private sector participation in R&D is our long-term goal. But to get there, the Government's approach is to use public sector investments to drive, and to seed, private sector investment. We will not just fund projects but we will also encourage collaboration between the wider research community, including the research institutes, universities and the private sector. We are one small country. We cannot have factions and different warring territories in Singapore. We have to bring everybody together and make the most of a national effort.

Dr John Chen and Mr Ahmad Magad have suggested that funds should focus on supporting commercialisation of R&D. Indeed, economic payoff is the ultimate objective. By commercialising technologies and ideas developed in the universities, research institutes and firms, we will be able to achieve this.

But we have to be prepared to invest in the whole continuum of R&D in a balanced sort of way, from upstream research to commercial application. We used to focus just on the very downstream development part. If we want to make further progress, we have to move upstream. But we have to do it in a focused sort of way, in fields where we believe there is a reasonable chance of a good outcome over the medium term.

We used to focus on capability building in our first efforts in developing R&D. Now, we are moving into creating new knowledge and commercialising the applications. EDB is already getting companies to set up the R&D centres here, with A*STAR focusing on applied research. EDB and SPRING have a programme called SEEDS, Start-up Enterprise Development Scheme, which also helps to provide equity financing for creative individuals who want to commercialise their business models or products. So far, eleven of them have achieved the million dollar mark and six have won international awards for their products. So, not too bad.

We have plans to help existing SMEs develop and commercialise creative ideas too, through the Enterprise Technology Fund. The details of how we will help SMEs to participate will be in the Committee of Supply for MTI.

Prof. Low Seow Chay expressed concern that R&D could be dominated by foreigners and that Singaporeans will not benefit from it. I think we should look at it positively. We want to develop Singaporeans to go into R&D - to become researchers and scientists - but we must get as many foreigners as we can to come here, do good work here, and help us to get the activities moving - better for them to be working with us rather than against us elsewhere. Only by attracting the best talent, foreign or local, can the quality of our R&D be truly world-class. There is no centre in the world which only works with local talent and is world-class. You can go to the Whitehead Institute in MIT, you can go to Weizmann in Israel, you can go to Cambridge, Cavendish Labs - all the world-class institutions gather talent from around the world. No single country, not even the US, not even China, has enough talent and scientists to say: "This is my own national effort - foreigners stay away."

The way to do it is to bring everybody in, the talent from wherever you can get them, to cross fertilise, spark off and germinate new ideas. At the same time, we will encourage locals to pursue a career in R&D - get bright people into R&D. We are always enhancing our programmes to grow our local scientists, but we need to find the talent with the potential and interests to do R&D. Not everybody can do it, not even every bright person can do it. You have to have the right mindset to focus, to understand the subject in detail, and to spend a large part of your life researching in-depth in something which may lead to nothing, but which you hope will lead to something big. There are only a finite number of such people in Singapore. So where we can find them, we will deploy them to R&D, remembering that you also need SAF officers, civil servants, MPs, businessmen, entrepreneurs and many other things.

Supporting entrepreneurship and enterprise

Third, this Budget builds on initiatives taken over the last several years to support entrepreneurship, enterprise and businesses. Of course, in every Budget Debate, there are speeches that not enough has been done for SMEs. But, as with every Budget Debate Round-up Speech, let me try to put this issue in perspective.

Help for SMEs

Dr Ong Seh Hong, Mr Lawrence Leow and Dr Wang Kai Yuen spoke about the lack of assistance for local enterprises and SMEs. We have to see this Budget not in isolation, but as one of a series. Supporting entrepreneurship and enterprise has always been a key pillar in our efforts to reinvent ourselves. In recent years, we have taken several major initiatives, many of which confer significant benefits to SMEs.

We have reduced taxes. We have introduced numerous tax measures that will help SMEs. Our tax burden is already low for start-ups and small companies. In fact, for the first three years, you do not pay tax at all. The tax system provides for cyclical swings in business and in earnings, because you have one year loss carry-back which I introduced last year. If you make a profit this year and next year you make a loss, you can actually go to IRAS and claim back some of the tax you paid the previous year and even out your tax burden - in fact, lighten your tax burden.

We have also reduced our regulatory burden. There is an online business-licensing scheme to streamline licensing processes and cut business costs. This year, we are reducing record-keeping requirements for 17 statutes, which I believe has been welcomed by members, and which will be particularly helpful to small companies with not a lot of space, not a lot of staff, and not a lot of money.

We have also introduced many schemes to help local companies upgrade and expand overseas. In fact over the last five years, 9,000 SMEs have benefited from the Local Enterprises Technical Assistance Scheme, LETAS, to help them upgrade their capabilities, and 12,500 SMEs have obtained $3 billion of Government-facilitated loans. $3 billion - it is bigger than the Progress Package. It is quite a substantial amount. It has gone to a lot of SMEs.

There are many, many schemes - too many for me to list here. But I went to the EnterpriseOne Portal yesterday, and I looked at the web pages on Government schemes for SMEs. If you print them out, it will be 10 pages, over 60 schemes - from tax incentives to grants and non-financial assistance measures. We do not lack schemes. Members have the handout.

What we need to do is help the SMEs take full advantage of schemes already there, so that they can be guided through this forest of assistance in order to get what they need and what will make a difference for them.

But nevertheless, I invite the members to look at these 10 pages. Let me know if you have other ideas, or if you think these ideas can be simplified or improved. We will keep on improving our package and, if need be, add to these web pages, so long as it makes our assistance more effective and does not increase confusion.

But I know that SPRING feels a mission to help SMEs. This is not just a business, and those are not just clients. They feel that this is something which is worth doing, which they believe in, and that there is promise and hope - something worth promoting. They are going at it 'heart and soul' and the Government is behind them. We are happy to consider new ideas to help SMEs succeed.

Our philosophy is that if SMEs have good potential for growth and for success, we should encourage and help them in all the ways which are possible. But if SMEs are non-viable, then we should not artificially prop them up because that will just extend their pain and misery. It would not do a real favour to their owners and to the employees.

Mr Inderjit Singh and Mr Chay Wai Chuen raised the question of incentives like the Global Trader Programme and the Warehouse Retail Scheme, which they felt were biased towards foreign companies and multi-nationals. This is not true. As a principle, our incentives are focused on promoting desired activities and influencing where companies decide to locate, be they Singaporean companies or foreign companies. The incentives are not biased or structured in terms of ownership.

In the case of the Global Trader Programme, it is aimed at making Singapore a global trading hub. It targets all companies that commit to conducting substantial offshore trading activities, and to carry out business activities which will result in spin offs to our local economy. It really does not matter whether these are local or foreign companies. As a matter of fact, there are some local traders which are enjoying this incentive, such as Petra Foods and Agritrade; maybe not as many as we would like, but it is open to them.

In the case of the Warehouse Retail Scheme, this is designed to encourage companies, whether local or foreign, to establish their regional activities in Singapore. The requirement for this scheme is that 60% of the gross floor area must remain industrial but the balance can be used for retail. But when it is designated for retail, the user is charged full retail rates, comparable to retail rates in the vicinity. It should not put retail businesses nearby at an unfair disadvantage or at risk from large firms which are enjoying concessionary rents. It will increase the supply of retail shop space - that is true - but that is supply and demand, and I think, overall, that is good for the customers.

Pro-enterprise Government

Mr Wee Siew Kim and Mr Zainul Abidin Rasheed have suggested that public agencies need to be more pro-enterprise. For example, they suggested that some small businesses should be allowed to operate at void decks.

We have relaxed rules for small businesses. We used to be very stringent and some of the regulations were overly restrictive. We review and update them on an ongoing basis. For example, we now allow small businesses like car cleaning and mobile ice cream kiosks in HDB car parks, provided they do not affect the parking needs of residents, they do not create nuisance to the residents, or compromise the safety of car park users. We have also liberalised street hawking so vendors can sell food like ice cream, which does not perish so easily, in housing estates and car parks. Last year, we included newspapers and costume jewellery because, in the downturn, we felt this is one way people would be able to make a little bit of money for themselves and tide over their family.

But many of the conditions and rules are there for some reason, and we cannot remove rules which are necessary for public safety or for the living environment. HDB has drawn the line on using void decks for commercial activities. I think we have to be fair to the people who live upstairs, especially on the second floor, and we have to preserve the residential character of the housing blocks. I would be careful about having char kway teow or something like that; the more fragrant it is, the bigger the problem upstairs.

But it does not mean that rules will never be changed. The position is continually open and we will review our rules as business needs change, and as views evolve on what the public considers acceptable, in terms of level of safety, convenience and public order.

So, I encourage Members to keep on raising the subject and pushing the boundaries. With this dynamic tension, from what you think will be good and what we feel we can do, we will be able to become more pro-enterprise. I hope that in the process, Members will be able to understand what are the constraints and real problems.

Mr Inderjit Singh has asked us to be patient before asking about results from the entrepreneurship promotion efforts. I also ask that he and other Members be equally patient because it will take time for the pro-enterprise mindset to become entrenched. But, we have success stories and we have outcomes which we can be proud of. For example, there is a home-grown sheet metal fabricator and machining company called Eng Tic Lee Achieve, which acquired new capabilities and became the first company in Southeast Asia to manufacture pharmaceutical packaging machines in partnership with a leading German equipment manufacturer. Many others have also made their mark in the region in China, in India, and also now in new markets in the Middle East. As we continue with efforts to improve entrepreneurship, I am confident we will have many more success stories to celebrate.

GLCs

Still on local enterprises, Mr Inderjit Singh has asked about efforts by Temasek companies to become globalised Singapore enterprises, as recommended by the ERC. Our companies have expanded overseas over the years, but these are decisions which the companies have to make - with their boards and their managements. The Government cannot dictate the pace of expansion for individual companies. In fact, Inderjit also reminded us that we should not get involved in dictating things for these companies. In the long term, Temasek's aim is to reduce exposure in Singapore from half, which it presently is, to about one-third. The companies are moving. Sometimes, we give them an encouraging nudge.

The Minister Mentor (MM) once in a while gives a very encouraging nudge. Members will have read that he has been talking to SIA and its management and unions. Mr Inderjit Singh raised an eyebrow and suggested that we have failed to observe the ERC's recommendation to ensure that GLCs are commercially-run without interference by the Government. I think without interference does not mean without encouragement.

MM's involvement has been chiefly in resolving the labour relations situation in SIA. It reflects his long association with the tripartite process and his standing as a trusted and well-intentioned neutral party by all the players. It is also driven by the Government's larger strategic interest to safeguard our status as an air hub and to help SIA restructure to face a new landscape while it is still doing well.

So MM's comments to SIA that it needs to consider trimming its businesses was not a directive. The specific restructuring and adjustment to deal with the future will have to be decided by SIA management and its board, based on what makes commercial sense. But sometimes it is helpful to paint a broader picture of the industry trends and state clearly where the Government sees a strategic national advantage - in this case, in being an air hub rather than keeping out competition in order to protect Singapore Airlines; so that managements and unions recognise that tough changes are necessary. As Mr Inderjit Singh pointed out, the comments may have preceded an upward tick in the SIA stock price. So maybe the market took it positively.

Maintaining a competitive tax environment

Finally, on maintaining a competitive tax environment, Prof. Ivan Png has suggested minimising tax incentives and moving towards a simple tax system with a low headline tax rate.

This is an ideal which I sympathise with, but unfortunately, reality is not so simple. The basic problem is this. We want the best companies in the world to come and locate here - offer the best technology, best jobs, best markets - but these best companies are in demand everywhere. Other governments are courting them. Even the developed countries are courting them. America, Japan, Europe - they offer lucrative incentives to selectively anchor key businesses and investments. Sometimes, they give outright cash grants per job created - one hundred thousand or two hundred thousand Euros because every job created is one fewer job on the unemployment rolls.

So, if we want them to come here and we say you pay the same here as everybody else in Singapore - 20% corporate tax - we cannot get them. We are out of the running. They come to see us and they show us; they say this is best of breed. Best of breed - they 'shop' for the best incentives from different governments - investment allowances, tax holidays, grants, training assistance schemes and so on. Assemble one page 'best of breed' and they tell us: please match this and then we will think about whether to put you into the running.

And if we need them, we have to make an offer which they will consider, but one which leaves us above zero. Not ending with a net negative but above zero. If they come, we get the economic spin-offs.

On the other hand, if we say we give the same favourable tax rates, flat tax rate, to other companies that we give to the best, most desirable project which we want to anchor here, the Government will get very little revenue.

So we have to retain tax incentives to attract and retain strategic businesses and activities. At the same time, we have to ensure that our incentives are granted fairly and objectively - that the companies must meet our criteria and deliver specific net benefits to our economy.

Overall, our formula has served us well. Quite a low headline rate to support enterprise, plus targeted incentives, usually with clear sunset clauses, to promote strategic investments. But we try to keep our tax code clean - we do not encumber it with many special perks and loopholes as happens in other countries, because we would like to keep the playing field as level as possible, subject to this constraint - that there are companies, which we need, whom we cannot charge the full rate.

Even as this Budget invests in key areas of growth and shares the fruit we have reaped with Singaporeans, it maintains our core principles of fiscal prudence and sustainability over the long term.

Keeping Government lean and trim

As I said in the Budget Statement, our major taxes are at about the right levels. On the other hand, there will be new spending needs in healthcare, education, training and R&D which will put pressure on our finances.

So, we have to keep the Government lean and trim to manage these new spending priorities. Over the years, we have introduced various initiatives to help do this. To drive discipline, we have the Manpower Management Framework (MMF), the headcount freeze and other schemes. To get value for money, we have best sourcing, demand aggregation, the Centre for Shared Services and so on.

Dr Ong Seh Hong has raised concerns that cost-cutting efforts such as the Manpower Management Framework should not come at the cost of poorer service levels, or worse still, drive agencies to outsource services at an increased cost to the public.

We are mindful of these concerns. The MMF aims to achieve headcount reductions through productivity improvements, job redesign or by re-prioritising functions. Where there is additional manpower required, the framework is responsive to the circumstances of the Ministries. For example, for the Budget Terminal at Changi - it is a new service. We are providing additional manpower headcount. Or, because the IR is coming, MHA needs to set up a Casino Regulatory Authority of Singapore - we are studying how we can increase MHA's baseline in order to account for this new function so that there will be appropriate manpower recruited for this.

Best sourcing results in outsourcing only if the private sector can do the task more cost-effectively and, therefore, cannot be the cause of increased fees. Since we launched Best Sourcing in February 2003, we have market-tested 218 functions. We have outsourced 59% of them. The annual operational cost savings is S$25 million or 25% of in-house costs. Still quite small, but I think there is further potential. Outsourcing has resulted in direct savings for the public. For example, the Ministry of Finance itself has reduced the fees charged to suppliers for registering as Government suppliers by at least 10% as a result of outsourcing this service.

Mdm Halimah has raised concerns that MMF should not inhibit public sector agencies from employing older workers and she has warned that best sourcing should not simply become "cheap-sourcing", because private companies may cut back on staff welfare and benefits to win jobs.

The public sector's approach is that we employ the candidate who best fits the job requirements regardless of age, sex or race. But when we outsource, we outsource to reliable vendors - we should not assume that outsourcing achieves lower costs simply by having the vendors cut the workers' salaries. There will be, in some cases, specialised private sector providers which offer lower costs simply because the business which is best sourced to them is their primary business. So, they can achieve greater economies of scale and innovation. Also, I would say that we want to outsource to a reliable company, not one which submits a ridiculously low bid and then is unable to meet its obligations or pay its workers and then runs into trouble halfway, leaving the Government to pick up the pieces.

Mdm Halimah has suggested that the Government considers stipulating in outsourcing contracts that providers must comply with labour laws and pay the employees decent wages on time. I recognise this concern and there have been some cases which have run into problems. But, the solution lies in enforcing the labour laws. I do not think a contract obligation stipulated by the Government as the buyer of the contract will solve this problem, because really it is a legal obligation that the vendor pays its workers, pays the CPF, meets all the legal rules which he has to meet. Anybody who does business with the Government, or with anybody else, is expected to do that. If they do not, there will be penalties. From time to time, employees complained that they have not been given their pay. In such cases, if they have missed out on the rightful employment benefits, they should seek the union's advice or they should approach MOM for help.

Specifically on the change on headcount arising from the MMF, Mr Chay Wai Chuen has questioned the apparent increase in the public service headcount despite the MMF. May I clarify that the increase which he saw in manpower in the FY2006 Budget - 1.6% increase in the headcount - is actually an increase in the establishment posts and not the actual headcount, because often the establishment posts are left unchanged for some time while agencies work out how to cope with fewer personnel by, for example, streamlining or modifying processes when they have natural attrition, resignations and retirements. On the other hand, when agencies undertake new functions, they introduce additional posts. So, overall headcount numbers have come down although the establishments have not yet.

Funding this Budget

Now, let me talk about one very important issue which MPs have raised, and that is, funding this budget. Several MPs, including Mr Yeo Guat Kwang, Mr Chew Heng Ching, have asked if this Budget's stance diverges from our principle of fiscal prudence and our longer-term sustainability. And Mr Ong Kian Min had asked if we should have been more tight-fisted and withheld some of the generous cash give-aways.

It is good that Members are looking beyond this Budget to these issues of long-term growth and fiscal sustainability. But let me assure Members that this Budget will not strain our long-term fiscal position.

First, the size of the Progress Package, $2.6 billion, is not large compared to that of the New Singapore Shares which was $2.5 billion and Economic Restructuring Shares which was $2.7 billion. So it does not imply unprecedented generosity as mentioned by Dr Amy Khor. However, because we have become more targeted in our approach, older, lower-income households can expect to receive more this time and the impact on them will be more significant.

Second, our Progress Package is not a permanent programme. It is once-off. We are not promising this every year or every five years or every so many years. It is once-off, needed this time because we are restructuring, because the economy has turned good, and yet we know that there are some segments of the population needing help. So, a Progress Package is justified.

Also, our transfers to the Endowment Funds, which Prof. Ivan Png mentioned, are accounted for conservatively. Prof. Png suggested that the Overall Budget Position should be calculated based on actual expenditures rather than the total transfers to these funds. This is a plausible accounting treatment, but we have chosen a more conservative approach in line with our principle of fiscal prudence.

Going forward, our fiscal position is sustainable. In this term, it has been tighter than we expected and tighter than before. Several reasons - because there was a slow economy in 2002 and 2003 and we have had two major packages. First, we provided the ERS (to offset the GST increase) which was $2.7 billion. Later on, we deferred part of the GST increase, staggering it, first 3% to 4%, then 4% to 5% - the deferral cost $600 million-$700 million. It is big money. And now, we are having this Progress Package.

Going forward, we are not likely to have the same combination of events. Nevertheless, the position will be fairly tight and we must continue to be vigilant and focused.

There seems to be some confusion about how we will fund the Special Transfers of $3.59 billion for FY2006, judging from the media and analysts' reports on the Budget, and also from what has been said in this House.

As I stated in the Budget Statement, we have some funds which accrued to the current Government when it took office in 2001, as well as some capital receipts from our statutory boards during the term of this Government. We do not reflect these capital receipts in the overall budget position because despite what Mr Steve Chia said, they are irregular, lumpy and uncertain sources of funds. Over the last 10 years, these capital receipts have fluctuated between $30 million at the lowest to a few billion dollars at the highest. If we had included them, it would have overstated the amount of regular revenue we have on a year-to-year basis with which to fund our regular expenditures. But these capital receipts remain available to the Government to spend within its term, without drawing on past reserves. Taking them together with the funds from the changeover of year 2001, we have enough to pay for the Special Transfers without drawing on past reserves.

Let me just go through some of the numbers.

We started off the current term in 2001 with $2.51 billion of funds accruing to the incoming government. The amount was computed because it was a changeover year, and it was computed in accordance with the Apportionment Rules between the outgoing and the incoming government as laid out in the White Paper on the protection of reserves.

The Government also received $2.45 billion over FY2002 till FY2005 in capital receipts from statutory boards which were returning capital in excess of their needs.

On the other hand, if you total up the budget surpluses and deficits between FY2002 and FY2006, including $3.59 billion of Special Transfers in 2006, the net cumulative Overall Budget Deficit is $4.23 billion.

So, just taking the $2.51 billion that the current government got in FY2001 plus the $2.45 billion in capital receipts from statutory boards - that adds up to $4.96 billion - we can comfortably fund the $4.23 billion net cumulative Overall Budget Deficit from FY2002 to FY2006.

So, we have enough funds with some left over. But let us not exaggerate. Today reported on 24th February that the Government is able to draw on capital receipts from statutory boards in the current term and such receipts raked in $13.42 billion between the fiscal years 2002 and 2005. Mr Steve Chia yesterday further inflated this figure to $19 billion.

Mr Steve Chia says that he is misled and that the people are misled by the Government. But actually it is Mr Steve Chia who is misleading all of us because these numbers are all incorrect. We do not have $13.42 billion of capital receipts to draw on as reported by Today, let alone $19 billion as claimed by Mr Steve Chia.

Let me explain. Today's main error is to treat capital receipts from the sale of Government land as money we can spend. These land sales add up to more $10 billion, but they are locked up, as past reserves, and cannot be touched because this is not new money. It is not earned, it is not capital gains, it is just transformation of a piece of land into cash, transformation of one asset into the other. The land has been locked up, so the cash proceeds are also locked up. This was Today's mistake. Mr Steve Chia also made this mistake but I believe he must have made some other mistakes in order to reach such a huge number.

Fiscal sustainability

Mr Low Thia Khiang asked why it is okay for the Government to incur a deficit of $2.9 billion and yet when the opposition suggests increasing expenditure on education and healthcare, we say it is fiscally irresponsible - which it is.

The reason is that the Workers' Party proposes to spend regardless of whether we can afford it on a sustained basis. To quote the Workers' Party Manifesto, it talks about "an unconditional needs-based welfare safety net". In contrast, this Government lives within its means without neglecting its obligations to lower-income Singaporeans. Regular expenditures are funded by regular revenues and not irregular capital receipts. I had explained earlier that the Progress Package does not draw on past reserves and will not impose an ongoing fiscal burden on taxpayers.

Mr Steve Chia's speech yesterday shows vividly where the Opposition's approach will lead. He wants to raid the bank. He proposed cutting all sorts of taxes and fees; just declare that Christmas has arrived. Or as Zaobao says "zuo chi shan kong" (sit and eat until the mountain is empty); it is precisely this kind of free spending which the Constitution and the Elected President have been designed to prevent. The safeguard ensures that our past reserves are protected and politicians will not make free with them in order to win popularity.

But the Workers' Party advocates that we abolish the Elected Presidency and remove the Second Key. That is why I believe that the Opposition's approach and the Workers' Party's approach is fiscally irresponsible.

Mr Low Thia Khiang's memory also seems to have been selective. He claims we are not spending enough for Singaporeans who need help. But, he has forgotten. During downturns, we have provided assistance to Singaporeans who have difficulties coping. Mr Low said that after giving out the New Singapore Shares and holding elections in 2001, we pushed up the GST rate. Yes, we did. But what we also did, which he forgot to mention is that before we raised the GST, we provided $2.7 billion worth of Economic Restructuring Shares to help Singaporeans cope. So the GST was completely buffered by the Economic Restructuring Shares, and the New Singapore Shares is a completely different package, a clean benefit which all Singaporeans enjoy. So to say that the New Singapore Shares resulted in the GST after the elections is as they say in Latin "suppressio veri suggestio falsi" (by suppressing the truth you suggest a falsehood).

Mr Low also said we have not done enough to help the poor on a consistent basis, and our help is only once in five years. Since 2001, this Government has spent about $7.8 billion in total for a variety of assistance measures not counting this Progress Package. This includes the New Singapore Shares in 2001, the ERS from 2002 to 2004, the CPF Top-Ups from 2004 to 2006, U-Save, Service and Conservancy Charges and Rental Rebates, and so on. A typical low-income household would have received more than $11,000 in total from all these schemes. This, not counting the Progress Package.

Furthermore, Mr Low has had nothing to say about the substance of the Progress Package, unlike, for example, Mr Chiam See Tong, who has gone through and has pointed out some issues with implementation, particularly with the Workfare Bonus. Indeed, Mr Low had nothing to say about his alternative propositions as to how the Workers' Party proposes to take Singapore forward and to help low-income Singaporeans - nothing. It only shows that he is really not interested in whether Singaporeans are getting the help they need. He is only interested in scoring political points.

The underlying principle that must continue to guide this Government is fiscal prudence. Every term of the Government must live within its means and the Budget must be in overall balance over the economic cycle, and that is what guides this Government.

Economic growth is a basic pre-condition to raise living standards across the board. But incomes will get stretched out as we restructure the economy and as globalisation hits us. Older workers and lower-income groups will face particular difficulties. So we have to augment our broad-based approach with more targeted help. Deliver the fruits of growth to every citizen, especially the older workers and lower-income groups who need the most help. Ensure that nobody is left behind and left out.

At the same time, we have to provide the help in a way that encourages recipients to make the effort to work, not to free-ride on state support, to target the areas where the needs are greatest, to involve the community and the grassroots network and leaders, and to maintain fiscal discipline and responsibility.

Workfare, not welfare

The key principle was set out by Ng Eng Hen's Committee on Low Wage Workers - Workfare, not welfare. Because, the best way to help people is to help them re-train and find work, so that they can take care of themselves and their families. This is something which many MPs have said in different ways over the last few days.

Long-term measures to help workers

Dr Amy Khor asked whether we can find sufficient jobs for all those willing and able to work. There are many jobs. Last year alone, we created 111,000 jobs. Job vacancies in the private sector, just in establishments with at least 25 employees, rose to a four-and-a-half year high of 20,000 in September 2005. But, many of the jobs created are at the higher end. Nearly half the job vacancies require at least an upper-secondary qualification, which is not surprising because this reflects our economic restructuring. So, while there are jobs available, the workers who are unemployed will need the skills and qualifications in order to take up these jobs. That is why we have many initiatives like the Workforce Skills Qualifications System to help them to do so. At the same time, NTUC is working with WDA to step up the Job Re-creation Programme and to re-create 10,000 jobs a year.

Dr John Chen and Mr Zainudin Nordin talked about the need for systematic and sustained measures and also asked whether we could make the Workfare Bonus permanent to help the lower-income and unemployed in the longer term. I agree that sustained measures are needed. Indeed, most of the key Workfare measures are permanent and address structural issues. We are providing more social support for low-income families so that parents can go out to work. We are expanding job opportunities through job redesign and equipping individuals with higher skills for better jobs. WDA is expecting to spend a lot of money - $140 million per year over the next three years on training and re-creating jobs, and we are investing heavily in education. I agree completely with MPs - Dr Lily Neo, Mr Arthur Fong, Mr Ong Ah Heng, Ms Eunice Olsen - who said that it is important to concentrate on children of lower-income families so that they can, in turn, help to lift their families out of poverty. We have a comprehensive approach that includes early intervention, making sure that education is affordable to all, reducing school dropout rates and strengthening vocational training pathways. The Opportunity Funds support our commitment to help these children.

Financial support for workers

There are two key financial measures to encourage work. One is the additional CPF Housing Grant, and the other is the Workfare Bonus. The additional CPF Housing Grant is a permanent scheme, consistent with our policy of helping Singaporeans to be homeowners. It will help provide lower-income HDB first-timers with a significant sum for buyers to own their homes - a significant sum over and above the subsidy which all HDB buyers already enjoy. $20,000 is equivalent to 20% of the selling price of a three-room flat, and an even bigger proportion of the selling price of the two-room flats which HDB will be building. So, we have made one very big move on the additional CPF housing grant, which is permanent, and which is targeted at the lower-income groups.

The Workfare Bonus marks a significant step because it provides low-wage workers with a cash bonus. If you work, you get the cash bonus at the end of the year, twice - this year based on 2005 work, next year based on 2006 work. It is a once-off scheme because this is the first time we are doing it. Payments will be for two years. We should experiment and gain experience with the scheme first, before considering whether we need a more permanent work-based assistance scheme like this, and if so, what form it should take.

With once-off schemes, we can afford to make mistakes. But with a permanent scheme, mistakes will be much harder to reverse and we have to be mindful of unintended consequences. Will a scheme like this cause employers to push wages down permanently? Will it reduce the incentive to upgrade to a higher paying job? How do we deal with a problem, which Mr Chiam talked about, where somebody works hard, goes from $1,200 to $2,500 doing overtime and then, as a result, falls out of the net and does not qualify? To some extent, that is unavoidable but how steeply do you want the bonus to tail off with income so that for each extra dollar of work, it is still worth your while to go for that extra dollar? This is the sort of problem we have to watch out for and study. How complex will the Workfare scheme be to administer? How do we prevent people from over-claiming? Nobody over-declares when you pay income tax but when you claim negative income tax, over-declaration can be a significant problem.

But, however this Workfare idea evolves, we must never allow it to expand into a permanent needs-based welfare scheme that is not conditional on work. Because that is the way to financial ruin and worse still, as many MPs have pointed out - Dr Amy Khor, Dr Chong Weng Chiew, Dr Wang Kai Yuen and Dr Tan Boon Wan - it will breed a crutch mentality.

Alternative suggestions for helping vulnerable workers

Some have suggested a few other ways to help vulnerable workers. One is to have tax incentives for companies to hire older workers. It is possible but I am not in favour. I will tell you why. A tax incentive is, in principle, no different from a Workfare Bonus which is paid directly to the workers, except for this - it goes through the company and the company has to make a profit before it can take advantage of the tax incentive. I would rather pay this directly to the worker. Also, if I make a tax incentive which extends to all older workers and not just the older lower-income workers, then there will be a lot of deadweight loss because I will be granting tax exemption on many people who really do not need the tax incentive. It is more straightforward to give a direct grant to workers, like through this bonus. In fact, that is how other countries which have earned income incentives do it - direct payments.

Mr Inderjit Singh suggested providing more retrenchment protection through increasing compulsory CPF savings or having a national unemployment insurance scheme. It is also one of the items in the Workers' Party manifesto. The same question applies to both - which is, who is to pay for this protection? Who is to pay for this unemployment insurance? If you raise employee contributions to CPF, then you reduce workers' take home pay. Are you prepared to do that?

If you raise employer contributions, then you are going to increase business costs and lower competitiveness. In fact, since the ERC recommendations, we have been working hard to adjust the CPF contribution rate to be at a sustainable level to lower cost and yet have enough for retirement requirements, for housing requirements, and for medical requirements. Quite a number of MPs, including Ms Penny Low and others, have pointed out that we must make sure that we have enough money for retirement. Every additional item you take out of the CPF means $1 less from somewhere, from retirement needs or from housing needs. You might say: Decide the principle, then we can figure out how to do it later on. But I think we have to look at the practicality and the practicality is: who is to pay for this?

Also in Singapore, most workers already have some form of retrenchment protection. MOM did a survey two years ago in 2004 - 96% of private sector establishments with at least 25 employees paid retrenchment benefits to their local employees who had at least three years of service. So there is already some kind of unemployment protection which is in the retrenchment benefits scheme. If you are going to introduce a new layer of unemployment insurance, is it going to be on top of retrenchment benefits or in lieu of retrenchment benefits? I think you have to consider carefully because if it is in lieu of retrenchment benefits, you have to take away a well-established scheme which is more or less working. We can improve it but it is a scheme which has worked out and people have accrued retrenchment benefit rights which are very important - as I am sure Mdm Halimah will confirm. If it is going to be on top of the present system, is it wise to have double provision for unemployment protection at additional cost and with additional negative side-effects?

What are these side-effects? Straits Times today had a timely article: "How the next welfare state must work?" It is an article from the Ifo Institute for Economic Research in Munich and it is by the Director, Prof. Hans-Werner Sinn, who is an eminent economist. The research institute is a well-respected European, German, think-tank. They produce Ifo Business Surveys which track how the European economy is going. Their article today says how the next welfare state must work and what is wrong with the present welfare state. I read from the article: "In Western Europe, the welfare state helps these people by paying replacement incomes in the form of social aid, unemployment benefits or early retirement benefits". Unemployment benefits - so it gives you replacement income. In other words, if the market does not provide you with a sufficient income from your labour, the state will provide an income without requiring you to work - which is what unemployment insurance is about. He goes on to say: "As humane as this policy is meant to be, it is largely responsible for the mass unemployment from which Europe suffers. The reason is simple - replacement incomes are wages for doing nothing."

Then he goes on to explain this is an old problem but it is worse now because of China and India, and now wages have to adjust. So, another way European companies have tried to fix this is with a legal minimum wage, to prevent wages from falling. He explains why a legal minimum wage is also not a sensible approach. He says Europe's welfare system based on replacement incomes and minimum wages will not survive globalisation. Because, if you go for minimum wages, you are actually pricing yourself out of the market. You are encouraging other people to come in to work - to take the work away. You will not survive globalisation and there is no way to turn back the tide of history.

So what does he propose? He proposes wage supplements, which means paying people to work - the way we are doing Workfare. He says even wage supplements is expensive, because you have to pay everybody - you have to pay all those who are working and not just those who are not working. But he thinks if you do the sums, it probably will be less expensive than going for unemployment benefits and minimum wages.

I think the most important thing is, whether we call it wage supplements or Workfare, we are encouraging people to work, we are encouraging people to take care of themselves, and we are ensuring that they have a reasonable standard of living. At the same time, we let the market do its work so the economy can restructure, can grow, and in time they will upgrade, retrain and be able to do better for themselves.

The Progress Package

Targeted approach

Now, let me talk about the Progress Package. When there are budget surpluses, we have periodically shared the fruits of growth with Singaporeans and that is what the Progress Package does. But there is a key difference. With the Progress Package, we are taking a more targeted approach. There is more for the older workers and for the lower-income group most affected by economic restructuring. More for the elderly most worried about medical and retirement needs.

Some MPs like Ms Irene Ng, Prof. Ivan Png and Dr Ong Seh Hong have suggested we could have taken a more broad-based approach and provided more to the 'asset-rich, cash-poor' group, younger lower-wage workers in their 30s, housewives and so on. I recognise that these are all groups which have some claim. The Progress Package recognises the contributions of all Singaporeans. Every adult Singaporean will receive at least $200 of Growth Dividends and many Singaporeans will receive more. But, we have to set priorities to make the most of the package and to send a clear message on what our focus is. This Progress Package is weighted towards poorer Singaporeans and lower-income workers. For the Workfare Bonus, we have focused on the older lower-wage workers because they are more vulnerable in terms of employment, security of jobs, and their income. Our aim is to make sure that nobody is left behind when we restructure and upgrade the economy. I think the message has got through. The New Paper reported one housewife, Madam Kwan Yoke Kuan, who said that looking after the older lower-income group is more important. This, I think, sums up the sentiment of many Singaporeans. Over the past week, I have received many emails too from people who agree with the Budget's focus of targeting help for those who are lower-income and most in need.

I should also like to urge Members to look at this package not by itself but in the context of the many other things which the Government has done and the many other packages which we have introduced over the years. As I explained just now, we've spent more than $10 billion, including this Progress Package, since 2001 on various assistance measures. It is not possible to be absolutely fair to every group every time. I cannot do that unless I know in detail everybody's life, how the household is structured, what your finances are, and what your background circumstances are. But, we try to be roughly fair, and over time, with the range of packages, taking all our policies together, I think generally we have been fair to all.

Implementation of Progress Package - fair and simple

Now let me deal with some of the queries on the details of the Progress Package. First, do not be anxious about the need to sign up. Most Singaporeans only have to be patient and wait for the letters to come. The letters will tell you exactly how much you will be getting, then just sign up from 1st April if you want to receive it on 1st May. But even if you are a little bit late, we will keep the window open until the end of the year. Let us know whether you want us to credit your bank account or you want the cheque in the mail. There is no need to put in $50 in your CPF account this time, but in future we will think about it.

Only those who meet the age, income and housing criteria for the Workfare Bonus but do not have CPF contributions and have not received a tax return, they are the ones who should fill in a Workfare Bonus scheme income declaration form by 1st April. It is a serious declaration. It is an IRAS form. There are serious consequences if it is not properly filled. Please declare honestly what you have earned and we will work on that basis.

I also welcome Mr Chew Heng Ching's and Mdm Ho Geok Choo's suggestions that better-off Singaporeans may want to donate their Progress Package to others because they may not need the money. They can do so. We have arranged for this. When they sign up online, they can donate to a list of available charities.

So, the first thing is - do not worry, the administration is simple. Second, the conditions are simple and fair. Mr Ang Mong Seng, Dr Teo Ho Pin, Dr Warren Lee and some members of the public have asked why we have not used property ownership instead of place of residence for the Growth Dividends and CPF top ups, because you could be living in your parents' or relatives' home. I agree that the proxy of the residential address is not quite perfect, but generally speaking, those people living in higher-value homes will have more resources to call on even if they do not own the place they live in. If we tried to determine the person's exact wealth or the wealth of the household per capita, it will be complex and intrusive, and I think Singaporeans will resent that. If there is some inequity, or maybe a few people benefit more than they needed to, we have to take the rough with the smooth.

The Workfare Bonus has the condition that one must work at least six continuous months in each year to qualify for the Workfare Bonus. Many MPs, including Mdm Halimah, have asked us to clarify this because sometimes a person may be unemployed for a short time, between jobs or some other reason, in spite of him making the effort to stay continuously employed. Over the past week, we have also heard from some low-wage Singaporeans. So, we have reviewed this and decided to be flexible. We will allow exceptions for those who have worked for at least half a year to also qualify for the bonus, even if their employment period had a break in it. Let me also clarify that it does not matter if you switch from full-time to part-time or contract work. What we ask for is that you work for six months - effort from individuals to work regularly and to help yourselves.

There will be other unique circumstances which we have not anticipated, but it is not possible to have rules that cater to all of these. Otherwise, it will be a whole book. So, those with genuine cases can appeal to the grassroots advisers who will take up the matter with the CPF Board. We will continue to work through the mass media to inform all Singaporeans about the Progress Package, but we will pay special attention to those who need additional help to sign up. We will enlist the help of grassroots leaders to reach out to residents staying in one and two-room flats. We will also be working with the welfare and nursing homes, community hospitals and even prisons to help the residents get the Progress Package.

Mr Speaker, Sir, I believe that overall, our approach of targeting help at the most needy and those willing to help themselves is working. People who are in genuine need have benefited and have got useful help.

Under the Job Re-creation Programme, which is spearheaded by NTUC and WDA, the tripartite partners from 13 sectors have come together to re-create jobs and retrain job seekers. Last Friday, I went to DXO. It is a disco, but there was no music. This was just a Job Re-creation Programme Awards Night. Mr Lim Swee Say invited me. I gave awards, among other things, to 15 JRP participants, workers, and I spoke to them all after that. I was very impressed and moved by their commitment. One of them is Mr Arumugam s/o Ramalingam. He is 45. He had a business failure back in 1997, and he was declared bankrupt. He worked for a cleaning company for five years - he got retrenched in May 2004. But he did not lose hope. He did not give up. He took up a National Skills Recognition Scheme course in landscape maintenance. He became a landscaping technician. Starting pay, $1,150 just February last year. He did well. After four months, he got a raise to $1,300 and last December he was promoted to supervisory position. Now, he earns $1,500 a month and oversees the work of a four-man team at Marina City Park. So it is a small programme to assist the person, but it has helped him to make good in his life. The other recipients all had stories to tell and were proud of themselves, and I think that is the way we should help people. It shows us that as long as we believe in our workers, and people believe in themselves, it is possible for them to move up the job ladder, earn higher salaries, and live better lives.

With the Progress Package, we will provide much needed help for the lower-income. So after I announced the Budget, the newspapers went and looked for specific cases to see how it affected people's lives. Shin Min Daily reported one odd job worker, Huang Qichang, who lives in a three-room flat with his wife and two daughters. The family will get Growth Dividends ($800 each husband and wife), Workfare Bonus for him ($600), NSmen's bonus for him (he had two daughters, so only for him, $400), U-Save rebate because three-room flat ($100); adds up to $2,700. He told the papers that he will use the money to pay off his outstanding bills. His daughters currently have to go to their classmates' houses to use computers to do their school assignments, so with money from the Progress Package, he is going to buy a study table and a new computer for his daughters.

And there was another example in Lianhe Zaobao, a 32-year-old lady, Wang Suyan and her family. She earns $300-$400. She just works part-time as a coffee shop assistant. Husband is a factory technician, monthly income less than $1,500. So when asked how she would use her family's share of the Progress Package, she said she would save the money for the education of her two young children, aged five and six, as the road ahead is still long for them. So, not everybody is buying 4D. These are the stories which give you heart and hope, and convince me that we are doing the right thing for Singaporeans.

Ultimately, we can only help Singaporeans if we can continue to grow the economy. Therefore this Budget also focuses on attracting investments to grow the economy, and to create jobs. The incentives and the measures we have put in place in this Budget and in previous years are beginning to bear fruit. We have seen good growth in a wide range of areas and let me just cite you a few.

In transport engineering, we have become the largest and most comprehensive centre in Asia for the provision of aerospace maintenance, repair and overhaul services (MRO) - that means aeroplane engines being serviced and overhauled in Singapore. Our shipyards build 70% of the world's oil rigs and platforms and their order books are full for the next five years. We are competitive.

In retail trade, wholesale and retail trade has been growing double digits in the last three years. I know HDB shops are still having some difficulty and MND has been helping to tackle some of their problems, but overall, the retail sales have been doing well and even provision and sundry shops in 2005 did better - went up by 8.6% compared to 2004.

In financial services and wealth management, we have had double-digit growth over the past five years - assets under management reaching $570 billion by end 2004. Each time I meet them, I ask them how well are you doing? They say "Sshhh", do not tell anybody, but they are doing alright.

And so jobs have been created - 111,000 last year. If you look at university graduates, last year 92% got employed within six months of final examinations. Polytechnic students - 91% found jobs within six months of final examinations.

So overall, I am confident we are on the right path. Our strategy of competitiveness and cohesion is the right approach for taking us into the future.

Mr Speaker, Sir, recently Ministry of Finance and SMU organised a forum: "If you were the Finance "Minister", where students developed and debated their own budget statements. We should practise this with MPs as well. The budget plan that was voted the most appropriate was entitled: "Staying Ahead, Staying Together". That is exactly what this budget is about.

I did not read the plan. Perhaps my staff may have borrowed some ideas from it, but that is what this Budget is about:

Staying ahead - building a vibrant economy where there is prosperity for the nation and good jobs for all.

Staying together - forging an inclusive society, where every citizen benefits from the country's progress.

Prof. Koo Tsai Kee is correct when he says this is a landmark year of profound change. While sharing the fruits of growth is something which the Government has periodically done, this Budget is different because it recognises that the world has changed and growth will no longer deliver the same opportunities to every individual. So going forward, we will work systematically to ensure that no Singaporean is left behind as we forge ahead. This Budget lays a foundation for a strong and prosperous Singapore. It offers a better life for all Singaporeans and that is our shared responsibility:

Courage and commitment from every citizen - adapting, upgrading, and seizing new opportunities.

Strong and competent leadership from the Government - focused on the long-term, in touch with the people and their needs.

Mr Ong Kian Min said some Singaporeans think Singapore has reached its peak and it is just downhill. I believe they are completely mistaken. We have scaled the peak of one mountain, actually we are not at the peak, we are on one mountain, and we are climbing up. We see a whole mountain range opening up in front of us. There is a whole range of possibilities ahead. We can choose which one to go to. We still have to climb, it will still require great effort, but with the skills and the strengths we have acquired climbing the first mountain, we are stronger and better placed to conquer the next higher peak and then the next.

So let us work to make Singapore our best home and together build a brighter future for all. [Applause.]

A clarification, Sir.

A short one. No speeches, please.

Sir, the Prime Minister has referred to the Workers' Party's manifesto. I happen to have a copy here. On unemployment insurance, I would like to clarify the reason why we contemplated and decided to propose this unemployment insurance. It is because of the experience of the financial crisis. Yes, we have retrenchment benefits, but when the company closed down, the workers get nothing. Bearing in mind that there are a lot of workers who are not unionised, they are just retrenched and left with nothing. They can be drawing a few thousand dollars or a few hundred dollars but, suddenly, when they are retrenched, they must be left with nothing because the company just went bust. How do they cope with life with the sudden drastic change in income? The current situation that we have, in terms of securing some kind of payment, when a person is retrenched, is not satisfactory.

That is not a point of clarification. It looks like Mr Low is making another speech.

He should have said this in the debate, not now.

I am clarifying. He is saying that unemployment insurance is something ---

But you are taking the opportunity to make a long speech, Mr Low.

Okay. I cut it short, Sir.

Just clarify. That is all.

The concern of the Government is whether this is going to be a welfare state. So I clarify that it is not so because we are contemplating unemployment insurance ---

I do not think Mr Low knows the meaning of clarification. After the PM has made his round-up speech, he is to seek clarification from the Prime Minister and not to say something in clarification of what he had wanted to say or had said but said wrongly or was misunderstood. That is the meaning of clarification. I think he better understand this carefully. If he wants to have a debate on the Workers' Party manifesto, that is a different matter. It is not a clarification.

May I understand that I can only seek clarification of what the PM has said. Okay, never mind, Sir. I leave the matter. I do want to clarify some points made by the Prime Minister. First, on unconditional needs-based welfare scheme, he said it would bankrupt the Government. He criticised the Workers' Party for saying that the Government should provide unconditional needs-based help. I would like to seek clarification from the Prime Minister as to what form of help that is going to be. If it is not going to be unconditional needs-based, is it going to be adhoc or depending on budget surplus? What happens if there is no budget surplus? The people who need help will perhaps have to fend for themselves. I hope he would clarify that point.

The second point is on fiscal prudence. First of all, I wish to thank the Finance Minister for his detailed explanation as to how the Budget is funded. I noted the funding is actually quite thin in the sense that you do not have very much left. Practically, this Government is spending almost everything it has accumulated within the term of government.

Is he spending too much and having it too thin in terms of the margin that has to be contributed to the national reserves?

Sir, the fact that the Prime Minister has to explain in detail here how the budget is funded shows that we do not need an Elected President. What we need is a robust parliamentary democracy and sufficient number of Opposition Members in Parliament.

Mr Low, there you go again.

It is purely for clarification, Sir.

Please take your seat.

I want to thank the Prime Minister for his comprehensive reply. Can I clarify with him about his comments on the funding of the Budget. Which chapter and clause in the Singapore Constitution states that all land sale proceeds go immediately into the national reserves and should not be reflected in the operating budget? I think it is the Government's choice of accounting practice and not a constitutional requirement. Can the Prime Minister clarify on this?

Mr Speaker, Sir, first of all, Mr Low Thia Khiang asks: unconditional needs-based versus what? It is versus what we have been doing, where we have many helping hands. We have ComCare, S&C, U-Save and Progress Package. We have many schemes to address problems according to their needs. But unconditional needs-based, that you will all be entitled, do not be afraid to put your hand out. This is something which should have been debated during the debate, when he made his speech, instead of scoring political points. Then we can discuss whether it is wise or unwise, how he raises it. Well, there will be further opportunities for him to do so, I assure him, before the General Election.

As for funding being thin, let me tell Mr Low that every self-respecting Finance Minister has more than one bottom card and I have not shown him all of my cards yet.

On Mr Steve Chia's land sale, this is the principle in the White Paper which is settled between the Government and the President, and it has been tabled. It is not an arbitrary arrangement. Land is a form of asset. So when you transform one asset into another, you are not earning something, you are just changing from land to the equivalent amount of money. The money can come back and become land. So land is locked up, therefore, the money is locked up. This is a straightforward matter. There is no monkey business or anything strange about it.

Question put, and agreed to.

Resolved,

That Parliament approves the financial policy of the Government for the financial year 1st April, 2006 to 31st March, 2007.

Order. I propose to take the break now. I suspend the Sitting and will take the Chair again at 3.00 pm.

Sitting accordingly suspended

at 2.48 pm until 3.00 pm.

Sitting resumed at 3.00 pm

Order read for consideration in Committee of Supply [1st Allotted Day].

Main and Development Estimates of Expenditure of Singapore for the financial year 1st April 2006 to 31st March 2007, contained in Paper Cmd. 3 of 2006.

For convenience, I shall take the totals for each Head of Expenditure in the Main and Development Estimates as they appear in the last columns of the schedules of estimated expenditure under the Main and Development Estimates Outlays for FY 2006 on pages 14 and 15 respectively of the Command Paper.

A total of 363 amendments to the Estimates of Expenditure have been submitted this year. The guillotine times to the discussion of the Heads of Expenditure under Standing Order 92(7)(a) have taken into consideration the earlier commencement time of the Committee of Supply for each allotted day. I must remind hon. Members that the total time for the discussion of the Heads of Expenditure includes the replies from the front bench. With the assistance of the digital timer in the Chamber and Members' experience last year, I trust that hon. Members will be able to keep to the speech times indicated against their amendments. I would urge hon. Members - both the back and front benches - to adhere to their time limits, as I will be very stringent in my time-keeping.

I shall deal first with the Heads of Expenditure in respect of which amendments stand on the Order Paper Supplement.

Head U - Prime Minister's Office. Mr Wee Siew Kim.

Zero-In-Process

Sir, I beg to move,

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

I have been much impressed by what I hear about the Zero-In-Process (ZIP) set up under PS21. Its objective was to find and resolve X files. These are recurring cases which cut across different public agencies, pointing to an underlying systemic problem. ZIP aims to review regulations, procedures and policies regularly to ensure their relevance to the public's evolving needs.

I would like to request for a progress report on the achievements of ZIP since its inception. I believe that such a report card will bring to the attention of many more Singaporeans the tremendous efforts put in by our Government to eradicate red tape and resolve inter-agency issues. Beyond this current set of achievements, I would like to ask if there is a push to expand and extend ZIP and do more work along these lines. In the machinery of the Government, like in most other sizable organisations, there will be issues of turf and silos. However, the public should not be affected or disaffected by boundaries between agencies. Hence, I am convinced that expanding the role of ZIP, which is client focused, will bring much benefit to all Singaporeans.

Scholarships

Sir, once upon a time, the Government faced a shortage of talent. The civil service paid poorly, and white officers were leaving for their home countries. The Singapore Armed Forces had to start almost from scratch. However, today, the situation is vastly different. The civil service and SAF offer exciting careers, pay market salaries, and attract plenty of talent.

Yet, the Government and statutory boards continue to grab young people at the age of 18. Today, the Ministry of Education announced GCE 'A' level results. Every year, about this time, the Straits Times makes thousands of dollars from its scholarship supplement.

Our talent pool, however, is quite fixed. So, the scholarship competition is just a zero-sum arms race. Sir, it is time for a performance review of the scholarship system. Scholarship selection is based on interviews and examination results at age 18. However, using such information to predict a person's future aptitude and interest four to 10 years later is almost like speculation. I know this from personal experience.

For instance, what proportion of Administrative Officers reach the Superscale Grade at the end of their bond? What proportion of SAF officers reach the rank of Colonel at the end of their bond? And likewise for Police officers. I am not saying that the "failures" were not talented. It is simply a matter of poor fit - they might have been better suited for another career.

Who loses from the scholarship scheme? First, the person himself/herself? Young people are attracted to scholarships. Indeed, I have heard that in certain junior colleges, it is shameful not to win an overseas scholarship. Yet, eight, even four years later, will they fit the organisation that they are bonded to?

Second, and ironically, another loser is the scholarship-granting organisation. One loss is the money spent on university tuition and allowances. A bigger loss is in the morale and contribution of "non-scholars". As I have said, the Government does attract talented people without scholarships.

However, Sir, there is at least a perception that the career opportunities of "non-scholars" are limited. Indeed, I have even heard that they are called "farmers". This is very disheartening to me.

The third loser from the scholarship is our Singapore universities. We have world-class institutions here. So, why do Government and agencies discriminate between "overseas" and "local" scholarships? Indeed, in a recent report from the Ministry of Trade and Industry on A*STAR, it also mentioned overseas and local scholarships. Sir, there should be only one class of scholarships. Give the student a fixed sum of money and let him/her choose how to spend it. That would be true empowerment.

Sir, there was a time for Government scholarships. Let us agree that that time has passed. Forty-one years after independence, our country has matured. Our Government has also matured. It is time to compete for talent on a level playing field.

Dr Tan Tze Wee is not here. Mdm Halimah Yacob.

Older Workers

Sir, much has been said about how rapidly our population is ageing, living longer and hence the need for Singaporeans to work longer to provide for their needs. It is important for the public sector to take the lead, as it is the largest employer in Singapore and its HR practices have an impact on the private sector.

The Committee on the Employability of Older Workers has made many recommendations on how to help older workers above 62 years old stay employed. In this light, I would like to ask the Public Service Division the following questions:

Firstly, what is the policy on the employment of older workers above 62 years in the public sector?

Secondly, how many per cent above 62 years old in the public sector over the last three years have been extended or re-employed?

Thirdly, what is the target the public sector has set for the employment of those above 62? How many percent will be extended in employment or offered re-employment? Finally, will the employment of those above 62 be automatically extended or re-offered and, if not, on what conditions will they be denied re-employment or extension of employment?

Registration of Criminals Act

Sir, I wish to speak on the Registration of Criminals Act amendment. The Act was amended recently to allow the records for certain categories to be considered as spent. And the reason behind this was to give offenders a second chance to find jobs. But that amendment only works depending on the question that the employer asks. If the employer asks, "Do you have a record?" Then the person can say, "No", because it is spent. But if the employer asks, "Have you ever been convicted of an offence?" Then the person has to say, "Yes". And the purpose behind that amendment is then lost.

I would like to ask whether the Government, as a major employer, is considering amending its forms. Its employment application forms, as I currently understand, actually ask the second question, which is "Have you ever been convicted of an offence?" I wish to know whether the Government, having amended the Act, will, as a major employer, also walk the talk and amend its forms to give such offenders a second chance.

Sir, first, let me thank Members of the House for their interest in issues related to the public service.

The challenges facing the public service are in line with those facing Singapore. The issues confronting us today are more complex and multi-faceted. Some can strike us with immediate and potentially devastating effect, such as a pandemic flu or a terrorist attack. Others are of a longer term but critical nature which will shape our society, country and region for decades to come - education, entrepreneurship, ageing population, healthcare, falling birth rate and new regional dynamics.

Our citizens are better educated, more globally connected and expect a higher level of service. They also expect more avenues for expression and participation. The public service has to be responsive to these developments. It must adapt and innovate in order to create the right conditions for peace and prosperity, and help seize opportunities for Singapore.

Today, the public sector consists of 15 Ministries and 66 statutory boards. These agencies, for reasons of accountability, have clear lines of responsibility. However, many issues do cut across agency lines. To be effective, the public service has to think and to act as one. There must be greater inter-agency coordination, not just in policy formulation but also in implementation of policies. This is why the public service is paying much attention now to working on what we call a whole of Government approach.

Various mechanisms have been put in place to tackle cross-agency issues. Where inter-agency problems are due to differences in fundamental policy orientation, there is a need to review the policies themselves and decide on potential policy trade offs, if necessary. To achieve this, we have set up inter-Ministry committees and project teams to carry out reviews. Examples of such high-level panels are the National Population Committee, the Ministerial Committee on Low Wage Workers and the Committee on Ageing Issues - the last two having recently released their recommendations. Much dialogue and collaboration between agencies happen with these committees which draw on public, private and people sector expertise.

We have also created new platforms to sensitise senior public officials to national imperatives and to build a common understanding of the challenges and issues facing Singapore. Managers are also put through milestone courses in the Civil Service College to attune them to cross-agency issues and national considerations so as to increase their capacity to think beyond their departmental work.

Besides addressing issues at the policy level, the public service has also set up similar mechanisms at the operational and implementation level to bring public officers together to resolve operational and service-related issues. One such mechanism, as Mr Wee has pointed out, is the Zero-In-Process, which he has requested for an update.

The Zero-In-Process Panel (ZIP Panel) was started in 2000. It is a mechanism in the public service to identify and resolve issues faced by members of the public that cut across public agency boundaries. Issues are typically identified through feedback from members of the public. All issues surfaced are addressed. Where appropriate, they will be channelled to the ZIP Panel, which is chaired by the Permanent Secretary of the Prime Minister's Office. If the issue is complex, the ZIP Panel may even commission study teams to look into the issue and make recommendations for its consideration.

Since 2000, the ZIP Panel has identified more than 110 cases for action, with 22 inter-agency teams formed to tackle how the more complex cases can be resolved. For example, the ZIP Panel implemented the no-wrong-door policy in 2004. This policy requires all public officers to put a member of the public in touch with the right agency for help. This has enabled citizens and businesses to get in touch with the right agencies more quickly, instead of being given a run-around.

As another example, organisers had to apply for many licences needed to hold community events, concerts, sporting events or exhibitions. As a result of one such specific case that was brought to the ZIP Panel's attention in 2005, a project team was convened to look into the matter. The project team helped to identify the typical licences and permits needed to hold events and made these available to the one-stop on-line business licensing service. This can be done now on this on-line service.

Apart from the Zero-In-Process, there are other mechanisms to resolve inter-agency issues. The Pro-Enterprise Panel has so far reviewed close to 1,500 suggestions, some of which also involved more than one public agency. Besides responding to public feedback, the public service proactively re-engineers processes to deliver integrated e-services. The on-line business licensing service is a prime example of how more than 30 Government agencies have worked together

to provide an integrated one-stop solution in the area of application, update, renewal and termination of business licences. As a result of process re-engineering, the time taken, for example, to incorporate a new company has been cut from five days to 15 minutes. Since the launch of the on-line business licensing service two years ago in 2004, more than 28,000 businesses have benefited from it. The public service strives to function as many agencies, one Government. Notwithstanding the achievement, there will always be cases where we can do better. Citizens and businesses who face problems with inter-agency coordination can surface this for attention at the PS21 website.

3.15 pm

Sir, to have a first-class public service, it is crucial for the public sector to attract a fair share of Singapore's most able people. Government scholarships are important as they are key source of talent to build capable public sector leadership. I would like to assure Prof. Ivan Png that the public sector is careful not to take in more scholars than we need. For the past few years, the total number of Public Service Commission and statutory board scholarships awarded had been kept relatively constant, at an annual average of about 300. For the year 2005, 249 scholarships, 93 in the civil service and 156 from the statutory boards were awarded. This is not a large number, considering that the public service, the Armed Forces and the Home Team have many challenging and demanding jobs that require very good people. It is also not a large number compared to the approximately 12,000 students a year graduating with 'A' level, or approximately 2,800 a year with three 'A' grades or more at their 'A' levels. If there were not sufficient people of high ability in the public service, we would not be able to have the quality and integrity that has become the hallmark of the Singapore Public Service which is recognised, not just in Singapore, but internationally, and we would not have the quality of a public service that the people of Singapore expect.

Students have a choice of whether to apply for a Government scholarship. If they do, they should be aware of the obligations and be ready to commit themselves to a public service career. For those who are not sure if they are suited to a public service career, they can pursue their university education on their own first and then decide on a career after graduation. And the public sector welcomes these individuals to join us if they wish to do so later on.

Prof. Png also asked how many of the scholars achieved Superscale grade or Colonel grade at the end of their bond. The bond today is six years and it will be quite an achievement if they do achieve Colonel grade or Superscale grade at the end of just six years of service. But many of them do stay on longer in their career, do achieve these grades and reach the highest ranks in the Armed Forces and civil service. That is precisely why we have taken them in. If we did not have such able people joining the civil service, committing and dedicating themselves to the profession, we would not have a constant flow of people, the refresh of people that is required in the service to have at the end of a 15-, 20-, 25-year career - people who can rise to the top and lead these very important organisations.

Government scholars are sent to both local and overseas universities. The PSC awards the prestigious Local-Overseas Merit Scholarships which are on par with Overseas Merit Scholarships for an undergraduate education in Singapore with the opportunity to do a masters programme overseas. PSC also sends scholars to top overseas universities in countries like the US, UK, PRC, France, Germany and Japan. Experiencing what the best foreign universities can offer and being exposed to diverse perspectives is good for the public service. We do not want a public service which has been brought up only within Singapore. I think that would not be very good for us.

To keep overseas scholars rooted to Singapore, the PSC brings them back after two years of study to attend a mid-course programme and to undergo a six to eight-week attachment in a public service agency. PSC scholars studying overseas can also choose to do their masters locally. Overall, the scholarship schemes have worked well. A vast majority of scholars adapt well to their working environment and live up to the high expectations demanded of them. Those who leave the public sector after working for some years generally still contribute to Singapore in one way or another at large.

On Prof. Png's concern about morale in the service, I assure him that scholars are not automatically placed on a career fast track. I wish all of them could become enormous successes because we have great hopes for them when they join us. But we do assess them on their performance and potential rigorously when they are in the service compared to all other officers in the service and only if they do well, do they progress. They must prove their worth and demonstrate aptitude and ability before they are promoted. The public service values and rewards talent, whether they be scholars or non-scholars. And it certainly would be our loss to neglect talented non-scholars in the service.

Sir, let me now move on to an issue of national concern which Mdm Halimah Yacob has touched on - the employability and employment of older workers. Mr Yeo Guat Kwang and Mr Loh Meng See touched on this yesterday as well. Mdm Halimah has focused on those who are aged 62 and above. I should say that the public sector looks at older workers, not just focusing on this age group, which has specific issues regarding them. But we also look at older workers in general, and we look at workers who are above 40 years of age and see how we can make them more welcome in the public service as well.

The public sector does welcome older workers who have the skills, experience and passion. The public sector has a diverse workforce, comprising both younger and older workers with different strengths and talent to build an effective and efficient service. Recruitment is based on merit. The public sector employs a candidate who best fits the job requirements regardless of age, gender or race. Currently, about 39% of public officers are above 40 years old and 17% are above 50 years old. On average, about 15% of the new hires each year are older workers above the age of 40. Between 2002 and 2004, the public sector has recruited more than 2,800 such older workers.

Public sector agencies are free to employ retired officers if these officers wish to continue working and where the agencies have a need for their expertise. Over the past few years, more than 800 officers have been re-employed. This number does not include retirees who are employed on casual terms or on short term, ad hoc projects. The re-employed officers are in a diverse range of jobs, for example, retired teachers are re-employed as adjunct teachers and school counsellors. In the Agri-Food and Veterinary Authority, retired officers are re-employed to maintain experimental farms and control stray animals. The Ministry of Community Development, Youth and Sports employs retired SAF and Singapore Police Force officers to undertake operational duties in the juvenile homes. And the Public Utilities Board re-employs about 100 retired staff mostly in the technical fields. So retired officers are being re-employed in the service.

As a large employer, the public sector has a role in addressing this national concern of employment of older workers. I believe that we can do better without compromising our ability to deliver cost-efficient public service. The Public Service Division will step up efforts to re-orientate the attitude of public agencies towards the employment of older workers. In December last year, we organised a seminar to raise awareness among public sector HR practitioners on this issue and will continue to promote sharing and best practices among the agencies. But PSC recognises that its efforts cannot stop here. It has therefore also engaged Ministries and statutory boards to identify and open up more job opportunities for older workers, and these could also be people who are not directly employed by the public sector. But these could be jobs created in the public sector. For example, the Ministry of Education has worked with private sector companies to provide more than 600 security guards for deployment in schools, and many of these positions will be taken up by older workers.

Public sector agencies will also be strongly encouraged to tap on WDA's ADVANTAGE Scheme, to redesign jobs and retrain the older employees. The response from some agencies has been encouraging. We will work with Ministries and statutory boards to create more flexible avenues to re-employ older workers. Although the public sector is not setting hard targets for the employment of older workers, we will be monitoring the progress of public sector agencies closely.

Finally, let me close with good news for Ms Indranee Rajah. The civil service supports the movement to give ex-offenders a second chance. As far back as 2000, Ministries have started to employ ex-offenders taking into consideration the type of offences and the nature of the job. We will take the additional step. The civil service will amend the job application form to ask applicants to declare if they have criminal records in Singapore, instead of whether they have ever been convicted in court. Candidates with spent records can now indicate that they do not have any criminal record. The new forms will take effect on 1st April this year. Ministries will work with the statutory boards under their charge to implement similar application forms by the second quarter of 2006.

Mr Teo, you have to leave some time for the second answer.

Sir, a clean and efficient public service is the foundation for good governance in Singapore. The service will continue to strive to live up to its core values of integrity, service and excellence. It believes in continuously challenging itself to excel so that it can function effectively to serve Singaporeans better. As an employer, the service will also ensure that its human resource practices are progressive, responsive and flexible. With this, we will have a first-class public service worthy of Singapore.

Item (e), Mr Chiam See Tong, two minutes.

General Election

Sir, I have three points to make. Firstly, I ask the Prime Minister in the coming elections to provide two or more election rally sites at Potong Pasir constituency. In the last general election in 2001, only one rally site was provided. That was not enough. I ask the Prime Minister please to provide at least two or more rally sites this time round.

Secondly, Sir, I would like to request that the election deposit be reduced from $13,000 to $5,000, or less. The Opposition candidate has to finance his own election expenses, including paying for the election deposit. Opposition candidates are not wealthy people and many cannot find a ready cash of $13,000 to pay for the election deposit. It is also really not democratic to bar serious candidates from taking part in the election. The $5,000, which I propose, is big enough a sum to show that a candidate is a serious contender in the election.

The third point I wish to make is that it concerns police action. In the last two general elections, the Police had been very strict with the Opposition. They did not allow the Opposition candidates to come down from the stage to speak and bond with the crowds. They insisted that the Opposition parties station a vehicle near the election stage and, immediately after the election rally, they whisked the Opposition candidates quickly away from the rally site. This is unnecessary as it only makes the crowd angry because they want to meet the Opposition candidates after each election rally. They are strong Opposition supporters and there is absolutely no danger to the candidates. I hope the Police shall not be so strict

and allow Opposition candidates to meet their supporters after an election rally.

3.30 pm

Sir, I know the Electoral Boundaries Review Committee is working hard now, that the Report will be out soon, and that the GE will be around early June 2006. This is my guess. It is only three to four months away. The Prime Minister and his team must have already decided on the nomination and the polling dates by now. I believe that the Prime Minister cannot be still undecided at this point of time.

Sir, can the Prime Minister please tell us exactly which day is Nomination Day, and how many days of campaigning has been assigned? Also, can we have the assurance that there will be at least three months between the publication of the Electoral Boundaries Review Committee's Report and the dissolution of Parliament?

Secondly, Sir, as explained in the Budget debate, I hope the Prime Minister can heed the numerous citizens' request to reduce the GRC size back to the 1988 proposal of a three-man team each. This will increase the number of SMC to 42, allowing at least 50% of our citizens to experience voting in this general election. If the Prime Minister disagrees to this request, I hope he can give good justification and still get the people's genuine support.

Sir, I must make a note of his questions, because he spoke so fast.

You may have to speak as fast, too, because you have 20 minutes left.

I will try to make it fast. We have up to 3.50 pm.

Sir, Mr Chiam asked for the usual things, such as more rally sites and for election deposits to be reduced, which he had also done in the past, and I am sure he also knows the answers I am going to give.

Sir, let me deal with the question of deposits first. The law specifies that the election deposit shall be 8% of the total allowances payable to an elected MP in the year before the election. This formula is not a new formula. The formula has been in place since 1954 when the MP allowance was about $500 and the deposit was also $500. So when the MP allowance was subsequently raised, the election deposit was also raised by the same absolute dollar value. Then, later on, we decided that instead of changing it every time the MP allowance was raised, we just have a formula. The formula is 8% of the total MP allowances payable in the preceding year. Therefore, it works out to be about $13,500 for the next election.

Should we reduce this to just $5,000 as Mr Chiam suggested? At one time, he even asked for much less than that. I would say that election is a very serious business. People who want to contest in the election must really have the ability or the confidence to be able to even get 12.5% of the valid votes. That is all he needs. If he can get 12.5% of the valid votes, he gets back his money. Very few candidates who took part in elections actually lost the election deposits. I have explained in this House before why, in the previous election, two candidates lost their deposits. One was because he just did not show up at all in Ayer Rajah. The other was because he went to contest in a single constituency where there were three candidates and he did not appeal enough to win even 12.5% and, therefore, he lost the deposit.

Mr Wong, sorry to remind you. You have not much time.

Yes, Sir.

On the question of rally sites, I think Potong Pasir has one rally site, and that one rally site is enough because, in the last election, Mr Chiam managed to hold only two rallies throughout the whole campaign. He could not get the last night because he was late, he lost out to the PAP candidate, so he went to Lavender Street. As a result, he attracted 13,000 people who went to attend this rally. Imagine that if the police did not have a system to ensure the security of the candidate, I am sure Mr Chiam would have found great difficulty in getting out of that situation where almost 200 of them went quite unruly and, as a result, quite a number got arrested for their unruliness.

On Mr Chia's question about having enough time and whether the ---

Mr Wong, I am sorry, your time is up. Unless Members have any clarification to raise, I can stretch it out. Yes, Mr Steve Chia.

Sir, the Deputy Prime Minister has not replied to my question.

Sir, on Mr Chia's question, the Boundaries Review Committee has already worked hard. They have completed their report and the report is now before the Prime Minister who will be informing the President of it, and I am very certain that, before the end of the week, the Members will receive a copy of the report.

On the question of reducing the size of the GRC to three, it really does not matter whether we have bigger or smaller GRCs, more singles or fewer. It is a question of whether the parties themselves are able to get enough people to contest in the election. And it is not the PAP's fault that the Opposition parties have not been able to get enough candidates. I think those who say that the PAP has denied the people a choice should ask themselves: should they themselves not take part in them? I have heard of the panel discussion reported in the papers just a few days ago that the PAP had denied the people a choice. I think those panel members should go and form a political party. If they want to form a political party, I will make sure that the registration will be expedited. Or they can join another party. Then, we will have more people contesting the election. I welcome that.

Sir, the Deputy Prime Minister has not answered my question. When is Nomination Day and how many days of campaigning are being assigned?

Sir, I am very certain that what was experienced in 2001, when there were only two days between the publication of the report and the dissolution of Parliament, will not happen this time. Therefore, it means that Mr Chia will have more than two days after the report is out before the dissolution of Parliament. He may have two months or he may have more than that, I do not know. But if the Prime Minister decides, and when he decides we will have the election and dissolve Parliament, I think all of us will know of it.

Sir, responding to the hon. Minister's explanation on scholarships, let me say that I am not saying that we should not send scholars overseas. Rather, I was advocating one scholarship. There should not be a local scholarship or overseas scholarship. If we are going to offer scholarships, let us offer one scholarship, ie, same terms to everybody, a certain lump-sum of money, let them decide how to spend it. From the Government's point of view, same expenditure and no discrimination between local and foreign universities.

Secondly, will be the Minister please confirm that the usage of this ---

It is a pretty long clarification, Prof. Png. Can you make it short, please?

Yes, Sir.

Secondly, would the Minister please clarify this term "farmers" is not used to distinguish people from scholars?

Do you want to reply to that, Mr Teo?

Mr Chairman, Sir, we fund people who go on scholarships according to how much it costs for them to study. So if we give the same amount of money to a person who goes overseas to study as a person who goes to a university in Singapore to study and we try to balance out the two, we will probably be over-funding one of them quite a lot and under-funding the other quite considerably. The one who is studying in Singapore could stay with his mother and father and not incur an enormous amount of cost, whereas the one who goes away, say, to France, Japan, Germany or the United States for several years will, I think, be seriously out of pocket, if we give them the same amount of money. I should say also that we have to respect the choices that these young people make. The world is their oyster. If we were to limit their choices by limiting the amount that we give them, I think we will be doing ourselves a disservice as well and doing the public service a disservice.

The second question the hon. Member asked was whether or not the term "farmers" has been used. Sir, I think Prof. Png has come to this term very late. For as long as I have been in the SAF, we have been talking about such terms and we have dealt with that and gone past that for many, many years already. So Prof. Png has made this discovery a little bit late.

Sir, the Deputy Prime Minister has not answered my question. Are we going to see more than the nine days for campaigning?

Sir, the law specifies a minimum of nine days and we will get nine days. I do not see a need for change because, even with five years, if you have not done enough campaigning, then nine days is nothing.

Mr Wee, are you withdrawing your amendment?

Yes, on behalf of the Members who have raised cuts, I thank the Deputy Prime Minister and the Minister for their replies. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The sum of $163,875,010 for Head U ordered to stand part of the Main Estimates.

The sum of $62,180,700 for Head U ordered to stand part of the Development Estimates.

Head M - Ministry of Finance. Dr Ahmad Magad, you have three cuts. You can take them together. Total of 6.5 minutes.

Retirement Scheme

Sir, I beg to move,

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

Sir, several hon. Members, including myself, have spoken about Singaporeans' inadequacy of savings for retirement and have argued on the urgent need to tackle this problem. With dwindling CPF contributions and the SRS losing favour because of its excessive restrictions on the scheme, the retirement nest-egg for Singaporeans is shrinking. Hence, further to what I have said during the Budget Statement debate, I would like to propose the following changes be made to section 5 of the Income Tax Act, so as to expand the options available to employers and employees to save for their old age. The proposals have no bearing on the current CPF and SRS, which should also be enhanced to encourage higher savings.

I welcome news to establish retirement schemes that will enable employers and/or employees to contribute directly to a retirement savings plan;

Limits for defined contribution plans should be capped at 20% of salary less employer contribution to CPF, instead of being capped at the level of benefit pay-out;

Employers should have the discretion to determine eligibility to the retirement benefit plan;

Employers should have flexibility in determining contribution level or benefit level;

Pooling of the retirement funds under one master trust to attract low unit cost from fund managers should also be permitted;

Portability of the retirement savings should also be permitted;

The benefits withdrawn at retirement should be tax-exempt, provided that they are used to purchase an annuity; and

Double taxation deduction to employees and employers for contributions made towards retirement savings should be considered to encourage contribution to the fund.

Sir, I believe these recommendations can provide relative tax efficiency at least at the tax contribution end, impose the discipline that the SRS lacks and could be used to assist the Government's undoubted aim of devolving retirement responsibilities to the private sector. They also provide tax-efficient benefits to foreign nationals who are always on the look-out for safe and tax-incentivised environments to park their funds.

Approved Holding Companies

Sir, a major reason why Singapore's endeavour to establish itself as the regional capital for holding companies has been lukewarm may be attributable to the uncertainty over the treatment of gains from the disposal of subsidiaries and other investments. To encourage more MNCs to locate their holding functions in Singapore, it was proposed in the recent Budget announcement that gains by approved holding companies on the disposal of shares in subsidiaries will be exempt from tax, provided that at least 50% of the shares are owned and the shares have been held for a period of not less than 18 months.

Sir, while the announced changes are encouraging, there is a lack of clarity of the definition of an approved holding company and whether it means simply approved for this very purpose. To make this scheme more attractive, I would like to propose that the term "approved holding company" be properly defined to remove any ambiguity and the requirement for the shares to be held for the specified period be removed.

Employee Stock Options

Sir, to make the wage system more flexible, companies should be given wider choices of flexi-components to be incorporated in the overall compensation of employees. An option that is increasingly being used today is to link employee remuneration to the company's performance by granting stock options or direct share awards, ie, share-based compensation. Companies that grant share-based compensation in the form of its own shares have two ways of meeting their obligations. They can either issue

new shares or alternatively buy back their own shares at the time when they are obligated to settle the share-based compensation.

3.45 pm

I am pleased that the Minister has proposed to grant a tax deduction to companies that have incurred actual outlay for share-based compensation, granted through treasury shares, in order to encourage companies to use such to settle share-based compensation obligations.

Sir, first, to encourage a higher degree of usage of performance-linked compensation system, including by MNCs, I would like to propose that the tax deductibility be extended to the MNCs' local subsidiaries here in cases where their parent companies have to purchase their own shares from the open market for the specified purpose of meeting the share-based obligations of their Singapore employees. In this regard, I would like to declare my interest that I am working for an MNC.

Second, Sir, when the treasury shares are transferred to employees pursuant to the share-based compensation scheme, the company could possibly record an "accounting gain" from the appreciation in value of the treasury shares. If so, would the gain be considered as capital in nature?

Third, if excess treasury shares pursuant to employee share-based compensation scheme are sold subsequently for cash or transferred to third parties, would such gains be treated as capital in nature?

And, finally, Sir, would companies be given a choice of method to value the transferred shares when valuing these shares for employees if treasury shares were bought at different prices and times?

Taxation and Duties

Sir, the PM has stated that our present headline corporate income tax of 20% is competitive. And for some strategic industries, they are granted preferential tax rates or exemptions. The question is: would we be able to be more competitive and more attractive to other general direct foreign investments, if our corporate income tax were to be lower? Can we be ahead of the curve and not be just there? Do we know how much investments we will be able to attract to Singapore and how many more jobs we can create if we were to reduce our corporate income tax to, say, 18%?

To do this, a quick calculation is that the tax forgone is about $770 million and this is equivalent to 3.1% reduction of the operating expenditure. The question is: has MOF not explored this and see if the reduction is worthwhile? After all, if we create more jobs, we will also reduce the amount of assistance we need to extend through Progress packages and so on whilst having more corporations and workers paying taxes.

Finally, estate duty. Much has been said but it bears repeating. I agree that in old societies where there were few opportunities to socially move upwards and where wealth was represented by great estates and other fixed assets, it was more justifiable to tax inherited wealth to preserve social equity. However, the situation is quite different today. In our meritocratic society, there are numerous opportunities for those in poor families to succeed. Our education system and scholarship scheme all exist to preserve social equity and cohesion. Besides, a fool who inherit wealth will soon part with it.

Further, only 3% of the 16,000 deaths pay estate duties and it seems only 2% of those dutiable cases contribute 70% of duty assessed. And it is estimated that only $70 million will be collected, maybe no small sum, as PM said. But I think the continuance of estate duty certainly runs counter to our aim to be an international wealth management centre, our attraction to global entrepreneur who has made his pile. And this is even more jarring when Australia, Malaysia, New Zealand and Hong Kong have all abolished estate duty in recent years. I am sure that the PM knows that estate planners and experts publicly share six best ways to avoid death taxes. However, when they advise you privately, they share with you another 36-lesson own ways. I hope the review will be expeditiously undertaken. Some people are counting on it. They cannot afford to die otherwise.

Mr Lawrence Leow, you have two cuts. Take them together. Total is seven minutes.

Fair Competition

There have been situations where GLCs, their subsidiaries or private arms compete with SMEs for public projects locally. These are inevitable situations as both GLCs and SMEs are equally entitled to bid for such projects. However, by virtue of their size and background, GLCs have a distinct advantage over their smaller counterparts, and from feedback gathered, GLCs are almost always favoured over SMEs in a head-on competition for the same projects. I would acknowledge that in certain situations, it could well be a problem of a perception rather than GLCs being granted an edge over SMEs.

However, besides feedback that I receive on this matter, on a personal note, I have also similar experience, so I would say that the problem does exist. It is more a question of extent than existence. Sir, I would like to declare that I have an interest here, as I too run a SME setup and would definitely get into situations where business comes into competition with GLCs for projects.

In the interest of fair competition, I have put forth this cut in the hope of having a more level playing field that SMEs can thrive on. I am fully aware that our Government operates a laissez faire environment, leaving the market to set the price and determine the outcome. Sir, I am not suggesting that we have to deviate from such a policy. Neither am I calling for SMEs to be accorded special treatment. However, to uphold fair competition, and to better align our objective of promoting the growth and development of SMEs, some measures have to be instituted to allow SMEs a fair and equal chance when they get into a competitive situation with GLCs.

I would like to propose that for projects of relevance, the review and award committee that is tasked with the job of evaluating the bids and making the final decision on the award of such projects, include representatives that are neutral, such as representatives from the Pro-Enterprise Panel that could provide a more balanced approach to the evaluation process leading to the award of the projects. This would also help to eliminate any perception problem, as the saying that "justice must be seen to be done" is of great relevance in such a situation.

Having a review and award committee that is seen to be neutral would go a long way to correcting any misperceptions the SMEs may hold. Sir, incidentally, I am also a member of the Pro-Enterprise Panel and I would like to clarify that my suggestion to have the representation from the Panel stems purely from the intent of injecting a greater sense of neutrality to the evaluation and award process.

Besides the evaluation and award process, the size of a project, if it is too big, could well rule out SME's participation. Where feasible, a project should be broken down to smaller parts or make them "bite size" so that SMEs can have the opportunity as well as the resources to take a bite and have a share of the pie.

I would also advocate for a strong message to be issued from the PM's Office, emphasising the need to grant SMEs a fair and equal chance to succeed in their bids for public projects, in the light of upholding fair competition. The above are just some suggestions and a more comprehensive set of measures has to be devised and implemented for this purpose.

Sir, in essence, I would like to know if the Government has in place, and if not, whether the Government would consider putting in place measures to ensure a more level playing field, that would allow SMEs an equal chance of securing public projects when they are faced with competition from the GLCs.

Age Limit for Business

Our youths today are no longer quite the same as those of older generation. They are knowledgeable, more IT-savvy and have better access and resources to pursue their interest. This has led to quite an encouraging number of our youths owning inventions and IP. However, by virtue of their age, they are unable to form a company to register their invention and IP.

Many from this group are students from the polytechnics and other local institutions, who are eager to take the entrepreneurial route but are unable to register a company in their own names because of age restrictions. Often, they have to register their invention or business in the names of their parents or friends, to circumvent the problem.

Since we are actively promoting entrepreneurship amongst our younger generation and are encouraging them to be innovative and to take risks, we could be sending a contrasting signal by forbidding them from registering their business or invention in their own capacity because of age restrictions.

At present, people below the age of 21 years old are considered as minors and not allowed to register a business in their names. However, from what I have found out, many countries in the world have lower age restrictions on business registration. In countries like the United States, England and Wales, there is no specific age restriction, while in Germany, Australia and New Zealand, the age limit for setting up a business is 18 years old.

In the case of Hong Kong, the age limit is also 18 years old. With a population of about 7 million versus 4 million in our case, Hong Kong has some 450,000 business establishments as compared to about 150,000 here. I am not certain if the proportionately higher number of business set up in Hong Kong as compared to Singapore, has anything to do with the lower age restriction on setting up businesses, but the statistics do seem to suggest that there may be some correlation.

Sir, I am not suggesting to leave the age limit entirely, but I do feel very strongly for a case of lowering the age limit on setting up businesses to 18 years old. I acknowledge that people below the age of 21 years old are deemed as minors. However, we ought to give due regard to the world we are in today.

Sir, as our youths today are quite discerning and better poised to assume greater responsibility, we should trust that they would be responsible businessmen. For those who may be concerned about dealing with businesses run by people for whom they deem as too young, we should let them assess their own risks and make their own judgement calls whether to deal with such businesses. After all, it is really a case of caveat emptor.

Sir, if there are no big problems in those countries that operate a restriction on the age of 18 years old, I cannot foresee the problem to be of any greater if we were to implement it here in Singapore.

I would therefore like to know if the Government would consider allowing people of age 18 to set up a business here.

Government Procurement

Increasingly, we hear of the term private financing initiative (PFI) in Government procurement. I wish to ask about our PFI experience to-date, especially after reading of interest a recent Straits Times' article on its unclear outcomes in the United Kingdom. What are the guidelines and mechanisms used in assessment of PFI projects to ensure that they make financial sense from a taxpayer's perspective? How do we prevent loading operating expenses of future years with what ought to be current year's capital?

I understand that PFI is new. What steps are being taken to ensure that the best of three quotations mentality of current procurement officers has been sufficiently reset since entering a long-term relationship requires a whole new mindset and approach? Additionally, as PFI projects are by definition long-term, how can this new approach to Government procurement be utilised to grow our local enterprises, especially SMEs which may not have the track record of financial strength to fulfil the long-term requirements of such ventures?

Mr Chairman, let me first thank Members for their comments and suggestions. Our fiscal policies and measures are fundamentally geared towards creating an environment that is best for business and encouraging and beneficial for citizens to provide hope, opportunity and progress for the future.

First, let me address the issue of enhancing economic competitiveness. Our key fiscal strategies to do this are two-pronged. First, a competitive and efficient tax system, supported by targeted incentives and, second, a regulatory environment that is conducive for business.

On Singapore's tax regime, Dr Loo Choon Yong has raised two points and I will address them. One, as he said, we should lower further our corporate income tax rate. Our corporate income tax rate has been lowered quite significantly.

If you look at it in 1986 it was 40%, today it is 20%. I think what you really want is a competitive CIT rate rather than the lowest headline rate. If you look at the recent study done by the Canadian think-tank, C.D. Howe, a cross-country study of 36 countries, and if you look at what is called the effective tax rate, which is the share of tax payable as a percentage of your pre-tax return on capital, Singapore is No. 1, ahead of Ireland and Hong Kong. So we are very competitive. It is not just the headline rate. But this is not something that is cast in stone. We constantly monitor this. We see what our competitors are doing and the aim, as I have just said, is not to have the lowest, not necessarily the lowest, but to have a corporate income tax rate that is competitive.

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On estate duty, I take note that now there are not only six ways, as enunciated by Straits Times, but 42 ways to avoid it. This is something that we are looking at. Our starting point, our operating philosophy, has been that we want everybody to have an equal start in life and not to have undue advantage over inherited wealth through structural advantages like this. But, again, we weigh this against all the arguments that you heard or read about and also debated in this Chamber, that many countries have abolished it, it might affect our aspiration to be a wealth management centre and, as was pointed out, you can get expert advice on how not to pay it. So we are looking at that and we hope to come to a conclusion by the next Budget.

One of our key economic strategies, and this relates to what Dr Ahmad brought up just now, is to develop Singapore as a centre for HQ activities. The Member may be pleased to note, because he mentioned that the response has been underwhelming, that actually it has been quite successful. With EDB, under their IHQ scheme, there are 350 companies under them. We have about 7,000 MNCs in Singapore and 4,000 of them locate their HQ activities in Singapore. The Approved Holding Company Scheme is to enhance and to make it more attractive. So to be an approved holding company, to begin with, you have got to qualify for the EDB HQ Scheme and the requirements there include how much fixed asset investments you are putting into Singapore, total business spending, the amount of jobs you generate. That is one. And, the business that you run should be an operating business, like a manufacturing business, for instance, and not one that simply deals with trading shares. So that is how you qualify the company for being a HQ company under the EDB scheme.

What we have done is to enhance this scheme. Because if you are an approved HQ company, sometimes you might need to transfer or sell your shares in a subsidiary. So we put down two conditions, one that it should own 50% of the subsidiary, the other that the shares that you have, you should hold it for 18 months. The Member has suggested why not get rid of this 18-month holding period. There are good reasons for having 18 months. It is to ensure that you are not in the business of trading the shares. That is why you have this 18-month holding period. This is not something that we are inflexible on. If you do not qualify for whatever reasons, including if you are below the holding period, we will review on a case-by-case basis. It is not as though the door is shut.

Related to being the centre for HQ activities is our aim to become a knowledge hub and exchange. An important part of the knowledge exchange is to attract and retain talent. I think the Member has mentioned about the different remuneration schemes that companies are now coming up with in order to retain talent. We recognise this - this is the reason we made it a matter of policy that remuneration in the form of employee share options or direct share award would qualify for tax deduction if actual outlay is incurred.

The Member has raised, I think, four questions. One is when a multinational corporation subsidiary in Singapore had incurred share-related cost under ESOP, is it tax deductible? The answer is yes, it is tax deductible. The two other questions, I think, are related. Treasury shares, we allow now. With treasury shares, what happens if, while holding the treasury shares, it goes up in value? Is it taxable? I think, the other issue that he raised, he said, what if you have excess treasury shares and then you sell the excess? All these things, you really have got to base on facts. You have to look at the details, but I can give you the principle involved here. The principle is that we would not tax it if the purchase of these treasury shares was not meant for trading. That means you treat the gains as capital. As a capital gain, we will not tax. But as I said, all these things turn on the details, on the facts of each individual case. That is the underlying principle.

Finally, he brought up the issue of what happens if you bought the shares at different times? How do you value these shares? Well, this is something that IRAS is now taking feedback on and they are working it out and they will issue a circular soon - the details on how to treat this.

Let me now speak about maintaining a conducive and business friendly regulatory environment. Mr Lawrence Leow has asked if the Government is looking into lowering the age limit to promote entrepreneurship among the young, say, maybe lower it to below 18 years old.

Currently a person below 21 cannot set up a business independently as the minimum age to be a company director or business owner is tied to the age of contractual liability, which is currently 21. This is important as companies entering into contracts with directors and owners ought to have the assurance that the contracts are enforceable. The Member is right that jurisdictions, such as Australia, Hong Kong, the US and the UK, have reduced the age of contractual capacity to lower than 21. My Ministry, the Ministry of Finance, is studying the desirability of lowering the age of contractual capacity, which could then pave the way for lowering the minimum age to be a director or owner.

In this study, we will also look at other statutory constraints, like the ability to hold land, which may prevent a young person from entering into and conducting business in Singapore. The merits of lowering the age to below 21 years old must be weighed against possible risks to parties to enter into a commercial relationships with young directors and owners.

Mr Leow has also raised the issue of Government procurement rules. Our rules aim to achieve value for money in public expenditure through fair and open competition. We do not favour GLCs or SMEs - fair and open competition. We do not give preference to or discriminate against any supplier, whether local or foreign, large or small, Government-owned or otherwise. Each supplier is assessed on its own merits. We believe this is the best way to grow a strong, resilient and competitive business. I believe that a vibrant SME sector is an important part of the economy. SMEs do face some inherent difficulties due to their size. They are small and so they have certain inherent disadvantages. Competition from bigger companies is inevitable. The way to help them is not to give them preferential treatment on Government contracts, but to enhance their capabilities and opportunities to better compete.

Sir, in response to Mr Leow's question as to what are some of the things we are trying to do to facilitate SMEs to better compete, what we have sought to do is to make it easier for them to participate in the Government procurement market. First, we have amended our rules so that we no longer require a track record for the purpose of registration as a Government supplier. New start-ups and SMEs can now register and bid for Government procurement tenders straight off. Second, SMEs can join forces by forming consortia to bid for high value tenders without forgoing their individual identities. To facilitate SMEs coming together to participate in such tenders, MOF has issued a new set of guidelines to recognise the combined strength of smaller companies. Third, on 1st April 2005, suppliers were given one free user account for GeBiz, the Government's e-procurement portal which all suppliers of products and services to the Government are expected to use. This helps cut business cost for the suppliers, especially SMEs. From 1st April 2005 to 1st December 2005, the number of suppliers registered with GeBiz as a trading partner has increased from 11,000 to 17,500, a 59% increase.

Now the good news is, and this is in reference to his point on whether GLCs get more contracts than SMEs, that our smaller enterprises, our SMEs, have fared well against the competition when it comes to Government tenders. Out of 374 Government tender contracts below $100,000, awarded between April and November last year, 70% went to companies with net assets below $250,000.

Next, let me touch on what Mr Wee Siew Kim brought up on public-private partnership or public finance initiatives, as he referred to them. This is another form of Government procurement. PPPs are long term partnering relationships where we bring together the expertise and resources of the public and private sectors to deliver services to the public at the best value for money. We have awarded four PPP tenders to-date. It will take time to fully evaluate the benefits. But the early results are encouraging. For instance, taking the PPP approach for the desalination and NeWater project has helped to lower the overall cost of water. By leaving the choice of desalination technology to the private sector, PUB was able to purchase desalinated water at a price which is highly competitive internationally. The PPP tender for the NeWater project also yielded very favourable tariffs. The guideline is that PPPs should be considered for all projects above $50 million in capital value. Given their scale, the PPP providers tend to be a consortium. SMEs can participate in the PPP consortium as partners, contractors or subcontractors. Our first PPP project to supply desalinated water to PUB was, in fact, awarded to Hyflux, a home-grown local enterprise. Hyflux's Chief Executive, Olivia Lum, said that the PPP scheme had actually made it easier for the SMEs to participate in such large scale projects. I asked her when we had the launch of the PPP scheme and she said it is because of the consortium arrangement where the main company is likely to outsource work to other smaller companies without these smaller companies having to go through a tendering process.

A final point I would like to make on Government procurement, as brought up by Mr Lawrence Leow, is how do we evaluate it? Evaluation of tenders and the decision on the award of tenders are kept separate. They are decided by different committees in the public sector agencies. This is to ensure both rigour and due process in Government procurement. It is neither appropriate nor desirable for an external party such as the Pro-Enterprise Panel to decide on a Government agency's procurement. What is critical is to have decisions made at the right level, with good checks in place, to ensure fairness and thoroughness in evaluation to make sure that we secure cost effective contracts.

The second thrust of our fiscal policy is to create an environment that is beneficial for citizens in providing them hope and progress for the future and the opportunity to be the best that they can be. We have over the years lowered the personal income tax rate and made changes to our tax system. At the same time, our tax treatment of savings aims to encourage Singaporeans to save for their long-term needs.

Dr Ahmad Magad has raised the issue of retirement saving plans. In Singapore, the CPF system provide the basic framework for retirement savings. Tax exemption is given for contributions in investment returns and withdrawals. Those who wish to set aside more for their retirement savings, over and above the mandatory CPF contributions, have several avenues today. I think it is useful just to outline them. First, Singaporeans and PRs can make voluntary CPF contributions to top up their mandatory CPF contributions up to a ceiling of $25,245 per year. These voluntary contributions enjoy the same interest rates as CPF monies although they do not qualify for tax relief. Second, they can also contribute to the supplementary retirement scheme, SRS, which I think he mentioned just now, which provides tax deferrable benefits. Contributions to SRS are eligible for tax relief and investment returns are not taxed at the time of accrual. Only 50% of the withdrawals are taxable at retirement. But, with proper streaming of the withdrawals after retirement, many people would pay little or no income tax on their SRS withdrawals.

The SRS contribution cap is linked to the CPF salary ceiling as the SRS is also meant for foreigners wanting to save for their retirement but who no longer enjoy tax relief for CPF contributions. The CPF salary ceiling is set at the 80th income percentile. Those who earn more than the 80th percentile should be able to save more if they want more for their retirement. They should not expect the Government to provide tax benefits for doing so. The SRS can be part of the extra savings but is tied to the CPF salary ceiling. Dr Magad has asked whether the SRS scheme can be enhanced. I think Members during the Budget debate have also raised the same issue. The Ministry of Finance is prepared to review the SRS contribution cap in the years to come. But such a review has to be done within the larger context of enhancing Singaporeans' retirement adequacy, including the question of how to improve the rate of return on CPF money as mentioned by Mr Inderjit Singh in the Budget debate.

Third, Dr Magad referred to section 5 of the Income Tax Act. Under section 5, employers can enjoy a tax deduction for making contributions for their employees to pension funds approved under the Act. But, there is a qualifier. All of these funds must be for retirement benefits and must be available to all staff. Dr Magad has suggested that we leave it to employers as to who shall benefit from this scheme. If we allow this, it will become a scheme which companies can use for attracting and retaining key personnel, mostly executives, rather than a scheme for supplementing the retirement benefits of all employees. This does not mean that we should, therefore, not allow it. It means that if we do allow it, it is for purposes of attracting talent rather than enhancing retirement adequacy of everyone.

So this is something which my Ministry will have to study carefully.

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With an ageing population, enhancing the retirement adequacy of Singaporeans is a major priority for the Government. We have several schemes in place, as I have outlined earlier. If Dr Magad or other Members of this House have specific proposals on how any of these schemes can be improved, I will certainly welcome them, with the assurance that they will be studied very seriously, because this is something where we share the same concerns.

Sir, I think I have addressed all the issues.

Amendment (h), Mr Steve Chia, you have two cuts.

International Monetary Fund and World Bank Meeting

Sir, the Budget book tells us that the Government has set aside $85.3 million to organise the IMF and World Bank meetings. That sounds like a lot of money for organising the IMF/World Bank meetings that last for a few days compared to some of the help schemes, like the $50 million Opportunity Funds to provide greater learning opportunities for our students. Are we being extravagant in such expenses whilst stingy with our own citizens' future? What is the expected return on this investment economically in terms of branding, reputation or goodwill-wise? What kind of indicators will be used to assess the returns on investment? Finally, how is this amount of spending compared to other countries that have hosted the IMF/World Bank meetings in the last five years? Are we at the top of this spending heap?

Investments

My second cut is on investments. I also understand from the Budget book that the investment expenses went up from $613 million in FY 2004 to $1.29 billion in FY 2005, and is expected to rise further to $1.38 billion in FY 2006. Sir, what kind of rise in our higher asset base from FY 2005 to FY 2006? What are we talking about that can cause such a large jump of more than 100% in our investment expenses? Are the MOF officers being taken for a ride with high-churning activities in the investment market by traders, thus leading to high trading volume and high expense cost? It is incredible to learn of such high expense from our stable Government reserves. What is our current total reserve asset and what is the total investment returns over the last five years? I think we are paying too high an expense ratio and not getting satisfactory returns from our investments.

Temasek Holdings and Government of Singapore Investment Corporation

Sir, we now have regular updates from Temasek on its performance. GIC also seems to be generating very good returns over the years. I am encouraged by this. In my speech on the Budget, I mentioned about my hope that both Temasek and GIC will return higher percentages to the CPF so that our Singaporeans' returns will be better. But before we can do this, we, of course, need to ensure that we can continue to generate good returns. I have three questions in this regard.

First, while the returns made by Temasek and GIC look good, how good is good? Can we understand how both organisations benchmark themselves? In other words, how do their performance compare to equivalent organisations, companies or funds which engage in similar activities?

Second, how do we account for the significant losses that happen from time to time, like the large write-off recently made by DBS and the expected write-off by other Temasek companies which also have made high profile, expensive acquisitions lately? My main worry is whether we are moving into an era where we can no longer expect good returns from both these organisations. The question is: how do Temasek and GIC manage such write-offs?

Third, how do both organisations account and manage the risk of investments done outside Singapore? I know that we can do this well in Singapore, but how do we do it outside Singapore? It will be useful to understand what is done to manage the risk to give comfort to Singaporeans, and moving forward, the money that we have will be well protected.

Dr Loo, do you want to raise a clarification before Mrs Lim replies?

Clarification, Sir. I have read the Canadian report. Currently, our tax rate is indeed competitive. I also acknowledge that for strategic industries that we want, we even give them tax exemption. What is the impact? For every percentage point reduction, how many more jobs and how many more businesses are we likely to create? And what are the downstream benefits? Is it worth acquiring these jobs and cut our tax further? This is really my question.

Mr Leow, make it short please because you are taking up other Members' time.

Sir, I want to inform the Hon. Minister of a situation where a subsidiary of a Government agency competes with an SME and the same Government agency has to decide on the award of the project. How can the Government help to ensure that there will be fairness when the award criteria are not based on price alone but based on very subjective elements like design?

On Dr Loo's question, he is right. That is what we do. We work very closely with the Economic Development Board because we are talking of tax incentives. They go through it carefully, as I mentioned to Dr Ahmad Magad just now. How do we award the HQ incentive scheme, for instance? They go through certain indicators. They look at the fixed asset investment. They look at total business spending. The Member is right. They look at jobs - how many jobs are created. That is something that is being done.

In answer to Mr Leow, as I said, we have a transparent and rigorous evaluation process. And I will be very surprised if it is a Government contract of a particular agency and that particular agency decides on its subsidiary's tender. It does not happen that way. As I have explained, we actually have an evaluation tender committee and a committee that actually does the award. We separate the two things. But if the Member has specific information, he should let me know, and we will look into it.

Sir, first, let me thank Members for their comments and suggestions.

In addition to balancing the Budget and providing a fiscal framework that is best for business and beneficial for citizens, the Ministry of Finance is also keenly focused on seeking the best value for money in Government, both for expenditure as well as in investments.

First, on value for money in Government spending. Members have heard the Prime Minister. Every dollar the Government spends has first to be earned. Members of this House can be assured that we are conscious of the need to live within our means. Our philosophy is always to exercise prudence in spending and to deliver more for the dollar.

Sir, Mr Steve Chia is concerned about the budget allocated for organising the annual meetings of the Boards of Governors of the IMF and the World Bank group. I would like to state that we do not take this expenditure lightly. We decided to bid to host the meetings only after much deliberation and hard-headed assessment of the costs and benefits.

Let me just spell out briefly the benefits that these meetings would bring to Singapore. Firstly, strategic benefits. We aim to develop Singapore as a global knowledge hub - a place where people, businesses and non-profit organisations converge and exchange ideas. Hosting premier international events is an integral part of this strategy, as it will help establish the Singapore brand globally, which he does not deny. Hosting meetings like the IOC and the World Trade Organisation's Ministerial Conference provides a unique opportunity to present ourselves to the rest of the world as gracious host, meticulous planners and efficient organisers. Moreover, playing host to a meeting focused on promoting economic development, alleviating poverty and fostering macro economic and financial stability will also reinforce Singapore's reputation as a responsible global citizen.

Secondly, the economic benefits. In addition to the official annual meetings, there will be at least 300 other meetings and events held concurrently during that time. With the bulk of the expenses borne by the private sector and accruing to the local businesses, there are significant spillover effects on our economy. In terms of tangible economic output, practically all the $135 million that it would cost to organise the whole event would go to contracts for local businesses. In relative terms, I would like to assure Mr Chia that Singapore's expected expenditure is commensurate with that of previous hosts. The IMF/World Bank meetings in 2003, which was hosted by Dubai, incurred expenditures of over $360 million, though that included the construction of a brand new convention centre just to house the meetings.

With 16,000 foreign visitors converging in Singapore in September, the meetings would also generate at least $50 million in tourism receipts. As it is, almost all the hotels and functions rooms in downtown hotels and conference venues have already been booked.

We are mindful, Sir, of getting value for money and keeping costs down but without compromising on security or good organisation. Just to give a little example of the exercise of innovation. For example, to provide some 1,000 office premises for the delegates, the organising committee opted to build temporary offices within Suntec itself rather than to retrofit hotel rooms into office spaces. And this creative solution saved us over $4.5 million.

Sir, the second aspect of seeking value for money in Government is to ensure adequate returns on our investments. Mr Inderjit Singh has asked about performance benchmarking and risk management for GIC and Temasek. Our investment objective for Government's reserves managed by GIC and Temasek is to achieve good long-term risk adjusted returns on a sustainable basis. GIC is the Government's fund manager, managing a globally diversified portfolio of assets comprising a whole range from equities, bonds, real estate, private equity and other assets. Temasek is the Government's investment holding company with stakes in a broad range of companies, principally in Singapore and the region.

As fund owner and shareholder respectively, Government holds GIC and Temasek accountable for returns and overall performance. The Ministry of Finance regularly reviews the performance of GIC and Temasek with the boards and management. We are satisfied that GIC and Temasek have performed creditably against comparable benchmarks.

Sir, what are these benchmarks? In the case of GIC, the performance of each asset class is benchmarked against relevant international measures like the Morgan Stanley Capital International, or commonly referred to as MSCI Equity Indices and the Lehman Brothers Aggregate Bond Index. Performance is also evaluated against other peers. On this basis, GIC has achieved good long-term returns.

In the case of Temasek, since inception, Temasek has delivered 18% total shareholder return by market value and 16% total shareholder return based on shareholder's funds.

Investments taken by GIC and Temasek are subject to rigorous risk management and internal control frameworks. These address all the major categories of investment risks, including market risk, credit risk, regulatory risk, operational risk and political risk.

The Ministry of Finance is involved in deciding the long-term return objectives, the risk tolerance levels and the asset mix for the Government's funds managed by GIC. As for Temasek, MOF endorses the overall strategic directions for its investments. However, the Government does not get involved in individual investments, leaving these to the respective boards and management. It is not for Government to approve each investment by GIC and Temasek, much less the Temasek companies, nor for us to second guess the risk assessments. Such micro management will ultimately be counter productive. What is important is that there is a good governance framework, regular performance evaluation, robust risk management and an effective system of checks and balances. These, I can assure Members, are in place.

Sir, Mr Steve Chia has also asked about the increase in investment expenses. Allow me to explain very briefly. The expenses on investments should not be viewed in isolation but within the context of the size and nature of the investments. The increase in EOI in recent years reflects really three things: first, the growth in the asset size; secondly, the investments in new markets and products; and, thirdly, accounting effects

arising from changes in investment strategies.

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The bulk of the increase was due to a greater use of investment instruments like interest rate swaps. Currently, the Government accounts treat the paying and receiving legs of the interest rate swaps separately as expense and income. But in substance, they are two related sides of the same investment transaction and viewing the net effect will give a better reflection of the return profile of the swap investment. Ultimately, what is important is that returns on our investments are monitored on a net basis, ie, after deducting expenses, and that the long-term performance of our investments remains consistently good over the years.

As for the exact size and returns of our investments, we have explained on numerous occasions that the disclosure of such information is not in Singapore's national interest. Our financial reserves help to maintain confidence in the Singapore dollar and the Singapore economy. Any revelation would make it easier for currency speculators to target the Singapore dollar.

Mr Chia can take comfort in the fact that there is full accountability for GIC and Temasek's overall performance and risk management.

Islamic Finance and Banking

Sir, Singapore has developed an excellent reputation as a transparent financial centre with a favourable regulatory environment for the placement and investment of offshore funds. Our tax system permits offshore funds to compound tax free for non-residents, with hardly any barrier entry for the repatriation of funds. As such, Singapore is well-positioned as a benefiting party to the movement of offshore funds out of Europe and the United States.

The various ministerial visits to the Middle East to boost bilateral and economic ties coupled with a series of FTA conclusions with several Middle Eastern and Gulf State countries, have created significant awareness of Singapore as an alternative leading financial centre for these countries to conduct business with. SM Goh, as Chairman of the MAS, has also pledged to boost Singapore's status as a centre for Islamic financial services.

All these, combined with our triple A political stability rating and positioning as the region's wealth management centre, should make our country attractive to Middle East funds. But to be the nexus for the convergence of both conventional and Islamic finance and banking in Asia, we need to do more. I would like to make two suggestions. First, to develop a healthy Islamic finance industry here, we need to strengthen the legal framework to attract the more lucrative Islamic funds. As the Islamic market is still infant and not well understood, we should be prepared to invest in its education. This could be done by promoting training and education in Islamic finance and banking and incentivising training courses and programmes with grants and subsidies. Funding for research into new products should also be seriously considered.

Second, Sir, is focused need on product development. To develop innovative products, we need a critical mass of players in the market which is currently grossly lacking. To encourage product development, the MAS could consider the declaration of an open arm and open minded policy to stimulate discussions on Islamic product applications. Doing so would provide assurance to potential investors that Islamic products they are developing or plan to develop, are permissible in Singapore.

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Wealth Management Industry

Sir, Singapore wants to develop into a full-service global financial centre. But the competition is hot. What is our competitive advantage? Although "The Banker" magazine ranked Singapore as the "Financial centre of the future" and Forbes magazine estimated that Singapore will overtake Switzerland as the leading centre of offshore private banking by the year 2008, I was curious about what else we must do to realise these prophecies. To be on the cutting edge, we need to innovate existing products as well as scan the global playground for emerging trends. I would like to highlight two rapidly growing niche markets - they are the philanthropic wealth management and micro-finance industry.

On philanthropy, there is a worldwide acceleration of philanthropy gifting, as witnessed by younger founders of companies like Google which has recently given US$100 million as micro-finance endowment fund, Salesforce.com that has got a 1% rule, Gates and Melinda Foundation, etc, which all accelerated the pace of large sum giftings. How does Singapore intend to tap into this multi-billion industry?

On micro-finance, Credit Suisse estimated the need for micro-credit to be at US$100 billion, with a short-term market size of between US$15-US$20 billion. Banks that traditionally serve the upper markets, like UBS, Credit Suisse and Citibank, have all jumped on the bandwagon to offer a suite of micro-finance products like bond funds, micro-savings, micro-insurance, and so on. It is a high growth industry, fueled by market size and profitability. It witnessed growth rates of between 20%-40%, with extensive diversity in structures and frameworks across the world.