Hansard, 2007-03-05

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 (2007) To (2007) Mr Lee Kuan Yew 05 Mar 05 Mar Mr Zainul Abidin Rasheed 07 Mar 10 Mar Mr Goh Chok Tong 11 Mar 14 Mar Mr George Yong-Boon Yeo 13 Mar 16 Mar 18 Mar 24 Mar Mr Lim Hng Kiang 18 Mar 21 Mar Mr Khaw Boon Wan 30 Mar 01 Apr

ABDULLAH TARMUGI Speaker Parliament of Singapore

[Mr Speaker in the Chair]

1. Mdm Halimah Yacob asked the Prime Minister and Minister for Finance (a) if he will provide an update on the efforts to promote the re-employment of officers above the age of 62 in the civil service and statutory boards; and (b) what percentage of those who reached the age of 62 were re-employed last year and what were the terms and conditions of their employment.

Mr Speaker, Sir, it looks like the Minister is not here yet. So can we defer it?

I think we can defer* the Question.

*Deferred to the sitting on 6th March 2007.

TO 31ST MARCH, 2008

Order read for consideration in Committee of Supply [3rd Allotted Day].

Head V - Ministry of Trade and Industry. Mr Inderjit Singh.

Economic Outlook and Cost Competitiveness

Sir, I beg to move,

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

Sir, I have heard the term "Goldilocks Economy" used to describe the Singapore economy. The "Goldilocks Economy" term is used to describe when things are just right. Indeed, in Singapore, after the tough few years, last year has been good for the economy and the outlook looks good. Most sectors of the economy are doing well and the outlook remains good for the foreseeable future. But external factors can quickly change the status quo and just right things can become too hot or too cold for us.

In such times we should not get complacent but instead should take the opportunity to position the economy for future growth and also to prepare to weather any storms that we might face. Let me ask the Minister to share with the House on what future growth drivers we will develop for the economy. Specifically, after the biomedical sector and the Integrated Resorts, what will the next couple of areas we can seek opportunities in to become the major growth drivers for the future economy? What new engines do we plan to develop for Singapore?

Sir, while we focus on new engines of growth, it is obvious that there is now an urgent need for us to nurture a new breed of innovation and technology-focused start-ups capable of very high growth and of becoming Singapore's own multi-nationals of the future. As more foreign MNCs exit Singapore, our best bet is to grow our own base of such companies. It will take a whole new approach for us to identify and support such companies quite different from the past approach of focusing on the already successful SMEs and to help them grow further. It will require a combination of incentives, ecosystem and support which can incubate and grow such companies rapidly, including the adoption of latest technologies and also in helping them globalise.

Sir, I do have two concerns which I want to raise for the Minister to comment on. First, the emergence of the dual economy and our strategy to address it. While there will always be weak sectors of any economy, I think the divide is not just among different industries but between big and small companies too. Is the Minister watching this dual economy development?

Sir, the second issue is on cost competitiveness which is not a major issue right now but which can very quickly become an issue if you are not watching it. As I mentioned during the Budget debate speech, we had in the past allowed our economy to become uncompetitive as a result of cost increases which resulted in the formation of special committees from time to time to address cost competitiveness. This time, I hope that we do not get in the same mode but try to avoid major cost increases. And I talked about the triple whammy of cost increases we have seen - rentals going up, wages going up and also the input costs, including fees and charges from Government, that have gone up recently. Perhaps, the Minister can share with the House the measures his Ministry will be taking to avoid getting into another cost uncompetitiveness situation. Specifically, can the Minister reconsider its strategy to allow JTC to divest its assets? I will not want to repeat what I said during the Budget speech but needless to say that, if JTC divests its assets in the industrial property sector, this will price some of the industrial land beyond the reach of some of the companies that could still operate out of Singapore.

Sir, finally, I would like the Minister to comment on the effectiveness of the Competition Act or has it been mainly a white elephant. We still have cartel-like behaviour in certain industries, like the oil companies, taxi companies as well as the energy sector, where I have heard about one example of how a new entrant in the electricity generation sector is facing a lot of problems because of the uncompetitive behaviour of the incumbent big players in the energy sector. In fact, this energy player is facing problems from the gas sector too which is not being liberalised. Perhaps, the Minister can share with us how the Competition Act is working in Singapore.

Economic Growth

Sir, I applaud the Government for putting various measures in place to make Singapore the best place to grow and start business and to globalise these businesses.

I agree that the best way to help all Singaporeans in good times and bad times is to build a strong economy and build it on a sustainable basis. We continue to be attractive to MNCs and global financial institutions. Our communication infrastructure, IP protection, rule of law, competitive tax regime and comfortable living environment for the expatriate staff will continue to give us an edge.

Sir, the many new measures announced in the Budget Statement, such as increasing partial tax exemption, tax exemption on chargeable income, will benefit SMEs and start-ups. I urge the Government to continue to promote all local enterprises, including SMEs and start-ups, and not to slow down the momentum as our economy improves. As we diversify our economy, SMEs and start-ups will continue to provide jobs and contribute to the development in many ways. Local enterprises are also more likely to stay rooted in Singapore and even if they were to expand all over the region and the world, they are likely to keep their HQ status in Singapore and repatriate their profits back home and pay Singapore taxes.

I also support the Government's intention to invest 3% of our GDP in R&D. This, I think, is a very good signal and it will in time create new companies once the products and services are commercialised. I hope that our agencies can revisit some of these opportunities in the region because SMEs in Europe like Germany and Italy are interested to use Singapore as a springboard into China and India.

Research and Development Plan and Biomedical Strategy

Sir, while we have seen some successes with our five-year R&D plans, we have not been very successful in deploying the R&D funds administered mainly by EDB to local companies. Our MNCs, on the other hand, have benefited from Government funding to encourage them to do R&D in Singapore. I am concerned that the new technology plan managed by the NRF may again not effectively reach out to our local enterprises. Sir, MTI needs to rethink how it plans to deploy the R&D funds as past approaches did not fully achieve their objective for local companies and, therefore, today, we have very few local innovative, technology and high growth companies which arose out of Singapore.

Let me point to the ongoing debate about how successful our biomedical strategy has been. On the surface, it seems to have worked and I think it did work exactly the way the strategy of attracting and growing foreign MNCs worked for many years through EDB's strategies. EDB's strategy for MNCs was to give them a whole lot of tax incentives and MNCs also got cheap land rentals, almost at negligible cost in many cases, plus a whole lot of other facilitation by Government agencies. If we look at the way the biomedical strategy has worked, it has been exactly the way the MNC's strategy was put together. We had lots of funding, lots of incentive and therefore we attracted many global researchers who did research in the way that they wanted and not necessarily the way it could have benefited the Singapore economy.

Sir, my worry is that the strategy seems to have ignored the local companies and expertise. We should have additionally focused on building local capabilities at the high end as well as supporting companies at the lower end. A case in point about supporting industries, I was told, is that there is a lack of some ancillary services in the biomedical sector. Specifically, the lack of gamma-sterilisation facilities in Singapore meant that our companies are sending such work to Malaysia to get it done.

So I hope that the new R&D strategy of the Government will not forget local enterprises and go the way that MNC strategies have worked in the past.

Promoting Local Enterprises Overseas

Sir, the Ministry and IE Singapore have good initiatives to promote internationalisation and growth for local enterprises. In 2006, the internationalisation efforts included organising and supporting a hundred over trade missions and incoming missions as well as facilitation of alliances to help local enterprises exploit overseas market opportunities.

I would like to ask the Ministry how successful have these programmes been in the growth of our local enterprises overseas? How much business have the local enterprises been able to secure? What is the Ministry's assessment of the success of these programmes and what have been the challenges? Have these efforts been coordinated in supporting our local enterprises?

On a related matter, on participation in larger projects overseas, has there been success in the Singapore consortium approach and has this enabled our SMEs that have good skills but lack business development capabilities grow and penetrate overseas markets and participate in these large deals? As someone said to me recently, a dwarf standing from the shoulders of a giant may see further than the giant himself.

12.15 pm

Sir, regionalisation is important to our economy, even as we continue to attract foreign MNCs and global financial institutions and move from a population of 4.5 million to perhaps 6.5 million. By and large, our agencies, such as EDB, IE Singapore, SPRING and even ACE, have done well in helping local enterprises, in particular and start-ups. We have done many right things, provide incentives, organise overseas business trips, conduct forums and organise business matching sessions.

ACE, over the last four or five years, has managed to help shift the mindset of Singaporeans and also added to the debt of financing available to new start-ups. Now, given that many other governments are actually actively involved in helping their companies penetrate overseas markets, some even engage in more direct activities, such as negotiating deals, then we should do more for our enterprises. SMEs and start-ups need more assistance than big companies that can help and fend for themselves.

I would like to suggest that some of our big companies and TLCs have actually been quite successful in regionalising the companies. You go to China and India and you will see quite a few of Singapore companies have established themselves in various fields - property development, estate development and manufacturing. The question really is: is it possible for the Government to encourage both TLCs and local companies to give smaller Singapore companies a chance to quote for the goods and services when they want to procure them? And obviously, not just moral suasion, but whether there could indeed be some tax incentives given at home when they actually give these contracts to Singapore companies. I understand Japan, Korea and, to some extent, the Taiwanese government do this to help their companies go overseas. A company, I know, that does this is Keppel Land and it actively encourages its consultants and sub-contractors to go with them to new markets - Shanghai, Beijing - as they develop these properties. And I think it has worked well for small companies because this is the first time that they have a chance to break into these foreign markets.

The next point that I would like to bring up - that I have no time earlier on to talk about - is that we notice in some established countries - Germany, Italy - there are many, many SMEs which are bigger than our SMEs in Singapore. I think they are beginning to be more interested in Asia because of the growth of the Chinese and Indian markets. I think there is a great opportunity to revisit some of these countries and try and see if they will use Singapore as a springboard to India and China. They could perhaps team up with our SMEs. They have the technology. Our SMEs and local companies have got people in place, knowledge of the terrain and connections with the people in these countries. I hope this will happen and it will enable SMEs to regionalise even further.

Finally, I think SMEs are all waiting anxiously for Mr Philip Yeo to take over the chair as Chairman of SPRING. With his immense wealth of experience and boundless energy and vision, I think SMEs and local enterprises would benefit.

Entrepreneurship

Sir, in the recent ACE's Finance Action Crucible study trip to Taiwan, Korea and Hong Kong, we observed that governments in the various economies took on SME financing as a developmental role. Hence, they did not expect any monetary profits from the financing that they provided to enterprises. My question is: should Singapore not adopt the same approach?

In our current Government-supported financing scheme, MOF has set a requirement that the agency administering will have to return to MOF a certain return over and above the cost of borrowing. In other words, SPRING and other agencies administering such schemes are required to make money for the Government. For the countries we visited, we noted that all ended up writing off a significant portion of the funds provided to support SMEs every year. While I do not have the exact data, my projection based on information I got from a couple of banks showed that, in Singapore, SME lending as a proportion of total lending is a mere 2%.

In some of the Asian economies that we visited, the evidence is that the number is closer to between 20% and 25% of the total lending going to SMEs.

Sir, I believe that if we just make a simple adjustment where SPRING and the other agencies just have to break even for the funds provided, not make money, I think we would be able to reach out to many more companies and service those that are deserving and increase our percentage from 2% to a much better number. This profit making requirement should be eliminated because really this should be a developmental role and we can then service many more companies which can benefit from the growth of the economy here in Singapore.

First, let me thank Members for their very insightful comments and suggestions. Members have rightly pointed out that our key challenge is really how Singapore should position itself, invest in our future and grow the economy.

First of all, we start from a very strong position. The Singapore economy is in good shape. It grew by a robust 7.9% last year, with growth permeating all sectors. More than 173,000 jobs were created and the unemployment rate fell to 2.7%. The average household income, among employed households, grew by 4.3% last year with income per household member showing gains across all deciles.

Our current strong position is due to our restructuring efforts over the years. We cut our income taxes; we recalibrated our cost structures and we increased wage flexibility. We also diversified our economic base by growing new industries and expanding into new markets.

Our economy now has more growth engines, compared to five years ago. This gives us greater cushion against business cycle fluctuations of the individual sectors. For example, the strong performance of the biomedical and transport engineering sectors in recent years has helped to compensate for the slower growth in chemical and construction sectors.

We have one of the most open economy in the world, and that has served us well. Trade grew by 13% last year and is projected to grow by between 8% and 10% this year. Our international trade linkages have never been stronger. Since we embark on the first Free Trade Agreement (FTA) in 2000, we have concluded 11 such agreements and are in active negotiations for 10 more. Our FTAs have helped our companies achieve tariff savings of over $470 million in 2006 alone.

The global economic growth however is expected to be slower but, overall, the external environment is still positive. Domestically, consumption is likely to strengthen, while investments will remain firm. We expect inflation to remain in check, even with the impending GST increase in July. Barring unforeseen setbacks, we should continue to see another year of robust growth of between 4.5% and 6.5%.

As Members pointed out, we should ride on this current growth momentum and seize this opportunity to further strengthen our competitiveness. While we are enjoying the low hanging fruits of our earlier restructuring efforts, we need to press on with the more difficult areas which will take time to transform. Three areas we need to concentrate on: first, rejuvenate existing sectors and grow new ones; second, build up our innovation capacity; and, third, develop our enterprises and help them to venture overseas.

As Mr Inderjit Singh pointed out, we need new growth engines. Today, we have a broadly diversified economy. If we can strengthen and nurture more sectors, we will have more engines of growth and be more resilient.

We have seen successes in rejuvenating the marine sector, for example. In the marine and offshore sector, they have reinvented themselves to become major global players in ship conversions and rig-building. Our recent investment successes in the electronics and chemical sectors will provide the growth momentum in these sectors in the next cycle. Tourism is another sector that we are remaking. MOS Iswaran will elaborate on the promising results so far, and what more we are doing beyond the first two Integrated Resorts.

Besides the existing clusters, we are also making good progress in growing new clusters, such as education, healthcare, water and environmental technology, interactive and digital media as well as alternative energy.

The biomedical sciences, or BMS, sector is another new sector that we started developing in 2000. It has since enjoyed phenomenal growth and now accounts for almost 7% of the GDP and 10,600 high value-added jobs.

Mr Inderjit Singh raised two main points about BMS strategy, first, whether our MNC-approach has left our local enterprises out and, second, whether we should sharpen the focus of our strategy. Let me first elaborate on our approach to developing the BMS sector. For knowledge-intensive industry like the BMS, talent and knowledge are the keys. Hence, in our first phase, we focus on establishing a firm foundation in basic biomedical research in Singapore, even as we attracted big pharmaceutical companies to set up plants here. We established our research institutes to develop the BMS capabilities as well as build up a pool of research talent.

Mr Inderjit Singh suggested that, apart from attracting MNCs, we also need to focus on building up local capabilities and supporting industries. I fully agree. A-Bio, our first biologics contract manufacturer, and MerLion Pharmaceuticals, a drug discovery company, are examples of local companies built up from our capability development efforts. We hope to nurture more such firms. On the biopharmaceuticals front, we have attracted a number of supporting services for R&D and manufacturing. We are also building up the local supplier base for medical technology. Specifically, on the gamma-sterilisation facility that Mr Inderjit Singh pointed out, this is indeed presently lacking in Singapore. And EDB is working actively to address it.

Mr Inderjit Singh's second point is that we should sharpen the focus of our biomedical strategy on niche areas, instead of just letting foreign researchers do what they want in Singapore. I agree. Let me explain our R&D strategy. First of all, we have decided to increase our National R&D expenditure to 3% of GDP. I thank Dr Loo Choon Yong for supporting such a strategy. By world standards, 3% of GDP is not very large, particularly when we consider the size of our GDP. Second, two-thirds of that expenditure would, in fact, be from the private sector. Hence, Government expenditure is only 1% of GDP. Third, Government expenditure has to be apportioned to the BMS sector as well as the non-BMS sectors. In the non-BMS sectors, for example, we are very clear of our mission - to support and expand the existing sectors and grow new sectors, as I outlined just now. Fourth, with the limited funds available, therefore, we have to concentrate and we have to focus on niche areas. And this is indeed what we have been doing. We have recruited foreign scientists based on the strength that Singapore wants to compete on and develop, and also on how the foreign scientists can help train and nurture our local talent. Furthermore, A*STAR does not work alone. In cancer research, for example, it collaborates with other leading research institutions, such as Sweden's Karolinska Institute. Our capabilities are well recognised internationally, due to the critical mass of excellent research talent that we have managed to attract internationally. At the same time, we are developing a healthy pipeline of our local researchers. A*STAR has so far awarded close to 400 scholarships in the field of BMS.

But we must recognise that BMS is a long-term investment. We are only five years into it. We have laid a strong foundation in the first phase. In the next phase, we will add a new focus to develop translational and clinical research capabilities. This will bring discoveries from the 'bench' to the 'bedside'.

We believe that our BMS strategies are in the right direction, but we will continue to fine-tune them as we gain more experience.

We will also continue to tap on our international scientific advisory boards as well as eminent local and foreign experts to guide us in our effort.

12.30 pm

The second thrust of our development strategy is to build innovation capacity. For Singapore to remain competitive in the longer term, we need to become a knowledge-based economy thriving on creativity and innovation. R&D is a major effort and we are undertaking to support this transition into a knowledge-based economy. I agree with Mr Inderjit Singh that the transition to a knowledge-based economy cannot be limited to just the MNCs located here but also has to occur among our SMEs as well. We should indeed help our local companies to develop and exploit technology. Recognising that local enterprises often need help to undertake R&D, we have indeed developed various programmes to provide them technical manpower and funding assistance. In addition, the National Research Foundation (NRF) plans to allocate $250 million for initiatives that will benefit our local SMEs, particularly technology start-up companies. NRF is working with MTI and its agencies to develop these specific programmes. MOS Lee Yi Shyan will provide the details later on.

The third thrust is really to develop our enterprises, particularly in helping them compete overseas. Financing is a problem faced by many SMEs. Mr Inderjit Singh mentioned that Government agencies are required to make a return on SME loan and investment schemes. He asked whether Singapore could adopt a developmental approach towards financing SMEs, whereby losses incurred by the Government from these schemes are regarded as investments in our economy.

First, let me assure Members that the Government does not expect to profit from our SME financing schemes. However, the cost of capital is charged to ensure financial discipline so that funds are deployed efficiently on worthy projects. But it does not mean that our schemes are not developmental in their approach. For example, for most loan schemes, the Government shares 50% of the loan default risks and sets aside a grant to cover the potential losses. We have even gone up to 70% on selected schemes. The grant is not expected to be recovered. For equity financing schemes, such as SEEDS, the Government's expected return is only 5%, far below the threshold for private equity funds. But I agree with Mr Inderjit Singh that we should fine-tune our financing schemes to be more efficient in reaching out to the various companies, and I welcome his suggestions. SPRING will work closely with ACE on this.

As our companies grow, they must also go beyond our shores to take advantage of the enormous business opportunities elsewhere. Ms Jessica Tan and Dr Loo Choon Yong asked about the Government's initiatives in leading overseas business initiatives. The Government's approach in helping Singapore companies internationalise focuses on three aspects, ie, competency, capital and connections. Ms Jessica Tan asked about the success of these efforts. Let me quickly update Members on our results over the past year.

IE Singapore's grants for capability development are expected to help companies generate almost $2.9 billion in incremental sales over the next three years. Our financing schemes capitalise $220 million worth of loans and help our enterprises insure almost $900 million in assets. Our various trade missions and fairs are expected to generate almost $1.7 billion of overseas sales. We agree with Dr Loo Choon Yong that our smaller enterprises need more help than their larger counterparts. That is why, when we design our schemes, we factor in the size of the enterprises. For example, the Trade Credit Insurance Programme pools the demand from the smaller enterprises so that they can gain access to attractive premium rates normally available only to larger companies. Our Internationalisation Finance Scheme is only open to companies whose turnover is $200 million or below.

Mr Chairman, Sir, even as we push on with growing our other sectors and building our innovation capacity and developing our enterprises, we must ensure that we remain cost competitive, as Mr Inderjit Singh pointed out. Let me address a few key issues which concern us.

First, the manpower issues. Our labour market is tight and wages are rising. A strong pipeline of jobs is coming onstream in the next few years, on top of a buoyant employment market. For example, the marine industry will need at least 15,000 additional workers by the end of this year. To support the construction of major projects, the process supporting industry will create some 10,000 supervisory jobs from 2007 to 2009. Another area is the tourism industry where the two IRs will each create about 30,000 jobs economy-wide when fully operational. To cope with the rising demand, we will train as many Singaporeans as possible to take up the new jobs created, especially the better-paying ones. But we foresee that there will still be a shortage of workers, in particular, for the semi-skilled jobs that Singaporeans are not attracted to. We are working closely with the Ministry of Manpower to see how we can ease the tight labour supply. The Minister for Manpower will elaborate on this in the Committee of Supply debate.

Next is the issue of rentals. Our industrial rentals have come down very significantly since the late 1990s. The rental indices for JTC's standard factories and flatted factories are approximately 50% and 45% below their respective levels just before the Asian financial crisis. The Government will continue to be responsive in making available land through the Government land sales programme to meet the demand of our industrialists. Mr Inderjit Singh is concerned about the upcoming divestment of JTC's properties and how this may push up rentals. JTC understands his concern. I had addressed this earlier last week in response to a question. To minimise the risk of unwarranted rental hikes, JTC will proceed with the divestment process carefully, with the aim of fostering a competitive industrial market landscape, post the divestment. JTC will not be divesting its entire industrial portfolio to one owner but, instead, plans to divest some via a REIT and others via trade sale. This will introduce more players into the industrial space sector. Even for properties put into a REIT, the REIT manager cannot hike rentals above what the markets will bear. Otherwise, tenant retention will be a problem. The divestment process, in fact, should result in more choices and better properties and services for tenants, as landlords try to maintain their competitive position.

Mr Chairman, Sir, in summary, our economic prospects are bright. We will strengthen our growth sectors, upgrade our innovation capacity and extend more help to local enterprises while staying vigilant on costs. We are confident we can maintain our long-term competitiveness and sustain Singapore's economic growth.

Small and Medium Enterprise Development

Sir, a recent seminar by the Institute of Policy Studies has pointed out the emergence of a dual economy in Singapore - companies servicing the local market which are performing poorly and companies earning most of their revenues from overseas and which are doing well. The Second Minister for Finance, in his Budget Speech, pointed out that only 25% of our companies derive half or more of their revenues from overseas. I presume they belong to this second group.

Sir, in the last session of Parliament, the Minister for Trade and Industry gave us a good profile of SMEs today. If I could quote him: "Today, we have some 133,000 SMEs in Singapore which make up 99% of all our enterprises. About 94% of our SMEs belong to the service and commerce industries, while the remaining 6% are in the manufacturing industry. SMEs contribute some 42% of our GDP and employ 56% of our workforce." By any measure, these are very large numbers. It underlines the important role that SMEs play in our economy. I should also add that 41% of respondents in last year's SME Development Survey said they did not generate any revenue from overseas. This may be an indication that our regionalisation drive, while successful in some ways, still has some way to go. These are just some of the development issues facing SMEs. What steps is the Ministry taking to help local SMEs in management training, international marketing and overseas expansion?

Sir, in my speech during the Budget debate, I raised the issue of change management for PMETs. I would also argue that managers of SMEs, too, would benefit from this form of training to help them transition and venture beyond our local market.

On other aspects of SME financing, during the parliamentary session in January, I raised the issue of the very low take-up rate of Government funding schemes for SMEs. Again, I quote the 2006 SME Development Survey which found that only 8% of SMEs surveyed took up the Local Enterprise Finance Scheme, only 4% took up the Micro Loan Programme and only 2% took advantage of SME Excess Loans. In his reply, the Minister said that the very fact that 8% of our SMEs took up the LEFS scheme, to him, is a very good sign. He cited the availability of funds and other avenues available for financing of SMEs. The SME Development Survey that I cited earlier also showed that 40% of SMEs surveyed depended on overdrafts for their short-term financing needs. This is a very costly option compared to other instruments and underlines the fact that SMEs were not able to avail themselves of other options, including Government financing schemes.

Sir, I raise this issue again for the urgency that it represents. I strongly urge MTI to review the Government financing schemes available today and ascertain how they could be better accepted. What further corrective actions, including adequate promotion and marketing of the various Government financing schemes, will MTI be embarking on?

Small and Medium Enterprises

Mr Chairman, Sir, Singapore has benefited immensely from foreign investment and MNCs. But we must also at the same time give full support and encouragement to our homegrown SMEs. They are an important pillar of our economy and create jobs for our people and generate revenue for our country.

Big businesses and investors have a super-efficient EDB to promote their interests and cut through the red tape. However, there is no central agency to coordinate and champion the interests of our homegrown SMEs. Is it IE Singapore or SPRING Singapore? Why not an EDB-like agency for SMEs? Last year, I said that SMEs are like Cinderellas and hoped that the Government would send a Prince Charming and transform the Cinderella into a princess. Maybe it is time. We are very glad that Mr Philip Yeo, a top-notch senior civil servant with a wealth of experience in EDB and A*STAR, has been appointed Chairman of SPRING Singapore. Will he be the Prince Charming who will lead the charge and transform the SMEs for the good of the country?

Sir, though our economy has improved, it is those big companies, which have the resources to go overseas, which are enjoying the growth. The SMEs, on the other hand, are feeling the going becoming tougher and tougher because of higher rental costs which, in some cases, have gone up by as much as double; higher staff costs as the bigger companies are hiring and can afford to pay higher salaries and, soon, higher CPF. It is a scenario of twin economy.

SMEs, by their set-up, are enterprises with limited resources, both in terms of finance, manpower and even contacts. Hence, SMEs find it very difficult to compete in the international marketplace and, at times, even on their own home soil where the bigger MNCs or GLCs muscle them off the field. In addition to that, very often, in order to have peace of mind and less justification to be made, the contract awarding Government agencies prefer to work with bigger foreign companies or GLCs instead of homegrown SMEs. At least, that is the impression that SMEs have.

Hence, I would like to urge the Government, firstly, to promote and buy local services and products. Secondly, JTC and HDB should continue to provide affordable office and industrial space to mitigate sharp increases in rentals. Lastly, I would like to urge the Government to encourage GLCs to work together with the local SMEs when they venture abroad and to take SMEs as their extended departments. For example, developers could bring along Singapore architects, engineers and contractors when they go overseas.

12.45 pm

Sir, I agree with the Second Minister for Finance's announcement that the Government will be attracting foreign SMEs with mixed feelings. On the one hand,

foreign SMEs would bring in the kind of talent and entrepreneurial flair that would give a "second wind" to our economic development. SMEs in the USA, for example, have shown far higher growth rates than large corporations. They could teach our local SMEs a thing or two about doing business, either in our own home ground or in venturing overseas. But, on the other hand, they may also pose a serious competitive threat to our own local SMEs. Our SMEs tend to be averse to competition, both local and foreign. Just witness the opposition to participation of GLCs in our economy.

Sir, would the foreign SMEs form a competitive threat to our own local SMEs? If so, what can MTI do to improve our local SMEs' competitiveness? Ever since Singapore embarked on our industrialisation drive, we have attracted MNCs. Besides providing much needed necessary investments and employment, these MNCs have also returned significant value to the economy through establishing local linkages and supply chains with local SMEs. They have also helped them to improve capabilities, through training, knowledge, skills transfer, and other forms of capability development. Some MNCs have even taken a stake in some of our local SMEs. As a result, our SMEs have moved up the value chain, attracting new businesses from other MNCs and even expanding their operations overseas.

The Government has facilitated these linkages through schemes such as the Local Industry Upgrading Programme (LIUP). In short, these linkages have been a win-win for the SMEs as well as the MNCs. I would like to ask the Minister if he sees any prospect of similar, mutually beneficial, linkages between these foreign SMEs and our local SMEs. Can foreign SMEs add value to their local counterparts? Could MTI pose as a condition to foreign SMEs that they 'adopt' local SMEs, either as suppliers or sub-contractors, and provide them the necessary support and industry linkages?

Sir, according to MTI, there are 133,000 SMEs in Singapore which make up 99% of our enterprises. I would like to ask if MTI could provide a more granular definition of SMEs, by breaking down by criteria such as revenue base, size of workforce, etc, so as to enable the Government to provide more targeted assistance to companies?

Resources and Opportunities for Small and Medium Enterprises

Sir, on behalf of the SMEs, I would like to start by thanking the Minister for the cheer and hope that they have brought to the SMEs in this Budget. In fact, I cannot wait to hear the details of the Government's plan to make Singapore the best place to start, grow and globalise businesses.

By nurturing SMEs today, the seeds for a bumper harvest for the economy as well as a better standard of living for our people are sowed. But what are some of our weak links? A recent SME development survey by DP Information Group revealed several ironies. I shall list three for our consideration.

One, cost efficiency, productivity and overseas expansion dominate the minds of SMEs in growing businesses. We know that technology can help improve productivity and lower costs. Yet, a third said that IT has no impact on their growth while only 9% of the SMEs see investments in new technology as a strategy to overcome competition. This suggests that many SMEs are still very low-tech. If bak kwa men and durian vendors have found ICT useful in their operations and distribution process, then we need to step up our efforts in driving the ICT adoption rate amongst our SMEs. We need, however, better designed integrated vertical and horizontal IT platforms to attract SMEs.

Two, the SMEs also listed the top hindrance to growth as competition and manpower issues. SMEs are unable to compete with the MNCs in attracting suitable and quality candidates. This will worsen with the tightening labour market. Yet, some 17% of SMEs are more concerned about their daily operations and have no concrete plan or direction for their businesses in the next two years. This suggests that short-term planning and, possibly, little or no investment in manpower training. A business is only as good as its people. Hence, I urge SPRING to seriously look into the manpower and professional needs of SMEs, and IE to play a more active role in helping SMEs' overseas operations manpower needs. Also, SMEs can benefit from more Government actions to help them establish business contacts overseas.

The third irony is on funding. Despite the Straits Times ' report that banks are rolling out red carpets to SMEs, funding remains a top obstacle. Currently, there are many Government-related schemes, but I think the devil is in the implementation. I hope the Minister can address this.

Providing a demand floor in helping SMEs will improve their access as well.

Miss Low, you are breaching your time limit again.

Finally, what steps would the Government take to ensure that the local SMEs will be the chief beneficiary of this new support for SMEs?

Local Enterprise and Small and Medium Enterprise Support

Sir, based on a recent STEPS survey conducted by DP Information that Miss Penny Low talked about, it was noted that 67% of the start-ups had expressed their desire to enter the overseas market right from day one. In addition, the latest GEM survey also reflected that one of five businesses employs the latest technology. We currently do not have a satisfactory eco-system which can help companies which approach our Government agencies for Start-up, Technology and Internationalisation assistance.

Sir, IE Singapore has done a good job in supporting companies already successful in Singapore to internationalise their operations or markets. IE is not set up to focus on start-ups and we cannot expect them to satisfactorily serve start-ups planning to internationlise because their needs are quite different compared to the needs of established companies. I feel that if we let one agency focus on local enterprise support from start-ups till the time they become our own MNCs, we will achieve better results. We can either merge the two agencies, IE Singapore and SPRING, to form a local enterprise champion, or have a rationalisation of roles with SPRING taking over certain roles plus resources from IE Singapore to help support start-ups to internationalise. This way, we will avoid the duplication of work, as I know SPRING has sometimes been asked by companies SPRING serves to help them tap overseas market opportunities.

Sir, in the area of technology adoption in local companies, as I mentioned, I feel that EDB alone cannot effectively reach out to all our local enterprises. At present, some Government incentive schemes and promotion role for all enterprises including local enterprises reside in EDB. But EDB is primarily focused on bringing in FDIs as well as MNCs. It is time that SPRING, as a local enterprise agency, took over these roles of technology promotion, leaving EDB the main role that it is good at - bringing in foreign companies into Singapore. Sir, EDB cannot effectively serve local companies because I was told by someone in Government that EDB "cannot use the same gun to fire at ants and elephants". So, it chose to fire only at the elephants which are MNCs. So, we are kidding ourselves if we think that EDB can effectively serve both local enterprises and MNCs.

Sir, there is a very good case, therefore, for SPRING to become that local enterprise champion that can also assist start-ups in the area of internationalisation and technology adoption.

Sir, in all, the real value that any Government agency can act in the coming years in supporting local enterprises is in the area of capability development. As I mentioned, this must be in the area of technology and innovation adoption. So I hope that MTI will bring greater focus in helping local companies become better in what they do, especially in the area of management expertise.

Sir, in case some Government officers misunderstand what I am saying, let me say that both EDB and IE Singapore have done well in doing what they have been tasked to do. The issue is not that the people in the two agencies did a bad job. The issue is with the structure which the Government has set up and, therefore, local companies do not get the optimal support that they desire. And I was told that some IE Singapore officers were a bit unhappy with my comments that appeared in the Today paper saying that they did not do a good job. This is what I meant, that is, the structure is such that they cannot serve the smaller companies.

Sir, as Dr Loo Choon Yong and Dr Ong Chit Chung have mentioned, I welcome Mr Philip Yeo in taking over the role of SPRING Chairman. I believe if he focuses, we will achieve the results that we desire for small and medium enterprises and to grow local enterprises into our MNCs. SPRING needs greater focus and we need a rationalisation of the roles in technology adoption and also in internationalisation, all in one place. I think we will be very successful.

Consumer Protection

(In Mandarin): [For vernacular speech, please refer to Appendix A *.] Sir, I understand that the Consumer Protection (Fair Trading) Act Working Committee has already submitted their work report to the Ministry of Trade and Industry. It highlighted the need to expand the scope of Fair Trading Act to deal with more unfair trade practices. In addition, it also proposes to place the financial services sector under the Consumer Protection (Fair Trading) Act. The Consumers Association of Singapore (CASE) has earlier submitted a proposal to MTI to suggest the possibility of introducing what is commonly called the "lemon law". Therefore, I would like to urge the Minister to reply at the earliest convenience with regard to the above proposal.

Being the Chairman of CASE, I would like to propose the introduction of a new law to protect the rights of all consumers, that is, the Timeshares Act. Such a law will be applicable for commercial practices including timeshare rentals, timeshare advertisement services or timeshare termination services, cancellation of timeshare contracts, timeshare sales, timeshare resales, buying timeshares, timeshare rentals, and/or to provide refund services for consumers with existing timeshare contracts or timeshare agreements.

Over the past few years, CASE has received continuous complaints against timeshare companies, and such complaints are becoming more and more. Usually, the timeshare companies will call up consumers and inform them that they have been selected and have won lucky draw prizes. But consumers will soon find out it is a timeshare scam and timeshare companies want to sell them thousands and thousands of dollars of timeshare packages. After making payment, consumers will then realise that the timeshare companies do not honour their promises. As these oral agreements are not put into the contract, consumers suffer heavy losses since they are not protected by the law.

In this regard, I would like to suggest that the proposed Timeshares Act include the following clauses:

To prolong the cooling-off period to 10 working days. This recommendation is made with reference to the "European Union Timeshare Guidelines" and the Guiding Principles announced by the Malaysian Supervisory Committee.

To forbid timeshare companies from receiving payments during the cooling-off period. The EU has already implemented this policy.

To disclose the letter of intent to the public every six months.

To appoint Small Claims Tribunal or Designated Court for court hearing of timeshare complaints. Currently, the Small Claims Tribunal does not have jurisdiction over any complaints arising out of timeshare agreement.

To revise the deadline given to enforce the law.

To ensure that the registered timeshare companies have a minimum paid-up capital.

To uncover the veil of timeshare companies so that restrictions can be imposed on the ownership. For example, the board of directors must be held responsible if the timeshare company goes into bankruptcy.

To protect the confidentiality of personal consumer information.

To fix the operation hours and code of business conduct and ethics for timeshare companies. The timeshare companies are not allowed to restrict consumers to stay for more than two hours in their office.

Sir, the above proposed suggestions are for the Ministry's consideration.

*Cols. 2823-2824.

Mr Chairman, first, let me declare my interest, before speaking on this cut, as a Committee Member of the Consumers Association of Singapore (CASE).

Sir, the Consumer Protection (Fair Trading) Act has been in force since 1st March 2004. It is a law meant to protect consumers from various unfair practices by suppliers.

Sir, after three years of operation of the law, there are some weaknesses in the consumer protection law that needs to be reviewed. Let me just highlight a few of them.

Opt-out practices. Consumers are sometimes required to pay for unsolicited goods and services. In such cases, suppliers typically send goods or services to the consumers without their prior consent and then subsequently demand for payment. Sometimes, these goods and services are provided on free trial and when the trial period ends, the consumer is obligated to opt out from the arrangement.

Sir, this places the obligation on the consumer to opt out from an arrangement which he never requested for in the first place. Sometimes, the consumer forgets to opt out because the reminder came by way of an SMS which he has either accidentally deleted or overlooked. In the process, he is required to pay because of a moment of forgetfulness. In such an instance, because this is not considered as an unfair practice under the Consumer Protection (Fair Trading) Act, the consumer has no recourse, even though he did not ask for the supply of services.

Second, refund for/or replacement of defective goods. There are increasing incidents where suppliers refuse to refund/replace goods which remain defective despite multiple repair attempts even though these goods are still under warranty. This can be basic goods like mobile phones with defective software or even expensive products like vehicles. Again, the consumer here is not protected as there is presently no lemon law in Singapore that will oblige a supplier to exchange or replace a product which is defective, despite many attempts to repair.

Sir, third, in 2004, CASE received 1,187 complaints against the financial industry for unfair and high pressure tactics in selling their financial products. In 2005, we have 1,021 complaints. Currently, contracts relating to financial investment and insurance matters are excluded from the CPFTA and this leaves little recourse to the consumer. The Consumer Protection (Fair Trading) Act Review Taskforce has been formed in July 2005. It has made several recommendations to MTI to amend the Act.

May I ask the Minister whether these amendments have been accepted, and if so, when will they be tabled in Parliament for discussion? I would like to ask the Minister also whether he will consider having a lemon law to compel suppliers of defective products to replace them. I also would like to ask the Minister whether he would consider bringing financial services under the ambit of the Act. I also like to urge the Minister to consider having a Consumer Claims Tribunal of some sort to assist consumers. From the feedback given by consumers, they face difficulties at the Small Claims Tribunal. Sir, the Consumer Claims Tribunal will allow consumers the option of making their claims before specialist referees and without having to resort to costly litigation under the present legal assistance.

I thank Members for their comments on SMEs. Let me assure Members that we share their sentiments and passion on the importance of having a vibrant SME sector.

The term "SME" has been used widely and loosely with good intention, to refer to a wide range of companies: sometimes start-ups, sometimes large companies by Singapore standard but small internationally. Different speakers may have different SMEs in mind when they expound SMEs' needs and how best they can be met.

1.00 pm

Thus, it is useful to highlight SPRING Singapore's definition of SMEs as enterprises with $15 million or less in fixed asset investment and, for non-manufacturing enterprises, 200 or fewer employees. SPRING uses this to qualify companies for its programmes. This has served us well, but we agree with Mdm Ho Geok Choo's suggestion to design even more targeted solutions based on more granular sub-classifications of SMEs.

By this definition, 99% of establishments here are SMEs. SMEs form an important pillar of our economy, employing 56% of our workforce and contributing 42% of our GDP . They form a broad base from which new businesses and innovative ideas sprout, and tomorrow's multinationals emerge.

Overall, many of our SMEs are doing well here and internationally. Aeromobiles, for instance, has the largest market share for aircraft Hi-Lifts in the Middle East. Esco Micro is among the top laboratory equipment companies in the world, counting Pfizer International and Harvard University as its customers.

As a group, the top 500 SMEs here have seen total turnover increase by 30% to $13.5 billion over the past five years, and net profits almost double to $630 million. For those in the domestic sector, the 20 retailers, including SMEs, who participated in the pilot phase of the Government's Customer Centric Initiative to improve service quality reported 8% improvement in service level, and expect sales to increase by $150 million. We applaud their achievements. The Government will continue to support their growth, and create a vibrant, dynamic and competitive base for SMEs.

Mr Inderjit Singh and Dr Ong Chit Chung suggested that we transform SPRING into a local enterprise champion that assists start-ups with internationalisation and technology through their growth stages. I also want to thank them for having identified the Prince Charming for the SMEs. I am pleased to inform them that SPRING thinks of herself as "the champion of enterprise growth" in many of her outreach programmes.

As the champion agency, SPRING recognises that enterprises' needs change as they grow. Broadly speaking, SPRING's assistance programmes for SMEs can be grouped under a 4-C framework, namely:

Creating a Pro-Business Environment;

Capital - making it easily accessible;

Capacity Building; and

Connections - linking up with the world.

The various programmes under this framework can be further classified into basic, intermediate and advanced levels, to meet enterprises’ needs at the start-up, growth and internationalisation phases.

While SPRING should not duplicate the role of other agencies, it endeavours to work with them as one government to help SMEs. For internationalisation, SPRING works closely with IE Singapore (IE). To help SMEs exploit technology, SPRING works with A*STAR. In this way, start-ups with internationalisation and technological needs can still get the necessary help through SPRING.

Mdm Ho, Miss Penny Low and Mr Singh asked about our plans for enhancing the competitiveness of local SMEs. Allow me to bring Members through our SME development efforts, under the 4-C framework:

First, we create a pro-business environment. To render Singapore attractive for small businesses and start-ups, we must continually simplify our business environment, cut red tape and lower barriers to entry by promoting fair competition. The Pro-Enterprise Panel, a public-private sector partnership, actively solicits suggestions to ensure our rules are pro-business. The EnterpriseOne web portal and Enterprise Development Centres (EDCs) provide one-stop services for businesses.

I am happy to note that the World Bank Doing Business reports consistently rank Singapore amongst the top three easiest places in the world to do business. Together with the recently announced Budget measures, we have one of the most pro-SME environments an entrepreneur can hope for.

Secondly, capital. Access to financing has always been a concern for SMEs. We have been working with our financial institutions to address this. Since 2001, the Government has provided $40 million worth of equity financing for 170 start-ups, and extended $3.6 billion worth of loans to 14,000 SMEs. Our intent is to introduce more SME-focused solutions from the private sector. I was therefore heartened to see Philips Securities launch an Over-The-Counter (OTC) platform last year. So far, two companies have raised $5.7 million.

When I first worked with SMEs in year 2000, SME was not the focus of many banks. Today, almost every major local and foreign bank in Singapore has a SME Banking Group. Overall, start-ups and SMEs now have many more options and better access to funding, as these banks offer collateral-free loans, trade services, and investment banking facilities. A recent report by the Milken Institute ranked Singapore second best for businesses’ access to financing.

Mdm Ho does not think that 8% of our SMEs taking up the LEFS scheme is a good sign. Should it be higher? How much higher?

Our target should be that every bankable project from the SMEs should be able to find its financing, ideally from a number of offers, from an efficient financial market. We see the Government's role in financing as a catalyst, identifying and filling gaps not well served by the private sector. Over time though, financial institutions in the private sector should, through our policy encouragement, introduce more varied and specialised financial tools for our SMEs, continually enhancing Singapore's attractiveness as a SME hub, a hotbed for SMEs to start up and flourish. This is why we are reluctant to set up a SME Bank per se. Going forward, we will continue to work with the private sector, including the ACE Finance Action Crucible, to bring about even more market-based financing solutions for our SMEs.

Thirdly, capacity building at enterprise and industry-level. Ms Low and Mr Singh are right in wanting to help SMEs exploit technology. This is necessary to grow enterprise in the knowledge economy, and to compete against lower-cost competitors.

SPRING launched the $150 million Technology Innovation Programme (TIP) last year to encourage SMEs to adopt technology innovation. TIP provides funding support for projects. It also allows technical experts to be seconded to SMEs, complementing an existing 'Growing Enterprises through Technology Upgrading', or GET-Up programme. Furthermore, under TIP, three Centres of Innovation are being set up for the Food, Marine and Environmental industries. As mentioned by my Minister, the NRF will also commit another $250 million to these efforts.

Mdm Ho asked how we help SMEs with marketing. I agree that SMEs need to differentiate their offerings to succeed. A strong brand helps. Thus, we run the BrandPact programme to raise awareness and adoption of branding as a competitive strategy. So far, 2,700 companies have benefited from the workshops, and 90 have received project funding. PGS Design, for instance, which produces signages for customers, like Food Junction and Kopitiam, expects sales to double in 2007, after the BrandPact exercise.

Mdm Ho and Mr Singh asked about management training. SPRING successfully piloted an 18-week Executive Management Programme with SMU last year. SPRING will soon release details for its new management development programme for SMEs.

At the industry level, our agencies work through various channels to maximise our reach to SMEs. We believe that if our industry players work together, many industry-specific programmes can become feasible to substantially raise the capacity and competitiveness of the industry. Since 2005, more than $65 million has been committed by the Government and 14 industry associations under the Local Enterprise and Association Development (LEAD) programme. We expect 40,000 enterprises to potentially benefit from these initiatives.

An example of cooperation under the LEAD programme would be: the Container Depot Association of Singapore, the Singapore Transport Association and the Singapore Logistics Association, which came together to work with PSA to implement the Containerised Traffic System to improve turnaround time using GPS technology.

The fourth thrust is facilitating market opportunities, issues which Mdm Ho and Ms Low raised.

To help our local enterprises internationalise, IE provides a comprehensive suite of Government assistance, such as the Internationalisation Finance Scheme, which extends loans to enterprises venturing overseas. IE organises missions and trade fairs to bring Singapore enterprises to new markets. It also introduces foreign buyers to Singapore enterprises. In 2006, over 300 trade missions and fairs led to $1.7 billion of overseas sales for 3,500 companies. IE's outreach programmes helped 3,000 companies learn to exploit our FTAs, saving $470 million in tariffs last year. IE recognises that start-ups and small companies have different internationalisation needs from the larger companies. To cater to these companies, IE will launch a New Exporters Programme this year to help them through training workshops and expert advice.

Let me now address Ms Lee Bee Wah's suggestion that Government-linked companies, or GLCs, should help SMEs internationalise.

Many of our GLCs are public listed companies. They operate as independent commercial entities and are free to choose to partner with local or foreign companies in international ventures. We encourage like-minded companies, large and small, to work together for the many obvious benefits. This is a process not to be mandated, but evolved over time on mutual understanding and trust. I must say that, based on my personal observation, many of our companies are beginning to work as teams. In 2004, IE Singapore launched the iPartners Programme to bring our enterprises together to bid for overseas projects as consortiums. To date, 25 consortiums comprising 130 companies have been formed. Many GLCs are leading or participating in such consortiums. For example, the Security Consortium, led by ST Electronics, enabled three SMEs - Teleradio Engineering, Technologies Creation, and Arrowcrest Technologies - to clinch $8 million worth of security projects in the Middle East. Other non-GLC but large local companies are also leading smaller companies in consortiums.

Mdm Ho and Ms Low expressed concern for local SMEs against foreign competition. Let me explain our approach. Last year, we launched a five-year $4 billion Enterprise Development Fund (EDF) III. 99.5% of the 2006 funds actually went to local SMEs. We assure Members we will continue to direct our efforts to build local SMEs to become tomorrow's MNCs.

Our SMEs operate in a globalised environment. Thus, shielding them from competition domestically will not help them as they internationalise. Foreign SMEs can help stimulate local enterprise development by bringing in new capabilities and market opportunities. One example is a Korean SME Colorzip which brought in ZapCode, which has already been adopted by the likes of Amazon.com and eBay, and creates new marketing possibilities for Singapore.

Foreign SMEs collectively employ 165,000 workers here and contribute to almost 20% of GDP. In fact, foreign SMEs only account for 9% of the entire 130,000 SMEs base in Singapore but they contribute almost as much as the local SMEs here. As we make our environment more pro-business, we can expect high quality foreign SMEs to move here. We should welcome them, but we will also study Mdm Ho's suggestion on ways to better foster collaboration between foreign and local SMEs.

We are committed to building our SME sector as a key thrust in our economic development efforts.

I am confident that by working together, we can achieve our vision of having a vibrant SME sector, thriving with globally competitive enterprises.

1.15 pm

Let me now move to the topic of consumer protection. I thank Mr Yeo Guat Kwang and Mr Lim Biow Chuan for their comments on the Consumer Protection (Fair Trading) Act. Since the Fair Trading Act was implemented in 2004, the Consumers Association of Singapore has been actively raising awareness and helping consumers resolve issues covered by the Act. In 2006, CASE took up close to 600 Fair Trading Act related cases. Last year, a taskforce led by CASE and MTI completed a review of the Act, and has submitted its recommendations. Among the recommendations are proposals to enhance CPFTA, such as expanding its ambit to cover financial services, and tightening existing provisions on cooling-off periods. My Ministry has accepted all of the taskforce's eight recommendations and is now in the final stages of finalising the proposed regulatory changes for public consultation. We will do this over the next three months.

The issue of "Lemon Laws" was also raised by the taskforce. These laws typically provide consumers with remedial rights for substantial defects in goods that persist after a reasonable period. Different countries have adopted different approaches with regard to the scope and extent of consumer rights to a refund or replacement. In the US, for example, lemon laws generally deal with specific product types and these allow the laws to cater specifically to the products of concern. The UK, on the other hand, strengthened its consumers' right to remedies through its generic Sale of Goods Act. Given the potentially extensive impact, this issue requires closer study and deliberation. We will do so with the various stakeholders' inputs.

Mr Yeo proposed to introduce new legislation to regulate the timeshare industry. He also made some specific suggestions on what the legislation could cover. We appreciate his thoughtfulness. We believe that an industry or consumer-led accreditation system, such as CaseTrust, is a better approach to encourage fair practices in the timeshare industry, and provide a monitoring mechanism to ensure compliance. Conditions raised by Mr Yeo, such as those relating to operational hours and prospectus requirements are better dealt with by the industry or through a consumer body like CASE. Additional legislation may not be the best solution. For example, it would not be practical for the Government to legislate the number of hours a customer can spend at the premises of a timeshare company. As a matter of fact, we do not legislate so finely for any other industry at all.

Notwithstanding, we are prepared to review some of the specific suggestions to weigh in on good practices. For instance, the CPFTA today already makes provision for a cooling-off period for direct and timeshare sales. We would look into Mr Yeo's suggestions to further enhance the cooling-off provision.

We will continue to work closely with CASE to review and improve our consumer protection framework. We will do so while maintaining a good balance between regulatory action and consumer responsibility. Consumers must play their part, and be vigilant when making purchases. Ultimately, we believe that the best way to protect consumers is to ensure that they are well-educated about their rights and protect them with a balanced legal framework.

Finally, Mr Singh asked about the effectiveness of the Competition Act. The Act has a short history, with the prohibitions against anti-competitive agreements and abuse of a dominant position only effective from 1st January 2006. The third and final prohibition against anti-competitive mergers will come into effect on 1st July this year. As the Act is still in its early days of implementation, it may be premature to say how effective it has been at this juncture.

If the Member or the public has information to suggest that the oil or taxi companies are engaging in anti-competitive activities, I urge them to lodge a complaint to the CCS. The energy sector is excluded from the Competition Act, and under the purview of the Energy Market Authority. Mr Inderjit Singh cited a generation company which is facing difficulties in its bid to enter the electricity generation market. Let me reiterate that my Ministry is committed to having a competitive gas market, to complement the electricity market which has been liberalised. We will ensure that all industry players, both the incumbents and new players, will have open access in the gas market.

Tourism

Sir, for Singapore to be a buzzing and exciting first world city we need to explore different forms of events and entertainment and that should be internationally based. But if we are overly focused on ROIs, we may have missed out on great opportunities. Many a time, it is not the event itself but the pre and post event activities that will bring benefit and that may be hard to measure. I get shivers down my spine when proposals by people from the private sector get turned down or received a lukewarm response because the returns forecast do not meet the target set. We are not experts and should let them take the lead. If we keep repeating ourselves to ask the people to help themselves so that we can help them, let us show it by giving more support and let us not discourage them. If not, I feel we are going to miss another great opportunity like F1. Now that we have a second chance to give F1 a shot, would the Ministry update us on the progress of the F1 event to be held here? And is the Ministry willing to look at the long-term strategic impact of such events, taking calculated risk, than to look at short-term gains, and what are the criteria for selection?

(In Mandarin): [For vernacular speech, please refer to Appendix A *.] Mr Speaker, we have attracted about 9.7 million tourists from all over the world in 2006. MM Lee forecasted that, after the completion of our two IRs, we expect to draw in 17 million tourists to Singapore every year, and this target is twice our current tourist numbers. With the upcoming integrated resorts and influx of tourists, the capacity to provide good services thus remains one big challenge for us. Besides Europe, America and Southeast Asia, there will be more tourists from China, India and the Middle East. Hence, it is important that we provide our visitors a wide range of tourism products and services. This will include ample tourist attractions, cultural and entertainment centres, shopping facilities, etc, to fulfill all their shopping needs and sightseeing needs.

One example of Singapore's upper market tourist attractions will be the integrated resorts; others include Orchard Road, Suntec City and Clarke Quay. These high end attractions provide them the opportunity to satisfy their tourism and shopping needs. However, there are also the middle class tourists, who have different shopping needs and habits, and sizeable purchasing power. It is thus a very wise decision for our Government to announce its plans to develop Little India. We will be able to attract more tourists from India and Sri Lanka.

Mr Speaker, Sir, I feel that Geylang Serai is another area worth considering for development. The rich Malay culture and traditions of Geylang Serai are expected to attract tourists from Malaysia, Indonesia and the Middle East. Its colorful architecture, shopping facilities and cultural performances will give a boost to our tourism industry. What is lacking now is a unique cultural attraction like Rose Garden in Thailand. While visiting Thailand, the tourists will definitely go to Rose Garden where they can catch Thailand's traditional cultural performances. Therefore, I would like to suggest that the Government consider setting up a multi-cultural performing arts centre which will feature various cultural performances of the Chinese, Indian as well as the Malay communities. Such performances will include lion and dragon dance performances, highlights of a traditional Malay wedding ceremony, etc.

I was told by many tourists that two of their favourite destinations are Sentosa and Geylang. Geylang offers a wide variety of tropical fruits at great prices, including durians, mangosteens and coconuts. These are popular fruits favoured by tourists from tropical countries. A great eatery area, Geylang has a lot of famous and good local food to offer. Apart from that, Geylang is best known for its bright and famous night life spots. It has attracted tourists from all around the world, and has become a popular tourist attraction.

Therefore, I would like to ask the Government whether it has any development plans to redevelop the Geylang area, including Geylang Serai, to reconstruct and rebuild Geylang into a more charming and interesting district. This will help us to achieve our basic goal of strengthening tourism as a key pillar and, at the same time, to reach our targets of 17 million tourists and the corresponding tourist spendings.

*Cols. 2825-2826.

Singapore is a small country with limited historical or natural attractions and therefore we need to create and develop our own tourism appeal. To help boost the sector, the Government decided to go ahead with the two IRs with casinos.

It seems that the gaming component has done the trick. STB received quality bids from world renowned names in resort development and gaming. And, in one stroke, we will soon see an iconic building at the Marina Bay and Universal Studio at Sentosa. Without the casino component, it would be very difficult to draw in such mega investments. But we still need more of such "wow" and bold attractions to make Singapore a more compelling destination , attracting the non-gaming tourists as well. How would the Ministry intend to attract other major tourism investments into Singapore without the gaming component? Would the Ministry consider sweetening existing incentive schemes?

Few years back, I read in the Straits Times that the Singapore Flyer project was delayed because of financing difficulties. Is STB prepared to take a more catalytic role, in not only assisting in the financing of such projects but perhaps to also participate as a co-investor? And is our high cost of land working against the viability of these projects? Often, our hot and humid weather is cited as a drawback to attract repeat visitors to Singapore. What more can we do to mitigate our shortcomings? Should we explore more mega indoor attractions that are also children-centric, something like the Hello Kitty Land in Tokyo?

When the Government announced about one year ago that the Crazy Horse is coming to Singapore, it signals to the world that Singapore is a vibrant global city with buzz and we do have premium night entertainment for the niche segment of our visitors. The news of Crazy Horse coming to Singapore was quite well reported by world media. I remember reading about it in the Financial Times. However, little more than a year later, after making its Asian debut, the famous Crazy Horse, which has been running for more than 50 years in Paris, closed its doors in Singapore due to poor attendance. According to the company, the 400-seat theatre was less than half filled on most nights.

So what went wrong with Crazy Horse? Not that I am crazy about it. Like Mr Baey, I have not watched the show as well. Is it a case of tight advertisement controls? I thinkthe House had heard replies from SMOS Balaji last week. But my point today is: do we have an effective cross-selling system to cross sell our tourism products, such as Crazy Horse, among our tourism stakeholders? Tourist arrivals hit 9.7 million tourists last year. If we have, say, about 1 % of these 9.7 million tourists visited the theatre, the company may not have to close its door prematurely. So, are our hotel concierges or the tour agents, or even the taxi drivers, aware of our tourism products and what to recommend to visitors? Mr Ang mentioned about the attractions of Geylang. I think there are other attractions that we can also offer. We can do more to encourage cross-selling.

My next point is whether we have done enough to nurture the industry’s local players . With the two IRs, local players are beginning to feel the cost pressure from the tight labour market. Headcount turnover is expected to increase and wages are set to rise further. Local operators fear that they are not able to match the high salaries offered by the IRs because they do not have the casino component in their business models. I understand that in Hong Kong, the government actually helps their local players cope with the entry of Disneyland into the markets with tangible assistance schemes. Can we do more to help our local players?

My last point is this. We have been pretty successful in bringing major conventions to Singapore. How about sports events, like the F1 or A1, that Mr Teo Ser Luck has mentioned as well? Can the Ministry give an update on that?

Mr Chairman, Sir, coincidentally my point augments Mr Liang's argument. After only one year of operations, the Crazy Horse cabaret show in Singapore has ended. There has been much discussion about the reasons for its failure here, considering its successful track record in Paris and Las Vegas.

The franchisee insisted that it was due to advertising restrictions. Others cited its pricey tickets and its poor fit with our entertainment scene as contributing factors. Some members of the public attribute the failure of the Crazy Horse here to simply the lack of demand. Singaporeans and visiting tourists are just not that interested in watching high-end strip shows however artistically staged or choreographed. Perhaps it is our uniquely Singapore culture; perhaps tourists expect a different form of entertainment from clean and green Singapore. Whatever it is, here is a clear signal to the Ministry handling the Integrated Resorts that strip shows are not a popular form of entertainment here. Hence, for both ethical and commercial reasons, we should not allow the IRs to bring in such shows in the future.

Such performances are not consistent with Singapore's reputation and image. They do not gel with the uniquely Singapore brand. Quite simply, visitors do not come to Singapore for strip show entertainment. These are not quality associated with Singapore. Tourists are here for our food and shopping. They come to experience the unique Singaporean way of life, the green city, the safe environment, the world class hotels and the many tropical attractions.

I think it is possible for us to have successful Integrated Resorts which are clean and profitable, with minimum sleaze and vice. We do not need to resort to scantily dressed women to pull in the crowds. A well conceptualised resort should be able to attract tourists and visitors on its own core merits. This may sound like Mission Impossible since many casinos in other parts of the world, which we know well about, are not just associated with gambling but with a string of vices. But this is not what our IRs should be about? And this is not what the Singapore Tourism Board should be about. Have faith that we can achieve it, just as we have succeeded in being one of the cleanest governments in the world. It would take political will, good planning and intelligent design, but it can be done. Families can come to our IRs and not worry about having to shield their children from embarrassing displays.

In fact, a "clean" IR is a unique proposition and can be a huge attraction simply because such IRs are not easily found elsewhere. It is therefore "Mission Possible". Tourists can come with their families and enjoy clean wholesome fun with the casinos being only an option among many others. I have been told that where there are casinos in cities, there is also an accompanying rise in organised crime and vice activities, such as strip shows, burlesque performances, prostitution and drug sales. We must avoid going down that road. Being a geographically small country, we are especially vulnerable to how easily the forces of moral corruption can spread. Therefore, I would like to ask the Minister or the Minister of State, as the case may be, how much money is going to be invested into making sure the IRs do not bring in sleazy entertainment and are not accompanied by vice activities.

Energy Market Authority

Sir, the electricity retail market is liberalised to promote the efficient supply of competitively priced electricity. A review of the performance of the national electricity market of Singapore revealed a net benefit of $128.6 million to the economy over a period of two years. However, the price of electricity remains high, despite market competition. Hence, I would like to ask the Minister in what ways the national electricity market has benefited the economy and whether the consumers enjoy any of these benefits.

I understand that Phase 2 of the electricity retail market liberalisation was completed in February 2006 leaving 25% of the total electricity demand still closed to retail competition. These remaining consumers comprise mainly households. It was announced that a decision would be made on the introduction of full retail contestability by EMA in 2006. However, EMA did not release any further news on this after that. Will the Minister give us some indication of the expected schedule of full retail contestability?

In respect of this, I would also like to ask the Minister why should household consumers be made contestable eventually, instead of keeping them on the current regulated electricity tariffs. My concern is that surges in wholesale price had happened between two and four times from 2003 to 2005. How would household consumers be protected from such fluctuations when they become contestable? What would be the other impacts to households?

Sir, I understand the need for the liberalisation of electricity market. However, we have to keep in mind that our household consumers should not be made worse off due to the liberalisation. Electricity is a necessity and keeping its price as low as possible should be our top priority.

Utilities

Sir, I would like to talk about the huge sudden decline in the number of people in utilities arrears. According to a Straits Times' report on 26th June 2005, there were about 9,000 households in arrears every year. But in the year 2006, this number magically went down to 3,600.

How did it happen? I know 2006 was a very good year. But no year can be so good that suddenly almost 6,000 households were able to settle their outstanding utilities bills just within the same period. Or did something happen to the classification that changed the number? I remember there was a device called Pay-As-You-Use meter introduced some years ago. Households on the scheme get a “smart-key”, like a cashcard, which can be topped up to a maximum of $250. At every top-up, 20% of the amount goes to paying for the arrears, while the rest is stored onto the key to pay for future bills. In July 2005, there were 1,000 such meters installed. In October 2006, there were 12,500 meters.

Sir, with this Pay-As-You-Use meter, in one stroke, the number of people with utilities arrears has come down dramatically. And the power company has an effective way to recover the utilities arrears with each top-up by the users.

But is this meter really effective in helping poor families to reduce their arrears, or improve their financial status? I am afraid the answer is probably, no. Because even when the household has only $1 in his meter and he still owes a few hundred dollars in arrears, his name will not appear on the arrears list. So, my point is that the real arrears cases are probably “masked” by the Pay-As-You-Use meter.

Sir, I have no intention to criticise the power company for its creativity in collecting bad debts. On the contrary, I think they deserve the credit for doing their job well. They earn their keep. However, I believe we should go beyond the Pay-As-You-Use meter to really address the root cause of the arrears problem. The most effective way is for the households to consume the energy prudently. During my house-to-house visits, whenever residents have complained about high utilities bills, I would always ask the Town Council officers to check their electrical appliances and consumption pattern, and advise them how to save energy consumption and reduce utilities bills through some simple steps, and I have found this approach to be useful.

I would therefore like to ask the Minister, besides using the Pay-As-You-Use meter to reduce the statistics of arrears cases, whether his Ministry will consider stepping up other measures to educate and incentivise Singaporeans, especially low-income families, to reduce their energy consumption and henceforth their bills or arrears. I believe this two-pronged approach - Pay-As-You-Use meter and public education on energy saving - will likely provide a real help to the poor.

Alternative Fuel Sources

Sir, I would like to raise the issue of developing alternative sources of energy supply for our country's needs and to sustain our profit growth. I should disclose my interest as a Director of Trust Power which has an interest in one of the alternative fuel sources I am going to speak about.

Currently, we depend on oil and natural gas to an overwhelming extent for our power generation, that is, the production of electricity for our domestic, commercial and industrial consumption. Indeed, the larger proportion, close to 80%, comes from natural gas as modern plants running on natural gas are considered more efficient and cleaner than the older ones running on fuel oil. Our suppliers of natural gas come from pipelines with two of our neighbours - Malaysia and Indonesia. Unfortunately, as incidents in the past involving water and now sand had shown, commercial agreements can be subject to political stresses. An example of the havoc that can be caused by disruption of gas supply was seen recently when Russia, having a difference of view with its neighbour, the Ukraine, halted the supply of gas which also affected Germany at the other end of the pipeline as well.

With our heavy dependence on modern amenities, Singapore cannot afford to suffer similar disruptions. We need to diversify our sources of energy supply. That is one of the key reasons for the move to build an LNG terminal as gas can be more readily stored in its liquefied form. I welcome the move. But oil and natural gas resources are finite and in high demand around the world, including from high growth economies like China and India, meaning that the prices in global markets are volatile, again as we have seen in the last few years. We need to look at other alternatives in addition to LNG.

I raise two such alternatives for the Ministry's consideration. The first is biofuel, that is, fuel made from grain, oil or sugar bearing crop. These are renewal fuels that in theory would never be exhausted as long as the crops themselves were being produced. The second is coal which is generally being considered an old fashioned and dirty fuel. But the proven reserves of which are far deeper than for oil or natural gas. How can we promote these alternative fuels?

The EDB is trying to do so by awarding pioneer status and tax benefits for biofuel manufacturers, and one such manufacturer, Natural Fuels Limited, an Australian-based company with the Singapore subsidiary, is building a plant here. But tax benefits only take you so far because they depend on the plant itself making money and being profitable. What would really get the industry going is to broaden the market for such fuels. This could be achieved, for example, by having a mandatory blending policy for automotive fuels.

This is similar to what we have done with the bulk of production of NEWater. It gets pumped back into our reservoirs so that its effect is felt, if not always seen or tasted. This could take the form of requiring or having incentives to make it commercially attractive, say, 20% of automotive fuels come from biofuels are eaten off. This is being done in countries, like Brazil and the US, and other countries are considering following suit. Allowing a wider range of cars, especially those with turbo diesel engines would also make biodiesel a more attractive fuel alternative to motorists.

The other advantage of biofuels is that they are considered green. A fuel source that is considered not so green is coal. However, that is an outmoded view of a fuel that is making a come back in the wake of high oil prices. Modern technology has succeeded in making coal plants cleaner than ever before, and it is continually being improved to meet stricter environmental standards, provided these concerns can be addressed. The time may come for Singapore to have its first coal plant to take advantage of the abundant supplies of coal available. I believe GIC has even taken a stake in the Di Coal Mine in Indonesia. This would allow us to further diversify our sources of fuel and better safeguard Singapore from disruptions that would affect our citizens and possibly derail our economy and send a strong signal to all and sundry that Singapore would not be held hostage in any arena, including that of security of energy supply.

Sir, I would like to thank Members for their suggestions and views on energy and tourism.

Allow me to first touch on the bread and butter energy issues before moving on to the more colourful tourism related questions that have been raised. Energy, like land and manpower, is a critical economic resource. The key objective of our energy policy is to ensure that we have sufficient and secure energy supplies at affordable prices, and to make sure that we accomplish that objective in a manner that is sensitive to our environment.

We have established an inter-Ministry Energy Policy Group to formulate and coordinate our energy policies. Led by MTI, and comprising several key agencies, the Energy Policy Group adopts a "whole-of-government" approach in addressing energy issues from the four perspectives of energy security, economic competitiveness, environmental sustainability and also the development of the energy industry itself. These are all points that many Members have touched on in different ways.

The establishment of competitive markets is the cornerstone of our energy policy. In the contestable segments of the energy value chain, we want to implement contestable markets. We have, therefore, liberalised the electricity market and, going forward, we will be taking steps to open the natural gas market to further enhance competition, a point that Mr Inderjit Singh raised earlier.

Mr Low Thia Khiang has asked how the consumer has benefited from this liberalised electricity regime. That is a fair question. Since 2001, we have liberalised the electricity generation and retail market in stages. Consequently, there is now greater competition in the electricity market, and this has led to downward pressure on price and it forces players to be more cost competitive. And this has helped to cushion the impact of high oil prices on our electricity tariffs. For example,

although fuel oil prices increased by 80% over the six years from January 2001 to January 2007 from nearly S$42 a barrel to S$75 a barrel, over the same period, our household electricity tariffs have increased by only 8% from 18.46¢ per kilowatt hour to about 20¢ per kilowatt hour. And what is particularly noteworthy is that this is despite the fact that the major cost component of electricity generation is fuel and that accounts for 55%. So, notwithstanding the fact that more than half the cost of generating our electricity comes from the cost of fuel oil and the fact that that has gone up by 80%, the price of electricity tariffs is actually quite steady, at about 8%. That is clear proof that the policy is working and the market structure is working in favour of our consumers.

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Therefore, competition in the market has certainly helped to keep electricity prices at about the same level since 2001, despite sharp increases in fuel oil prices. This is the clearest demonstration of how consumers have benefited from the liberalised electricity market.

Nevertheless, the Government does recognise that lower-income households may still feel the impact of rising electricity and other utility bills, even if the increases are modest. This is why we have the Utilities Save (U-Save) scheme, which disbursed about $600 million over the past five years. In this Budget, it has again been renewed for a further five-year period. That will provide additional cushion. On top of that, we have the ComCare Fund and other schemes. So, I would say that, in general, the market structure and the regime favour consumers and there are other schemes to help those who might slip through the cracks.

Mr Low also asked the question about retail contestability. We have taken steps to liberalise the electricity retail market. This is to provide more competitive pricing and choice to consumers and businesses. Since 2003, about 10,000 large consumers, accounting for 75% of total electricity demand, have already become contestable. This means that the retailers compete to sell electricity directly to these consumers.

The remaining 1.2 million small customers are basically households which account for 25% of total electricity demand as residual, and they are not yet contestable and continue to buy electricity from SP Services Ltd. The reason is simple. It is because the economics of catering to this vast group of small consumers is very different. It is more expensive for electricity retailers to service a large number of small customer accounts, than to serve a single customer with a large amount of electricity demand. For small consumers to enjoy the true benefits of contestability, there is a need to reduce the cost of the supporting infrastructure.

EMA is currently studying an Electricity Vending System (EVS) which allows retailers to post their electricity supply schemes and prices at various points-of-sale, such as the Internet and convenience stores. An EVS will help reduce the back-end administration and business costs associated with serving small consumers. As the EVS has not been tried elsewhere, EMA is developing the technology and testing the prototype, and that will take the next two to three years to stabilise and make sure that it works. If the EVS is found to work and it stabilises, then there is a very higher chance that the real benefits will accrue to the consumer in a switch to contestability.

Mr Sam Tan asked about the number of household accounts in utilities arrears and whether there has been some masking of the numbers. Let me first deal with the arithmetics. In January 2005, there were 9,859 accounts in arrears. These are consumers whose payments are overdue for at least three months. Subsequently, in May 2005, the Pay-As-You-Use (PAYU) Scheme was implemented. Following this, accounts in arrears are distinguished between those on the PAYU scheme and those who are not. In January 2007, there was a total of 6,200 accounts in arrears, about half on the PAYU scheme and half non-PAYU accounts. This is a decline of about 37% from the 9,000-odd accounts in arrears in January 2005. The more basic question that Mr Sam Tan is asking is whether this, by some magic, has masked the numbers. The answer is simple. There is no magic. This is a simple account management process that SP Services uses to decide who are the accounts in arrears. So, as in any commercial practice, when an account in arrears reschedules its debts and is migrating to pay you, let us say they reschedule their debts, then they are no longer treated as cases in arrears. They are moved to a new category and, thereafter, they only re-enter the arrears account if they default on their payments again above the three-month period. That is the nub of it.

Mr Sam Tan has a very legitimate concern, ie, does this somehow deprive those who really need help in order to meet their utilities costs from getting it? It is not SP Services' job to take care of the welfare, although they do take a very considered approach in dealing with arrears' accounts. They give them several chances, counsel them on the usage of electricity and so on, before they go to more extreme steps. But at the same time, as Mr Sam Tan is aware, there is nothing stopping any one of the individual account holders from approaching their MPs or other agencies for help. The help is available through ComCare and other facilities. So we can take care of them. As far as SP Services' accounting is concerned, it is designed to manage it from a commercial point of view.

Mr Alvin Yeo has raised the important issue of energy security. We need policies and strategies on both the demand and supply side to safeguard our energy security. Demand management is key, as using energy more efficiently will help reduce our energy dependence and emissions. We are, therefore, working closely with MEWR and NEA to develop programmes and measures on energy efficiency.

On the supply side, Mr Alvin Yeo has highlighted the need to diversify our fuel sources. In that regard, we are planning to develop a terminal to enable the import of liquefied natural gas (LNG) so as to diversify our gas supply sources. To guard against a disruption in fuel supplies, our power generation companies are also required to stockpile fuel reserves. If our natural gas supply is disrupted, our gas turbines can switch to using diesel instead.

I agree with Mr Alvin Yeo on the importance of developing alternative energy sources and keeping ourselves open to the different options, including coal. These alternatives can help us diversify away from our dependence on oil and gas, which accounts for nearly 90% of our electricity supply. We keep an open mind on the use of coal power, as long as it is cost effective and can meet our environmental standards. We know that there is new technology which is able to bring the sulphur dioxide and particulate matter emissions down to levels comparable with fuel oil emission, but there are issues pertaining to carbon dioxide emission and these need to be addressed as well.

At present, waste-to-energy is our largest source of renewable energy. The incineration of wastes generates 2%-3% of our electricity supply. But due to our geographic limitations, other sources like hydro, geothermal, wind and tidal energy sources are not viable. Solar technology and biofuels appear to be the main renewable energy options that are feasible in Singapore. However, solar power is still about twice as expensive as our household electricity tariff due to the high upfront cost of photo-voltaic systems. Similarly, ethanol and biodiesel are costlier than their petroleum counterparts. In fact, this is a key consideration, ie, cost, quite apart from which there is the issue of the infrastructure for fuel supply and refueling. These need to be taken into account. Biofuels are new, and we need to understand their impact on car engine performance, reliability and tailpipe emissions as well.

The Government is stepping up R&D efforts to produce commercially viable alternative energy technologies. A*STAR and EDB will be investing more than $100 million over the next five years in various energy research and testbedding programmes. One new initiative is the S$17 million Clean Energy R&D Platform under the EDB. This R&D Platform will allow us to evaluate the performance of various clean energy technologies in our tropical context. Through this programme, we hope to install around two megawatts of power generation capacity from solar and other clean energy sources.

Our efforts on biofuels are ongoing. The Institute of Chemical and Engineering Sciences (ICES) under A*STAR is conducting research into new methods to produce biofuels, such as from cellulosic materials. The EDB and the NEA have brought together a group of companies, including Robert Bosch, Shell, Nexsol and DaimlerChrysler, to test and evaluate the use of biodiesel in our local setting. If the trials are successful, we can consider introducing biofuels into the market on a pilot scale.

Mr Chairman, Sir, let me now touch on our tourism strategy. The World Tourism Organisation has projected that global tourist arrivals will grow at about 4% per annum, and that the Asia-Pacific region will experience even higher growth exceeding 6% till 2015. This presents Singapore with significant opportunities, especially given our location. At the same time, our competitors are not standing still. Many countries have been aggressively investing in new tourism products. We must be prepared to respond swiftly and make bold changes to avoid being left behind.

To capture our fair share of the growing tourism pie, the Singapore Tourism Board (STB) aims to triple tourism receipts to $30 billion, and double visitor arrivals to 17 million by 2015. This means that our tourism receipts have to grow at about 10.3% annually and our visitor arrivals by 6.4%. These are ambitious targets, but they are essential to spur our efforts to ensure Singapore remains an attractive destination for visitors.

I am pleased to inform the House that we are on track to achieve our 2015 targets. The strong performance of our tourism sector in 2006 was very encouraging. Several new record highs were set. We generated an estimated $12.4 billion in tourism receipts, ie, about 15% growth year-on-year, and welcomed 9.7 million visitors, ie, about 9% growth. The average occupancy rates and average room rates in our hospitality industry reached an all-time high of 85% and $164 respectively.

The next few years promise to be quite exciting for our tourism industry, with the opening of several large attractions. The development of the Singapore Flyer observation wheel is progressing well and it is expected to open in the first quarter of next year. In addition, the opening of the two Integrated Resorts at Marina Bay and Sentosa is anticipated in 2009/2010. These three products will give a major boost to our tourism industry.

But borrowing a line from our population policy, why stop at three if we can afford more? To keep ahead, STB aims to develop a wide range of tourism attractions and product offerings to enhance our appeal as a leading destination to a diverse group of business and leisure visitors.

In this respect, Mr Ang Mong Seng has asked how we will enhance the attractions in Geylang. I think we all know what he meant. I agree with Mr Ang that, aside from the high-end tourists, we also want to develop offerings which appeal to other market segments, including the middle and mass markets. The ethnic precincts are an integral part of Singapore's tourism offerings. STB has been working with other Government agencies to develop and rejuvenate various ethnic tourism precincts like Little India and Chinatown. STB will do the same to further develop Geylang and Geylang Serai and continue to actively involve the local business associations and other key stakeholders in the effort. The key is to be able to enhance the infrastructure and amenities in these areas without losing their charm, character, street life, and even their intrinsic "messiness", which many visitors find quite attractive.

In addition to developing attractions and products, STB will actively pursue other tourism initiatives, such as branding, marketing and pursuing new market segments, to position Singapore as a truly global city and to capture our fair share of the growing Asia-Pacific tourism pie. Singapore is widely acknowledged as a financial centre with a conducive environment for business. But, as Mr Teo Ser Luck has pointed out, we need to enhance our range of leisure and lifestyle events. Singapore must have the X-factor to be a place that is vibrant and buzzing with energy, and a place where it is fun to live and work. Take London, as an example. London has been ranked the top European city for business for the 16th year in a row by the European Cities Monitor, a well-known survey conducted annually of European business locations. It is also famous for its myriad of leisure and lifestyle events, such as West End musicals, the London Fashion Week and Wimbledon. London and other global cities like New York are renowned business hubs which are also on the list of "must-visit" leisure destinations for tourists. They are

widely mentioned in both business and leisure media - cities that are equally at home in The Economist or Vogue magazines.

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Our aspiration is for Singapore to join the ranks of these global cities with its own unique and sustainable positioning. Mr Christopher de Souza has passionately expressed his ethical concerns and wanting an assurance that we will remain within certain boundaries. Let me assure Mr de Souza, that we have not lost, and will not lose, our ethical bearings in this journey. The fact is, opinion is somewhat divided on why the Crazy Horse cabaret in Singapore came to an end and a good many may not agree with Mr de Souza’s analysis. But that is besides the point. The key thing is that I would caution that we do not extrapolate too much from this single episode in drawing general conclusions. More importantly, what is our approach? It is to clearly define the boundaries, based on our social mores, so that investors are fully aware of our requirements and the limits. And we make no apologies for it. We make it very clear these are the boundaries. We then leave it to the market to judge whether there is a commercial case, or in Mr de Souza's language, whether it is mission impossible or mission possible. That is why, in proceeding with the Integrated Resorts, we put in place a robust and stringent regulatory regime to keep casino and other activities under control. All shows staged in Singapore are subjected to the guidelines for public entertainment and censorship set out by Police and MDA. The entertainment in the Integrated Resorts will be subject to the same rules - no more and no less.

Singapore's reputation as a business and Meetings, Incentives, Conventions and Exhibitions (MICE) destination was further burnished by the recent successful hosting of the IMF/World Bank Meetings. We have also been nurturing and growing leisure and lifestyle events. The Barclays Singapore Open, World Gourmet Summit and Singapore Fashion Festival, for example, have grown in stature and popularity with each passing year.

Our efforts in creating more "buzz" in Singapore seem to be producing results. Recently, the Global Country Brand Index ranked Singapore second in the world for nightlife and dining. And I think it came as a mild surprise to even some Members of this House, that we achieved such a high ranking. But the fact is that our leisure and entertainment scene is thriving and it is being given an additional boost with the opening last year of Saint James Power Station, and the more recent launch of the world's largest Café Del Mar in Sentosa. In January this year alone, Singapore hosted seven high-profile concerts including Eric Clapton, which I have the pleasure of attending, but also Korean sensation Rain (I did not attend that) and the classical pop group IL Divo.

But as Mr Liang Eng Hwa has rightly pointed out, more can and needs to be done. While we continue to do well in international business competitiveness rankings, we fall short when it comes to leisure. In Travel and Leisure Magazine's Best City awards, Singapore is not even in the top 10 list of cities to visit in Asia.

To be known and seen as a truly global city, we must have an exciting and fun living environment offering not just a wide variety of quality lifestyle, leisure and entertainment options but also world-class events.

That is why we are taking a very serious look at hosting a Formula One Grand Prix in Singapore - an idea that both Mr Teo Ser Luck and Mr Liang Eng Hwa have raised. The F1 is the highest echelon of motorsports, and is said to be the third most watched sporting event in the world, after the Olympics and the World Cup. It is also a glamorous event - one which is attended by sports and entertainment celebrities alike. In fact, the Formula One drivers themselves - such as Schumacher, Alonso and Raikkonnen - and even the cars are celebrities in their own right.

Mr Teo Ser Luck has asked whether we are willing to look at the long-term strategic impact of events like F1, to take calculated long-term risks rather than just consider short-term gains in deciding whether to bring them into Singapore. He said he gets shivers. I wish to assure him that there is no need to.

Mr Chairman, the answer is definitely "yes". We do and will continue to assess our tourism projects on the long-term strategic benefits - economic and non-economic, tangible and intangible - that they bring to Singapore. In fact, the F1 is a prime example. The attention and buzz that it generates will expose Singapore to a very different audience from that in the business and financial world. It is a group we currently do not reach out to. An F1 race could also bring about broader tourism benefits and spill-over gains for associated industries such as hospitality, retail and travel.

For these reasons, the Ministry of Trade and Industry has been studying, with various agencies, the feasibility of an F1 race in Singapore. An F1 race is a major financial undertaking for any business venture. It will require Government's financial and other support to be commercially viable. The Government is willing to support such a venture but only up to a level that is commensurate with the broader benefits for our economy. It is not a venture that we will support at all costs and certainly, Government cannot do this alone without the strong support of key stakeholders and interested businesses, including hoteliers. In response to Mr Teo and Mr Liang, I would say that the prospects are good, but there are still issues such as the commercial terms to be struck between a potential race promoter and the F1 Group, the level of support required from Government, and the extent to which other stakeholders come forward with their support.

Mr Chairman, allow me to conclude by saying that the outlook for our tourism industry is good. To capture the growing opportunities in the Asia-Pacific region, we must be responsive to the needs of the industry, be prepared to revisit old assumptions, and dare to take risks where necessary. To achieve our aim of being a global city, we will need to transform Singapore into a vibrant and exciting lifestyle destination - a city that commands "top-of-mind" awareness amongst travellers as a place where locals and tourists alike would like to visit, live and play.

Mr Low Thia Khiang, take your two cuts together.

Sentosa Development Corporation

Mr Chairman, Sir, the report of the Auditor-General has revealed deficiencies in procedures for land sales. It is disturbing that the land sales by Sentosa Development Corporation through its subsidiary, SCPL, were not seen as transparent, fair and competitive.

The following instances were reported by the Auditor-General. In one tender in November 2004, 24 land parcels were sold to a sole tenderer significantly below valuation. The result of the tender was neither published nor was a required advice of the Chief Valuer obtained. In another sale, 33 land parcels were sold in August 2005 through a process in which the award criteria were not made known at the beginning to all 170 invited parties. Subsequent extension of deadline was only disclosed to a much smaller group. In a third case in December 2003, a former director of SCPL was allowed to tender for sales of land through a company he controls 33 days after he retired from the Board of the SCPL. Before his retirement, he was involved as Board Member in deliberating the land sales. SDC subsequently sought approval of the Ministry of Finance for exemption for breaching the financial code for reason of flexibility needed to market Sentosa Cove. MOF decided that no retrospective exemption will be given for the deviations from IM detected by Auditor-General for past Sentosa Cove's property sales.

Sir, these deviations are significant, given that one of the sources of building reserves is from sales of State land. I would like to ask the Minister for Trade and Industry:

Who approves the sale of land parcels listed above?

Was the Minister aware of the breach of the Government Land Sales procedure?

What measures have been taken to ensure adherence to a principle of fair competition, maximising total returns to the Government and transparency in future land sales?

Sir, now I move on to EDB.

Economic Development Board

Sir, Singapore ranks highly in many surveys on our level of corporate governance in the public sector. However, I wonder whether such rankings are well-deserved as one of our statutory boards, namely, the Economic Development Board has been found by the Auditor-General for numerous lapses in governance, structure and practice.

For instance, the Board of EDB dedicated its powers to a sub-committee to approve big amounts for incentive loans and grants, but without requiring it to report back to the Board. The delegation of the Board's powers to certain staff to make borrowings and to grant loans was not allowed under the EDB Act either. As a result, an expenditure of $5.8 million was only approved 15 months after the completion of the transaction. The Auditor-General also found that a project of $9.2 million was split into smaller contracts which were approved by lower level approving authorities. There was also an overpayment of salaries totalling more than $400,000 for the period November 2001 to 2004.

I would like to know what oversight mechanisms are there in place to ensure that EDB is functioning in line with the Act passed by Parliament and complying with Government's financial procedures, especially in respect of procurement, tender and approval of expenditure. For Singapore to aspire to be first world standards, statutory boards, such as EDB, should lead by example to implement and to maintain a high standard of governance and internal control, especially in light of the Government's new economic initiative to promote Singapore as a centre for "a range of high trust services from legal, financial services to highly specialised niche services", as highlighted by the Second Minister for Finance, Mr Tharman, in his Budget speech.

Mr Chairman, Sir, let me thank Mr Low Thia Khiang for raising the two findings raised by the Auditor-General's Office and giving me the opportunity to clarify.

First, on the Sentosa Development Corporation's land sales, let me explain the background. As we know, Sentosa Cove is a unique development, comprising not just condominium parcels but also individual bungalow lots, hotels, shops and even a marina. SDC had originally adopted the tender mode of sale for Sentosa Cove for the first and second sales of sites. However, the feedback from potential buyers was that this mode was rigid and too onerous. It was not flexible enough to cater to private developers as well as to individual final home-owners.

From our previous experiences, selling land in such a complex mixed development using the normal Government methods will not achieve the best value. SDC therefore set up a private company, SCPL, so as to position the sale of sites at Sentosa Cove as a commercial undertaking. It also enlisted the help of private sector people in the SCPL Board to contribute their market expertise and their business acumen. To better meet the market needs, SCPL decided to adopt alternative modes of sales and practices which are common in the private sector. These methods have been effective and Sentosa Cove has done very well.

However, Auditor-General found that these practices do not comply with the Government's Instruction Manual (IM) which SDC, as a statutory board, has to follow. Following Auditor-General's observation, SDC has reconciled its sale practices with the requirements of IM and obtained the Ministry of Finance's exemption from certain provisions. This allows SDC to meet the market needs while fully observing the principles of fair competition, transparency and maximising the returns to Government.

Let me now turn to the three specific instances which Mr Low Thia Khiang mentioned. First, the November 2004 case where it was the sole tenderer and the tender was awarded below valuation. The SCPL Board, in fact, had very long and deliberate discussions on whether to award this despite being only a sole tenderer and below valuation. As you know, the market situation at that time, in 2004, was still very fragile. We had just recovered from the 2003 SARS episode. And the Board decided that if they did not award this tender, it would send a signal to the market and cause the market to be more fragile. So they decided that in the interest of pursuing Sentosa Cove's development, to maintain the momentum, they decided to award to this tenderer.

Another reason why the tender price came below the valuation is because this was the first time we awarded based on an en-bloc development of the bungalow lots. Previously, we were selling the bungalow lots individually and selling to the highest bidder for each lot.

But the target catchment that we are looking for in Sentosa Cove high-end bungalows, many of them did not want to come in and tender individually. And some of these sales are to foreigners. So SCPL thought that en bloc sale through an intermediary, who is more able to respond flexibly to the final home buyer, would be a better approach. Therefore, there is a question of judgment by the valuer on how much to discount when we do an en bloc sale. That explains why there was a difference in the valuation.

2.15 pm

In the second case, Mr Low Thia Kiang mentioned that it was a limited tender. This was because SCPL decided to go for an approach called "Expression of Interest". This is something that is not in our Instruction Manual but, in the private sector, the developer will invite prospective tenderers through an Expression of Interest. So, in this case, SCPL asked all members of REDAS, the Real Estate Developers' Association of Singapore, whether they were interested in tendering for this particular project. As a result, a smaller group of people expressed interest. From then on, SCPL dealt with this smaller group. So there is nothing wrong in dealing with a smaller group after you have asked the huge membership of REDAS to first see whether they have any interest in the project.

On the third case of a former director tendering, this is not unusual. Many times, we invite private sector people on to our boards to make use of their expertise and for them to contribute. It is common corporate governance that when they join the board, they will declare their interest and they will excuse themselves from participation in individual cases, which is what happened in this case. The former director retired and, after his retirement, he participated in the tender.

Let me now turn to the second case of EDB. In the EDB's case, the Auditor-General had eight findings. EDB views the Auditor-General's findings very seriously. For the non-systemic findings, EDB has taken swift actions to rectify the lapses highlighted. For areas where the Auditor-General has recommended improvements, EDB has promptly reviewed and implemented the necessary changes. MTI will work closely with EDB to ensure that it continues to strengthen its corporate governance practices and its internal control systems.

Let me explain the eight findings. There were two findings on board governance structure. Previously, the EDB budget and applications for large incentive loans and grants were submitted directly to MTI HQ and approved by MTI HQ without going through the board. EDB has since accepted Auditor-General's Office recommendation and its operating budget is now approved by the board since FY 2006, and all key decisions and decisions made by the board's sub-committees are now reported back to the board.

There were three findings because of differing interpretation of the EDB Act and the accounting treatment. On the wrongful delegation of the board's powers on two of the findings, ie, on the delegation of the board's powers on borrowings and to grant loans, EDB has acted on its legal counsel's advice regarding the interpretation of the EDB Act. AGC has a different interpretation of the Act. EDB and MTI have since adopted AGC's interpretation

instead, and EDB has made the necessary changes to comply with the Act.

On the under-contribution of its annual surpluses because of different accounting treatment, EDB has relied on the view of two external auditors on the accounting treatment adopted for the Scholarship Fund, which was different from the Auditor-General's Office. EDB has since adopted Auditor-General's Office's recommended accounting treatment and has made the necessary corrections and contributions to the Government.

There were two findings on procurement procedures, as highlighted by Mr Low Thia Khiang. One was on expenditure of $5.8 million which was approved 15 months after the completion of the transaction. This was because the project was very complex. The costing was available only much later and the approval was therefore obtained late.

On the second case of $9.2 million which was split into smaller contracts, EDB has followed the procurement procedures for each contract's value rather than on the total project cost. EDB has accepted Auditor-General's recommendation to seek approval based on the total project cost.

Finally, there was a finding of over payment of salary totalling some $400,000 for the period from November 2001 to May 2005. The over payments were isolated incidents and not systemic. The amount was promptly recovered through instalments and will be fully recovered by 31st March 2007.

EDB has also put in place various monitoring processes to prevent such incidents.

Sir, on the issue of JTC divestment, can I ask the Minister how many companies or REITs will be managing the divested JTC properties? The reason I ask this is that if we want true market competition, then we need a bigger number. Perhaps the Minister can share with us what will the process be in this divestment exercise.

There was also a question on dual economy that I raised together with Mdm Ho. Could the Minister comment on what the Ministry plans to do on this?

As I mentioned, for JTC divestment exercise, we are now in the process of engaging a financial adviser. Our intention, first of all, is to have a separate REITs manager from the REITs. The two will be separated.

As for the sale of the REIT, whether it is to be divided into two, three or four separate REITs out of the properties to be divested, this is something that we are working together with our financial advisers. Our objective is quite clear. We want to make sure that we have a competitive industry structure at the end of the divestment exercise.

On dual economy, let me apologise for not responding earlier. This is quite a complicated subject. When you look at the Singapore economy, I am sure you can dissect it in many ways and claim that it is a dual economy, tri economy or an economy with four parts. I am not so sure how useful that analysis is. Mr Inderjit Singh explained that the economy can be divided into the small and the big.

Mdm Ho Geok Choo had previously argued that the dual economy is because of domestic versus exports. I would say that our economy is evolving. We are confronted by globalisation. We are confronted by technology. The different sectors in the economy that our companies are in have to evolve and innovate and compete based on these globalisation and technological changes. So some sectors which were considered not doing so well in the past, eg, the ship-repair industry, through their rejuvenation and changes, they have done very well in the last few years.

Similarly, because of under investment in the refinery and chemical sector, the margins were poor and also under invested for the last five to seven years. But in recent years, we are seeing a revival of investment and I am very confident, over the next two to four years, the contributions from our chemical industry will be more significant and we will see it as another growth sector.

Even in our electronics sector, last year, we went through severe readjustment - retrenchments in Maxtor; we had a major restructuring in our hard disk drive sector - but, at the same time, we are attracting new components of the electronics sector and also in the hard disk media sector. So I am confident that in two to three years, as these factories come into operation, we will see the contribution from the electronics sector improve.

The best example, of course, is construction - great difficulties over the last few years and now on the threshold of growth. And as long as we are able to continue to get new supplies of sand and granite, as we are confident we will get, our construction sector should do well.

Sir, I think we have to deal with these changes as the economy evolves. The economy cannot stand still. We are very open, a very small economy, and we have to continuously evolve to meet with our global changes.

Sir, two clarifications. First, why did SDC not first seek approval from MOF on the so-called alternative mode of sale? Second, does the Minister see a need to impose a limitation period for retired board members who participate in tender of projects, and who were also involved in the discussion and deliberation of matters pertaining to the project? Because, to me, I think it is clearly a conflict of interest in this case.

Sir, I thank Mr Low Thia Khiang for his comments and his suggestions.

I fully agree with him. In SDC's case, obviously, SDC made some lapses. SDC bought over Sentosa Cove land. They took up a bank loan and they procured the entire land parcel. As far as they are concerned, they have bought the land lock, stock and barrel from the Government. So they set up a private company to implement the sale of the land. They did not realise that as a statutory board, they still have to follow statutory board procedures, especially the Instruction Manual. Therefore, when this was raised to them, then, of course, they sought exemptions from MOF. That was the lapse.

Similarly, I agree with Mr Low that even when we invite people into our board, there ought to be considerations of limitation period after they resign from the board. This is something that we will definitely consider.

Sir, I would like to thank the Minister of State for addressing my concerns on the masking effect of the pay-as-you-use scheme and the arrears scheme. But I do not think he has responded to my suggestion on whether his Ministry will be considering stepping up efforts on public education in teaching Singaporeans, especially the poor families, on how to save energy and therefore to reduce their bills and their arrears.

Sir, I am sorry I did not completely address the issue. I mentioned the point that SP Services itself, when arrears cases come up for the first time, they do undertake a counselling process where they advise them on their energy consumption and so on, and then give them another chance to make good the payments, etc. Even after a second default, they still undertake some level of counselling. But beyond that, I think we are very open to any suggestions or working together with the CDCs, other Government agencies, grassroots and community organisations to educate especially the lower-income households on how they can moderate their energy consumption to keep their utilities bills low.

Sir, on JTC's divestments, can the Ministry consider not divesting the JTC workshops that are near the HDB heartlands, as they offer budget and low-cost repair works to the residents there as well as the SMEs there?

Sir, in fact, JTC workshops are not under this current divestment exercise.

Sir, on the energy sector, could I ask the Minister whether there have been any new applications for energy generation in Singapore and, if there are, how many?

For the tourism industry, will the shortage of projected supply of hotel rooms become a bottleneck in our plan to grow the tourism industry?

First, on tourism, the sites are available. Developers know this. Our approach is really to make the sites available and then allow the market to decide whether there is sufficient demand. The fact that hotel rates have been moving up and the occupancy rates are at an all time high, it is a clear signal to the market. At the end of the day, the individual entrepreneurs and companies have to make their calculations and make their relevant bids. And if they meet the minimum threshold set by the valuer, then it will trigger a bid process.

On electricity, there has been one that has been publicised, as the Member knows, the IPC site, and we remain open to other proposals as well. I think the whole point is that we keep the market open

for new entrants and the fact that we have a competitive pool for the sale of electricity also means that potential and existing entrants can make the calculations on whether they want to enter the market afresh or plant new capacities as well.

On my proposal for time share legislation, I would like to seek a clarification from the Minister. While I agree that legislation is one way forward, would the Ministry consider making it as a requirement for all the time share companies to go for legislation before they operate? And on lemon law, I would like to also seek clarification from the Minister whether he would consider introducing such a legislation for certain products, for example, electronics or infocomm products.

I thank Mr Yeo for his questions. Yes, the Ministry will consider proposals to refine the current framework to enforce and encourage better commercial practices on the time share industry. But I think we should be quite careful in making legislation specific to a particular industry because legislation can also work towards stifling the flexibility needed for the industry to thrive. So we need to strike a balance, but we welcome suggestions on how to improve the regulations of the time share industry.

As for lemon law, we are studying the proposals and we would be happy to work with CASE to see how to implement some of these ideas of lemon law in Singapore, but I still think the first preference in terms of solving problems like this is to enforce accreditation and raise the commercial practice standard.

In reply to MOS Iswaran, the arguments I made was not mere extrapolation. Even if the MOS genuinely believes it was, how many Crazy Horse failures would he require before extrapolation becomes proof? Two or three? MTI must appreciate that there is an issue of much bigger significance here. In market talk, the casinos are synonymous with IRs. If risky entertainment is allowed this will similarly become synonymous with the IRs.

Mr de Souza, you are to seek a clarification, and not make a speech.

My clarification is this. Given that the IRs have become a new national flagship and that anything allowed within the IR maybe accorded the same status, what will MTI do to prevent risky entertainment from entering the IRs given the recent failure of Crazy Horse?

Mr Chairman, I appreciate Mr de Souza's concerns. I think we will go a bit crazy talking about the horses. But let me just address his points again. I think we need to separate the issue of our concerns in terms of what are the boundaries that we are prepared to accept in Singapore from the commercial outcomes of any ventures undertaken within those boundaries. So we set the boundaries, and it is not specifically for one or two industries. We set it across the board, so we have the rules and these are rules enforced by the Police, MDA and other agencies. All our potential and existing entrepreneurs in the business understand these rules, and the same rules should apply and will apply to the IRs, no more and no less, as I said. So that would be our approach. Beyond that, we leave it to the companies. If the IRs want to bring in a certain type of entertainment, the first thing really is: does it pass muster with our agencies that control or license or guide the kind of activities they can have? If they pass muster, it is up to them, and then good luck to them. They go ahead, try it out, and see whether it works. But it is not for us to micro-manage what occurs within the IRs beyond the existing and pre-agreed and generally established norms of what we consider to be acceptable.

Sir, relating to consumer issues, I earlier asked the MOS whether he would consider having a consumer claims tribunal of some sort to assist consumers. The feedback that we have from consumers is that the Small Claims Tribunal refuses to listen to claims relating to time share disputes.

Sir, for the idea of a tribunal on time shares, we are at this moment not convinced that a tribunal would work. We still prefer to take steps in strengthening the commercial practices and best practices in this industry before recommending a tribunal. But we will be happy to work with CASE to study the idea further.

Four clarifications, Sir. The first is on the manpower needs. Earlier on in his reply, the Minister mentioned that he recognised a tightening labour market and this will indeed pose a problem to the businesses. My question is: as a world class SME would require world class professional workers, what steps can we take to ensure that the creme de la creme do not all flow towards only the foreign SMEs or the MNCs, but some would at least be encouraged to work in the local SMEs?

The second point is on the chorus of green to go with opportunity waves, talking about the green collar jobs and green dollars that we can bring into Singapore. Can the Minister inform this House of his plans and intentions, and what can consumers and businesses anticipate in the near future?

Third, the ICT adoption rate. How is MTI or SPRING working together with IDA in driving the adoption rate amongst SMEs and what are some of the performance indicators?

Fourth, tourism. I think there has been a lot of talk about the MICE events and Formula 1 events. I think they are all exciting but the WEF's Travel and Tourism survey also ranked Singapore 8th out of 124 cities. That is marvellous, except when it comes to the category on human culture and heritage, we actually ranked very, very low. Obviously F1 or MICE events will bring in the crowds. They will bring a lot of crowd but they are also footloose and price competitive. Is it not better to encourage the joining of local festival type of events to attract tourists and to make it a permanent attraction?

Let me take all four points quickly. On manpower needs, I think we are trying our best to encourage Singaporeans to work for the best employer, whether it is foreign SMEs or local SMEs. We also work with the various industry associations to increase the attractiveness of the various sectors. For example, you would have noticed that people in the shipyard business are now advertising themselves through a Chinese serial.

On green dollars, we are working very hard. We gave the answer just now about bio-fuels, alternative energies, and the various incentives we have.

On IDA and the adoption of IT, we adopt a whole-of-Government approach. So SPRING, IE and IDA work with our SMEs to encourage them to adopt IT. On tourism, we look for and we will have performance indicators to guide this. On tourism products, we cover a whole range. We know that we do not have the cultural or historical attractions that other people go to in Paris or elsewhere and, therefore, we must make up for these in other attractions as well.

I thank the MOS for the very comprehensive programmes that he has elaborated with regard to helping the SMEs. On the SME issues, I would like to ask whether he has any implementation details or issues on record with regard to these programmes and, if there are, what is being done to address some of these implementation issues.

May I ask what programmes the Member is referring to?

I think you have elaborated a suite of programmes with respect to, for example, the financing schemes and the collaboration between the local SMEs and the foreign SMEs. In the process of these programmes being implemented, are there any on record that specifically the MOS may like to share on the issues, and what is being done to address some of these implementation issues?

There are 60 over incentive programmes that the Government agencies run for SMEs. In fact, they all fall under the category either of capacity building or helping them to go international or getting them finances. So there are many indeed, and all these programmes have their own KPIs, as the agencies will put it, and they are monitored on a regular basis.

On the issue of local and foreign SMEs, the way we see it is really over time Singapore should have a larger pyramid of enterprises - the small and the startups forming the base, the larger one at the tip. What we try to do is to make the system efficient, as if we put in the catalyst or enzymes so that those at the bottom starting out can rise quickly to the top and become big companies. And this will bring about benefits in terms of economic spin-offs and jobs, etc. I want to assure Mdm Ho that there are many indicators in place and we track closely the performance of SMEs as well as the programmes designed to assist them.

Sir, in his response earlier, MOS said that tribunals are not appropriate for questions relating to time shares. Would the Minister be able to explain why he thinks that a tribunal is not appropriate in the context of claiming redress for a person who is aggrieved in this regard?

At this point in time, I think the approach we are trying to take is to give CASE more powers through the Fair Trading Act to empower them to take certain steps to regulate the time-sharing industry as well as other industries that are known to have created problems for consumers. So once that is done and through accreditation, we will be able to identify good players and bad players in the market, and for bad players as with the existing mechanism, there are ways to stop them and publicise their shortcomings to the market. In this way, we feel it is more effective than by way of regulation or legislation on one particular industry.

Sir, I would like to thank the Minister and the two Ministers of State as well for clarifying and answering all our questions. They were wide ranging questions from nuts and bolts issues to colourful issues. At the same time, I like to take the opportunity to thank all the economic agencies under the Ministry for doing a very good job in steering Singapore's economy to the direction that it is heading. As I mentioned at the start of my speech, we are indeed seeing a "Goldilocks Economy" and we are thankful that this has happened and we hope that we have many more years of growth like this.

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

Amendment, by leave, withdrawn.

The sum of $510,482,110 for Head V ordered to stand part of the Main Estimates.

The sum of $4,605,637,800 for Head V ordered to stand part of the Development Estimates.

Head N - Ministry of Foreign Affairs. Ms Indranee Rajah.

Singapore's Foreign Relations

Mr Chairman, I beg to move,

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

Mr Chairman, may I take my two cuts together on Singapore foreign relations and ASEAN? That will be five minutes then, Sir?

Yes.

With respect to Singapore's foreign relations, I would like to ask the Minister whether there had been any significant developments in our foreign relations as a whole. In particular, I would like to know where our relationships with the US and Europe stand and also our international standing. We are a small country but it has been said that we punch above our weight. It would be good if the Minister could update us on where Singapore stands in the international community and whether what we say in respect of international conventions, treaties and international affairs generally is taken note of by other countries.

ASEAN

I would also be grateful if the Minister could comment or give us an update on ASEAN. ASEAN is still a cornerstone of our foreign policy, so I would appreciate it if the Minister could let us know what is our current policy on ASEAN and, in particular, what are our plans for the ASEAN Chairmanship since Singapore would be taking the chairmanship of ASEAN. And also what it the progress on the ASEAN charter?

There has been much talk from time to time about ASEAN integration. It would also be appreciated if the Minister could comment on the feasibility of ASEAN integration, or what sort of progress is being made in that decision. I would also ask the Minister to comment on our bilateral relations with Malaysia, Thailand, Brunei, Vietnam and Indonesia.

2.45 pm

If I may just spend a few minutes on Indonesia because I had, in my Budget Statement, spoken about that. I had noticed that in the Sunday Times, there has been a further development or yet another episode emanating from our Indonesian neighbours. I must say, Sir, that it really is rather like a bad soap opera.

The latest salvo that has come from Indonesia can perhaps be described as the five Ps. The first "P" is that Indonesia took a stand on banning the export of sand on the matter of principle. They said that it was the environment. So that sounds quite noble and high minded. They wanted to protect the environment. It is a matter of principle. A few days later though, they emanated another statement which said that the ban was because of pressure. They wanted to pressure us. That sounds rather less noble. That is the second "P".

Then, on Sunday, I noticed that Indonesia's Maritime Affairs Minister, Mr Freddy Numberi, had said, and I quote, "The ban on sand exports will not be lifted till the Republic settles their border dispute. And even if Indonesia were to eventually allow sales to resume, it wants to renegotiate the price of the sand and determine which areas could be mined to avoid environmental degradation." And he said also, "Politically, we banned the export of sand because we wanted it to have a larger economic value, and we also wanted to settle our border disputes with Singapore." This comment about banning sand because they wanted to have a larger economic value is rather telling. Because what that suggests is its price, the third "P". So the first "P" - principle can perhaps be compromised, if the third "P" comes in, which is price. So the principle can be purchased. Of course, all this results in the fourth "P" for Singapore because we are puzzled. And if I could just wrap the whole thing up by saying that the entire Indonesian stand can be described as the fifth "P", which is that it is peculiar.

If the Minister could comment on these developments as well as the other bilateral relations that we have with our neighbours, which seem to be rather more smooth sailing with the occasional ups and downs. But bearing in mind that we live in a neighbourhood which is sometimes calm and sometimes exciting, it would be helpful if the Ministry of Foreign Affairs could give us an indication of whether we are sailing in smooth waters or whether we must experience a little turbulence here and there.

Sir, ASEAN would be celebrating its 40th anniversary. ASEAN is at the crossroads and is time for stock taking. As Mr Severino, a former Secretary General of ASEAN, put it, ASEAN would have to face tough questions from both its citizens and the international community in the coming years. Is ASEAN the right vehicle for cooperation? Does it focus on the relevant problems? Are the appropriate instruments available? Some are indeed disappointed that ASEAN is not a strong economic entity. The pace of economic integration is far too slow and at its snail's pace. There is also the thorny question of membership. How do we deal with a wayward member like Myanmar whose conduct somewhat diminishes ASEAN standing? There are lots of ASEAN conferences and talks but little action. We wish ASEAN well. But it is in danger of being a NATO - No Action Talk Only.

Will the ASEAN Charter chartered by the Eminent Persons Group be a good roadmap for ASEAN in future? What is the outcome of the ASEAN Ministers' Retreat at Siem Reap, we wonder?

Sir, ASEAN governments must surely realise by now that ASEAN's policy of constructive engagement and quiet diplomacy with the Myanmar's military junta over many years has failed to bring about any change for the better in that country. In fact, the situation appears to be regressing after many broken promises made to ASEAN and with hardly any progress made on their roadmap to democracy. Myanmar's military junta has done little to provide ASEAN with justification to continue defending it, and ASEAN's credibility has suffered much as a result of trying to defend the junta against international criticism.

However, ASEAN must also realise the limits of its influence, as evidenced by the snub received by its envoy, Syed Hamid Albar when he visited Myanmar earlier last year. Although ASEAN's influence on Myanmar appears limited, ASEAN governments must speak up and make it clear that what is happening in Myanmar is not acceptable to the other ASEAN members. ASEAN cannot simply ignore the tragedy happening in the member country and should review its policy of constructive engagement and stop using non-interference as an excuse for inaction. ASEAN's current constitution does not have any provision to suspend or expel rogue members. Could the Minister tell us whether the proposed ASEAN Charter currently being drawn up will address this shortcoming?

Sir, we have been a member of ASEAN since its inception some 40 years ago. ASEAN has expanded, not only in size, but also in scope of its work as a regional and economic bloc. Our ASEAN members are also riding on each other's development as we see the positive outcome of the region being seen as an attractive destination for investors, albeit occasional domestic challenges faced by individual members.

Sir, while individual member countries may have their own challenges and difficulties, we also see periodic tensions in bilateral relations between ASEAN members. We have had our fair share of bilateral challenges with our neighbours. Our relation with Thailand was affected recently by the Shin Corp episode and the former Prime Minister Thaksin's private visit here. Then with Indonesia, we had the sand ban issue with their leaders going back to enforce on the reasons for the ban. Whether their reasons are environmental or political or the other "Ps" that are mentioned by Ms Indranee Rajah earlier, our relations with them is a little bit strange.

It does not help when political leaders make statements that seem as though we are such bad neighbours. Then with Malaysia, we continue to be targets of various accusations from time to time. Sir, I acknowledge that we are not the only ones having periodic bilateral issues with our ASEAN countries. Relations in Thailand have their own border issues to deal with. Countries continue to dispute on territorial boundaries.

Sir, bilateral relations have often times become thorny issues between member countries. How do ASEAN members ensure that these issues do not affect the larger objectives and vision of ASEAN? The stability of the region is critical for us to attract investors and for ASEAN to be seen as an economic force to be reckoned with. We cannot allow intra-ASEAN disputes to affect investor sentiment for the region as we will all stand to lose. While we continue to look beyond ASEAN, we should ensure our attractiveness as an investor destination. We must work to impress upon our counterparts in ASEAN on the importance of ASEAN solidarity for our collective and mutual benefit.

In this regard, Sir, I would like to ask the Minister: how is Singapore managing its relationship with individual ASEAN member countries bilaterally, especially during periods when bilateral relations are strained? Sir, we are aware of the non-interference in domestic policies of ASEAN. However, is there a role for ASEAN in managing such bilateral issues?

Finally, Sir, I would like to ask the Minister what is Singapore's role to ensure that ASEAN continues to remain strong and able to glue the member countries together to rise above sensitive bilateral issues.

Through the Singapore Cooperation Programme, we have helped our ASEAN neighbours by giving technical assistance. We have also helped our ASEAN neighbours in their times of need as much as we can within our capabilities. An example is our tsunami relief effort. Singapore was among the first to rush to Indonesia's aid. We sent emergency relief and pledged $15 million for its reconstruction efforts. Singaporeans from all walks of life also donated a total of $88 million for tsunami victims.

More than half the projects are in Indonesia. Just to name some: we built 1,500 houses in Aceh, built and upgraded hospitals, training centres and schools, and also built a pier in Meulaboh. Hundreds of ordinary Singaporeans, from retirees to students, also pitched in, serving as volunteers. And this was not a one-off effort. After the earthquake in Central Java last May, Singapore was also among the first to help with emergency relief.

Singapore has also sought to spur growth in our neighbouring countries through economic cooperation. One of the most recent was the framework agreement to develop the Special Economic Zones in Batam, Bintan and Karimun. In Thailand, we have also worked hard with the various Thai governments over the years to build a constructive relationship based on mutual help and mutual benefit. In particular, we have encouraged our companies, including our Government-linked companies, to seriously consider Thailand as a key investment option. Hence, Temasek's investment in Shin Corp.

These are major expenditures and investments, both tangible and intangible. But Singaporeans witnessing the unfriendly actions of Indonesia and Thailand would be forgiven for asking if all these efforts to build a strong ASEAN community and to help our neighbours are a worthwhile effort.

Singaporeans do not expect gratitude from our neighbours and we certainly do not expect also to be constantly made the scapegoat for their own domestic troubles or the butt of bully-boy tactics.

In Singapore, we do not forget countries which have helped us in times of need. We also resist populist pressures to play the nationalist card against our friends just to win votes. In our early years of struggle for survival after independence, it cannot be said that Indonesia was helpful to us. On the contrary, Indonesia was engaging in konfrantasi against us.

To become a viable state, we were forced to leapfrog the region. Our economic success today is the result of our hard work, resilience and ingenuity, and not because of any sand that we might have imported from any country or the oxygen that they might have provided.

Sir, we have put the past behind us and we have been working hard towards a strong ASEAN. We want a peaceful and prosperous neighbourhood. And we know that this region needs a strong ASEAN to face up to the challenges of a rising China, India and the shifting geostrategic landscape. But until the bigger countries in ASEAN get their act together and treat other countries in ASEAN with mutual respect, it would seem that this would remain only a hazy dream.

Can I ask the Minister what are the prospects for an integrated ASEAN given this state of affairs? Can I also ask the Minister whether he thinks that the haze problem would be considered a major ASEAN problem that all ASEAN countries should solve together, especially with the help of our biggest neighbour, Indonesia? It would seem that if we want to strive towards an integrated community of peace and prosperity, we should have a clear ASEAN, a clear-minded ASEAN with fresh air that would draw in investments, rather than one that is clouded in smoke and haze and will cause investments to go away.

I mentioned about Hong Kong having China as a mass market that backs them up so that they gain a competitive advantage. ASEAN as a whole should be more integrated and work more closely on various fronts to tap on the opportunities and face the threats of competition. Would the Ministry share what are the plans ahead for Singapore in both social and economic aspects within ASEAN? And what is the strategy in positioning Singapore and ASEAN in the new world for the years ahead?

Sir, in the face of the growth of China and India as economic power houses, it is very important and urgent for ASEAN's 10 members to work more closely together to enhance their competitiveness and attractiveness to investors. I would acknowledge that the different stages of economic development among the member countries is a key challenge to ASEAN's economic integration but efforts must be put in to achieve it.

Singapore is the current Chairman of ASEAN. Can the Minister give an update on whether we are achieving the objectives, in particular ASEAN economic integration, that we set out to achieve for ASEAN when Singapore assumed the chairmanship last year? What are the problems and challenges that are yet to be overcome towards that end?

Sir, I would also like to ask the Minister whether we are moving towards political integration and what are the challenges and, if we are achieving, whether there had been an agreement among ASEAN member countries to achieve it.

Relations with China and India

Sir, in the last 10 to 15 years, China and India have become major powers in Asia and, indeed, the world in international politics and economics. There is no doubt that China and India would control to a very large extent the future growth of the region, including Singapore. ASEAN must ride the Asian economic wave that is being led by China and India. Singapore is poised to lead the way in riding this wave.

From the point of view of regional security and stability, both China and India would play key roles in maintaining the balance of power in Asia. Given the rapid growth of these two Asian superpowers, can the Minister address the following: What is the state of our relations with China and India?

What is the future of our relations with these countries? Aside from political and economic relations which are foremost on the agenda, would Singapore be involved in any cultural projects, such as the Nalanda project, given the rich culture and heritage of these two countries? In the event that relations between the US and China deteriorate and India aligns itself with the US, which way would Singapore go? Can Singapore afford to take a side in such a scenario? Now that Japan is developing a full army governed by its new Ministry of Defence, in the event that China-Japan relations deteriorate, what position would Singapore take?

Bilateral Relations with Neighbouring Countries

Mr Chairman, Sir, recently, Singapore's immediate neighbours, Malaysia, Thailand and Indonesia, seem to have an axe to grind and are terribly unhappy about Singapore.

The Johor Menteri Besar, Mr Abdul Ghani Othman, blamed the floods in Kota Tinggi on Singapore's reclamation works. This is a ridiculous claim, unsubstantiated by facts, and also did not explain why floods occurred in so many other parts of Malaysia. And the same Menteri Besar is ambivalent, blowing hot and cold about Singapore investors participating in the Iskandar Development Region.

The Thais accused Singapore of spying through Shin Corp's mobile and satellite operations. Why should Singapore be interested in spying on Thailand? We have better things to do. And the Thai government was terribly unhappy when the former Thai Prime Minister Thaksin made a private visit to Singapore. If the Thai military government is self-confident, why should they be worried who Mr Thaksin visited or whom Mr Thaksin had dinner with?

And Indonesia abruptly banned the sale of sand to Singapore, out of anger. The Indonesian Fisheries and Maritime Affairs Minister, Mr Freddy Numberi, called Singapore a "United States puppet". He said that the ban on sand export would go on till border disputes are settled.

But we are not intimidated. We shall get sand from elsewhere, use better construction methods and come up with NewSand, like we did with NEWater. Indonesia is also terribly unhappy that we raised the haze issue at the UN during a debate on environmental issues.

Overall, Sir, what does it all mean? It means that our neighbours are simply jealous of our success. I would say they have developed a "red eye" syndrome, infected with jealousy and envy, seeing red over the little Red Dot.

Order. I propose to take the break now.

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

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

Sitting accordingly suspended

at 3.00 pm until 3.20 pm.

Sitting resumed at 3.20 pm

[Mr Speaker in the Chair]

Debate in Committee of Supply resumed.

Head N - Ministry of Foreign Affairs (cont.)

Head N - Ministry of Foreign Affairs. Mr Hawazi.

Mr Chairman, Sir, recently, we have been reassured by the Minister that the fundamentals in our relations with our closest neighbours, namely, Indonesia, Malaysia and Thailand, are sound and are not affected by the current spats in our relationship now with two of them at least. However, in the case of our relationship with Indonesia and Thailand in particular, there seem to be almost daily events and statements from their government leaders that indicate that even strong fundamentals built over the years may not be that strong after all.

In the case of our relations with Thailand, our use of their territory for regular military training is being questioned. As for relations with Indonesia, their flip-flopping on the reasons for the ban on sand export to Singapore does not augur well for strong bilateral ties. In fact, by the actions taken by the Indonesian navy to stop barges carrying granite stones which were heading towards Singapore, there seems to be a ban on the export of granite to Singapore too. If there is any concern in Indonesia about the possibility of sand smuggling under the guise of granite export, we should work towards joint inspection of the barges carrying granites, unless Indonesia intends to also block the export of granite to Singapore.

Sir, we must maintain a close relationship with all countries, including the US and other external major powers, that can enhance our safety and security and that of the region too. In this context, like fellow Member, Dr Ong Chit Chung, I am puzzled by the comment made by an Indonesia Minister that Singapore is a "puppet" of the US, and would thus like the Minister to comment on it. Can the Minister give us an update on the state of affairs of our relations with our three close neighbours and those outside Southeast Asia? Can the relationship that can be mutually beneficial be moved forward despite the current bilateral issues?

Middle East

Sir, with the rapid development and growth of the Middle East, Singapore has, in recent years, begun to give more attention to the region. What is the progress of our Middle East engagement efforts? Are we too late in realising the economic and other potential of this region? Can the Minister also update the House on the progress of our Free Trade Agreement negotiations with the Middle East countries, if any? How would these Free Trade Agreements translate into tangible economic and social benefits for Singaporeans?

Mr Chairman, Sir, I have heard feedback about how we have for a long time paid little or no focused attention to the Middle East region. Similarly, some have lamented on how little knowledge that we have about the culture and traditions of the Arabs and the Arab nations.

If this is true, Sir, what are the new initiatives and efforts that will be done to remedy this situation? In the long term, it would be beneficial for us to develop and enhance knowledge and capabilities on Middle East civilisation, language and culture. As more of our political leaders and businessmen meet and interact, I am confident more relations will be built and more goodwill could be garnered. Nevertheless, Sir, we should not ignore the people-to-people interaction. The Arab and the Muslim community in Singapore could play a role to further develop these contacts.

Mr Chairman, Sir, allow me first to thank Members for their questions on Singapore's foreign policy, although there are not many cuts this year.

Overall outlook

To answer Ms Indranee Rajah and others, the overall international and regional outlook for Singapore remains favourable. The big international relationships which affect us have improved. Sino-US relations are on an even keel. As a result of this, cross-Straits relations are stable, at least for now. The US has recognised China's helpfulness in finding a solution to the North Korean nuclear problem. Under Prime Minister Abe, Japan's relations with China have become less frosty. China's relations with India are also getting better. Both sides are engaged in serious border talks and trade between them is growing smartly. All this is good for community building in the region

- APEC, ASEAN + 3 and the EAS (East Asia Summit).

3.30 pm

The Middle East, however, remains worrying. The situation in Iraq continues to deteriorate. The standoff between the international community and Iran over its nuclear programme is reaching a head. Against the backdrop of growing division between Sunnis and Shiites, the Middle East is one area where conflict can suck in all the world's major powers. We will be directly affected in Southeast Asia as well. Without forward movement in Palestine, Iraq and Iran, the problem of jihadi terrorism can only get worse. But it is not all gloom; there are some positive developments as well. For example, Saudi Arabia is now playing a helpful role in bringing Fatah and Hamas together to form a unity government in Palestine. Although the Mecca Agreement falls short of the conditions set for an internationally-recognised Palestinian government, it nevertheless represents a step forward. It is good that the US is also now prepared to engage Iran and Syria through a regional conference on Iraq. While we have little influence over the larger forces at play, we can help stabilise our immediate environment in Southeast Asia. Ms Indranee Rajah, Dr Ong Chit Chung, Ms Irene Ng, Mr Charles Chong, Dr Maliki, Mr Teo Ser Luck and Mr Hawazi Daipi raised ASEAN and the importance of ASEAN integration. Building a stronger ASEAN is indeed a core element in our foreign policy. By the next Summit this November, the ASEAN Charter, which is being drafted, should be ready for our Leaders to sign. We will strengthen all three pillars of ASEAN, for political-security cooperation, for economic integration and the strengthening of our socio-cultural linkages.

A strong ASEAN enables us to negotiate more effectively with our major partners like the US, China, Japan, India, Europe and Australia/New Zealand. ASEAN is already playing a leading role in the construction of a larger architecture of peace and cooperation in the region. We have an inner concentric circle consisting of ASEAN and the three Northeast Asian countries of China, Japan and Korea, what we call ASEAN + 3. And we have, in addition, a larger concentric circle, the EAS, which also includes India, Australia and New Zealand. Launched in Kuala Lumpur in December 2005, the EAS had a successful second meeting in Cebu.

Dr Ong Chit Chung asked about the ASEAN Formal Ministers' Retreat in Siem Reap last week. We had a good meeting and we were able to advance the ASEAN agenda significantly. Later this year, Singapore will be in the ASEAN Chair for its 40th Anniversary as pointed out by Ms Rajah, Dr Ong and Mr Hawazi. We will also be celebrating the 30th Anniversary of our dialogue relations with the US and the EU. ASEAN's relations with both the US and the EU are becoming stronger. With the US, a Plan of Action was signed last July to implement the ASEAN-US Enhanced Partnership. With the EU, negotiations for an EU-ASEAN FTA will soon be launched. The EU has also indicated its desire to accede to ASEAN's Treaty of Amity and Cooperation. Singapore is a strong advocate of stronger EU involvement in ASEAN. We hope that both the ASEAN-US and ASEAN-EU Anniversaries will be celebrated at the Summit level.

While in the Chair, we will do all we can to move ASEAN forward. A peaceful ASEAN can play a major role in maintaining the larger peace in Asia. If I may answer Dr Maliki, Dr Ong and Ms Irene Ng directly, it does not mean that, with a strong ASEAN, there will be no more problems or conflicts among countries in Southeast Asia. There will still be. But a sense of regional solidarity and a habit of consultation and cooperation will set our disagreements within limits and facilitate their solution. To respond to the comments made by Dr Ong and Ms Irene Ng, ASEAN still has a very positive role to play. The most important objective is to maintain the peace in the region. If we are able to keep the peace for another generation, the entire region, which encompasses more than half the world's population in Asia, will be transformed beyond recognition and hundreds of millions of people will be brought out of the depths of poverty.

Let me now move to our bilateral relations in ASEAN. Ms Rajah, Dr Maliki and Dr Ong Chit Chung commented on our relations with Malaysia. On the whole, our relations with Malaysia are good and getting better. I agree with the recent remarks by Foreign Minister Syed Hamid, quoted in the Straits Times that, "our bilateral ties with Singapore have never been better. That doesn't mean all our bilateral issues have been resolved, but we are moving on to a more mature track. We are able to segment areas where we think we can move forward and areas we cannot, and move on the areas we think we can move ahead". I welcome this new phase in our relationship with Malaysia. In May, Prime Minister Lee Hsien Loong will visit Malaysia with a delegation of Cabinet Ministers for a retreat with Prime Minister Abdullah Badawi and his colleagues. This will be the first Retreat between our Leaders.

Close cooperation between our two countries will benefit our peoples. Personally, I was delighted, when it was announced that Genting made the successful bid for the Sentosa IR project. We look forward to working with Malaysia on the Iskandar Development Region in South Johor on the basis of mutual respect and mutual benefit. I am pleased to inform the House that the National University of Singapore will be conferring on the Sultan of Johor an honorary doctorate in April on the occasion of his official visit to Singapore. At Siem Reap last week, I expressed our intention to establish a Consulate in JB to Syed Hamid who welcomed it.

Singapore's relationship with Vietnam is growing from strength to strength. Vietnam has made remarkable progress in the last decade. It has been the fastest growing economy in ASEAN all through the Asian Financial Crisis. We have been working with Vietnam to deepen our economic cooperation. The Connectivity Agreement which we signed with Vietnam in December 2005 has raised our economic relationship to a new level by allowing both countries to leverage on each another's strengths. Last year, PM Lee was invited by Vietnam Premier Dung to celebrate the 10th Anniversary of the Vietnam-Singapore Industrial Park which has been a signal success. The two PMs also witnessed the launch of the VSIP II in September 2006. We look forward to Vietnam playing a growing role in ASEAN. Our relations with Cambodia and Laos are also in good shape.

Dr Ong, Mr Hawazi, Ms Rajah and Dr Maliki asked whether problems in our bilateral relations with Thailand and Indonesia will affect ASEAN's development. Well, I certainly hope not. With Thailand, our relationship is strong enough to weather the uproar over Prof. Jayakumar's private dinner with former PM Thaksin. As Thai Assistant Army Commander, General Saprang, who is a member of the Council for National Security (CNS), said in his interview with the Straits Times published on 21st February 2007, "misunderstandings between the two countries have come about because of Thaksin's business. The problem can be resolved fairly ... and won't blow up because the cause of the problem is not Singapore, but Thaksin". In other words, we are just being embroiled in their own domestic political conflict. I share General Saprang's sentiments. As close and friendly neighbours, it is right that both sides take into account each other's sensitivities whenever possible. We value our friendship with Thailand and the Thai people. It is good that both countries view Temasek's purchase of Shin Corp as a commercial transaction. The Thai Government has stated publicly that it is mindful of the rights of international investors and will not take action which is discriminatory in nature.

As for Indonesia, which was raised by, I think, all MPs, our relations were improving until recently. In October 2005, PM Lee held a retreat with President Yudhoyono in Bali. They agreed to negotiate an ET, an Extradition Treaty and a DCA, or a Defence Cooperation Agreement, in parallel and to be concluded as a package. We have made good progress on both the ET and the DCA. There are a few difficult issues remaining, but the gaps can be overcome. We have also agreed to cooperate on the development of Special Economic Zones (SEZ) in the Riaus, and to work together regionally and internationally to combat the haze.

Unfortunately, despite these positive developments, other issues have recently emerged that could sour relations and affect bilateral cooperation. On 5th February 2007, Indonesia banned the export of land sand to Singapore. Various reasons have been advanced by Indonesian politicians and legislators, some quite wild and strange. I like the five "Ps" which Ms Indranee Rajah used to describe the cacophony which we are now hearing.

On 16th February 2007, the Jakarta Post published an article which quoted the DEPLU's (Indonesian Department of Foreign Affairs) Director General for Asia, the Pacific and Africa saying that the ban on land sand exports to Singapore was a way to put more pressure on us to move faster on ET and border demarcation. MFA issued a statement on 19th February to say that, if this was indeed DEPLU's position, it was unfortunate and contravened the earlier agreement by the two Leaders and would further complicate border negotiations. On 21st February, Foreign Minister Hassan clarified that the land sand ban was not intended to pressure us. He reiterated environmental concerns and conceded that our reclamation would not change the sea boundaries between Singapore and Indonesia because what was under discussion was far away from our reclamation areas.

Last week, I met Minister Hassan during the ASEAN Foreign Ministers' Retreat in Siem Reap. He repeated to me that there was no linkage between the ban on land sand and other bilateral issues. And he explained Indonesia's environmental concerns. I told him that our offer to work with Indonesia on these concerns was still on the table. On sand, I acknowledged Indonesia's prerogative to stop its export, subject, of course, to international rules. I told him we were disappointed but we would find alternatives.

Early last week, another issue arose. We received reports that the Indonesian Navy was interdicting and detaining tugboats and barges carrying granite chips from Indonesia to Singapore. As of this morning, some 12 tugboats and 12 barges have been detained, most of which fly the Singapore flag. Mr Hawazi and others raised this specific problem.

I asked Foreign Minister Hassan whether there was a ban on granite exports to Singapore as well. After checking, he assured me that there was no such ban. He said there were only some existing administrative verification procedures to be complied with for granite exports. He invited us to witness the verification process to ensure its transparency. I welcomed this.

Minister Lim Hng Kiang also spoke to Indonesian Trade Minister Mari Pangestu to clarify the matter. She also confirmed that there was no ban on granite exports and acknowledged that several barges carrying granite chips from Indonesia to Singapore had been detained by the Indonesian Navy.

This morning, MFA delivered a TPN to the Indonesian Embassy in Singapore to confirm what Foreign Minister Hassan had assured me in Siem Reap and to ask the Indonesian Government to take immediate action to release the vessels that are still detained.

It is not clear to us what caused the recent events which threatened our bilateral relations. We know, for a fact, that President Yudhoyono values good bilateral relations as we do. On ET and DCA, we are not far from a solution. This was also Minister Hassan's view when I met him. And we have agreed that negotiations should now be elevated to the ministerial level so that they can be jointly concluded on the basis of "an overall balance of benefits" agreed to between Prime Minister Lee and President Yudhoyono.

Mr Chairman, Sir, from time to time, we must expect countries to pressure us in the hope that we will then give way to their demands. Singaporeans know that if we give in to such pressures, we would only invite more such pressures. However, we are always prepared to build good relations with them on the basis of mutual respect and mutual benefit. We should still help them when they are in difficulty not because we expect gratitude or reward, but because that is the right thing to do. I do understand the sentiments expressed by Ms Indranee Rajah, Ms Irene Ng and Dr Ong Chit Chung, which are sentiments shared by many Singaporeans but we have to take these ups and downs in our stride.

3.45 pm

Moving on to the rest of ASEAN, Singapore treasures its close ties with the Philippines and Brunei. The leadership of President Arroyo was a decisive factor in the success of the last ASEAN Summit in Cebu. We were touched by the warm welcome accorded to President Nathan during his State Visit to the Philippines last month. With Brunei, our relationship is intimate and problem-free. Later this year, Prime Minister Lee will be visiting Brunei to launch jointly with the Sultan a commemorative currency note to celebrate the 40th Anniversary of our Currency Interchangeability Agreement.

Dr Ong Chit Chung and Mr Charles Chong asked about our attitude towards Myanmar. It is sad that the country is not moving forward, at least not in a way obvious to foreign observers. By right, Myanmar should be in the Chair of ASEAN this year. We have decided that in ASEAN, we should give Myanmar more space to work out its own internal problems. This also means that ASEAN stopped having a common position at international forums, like the UN and the ILO. Mr Chong asked whether the ASEAN Charter should have provisions for actions against member states in the case of serious violations. This is a subject still being discussed but not with specific reference to Myanmar.

Bilaterally, we continue to maintain good relations with Myanmar and we wish the Myanmar people well. I will be making a bilateral visit to Myanmar next month. It is not for us to tell them what to do but we support ASEAN's consensus calling on the Myanmar Government to adhere to its own Roadmap to Democracy and for the release of Ms Aung San Suu Kyi.

To answer Ms Rajah and Mr Palmer, our bilateral relations with China, Japan and India are excellent.

With China, the Joint Council for Bilateral Cooperation co-chaired by Chinese Vice Premier Wu Yi and DPM Wong Kan Seng covers a wide field. Last year, both sides agreed to launch negotiations for a China-Singapore Free Trade Agreement within the framework of the ASEAN-China Free Trade Agreement. Suzhou has become an icon of our close partnership. China welcomes the extension of our involvement from the coastal regions to the West and the Northeast, and both sides have been making bilateral visits at a high level.

Our good relations with Japan were highlighted last year by the visit of the Emperor and the Empress. Following the custom of the Imperial Household, the visit was carefully crafted in great detail to express the depth and the warmth of our friendship. This month, Prime Minister Lee will be making an official visit to Japan. With economic recovery, Japan's role in ASEAN's economic development is growing again.

To answer Mr Palmer, we are relieved to see the sun come out in the relations between Japan and China although the clouds have not completely dispersed. Prime Minister Abe made an important move in visiting Beijing first when he assumed office, and Prime Minister Wen will be returning the visit to Japan in April 2007.

As for India, raised by Ms Rajah and Mr Palmer, our bilateral relations have never been better. We are now cooperating on a wide front, including in security and defence. Our artillery and armour units conduct joint exercises regularly, including live-firing exercises. The two air forces have been conducting a series of bilateral exercises, out of Kalaikunda in West Bengal and, for the first time last year, in Singapore. Following the signing of the Comprehensive Economic Cooperation Agreement in June 2005, bilateral trade jumped 40% last year.

In a modest way, we have been promoting good relations between India and China and between India and Japan. We try to add value where we can. And these are the three most important countries in Asia. If they develop strong bonds of cooperation, the whole of Asia will benefit and Singapore will prosper. For this reason, we worked hard for an EAS that included India. But we need more than economics to bind us together. We need also to develop cultural ties, the ties that in past periods created the maritime silk route. For example, with the support of the Buddhist community in Singapore, MFA has been working with India, China, Japan and many other Asian countries to promote the Nalanda project which Mr Palmer referred to.

Mr Palmer asked whether there is a danger that Singapore might be caught in between should conflict break out between the big powers, for example, between China and US, or China and Japan. There is always such a risk. What is important is for us to be clear about our own position. While we have friendly relations with the major powers, we are never their agents. And we must always be autonomous and have our own core. Let me answer Ms Irene Ng and Mr Hawazi Daipi. If there is a puppeteer, it is the people of Singapore whose collective interest we advance.

Dr Ong Chit Chung referred to our relations with the US, with whom we have an FTA and a Strategic Framework Agreement. Last year, President Bush made his second official visit to Singapore. No other country can match the US in its comprehensive capabilities. When the Boxing Day tsunami hit us, it was the US military which did the heavy lifting in countries all along the Indian Ocean rim. The SAF was only able to play a significant role because we were within operational range of Aceh.

We also recognise the importance of Russia to our region. Our political and economic links to Russia are getting stronger. There are now many direct flights between Singapore and Moscow. We are also working together on the development of Special Economic Zones.

Mr Chairman, Sir, Mr Zainudin Nordin asked for a progress report on our Middle East account. We have made significant progress since our policy shift to engage that region some three years ago. Last year, the Saudi Crown Prince made a very successful official visit to Singapore. The story of the young boy who walked up to the Prince at the lounge of the Fullerton Hotel, chatted him up and who was then given a string of beads by the Crown Prince, touched the hearts of many Singaporeans. Prime Minister Lee also had a good visit to Saudi Arabia in November last year. We were pleasantly surprised and honoured when the Saudis proposed to send more than two hundred scholarship holders to study in our universities annually.

Our relations with the other Gulf states - Qatar, UAE, Oman, Bahrain and Kuwait - are also blossoming and becoming more multi-faceted. We enjoy a good brand name and, generally speaking, our companies and our citizens are sought after by all these countries. Some of our companies have secured sizeable contracts. I hope more of our businessmen will seize opportunities in that market.

Negotiations for an FTA with the GCC countries, which consist of all the countries that I have mentioned, have begun and should not take too long to complete. Not only are there opportunities for us to trade and invest in each other's economy, there are also good prospects for us to work together in third countries. Flushed with cash reserves from high energy prices, and feeling somewhat less welcome in the West nowadays, some of the GCC countries are looking for opportunities to invest their money in China, Vietnam, Malaysia and other countries in our region. Some have asked to partner us in entering these Asian markets, especially China, as they believe that we are more familiar with this region. And, as Minister Tharman mentioned in his Budget Speech, Singapore is also becoming a centre for Islamic finance to service the growing economic links between the Middle East and East Asia.

I spoke about the strategic importance of Iran earlier. Senior Minister Goh Chok Tong will be visiting Iran in a few days' time. On Iran's nuclear programme, Singapore has always taken a firm position. We acknowledge Iran's right to develop nuclear technology for civilian purposes but this must be done under the supervision of the IAEA. It is necessary for Iran to comply with its obligations under the Non-Proliferation Treaty and the IAEA safeguards regime. Since Iran has explained that its nuclear programme is a peaceful one, we hope that it will abide by UN Security Council Resolution 1737 and reduce what IAEA Director-General El Baradei called the 'confidence deficit'. We believe that Iran can play an important positive role in bringing peace and stability to a troubled region. Doing so would be in the interest of Iran and the rest of the world.

Beyond the Gulf, Singapore's relations with Egypt, Jordan and the Maghreb are all warming up. Last year, we established diplomatic relations with Libya. And I hope to visit Libya this coming May to explore opportunities for cooperation.

To deepen our knowledge of the Middle East, we will establish an institute to study the Middle East focusing on West Asia and North Africa. It will complement the existing Southeast Asian, East Asian and South Asian Institutes. Our Arab community in Singapore is an invaluable bridge we should use to re-establish links with that region. Many of our Arabs are Hadramis who are an unusually talented and entrepreneurial people. Recently, Minister Yaacob and I had lunch with members of the Arab Association to discuss how the Government can facilitate the Association's efforts to reinvigorate our Arabic heritage, including the teaching of the Arabic language.

Mr Chairman, Sir, with the unfolding of our second wing, Singapore's external engagement has grown dramatically in recent years. Singaporeans and Singapore companies can now be found all over the world, including Africa and Latin America. It is the job of the Foreign Ministry to help expand that external space for Singaporeans in this new phase of our national development. It is an exciting phase and one which I hope more Singaporeans would consider being a part of.

Sir, I would be grateful if the Minister could elaborate a little more on the ASEAN Charter. What, for example, would be the value or the importance of having the Charter as opposed to the current situation? Is it intended to be something more than just a statement of broad principles? Does it have any teeth to it? And what would happen in the event there were disputes or differences of opinion on how it is to work? Would there be a dispute resolution mechanism? Or, basically, how would one implement that Charter?

Sir, the ASEAN Charter is intended to be a legal document, a mini-constitution for ASEAN integration. It would be drafted as a legal document. It would have provisions which will put upon its member states certain obligations. Should there be disputes, there will be provisions for dispute settlement. It will cover all three pillars of ASEAN - political-security, economic, socio-cultural.

We had the Eminent Persons Group meet for a year and they put up ambitious recommendations which the leaders have accepted. We are now, on the basis of those recommendations, drafting the Charter. It is a very important undertaking. If you look at the constitutions of many countries, if you look at the UN Charter, once these documents are drafted, they are not easy to change. They will affect structures and systems for years to come. The moment of conception is always the most important. We are now tinkering with the DNA of the egg, which is why from Singapore's perspective, we need to pay close attention to the drafting of the Charter. Prof. Tommy Koh is our representative on the drafting committee, and Second Solicitor-General Walter Woon is assisting Prof. Tommy Koh.

Sir, I would like to ask the Minister, in discussing the ASEAN Charter, will the ASEAN Charter take a stronger position on Myanmar? Or would Singapore and ASEAN consider taking a stronger position on Myanmar now that Myanmar does not seem to listen to any advice?

Sir, the ASEAN Charter should contain provisions for the leaders to take action against a country that is in gross violation. The problem is this - among the leaders, they operate on the basis of consensus. But in such a situation, there cannot be consensus. This is the problem that we have posed to the High Level Task Force, which is the drafting group, and we told them that in this extreme situation, a provision should be drawn up. It is important that we separate this from the issue on Myanmar, which does not come close to that situation. I appreciate why Dr Ong Chit Chung and Mr Charles Chong feel strongly about the situation in Myanmar. I think many of us share the same sentiments. But sometimes, difficult cases make bad law. We should not use the example of Myanmar to settle what should be a long-term provision for ourselves in ASEAN.

4.00 pm

I would like to ask the Minister for his update on ASEAN’s commitment to combat the haze, especially since it is expected to get worse due to the El Nino effect. It is worth mentioning that the biggest victims are the Indonesian people themselves. But suffering with them are also people in this region, including Singaporeans.

Can I ask the Minister whether ASEAN has done enough to combat the haze as a regional grouping? Or does it need international help to make sure that the problem is solved once and for all?

ASEAN Environment Ministers have been meeting. They have drawn up plans to combat the haze this year. We do expect the situation to be bad because of the El Nino effect. For sure, ASEAN by itself cannot combat the haze. We have been trying for 10 years without much effect. So we do need international support and assistance in overcoming what is really a global environmental problem.

Sir, the Minister said that there were difficulties in the negotiations with Indonesia. Could he highlight what those difficulties are, and what exactly is in the package that was supposed to be discussed between Singapore and Indonesia, particularly in the ET?

By their very nature, they are not easy agreements to negotiate - Extradition Treaty and Defence Cooperation - but we have made good progress. The officials have met many times. We have been negotiating in parallel and the remaining issues are quite well crystallised now and I hope that when the Ministers meet, which means the Foreign Ministers and the Defence Ministers together, I hope we will be able to reduce the gaps so that they can be settled when our Leaders meet. So I would not say that the issues are too difficult. I say that they are difficult but they can be overcome.

The Minister mentioned about the setting up of an Institute that focuses on the Middle East. May I just have an idea of the timeframe that we can expect this Institute to be set up?

We hope to have it launched this year.

Mr Chairman, I wish to thank the Minister for his comprehensive reply and, on behalf of the GPC, we would like to wish him another three "Ps" - patience and perseverance which will hopefully result in progress. With that, Sir, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

The sum of $316,405,000 for Head N ordered to stand part of the Main Estimates.

The sum of $83,610,000 for Head N ordered to stand part of the Development Estimates.

Regional and Maritime Security

Mr Chairman, I beg to move,

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

If I may touch on the topic of Regional and Maritime Security. Sir, I would like to ask the Minister for Defence for an update on our regional and maritime security. The reason for the existence of the SAF is the safety, security and protection of Singapore. However, the external threats are not constant. In the 60s and 70s, there was communism. This changed over the decades to various other visual instabilities. Most currently, the key threat to Singapore and our security is that of terrorism. Nobody can say that we do not live in an exciting neighbourhood. What this means though is that the regional security scenario is not static. It is changing every day, every month. The SAF exists to meet these external threats and because the external threats change from time to time, a clear analysis of regional security is necessary to ensure that we are well positioned to meet any of the security challenges that face Singapore.

Sir, I would be grateful if the Minister could share with us MINDEF's assessment of the regional security situation so that Singaporeans can understand better what it is that we are looking at and in what way we should be prepared. In this connection, I would just also like to ask the Minister if he could comment on an assertion that was made by an Indonesian official that the RSAF is flying over the Riau Islands without clearance from Jakarta. It would be appreciated if MINDEF could give us their perspective on this comment.

I would also like to touch briefly on maritime security. The Straits of Malacca and Singapore are amongst the busiest Straits in the world. It is estimated that half of the world's oil supply and a third of global trade passes through the Straits each year. Security of the Straits is therefore of paramount importance to the region and to Singapore in particular, given our role as an international commercial hub and being one of the busiest ports in the world. Piracy continues to be a problem in regional waters and this can have a very detrimental impact if it is not addressed.

There is also of course the ever constant threat of terrorism. Any act of terrorism in the Straits or regional waters would have a devastating effect on our commerce. At one time, I recall Lloyd's has classified the Straits of Malacca as a war-risk zone even though no terrorist incident had taken place and this of course had an immediate adverse effect on commercial shipping, most notably on the insurance cost. Subsequently, I understand that after enforcement and surveillance, Lloyd's has in fact changed this and has delisted the Straits of Malacca as a war-risk zone but the potential for the threat in terms of terrorism or piracy remains and consequently the threat to our economy remains as well. It will be appreciated therefore if the Minister could update us and give a comment on the security situation as far as the Straits is concerned and what the SAF is doing to make the Straits a more secure place.

Security and Defence Relations

Just as the threat of nuclear arms development in North Korea has subsided, the concern in the Asia-Pacific region has shifted to the potential arms race among the big powers. China's decision to boost its defence spending by 17.8% this year has already drawn a reaction from the United States which has called for transparency in China's military spending and this may complicate relations between the two big powers. Japan and Taiwan are likely to react to China's plan by increasing their own defence budget. Bearing this in mind, what is MINDEF's assessment of the security situation in Asia Pacific? What would be the consequences of such military build-up to Southeast Asia? Apart from that, have there been any escalation of military activities in the South China Sea that could threaten the security of littoral states in particular and other Southeast Asian countries in general, including Singapore?

To avert any conflict in the region, especially one that could involve or affect us, we have to continuously work on defence diplomacy and cooperation with other countries. What has MINDEF done to boost defence relations with other countries in the region and outside? Can the Minister also inform the House of the progress and problems in multilateral defence cooperation like the Five Power Defence Arrangement?

Maritime Security

Mr Chairman, Sir, maritime security is of vital importance to Singapore, particularly the passage through the Straits of Malacca.

The bulk of our trade flows through the Straits of Malacca. It is therefore in the interests of all trading nations that the sea lanes of the Straits of Malacca be kept open, and be kept safe and secure for shipping, and piracy and terrorism be kept out. It is of utmost importance for Malaysia, Indonesia and Singapore to cooperate closely to keep the sea lanes open.

I would therefore like to ask the Minister whether there is scope for further cooperation, and whether he is satisfied with the state of maritime security.

Training Facilities

Mr Chairman, with the limited military training ground on our shores, it has not prevented us from developing and growing a credible defence force.

From as early as the 1960s and 1970s, we have put our minds into exploring and developing more training facilities for our troops. Due to limited space within Singapore's territorial land and waters, some training programmes and facilities are located overseas. In the early years, we developed and established overseas training bases for our SAF in Thailand, Brunei and Taiwan. In fact, many of the male colleagues in this House probably had served at least one stint in one of the three overseas training facilities. This has also in no small way added to the increased mutual understanding between our countries and added much to bilateral cooperation on many fronts, not just military.

Sir, I understand that we have over the last few years managed to extend cooperation with new countries for more training facilities. Some of these countries are Australia, New Zealand, France and even the US and India. Having new areas of defence cooperation, including joint training facilities, supplement existing bilateral cooperation. I was therefore puzzled to learn that our training facilities with Indonesia are not on the same footing as the other arrangements with so many other countries. I am further puzzled as to why the Indonesians would sacrifice closer cooperation activities that go beyond military, like economic, and most of all for Indonesia, humanitarian activities. I note that our cooperation in the past on frequent military exchanges with our Indonesian neighbours had yielded good results too. It had facilitated, for instance, our boys in uniform helping out in Aceh smoothly and without any glitches. The coordination in such efforts cannot come about without close cooperation and working side by side with different forces during peacetime.

Sir, military-training facilities overseas are beneficial in more ways than one. It serves to enhance the peace and stability of the region and it is vital for our economic growth. I urge MINDEF to continuously search for more and greater overseas training cooperation with countries that share our holistic view.

Humanitarian and Disasters Relief

Mr Chairman, Singapore has been a responsible member of the international community by contributing to many United Nations peacekeeping and related activities as well as numerous humanitarian and disaster relief operations in recent years such as the Taiwan earthquake in 1999, tsunami relief in Aceh and Thailand in 2004, just to name a few. Similarly, many VWOs and NGOs also take part in search, humanitarian and disaster relief missions; often times, duplicating the efforts provided by the military. Humanitarian and disaster relief often requires collective, multi-agency response. Depending on the scale of the catastrophe, collective national or even international responses may be required. The Armed Forces can play an important role in a coordinated response to humanitarian and disaster relief contingencies, especially in large scale and acute disasters as they are disciplined, operationally ready and can contribute valuable assets. I would like to ask the Minister if it is feasible for the Ministry to set up a central coordinating body within MINDEF to coordinate and amalgamate the many ad hoc contributions from the NGOs and VWOs with those of the military so as to optimise the efforts and limited resources available.

3G SAF

Mr Chairman, I would be grateful if the Minister could outline or explain to us exactly what the 3G SAF is. We have heard a lot about the 3G SAF but it is a little bit like the four men trying to describe an elephant. If you are looking from the front, you think it is long, like a tube. If you are looking from the back, it is a short little tail. If you are looking from the side, it is a big solid wall. I think we have heard a lot about it.

We know that the SAF is being transformed in all the tri services but it would be useful if we could understand exactly what it means. How does this translate into implementation? What is the practical consequences for the SAF? And also I understand from speaking to people, both in the SAF as well as NSmen, that the pace of change is tremendous. So the question is, what about those NSmen who are not regulars? How do they keep up with the change? Because if the day comes when we have to push the button and everybody needs to be mobilised, they have to be able to react just as quickly as the regulars. They have to work together as a team. So how are they being kept updated in terms of training, in terms of knowing what is going on in the transformation of the SAF? Also, what attracts a lot of attention in the press and the media is the hardware - these nice, new, shiny weapons (the big planes and big tanks). But I think everybody knows that at the end of the day, it is the people behind the machines that matter. It is the quality of the officers, the personnel, and the quality of their thinking that make a big difference between the kind of Armed Forces that we have and the armed forces anywhere else in the world.

So I would be grateful if the Minister could elaborate a little more on what we are doing in terms of manpower and human resource development in the SAF as well as update us on the hardware.

Mr Chairman, Sir, I will leave the Minister to describe the elephant, but I would say that the SAF has embarked on what some call a "Revolution in military affairs", employing IT and state-of-the-art technology to transform the SAF into a 3G fighting force: I believe, a decisive force, an effective deterrence against any would-be aggressors against Singapore.

The SAF has been upgraded with submarines, frigates and Apache attack helicopters. Soon, it will be beefed up with powerful Leopold tanks, as announced, and advanced F15 SG fighters,

the latest. SAF will have tremendous and awesome firepower and great mobility, and would be a cutting-edge force to be reckoned with.

May I therefore ask the Minister if the transformation of the SAF is going according to plans and which are the areas that need further improvements, and whether the officers and men are trained and prepared sufficiently for the new phases of war, not just in terms of technology and, as Ms Indranee Rajah said, prepared mentally and physically and in terms of manpower and management?

Sir, we have invested much resources in our country's defence. I understand that, in some areas, we are at the forefront of cutting-edge technology. This has even raised some concerns by some countries. Nevertheless, just as the knife blade needs constant sharpening, our armed forces need constant evolving to be kept abreast of emerging security challenges. On this score, I notice that the SAF too is evolving, especially in terms of changes being made to our Third Generation Army. The changes being introduced to our 3G Armed Forces are rather profound and wide ranging. The backbone of our defence force rests with our 300,000-odd operationally ready National Servicemen, 20,000 regular servicemen, another 30,000 NSmen. It is always therefore that the main bulk of our defence force rests with the 300,000 servicemen who are no longer on active duty. While I note the transformation to the 3G forces, I also wonder if the 300,000 servicemen who have left active duty are in sync with the new operational demand. This point was so eloquently put by the Chairman of our GPC, Ms Indranee Rajah.

One of the declared principles under the 3G armed forces is the reliance on leaner and meaner forces, that is, lesser amount of troops would be needed. Along this line of 300,000 servicemen who have been trained to operate with more personnel when called to duty, their combat readiness might certainly be compromised if the training is not up to speed.

Finally, retired Chief of Australian Defence Force, Prof. Peter Dennis, was quoted in an interview that history has shown that there is no substitute for boots on the ground when it comes to military superiority. In other words, technological advancement cannot be replacement for soldiers. We still need the numbers. Hence, I would like to hear from the Defence Minister what our 3G armed forces combat readiness and evaluation is.

Research and Development

Sir, it can be seen, in recent wars, that science and technology have emerged to be important elements that characterise the battle. In light of these developments and also our constant effort to develop a formidable fighting force, may I know whether there are sufficient resources that have been allocated for our defence R&D? What is the guiding principle in deciding between acquiring versus developing our own technologies? How do we compare to other modern and advanced forces in other developed countries?

Sir, may I know also what is the role of DSTA in ensuring that we are up-to-date in our technological defence capabilities? How will the investments and work in the DSO National Laboratories be translated into tangible benefits to our defence and also defence industry in general?

Defence Spending

Every year, the Defence Ministry gets a lion's share of the Government budget. This year is no different and with a further increase over last year's budget. I do not question the need to build and maintain a strong SAF. I also fully support the approach of consistent investment, rather than a feast-and-famine approach. I am only too aware that we live in an unpredictable neighbourhood with bigger neighbours which show a predilection for picking on Singapore because of its small size. Indeed, witnessing the recent bully tactics and bizarre antics of Indonesia and Thailand towards Singapore, I am tempted to ask if the defence budget is sufficient.

Sir, we need to have the wherewithal to withstand the pressures that come our way. Some Singaporeans however have expressed concern if our defence spending is prudent and if the budget allocated is spent wisely. It is difficult to ask for KPIs, given the nature of deterrence. But can I ask the Minister on the priorities for defence and how he ensures that it is spent prudently? Several analysts have also warned that, with the current pace of military modernisation programme in this region, the arms acquisition can quickly become competitive and may lead to conflict if the relatively benign climate of political relations deteriorates. There have also been fears of an arms race being started in the region, leading countries to spend more on defence than necessary rather than on the social and economic development of their own countries. Can I ask the Minister to comment on this?

Training and Safety

Sir, may I also ask the Minister on the SAF training and safety records, in particular, for the past three years? I would be grateful if the Minister could tell us what are the most common types of accidents during training, whether the SAF takes note of the causes of the accidents and whether, as a result of that, steps are taken to ensure that such accidents do not happen again. Here, when I ask about the training and safety record, I am also very conscious of the need to balance between having realistic training in order to prepare our SAF personnel and, at the same time, to ensure that there is safe training. We certainly do not want our SAF officers to under-train or for the training environment to be so protected that it is unrealistic. Obviously, if we are going to send them into battle at some time or into whatever sort of operation, they need to be prepared and adequately trained. But at the same time, there is also a question of ensuring that these men and women who serve in the Armed Forces are also taken care of because we expect much from them. Because we expect much from them, it is also important that we do our part to ensure that their training is safe.

Sir, every year, cohorts of young man join the SAF to perform their National Service. Having 40 years of experience, Singaporeans have embraced the importance of National Service and parents willingly let their sons go, albeit with some levels of anxiety. Certainly, at the top of every parent's mind is the safety of their sons. It is understandable for MINDEF to prepare parents for the reality that, in preparing their sons to be soldiers, parents cannot expect 100% accident-free situations. In fact, I think in every NSman's experience, he must have had some kind of injury, otherwise he would want to know what he actually did during his NS.

Sir, there is a Malay saying. It says, "Malang tidak ber bau ", or misadventure has no smell, that is, we cannot predict or anticipate misadventure. However, we can do all we can to try to prevent these misadventures from happening. If it does still happen, then really, no smell.

Sir, in this regard, I would like the Minister to update us on the rate of major training accidents in the last three years. What is MINDEF's assessment of the rate of such major training accidents? How many of these accidents in the last three years had been fatal?

Sir, while we understand that MINDEF will do all it can to prevent misadventures and accidents, we must make sure that the training conditions do not end up being artificial or severely contrived. In this regard, Sir, I would like to ask the Minister how has MINDEF continued to ensure training safety, yet not at the expense of critical elements of realism in the training. What is MINDEF's public education effort in reaching out to parents to appreciate the fine balance that MINDEF has to strike between these two opposing forces?

Sir, in maintaining a people's army like ours, it is natural that the public pays particular attention to the safety record of the SAF, particularly in training involving NSF and NSmen. A good safety record will boost the confidence of every parent whose son is in or will be in the Army or National Service.

Can the Minister inform the House about the SAF's safety strategy and give an update on the SAF's safety record for military training? It is important that the SAF take near accident misses seriously in order to prevent accidents in the future. So, can I ask the Minister: has there been an increase in the number of near misses reported and how it deals with non-reporting of near accidents?

While safety must be a key concern of the SAF, it would not be beneficial if it adversely affects the effectiveness of our NSmen, NSF and units. I would like to know how the SAF achieve both training safety and operational readiness of our armed forces.

National Service

Sir, the responsibility of defence, especially total defence, of a country is every citizen's duty. I quote George Washington who declared, "It must be laid down, as a primary position and the basis of our (democratic) system, that every citizen who enjoys the protection of a free government owes not only a proportion of his property, but even his personal service to the defence of it." Although I have argued in this House for a shorter stint for our NS, it has not in anyway dented the belief in the essence of George Washington's declaration.

The cornerstone of our defence force - the SAF- relies heavily on the conscription of our youth from the young age of 18 years. Our conscripted defence force had undergone quite massive transformation. We are into our Third Generation and a new military philosophy. Globally, there are views that the end of the conscripted army is near. They argued that military labour is now more complex and has demanded increasing professional personnel. Secondly, technological advancements have proven to be an effective force multiplier that can substitute, to some degree, physical soldiers in the battlefield.

Hence, here in Singapore, the maturity of our citizenry in recognising the institution of National Service is the chief reason for the SAF's success.

National Service promotes universal values, inculcation of discipline and patriotism in citizens. It is especially beneficial for youth in character-building and it occurs at a time when they are more susceptible to outside influences. I believe that many parents shared in this belief as well as in the benefits not only to the country but also the overall development of their sons. Notwithstanding this, I am also sure that many parents also welcome a shorter stint for their sons in the service to the country.

Sir, it is two years since we have reduced the stint of most of our NSmen to two years. It is timely to ask for an evaluation if the shorter stint has any effect on the operational readiness of our defence force. The Minister may also share with Members the adoption of more sophisticated technologies as the proverbial force multiplier that allows us to manage with a smaller number of men in the SAF.

Mr Siew Kum Hong is not here. Dr Ong Chit Chung.

40th Anniversary of National Service

Sir, National Service has become a rite of passage for our young men. It is part of nation-building. It has bonded our people with all serving, regardless of race, religion, social standing or wealth. It has become our way of life.

National Service has made our nation strong. The commitment and sacrifices of our young men in arms have deterred aggression and provided all Singaporeans with 40 years of peace and security, and laid the foundation for our prosperity.

This year, Sir, we celebrate the 40th Anniversary of National Service. This is a historic milestone, and we as a nation and people must take this opportunity to honour and appreciate the sacrifices of generations of our National Servicemen. I say generations, as many of us here have two generations who have served in National Service, including myself and my two sons, and it would be interesting to find out whether there are families with three generations in National Service or volunteer service. I therefore hope that MINDEF would not let this occasion pass without giving due recognition and prominence to this important milestone.

Mr Michael Palmer, I am sorry I had skipped you earlier. You have altogether two cuts now, total 7 minutes.

National Service

It is all right, Sir. I hope I would not need that time, but let me not speak too soon.

Sir, there is no doubt that National Service is an important and intrinsic part of our society and national security. I, for one, support National Service. And it is my view that general public opinion lies in favour of National Service and our citizens realise the importance of National Service.

Whilst we have a small professional army, our population size does not provide enough people to support a sufficiently large enough professional army to satisfy our national security and defence needs.

National Service supplements our professional army and provides the manpower needed to maintain a sufficiently large army for our optimum defence requirements.

That said, some opportunities only come once in a lifetime and, sometimes, we need to seize these opportunities when they present themselves, otherwise we may miss a chance of a lifetime. That is what pianist Melvyn Tan said when he decided not to return but instead pursued his career in music at the Royal College of Music in London.

Another opportunity of a lifetime presented itself to Stanley Aw when his team had the opportunity to take part in the Singapore finals of the World Cyber Games championships. The most recent of once-in-a- lifetime opportunity was violinist Ike See who was offered a place in the Curtis Institute of Music, but who had his request for deferment initially turned down.

4.30 pm

In the case of Stanley Aw, MINDEF allowed Mr Aw to defer his enlistment by three months to take part in the competition. In the case of Mr See, MINDEF initially refused to allow Mr See to defer enlistment

to pursue his musical training. MINDEF said in a statement that, "To do so would be unfair to others who have put their personal aspirations and goals on hold to serve National Service when called upon to do so." The statement went on to say that MINDEF was prepared to grant deferments to pursue university studies "under very exceptional circumstances". Subsequently, MINDEF allowed Ike See to take up a two-year course instead of the original three-year course which he was offered.

Deferment is not limited to our young seizing once-in-a-lifetime opportunities for the advancement of their education. It is also important to some of the male population in our workforce who are liable for annual National Service Reservist Training. In some circumstances, they may need to defer their reservist training in order to finish a particular project or deal which only comes around once in their careers or business.

Could I ask the Minister to please clarify MINDEF's policy on deferment, both pre-enlistment and during reservist training liability period? When will MINDEF grant deferment from National Service enlistment and annual reservist training? What are the very exceptional circumstances that were referred to by MINDEF in the Ike See's case? Could the Minister please clarify whether preference is given to athletes, particularly athletes who are part of the Project 0812, ie, athletes that show promise for Olympic medals? If so, what is the rationale for the preferences for athletes as opposed to artists and musicians or, for that matter, anyone else?

Last year, MINDEF, also announced changes to its disruption policy, in view of the shortened National Service term. What is MINDEF's current disruption policy? When will disruptions of active National Service be permitted and when will they be refused? More importantly, what is the rationale behind the disruption policy? As I understand it, there is a particular need or desire to maintain cohort integrity when granting or refusing disruptions. Would the Minister please explain this cohort integrity policy and why such a policy is necessary?

40th Anniversary of National Service

2007 marks the 40th year of National Service in Singapore. On 27th February 1967, the National Service (Amendment) Bill was first read in this House by the then Minister for Defence, Dr Goh Keng Swee. During his speech on the Second Reading on 13th March 1967, he said: "I consider it to be wrong to believe that there is nothing we can or should do about defending ourselves, even though we cannot achieve complete invulnerability by our unaided efforts." After a spirited debate, the Bill was finally passed on 14th March 1967. But not all people shared the same sentiments of the need for a people's defence force that would be ready to defend Singapore. After the Act was passed, there were anti-National Service marches in various parts of Singapore. People took to the streets and the most serious one took place along New Bridge Road. These demonstrations saw some 300 people having to be dispersed with teargas and about 13 demonstrators detained.

Thereafter, between 28th March and 18th April 1967, registration for National Service began in earnest. This marked the beginning of our citizens' army and National Service has since become an entrenched way of life for every male citizen in Singapore. Our army has transformed itself in the last 40 years and our regular Armed Forces, together with our active National Servicemen and reserve forces, form a formidable defence force. It is, therefore, timely for MINDEF to update us on the following issues:

What is the state of our National Service today?

How has it been transformed over the last 40 years?

As we move into our Third Generation army, what part do our National Service personnel play in the 3G army, and has that transformation been complete?

How many NSmen have the SAF trained over the last 40 years and how many NSmen stand ready for combat at any one time?

What does MINDEF consider to be the key achievements of National Service and have we achieved what we set out to achieve in this House 40 years ago?

What is the support level for National Service amongst our population? How has the support varied over the last 40 years, and what does MINDEF intend to do to raise that support level?

How has globalisation affected the commitment of Singaporeans to National Service, and how does MINDEF intend to commemorate the 40th anniversary of National Service?

Mr Siew Kum Hong, do you want to take your cut now, since you are here and the reply has not been given?

Much obliged, Mr Chairman.

Mr Chairman, Sir, all NSmen face reservist liability. I understand that PES-C NSmen, including clerks, are subject to NS call-ups as well. I was told of a case where a company was deciding whether to locate an investment in Singapore. But they could go ahead in Singapore only if a PES-C NSmen could get a deferment from his ICT. He was crucial to the project, if it was to happen in Singapore. But his ICT clashed with an important deadline. Despite repeated requests, he was not granted a deferment. He went for his ICT and his company located the project in China.

Sir, I can understand the rationale if this NSmen was a key appointment holder and essential to the ICT. But he was not. I would like to ask the Ministry what is the value of calling PES-C NSmen for reservist training and whether more flexibility can be introduced in considering deferment for NSmen who are not key appointment holders and, especially, if they are clerks? Is there sufficient consideration given to the actual benefit derived from calling up an NSmen compared to the potential opportunity cost to his employer and his career?

Sir, there is a wider dimension to this. Many NSmen seem to believe that NS liability has adversely affected their career prospects. There is also some anecdotal evidence about employers discriminating against Singaporean males to do their NS liability and in favour of foreign talent. I hope that the Ministry will also state its position on this issue and explain what measures are in place to address such discrimination.

(In Mandarin): [For vernacular speech, please refer to Appendix A *.] Mr Chairman, Sir, National Service (NS) was introduced in 1967 by the then Prime Minister Mr Lee Kuan Yew to prepare Singaporeans to defend Singapore. NS has been implemented for 40 years. Whether it is in the Air Force, Navy or Army, it has achieved remarkable results. To commemorate the 40th Anniversary, I believe that the Ministry of Defence (MINDEF) will have a celebration this year to mark this significant milestone. The achievements over the past 40 years have been remarkable and personally I do feel proud having completed 2½ years of NS. In this regard, I would like to know if the Government will give recognition to our NSmen and give them some form of incentive. I would like to know what are the measures taken to ensure our security and safety and what is our role in safeguarding the regional safety and security of Singapore.

4.33 pm

Over the past 40 years of development, we have innovated and developed high-quality weapons and arms. Recently, I visited our NSmen who are training in New Zealand. According to the training officer, the 155-mm artillery that we are currently using is developed by DSO National Laboratories (新加坡国防科技研究院). The shooting range is between 24 and 30 kilometres. Being a small country, it is thus not possible for us to use long-range weapons in our military exercises within Singapore. Therefore, I would like to ask the Minister, with advanced weapons being developed, whether we will have enough opportunities and training grounds for our NSmen to carry out military exercises accordingly, so as to improve their fighting techniques and combat skills. This will include our Navy, Air Force and Army. In this regard, I would also like to ask the Minister which are the countries that our army forces have been for military exercises. And what is our relationship with these countries in terms of military alliance?

*Cols. 2827-2828.

New Citizens

Sir, we have heard so much about our population policy and how we have to open our doors to immigrants, given our low fertility rate. We are even attracting many of them at a very young age, giving them scholarships and, subsequently, PR status. We know that we require them to do National Service, to be fair to other Singaporeans.

Sir, National Service is about a sense of commitment and patriotism to Singapore. It is about ownership of a country that one is born and raised in. It is about defending and protecting what belongs to oneself. We know our citizens feel this way. Can we expect our PRs, who are required to do National Service, to feel likewise?

Part of the unique NS experience is the blending of cultures and backgrounds into one common vision. Young men from different ethnic groups and socio-economic backgrounds are put together to live, learn and prepare to defend the nation together. With immigration, an influx of new PRs and naturalised citizens, I would like to ask the Minister how is the SAF managing the integration of these naturalised citizens through the NS experience. Have there been instances of naturalised citizens having difficulty adjusting, and how has the SAF managed such instances? A related question, Sir, is whether there is a difference between the adjustment and NS performance of naturalised citizens with Asian and those with non-Asian origins.

Mr Chairman, Sir, we heard recently that Government scholarships are awarded with PR status tied to it. With this PR status being offered at such an early age, what happens if they change their minds and revoke their PR status midway? What happens if later, when they are more mature, they decide to reapply for PR status and are prepared to serve their NS then? What is MINDEF's policy position for such cases? I understand that ICA's consideration for such cases is dependent on MINDEF's willingness to support.

Sir, this issue has a greater implication on how naturalised citizens and PRs are assimilated and acculturated into the Singapore society, including our institutions like National Service. I would like to ask the Minister how MINDEF works with ICA in ensuring that this important component of our society is stressed to each PR and new citizen.

Mr Chairman, Sir, with the focused efforts to increase Singapore's population through the different alternatives, including naturalisation of foreigners, there have been questions about loyalty and commitment of naturalised citizens vis-a-vis Singapore-born citizens.