Hansard, Monday, 23 February 2015

1 Mr Gan Thiam Poh askedthe Minister for Transport (a) what are the total and average amounts of subsidies given by the Government for public transportation for each Singaporean in the past five years; (b) how do such subsidies compare with those in all the major cities in the world; and (c) whether such subsidies can be sustained or increased without it being a burden to taxpayers.

Mdm Speaker, the Government subsidises public transportation through its funding of the infrastructure and start-up costs of the rail and bus network. These include the rail tracks and systems such as signalling and power systems, MRT and LRT stations, bus depots, ticketing systems and the first set of trains for new MRT lines. We have also been buying new trains to expand capacity and subsidising higher service levels for commuters under the Bus Service Enhancement Programme which would otherwise have required fares to increase by more than 15 cents per journey. In addition, the Government has started providing direct fare subsidy to lower wage workers and persons with disabilities since last year. In total, about $14 billion has been deployed to the public transport system over the past five years. Another $26 billion has been committed for the next five. This works out to close to $4 billion per year over 10 years.

It is not appropriate to compare the amount of subsidies between countries as there may be vast differences in ridership, income, service levels, coverage and operating costs. To the Singapore commuter, what is most pertinent is that our fares are affordable. The Government has committed to ensuring that this will remain so.

As Mr Gan rightly pointed out, while keeping fares affordable, it is also important to ensure that the burden on taxpayers does not become excessive. Thus, we will still need to review fares regularly and keep to a public transport system that we can sustain financially.

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2 Mr Yee Jenn Jong askedthe Deputy Prime Minister and Minister for Finance over the past 10 years (a) how many public sector projects with an approved value of S$100 million or more each have overrun budgeted costs by at least 50%; and (b) what is the combined value of the cost overrun from all of these projects.

3 Mr Yee Jenn Jong asked the Deputy Prime Minister and Minister for Finance (a) what is the basis for selecting S$500 million as the cut-off point below which public sector projects need not be subjected to the Gateway Process; (b) whether there are plans to extend the Gateway Process to projects between S$100 million and S$500 million; and (c) whether there are plans to make available to the public the reports of completed public sector projects made by the Value-for-Money Review Office.

Mdm Speaker, may I have your permission to take Question Nos 2 and 3 together?

Yes, please.

Mr Yee Jenn Jong asked for data regarding major public projects. Let me first outline the approval framework for major projects funded by the Government.

A system is in place and has been strengthened over the years, with emphasis on fiscal prudence, transparency and accountability. It involves rigorous assessment of proposals by the Ministry in charge of the project as well as MOF. The system also subjects projects of higher value and risk to greater scrutiny; proposals must pass several rounds of reviews by specialists before tenders are called and works allowed to begin.

Examples of projects exceeding $100 million which Mr Yee asked about include the construction of hospitals, waterworks and MRT projects like the Downtown and Thomson Lines. After a major project proposal by a Ministry or Statutory Board passes its review by MOF, budget approval must be obtained from the Development Planning Committee or DPC which comprises three Ministers before it is allowed to proceed. The three Ministers are the Minister for Finance, Minister for Trade and Industry, and the Minister overseeing the Ministry which submitted the project proposal.

If a project is estimated to cost above $500 million, it is put through the Gateway Process where it is subject to a series of further reviews before it is submitted to the DPC for budget approval. These projects are reviewed by the Development Projects Advisory Panel,

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which comprises senior public officers and industry practitioners with deep technical expertise and experience in major infrastructure development. The reviews seek to optimise the overall design, space take-up and cost-effectiveness of the project, and include the Value Management workshops which bring key project stakeholders together to refine the project design. This process helps to ensure that projects draw on the relevant expertise and best practices within and outside the public sector.

The Gateway Process described above is mandatory for all projects with estimated budgets exceeding $500 million. Complex major projects of smaller values may also be subject to the same process before they are allowed to proceed. One example is the Goh Keng Swee Centre of Excellence.

We have found the Gateway Process to be highly relevant in providing a useful second opinion to agencies' project plans. For example, the Gateway review of the Singapore University of Technology and Design campus project helped to reduce the footprint of the campus, thus freeing up land for other purposes. This was achieved through the re-routing of a service driveway and the relocation of the tennis courts to the roof of the indoor sports hall instead of on the adjacent ground.

The process I have outlined above ensures that project proposals submitted to the DPC for approvals have been carefully assessed. Therefore, the budgets approved by the DPC are best estimates, which, for projects such as the construction of hospitals or MRT lines, are generally determined by broad cost norms of projects with comparable scope and design.

When a tender is eventually called by the Ministry or Statutory Board in charge of the project, there is also independent assessment before an award decision is made. To ensure impartiality and transparency, the tender approving authority comprises individuals who are neither involved in project proposal or implementation and officers handling procurement must declare and excuse themselves if there is conflict of interest, for instance, if they are related to any of the bidders. This helps to ensure that the tender process is a fair and transparent way for true price discovery.

Given the complex nature of major projects, there can be material changes to the project scope or design between the time budget approval is obtained and when tenders are called. The tender prices may also exceed the original budget estimates by more than the acceptable thresholds specified during the approval process. Further, for major construction projects, there may be price fluctuation clauses for key materials, so that contractors do not have to bear the financial risks when those prices change in response to market forces. This means that it is quite possible that the budget needs adjustment after approval if there are

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sharp increases in material prices during the construction phase.

For higher value projects, any cost increase exceeding 10% or $100 million, whichever is lower, will be scrutinised again by MOF to ensure that there are valid reasons for the budget revisions. For proper accountability, the agency must also seek re-approval from the three Ministers in the Development Planning Committee.

Taken together, there is a well-functioning system of checks and balances to ensure prudent use of public funds. Cost increases from the original budget must also be justified and documented before projects are allowed to continue.

In the past 10 years, there had been 12 public sector projects with original budgeted cost of $100 million or more which experienced more than 50% increases in project costs, with a majority of these occurring between 2007 and 2010. The total value of cost increases was $13 billion, of which nearly 80% was attributable to the Downtown Line and Marina Coastal Expressway. To put this amount in context, this is out of over $100 billion in expenditure for public infrastructure over the same period.

One key reason was the sharp increase in construction costs as a result of global demand and supply factors which drove prices of materials and resources significantly above cost norms used in the original budget estimates. This factor alone contributed to almost half of the cost increases. As was fully explained by the Minister for Transport in Parliament in 2012, market prices for key materials such as steel bars and concrete spiraled upwards by 60% and 14% respectively from late 2007 to mid 2008, leading to higher costs for the Downtown MRT Line.

The project budget for the Downtown Line was also increased to accommodate one more station as well as to provide for more entrances and underground links to improve connectivity and access for commuters.

Unforeseeable findings are another key driver of cost increases. When conducting detailed soil investigations for the Marina Coastal Expressway, for example, LTA discovered that certain stretches of the proposed Expressway would have to be built in soil conditions that were weaker than originally thought. To ensure safety during construction, LTA had to put in more robust and deeper temporary structures and perform additional works to improve the soil.

In all of the above projects, MOF independently scrutinised the cost increases and verified them against the prevailing industry data. The relevant agencies then sought re-approval from the Development Planning Committee. In other words, they had to go back

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to the Development Planning Committee, explain the process of verifying the items that led to the cost increases that had already been scrutinised by MOF, and then proceeded, only if the DPC had granted re-approval.

In addition to the introduction of the Gateway Process in 2010, the Centre for Public Project Management was also set up in 2011 to improve cost management for major projects. In recent years, we have seen fewer cases of tender prices being significantly higher than their original budget estimates.

Mr Yee has also asked if there are plans to make public the reports of completed public sector projects by the Value-for-Money Review Office. These reports are part of the public sector's internal processes to help identify learning points and best practices. They include sensitive information such as internal tender deliberations and cost norms that could result in less competitive bidding from tenderers if revealed.

Nonetheless, like other internal documents, such as internal audit reports or project approval papers, these are made available to the Auditor-General's Office, or AGO, for their regular review. Where there are concerns in relation to irregularities or extravagance or waste in the expenditure of Government agencies, AGO has the authority to conduct audits and will report the matter publicly and table their reports to Parliament if warranted.

Mdm Speaker, I thank the Senior Minister of State for the very comprehensive answers. I just have a couple of supplementary questions. The first is on the Gateway Process. I understand that other governments, such as the Australian government, also have some sort of a gateway process, and their cut-off is at $30 million for projects and $50 million for programmes. I was wondering if our $500 million threshold is set a little too high.

Also, for those projects below $500 million, I understand the Senior Minister of State said that some projects are also subjected to a similar process. Given that there are some projects that are above $100 million that have also significant budget overruns, is the current process effective without this Gateway Process, and should we extend the Gateway Process to maybe a lower threshold?

Lastly, on the Value-for-Money Review Office report, I was wondering if it is possible for certain sensitive information to be de-sensitised. For example, tender prices and so on may not have to be put in, but perhaps the key lessons learnt so that public projects could be more accountable to the public and for people to look at to see what are the learning points for everybody.

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Madam, I thank the Member for his supplementary questions. I should add that although there are occasions where the project costs are higher than originally estimated, there are equally projects with cost savings. In other words, the utilised budget is actually less than what was originally estimated. One that I can think of immediately is LTA's own provision of barrier-free accessibility to current MRT and LRT lines. The utilised budget was almost $30 million lower than the original approved budget of $116 million. It turned out that it was only $87 million when the original approved budget was $116 million.

The point that I am trying to make is that it is not always the case that actual project costs are higher than the budgeted estimate. When we think about the process that we would subject major project proposals to, we have also got to weigh the time as well as the significant administrative resources that will have to be put in, in order to fulfil the review requirements appropriately and to make sure that the reviews are thorough. So, if you want to do a proper job of the reviews, you have got to set aside the proper resources.

As a result, the approach that we adopt is to look at project proposals based on value and also the risk that could be involved. As I had mentioned in the reply earlier, the Gateway Process is mandatory for projects that have an estimated budget of $500 million or more, but if there are projects of smaller value, we do not hesitate to put them through the Gateway Process if we assess that the risk involved is significant as well.

As to what the appropriate threshold would be, I think we have to look at our own situations and also look back at projects for which tenders have been called and compare them against our estimates. So far, it appears that this $500 million threshold works reasonably well for us. But we take the Member's suggestion into consideration. If there is a need to revise the threshold, we would consider doing so.

The Member's other question relates to Value-for-Money or VFM Review Office reports. I should say that while the VFM reports are not publicly published, it does not mean that the findings and learning points are not shared within the Government. In fact, there is a very deliberate effort to share the findings and learnings through forums such as Cabinet meetings, Committee of Permanent Secretaries meetings, Director of Finance meetings and agencies' own internal forums. The Centre for Public Project Management also collates best practices in managing infrastructure projects and shares those across the public service through various physical and online platforms. So, in response to the Member's question, there is a very deliberate effort to make sure that the learnings are shared. We will continue to do so to make sure that best practices continue to be adopted across the public sector.

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4 Mrs Lina Chiam askedthe Minister for National Development (a) how many constituencies have benefited from HDB's Neighbourhood Renewal Programme (NRP) from 2007-2014; (b) which are the constituencies that have benefited from NRP after 2011; and (c) what is the total amount of monies disbursed for NRP from 2007-2014.

Madam, since its launch, 100 projects have been selected for the Neighbourhood Renewal Programme or NRP, benefiting 22 constituencies.

However, selection of projects is not by constituencies, but at the Town Council or TC level. This allows MND to ensure a good geographical spread of projects, while at the same time better meet the preferences of the TCs. As part of the selection process, TCs are required to nominate and prioritise their preferred precincts and MND will strive to meet them within the limits of the approved NRP budget. Since 2011, 41 projects have been selected, with each TC getting from one to five projects each. The only exception is the East Coast TC where all eligible NRP blocks had already been selected.

From FY2007 to FY2013, about $150 million has been disbursed under the NRP.

I have four supplementary questions in regard to the NRP. What was the first constituency chosen as the first batch or sites to have undergone NRP in 2007, and when were these flats built? Can the Minister of State let the House know who are the people comprised in the Committee to decide which sites in a constituency are eligible for NRP? Why is Toa Payoh Lorong 8 first, although some of the flats were built as early as 1974? What is the timeframe for public consultation by residents for feedback for NRP?

Madam, perhaps I can clarify. The Neighbourhood Renewal Programme or NRP was announced in 2007. The NRP focuses on blocks and neighbourhood improvements, and is implemented on the neighbourhood basis, if it is more than two or more constituency precincts. It is meant for blocks that are built up to December 1989 but have not undergone any Main Upgrading Programme or MUP, or Interim Upgrading Programme or IUP, or IUP Plus. So, we do not do NRP for precincts that have already undergone some of these upgrading programmes.

The question was what were the first few constituencies. I do not have the details of the breakdown by constituency from when we started out 2007. But just to say that, as I had mentioned earlier, we give it by Town Council. We ask the Town Councils to nominate. When we started out, we were trying to see how to implement the projects. So, at that point in

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time, not all Town Councils may have received or selected their nominated precincts.

Since 2011, we have started ramping up. At that point, LUP was coming to the tail end of the programme. By 2011, we were able to select at least one nominated precinct by each of the Town Council.

On the timeframe, the challenges in NRP are that it works differently from the LUP and the other upgrading programmes. Because residents are not required to pay and the works are done externally, NRP requires a lot more consultations because of the space that is being upgraded. There is a two-stage consultation process: one is the public consultation; and the other is the consensus-gathering stage. The engagement process is very critical. First, it really depends on the size of the precinct that has been nominated and selected. Secondly, it really depends on the level of consultation and the extent to which the residents can find consensus in terms of the kind of works that they would like to have. This would engender greater ownership for the works done.

It is very difficult to say what is the average timeframe. It usually takes four to five years in total, from nomination to completion. But some may complete earlier, depending on the consensus built by the residents on the kind of works that they want to have.

The other objective of the NRP is to encourage greater community spirit in the community, so that neighbours come together and come to the realisation of the kinds of things they can and want to have and, at the same time, meet the various needs of the demographic profiles of that particular neighbourhood.

I have another supplementary question for the Minister of State. As mentioned in my Parliamentary Question, under (b), what are the constituencies that have benefited from NRP after 2011?

Madam, as I have said in my reply, we do not select the projects at the constituency level. We select them based on those nominated by the Town Councils. As of now, 22 constituencies have benefited from the NRP projects. All TCs have nominated since 2011. At least one project by each TC has been selected since 2011.

5 Mr Gan Thiam Poh askedthe Minister for Transport (a) whether there is an increase in the public transport operators' operating costs last year; and (b) what will be the projected increase for the next two years.

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Mdm Speaker, both operators had seen higher operating expenses last year as can be seen from their most recent quarterly reports. For SBS Transit, for the period January 2014 to December 2014, operating costs increased by 11.8% or $98.6 million over the same period in 2013. SMRT's operating costs during the period April 2014 to December 2014 increased by 3.3% or $27.6 million, over the same period one year ago.

It is not appropriate for my Ministry to project the two operators' costs, given that they are publicly listed companies. However, generally speaking, while public transport operators are seeing lower energy costs today, other operating costs such as salaries for bus drivers and other public transport workers may continue to rise. We also expect their operating and maintenance costs to rise when LTA tightens the operating standards from 2016.

6 Mrs Lina Chiam askedthe Minister for National Development to date, (a) how many precincts in Potong Pasir constituency are still undergoing the Lift Upgrading Programme (LUP); (b) what are the reasons for the delayed LUP's completion date which should be by end-2014 according to the Government's schedule; and (c) what is the estimated timeframe for the remaining new lifts to be installed.

Madam, in the Potong Pasir constituency, we have committed to carrying out Lift Upgrading Programme or LUP in six precincts. As at the end of 2014, HDB has completed and put into operation all the new lifts in the six precincts.

The remaining works are to shut down the existing lifts which are no longer required, or to upgrade the others. We target to complete this work this year.

I thank the Minister of State. I still have a few more supplementary questions. What is the timeframe? Did I hear wrongly and you have actually answered my question? And also what are the reasons for the delay for LUP completion in Potong Pasir? I just want to know this, for the constituency of Potong Pasir. There are still a lot of flats undergoing LUP.

There is no delay. As I have mentioned in my reply, all new lifts have already been installed and are operational. Right now, the works that need to be done are to upgrade the existing lifts and to close down those that are not required. We

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will complete all the works of upgrading the existing lifts by this year.

7 Mrs Lina Chiam askedthe Minister for National Development (a) how many void decks or part void decks in the constituency of Potong Pasir and Lorong 8 Toa Payoh have been rented out for commercial uses since 2011; and (b) what is the total amount of rental collected in the last four years.

Madam, there are 101 commercial premises rented out at the 12 void decks and three standalone blocks in Potong Pasir and Lorong 8 Toa Payoh. Since 2011, there have been no new commercial premises developed, although three of existing premises were let out after they were vacated by their previous tenants.

The average rent for these 101 commercial premises ranges from $37 to $52 per square metre or psm, depending on the type of use.

I thank the Minister of State for answering the question. Is it possible to know the percentage of void deck space – both at the constituency of Potong Pasir and Lorong 8 Toa Payoh – that has been used for commercial purposes? What is the percentage being used?

I thank the Member for the question. The total void deck space available in Potong Pasir is about 39,100 sqm. This includes 434 sqm of commercial space, which is just about 1.1% of the total void deck space. About 4,066 sqm are for social and communal facilities. That is about 10.4%. In total, about only 11.5% of void deck space is used up. About 88% of space is still available for residents to use for their own activities.

Order. End of Question Time. I suspend the Sitting and will take the Chair at 3.30 pm.

Sitting accordingly suspended

at 2.59 pm until 3.30 pm.

Sitting resumed at 3.30 pm

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[Mdm Speaker in the Chair]

Mdm Speaker, I beg to move, "That Parliament approves the financial policy of the Government for the financial year 1 April 2015 to 31 March 2016."

Our Budget for FY2014 is expected to record a slightly smaller deficit than what we had estimated a year earlier. We had budgeted for an overall deficit of $1.2 billion or 0.3% of GDP. We now expect a very small deficit of $0.1 billion, close to a balanced position.

MTI expects Singapore's GDP growth in 2015 to be between 2% and 4%. This is not different from the 2.9% growth last year.

The global outlook for 2015 is uncertain. The US continues to recover. But Europe's growth remains weak and the Eurozone is facing new uncertainties. Emerging Asia, including our own region, is seeing the effects of a slowdown in China.

The current global environment is not, however, just a temporary challenge. We may see prolonged sluggish growth in the advanced world as well as continued consolidation in China's growth as it reforms and rebalances its economy. We should not count on significantly stronger global demand over the medium term.

Consumer Price Index (CPI) inflation fell to 1% in 2014 largely due to the fall in Certificate of Entitlement (COE) prices and the correction in the property market which has reduced imputed rentals. Food prices have been rising, especially raw foods imported from the region. However, we expect overall inflation to be close to zero in 2015.

Our labour market remains close to full employment. The unemployment rate for citizens remained low at 2.9% in 2014. The tight labour market has also led to further increases in labour force participation rates, with more women working and more older workers staying on in employment.

Incomes have continued to rise, outpacing inflation. The median Singaporean worker's pay grew by a slower 1.4% in real terms in 2014. But added up over the last five years, the median worker's pay grew by a total of 11% after adjusting for inflation. Median household income per member grew faster, at 18% over the five years in real terms, because besides higher pay, more Singaporeans have jobs.

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We have set new directions for the future. As the Prime Minister stated in his New Year Message, we are making fundamental policy shifts to give Singaporeans greater assurance at each stage of life, more opportunities and a better home for all.

We build on the transformation we achieved in our first 50 years as a nation. Decade by decade, we competed for our place in the world against much larger and more advanced countries and raised the quality of life for all Singaporeans.

The older amongst us will remember the Swan brand socks we wore as school children – tearing off the Swan label that was pasted on each new pair of white socks. They were made in the Swan Socks factory at Jalan Tukang in Jurong, founded with Japanese investment and officially opened by Dr Goh Keng Swee in 1964. It was labour-intensive work but as Dr Goh in fact mentioned in his speech when he opened the factory, it was the first factory offering significant employment for women.

The factory no longer exists. Today, the area is quite transformed. Tukang Innovation Park is home to a range of companies engaged in new technologies. It also hosts MedTech One, JTC's dedicated facility for the rapidly growing medical technology industry. I am glad that we kept the name "Tukang" because in Malay, it means "skilled worker".

The story is the same in other industries. We have moved to advanced and sophisticated products in data storage, chemicals and pharmaceuticals.

Services have also emerged as a major engine of enterprise and jobs. Starting from the traditional entrepot business, we built a transhipment hub, airport and airline that are each amongst the world's leaders. Add international logistics, finance, professional services, environmental solutions and hospitality. We have made Singapore a key node in services, for Asia and the world.

Our homegrown enterprises have made their names around the world. ST Aerospace, which started as a maintenance depot for the Air Force in the 1970s, has become the world's largest independent maintenance, repair and overhaul (MRO) provider. Hyflux's membrane systems have been installed in more than 1,300 plants worldwide, including desalination plants in the African continent. BreadTalk has in just 14 years grown from a single outlet at Bugis Junction to more than 700 outlets in 15 countries. It says it sells its signature "Floss" bun worldwide at a rate of one every 10 seconds. XMI, started in a living room nine years ago, is selling its X-mini pocket-sized, high sound quality speakers in over 80 countries.

But at the heart of Singapore's transformation has been our people.

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Among young adults today, those from their mid-20s to mid-30s, more than 95% progress to post-Secondary education. This is more than four times as many compared to the experience of the Baby Boomers, those between their mid-50s and mid-60s. The change in just one generation has been dramatic. It enabled better jobs and much higher living standards for Singaporeans. Everyone has moved up, including poorer Singaporeans.

Among the lower-income in the 1960s were the factory employees who made rubber slippers. They were paid about $87 a month in 1965, which in today's dollars, adjusting for inflation, is around $340. That was slightly less than half the average wage at the time. Today, a lower-income Singaporean worker at the 20th percentile of the income ladder would earn about $1,860. That is more than five times as much as it used to be, after adjusting for inflation over the years. So, it is a more than fivefold improvement in the standard of living.

Wages for some of our lowest paid jobs, like cleaners and security guards, were stagnating a decade ago, but have begun moving up in a tight labour market. Our cleaners have seen a significant increase in pay with the introduction of the tripartite Progressive Wage Model (PWM).

We achieved the same transformation for middle-income Singaporeans. The median worker's pay is about six times what it used to be in 1965 after adjusting for inflation. Our nurses are an example. The pay of the average nurse has always been around the median for the workforce or slightly higher. Our registered nurses earn about $3,700 on average today. Their jobs too have changed. With greater education, nurses today do initial diagnoses and perform a range of tasks that only doctors used to do.

We have caught up with many other countries that were well ahead of us. The median Singaporean worker's wage was about 60% of that in Hong Kong in the mid-1970s and less than half of that in Japan. Our median wage is now the highest among the Asian Newly Industrialised Economies or NIEs and is only about 10% lower than in Japan. [Please to Annex A-1.]

However, as the experience of the developed economies shows, as average incomes rise, it becomes harder for them to go up. In the US, Japan, UK and much of Europe, there has been no increase in real incomes over the last decade for the median household. Even in Taiwan, where median household incomes are lower than in Singapore, real incomes today remain below where they were at the start of the previous decade. The stagnation in median incomes in all these countries has happened despite the real strengths that they have, some of which exceed our own capabilities in Singapore. Their experiences reflect both the intense global competition and the forces of technology that are challenging a growing

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range of jobs, in virtually every developed economy.

Our incomes in Singapore have fortunately continued to grow in the last decade, for both middle- and lower-income households. The median household income per member has in fact increased by 36% in real terms over the decade. But we face the same global realities and challenges as these countries. We cannot change these realities. We must, therefore, stay the course in restructuring our economy, lift productivity and develop new capabilities for the future. That is the only way we can sustain income growth and meet aspirations for higher living standards in the years to come.

This Budget is focused on building Singapore's future. We must reach our next frontier as an economy, with firms driven by innovation and higher incomes coming from deep skills and expertise in every job. We must ensure a society that is fair and just, where everyone has a chance to move up and do well regardless of where they start from. And we must complement a culture of personal effort and responsibility with stronger collective responsibility, especially for our elderly.

To achieve this vision, the Budget takes major steps in four areas.

First, we will invest in the skills of the future and empower every individual to learn and develop through life. We must become a meritocracy of skills, not a hierarchy of grades earned early in life. A society where people keep learning and pushing their potential and are valued for their contributions at each stage of life.

Second, we will continue to restructure our economy and support the next generation of business successes by promoting innovation and internationalisation.

Third, we will invest in economic and social infrastructure for the future, to create new competitive strengths, a highly liveable home for Singaporeans and quality healthcare.

Fourth, we will strengthen assurance in retirement, complementing the Pioneer Generation (PG) Package and other social policy shifts in recent years. We will also enhance support for our middle-income families.

Let me elaborate briefly on each of these major directions.

First, we must build deep skills and advanced capabilities. It is absolutely critical that we achieve this so that we can compete internationally and help Singaporeans do well in their

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careers, even as the world of work is transformed by new technologies.

Being small, we cannot achieve expertise and advanced capabilities in every area. We have to build on the strengths we have already developed. We must also focus on areas in growing demand and where Singaporeans have the capacity to excel. We are well positioned to be amongst the leaders in Asia and globally in five growth clusters of the future.

First, Advanced Manufacturing, aided by new technologies such as advanced robotics and additive manufacturing.

Second, Applied Health Sciences, such as developing new medical devices and better nutrition, and transforming healthcare delivery to provide the best care in an affordable way. This cluster will help serve our social goals, but also develop economic leadership.

Third, Smart and Sustainable Urban Solutions. There is growing demand in the world for Singapore's expertise in water and waste management, transport and urban planning. We must also develop new solutions to overcome our own physical constraints.

Fourth, Logistics and Aerospace. We must entrench our position as a leading global hub, by investing in new technological platforms and in our air and seaport infrastructure.

Fifth, Asian and Global Financial Services. Singapore is well positioned to serve the rapid growth of Asian finance, in areas such as infrastructure funding, structured trade finance and wealth management. In fact, virtually every area of Asian finance is multiplying, and we are very well positioned to serve that market.

Besides investing in the advanced capabilities that these growth clusters need, we must retain our vibrance as a city by developing creative talents and refreshing our hotel and retail sector. In addition, we must ensure we have people with the skills and empathy needed for our important social priorities, such as strengthening early childhood education for those with weaker starts in life.

We are therefore embarking on the next wave of investment in our people. Through SkillsFuture, we will help Singaporeans learn at every age, and develop expertise and flair in every field. We will develop a whole array of learning options for individuals to choose as they shape their journey through life. We will support this through higher subsidies and a range of awards and fellowships for those pursuing mastery in their fields. SkillsFuture involves everyone: individuals and families, employers and industry associations, unions, education and training providers, and the Government as an active enabler in the whole

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initiative.

Second, we must make innovation pervasive in our economy and take concerted steps to include as many SMEs as possible. Our industries have to shift from value-adding to value-creating. We have to bring new ideas to the market.

The Government will refine the pace of increase in foreign worker levies, since foreign worker inflows have slowed down markedly. However, the tight labour market is now a reality. Firms have to devise new ways to survive and grow.

We will give stronger support to SMEs who innovate and go beyond the norm. Every form of innovation counts, and must be supported – whether it is a new process or brand, developing online marketing or leveraging on big data.

We will also strengthen support for our SMEs to venture abroad. Compared to a decade ago, many more SMEs are doing well overseas. They are growing and overcoming the constraints of our domestic economy. New technologies now present another opportunity. E-commerce, digitisation and crowd-sourcing of ideas and funds are levelling the playing field for startups and small enterprises, making it easier for them to compete with larger players and expand internationally.

However, achieving this transformation towards deep skills and innovation will require more than new programmes, or a higher take-up of Government incentives. We need a different motivation in our society. Our economic and social culture must change.

First, as individuals, we have to view the education that we get when we are young as but the starting point of a journey of personal learning and self-renewal throughout our lives. Whichever the job, we must want to master what we do and gain satisfaction from it. We must also develop a culture of mentoring, where individuals who have developed expertise and experience share their knowledge and passion with others, at their own workplaces, in the community, at education centres.

Second, employers must recognise what the best companies have found: that people are their biggest opportunity. Every employer must look for the potential in their people, and put time and effort into developing this potential with them. It also means looking out for mid-career Singaporeans who are temporarily dislocated, and helping them to get back in, get retrained where necessary and contribute their worth. And it matters greatly too when employees are empowered. The most innovative companies find that ideas come from people from all across the enterprise – whether for an improved workflow, a new colour or

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design, or a better way to reach customers' hearts.

Third, in industry, we need a new, collaborative culture, to take Singapore's skills to a much higher level. We do not have the long tradition of collaboration in countries like Germany and Switzerland, where it, in fact, started with medieval guilds and companies join forces to develop skills for the whole industry. We do not have that long tradition. We have to develop our own tradition and find practical means to deepen collaboration, industry by industry. It will be especially critical to developing capabilities among our SMEs, who on their own often lack the capacity to attract and train people.

It will take time to develop a new economic and social culture. Neither can we within a few years develop the deep pools of expertise that we need, transform our enterprises and achieve innovative breakthroughs in every sector. But we can only get to where we want in the long term by taking steps now, moving ahead relentlessly and never thinking that the status quo will get us to a better place.

The third thrust of this Budget involves a major reinvestment in Singapore's infrastructure to meet our future economic and social needs.

First, we are embarking on the development of Changi Airport's new terminal, T5. Changi is part of the lifeblood of our economy. T5 will be almost as large as T1 to T3 combined. It is a critical investment that will yield benefits for decades to come. It will enable Changi to keep its role as a leading hub for international transit, and create connections to emerging cities in Asia and globally. We are starting now, but the whole project will take more than 10 years. Together with the development of Tuas seaport over the longer term, we will secure Singapore's place in Asian and global logistics for many years to come.

Second, we are investing to make Singapore a highly liveable city. We are making vast improvements in public transport and developing our heartlands into vibrant homes and communities.

We are also expanding every dimension of the healthcare system: increasing the number of beds in acute hospitals by 25% by the end of the decade; doubling our community hospital beds; increasing nursing home capacity by about 70%; and investing to bring affordable care into the community so that our seniors can be cared for at home. Each of these efforts will be complemented by our Smart Nation initiative to improve the quality of life for the average citizen.

These major investments in Singapore's future will mean significantly higher development expenditures. Our development expenditures have already increased from $12

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billion five years ago to about $20 billion in the coming fiscal year. They will grow further, by 50% to about $30 billion by the end of this decade. That is a very significant increase in development expenditure.

The last time we made such significant investments in infrastructure in proportion to GDP was in the 1990s, when we embarked on the development of Jurong Island, built the North-East Line and the Light Rail Transit network, and Changi General Hospital amongst other significant investments.

Just as these investments two decades ago laid the foundations for better living standards over many years, we must now invest in the next era of jobs and incomes, and a higher quality of life.

Mdm Speaker, we are taking further steps in this Budget to build a fair and inclusive society.

They build on the major shifts in social policy that we have introduced in the last five years, to support both middle-income and lower-income Singaporeans.

In education, we have substantially increased the number of teachers and allied educators in our schools to raise the quality of education for all. Our spending per student has increased by more than a third in real terms over the last five years, and with more resources going especially to students with a weaker start. We have also increased subsidies for lower- and middle-income students significantly, from preschool through to tertiary education.

We have enhanced Workfare, which supplements the incomes of our lower-income workers. We have significantly expanded housing grants for both low and middle income couples so they can afford HDB homes.

In healthcare, we introduced the Pioneer Generation Package or PGP last year and introduced permanently higher subsidies for lower- and middle-income Singaporeans of all ages.

We have also transformed our social support networks on the ground. Older Singaporeans will remember the Social Welfare Department or what was more familiarly known in Hokkien as "Hock Lee Por" or 福利部. It provided some support for the homeless or those suffering from malnutrition. By the end of this year, we will have 24 Social Service Offices or SSOs in our HDB towns to disburse social assistance and coordinate social services for those in difficulty. That is 24 "Hock Lee Pors", closer to the ground and each providing a

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wider range of social support for Singaporeans who fall into difficult times. Plus we will have many more Senior Activity Centres and Eldercare Centres to provide recreation and care for our seniors near their homes. So, it is a transformed landscape of social support – we have enhanced not just the schemes, not just the subsidies, but the network on the ground, close to where people live.

We will make further moves in this year's Budget. We will strengthen our social security system, to help Singaporeans supplement their incomes in retirement. It will complement the enhanced healthcare subsidies that we introduced last year.

First, we will raise the CPF salary ceiling to benefit middle-income Singaporeans and raise contribution rates for older workers. We will also enhance CPF interest rates further in retirement to benefit those with lower balances. These are important enhancements. They will be on top of the changes recently proposed by the CPF Advisory Panel, aimed at providing more flexibility and certainty to CPF members, which the Government has accepted. That is the first set of changes – enhancing the CPF.

Second, we will introduce the Silver Support Scheme that the Prime Minister spoke about at last year's National Day Rally. It will be a major new feature in our social security system. While Workfare systematically enhances the incomes of the bottom 20% to 30% of lower-wage Singaporeans during their working years, Silver Support will supplement incomes for 20% to 30% of seniors in their retirement years, with greater support going to the least well-off among them. Together with Workfare, Silver Support will help mitigate life's disparities. It is the fair thing to do, and complements the family support for our elders and the community initiatives that make us a strong society.

This Budget will in addition encourage the spirit of philanthropy and giving, as part of Singapore's 50th year. It will also lend further support to families with children as well and include a few measures to help Singaporeans with the cost of living.

Our total Government spending will go up significantly in the coming years. We are increasing development expenditures, as we reinvest in Singapore's future. We will also see a steady increase in operating expenditures, especially due to higher healthcare subsidies and the care needs of a growing older population. We must, therefore, strengthen our revenue base to support this increase in spending through the end of the decade. We have to strengthen our revenue base and I will talk about this later in the speech. It is much later, so you are advised not to hold your breath.

Budget 2015 takes us into our future. Our aspirations are attainable. We can build a future that keeps social mobility alive in each new generation. A future that meets the

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aspirations of young and middle-aged Singaporeans and enables us to realise the best in ourselves. And a future with greater assurance as we grow old.

We must go forward with the blend of imagination and practicality that brought Singapore this far in 50 years. With hard heads, but with warm hearts too, so that we all move up together.

Mdm Speaker, I will now move on to the first major thrust of the Budget in a little more detail – Developing Our People. We have built a first-rate school system in Singapore. Compared to other countries, our students do better than their peers in learning. Importantly, we have achieved high average performance while avoiding the very large disparities in outcomes that many other education systems have. So, it is not just about the high averages, but avoiding large valleys in between the peaks.

We have also built highly credible Institutes of Higher Learning. We are investing more in our ITE, Polytechnics and Universities to enhance quality and affordability and to offer more diverse pathways for Singaporeans to choose to advance themselves.

We have also been developing a system of continuing education and training. Over the last seven years, the take-up of CET places has increased five-fold from 79,000 to 384,000, covering more than 30 industries.

We will build on these foundations to create a new environment for lifelong learning. It is critical to our future. It will develop the skills and mastery needed to take our economy to the next level. More fundamentally, it aims to empower each Singaporean to chart their own journey in life and gain fulfilment at work, even in their senior years.

We have called this development effort "SkillsFuture". It marks a major new phase of investment in our people, throughout life.

It starts in school, where all students will receive education and career guidance to help them make informed choices about the pathways available to them.

They will be able to engage in deeper and more structured internship programmes, particularly while enrolled in our Institutes of Higher Learning.

Once in the workforce, Singaporeans will be able to acquire deeper skills relevant to their jobs, as well as renew themselves by going back to education in the course of their

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careers.

We will support these continuous engagements in learning. We will provide enhanced subsidies for courses, as well as special support through SkillsFuture Study Awards and SkillsFuture Fellowships for those pursuing mastery in their fields.

These specific initiatives – the subsidies, the awards – will be accompanied by a lifelong SkillsFuture Credit which every Singaporean will receive. There will be top-ups at regular intervals with credits that they can use to help pay for courses of their choice. Every Singaporean can use the SkillsFuture Credit to take charge of their own learning over the course of their lives.

SkillsFuture will involve new modes of learning – such as short modular courses, weekend workshops and learning online through Massive Online Open Courses. It will include executive and specialist development programmes, and on-the-job training both in individual firms and "industry campuses".

It will also involve new types of educators and trainers, including industry practitioners, besides our academics. Developing this new landscape of learning will take time and resources, but we must put full effort into this. MOE and WDA will enhance existing accreditation frameworks for this purpose for courses within the education and training industry.

We must make it possible for every individual to decide on his or her own learning journey: when to go for fresh infusions of skills or knowledge and whether it should be in specialised professional training, acquiring soft skills or developing a new interest.

No one can honestly tell what they will be doing a decade or two after leaving school. We must each develop through life, adapting to changes in the job market and the new opportunities that will come up. But whichever the field we are in or the job that we do, we must, as Singaporeans, aim to gain expertise and achieve mastery.

Senthilnathan Manickam, 41, is an example. Senthil graduated from Ngee Ann Polytechnic's Film Sound and Video course. After some years of working on corporate videos and TV programmes, he felt he needed to specialise, to differentiate himself from the field. He chose to specialise in high-speed cinematography – 1,000 frames per second. He is making a name for himself in the field in Singapore and abroad. As Senthil puts it, "There isn't one path but many paths to achieve your dreams and be successful. Don't give up. You always learn something new every day."

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With the implementation of the full package of measures under SkillsFuture, we estimate that spending on continuing education and training will increase from about $600 million per year over the last five years, to an average of over $1 billion per year from now to 2020.

I will also top up the National Productivity Fund by $1.5 billion this year to partly meet this increase in expenditure. This is a major allocation of resources for the future.

We will start from our Secondary schools. SkillsFuture is not intended to tell young Singaporeans they have to zero in on a particular career at that stage, at an early age. However, we have to help them discover their strengths and interests, so that they can choose an educational path not determined just by cut-off points, but by informed choices about courses and the career opportunities that they lead to.

We will develop a professional core of Education and Career Counsellors, for our schools and Institutes of Higher Learning. We will also scale up career counselling services at WDA for our working individuals. These counsellors will be equipped with the industry experience and knowledge needed to provide informed guidance.

Next, we will improve internships in our Institutes of Higher Learning to make them more structured and meaningful. We will also help more of our students get international exposure, through more internships abroad.

We have to develop much better internship programmes compared to what we have today, to help our students as well as our SMEs. There are some good examples of how this can be done. Hope Technik is a young company in Advanced Manufacturing. It has 50 people and takes in about 10 interns a year. The interns get a chance to pick up new skills beyond their formal Polytechnic and University curriculums. Hope Technik also hopes to retain some of them as future employees. Mohamad Jafry bin Samsudin is an example. During his internship at Hope Technik, he was involved in developing the latest generation of the SCDF's Red Rhino fire vehicles. Since graduating from Republic Polytechnic, Jafry has joined Hope Technik, where he continues on his journey of development.

Many more of our SMEs can benefit in the same way. We will roll out enhanced internships in two-thirds of Polytechnic courses and half of ITE courses over the next two years.

The Minister for Education will provide more details during the Committee of Supply.

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The next stage concerns what happens after we graduate from school and tertiary education. We will invest continually in Singaporeans, throughout their careers.

We will create a SkillsFuture Credit for all Singaporeans. NTUC and several Members of Parliament have previously suggested a scheme of this nature.

Each Singaporean 25 years and above will receive an initial credit of $500 from 2016. We will make further top-ups to their SkillsFuture Credit at regular intervals. These credits will not expire, but can only be used for education and training. So, the credit stays with you and it can be used anytime you wish, for education and training, starting with $500 but with regular top-ups after that.

We have decided to spread out the top-ups over the course of a person's life for two reasons.

First, there is no need for anyone to rush to use their credit. While some may use their initial $500 immediately for a short programme, others may want to accumulate credits to engage in more substantial training later in their career.

Second, we need time to develop quality offerings in our SkillsFuture landscape; quality education and training that is relevant to jobs and individuals' future careers. We must go for quality training which will open up career possibilities for individuals and that employers find relevant.

The SkillsFuture Credit can be used for a broad range of courses supported by Government agencies. These will include courses offered by our Institutes of Higher Learning and accredited education and training providers, as well as a range of courses that are funded by the WDA.

To complement this, each Singaporean will be given an online Individual Learning Portfolio – a one-stop education, training, and career guidance resource to help them plan their learning starting from their time in Secondary school.

To cater to fresh graduates from our Polytechnics and ITE, we will launch a SkillsFuture Earn and Learn Programme in 2015. It will give them a head start in their careers.

The graduates will be matched with suitable employers. They will start working and undergo structured on-the-job training and mentorship, while they study for an industry-recognised qualification. So, they start working, start earning, but they continue studying

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and they graduate from that stretch at work with an industry certification.

Both trainees and employers who sign up for this programme will receive substantial support from the Government. This will be done in a phased way, eventually covering up to one in three Polytechnic and ITE graduates. So, there will be financial support for this.

Next, for mid-career Singaporeans. We will enhance subsidies for mid-career Singaporeans.

First, education and training subsidies for all Singaporeans aged 40 and above will be enhanced to a minimum of 90% of training costs for courses funded by MOE and WDA.

This additional support from the Government recognises the opportunity costs that mid-career Singaporeans face when they go for education and training can be significant.

These subsidies are significant.

For a part-time undergraduate course such as a Bachelor of Engineering, which is already subsidised, the total fees payable by a student will be reduced by 60%, from about $17,000 today, to $6,800. So, that is the effect of enhancing the subsidy rate. It can be quite a significant reduction in their out-of-pocket costs.

Second, Singaporeans will now be able to enjoy multiple subsidies from MOE for modular courses – at all levels, and regardless of age. This flexibility of modular, continuous learning will help individuals, who will often have to balance family and career together with their learning. Many individuals prefer to go for several bites of short courses, rather than to go for a long course.

We will implement these enhanced subsidies later in the year.

Beyond the SkillsFuture Credit that I spoke about and these broad-based subsidies, we will provide special support for Singaporeans seeking to develop deep skills in particular fields.

First, we will introduce SkillsFuture Study Awards. They will support individuals who wish to develop the specialist skills required for our future growth clusters. For example, they may include software developers, satellite engineers or master craftsmen. The awards can also support those who already have deep specialist skills and wish to develop other competencies such as business and cross-cultural skills. At this stage, we are not setting a

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cap on the number of SkillsFuture Study Awards, but it should eventually be about 2,000 study awards per year. We will introduce the SkillsFuture Study Awards in phases, starting this year.

Second, we will introduce SkillsFuture Fellowships, to develop Singaporeans to achieve mastery in their respective fields. We will award about 100 fellowships a year, which can be used for a range of education and training options, in both craft-based and knowledge-based areas. It will be funded from the SkillsFuture Jubilee Fund, which will be financed by voluntary contributions from employers, unions, the public and the Government. This broad-based involvement signifies everyone being a stakeholder. The SkillsFuture Fellowships will be introduced from 2016.

The SkillsFuture Study Awards and Fellowships will be mainly used to develop deep skills and mastery in the growth clusters of the future. But we will be open to those who want to develop themselves in fields that they are really passionate about, that may not be in these growth clusters. Take individuals like Edwin Neo, for example. He was trained in interior design, but developed a passion for making high quality European-style shoes. He went to train under a master shoemaker in Budapest, in Hungary and came back to found his own company. He is doing well. His company is called Ed Et Al, selling both ready-to-wear shoes and upmarket bespoke creations. Not cheap, by the way.

Finally, we will work with companies to grow Singaporean corporate leaders under the SkillsFuture Leadership Development Initiative. This initiative will provide support for companies who commit to developing a pipeline of Singaporeans to take on corporate leadership roles and responsibilities in the future. This too is important.

A key challenge in SkillsFuture is to help uplift a significant base of our SMEs and involve them in this process of skills development. This will not happen naturally – many of our SMEs lack their own training capacity and are unable to plan for the future.

To uplift the broad base of companies, and to help Singaporeans develop their careers across our economy, we need new forms of industry collaboration.