Hansard, Tuesday, 16 August 2016

1 Dr Chia Shi-Lu asked the Acting Minister for Education (Higher Education and Skills) in light of increasing incidents of sexually offensive and "sexualised" activities during orientation activities at the National University of Singapore over the last decade (a) what are the regulations in place to protect students in our tertiary institutions from physical abuse and harassment; (b) whether these regulations are standardised across our polytechnics and universities; (c) what checks and enforcement are in place to ensure that the regulations are adhered to; (d) how many students or staff have been found guilty and have had to face disciplinary action and how were they punished; and (e) whether any civil or criminal suits had been filed as a result.

2 Mr Zaqy Mohamad asked the Acting Minister for Education (Higher Education and Skills) (a) whether the Ministry has a code of conduct to prohibit sexually inappropriate or degrading activities in institutions of higher learning and schools; (b) what measures have been taken to ensure adequate oversight by university staff on students organising such activities; (c) how many complaints has the Ministry received in the past five years and what actions have been implemented to prevent recurrence; and (d) why safeguards have not been put in place to prevent the recent incident in the National University of Singapore.

3 Miss Cheng Li Hui asked the Acting Minister for Education (Higher Education and Skills) in light of the reports of sexual harassment and abuse during orientation activities at the National University of Singapore (a) whether the Ministry has been monitoring this situation in all our tertiary institutions and keeping track of the number and nature of incidents reported; and (b) whether resources have been provided to our institutions to ensure the safety of our students.

4 Mr Gan Thiam Poh asked the Acting Minister for Education (Higher Education and Skills) with regard to the incidents of sexual harassment and physical abuse during orientation activities at the National University of Singapore (a) what are the existing guidelines for orientation activities and whether students/staff have been properly advised and guided; (b) how many complaints on such lewd orientation activities has each of our tertiary institutions received annually in the last 10 years; (c) what measures have been taken by the respective institutions to prevent such abuses by the students or staff who organised the orientation; and (d) how many students or staff have repeatedly been found to be responsible for such orientation activities.

Mdm Speaker, I am informed that the Acting Minister for Education (Higher Education and Skills) is on his way into this House and he seeks Mdm Speaker's indulgence to allow him to respond when he returns to the Chamber.

You are seeking approval for the questions to be responded to later?

Mdm Speaker, he has informed me that he would like to request for him to respond to Question Nos 1 to 4 on the Order Paper, after some of the questions there after have been responded to, as he is on his way to the Chamber. So, seeking your indulgence, Madam.

Deputy Leader, let me draw your attention to Standing Order 22(4), which states, "If a Minister, Parliamentary Secretary or other Member, who is to answer a question, is absent, the question shall, if he then be present, be taken after all other questions appearing on the Order Paper have been disposed of."

This basically means that he can only respond to the questions after Question No 61 has been disposed of. This is not possible within today's Sitting. Is there any other Member present who can answer these questions? [Please refer to the "Written Answers to Oral Answers Not Answered by 3.00 pm" section for the answers to Question Nos 1-4]

If not, I will have to move on to Question No 5. [Please refer to the "Written Answers to Oral Answers Not Answered by 3.00 pm" section for the answers to Question Nos 1-4.]

5 Mr Charles Chong asked the Minister for National Development what measures the Ministry intends to take to better safeguard public monies and residents' service and conservancy payments to Town Councils and to recover any improper past payments made by Aljunied-Hougang Town Council (AHTC), especially in light of the July 2016 KPMG report on AHTC's financial controls and systems.

Mdm Speaker, the Ministry of National Development (MND) is deeply concerned with what KPMG had uncovered about the state of financial controls and systems in Aljunied-Hougang Town Council, or AHTC.

In its July 2016 report, KPMG reported a total of 185 control failures in AHTC. This comprises 115 identified by AHTC's statutory auditors and the Auditor-General's Office (AGO) in previous audits, and an additional 70 control failures uncovered by KPMG. KPMG concluded that AHTC's control failures were "pervasive, cutting across the key areas of governance, financial control, financial reporting, procurement and records management over the course of five years".

To recap, AHTC had received qualified financial statements from its own independent auditors for four consecutive financial years (FYs) since FY2011. AHTC's auditors were unable to determine the accuracy of the Town Council's various balances, expenses and receivables, including those relating to their service and conservancy charges (S&CC). There were also other audit observations, including late Sinking Fund transfers, incorrect usage of Sinking Funds, as well as inadequate disclosure and segregation of duties over related party transactions.

When AGO undertook a special audit on the Town Council in 2014, it similarly found lapses in the Town Council's management of Sinking Funds, governance of related party transactions, management of S&CC arrears, internal controls and procurement, as well as inadequacies in their record management and accounting system.

When AGO's report was debated in Parliament in February last year, the Town Council's then-Chairman and her fellow Town Councillors assured us that they had "already taken concrete steps to address and remedy many of the issues".

More than a year has passed but the Town Council appears to have made little progress. KPMG had noted in its July 2016 report that only a few of the remediation steps that AHTC had said they would do had been completed. While AHTC had indicated that they aimed to complete the remediation works in 15 months, that is, starting from July 2016, KPMG estimates that at the current rate of progress, the remediation process will take at least 18 months.

Instead of completing the remediation plans expeditiously, what we have seen from the Town Council in this past one and a half years is a series of actions that have only slowed down, prolonged and frustrated the whole process.

First, the Town Council attempted to avoid having one of the Big Four firms appointed as its independent accountant.

The Town Council also rejected the joint appointment of accountant with Pasir Ris-Punggol Town Council (PRPTC) to review AHTC's past payments in relation to Punggol East (PE), and when PRPTC appointed its own accountant, the Town Council refused to grant access to documents or to attend the coordination meetings called by the Housing and Development Board (HDB) with all parties to try to resolve the impasse. This pattern of behaviour is all the more worrying when set against what KPMG had stated in its July 2016 report, that the remediation of the control failures will require that the Town Councillors engage to "reset the tone at the top of AHTC, emphasising competence and accountability".

Apart from AHTC's slow progress in remedying the control failures, MND is also concerned with various systemic control failures that KPMG's latest report has highlighted, including:

First, the extensive use of manual journal entries that bypassed AHTC's accounts payable module, for payments totalling more than $60 million. KPMG has flagged this as "highly irregular" and "makes effective oversight of payments by the Finance Department practically impossible".

Second, temporary clearing accounts which were not investigated or cleared, containing transactions amounting to over $648,000 in total.

Third, the use of dummy codes which might not update payee records in the Accounting System, for transactions amounting to over $270,000 in total.

These control failures continue to paint a serious state of affairs in AHTC and are a cause for concern. KPMG noted that these control failures could conceal duplicate, fictitious or fraudulent payments, which could have been made without being detected.

As ordered by the Court of Appeal, KPMG is currently reviewing the past payments made by the Town Council to ascertain whether any were improperly made and, therefore, ought to be recovered. The findings are due on 31 August 2016, the end of this month.

MND asked AHTC to cooperate fully with the accountants to carry out a thorough and robust review of the past payments. The matter has dragged on for many years, with multiple Court hearings and not much actual progress made. For four FYs consecutively, AHTC has not had accounts that passed accountants' muster. This is accurately summed up by the Auditor-General in his report that "there was no assurance that the accounts are accurate or reliable, or that public funds had been properly spent, accounted for or managed".

Residents of Aljunied, Hougang and also Punggol East need to be assured as to whether or not there were any improper past payments that ought to be recovered. The Singaporean public also needs to know as public monies and grants are at stake.

MND and HDB will be studying the accountants' subsequent findings carefully and will take the necessary and appropriate actions to ensure that residents' interests are safeguarded and that any improper past payments are duly recovered.

Mr Charles Chong.

Mdm Speaker, supplementary questions. The Minister for National Development had said that MND will be reviewing the Town Councils Act. Can the Senior Minister of State tell us when this review will be completed and if MND would consider including it in the Act penalties for wilful acts of concealment or non-cooperation with MND, HDB or other agencies which result in MND, HDB or other agencies being unable to detect or assess financial transactions which may be of public interest, or of non-compliance with the Act?

Will the Minister also consider including in the Town Councils Act provisions to enable MND, HDB or other agencies to compel Town Councils and their contractors to provide records in the event of non-cooperation by Town Councils or their agents in connection with investigations into the affairs of Town Councils?

Madam, I thank the Member for his questions. The Town Councils Act review is ongoing and we aim to complete the review by the year. As the then Minister for National Development Mr Khaw Boon Wan had articulated, I believe at the opening of the Parliamentary debate of the Auditor-General's report, he said that the Town Council Act review ought to focus on three areas, principally: first, it would make clear that Town Councils are subordinate to and must comply with public authorities charged with public duties; second, to strengthen the Town Councils' corporate governance and financial accountability framework; and third, to strengthen MND's regulatory oversight and the powers to obtain information and conduct investigations, as well as to look at the overall penalty framework. In that sense, we will look at the Member's suggestions in the course of this review. I think I have addressed the Member's questions.

Mr Zainal Sapari.

Given that MND is doing a review of the Town Councils Act, would MND consider setting a reasonable timeframe and deadline for the preparation and submission of audited financial statements or distribution of assets and liabilities after each political boundary change?

Mdm Speaker, this is an area that we will look at in the course of the Town Councils Act review. In particular, we will further look at the handover process. We understand that when boundaries change, especially across political lines, delays in submission of accounts and documents may impact the financial audits of the receiving Town Council. This is certainly something that we need to look at in the course of this review.

Mr Pritam Singh.

Can the Senior Minister of State confirm if the joint appointment of accountants was required by the Court of Appeals in CA114 of 2015, or HDB had included it as a prayer to the Court of Appeal at any point in time?

Madam, the Court of Appeal order was against the Aljunied-Hougang-Punggol East Town Council (AHPETC), as the Member would be aware, along with the former Chairman because they were involved in the proceedings. This AHPETC no longer exists in its previous form as a legal entity. Instead, because of the intervening General Elections, Punggol East was carved out and handed over to PRPTC and became part of that entity.

So, based on the Town Council's declaration order, we are advised that this means that all the rights, obligations and liabilities of Punggol East then flow on to its successor organisation. In that sense, the accounts that relate to AHPETC are in relation to what would now be AHTC, which is one successor, and PRPTC, which is the other successor in respect of the Punggol East portion. So, that makes sense. The orders then need to be applied to all the entities for which the issues of AGO and all the Foo Kon Tan reports, and, indeed, the nub of the discussion in Parliament, they all relate to the former AHPETC. In that sense, both were required to comply with the Court order, which was initially at AHPETC.

We are given to understand that PRPTC wanted to discuss the issue of appointment because they wanted to have some coordination and efficiency because, essentially, they are looking not just at PE or AHTC but looking at the whole previous entity and how they inter-relate. I think that makes sense. We are also given to understand that there was an attempt to then appoint a joint accountant but without success.

In order to assist in Members' understanding of the question that the Member asked, allow me to take this House and Members through what we understand had happened. Following the Court of Appeal judgment, the Attorney-General's Chambers (AGC), on behalf of HDB, had written to AHTC and PRPTC on 4 December 2015. AGC had highlighted the importance of appointing accountants that could competently execute the duties envisaged by the Court of Appeal's orders, given the complexity of the work entailed. HDB suggested that the accountant be from the Big Four accounting firms. And to avoid duplication of effort, competing access to documents and incurring of costs, HDB also asked both Town Councils to consider making a joint appointment of accountants. And that is the genesis of the Member's question.

On 4 December 2015, AHTC, however, nominated Business Assurance, while PRPTC sought to jointly appoint PricewaterhouseCoopers (PwC) with AHTC on 15 December 2015. When asked to reconsider its nomination, AHTC had applied to the Court of Appeal for directions on the issue of appointment. AHTC also did not respond to HDB's subsequent queries on Business Assurance's experience and expertise, for example, their years of experience in the relevant areas of audit and the latest Practice Monitoring Programme (PMP) inspection results.

The Court of Appeal later directed AHTC to file an affidavit to respond to HDB's queries by 11 January 2016. On the day of the deadline, AHTC had filed the response but instead of answering HDB's questions on Business Assurance's experience and competence, AHTC said that Business Assurance had withdrawn due to "intense media scrutiny", that since Business Assurance had withdrawn, it was no longer necessary to provide the information on Business Assurance and that the Town Council had nominated a new firm, MRI Moores Rowland, instead.

On the night of 19 January 2016, the night before the next Court of Appeal hearing, AHTC wrote to the Court to state that MRI Moores Rowland had also withdrawn on 17 January 2016. So, this was 19 January; the date they had withdrawn was on 17 January. But no reasons were given. The latest development was also not mentioned in AHTC's two affidavits by the Chairman, I believe, on 18 January 2016. At the Court of Appeal hearing on 20 January 2016, it emerged that Business Assurance withdrew because it did not want to reveal its PMP inspection findings. This led the Court of Appeal to raise concerns about whether the Court had been apprised of all the facts in a candid and forthright manner and whether the Town Council had in place a system to ensure due diligence in selecting candidates to do this work.

The Court of Appeal eventually heard evidence on 22 January 2016 that both of AHTC's nominated firms of accountants each had a member who had failed ACRA's PMP inspection.

Agreeing that AHTC's nomination approach suggested a lack of rigour and basic due diligence, the Court of Appeal then directed AHTC to appoint one of the Big Four firms as the matter was of public interest and involved public funds.

That is where I come from, as background, to the response to the Member's question. On 1 March 2016, AHTC then announced that they have appointed KPMG LLP with HDB's consent ‒ HDB consented because it is one of the Big Four ‒ to perform the task ordered by the Court of Appeal.

After KPMG's appointment was announced by AHTC, PRPTC informed HDB on 3 March 2016 that it wished to appoint KPMG jointly with AHTC, but later updated HDB that AHTC was not agreeable. It was in this context that HDB agreed to PRPTC's appointment of a different set of accountants, namely, PwC to carry out its Court of Appeal orders. To ensure that the reviews were carried out efficiently and effectively, HDB invited both Town Councils and both sets of auditors to a meeting in June to discuss the implementation details, such as scope and timeline, but AHTC twice declined to attend as it did not agree that PRPTC was bound by the Court of Appeal order, precisely what the Member has asked earlier in relation to PE. AHTC also did not give PRPTC access to the documents of PE and requested that HDB seek clarification from the Court of Appeal first.

On 8 July 2016, the Court of Appeal ruled that PRPTC, on behalf of Punggol East, had an interest in the outcome of the work carried out by KPMG and because the issue of joint appointment, as the Member had alluded to, was already moot by then, the Court of Appeal directed that the two accountants communicate directly with each other to provide each other access as may reasonably be required to safeguard each other's interests.

Yes, Ms Sylvia Lim.

Madam, if I could make some clarifications on what the Senior Minister of State has just said and also ask him a few supplementary questions.

The first clarification to make is that the Senior Minister of State mentioned in his answer earlier that AHTC had been reluctant to appoint a Big Four firm but, based on his answer, I think he will confirm that the requirement to appoint a Big Four firm was only clarified in January this year when the Court of Appeal subsequently explained further its view on the matter, on which accounting firm it felt was suitable.

Secondly, the issue of whether PRPTC is required to comply with the judgment, I think the Senior Minister of State would be aware that at the recent hearing, the Court of Appeal declined to answer that question and, in fact, we are going to Court again this Thursday for some further clarification. So, that matter is really in one sense, in a way, sub judice as well. And at the last hearing, PRPTC did not attend, so we were not able to move further on that matter.

Next, I would just like to clarify also Mr Charles Chong's question to the Senior Minister of State. I am not sure whether Mr Charles Chong is accusing AHTC of wilful concealment of any documents. If he is, we utterly reject that.

A further supplementary question for the Senior Minister of State: I understand that the Ministry annually requires Town Councils to submit not just their financial statements but also their management letters issued by the auditors to each Town Council. We appreciate all this attention on us and how bad we are. But in order for us to get a proper perspective, is MND saying that the auditors of the other Town Councils have not picked up control failures in the other Town Councils since MND is receiving these annual management letters as the regulatory Ministry? Certainly, would —

Ms Lim, please keep your clarifications short.

Yes. Two more questions, Madam.

Secondly, would MND be prepared to share the findings regarding the other Town Councils with us or with the public so that we can better benchmark ourselves and perhaps adopt some of the best practices that may be available in the other Town Councils?

Last of all, Madam, it was interesting to me that when KPMG issued their first report in April 2016, and shortly after that in May, the Senior Minister of State himself actually sent a circular to all Town Council Chairmen attaching some slides and saying that Town Councils might want to use these slides to brief their Town Councillors on their roles and responsibilities, especially the key committees involved in finance and governance. This email came out of the blue. I have not seen such an email for the years that I had been —

Your clarification, Ms Lim?

So, I would like to ask the Senior Minister of State whether this email was actually prompted by the KPMG report and a concern by the Ministry that perhaps other Town Councils also need to get themselves better organised.

I thank the Member for her questions. On the second question, the email which sent some slides, basically, it flows from the concerns that have arisen with regard to the AHTC and AHPETC issues. We wanted to send out information to make sure that all Town Councillors, not just AHTC, were on the same footing and would have this information, especially since we are on a new term, after the General Elections.

As for the Member's first question about whether the other Town Councils have control failures, well, all the Town Councils ‒ and I believe AHTC, too ‒ should be submitting their annual accounts by the end of this month, and once everything is in order, they will be tabled before Parliament and then all Town Councils, I believe, will put it on their websites. So, the auditors' findings would then be made available, and the Town Council Management Report (TCMR) would then, of course, come out in due course to set out the banding as well as the findings on corporate governance and other issues relating to Town Council governance.

The Member says that other Town Councils may also have governance failures. I have no doubt that, from time to time, they will make errors as well. These will be picked up and the MND and HDB secretariats will raise them. They will appear in the TCMRT and we will speak about them. But I think it is also important for this House to keep in mind the context of the issues that AHTC had been facing, in that this is not KPMG citing control findings in relation an audit arising from a year.

Instead, actually, this whole issue started when the new AHTC had taken over from 2011 from a Town Council which hitherto did not seem to have any of these qualified accounts. And for the last four financial years, this is a public statutory body charged with municipal services and collecting millions of dollars in public revenues and receiving millions of dollars in grants from taxpayers every year. In fact, collecting money every month through its principal source of revenue, which is S&CC. And its accounts have not been seen fit by accountants to be passed without disclaimers and without qualification.

So, I think this is accountant-speak, but accountants will say that a qualified set of accounts is a serious matter. And that is for four consecutive FYs. Not by any accountant, but by accountants appointed by AHPETC and then AHTC. FY2011/2012, four consecutive years, until the present date.

AGO is the independent accounting body which audits Government agencies as well, and there were lots of questions that were raised yesterday on Government agencies. Members asked many questions. AGO also made many findings of concern on AHPETC, and, in fact, I have articulated a summary of AGO's findings, which is that there is no assurance that AHTC's accounts are accurate or reliable, or that public funds are properly spent, accounted for and managed. So, that, in sum, is not about one individual process or one individual matter, but it is a finding of the AGO on the whole system of AHPETC and its accounts.

In Parliament, this was also debated and all Members were involved deeply in the discussion. Members from AHPETC had, on the surface, agreed with the Motion and we all know that. But in substance, it did not seem that there were real answers in the debate and some of the questions asked were not answered.

Be that as it may, this matter then went to two levels of the Supreme Court, both at the High Court and the Court of Appeal. And, again, serious findings were found after lawyers from both sides provided affidavits and addressed the Court. The High Court, for instance, in its judgment, stated, and I quote: "there are grave and serious questions" about the state of accounts and whether payments to related parties were valid or proper". It also stated that there were numerous breaches of the Town Councils' Act and regulations.

The High Court found that it was the "height of financial irresponsibility" and if the Town Council were an entity under the Building Maintenance and Strata Management Act (BMSMA0, like a condominium, running a condominium, there would be serious ramifications both in civil and possibly in criminal law. It was a "travesty", the Court said, to ignore its duties, and that some parties who were before the Court had not been completely truthful. That was actually in the High Court's orders. Similarly, the Court of Appeal made certain findings. In fact, it repeated what the High Court had found.

I have just spoken about 2011, 2012, 2013, 2014 and 2015. In 2016, we have KPMG which is appointed by AHTC, in compliance with limb one of the Court of Appeal's orders, and in that respect, the latest report in July raised serious concerns and this was what we articulated in the Parliamentary Question reply earlier.

In relation to what the KPMG auditors are doing in relation to limb two – which is checking whether there are improper past payments – we came across an article by the Chairman of the Town Council, Mr Pritam Singh, to Lianhe Wanbao one or two weeks ago where he said, translated, "We have to rectify the issues raised, the AGO's report and audit all the previous transactions with the former managing agent FM Solutions and Services Pte Ltd (FMSS). If unlawful transactions are confirmed, as Town Council Chairman, I have a responsibility to recover that money with my team."

Looking at the KPMG's remit, looking at what the Town Council is setting out to do, and what the Chairman has articulated publicly to the newspaper, could the Chairman perhaps, in the spirit of this discussion, confirm that he cannot now rule out illegality or unlawful transactions?

Mr Pritam Singh. Last question.

Mdm Speaker, I will deal with the point about the Lianhe Wanbao interview.

The word I used was not "unlawful", but "improper", and that word really follows in concert with the Court of Appeal's judgment which was to look at improper past payments, so it will be how KPMG puts it out in its past payment review report. Indeed, if they find that there are payments which ought to be recovered and there were lost monies, then it is our duty to go and recover them. I make no bones about this.

The second issue I would like to raise is the point that the Senior Minister of State brought up about the joint appointment of accountants which HDB, if I heard him correctly, agreed with PRPTC on 3 March.

Can I ask the Senior Minister of State when was this information that HDB had agreed with PRPTC to appoint accountants made known to AHTC? And if the joint appointment of accountants was indeed so important to HDB, the Court of Appeal's judgment of 27 November 2015 allows HDB, MND and AHTC liberty to apply to the Court. I am a bit surprised that the joint appointment of accountants is so important now because HDB did not raise it to the Court of Appeal.

The issue of joint appointment, like I have said earlier, is water under the bridge. It would have been ideal if both could address one set of accountants because, really, it is one former entity and one set of accounts.

In relation to the entire estate of the different precincts that used to form AHPETC, that is why HDB has suggested, after the Court of Appeal had ruled, that AHPETC had to appoint an accountant, and then suggested that perhaps both sides could consider. And that is in the context that the suggestion was made.

Coming back to the Member's confirmation, and I thank him for confirming that he meant "improper" as opposed to "unlawful", because that could be a translation issue. Some of us recall, and we may be wrong, that during the General Elections in 2015, various Members from the Workers' Party or the AHPETC had said that there were no overpayments at all. So, why now the Member's position that there could possibly be "improper" payments, not just improper but that will warrant it being clawed back from FMSS?

Can the Senior Minister of State confirm which individual made that statement?

Various Members.

I just want to remind Members that we have had a very lengthy extensive debate on this issue not so long ago. We do not want to restart that debate again because the issues concerned are broader issues. So, just a clarification and then we are moving on to the next question.

I understand. So, I stand guided by Madam. This is in the context of the General Election rallies being made. I think these statements can be easily found as a matter of public record.

6 Mr Liang Eng Hwa asked the Minister for Finance whether the lapses and inadequate financial controls reported by the Auditor-General in his Report for FY2015/2016 uncover any systemic flaws and how will the public sector entities strengthen their management of public resources to prevent future occurrence.

7 Mr Lim Biow Chuan asked the Minister for Finance whether the Report of the Auditor-General for FY2015/2016 has highlighted any repeated breach of financial regulations by any Ministry and, if so, whether any action will be taken against officers who fail to take remedial action to rectify the breaches.

Madam, may I have your permission to take Question Nos 6 and 7 together?

Yes, please.

I thank Mr Liang Eng Hwa and Mr Lim Biow Chuan for their questions. Let me first highlight that there are two types of audits that the Auditor-General's Office (AGO) conducts on Government agencies. Each is important in a different way.

The first concerns whether the accounts of Government agencies are reliable and prepared in accordance with the law. The second involves checks on individual public agencies' compliance with rules and procedures, for example, the rules that guard against wastage of public funds and excess spending.

The first issue is whether the accounts of public agencies are proper and reliable. AGO has given an unmodified audit opinion for the Government Financial Statements this year, just as in previous years. The same is true for the Statutory Boards, all of which received an unmodified audit opinion from their respective auditors for the financial year (FY) 2015/2016.

In other words, the accounts of the Ministries, Departments, Organs of State and Statutory Boards have all been found by independent auditors to be reliable and prepared in accordance with the law. Public funds are properly accounted for and we know what they are being used for.

The second type of AGO audit, as I mentioned, concerns the rules and procedures in individual public agencies, for example, those that aim at avoiding wastage. Are the rules adequate and were the rules complied with?

As we review AGO's findings in this regard, there are three key questions we ask within the Government and which everyone should be concerned about.

First, what is the scale of the shortcomings and do they reflect a systemic weakness in the Government? Second, is there financial malfeasance, for example, fraud or corruption? Third, how are Government agencies dealing with the lapses that are found so as to avoid the problems being repeated?

AGO's report highlighted several lapses amongst our agencies. However, I can say with confidence from this year's AGO report and past years', that there is no evidence of systemic weakness within Government agencies with regard to compliance.

Most of the lapses were due to non-compliance by individual officers. In some cases, individual agencies had not followed full and thorough procedures in approving contracts or payments, as required in our internal rules. The respective Ministries and agencies have, in all instances, taken steps to rectify the weaknesses identified.

It will be unrealistic to expect that there are no lapses found within the system each time a serious audit is done. With over 140,000 officers in the Public Service handling hundreds of thousands of transactions each year, human laxity or errors of judgement will happen. We take each and every lapse seriously, but if nothing was found by AGO, we would be very concerned about the independence and rigour of AGO's audits.

Secondly, there is no suggestion of financial malfeasance, such as fraud or corruption, in the findings of the AGO. If there are any suspicions of wrongdoing, AGO does not hesitate to report them to the relevant authorities and highlight them in its report.

From time to time, we do come across such instances. We have zero tolerance for fraud or corruption. Everyone knows this: the Government acts promptly and thoroughly to investigate such cases. Indeed, this zero tolerance has itself kept fraud and corruption in check.

This is why we have a situation in Singapore that many countries seek to emulate. Singapore has consistently been ranked by institutions, such as the World Bank and Transparency International, as amongst the least corrupt nations in the world, with the likes of Finland, Switzerland, Sweden and Denmark.

The third question is just as important. How do Government agencies respond to AGO's observations? The Auditor-General has himself noted from our public agencies' responses that they take the AGO audit observations seriously, including putting in place measures to prevent future occurrence.

The Permanent Secretaries of each Ministry and the Chief Executives of the Statutory Boards are responsible for ensuring that the lapses are rectified and steps are taken to minimise recurrence.

Mr Lim Biow Chuan asked about actions taken on officers responsible for lapses. Where there is evidence of individual responsibility for the lapses, the officers responsible have been subjected to the appropriate disciplinary actions. Twenty-eight officers have been counselled or warned arising from this year's audit findings. One officer was put on a performance review process for repeated poor performance and subsequently, left the organisation.

Let me highlight two areas where we have taken actions to avoid problems that tend to occur amongst our agencies. The first is contract management, particularly amongst agencies that do not manage construction projects regularly and, hence, may not have sufficient expertise and experience to robustly assess costs. The new Building and Infrastructure Centre of Excellence that we have set up under JTC this year will advise Government agencies which lack in-house expertise, and help us strengthen the public sector's capabilities in managing infrastructure projects.

The second example is procurement. As Members may recall, this was an area that needed improvement, as highlighted by AGO a few years ago. We took major steps to strengthen public sector procurement.

Since 2014, Permanent Secretaries and Chief Executives of agencies have been required to report to the Ministry of Finance regularly with an assessment of the findings in procurement audits and their follow-up actions. We published the Essentials of Procurement Handbook to ensure top management is apprised of procurement issues. The procurement specialist track was launched in 2014 and we updated the accompanying training programmes to professionalise the procurement function. We also instituted the Procurement Leaders Programme to groom procurement leaders to better guide and supervise their officers.

We will continue to tackle all lapses identified each year with the same resolve.

So, let me summarise. We have a system that is transparent and accountable, and with the Government responding to every weakness that is found. The fact that we have found reports of lapses from AGO each year reflects this transparency and accountability. It is a part of the workings of a robust system – which includes a diligent and impartial AGO, and Government agencies that willingly submit to AGO's audit and have their lapses displayed openly and seek to rectify them promptly. It is not perfect, but it is a system that has given Singapore international recognition for clean and efficient Government.

Mr Liang Eng Hwa.

Madam, I would like to ask the Senior Minister of State what is the distinction between the AGO's report and that of the KPMG audit report on Aljunied-Hougang Town Council (AHTC), given that they also uncovered a series of lapses, as people may be confused and draw comparisons and similarities between the two reports. Would the Senior Minister of State give us proper perspectives on this, to borrow the words of Ms Sylvia Lim?

Madam, I thank Mr Liang Eng Hwa for his question. There is a world of difference between the lapses found in Government agencies and those of Aljunied-Hougang-Punggol East Town Council (AHPETC) or now known as AHTC. They are different in scale, in nature and in the way Government agencies and the Town Council have each responded to problems when they are found.

First, AHPETC's accounts have been unreliable. Its own auditors repeatedly gave the Town Council a "Disclaimer of Opinion", which is the least desirable audit opinion. AGO concluded in 2015 that there was "no assurance that AHPETC's accounts are accurate and reliable or that public funds are properly spent, accounted for and managed." There is no similar problem in the Government.

The accounts of Ministries, Departments, Organs of States and Statutory Boards have all been found by AGO and independent auditors to be reliable and prepared in accordance with the law. Public funds are properly accounted for and we know what they are being used for.

Second, the problems at AHTC, formerly AHPETC, are of a systemic nature, not just a matter of individual lapses. The independent accountant, KPMG found a further 70 control failures in AHTC in addition to the 115 found previously by AGO and statutory auditors. To quote KPMG in their July 2016 report, "Control failures are pervasive, cutting across key areas of governance, financial control, financial reporting, procurement and records management over the course of five years …. there is an issue larger than the sum of individual lapses at AHTC". As I explained earlier, there has been no such systemic problem in the Government. From this year's and past years' AGO reports, there is no evidence of widespread compliance problems. There is certainly no culture of non-compliance.

Third, in the case of AHPETC, there are serious issues to do with personal gains from related third-party transactions. The general manager, deputy general manager and secretary of the Town Council were also the owners and directors of FM Solutions and Services Private Limited (FMSS) which provided managing agent services to AHPETC and received payments. In addition, the secretary of AHPETC was a sole owner of FM Solutions and Integrated Services (FMSI) which provided maintenance and lift rescue services to AHPETC and, likewise, received payments.

In a review carried out by the Accounting and Corporate Regulatory Authority (ACRA), it was found that the profit margins of FMSS were abnormally high. The total payments by AHPETC to FMSS owners and directors amounted to 22% of FMSS' revenue in FY2012/2013 and grew further to 36% in FY2013/2014. The conflicts of interest highlighted by AGO in the AHPETC case are fundamentally different from the case of Nanyang Polytechnic (NYP) and its subsidiary, NYP International (NYPi), that was highlighted in the AGO report.

As explained by Acting Minister for Education, Mr Ong Ye Kung yesterday, in the case of NYP and NYPi, there were no questions of personal gain. There was no personal interest involved on the part of the directors of NYP and NYPi and no leakage of money to any third parties. NYPi is wholly owned by NYP and any profits made by NYPi will only benefit NYP.

Fourth, our Government agencies and AHPETC have been completely different in the way they responded to problems when they are found. Notwithstanding the shortcomings and failures identified by their own auditors and, subsequently AGO, AHPETC did not take prompt measures to rectify these problems despite repeated requests by the Ministry of National Development (MND) to do so. This resulted in MND having to bring an application to Court and it was only after the Court order was made that KPMG was appointed as an independent accountant by AHPETC.

KPMG has been issuing monthly reports since April 2016. In its latest monthly report published in July 2016 – four years since AHPETC's auditors first voiced their reservations about the accounts – KPMG has stated that "progress remedying the control failures has been slow." We understand that AHPETC is working on its remedial plans. In the June 2016 KPMG report, AHTC has updated and implemented its revised conflict of interest policy which now extends to AHPETC's Town Councillors, management and employees, and supporting procedures to manage conflict of interest. However, the other remediation plans on the governance of related party transactions were still unresolved.

By contrast, every Government agency takes AGO findings seriously. Where there are lapses, they are openly acknowledged and steps taken to address them as soon as possible. The Auditor-General has himself noted their commitment to rectify the lapses and put in place measures to prevent future occurrences.

So, to conclude, let me emphasise once again that the lapses found in the Government are wholly different from AHTC's problems. Our accounts are reliable, unlike AHTC's. There is no systemic weakness in Government agencies, unlike what the auditors have found at the Town Council. Unlike AHPETC, too, there was no question of personal gains in any of the lapses highlighted in this year's AGO report. And finally, the Ministries and the agencies have, in all instances, taken steps to rectify the weaknesses identified. Our system is transparent, accountable and responsive and we look forward to the same in AHTC as it hopefully rectifies its problems.

8 Mr Sitoh Yih Pin asked the Minister for Transport what are the reasons for LTA or SMRT not releasing public information on the discovery of hairline cracks on the MRT trains in July 2013 and on their subsequent decision to call on the warranty by shipping the affected trains back to the manufacturer's factory for defect rectification works.

9 Mr Sitoh Yih Pin asked the Minister for Transport whether Kawasaki Heavy Industries and CSR Sifang are liable to compensate LTA and/or SMRT for any loss of use and/or profits (or any other damages suffered) for the downtime of the MRT trains sent back to the manufacturer's factory for rectification in addition to the shipping and defect rectification costs.

10 Mr Sitoh Yih Pin asked the Minister for Transport (a) whether the hairline cracks found on the car-body bolster of the affected MRT trains were inherent defects from the time LTA and/or SMRT accepted delivery of the trains in 2011 or defects that were manifested through use and subsequently discovered in July 2013; (b) if the hairline cracks were inherent defects, why were the defects not discovered through earlier routine checks; and (c) if these were defects manifested through use, whether LTA engineers expect the hairline cracks to worsen through continued use.

Madam, may I have your permission to take Question Nos 8, 9, 10 from Mr Sitoh Yih Pin as well as Question No 12 from Assoc Prof Daniel Goh, please?

Question Nos 8, 9, 10 are possible, Minister. Question No 12 is not possible because you are skipping Question No 11.

Then, I shall come to it when the turn comes up.

The Land Transport Authority (LTA) did not detect any cracks when it took possession of the trains and when it was testing them in 2011. The hairline cracks appeared only about two years after they were put into operation. It is not uncommon for new trains to develop minor defects after some time, because they are subject to different levels of stress during testing and when they are deployed for actual operations.

LTA did not publicise the hairline cracks for three reasons. First, they did not pose any safety risk to commuters. In fact, I wanted to reply to Question No 12 so that I can elaborate on this point, but we shall come to it later.

Second, the manufacturer took immediate and full responsibility for the defects, committed to fully replace the bolsters with a new set made in Japan, weld them to the new car bodies and re-assemble the trains in China. All these remedial actions would be fully paid for by the manufacturer.

Third, the manufacturer accepted LTA's replacement work schedule which is deliberately formulated to ensure that train services and capacity levels are not affected by this incident.

Had any of these factors not been satisfactorily dealt with, LTA would have publicised the defects. Meanwhile, we continue to monitor the affected trains closely, including those which had been rectified by the manufacturer. Whether there is a case to pursue compensation, I leave it to the LTA Board to assess.

Mr Sitoh Yih Pin.

Madam, I thank the Minister for his response. I would like to ask two questions. Firstly, does this series of events, in any way, affect our plans to increase our capacity on the North-South East-West lines? Secondly, it was reported in The Straits Times that there was a freon gas leak yesterday in one of our trains. Can the Minister provide more information to the House, please?

We handled the defective bolsters in such a way that we make sure that the planned capacity expansion of the North-South East-West line will not be affected. As Members know, 26 trains were found to have defective bolsters. Had the manufacturer wanted LTA to return all the 26 trains in one go, then our plan to expand the capacity of the North-South East-West lines would have been affected.

That is why, in 2013, LTA worked out a schedule to which the manufacturer accepted that they will only take one train at a time. In that way, the capacity will not be affected too much because all operators of train service would allow for at least a 10% buffer. For example, for North-South East-West lines, although we have 140-plus trains, only 124 are fully launched at peak hours. We do not need more than 124. Our plan was to expand 124 deployed trains to about more than 150 by the year 2019; which requires the North-South East-West line to expand its fleet from 140- to 170-plus. All the new trains will continue to come. But because we would only release one train at a time for the manufacturer to fix the bolsters, it does not affect our buffer and, therefore, it does not affect our planned capacity expansion of the North-South East-West lines.

To reiterate the point, this is also the reason why the whole process of rectifying, seemingly, takes such a long time. Actually, to fix the bolsters only requires about three to four months. It involves the following activities. We send the trains back. The manufacturer has to dismantle the trains, remove the bolsters. The bolsters are actually welded to the car body. Meanwhile, a new set of bolsters are being manufactured, this time not in China but in Japan. So, they have to be sent over to China and then to be welded to brand new car bodies and the manufacturer has to re-assemble all the engines and so on, to the train. The whole process would take about four months, including testing. Having completed this whole re-assembly, you have to test the trains to make sure they are safe and functioning as required.

But because each time we can only release one train, so we have to queue up the trains and we have a work schedule that stretches all the way to beyond 2020. Recently, we sat down with the manufacturer and asked to speed this up a bit. The possibility is that we can release two trains at a time in the later part of next year, when more new trains come in. We are working on that basis. With that, we could speed up the whole process to complete by 2019.

The query on freon gas. This has nothing to do with the new Kawasaki trains, but yes, it happened yesterday. It is an old train. This is the first-generation Kawasaki train; not this current generation, which is having the bolsters problem. The train and air-con compressors are all 20-odd years old by now. That is the trouble with old parts. Sometimes, little problems happen. Preliminary investigation suggests that there was a leakage of the oil from the compressor which resulted in overheating of the compressor. Subsequently, that caused the evaporation of the freon, which was then released.

We are still checking. This morning, the engineers are going to pull apart the whole compressor to see what caused the leakage from the compressor shaft seal. There is a seal which keeps the oil in place. We need to know why it failed. There is a three-weekly check on the compressor as part and parcel of routine maintenance and the last time we checked on this particular compressor was only about 10 days ago, in the early part of August. So, we need to know what is the reason for this incident.

There is a lesson here, even though it was about train. Old assets are not the same as new assets and, therefore, you have to pay particular attention to maintenance. But the earlier part of the life history of the components is also important. Like a human body. If you look after your body well from Day 1, when you are 40-50 years old, you can probably still maintain pretty good form, but still a 40-year-old is not the same as a 14-year-old, and, likewise, it is the same with trains.

Mr Pritam Singh.

Mdm Speaker, just two follow-up questions for the Minister. Firstly, were there any other inherent manufacturing defects that have to be looked into, either in Singapore or China, and, in this case, in China, where the train carriages are to be repaired and re-assembled there? I ask this because there was one reported case, I believe, of the explosion of a battery, affecting this batch, the C151A batch. And then there were also a number of cases which affected, I think, five trains of shattering glass screens. Have there been any other inherent manufacturing defects that have been discovered?

Secondly, can the Minister confirm whether there will be more regular safety inspections for this batch of trains even when they come back? And what is the role of Kawasaki Heavy Industries in this?

Lastly, when the trains return, will there be a warranty period for them?

Thank you. Those are good supplementary questions. Let me reply to the Member's questions in the order as I recall.

First, Kawasaki. When they tendered for this, it was Kawasaki with the Chinese company Sifang. I think they are from Qingdao in the Shandong area. They jointly made a bid. But the main contractor, as far as we are concerned, is Kawasaki. In fact, the bulk of the design, how it is laid out, the engines and so on, were all from Kawasaki.

The Chinese partner, essentially, has three roles. First, they produce the bolsters which are made in China; secondly, they produce the car bodies; and thirdly, they assemble. So, all the engines or whatever parts that go into a train – if they are not produced in China, and most of them are not – they will be sent to Qingdao and then Sifang Company will do the assembly, do the testing, and then they will export it to whoever is the customer, in this case, Singapore.

As far as we are concerned, the party that we interact with is Kawasaki. In fact, Kawasaki set up an office here in Singapore for many years now because they were also the manufacturer, designer and producer of our first set of Kawasaki trains; in fact, of our first set of Mass Rapid Transit (MRT) trains. The first lines, North-South East-West lines, were all based on Kawasaki trains. It is a very established, good company that has been around for many, many years.

Their arrangement to do the various assembly work in China is not unique to Kawasaki. In fact, in recent tenders, when we look at the bids, whether it is from Siemens, Bombardier, almost all of them now partner China to do the various things, very similar to what Kawasaki is doing with Sifang, I suppose, partly because of cost competitiveness, in order to bring down the cost of their total bids.

The way Kawasaki dealt with this whole incident – I have not met them but based on reports and discussions I have had with LTA as well as SMRT – I have been very impressed with the way they dealt with this problem. There will always be problems, but at the end of the day, when confronted with a problem, how do you handle it? There are people who will deny, blame others, but in this case, Kawasaki took immediate attention, sent their engineers down, checked, identified the primary cause and, at the same time, worked out how to move from there. It is a very professional response to this problem which I find very impressive.

They took responsibility and fulfilled the warranty period commitments. Although the cracks are not of major safety concern, they decided that a defect is a defect and they will replace it. Although the contract was for the bolster to be made in China, they said, from now on, all the bolsters will be made in Japan. They require the Chinese partner to also produce the new aluminium car bodies, weld it, assemble it and retest it. When they are sent back to Singapore, the defects liability and warranty clock will be restarted. In fact, we have now a very prolonged warranty period for the product. I find that gesture on the part of Kawasaki highly commendable and, if I may say, generous.

The point about other defects of this train, such as battery. This was during the testing period. As we know, when train cars are manufactured or assembled, a lot of testing will be done. During one of those tests, they found that one of the batteries was defective where gases were somehow accumulated in the housing that holds the battery covers. Because of the accumulation of gas, it exploded. Again, Kawasaki took note of that testing result and immediately decided with their Chinese partner to get a new supplier of the batteries. They also redesign the housing, so that this problem will not repeat. Indeed, it was the only incident of this kind which happened.

There were a few cases of glass shattering, not the main glass for the car but on those side windows. Again, they checked. This was also during testing in China. They checked and they found that there was installation error. In other words, the workers could have done it better. Subsequently, when they reminded the workers to do the installation properly, we never heard of such incidents again.

Mr Yee Chia Hsing.

Mdm Speaker, I would like to just clarify on the warranty period. What is the actual period? Also, when we get the replacement car body and bolster, when we reset the clock, is it just resetting the clock on the car body and bolster? The whole machinery and engine are also disassembled and assembled on the new car body. Does the reset of the warranty also apply to the mechanical parts?

The other question I have is: are there any lessons, with the benefit of hindsight, on whether LTA should have given timely information as and when the issue cropped up?

There is a defects liability of one year, then an extended warranty of four years. So, one plus four. In this instance, they decided that they will replace the entire bolsters, including the car body, and then restart the clock. It is fair that the extended warranty only applies to the new bolster and the car bodies. It will be asking too much to require the extended warranty to also cover the engines and other parts, which may not be produced by them. To answer the query, the extended warranty and the defects liability period only apply to the bolsters and the car bodies.

Are there lessons from this incident? Yes, there are. I derived two lessons. First, sometimes, in public communications, providing more information is better than less information. My colleagues who have worked with me now for almost 40 years, know that I always prescribe the principle of over-provide rather than under-provide. This is something that I learnt, especially during the Severe Acute Respiratory Syndrome (SARS) period, in crisis communications. Because at that time, there was a lot of misinformation, a lot of lack of information, a lot of lies going on. And always coming out to share with the people what you know, including what you do not know and admit that "Yes, I do not know at this point in time. I will find out". And when I find out, I will let people know. That is always a better strategy than to try to keep information to your chest.

The second lesson will be, I was struck by how the Kawasaki Manufacturer reacted to this problem: face the problem, get to the bottom of it, own it, not in denial and then go all out to do what is right, even if it means at great cost to the company. That way, you preserve integrity, reputation and also, that is the way one should treat one's customers.

Mr Png Eng Huat.

Mdm Speaker, I just got a few questions for the Minister.

There is still a series of Parliamentary Questions (PQs) to be answered later.

Mr Png Eng Huat.

It is related to the trains.

Sure, please. The other questions are also related to trains.

Just one quick question then. The other one I will reserve for the next set of questions. For those trains that are awaiting to be sent back to China and they are in service now, are there any cracks found on the body because the cracks originated from the car body bolster? Are there any cracks found on the body now or developing?

No, the cracks are only on the bolsters. Each car train has two bolsters. This is North-South East-West lines, so each train has six cars. This only happens in some bolsters of some train cars. Were there other cracks elsewhere? No.

Mr Dennis Tan.

I thank the Minister for the answers so far. I just have a quick clarification. Have we ever experienced similar hairline cracks on other trains or models and, if so, what are the models?

The only other times where cracks appeared were in the Bukit Panjang Light Rail Transit (LRT). These are Bombardier LRT trains, different from MRT trains. They found some cracks on the underframe of the cars. This was about last year or the year before. This was before my time. But I recall reading about it. These are old Bombardier trains. They should be coming to 20 years, 18 years or so.

The nature of the cracks is quite different because here, with the Sifang trains, the trains are brand new. I sent to you and then after operation, we found some cracks. Whereas Bombardier trains, they were all right until last year or so, and then there were some cracks on the underframe.

Bombardier also took it quite seriously even though this is now an 18-year-old or 17-year-old product. They sent their chief structural engineer down to take a look, inspect. First, they needed to establish if it was safe to operate, and they confirmed that it was safe to operate. Then, they also decided on what the next step should be. The next step requires regular inspection to see whether it is growing but, more importantly, how to fix the problem.

In that instance, the recommendation of the Bombardier chief structural engineer is to weld it. Therefore, there is no need to send it anywhere. So, they can weld it, in situ, locally in Singapore. They worked out a work schedule on how to do it. I think most of the trains have already been fixed. The other train cars should all be completed by October this year, if I am not mistaken. Meanwhile, the trains are safe to be used.

11 Mr Muhamad Faisal Bin Abdul Manap asked the Minister for Transport whether members of the Public Transport Council, board members of SMRT and LTA, and the management of Temasek Holdings were aware of the faults discovered on MRT trains supplied by Kawasaki Heavy Industries and CSR Sifang in 2013 and the subsequent train recall exercise.

Madam, both issues were discussed among the Ministry of Transport, Land Transport Authority and SMRT. The Public Transport Council (PTC) was not involved. I am told that SMRT Board was aware. As for Temasek, what was communicated between SMRT and its shareholders is not something I am privy to.

12 Assoc Prof Daniel Goh Pei Siong asked the Minister for Transport with regard to the 26 defective MRT trains (a) whether the defects being not "safety-critical" meant that they pose zero safety risks for commuters; (b) why is it most effective for the car-bodies to be entirely replaced when cracks have been found only on the bolsters; (c) what are the risks for cracks to happen on other components of the car-body; and (d) whether the monthly safety assessment is focused only on the found defects or conducted for the entire train.

The hairline cracks do not compromise the safety of commuters. The trains are safe. The trains are designed with a large safety margin of three. What it means is that the bolsters are able to take more than three times the maximum stress that they may experience during operations. The cracks have not reduced this safety margin. In other words, all these can be tested in the laboratory and you can check it out that, despite having the cracks, the safety margin of at least three is still being preserved. The cracks have not reduced the safety margin.

But to be absolutely sure, the Land Transport Authority (LTA) had appointed an independent assessor, TUV Rheinland and the assessors confirmed that the trains are entirely safe to operate. In any case, as I said just now, LTA, SMRT and Kawasaki-Sifang continue to monitor closely the affected trains, including those that have been repaired and returned to service.

Kawasaki-Sifang decided that the most effective repair method was to replace the entire car-body. This is because the bolster, where the hairline cracks are found, is welded to the car-body. As Kawasaki-Sifang does not have the necessary facilities in Singapore to refit the trains with new car-bodies, the trains have to be shipped back to Kawasaki-Sifang's manufacturing base in China.

The cause of the cracks was traced to a specific batch of aluminium material used for the manufacturing of the train bolsters only. Other parts of the trains are not affected.

Assoc Prof Daniel Goh.

I thank the Minister. What is the difference between the bolsters being made in Japan versus those being made in China? Why is the decision now for the bolsters to be made in Japan rather than in China? Is there a confidence issue with manufacturing of train parts in China and, if it is so, is Ministry going to take this into account for future contracts?

What is the difference? One is made in Japan and one is made in China. Is there a qualitative difference? I do not know. But the decision − using new bolsters from Japan − is made by the manufacturers themselves. They said, "Well, since it is defective, I will replace your bolsters". And they offered to now use a Japanese bolster and, of course, we said "You are welcome to use Japanese bolsters". In fact, the first generation of Kawasaki trains all used Japanese bolsters. I do not think we need to read anything more into this. I do not want to create a diplomatic problem.

13 Mr Png Eng Huat asked the Minister for Transport (a) what did TUV Rheinland's report on the hairline cracks found on defective MRT trains reveal; and (b) whether the Ministry will make the entire report public in the interest of transparency.

TUV Rheinland's technical report assessed that the trains are safe to operate. It also assessed that the primary root cause of the hairline cracks is the inherent defect in certain batches of the bolsters. We have no objection to make public the consultant's report. However, as the contract contains a confidentiality clause whereby written permission from the consultant has to be granted, we will put the request to them. If they have no objection, we will have it published on the Land Transport Authority website.

Mr Png Eng Huat.

Madam, just one supplementary question. Did the report also make similar recommendation that you all should replace the body as well? Did the report also recommend that? Or is it just Kawasaki's decision to replace it on goodwill?

Relying on memory, I do not think the report talked about car-body. The report was purely to check firstly, what is the reason for the bolster defect and it established that there was impurity during the manufacturing process. Secondly, is it safe to use the train with the crack still on the bolster?

The consultants focused on these two issues. The decision to rectify this problem by getting new bolsters and to get the new car-body was made by the manufacturers. I can understand, as an engineer, why they decided to take this course of action. It is a little bit like when you extensively renovate your house. Sometimes, the contractor will tell you, I think, in all honesty, it is better you tear it down and rebuild. If it is massive renovation, they find that it is more troublesome and, perhaps, it may even take longer and, sometimes, they do recommend to simply tear it down and rebuild.

Let us understand a little bit of the process here. The bolster is welded, as I said, to the car-body and then the car-body carries all the engines, the seats, glass windows, and so on. The bolster is the one that has some problem. To replace the bolster is straightforward. You must replace the bolster because it has impurities in it. If you were to reuse the car-body, then what it means is that, first, you got to cut out the bolster from the car-body. And then when you receive the new bolster, you got to find a way to weld it to the car-body. Of course, they do not speak Singlish, but they probably said, "Aiyah, so 'leceh'. Let's just produce a new car-body and get a new piece of bolster and weld it on."

14 Mr Dennis Tan Lip Fong asked the Minister for Transport (a) whether the Ministry/LTA was aware of the problems with the MRT trains delivered in 2013 from Kawasaki Heavy Industries and CSR Sifang under a previous contract before placing new orders with the same consortium for more trains in 2014 and 2015; (b) if so, why were further contracts for additional trains extended to the same consortium; (c) whether the Ministry/LTA had evaluated alternative suppliers before placing the new orders in 2014 and 2015; (d) whether there were any changes made to the new contracts with the consortium in 2014 and/or 2015 or any extraordinary quality control measures put in place to ensure that the same problems would not recur; and (e) whether the Ministry/LTA has required the supplier to provide mitigating solutions or compensation for the operational setback.

Mdm Speaker, the consortium, Kawasaki-Sifang, had fully complied with the terms of their warranty and was cooperative. In fact, as I elaborated just now, I think they were exemplary in their conduct. After the defects were discovered, they immediately committed to making the rectifications to the Land Transport Authority's full satisfaction. All costs, including shipping, are borne by them. The concern about the defects had thus been resolved when we called the tender for more trains in 2014 and 2015.

Our train tenders have always been conducted in an open and transparent manner, and are based objectively on quality and price assessments. Kawasaki-Sifang won the subsequent tenders fairly. The list of tenderers and their prices are publicly available online.

Mr Dennis Tan.

I thank the Minister for the reply. In subsection (d) of my question, could the Minister clarify whether or not in light of what has been discovered in respect of the hairline cracks, whether any additional measures were in place or any additional clauses were worked into the contract to prevent or to handle this aspect of the hairline crack problem?

Sorry for missing out on that little subsection. The subsequent contracts will have the bolsters from Japan.

15 Mr Pritam Singh asked the Minister for Transport (a) what is the total number of MRT trains deployed for operations currently; (b) among these, what percentage of trains are not embarking passengers as they need to be sent back to the manufacturer CSR Sifang for depot-level train repairs due for completion in 2019; and (c) in what way has this episode affected the Ministry's plans to improve the reliability of the MRT system.

Madam, as I said earlier, currently, we are deploying up to 124 trains during peak hours, out of the 140 trains we have for the North-South East-West Lines. So, we have 140 trains altogether, but actual deployment, at the maximum, that means, during peak hours, 124. It is standard practice in all subway systems to have a buffer, about a 10% of trains for repairs, upgrading and standby.

By "standby", we are talking about both cold standby and hot standby. Hot standby means the trains are ready to be launched if you want to. This is because sometimes, for example, yesterday, when you have this train with the air-con problems, you can immediately deploy a new train into the system. This is called "hot standby". At any one time, there is only one train sent back to China for the manufacturer to replace the bolsters and, therefore, we are well within the 10% buffer.

The Kawasaki-Sifang train incident has not affected the reliability of the system. None of the delays on the trains was due to the bolsters' hairline cracks.

Mr Pritam Singh.

Madam, just following up on part (c) of my question and I am really referring to the future batches of trains ordered from CSR Sifang and Kawasaki. What pre-emptive action, if any, is the Ministry taking to ensure that the C151C batch of trains and CT251 batches of trains that were ordered, even as the manufacturing defects were discovered which affected the C151A batch, what is the Ministry doing to ensure that this would not be repeated in future?

As I said, the problem was with certain batches of aluminium which are manufactured and used for the bolsters. So, when the manufacturer offered to say from now on, all bolsters will be manufactured in Japan, that settles the issue.

Mr Leon Perera.

Just one supplementary question to the Minister. I think when these defects occurred, would the Minister acknowledge that the main contractor, which is Kawasaki-Sifang, bears some responsibility for the quality control of the metallurgical process of the supplier because there was some impurity in the alloy, there were metallurgical issues from the supplier of the bolster. So, would not some responsibility have to be borne by the main contractor, that is, Kawasaki-Sifang, and, if so, what then is the Land Transport Authority (LTA) doing to make sure that they had done the necessary corrections to their quality control process for all suppliers?

If the Member has listened carefully to what I have said over the last half an hour, he would note that Kawasaki, at great cost to themselves, has taken full ownership of the problem − not in denial, "not my problem", "somebody else's problem". They went all out to protect their reputation, make certain decisions, not at our request, but on their own, volunteered to have the bolsters replaced, to completely replace the car-bodies, extended warranty, restarted the warranty commencement. That is part of the reason why LTA originally decided to release one train at a time even though the whole process would then drag on to 2023. What it means is that we have free use of the trains for several years and a prolonged warranty period.

I think that is much more than one can hope for from any manufacturer. Indeed, all organisations should try to emulate, including all of us in positions of responsibility, let us say, for running Town Councils. That should be the attitude we take when we confront a problem. Take ownership, rectify it to the satisfaction of your customer.

Order. End of Question Time.

[Pursuant to Standing Order No 22(3), provided that Members had not asked for questions standing in their names to be postponed to a later Sitting day or withdrawn, written answers to questions not reached by end of Question Time are reproduced in the Appendix.]

[(proc text) Order for Second Reading read. (proc text)]

Mdm Speaker, I beg to move, "That the Bill be now read a Second time".

We live in a world of greater uncertainty and faster change today. Last month, I attended the Group of 20 (G20) Labour and Employment Ministerial Meeting, and the mood was one of concern.

Seven years after the Global Financial Crisis, G20 economic growth is still lower than before the crisis, at 3.2% per annum versus 4.1% per annum before the crisis. Unemployment at 5.8% has barely fallen from the peak of the crisis of 6%. Labour force participation is also lower than before the crisis. Across the G20 countries, there is said to be a shortfall of 50 million jobs.

Back home, our economy and workforce are in transition, too. Our workforce is ageing at one of the fastest rates in the world. Workforce growth is falling from 4% per year in the earlier part of the decade, to around 1% per year by 2020. Importantly, each generation of Singaporeans is aspiring to do better, with better education, better jobs and better incomes.

To avoid ending up with the challenges that many countries are now facing of high youth unemployment, sticky unemployment and declining labour force participation, we must get three things right.

First, we need to quicken the transformation of industry, to make every job a better job. The Ministry of Trade and Industry and sector agencies are leading this effort to create the new industries, new businesses, and new jobs of the future.

Second, we will need to quicken the transformation of the workforce, to make every worker a better worker. The Ministry of Education (MOE) is leading the effort to inculcate lifelong learning, from pre-employment education to professional and continuing education. SkillsFuture Singapore (SSG) is the new agency tasked with this.