Committee of Supply − Head M (Ministry of Finance)

11.10 am

Productivity and Innovation Credit

Ms Jessica Tan Soon Neo (East Coast): Sir, I beg to move,

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

Mr Chairman, restructuring our economy and the need for companies especially SMEs to improve productivity was a topic that many of the Members of this House spoke about over the last few days as we debated the Budget. Singapore still remains quite a distance behind most developed economies in terms of productivity. To be able to address the issue, SMEs must be the focus as they are a significant part of our economy. To achieve this, businesses have to invest in their people, processes and leverage on technology to create higher value jobs for Singaporeans and those who work in Singapore. This will require funding.

The Productivity and Innovation Credit (PIC) which was introduced in 2010, together with the enhancements announced in this year's Budget will be valuable in providing companies especially SMEs the impetus for investments in innovation and restructuring of businesses. It will help to address the cashflow required for substantial upfront expenditure required for restructuring. I was heartened to hear from Deputy Prime Minister Tharman when he summed up the Budget that no effort would be spared to help SMEs in this drive to restructure their businesses. While I did get his assurance that SMEs will not be required to read all the 66 pages of the PIC Guide to apply for the scheme, I do, however, want to ask that we still give some serious thought to simplification of the application process and the access to PIC. Apart from the complexity of the scheme and the application process for the PIC, the feedback I received from the various dialogues with business leaders indicates that the qualification criteria for PIC are fairly rigid. In the ICPAS Pre-Budget 2012 Survey, although PIC was the top initiative that was utilised by respondents, there was still a significant difference between widespread awareness and actual utilisation of the incentive scheme. To encourage greater adoption of PIC by SMEs, I think that it would be worthwhile to review the qualification criteria and to simplify the application process.

A suggestion made to enhance the adoption of the scheme is to have an exclusion list on what would not qualify rather than a qualifying list. Another feedback is the conditions to qualify require substantive and fairly significant expenditure and are almost always expenditure-based. As mentioned, the PIC forms in themselves are not too difficult, the challenge is in understanding the criteria which companies are required to check, validate and get the appropriate approvals from relevant agencies against their other tax criteria.

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It was reported that the PIC scheme has helped companies enjoy tax savings totalling S$650 million since its implementation. Can the Minister share how many smaller companies are utilising and benefitting from PIC currently? What progress have these companies made in improving their business productivity?

Effective Government

Mr Chairman, throughout the Budget debate this week, there has been a lot of discussions on productivity and the need for companies to innovate, and to improve productivity. What I would like to ask is: what measures have public agencies taken to innovate and improve productivity in their operations? Has there been streamlining of processes to improve the handling of citizen/business applications and requests? Like the experiences that the hon. Ms. Indranee Rajah shared in her Budget debate speech, many of us will have similar scenarios on the ground that we could share, where there could have been more effective partnerships and approaches taken by the public agencies to address issues on the ground. While our agencies are effective and efficient in each of their areas of responsibilities, cross agency collaboration can be improved. Is there a coordinated effort across the relevant Government agencies to drive better collaboration and hence improve productivity and positive citizen experience?

Can the Minister share the progress that the Government has made to drive a Whole of Government approach to achieve the strategic outcomes for effective citizen services and national issues? What measures have been put in place to encourage and ensure greater collaboration and accountability across agencies to be more effective at the national and citizen level?

The Government has adopted a fiscally prudent approach and has maintained a balanced Budget. I would like to ask what measures are being taken to ensure fiscal prudence and discipline of public agencies. What measures are in place in our public agencies to ensure fiscal prudence, strengthening of the procurement process and strong management of projects to achieve intended outcomes and fiscal accountabilities? What is being done to ensure a balance between operational efficiency and risk of fraud? How will fiscal disciplines be maintained while allowing for flexibility in the approach?

11.15 am

Project Finance Company

Mr Chen Show Mao (Aljunied): Based on the recommendations of the Economic Strategies Committee (ESC) in 2010, Budget 2012 announced that Temasek has put together a consortium of reputable financial institutions to establish a specialised project finance company (PFC). I would like to understand more specifically how the PFC will benefit our companies.

First, the PFC will aim to have about 80% of its portfolio comprising cross-border projects with significant Singapore-based corporate participation. What does the Government mean by "significant Singapore-based corporate participation"? Does significant participation means majority ownership? And how does the Government define a Singapore-based company for this purpose? Does it have to be headquartered in Singapore, listed on the SGX or majority owned by Singaporeans? Is a Singapore subsidiary of a foreign multinational company considered a Singapore-based company?

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I hope the Government will have clear guidelines on this. The ESC has made it very clear what the gap is and that is to facilitate cross-border financing for our companies that are investing in large-scale projects overseas, because project finance is significantly less developed in Singapore than elsewhere and capabilities of our local banks in this area are relatively limited. These concerns do not exist in the case of companies that can access project financing outside Singapore's financial system.

Second, the ESC highlighted that as foreign export/import banks (EXIMs) remained largely nationalistic, Singapore companies are currently disadvantaged in this aspect. In order to help our companies compete on an equal footing, will the PFC adopt a similar approach to the foreign EXIMs? The Singapore Government will provide backing to the PCF by guaranteeing it debts. Will the PCF require some form of participation by Singapore companies in every project that it finances?

Mr Chairman: Mr Inderjit Singh, please take your two cuts together.

Managing Reserves

Mr Inderjit Singh (Ang Mo Kio): Sir, I would like to raise one point regarding our Sovereign Wealth Funds (SWFs). The reason we have two SWFs – GIC and Temasek – which operate separately as private funds with larger risk appetites is because they are supposed to target different types of investments. However, in recent times, they are starting to look very similar and are also investing in almost similar assets. This is not a good trend as we may be over-investing and lack diversification in our investments, which could come back and haunt us doubly hard if these sectors are hit by problems. We have seen this when we were hit by the number of investments in financial institutions by both entities in the last few years.

The reason this is happening is due to a lack of coordination. I think this problem first started when Temasek first reviewed its charter in 2009 in conjunction with its 35th Anniversary where it started developing a more fund manager-like charter and added greater international outlook to its investments.

MOF should review and redefine the charters of both GIC and Temasek and also play a more active role in coordinating their investment philosophies. This oversight will allow MOF to ensure that there are no overlaps on the types of investments that GIC and Temasek make. Sir, the SWFs have a huge responsibility. Besides helping Singapore in its economic strategies, they also have to ensure that they do not dilute the reserves through their investment philosophies. Although their investments should not be politically influenced, I think MOF should not shy away from carrying out a coordinating role as it would be beneficial for Singapore as a whole.

Tax

Sir, on tax, I would like to raise three broad points on tax changes in this year's Budget. First, I would like commend the Government for introducing the GST Vouchers on a permanent basis in this year's Budget. While GST credits paid out in previous years provided some relief for households, there was, nevertheless, some apprehension on the part of these Singaporeans. Their main concern was in anticipating if these credits would come the following year – so there was a sense of uncertainty at that time. The voucher system has provided the much needed assurance to these households in this regard.

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In the past, Sir, I have argued about the case for removal of GST for basic necessities. A grassroots leader of mine recently asked me why the Government zero-rated GST for gold investments, a luxury item, and not for basic necessities. I would like to seek clarification why the Ministry of Finance opted for the vouchers instead of removing the GST from the basic items. I would think that the GST Voucher system is administratively more cumbersome than the zero-rating of GST of basic necessities.

Sir, on corporate taxes, the tax changes to the Mergers and Acquisitions scheme, where companies can now claim up to 200% tax allowance on the transaction costs incurred is a welcome initiative as many companies in the past, particularly the smaller ones, were put off by the relatively high transaction costs. This is therefore a step in the right direction but I urge the Government to review the $100,000 cap, so that it will stimulate M&A deals of bigger nature. At the present cap, companies would qualify for up to $34,000 of tax allowance a year based on a 17% corporate tax rate, and may not be enough to stimulate the very large deals as the transaction costs associated with those are high due to a larger pool of professionals working on them.

Our personal income tax is already one of the most competitive but I thought that it was about time that we rationalise the top personal income rate tax with the corporate tax level so that both are aligned.

Sir, adjustments to the Earned Income Relief for the older workers is a welcome move to help them save for their retirement. But I am surprised that there was nothing done to ensure that this problem was nipped in the bud this time and does not carry forward to the future generations of Singaporeans. The Government could have perhaps encouraged additional tax deduction for voluntary CPF contributions, or reviewed the Supplementary Retirement Scheme to allow greater tax deductible contributions so that younger Singaporeans can now already start saving for their retirement. By not addressing this problem at this time, we will be revisiting it at every generation and we may have to continue using more Government top-ups rather than equipping them to be self-sufficient. That would have been in line with this Budget for the future – about doing something now that will help them in the future without Government's intervention.

Tax Relief: Handicapped Family Members

Dr Chia Shi-Lu (Tanjong Pagar): Mr Chairman, I would like to ask for the Ministry's support in recommending an increase in the Handicapped Child Relief (HCR) and the Working Mother's Child Relief (WMCR) for handicapped children. Currently, the difference between the Qualifying Child Relief (QCR) for a normal child and HCR is only $1,500 – $4,000 versus $5,500. But surely, the difference in the cost of bringing up a normal child compared to a handicapped child is significantly more than that. In addition, the QCR or HCR, together with the WMCR, is currently capped at $50,000 per child regardless of the condition of the child. I hope that the Ministry will consider a higher relief for the WMCR for the mother of a handicapped child.

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On a similar note, the difference between the tax reliefs for supporting a normal spouse and a handicapped spouse is only $1,500 a year – $2000 versus $3,500. The tax relief for the care of each handicapped sibling is similarly only $3,500 a year.

I think this year's Budget is notable for the extra benefits it extends to working handicapped Singaporeans, but I feel that there should be something for the caregivers of non-employed handicapped Singaporeans as well. So in view of the hardship and challenges, not to mention the additional financial burdens borne by such families, I hope the Ministry would consider increasing these tax reliefs.

Full Convergence with International Financial Reporting Standards

Mr Ong Teng Koon (Sembawang): Mr Chairman, Sir, in 2009 the Ministry announced that by 2012, we would work towards the full convergence of the Singapore Financial Reporting Standards with the International Financial Reporting Standards for the Singapore incorporated companies listed on the Singapore Stock Exchange.

The Accounting Standards Council was to give a review last year. However, the International Financial Reporting Standards are currently undergoing very significant changes partly due to its agreement to converge with the US Generally Accepted Accounting Principles – a response to the global financial crisis and improvement for changing business transactions. These changes in International Financial Reporting Standards have to be implemented by businesses when they are finalised and issued. Can the Ministry provide an update on the timetable for convergence? Will there be increased compliance cost because of the convergence? And given the Ministry's plans to develop Singapore into an international accounting hub, so that infrastructure, networks and human capital resources in the accounting arena are well placed to help businesses, will there be measures to help the affected businesses?

Productivity and Innovation Credit Scheme for Self-Employed

Mr Seng Han Thong (Ang Mo Kio): Sir, the previous PIC scheme applied only when there was an employer and employee relationship. It is noted that the PIC scheme announced in Budget 2012 also includes training of agents, such as insurance or real estate agents. Would this mean that the PIC scheme also covers the training of other self-employed persons such as the taxi drivers?

I urge the Government to apply the PIC scheme on taxi companies which invest in the training of their taxi drivers who are self-employed, just like the Government has made an exception for taxi companies to claim for tax deduction on expenditures incurred under the Drive and Save Scheme in the previous Budget.

More Effective Productivity and Innovation Credit Implementation

Ms Tan Su Shan (Nominated Member): The PIC scheme aims to improve productivity through innovation and upgrading of the labour skills. My question is: do the people who should know about it, know about it? What is the take-up rate? And do the sectors or the segments of people who need it most qualify? And can some people actually game the system?

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One, awareness and take-up rate. The SME Development Survey 2011 done by the SBF showed that although 65% of firms that are aware of the PIC, only 24% avail themselves of it. Is this because the qualifying criteria are too strict? Feedback so far: the scheme is good, it is generous but it is a bit convoluted.

Two, more targeted help. Different sectors have different factors that affect productivity growth. If we are serious about facilitating productivity growth across different sectors, we may need to target those where productivity levels are falling most. According to an MCI survey recently, whist productivity grew in the manufacturing sector by 8.7%, it fell in the service sector, particularly infocomm's business services and finance down 3%. So what are we doing to ensure that the PIC scheme reaches out to these sectors that most needed?

Three, more flexibility. For the PIC to benefit the low-income segments, we may need to be more flexible. Requiring a staff size of at least three local employees will exclude a significant proportion of micro enterprises, including social enterprises, who may not have regular or sufficient cashflow to support full-time salaries. It may also exclude hawkers or many of those in the bottom 20% of our income segments, and these are the people who need the most help. The Government had stated that the PIC is for all businesses, but instead of staff size criteria, would the Government consider more targeted ones such as auto qualification for the scheme if you have been in your second year of business, for example? Or perhaps, one for one cap on each equipment type per staff?

Lastly, gaming the system. Is the Government confident that firms which qualify under the current scheme are not gaming the system? For instance, is there no reselling of equipment subsidised by taxpayers? And as foreign companies are also eligible for the PIC, how can we be sure that the equipment subsidised by Singapore stays in Singapore?

Productivity in the Public Sector

Mr Laurence Lien (Nominated Member): Mr Chairman, according to figures released in the Budget highlights, actual headcount in the public sector rose 14% in just four short years from FY2006 to FY2010, and is poised to increase significantly more this year. Based on my own estimations, it would probably exceed 20% in the six years from FY2006 to FY2012. And these numbers do not even include headcount in Government-linked institutions and companies like the restructured hospitals and the universities. At the same time, the Government is promoting productivity and innovation in a very tight labour market. So my question is whether the public sector is setting the right example for the rest of Singapore.

In last year's COS, then Second Minister for Finance mentioned that it used its manpower management framework to allocate manpower resources prudently, and it allows headcount growth to meet our growing challenges at a rate no more than Singapore's resident labour force growth rate. According to MOM figures, the resident labour force grew 9% from 2006 to 2010, yet the public sector headcount grew 14%. May I ask for an update on how the manpower management framework is working?

11.30 am

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I am particularly concerned because the rest of us in the private and non-profit sectors are really suffering from labour shortage. The lack of human resource is the greatest challenge in the non-profit sector where I work. And I think Government is at an unfair advantage because every time it cannot attract enough staff, it can just raise the pay, and just last month, we saw that. When my little NPO loses people, many of them go to Government bodies.

Before the public sector goes on a hiring spree, I would like to urge the civil service to go on a major productivity drive and really examine whether staff are using their time meaningfully and productively. I spent many years in the public service, and I can tell you that the generous staff numbers is something that the non-profit sector can only dream about. And besides, the Prime Minister is asking the civic society to do more!

Just as is the case in the private and public sectors, there is a lot of inertia and I understand that it is often difficult to reap productivity savings. You can only make a quantum leap if you really look at ingrained ways of doing things and fundamentally change them. This could involve disruptions. Like Ms Jessica Tan, I urge the Government to cut red tape further, review all the bureaucracy and regulations that it imposes on the private and people sector. They are often a huge drag on productivity. But I do strongly suggest an active involvement of people from the private and people sector in this, because internal reviews can only bring you so far before you hit a wall.

Best-Sourcing Initiative

Mr Vikram Nair (Sembawang): Mr Chairman, one of the issues that many companies go through at some point in their life is that they decide certain functions need to be outsourced and this applies to both companies and governments. Now, one of the issues that arises when functions are outsourced is that quite often, these outsourced functions are put up to competitive tender. When it goes to competitive tender, quite often, the cheapest bid will end up winning. Now, one of the side effects of the cheapest bid winning is that this often puts a downward pressure on the wages of the workers in those outsourced functions.

In this regard, when the Minister of State for Finance recently informed this House that all public agencies are encouraged to adopt the recommendations in the Tripartite Advisory on the Responsible Outsourcing, I was actually quite heartened. I understand the Government is working with its tripartite partners to update the advisory and to ensure that the public agencies are aligned with the revised requirements. The benefit of this proposal is not just for the Government sector but if the Government sector goes to what may be called best sourcing rather than going to the cheapest source, that may hopefully have knock-on effects to the private sector companies as well because that may drive up wages in the sector altogether. The cleaning sector is a good example because I understand the Government employs a large number of cleaners in the cleaning sector. I believe 6,000 out of 46,000 local cleaners. This may be a good way to drive up the wages of the cleaners.

In that sense, I just wanted to check if the Ministry of Finance can update the House and share what other details of the measures that will be taken, especially those that will help low-wage workers receive higher wages and better employment terms. I would also like to ask the Ministry of Finance if it would be monitoring and assessing the proportion and wages of workers on contract with the Ministries hired through the Best-sourcing Initiative (BSI).

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Temporary Occupation Licence at Community Rate

Ms Indranee Rajah (Tanjong Pagar): Sir, I would like to ask the Ministry of Finance whether it would consider issuing TOLs for State land at the community rate for community use. This issue first came to my attention when I was attempting to solve yet another traffic problem in my area. This was the Sikh temple at Jalan Bukit Merah which is an old temple and, therefore, there is not an awful lot of parking space there. I noticed that there was an unused school across the road and suggested that they might want to consider applying for permission to use that to park cars. I applied to SLA for them. Approval was initially granted but, for various reasons, the scheme has now not gone through partly because of the constraints in terms of time. It is only available for a short period and it is now required for another use.

In the course of this, I realise that the TOL for use of that school was actually rather high and I made inquiries of SLA why that was the case. SLA informed me that currently the use of State land pursuant to TOL may be permitted upon payment of a licence fee but under current MOF requirements, the TOL is charged at a commercial rate depending on the type of use. And I thought whilst that was appropriate for commercial use, it may not be so suitable when the intended use is community use. So I wanted to ask the Ministry of Finance whether it would be prepared to consider at least for such instances, TOL fee at a community rate for community use and/or for community uses. So, for example, churches, temples or community organisations where it is clear that the use is for a social or a community purpose.

Encouraging Philanthropy

Mr Liang Eng Hwa (Holland-Bukit Timah): Sir, I am happy to learn that individual and corporate donations to Singapore charities have grown over the last decade. I also want to give due credit to the Finance Minister for the extension of the 250% tax deduction benefit for donations to IPC at the last year's Budget. This is a positive move which would entice donors to continue donating generously. However, while philanthropy have increased in Singapore over time, when compare with many countries, we are still lagging behind in charitable giving and generosity. If the World Giving Index 2011 published by Charities Aid Foundation is any indication, Singapore was ranked No. 91 in the world. In the whole of ASEAN, Singapore was just ahead of Vietnam but behind neighbouring countries like Malaysia and Indonesia.

Due to the globalised nature of our economy, Singapore experienced a wider income gap than many countries. Based on a report by Boston Consulting Group, Singapore has the highest concentration of wealthy households in the world; 15.5% or nearly one in every six households has more than $1 million in assets. So, there is really no excuse why our charitable donations are lagging behind countries that are less affluent than us. I hope the Ministry of Finance would look at further schemes to encourage philanthropy and to encourage those who have done well to give back to society.

As only about 21% of the population in Singapore pay income tax, the reach of the income tax deduction benefit is quite limited. So, we should look at non-income tax related avenues as well to encourage Singaporeans and non-residents to donate more; especially those that may be income poor but rich in assets. At the end of the day, we would also want these charitable acts to come from our hearts. I hope that the Government can step up its messaging on philanthropy and encourage more giving by those Singaporeans who have done well. By cultivating the virtues of giving back to society, it is an important way to strengthen cohesiveness in our society even as the income and wealth gap widens.

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The Minister of State for Finance (Mrs Josephine Teo): Mr Chairman, first, let me thank all the Members who have spoken for their comments and suggestions on a fairly wide range of topics. The questions and cuts that have been filed centre around three areas: the first is on facilitating businesses, especially our SMEs; the second is on an efficient and effective Government; the third is on how we can nurture a caring society. Sir, I will address each of these themes in turn.

Let me start with facilitating businesses. Ms Jessica Tan and Ms Tan Su Shan suggested simplifying PIC and making it more accessible to SMEs. I think we have heard throughout the debate many concerns on how SMEs can be helped to make this transition. We share these concerns. I would like to emphasise that although the PIC is available to all enterprises, it is, in fact, designed very much with small businesses in mind. PIC is available to all enterprises and they can qualify without having to meet any special criteria.

Now, all businesses, including small and micro enterprises as well as sole proprietors can benefit from the PIC. Based on the tax returns filed last year, one in three or more than 25,000 small companies claimed PIC. This is a good start since 2011 is the first year of PIC claims. We are quite confident that with improved awareness, more SMEs will be able to take advantage of the PIC.

Since the PIC was introduced two years ago, we have also acted on feedback and improved the scheme to better benefit small businesses. First, recognising the value of cash flow to small businesses, we allow them to opt for a cash payout as an alternative to tax deductions. So, for example, if a small business incurred $10,000 worth of qualifying expenditure, it could previously get a cash payout of $3,000. From this year, the cash payout is doubled to $6,000. Second, the cash payout can now be claimed at the end of each financial quarter rather than at the end of each financial year. So for SMEs, this further eases their cash flow. Third, we have made it easier for businesses to claim PIC for in-house training and they can now claim up to $10,000 per year on their in-house training course without the need for certification by WDA or ITE. This change arose from the feedback we received about how the scheme can help to benefit SMEs in particular.

Some businesses may have the impression that it is difficult to make PIC claims. In fact, the process is fairly straightforward - the claims are made as part of the annual tax filing process. Quite a number of people do not realise it. You have to file your tax returns anyway and whilst you are filing your tax returns, you can make your PIC claims and a taxpayer needs only to provide a few additional lines of information. I have checked it out myself. It is really just a few additional lines specifying what their productivity investments were. The PIC does not require an "ocean of paperwork" which was a phrase used by the hon Member Mdm Foo Mee Har yesterday, as feared by SMEs. No ocean of paperwork. In fact, there is no need to produce any additional supporting documents as this was discovered by Ms Yoong Chwee Hwa, Director of Creative Edge Consultants Pte Ltd. They are a small business in design and project management, less than $2 million in turnover with fewer than five employees. Like many of the other SMEs who have actually claimed PIC, Ms Yoong told us that she thought it was a lot simpler than she originally imagined. Now, if the earlier cash payout is preferred, a business just needs to complete an additional simple form. That is only if they want the cash payout. Otherwise, if they want to claim it against their taxable income, they do not need to put in any additional form.

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As the PIC is a relatively new scheme, we fully recognise the importance of communications efforts which many MPs have emphasised, especially to SMEs. More proactive outreach is needed. Since the PIC was announced in Budget 2010, IRAS has, in fact, held nearly 150 seminars or more than one seminar per week reaching out to more than 20,000 people. IRAS will keep up the pace of its seminars. These will carry on. At the same time, it will also step up its outreach in three ways.

First, it will start a new series of PIC clinics which offer one-to-one consultations to businesses in partnership with the five major business chambers and associations. The clinics will be held weekly over the next six months and will be free of charge. Businesses do not have to pay to get this one-to-one consultation. And if after the six months, there is a need for us to continue, please be assured we will do so.

Second, IRAS will focus on small and micro enterprises operating in HDB neighbourhoods, which is where many of our SMEs are. This will be through a new programme organised jointly with the Community Development Councils, the CDCs. The first such seminar will, in fact, be held this month at Kembangan/Chai Chee constituency. We are going all the way down to the ground to make sure that everybody who needs to know about it gets to know about it.

Third, IRAS will engage service providers like IT vendors, software providers and trainers so that they become more familiar with the PIC and help their customers benefit from it. We are going through intermediaries which are in a position to help their SME clients benefit from PIC.

To Ms Tan Su Shan's question on whether the three-employee condition can be removed, I would like to clarify that this condition is only applicable to the cash payout feature of the PIC. No such requirement is needed for claiming the tax deduction itself. Now the three-employee condition is to ensure that cash is dispersed only to businesses with substantive operations. This helps to prevent a potential gaming which Ms Tan also expressed concern over, by individuals who set up businesses to get a cash subsidy for essentially personal purchases. So, if they buy an iPad and set up a company, without this condition of three-employee, they can also get this cash payout. That is the purpose for introducing this three-employee condition – only for the cash payout, but not for the cash deduction.

11.45 am

We also like to thank Mr Seng Han Thong for suggesting that taxi companies be allowed to claim PIC on the training of taxi drivers. We have considered the suggestion and will indeed implement it from Year of Assessment 2012. We will align the treatment for taxi driver training with the training of insurance agents, real estate agents and financial advisers, who will also qualify for the PIC. We will make every effort to simplify the PIC so that more businesses especially the SMEs can get easy access. Mr Chairman, if you would allow, I would like to summarise it in Mandarin.

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( In Mandarin ): [Please refer to Pg 1847 for Vernacular Speeches.] We understand the challenges faced by SMEs. They often do not have the time or energy to look through the details of Government assistance programmes and may not benefit fully from them.

As the Productivity and Innovation Credit (PIC) was introduced only two years ago, some businesses may still be unfamiliar with the scheme. Nonetheless, one in three small companies have benefitted from PIC. To help SMEs raise productivity, the Government will further simplify PIC to make it more accessible to them.

First, we have ensured that the PIC claim process is simple and straightforward. PIC does not require additional application procedures – claims are made as part of the annual tax filing process.

Second, we fully understand that cash flow is important to SMEs. Thus, small businesses can opt for the cash payout option as an alternative to tax deductions. We have also doubled the cash payout conversion rate from 30% to 60% or up to $100,000 of qualifying expenditures. For example, an SME that invested $10,000 in new equipment or training for its workers is now eligible for a $6,000 cash payout. In the past, a company could only receive the cash grant after filing its annual tax return. Starting this year, we have also allowed cash payout claims to be made at the end of every financial quarter.

Lastly, in response to feedback from various sources, the Government will enhance our efforts to raise awareness of the PIC amongst businesses. This includes providing one-to-one consultations to businesses that are conducted free-of-charge; holding seminars targeted at small and micro enterprises operating in HDB heartlands; and engaging service providers so that they can help their customers benefit from PIC.

We believe more SMEs will tap on PIC to aid in their overall business, productivity and restructuring efforts. This will ensure that SMEs continue to play an important role in Singapore's economy well into the future.

( In English ): Mr Ong Teng Koon's request for an update on Singapore's progress towards full convergence of the Singapore's Financial Reporting Standards (SFRS) with the International Financial Reporting Standards (IFRS). As an international business and financial centre, it is in Singapore's interest for the SFRS to converge with the IFRS. Using a single set of high-quality globally-accepted financial reporting standards will help to minimise reporting costs for our listed companies that operate in multiple jurisdictions and also make it easier for companies to participate in the international capital market. The SFRS is closely modelled after the IFRS. In 2009, the Accounting Standards Council (ASC) announced that it would work towards full IFRS convergence for Singapore-incorporated companies listed on the Singapore Exchange by 2012.

Since then, it has proactively engaged the International Accounting Standards Board on Singapore's convergence initiative, commissioned in-depth research and undertaken extensive consultations with our local stakeholders on the implementation plans. Internationally, there have been some delays to the broad convergence initiative. Standards under review by the International Accounting Standards Board (IASB) such as the revenue recognition and financial instruments have attracted extensive comments and differing views internationally and are unlikely to take effect before 1 January 2015. The Accounting Standards Council has thus reviewed Singapore's convergence plans and concluded that we should not rush into convergence until these key standards are finalised so as to avoid additional transition costs for our listed companies. Therefore, our full IFRS convergence will not take place by 2012 as originally envisaged. The timeline for convergence will be adjusted in tandem with international developments. The revised timeline will be announced at an appropriate juncture, and we would like to assure the affected companies that we will give them adequate time to prepare for it. Convergence is not expected to be unduly demanding because our standards are already very much aligned, nor is convergence expected to result in significant costs for listed companies.

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Sir, we had said that to further support internationalisation efforts, a Project Finance Company (PFC) will be operational from the second half of this year. Mr Chen Show Mao sought to understand how the PFC will benefit local companies. The PFC addresses a market gap in long tenure, cross-border project financing. The PFC, which is a commercial venture led by Temasek Holdings, will address this gap and catalyse the supply of such project financing. Local companies will benefit in the following ways: first, access to financing gives them added confidence and ability to bid for major projects on an equal footing with their competitors, who typically have funding support from their respective national Export Import (EXIM) banks. The PFC removes a constraint on our companies where Singapore companies have had to partner foreign contractors to tap financing facilities overseas. And, as Mr Chen pointed out, we have put our companies at a slight disadvantage. So this opens up opportunities for our own SMEs to participate in these projects.

Mr Chen has a specific question on the definition of Singapore-based companies. We have defined a Singapore-based company as one that is listed or incorporated in Singapore and have at least three global or regional strategic decision-making functions located in Singapore. This is the definition that is commonly used in incentive schemes of our enterprise development agencies. While this definition does include foreign companies based here, these companies will have substantial presence anchored in Singapore. And there are significant spin-offs to the economy such as value-add and jobs created because they use Singapore as a base for internationalising and undertaking major projects overseas. This will strengthen our position as a global Asia hub.

Mr Chen also asked whether the involvement of Singapore's companies will be a requirement in every project. Let me reiterate that the PFC will aim to have 80% of its long-term portfolio comprise projects with significant participation from Singapore-based companies. This already assures us of significant benefits because the Singapore-based company must have at least three global or regional strategic decision-making functions located in Singapore, which I have explained earlier. The additional condition of local partnership, if we were to put it in, will unduly constrain the borrower and make it less attractive for the deal to be financed out of Singapore. So if we make that as a requirement, you might not even get it. Notwithstanding this, our economic agencies will continue to facilitate meaningful partnerships between our local SMEs and international companies for infrastructure opportunities in the region.

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Mr Chairman, let me now touch on issues related to an effective and efficient Government, beginning with the management of our reserves, which Mr Inderjit Singh raised. He had suggested that Government plays a coordinating role between GIC and Temasek to ensure that there are no overlaps. His key concern is that even as GIC and Temasek manage their own portfolios on a diversified basis, taking them together, there could still be concentration risks in the overall Government portfolio. Mr Inderjit Singh's question is a valid one and I should assure him that the Government does, in fact, systematically review the risks in its overall portfolio. We do this by considering the Government's whole portfolio of assets invested by the three entities – MAS, GIC and Temasek. We monitor for concentration risks in the whole portfolio, and whether there is appropriate diversification in terms of asset classes, sectors and geographies. We also assess the impact on the whole portfolio of various adverse global scenarios across medium to long-term timeframes, to ensure that the risks to the whole portfolio are not excessive. MAS, GIC and Temasek, in fact, operate at different parts of the investment risks spectrum, even if there is some overlap. They engage in different investment strategies and take different degrees of risks.

MAS, as a central bank, is the most conservative of the three. A significant majority of its diversified portfolio is in low risk and liquid investments. GIC's mandate is to preserve and enhance the real value of Singapore's foreign reserves over time. GIC's portfolio is well-diversified across asset classes including equities, bonds, real estate, natural resources and some other asset classes. It is also highly diversified internationally. Temasek's mandate is to create and deliver sustainable returns for its shareholders over the long run. This has remained Temasek's mandate even after its Charter was revised in 2009. Temasek is an equity-only value investor. It takes concentrated stakes from time to time but its portfolio remains diversified and it is also invested across sectors and geographies. I should add that Temasek's strategy of actively investing internationally begun much earlier than 2009 – it made the shift in 2002 and has since achieved more diversification by reducing its previously heavy concentration in Singapore assets.

The Government does not decide on how each investment entity should manage its own portfolio. Their respective boards and professional management teams are responsible for those decisions. The Government's role is therefore two-fold: first, and foremost, we ensure that these investment entities have competent boards to oversee how their respective management teams execute their investment mandates. We also ensure that these entities have proper mandates and objectives. Second, based on the overall risk profile of the Government's whole portfolio, we decide how Government capital should be allocated among the three entities. Further, we ensure that GIC, Temasek and MAS are sensitised to Government's considerations with regard to these overall risks. It is therefore not an auto-pilot system. We have a governance structure for looking at our Whole-of-Government assets within the system and for monitoring the overall risks and returns. It is a structure that has worked well and that we will keep improving.

Sir, let me now turn to Mr Laurence Lien's question on the public sector promoting productivity and being efficient in the use of manpower resources. The growth of the public sector headcount in recent years reflects the greater manpower needs on the public sector in essential areas such as education, public security and healthcare. The 14% cited by Mr Lien was largely contributed by major increases in teachers and allied educators − in fact, the allied educators scheme is a completely new scheme − and also of security personnel. Teachers, allied educators and security personnel accounted for nearly two-thirds of the overall increase. So, a very large portion of that 14% was really due to teachers, allied educators and security personnel.

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The necessity for increasing the teaching force as well as allied educators is well-known because they have improved pupil-teacher ratios and supported more customised learning in schools.

12.00 pm

As Mr Lien noted, since 2004, the Ministry of Finance has introduced the manpower management framework or MMF to promote discipline in public sector hiring. This also attends to Ms Jessica Tan's earlier question on fiscal prudence and how do we manage our resources. The MMF constraints the overall growth of the public sector manpower to keep it in line with Singapore's resident labour force growth in the long run. Since the introduction of the MMF in 2004 to 2011 – if you look at the whole period, since MMF was introduced, public sector headcounts, in fact, increased 8%, compared to the resident labour force growth of 19% over the same period. So, that is the update that Mr Lien was looking for.

Many agencies have, in fact, introduced initiatives to improve productivity and efficiency by leveraging on technology, for example. The Immigration and Checkpoint Authority (ICA) introduced the enhanced Immigration Automated Clearance system in 2006. This has helped to relief the manpower pressures on ICA despite the large increases in cross-border travel in recent years and also improved security at our checkpoints. We acknowledge Mr Lien's point that manpower issues are a key challenge faced by the social services sector. Mr Lien mentioned salary increases in the public sector as one of the factors contributing to these challenges.

Like the social services sector, the public sector cannot and does not depend only on salaries to attract and retain good staff. Salary adjustments are made only when benchmarking studies indicate a need to keep pace with the market. Last month's review, which Mr Lien mentioned, was in fact for a group of civil servants whose salaries were last reviewed five years ago in 2007. So it is not all that frequent − it was quite some time ago. We support more being done to enable the social services sector to groom a larger pool of social workers and professionals. It is very important for the ongoing development of our social sector and this would involve providing not just better rewards but also fulfilling careers. MCYS will implement a comprehensive social sector manpower development plan and ensure that adequate resources are provided to support it. MCYS will elaborate on this at their COS. The Government will continue to seek ways to increase productivity and efficiency in manpower use while ensuring sufficient resources to meet emerging needs and priorities.

Sir, Ms Jessica Tan asked about procurement compliance in public agencies and fraud risks. MOF regularly reviews our financial rules and guidelines. A comprehensive review in 2010 led to the clarification of key procurement roles and further segregation of duties to strengthen checks and balances in the procurement process. Public agencies were also reminded to adopt good practices such as periodic rotation of officers with procurement responsibilities. We are also developing a business intelligence system that will help identify procurement irregularities, point them out, flag them out and show instances of non-compliance.

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To minimise opportunities for fraud, we must complement sound rules, systems and processes with effective management, supervision and robust audits. Since June 2009, public procurement officers have been required to complete a mandatory training programme. MOF also organises discussion forums and workshops for procurement officers to share and learn good practices. And to ensure the prudent use of public funds, the Accountant General's Department conducts regular Value-For-Money audits on expenditures of public agencies. Learning points on these audits are shared with senior management of the public agencies and also tabled at various Government platforms. All said, the professionalism and the integrity of public procurement officers is what really matters for a well-functioning system of public sector procurement. We will continue to emphasise this to our officers that they need to be responsible for upholding these values.

Let me now turn to the other theme of nurturing a caring society which Mr Liang spoke about and also Mr Vikram Nair. We recognise that MOF can help to nurture a caring society. Let me just highlight two areas. First, on uplifting low-wage workers and a tax regime that encourages giving. Mr Vikram Nair requested for more details on the Government Best Sourcing Initiative. In consultation with tripartite partners, the Ministry of Manpower is working closely with the National Environment Agency and the Ministry of Home Affairs to enhance their respective cleaning accreditation and security grading schemes. The enhanced schemes aim to raise the productivity and professionalism of low-wage jobs as well as help workers earn higher wages and enjoy better employment terms. MOM will be announcing further details at its COS. What I would like to give assurance of is that MOF will give full support to the enhanced accreditation schemes. We will make it mandatory for all Government agencies, which include Ministries and statutory boards to procure only from accredited contractors.

This means that any contractor wishing to bid for Government cleaning contracts must be accredited under the enhanced schemes. In the case of security contracts, the contractors must obtain at least an A or B grade. Tripartite partners are working together to finalise the criteria for enhanced accreditation. This work is in progress. Once the criteria is finalised, sufficient time will be given for contractors to be accredited. The Government will consult the industry and set an effective date from which only accredited contractors can bid for Government contracts. We expect that within two years of the effective date, the vast majority of Government cleaning and security contracts will be serviced by accredited contractors. Let me assure Mr Nair and other Members that the Government recognises that Ministries and statutory boards as significant buyers of services, have an important role to play in providing momentum to the Best Sourcing Initiative.

However, the Government alone cannot transform the cleaning and security sectors. Government contracts cover just about 10% of the cleaning workforce. In this regard, we are heartened that autonomous agencies such as the restructured hospitals and universities have already indicated their support for the Best Sourcing Initiative (BSI). We share Mr Nair's desire to see many more companies come on board to support the BSI. The Government hopes that by taking the lead, we will provide a strong signal to the entire private sector to embrace the Best Sourcing Initiative and help in this very meaningful national effort to uplift low-wage workers.

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Next, let me turn to an important topic that many Members have spoken about during the debate. It has to do with how we, as Singaporeans, look out for one another and contribute to worthy causes as we build an inclusive society together. Mr Liang Eng Hwa asked if our ranking on the World Giving Index of 2011, showed that Singaporeans were less charitable than in other countries and if more could be done to encourage philanthropy amongst higher income individuals.

Sir, I would like to clarify that the methodology used in the construction of the World Giving Index, or WGI, actually understates the level of charitable giving in Singapore. The WGI measures the percentage of people who donated and volunteered a month before the survey was conducted. An alternative study was done by the NVPC, which tracks individual giving over a full year. And in 2010, the survey found that 85% of the Singapore population contributed money whilst 23% volunteered time in 2010. This is significantly higher than the 41% and the 11% recorded under the WGI. Nonetheless, we agree with Mr Liang that those who are better off should be encouraged to contribute more and that is why we increased the tax benefit from 200% to 250% for donations to approved recipients in Budget 2009 and also provided matching grants for donations to Institutes of Higher Learning through the $2 billion Singapore Universities Trust and to the long-term care sector through the $1 billion Community Silver Trust.

Of course, we also have non-tax measures to increase giving. The Charity Council and MCYS have been working to enhance public confidence in our charities. The NVPC has rolled out initiatives such as the Community Foundation of Singapore and the Singapore Gives online portal to encourage giving as well. To Mr Liang's question on whether there is support to encourage the setting up of charitable vehicles, let me highlight two specific ways. First, we exempt all our charities from income tax. Second, in Budget 2007, we introduced the qualifying grant making philanthropic organisation scheme. What this scheme allows is tax deductions for donations to grant makers, such as family foundations, community foundations and business giving programmes. Since inception, 10 charitable vehicles, such as the Anglo-Chinese Schools Foundation have registered to benefit from the scheme. We are very encouraged that charitable giving has, in fact, been growing steadily in Singapore. We know that many Singaporeans want to do their part to give to the community. And with them doing so, Singapore can become a more caring and inclusive society.

Let me now address several specific questions raised by Ms Indranee Rajah, Dr Chia Shi-Lu and Mr Inderjit Singh. Ms Indranee Rajah asked whether MOF would be prepared to consider charging a community rate for state land use for community purposes and/or use by community users. The Government's policy is to charge market rates for the rental of temporarily unused State land to recognise the true value of the land. I understand where Ms Indranee Rajah is coming from. She will be pleased to know that if there are grounds to subsidise the operations of an organisation, the relevant Ministry will consider doing so, for example, MCYS currently provides rental subsidies to some VWOs, operating day care centres and senior citizen homes.

This approach of charging State land use at the market rate and the Ministry providing subsidies in a directed manner is a more transparent and targeted approach. Dr Chia Shi-Lu asked if MOF could consider increasing the income tax relief for handicapped family members. We share his concern for such families. In 2008, we increase the Handicapped Child Relief from $3,500 to $5,500. In 2010, we allowed tax reliefs for the handicapped to be claimed regardless of the dependent's earned income. However, we are mindful that about 40% of individual income tax payers already do not pay taxes after reliefs and rebates. So, higher reliefs are less meaningful to them. That is why we have introduced other support measures to help persons with disabilities, at all stages of life.

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In Budget 2012, we have made significant enhancements including increasing places in centres for children who need intensive early intervention; and also extending the Workfare Income Supplement Scheme, as well as the Special Employment Credit to lower-income Singaporeans with disabilities. Nonetheless, let me assure Dr Chia that we will continue to review the relief quantum and adjust them from time to time. Mr Inderjit Singh gave several tax-related suggestions on the M&A Allowance Scheme. It has just been liberalised to cover transaction costs. The scheme targets SMEs which tend to have smaller deal sizes and the $100,000 cap on transaction cost is sufficient for most.

On aligning top Personal Income Tax (PIT) rate with the corporate income tax rate, there is currently no compelling reason to do so because these are different tax types and our PIT rate remains competitive. On tax deduction for voluntary CPF contributions, Mr Inderjit Singh's broader point is how we can use fiscal policy to better support retirement adequacy. Retirement adequacy is a very important subject and will be comprehensively addressed in the Ministry of Manpower's COS.

Sir, let me once again thank all Members for their comments and suggestions. To summarise, MOF has taken a comprehensive approach towards facilitating businesses, ensuring an effective and efficient Government and playing our part in nurturing a caring society. First, we will continue to facilitate businesses, particularly SMEs. Ensuring that the PIC claims process is straightforward; doubling the PIC cash payout option from 30% to 60% of qualifying expenditure up to $100,000 and allowing claims to be made quarterly rather than annually; relaxing the criteria to allow PIC claims on in-house training without WDA/ITE certification. Those are some of the moves that have been made. We will also introduce more channels to help businesses learn more about PIC and get help. MOF will continue to play our role in reinforcing the efficient and effective use of manpower resources. Let me just close by saying that on the Best Sourcing Initiative, we will do everything that is within our means to make it an important tool to uplift our low-wage workers' wages and working conditions. Through our tax regime and matching grants, we will encourage philanthropy and support the less fortunate.

12.15 pm

Mr Chairman: Members, we have some time for clarifications. Mr Pritam Singh.

Mr Pritam Singh (Aljunied): Mr Chairman, thank you very much. I refer to some of the cuts that were made on tax issues and I would like to come back to some of the charts that the Minister for Finance used yesterday in his speech and, particularly, one that caught my attention was on car ownership. If you have a car, there are certain savings, if you do not have car, actually, you will have more tax savings now. I am not sure whether the variables and the assumptions behind those figures are available in the public. I checked the Budget 2012 website. I could not find them there. It could be there, but I just could not find them, but can I get an assurance from the Minister that those assumptions and variables will be made public and will be made known?

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Mr Tharman Shanmugaratnam: Sir, I thank the Member for raising the issue. That is our standard procedure. We will be putting out the information on our website. We did the same last year, in fact, when I also presented some lifetime benefit calculations. We followed up by providing the full information on our website. So, that will be done.

Mr Yeo Guat Kwang (Ang Mo Kio): Mr Chairman, Sir, I am glad that MOF has extended the scheme to taxi drivers as per request by the hon Member Mr Seng Han Thong. I would like to know if the scheme will be extended to other self-employed persons, including tour guides?

Mrs Josephine Teo: Mr Chairman, I thank Mr Yeo for his question. In principle, as long as the training provider is not exacting a commercial benefit from providing training – in other words, the training is provided for the purposes of enhancing skills and improving productivity – we will be open to making it available.

Mr Cedric Foo Chee Keng (Pioneer): Thank you, Sir. I would like to follow up on the statements made by the Deputy Prime Minister and Finance Minister yesterday. Deputy Prime Minister Tharman talked about an inclusive society, uplifting people who are less privileged. I think that is a very laudable objective. I want to remind him that there is one group of people – polytechnic students – who are not enjoying equal public transport concession fares as their peers in JCs and ITEs. This is a subject that has been discussed many times. Now that we have breached the Rubicon, with the Government prepared to fund directly our public transport companies, we should look into assisting this group directly. I estimated that it is about $30 million to $40 million a year. So, say, if it is a permanent feature, then it will be $200 million for five years. Would the Minister consider raising the $1.1 billion by about $200 million or so, so as to correct this inequality?

Mrs Josephine Teo: Mr Chairman, I thank Mr Foo for expressing his concern for polytechnic students. This issue of concessions will indeed be addressed at MOT's COS, so I ask for his forbearance until such time.

Mr Cedric Foo Chee Keng: Mr Chairman, Sir, my second question is for the Minister of State. I am a member of the Public Accounts Committee. We listen to the Auditor-General regularly. We study his report. We have also called up the Chief Accounting Officers (who are the Permanent Secretaries) of MHA and MOF, for dialogue and discussion. It seems that some of the feedback we got was that there are many different Ministries – some large, some small, there are many different statutory boards – some large, some small. A particularly disturbing feedback was for that of smaller Ministries and statutory boards, they do not have, say, a DSTA-equivalent in the Ministry of Defence. And, for good reasons, many of the officers have to be rotated and sometimes, they are rotated out in the middle of a procurement project. There is no opportunity for deep, institutional knowledge and skills-set to set in especially for smaller Ministries and statutory boards. Would the Ministry consider setting up a central procurement unit for the Government so that smaller Ministries and statutory boards can opt in and avail themselves to such expertise?

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Mrs Josephine Teo: Mr Chairman, I thank Mr Foo for his observations. Indeed, it is a challenge, especially for the smaller agencies. And it is not just in procurement. It is in a variety of functions that they have to perform, whether it is HR, administration, finance, audit. They do not have a very large pool of people to be able to support these functions. In order to standardise and ensure compliance and also keep up high standards, the Government set up Vital.org to consolidate some of these activities so that there can be greater economies of scale. There can be more specialised expertise being built up. Central procurement currently is not one of them right now, but I take his feedback and we will certainly look at it.

Ms Indranee Rajah: Mr Chairman, I thank the Minister of State's clarification and her response on community use. I just have two comments. One is that, whilst I appreciate that certain Ministries will subsidise certain types of use, it would seem odd to do so, for example, when you are having a church or a temple that needs to use the space as a car park. It just seems odd to be subsidising such an organisation for car parking, and I would have thought that a better approach would actually be to have a discounted rate.

And the second point is that the alternative is that you do not use the land at all, in which case, the land does not earn any money. So, I do not expect a definitive response today, because I do not expect that I will get one, but I would hope that the Ministry of Finance would look into it and consider it. We have another year before the next Budget, so there is plenty of time to consider the matter.

The second point, if I may, Mr Chairman, and I would try to wrap it up within a minute, is that the Minister of State spoke about the use of technology for productivity for Government services. I acknowledge that. But I think that it is sometimes more than just a case of technology, it is a question of taking ownership of the issue, it is a question having initiative and making sure something gets done. Two illustrations – very quickly – my favourite topics: Kim Yam Road – Seventh Moon – always very crowded, always complaints from residents because of the festival and activities at the temple there. It has been going on for many years, and every time the residents have to call, it takes time for the LTA officer to come down. By that time, the offenders have moved off. I therefore have to suggest to LTA that it might be a good idea to actually be there at the peak hours before it starts and take care of the problem, and that did a great deal to resolve the issue. You do not need technology to know that you should come down.

The second point – Robertson Quay. Because, after a certain time, you want the noise to die down, so I suggested, perhaps, having much brighter lights after a certain time to say that the party is over. The response from LTA was: we cannot raise ambient lighting because it would destroy the ambience of the place. My response was that I am not asking for an increase in ambient lighting but for floodlighting after a particular time. LTA said they would look into it. They did. What they did was they increased the ambient lighting. I waited, of course, because that is not going to work. So, after several months, they said that increasing the ambient lighting would not work. I said, yes, I know, could they please consider floodlights? The answer that has come back is, well, we now have to consider the loading on the bridge to see whether the floodlights can be put on the bridge. I have suggested that, you know, we do not have to put floodlights on the bridge, you can put it on the land next to bridge, on terra firma , and that would take care of the issue. They are considering this now.

Mr Chairman: Mrs Teo, I do not know whether you have a response.

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Mrs Josephine Teo: I very greatly enjoy Ms Indranee Rajah's sharing of the very innovative approaches that she has taken in the community. I can attest to the fact that technology is not the only way in which we are trying to improve efficiency and promote innovation. And I do agree that, sometimes, a fresh perspective offered by colleagues – and that attest to Ms Jessica Tan's earlier point about whether agencies do work in partnership and leverage on one another's expertise, knowledge, best practices – those are also very important. So that point is very well taken.

On just a small clarification on the part of TOL land for community use, the purpose of charging at market rate is not to earn money. The objective is to find a way that is equitable, and so that all players can have a fair way of accessing that land. Also, I think, from the point of view for community uses, how the scheme has been set up is to say that you do not have to confine yourself to these kinds of land, and there are other types of facilities and lands that you can also access. So, it is not to turn them in the direction of such unused State lands. I just wanted to clarify that.

Mr Vikram Nair: On the Best Sourcing Initiative, I understand that one of the things that will be looked at is the employment terms given by the accredited contractors. Now, in the process of working out these criteria, I would just like to make two points on what those employment terms probably should take into account. One is where, say, language and literacy are not that important, perhaps that should not be emphasised too much because, for many people, for example, they can do cleaning jobs but may be concerned about keeping their job if the criterion goes up. So that is one tension.

On the other side, I think, it would also be good if we can look at the salary requirements and so on, to make sure that at least the income is protected. Both of these are for Singaporeans.

Mrs Josephine Teo: Mr Chairman, I would like to thank Mr Nair for his very useful suggestions. Indeed, I think when MOM reviews the criteria, it is doing so together with NEA and MHA, who are the users of these services but, at the same time, they are getting very valuable inputs from the Labour Movement, NTUC. Specific units are participating in it and looking at it from the workers' standpoint and asking how this is really useful to us. So I think it is an effort that needs the inputs of the relevant stakeholders and I can assure Mr Nair that the items that he has talked about, including salaries, they are also being looked at.

Mr Chairman: Mr Yee Jenn Jong, last clarification.

Mr Yee Jenn Jong: I have two questions regarding the PFC. It seems that the criteria allow Singapore incorporated foreign companies with zero Singapore ownership to take part. The first question is that can the evaluation criteria be bias in such a way that it will favour companies with local ownership so that we can help grow locally-owned companies? The second question is that by having only 80% of the projects required to be Singapore-based companies involved and not 100%, is it because we are not confident that there will be enough projects that will involve at least some of our local companies?

Mrs Josephine Teo: Mr Chairman, I will try to be brief. On his second question first: why 80% and not 100%? Actually, with the requirement to have 80% of the portfolio comprised projects with significant participation from Singapore-based companies, the mandate of the PFC is very clear. However, as with any investment portfolio, the PFC needs to diversify its project portfolio and also the risks. Other countries and their EXIMs are far larger than Singapore's and able to achieve sufficient risks diversity within their own country's industries and companies. So, it is a practical concern there. With us, there is a reason why we have decided to allow the PFC some flexibility to provide financing for projects not involving Singapore-based companies. It is to our benefit that the PFC is able to diversify and manage it risks to enhance the commercial viability. So, that is to the second question.

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To the first question: I have every confidence that Singapore companies are up to it and, in fact, all of our efforts are directed towards helping them to build the capabilities and not assuming that they are not up to it. So, let me give him that assurance.

Mr Chairman: Ms Jessica Tan, would you like to withdraw your amendment before you apply for your PIC?

Ms Jessica Tan Soon Neo: First of all, I would like to thank the Ministry as well as the Deputy Prime Minister and the Minister of State for taking our questions – a wide range of them – your assurance to helping our SMEs, to ensuring that we continue to improve the productivity of Government agencies as well as looking at best sourcing and being able to address the needs and the work conditions of our lower income workers. I appreciate your openness and in taking our suggestions as well. With that, Mr Chairman, Sir, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

The sum of $644,607,500 for Head M ordered to stand part of the Main Estimates.

The sum of $131,918,000 for Head M ordered to stand part of the Development Estimates.