START OF DEBATE

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[Mr Speaker in the Chair]: **ESTIMATES OF EXPENDITURE FOR THE FINANCIAL YEAR
1ST APRIL, 2011 TO 31ST MARCH, 2012 **

(Paper Cmd. 1 of 2011): Order read for consideration in Committee of Supply [4th Allotted Day].

[Mr Speaker in the Chair]: Head M – Ministry of Finance

Question again proposed.

Whole-of-Government

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.

Over the last week, as we debated Budget 2011 and in the various

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Committee of Supply discussions, the focus has been on productivity and building capability. As Minister Tharman has said, we are stepping up investments to transform Singapore into a high-capability economy and a global city that stands out for its liveability. So can Minister share how effective public agencies have been in achieving productivity gains?

In December 2010, in the Singapore Public Sector outcome review, the Government outlined six broad strategies to take Singapore forward and how public agencies can work together to achieve these goals. The report recognised the need for the whole-of-Government approach to tackle issues rather than having each agency deal with a specific area. While agencies are effective and efficient in each of the areas of responsibility and competency, there is an increasing need to work across agencies to address the complexity of situations and scenarios that face us at the national and at the citizen level.

Can the Minister share the progress that the Government has made to drive the whole-of-Government approach to achieve the strategic outcomes for effective citizen services and national issues? What measures have been put in place to ensure accountability across agencies?

In the Budget debate, I had raised a question on our fiscal position given the several large projects in the pipeline: projects announced by the Government from our transport infrastructure, upgrading projects to rejuvenating our heartlands, our lifestyle projects and investments to further improve our health and educational systems to serve the need of Singaporeans.

Our expenditures have increased to 14.5% of GDP in the last five years. As

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Minister had shared in the Budget Statement, our expenditures are expected to increase further to 16.5% of GDP over the next five years. These projects are large and complex requiring sizeable financial commitments over the next five years. Can Minister share the measures put in place to ensure strong management of these projects to achieve intended outcomes and meeting fiscal accountabilities? How will fiscal disciplines be maintained while allowing for flexibility in the approach? Many of these projects are multi-year and, as we all know, the requirements will change and will need to be incorporated while managed effectively to ensure that the intended outcomes are achieved.

Many of these projects will also require the whole-of-Government approach as they will involve multi-agencies to achieve the outcome. For example, the Remaking Our Heartland (ROH) projects will involve HDB, LTA, NParks, PUB, NEA, the Sports Council and even the Heritage Board, to name a few. What is in place to facilitate this collaboration and ensure effective and productive use of resources? How would we track our progress towards achieving the outcomes outlined in the Singapore Public Sector outcome review? What will the indicators of success be, as we are looking over a multi-year period?

Fiscal prudence

Assoc. Prof. Dr Muhammad Faishal Ibrahim (Marine Parade): Sir, it is widely known that our Civil Service is held in high regard by both the public as well as its counterparts in the region and other parts of the world. However, one feedback from the citizenry we hear from time to time has been on occasions, public funds have not been well accounted for in some of the Ministries with procedures that can be further improved. There were also occasions when Ministries have overspent their

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budget for projects, such as the recent Youth Olympic Games, and evidence of wastage has been detected during audit exercises. When such incidents are reported in the press, it affects public confidence in our processes.

As such, I would like to ask the Minister, what are the initiatives for instilling discipline within public agencies? What measures are taken when there are instances of over expenditure from the amount budgeted for?

Another related issue is with regards to the management of mega projects. In recent years, I can see that public development projects are getting larger and more complex. These include the development of the new MRT lines which may need to go deeper underground and are more complex. I would like to ask the Minister if there is a framework in place to ensure proper and prudent management of these mega projects. Perhaps the Minister can also share with the House examples of such measures.

Collaboration through e-Government

Mr Zaqy Mohamad (Hong Kah): Chairman, I would like to declare my interest as the company I work for bids and engages in e-Government projects. I represent the GPC in fielding this cut.

The Government has always been seen as a leader in e-government initiatives. With more Singaporeans being connected and having greater interest to have a say in their well-being, there is an opportunity to use the Internet and social media to better engage and collaborate with citizens.

Can the Ministry elaborate on new services that it plans to deliver for citizens? What can Singaporeans look forward to better engage, share ideas and better collaborate with the Government? I elaborated in my Budget speech that this

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is the best opportunity for the Government to truly connect with the young but we must also work hard at the messaging, packaging and communications aspects to truly connect and garner buy-in; not just spend on Web2.0 technologies and infrastructure.

I hope that the Ministry is planning on ensuring that we also have sufficiently trained personnel who understand our policies and can engage effectively with members of the public. How does the Ministry improve measures and training for officers to minimise mistakes online, such as the recent case where an HPB officer mistakenly published his personal message on a Government platform?

How has the Ministry performed in improving productivity across the Government through better automation and integration in recent years? Can the Government share some statistics on achieved cost-savings and efficiency through large projects and economies of scale projects, such as SOEasy? In this, I also hope that the Government sets an example for the industry to practise best-sourcing for innovation, rather than solely on cheapest price.

Income tax of sole proprietors and limited liability partnerships

Er Lee Bee Wah (Ang Mo Kio): Chairman, Sir, shaping our nation into a regional and global business and investment hub has always been high on the Government's agenda. Rightly so, because this would translate to greater opportunities to develop more industries on home ground which in turn promotes a flourishing business economy. In recent years, the Government has also been encouraging more people to take the journey to entrepreneurship by equipping them with the know-how and making loans more accessible to them. In running a business, the annual income tax payable

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is one item that must not be overlooked as it can add up to quite a significant figure. For Limited Liability Partnership (LLP) companies, profits are distributed among partners and tax based on each partner's personal income tax rates. The current income tax rate for top bracket income is 20%. A private limited company, on the other hand, is taxed at corporate tax rate which is currently capped at 17%. In addition, they enjoy various other tax exemptions where applicable.

This means that they invariably pay lower taxes than successful sole proprietors and limited liability partners. This may impose an undue burden on sole proprietors and limited liability companies which are receiving less Government support and yet are exposed to the same risks and turbulence of a market economy as any private limited company. Also, sole proprietorship and LLPs are less expensive to set up compared to a private limited company. It is precisely for this reason that some budding entrepreneurs are attracted to set up their companies under LLP.

Hence, I urge the Minister to make the income tax system fairer and more equitable for sole proprietors and LLP companies. An example of how this could be done, perhaps, is to subject sole proprietors and LLP partners to be taxed not higher than the corporate tax rates. I hope Minister can give a favourable review on the tax system.

Business-friendly processes

Ms Jessica Tan Soon Neo: Mr Chairman, Singapore remains one of the world's most competitive economies according to several reputable rankings. The World Bank has, for the last five years, ranked Singapore as the best place to do business. In early 2010, Singapore

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was also ranked as the most competitive economy in the world by Switzerland's IMD Business School in its 2010 World Competitiveness Yearbook, ahead of Hong Kong and the US, highlighting Singapore's resilience through the financial crisis despite the challenges on the volatile economic conditions we faced.

The World Economic Forum's Global Competitiveness Report 2010/2011 has also recognised Singapore as the third most competitive economy in the world, after Switzerland and Sweden, and Asia's most competitive economy with our strong institutional environment, market efficiencies and quality infrastructure.

Singapore was ranked highly for our goods and labour market efficiency and our financial market sophistication. It has, however, highlighted that to further strengthen Singapore's competitiveness, there could be stronger adoption of the latest technologies and policies to enhance the sophistication of our companies.

Switzerland's economy, which is ranked first, is characterised by an excellent capacity for innovation and very sophisticated business culture. It has high spending on R&D and its scientific research institutions are among the world's best. The strong collaboration between academia and business sectors ensures that much of the research is translated into marketable products and processes reinforced by strong intellectual property protection.

So, can Minister share the various pro-business measures that are in place to continue to foster a favourable business environment to support businesses operating in Singapore? While we continue to drive business-friendly processes and simplification for businesses to operate in Singapore, what more can be done to enable a competitive and conducive business environment to support greater

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innovation and sophistication of our companies and make Singapore the most competitive economy, both in Asia and globally?

Export-Import (EXIM) Bank

Mr Teo Siong Seng (Nominated Member): Mr Speaker, Sir, and Members of Parliament, good afternoon. First, I would like to declare that I am the President of the Singapore Chinese Chamber of Commerce & Industry, President of the Singapore Shipping Association and Managing Director of Pacific International Lines.

The notion of an EXIM Bank for cross-border financing was brought up by the Economic Strategies Committee and then again in Budget 2010. Since then, the business community, especially the SMEs, had been looking forward to good news on the setting up of such a specialised institution. The setting up of an EXIM Bank would be highly useful in serving the needs of SMEs intending to spread their wings into emerging markets.

After listening to the 2011 Budget Statement, SMEs cannot help but feel disappointed. I speak on behalf of SME owners who expressed dismay upon learning that the Government has decided against setting up a dedicated trade finance institution. This was only disclosed after a whole year had gone by. Instead, we were told that the Government would work with existing specialists and providers to provide such a service to SMEs.

Again, there is no real certainty on the details as the Government will only provide an update in the latter half of 2011.

12.15 pm

I note that the Government plans to work with commercial players to set up this specialised institution for cross-border financing. This is likely to work at cross

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purposes. Existing specialist providers are driven by commercial considerations and are reluctant to provide financing for overseas projects bearing a higher element of risk. Currently, SMEs with the resolve and intention to embark on viable projects in emerging markets find themselves in a dilemma. They are strapped by the inability to secure financing from risk-averse commercial banks. Having no track record is viewed as a major constraint by the banks. Thus, the prospect of an independent EXIM Bank to support their overseas ventures seems to provide a glimmer of hope.

Again, let me cite the case of WEC Engineers & Constructors Pte Ltd, which I brought up in the Budget debate last year. WEC’s core business is in the aviation and jet fuel system. The company had applied for IE Singapore’s Internationalisation Finance Scheme, where IE Singapore’s portion of risk sharing is 70% while the participating financial institution's (PFI) portion is 30%. However, because WEC is an SME, the PFI demanded that the company should undertake additional co-sharing of default risks. Overseas ventures require a healthy cash flow, and this additional co-sharing ties up their liquidity funds.

WEC also heeded the Government’s call to develop overseas markets, and are currently bidding for two projects in Indo-China. Overseas projects are far larger in scope than those in Singapore’s small domestic market, and thus, require additional financial assistance. This is extremely difficult to secure through commercially-driven financial institutions.

Venturing overseas is not for the faint-hearted. Businessmen and entrepreneurs need to have big dreams. At the same time, substantial financial resources need to be invested before these dreams can be a reality. The ideal scenario would be to combine private enterprise with Government support. In this case, Government support

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in the form of an EXIM bank was considered essential and important.

I raised this same concern during the Budget debate last year, and continued to ask for an update on the setting up of an EXIM bank in a subsequent Parliament session in May last year.

We are experiencing increasing volatility in various regions today. As Minister had mentioned at the beginning of his Budget speech, the external condition has become more complex. Last year, the concerns were on the sovereign debt crisis in Europe. This year, the Middle East and North Africa are being affected by revolts and toppled regimes. This would definitely affect the cost of borrowing in private financial institutions.

If SMEs were to rely on traditional banking channels, they are unlikely to make any headway in the current market. A full-fledged, dedicated EXIM bank to support cross-border financing would have addressed this need. This vehicle would then take a long-term view of overseas investments instead of shying away from financial support to fuel business expansion. We are concerned that further delays on setting up such a financial vehicle would become a precious opportunity cost for SMEs.

I would also like to discuss how an EXIM Bank could help to develop the maritime sector, which has been identified as one of Singapore’s strategic business sectors. Based on industry feedback, shipping banks in Singapore are not as competitive as EXIM banks. They rarely lend to companies beyond a five-year tenure and often require vessels as mortgages and collateral.

Export-Import institutions in China and South Korea are more willing to lend on commercial terms and provide liquidity to

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shipowners. Even though there are certain strings attached to the loans, such as building the vessels at their yards, they can provide up to 70% financing. In fact, it was just reported on the 4th of March that the EXIM Bank of Korea, the state-run lender known as Kexim, will be boosting its 2011 fund-raising target by about 10%, to finance more shipbuilding orders.

Banks in Singapore might be uncomfortable with taking up such exposures, especically for financing of rigs and FPSOs. Banks tend to shy away from financing due to the huge amount of money involved and the risk deemed involved with the oil businesses.

If such an EXIM bank were to be set up in Singapore, it could be tied to activities like building rigs and FPSOs at yards in Singapore, which is a booming sector here. By doing so, we can not only develop Singapore as a ship financing centre, but truly become a one-stop International Maritime Centre.

On the topic of financing for SMEs, I would also like to touch upon the Co-Investment Programme for SMEs. Under Phase One of this programme launched in December last year, the Government will provide up to $250 million in capital to grow local firms into globally competitive players. This would be matched by private equity fund managers. It is envisaged that about $200 million will go to promising SMEs with annual revenues of less than $100 million.

The Co-Investment Programme will be administered by private equity fund managers. In order to ensure that promising SMEs benefit from this programme, I hope the Government would provide special consideration or added incentives to encourage these fund managers to assist new and innovative SMEs. These new and innovative SMEs are likely to venture into fast-growing new

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industries or traditional industries with new growth potential.

Ultimately, SMEs should find faster and easier access to capital, so that they could survive, thrive and contribute even more to our economy.

Developing capability in accountancy sector

Assoc. Prof. Dr Muhammad Faishal Ibrahim: Sir, the accountancy sector plays a significant role in providing access to talent and professional accountancy services required by our economy. In April 2010, the Committee to Develop the Accountancy Sector (CDAS) proposed 10 recommendations to broaden the talent pool and deepen expertise in the accounting sector to transform Singapore into a leading global accountancy hub for Asia Pacific by 2020. I find that the report provides credible and good recommendations, as well as directions in helping us to build capabilities in the accounting sector. I would like to ask the Minister for an update on the progress made in implementing the recommendations made by CDAS. What are the challenges that we are likely to face in our quest to be a global accountancy hub and how are we going to address these challenges?

Singapore as a global accountancy hub

Mdm Ho Geok Choo (West Coast): Chairman, Singapore serves as a global and regional hub for several international companies. In the borderless global economy, accounting practices are being outsourced. Singapore is blessed with an excellent financial regulatory framework and skilled accounting practitioners and is an excellent choice for the setting up of a global accountancy hub. I will be grateful if the Ministry could provide an update on its initiatives to transform Singapore into a leading global accountancy hub. What is the outcome of efforts to attract

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accounting professionals? What is the supply and demand situation for accounting professionals in the current job market? How is the sector managing the salary pricing of these accounting professionals?

Chairman, I am also keen to know the proportion of business derived by Singapore-based accounting firms from overseas last year. Of the overseas business, what proportion was derived from China and India, compared to other countries in the region?

Mr Speaker: Mr Teo Ser Luck. You have four cuts, take them together please.

Singapore Accountancy Council and Institute of CPA in Singapore

Accountancy graduates

CPA designation

_ Accountancy sector development fund _

The Senior Parliamentary Secretary to the Minister for Community Development, Youth and Sports and Minister for Transport (Mr Teo Ser Luck): Sir, I declare my interest as the advisor to the Institute of Certified Public Accountants of Singapore (ICPAS). The Asia Pacific accountancy market is the fastest growing market for international accountancy networks. This market is targeted to hit US$38 billion in the next few years, and this presents a compelling value proposition and opportunities for Singapore's accountancy sector.

I support the recommendations of Committee to Develop the Accountancy Sector (CDAS). The need for strong infrastructure and concerted action by key stakeholders and institutions to support the growth and development of the sector is of utmost importance. The services sector has been identified as one of the key economic drivers. I am glad to know that the accountancy sector is on its radar screen and the $10 million fund would be

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injected to develop the capabilities of the sector. I would like to ask the Minister to elaborate on the specific plans for this $10 million fund.

ICPAS has a membership of 23,000 and has an integral role to play in the development of the accountancy sector. These members include both practising and non-practising ones, and they carry with them a Certified Public Accountant (CPA) designation. This designation is a form of recognition for their qualification, experience and professionalism. I fully support the CDAS's recommendation to have a new professional qualification examination to qualify CPAs. This will ensure we keep to the high standards of the profession and level up to the international accountancy bodies of the world. I would like to ask the Minister: with the new professional accountancy programme, will there be any change to the CPA designation? What will happen to the current ICPAS members and how will it affect the current cohort of accountancy students in the three universities?

The institute must play a committed and concerted role to support and partner the Government in its efforts to develop the accountancy sector. It must also widen and deepen its mission of leading, developing and supporting accountancy professionals, and contribute in developing Singapore as an accountancy hub for Asia. CDAS has recommended that the ICPAS be transformed into a professional body with global membership, outlook and standing. It outlines two key strategic areas for ICPAS to undertake and achieve these goals.

I understand that ICPAS is in the process of reviewing its constitution to ensure that the constitution will be aligned and relevant to its mission as a national accountancy body. This will include changing leadership structure and

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renewal, which will include a maximum tenure for the presidency, lower the average age of the membership and office bearers, and strengthen governance structure and systems. I am aware that ICPAS is expected to complete the review of the relevant recommendations of its constitutions within six months. This will also ensure that ICPAS will realise its mission and vision and strongly support the Government's effort to transform Singapore into a leading and global accountancy hub for Asia Pacific.

It is of importance that a transformed ICPAS will see the widening and deepening of its talent pool as well. This will catalyse and multiply ideas and spur innovation to cater to higher expectations, a more sophisticated economy, keener international competition, and more complex issues. If ICPAS is to transform itself and align objectives in implementing CDA's recommendations today, it must work with the Singapore Accountancy Council (SAC), to be set up, very closely. However, the SAC's scope of work and responsibilities are still unclear. I would like to ask the Minister what is the SAC's role in comparison to ICPAS? Will both entities be complementary?

The Second Minister for Finance (Mrs Lim Hwee Hua): Mr Chairman, Sir, first, let me thank hon. Members for their comments and suggestions. Given the time constraints, I shall highlight the key intent of the relevant policies and address specific comments whenever possible.

The questions that Members have raised centered on three areas which I shall address in turn. First, leading a high-performance and accountable Government. Secondly, fostering a favourable environment for business. Thirdly, building capabilities in the accountancy sector.

Sir, my Ministry will continue with our efforts to build a high-performance Government that is accountable to

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Singaporeans. We adopt a three-pronged approach. First, we will promote whole-of-Government strategic outcomes, by addressing important challenges and opportunities that cut across agencies or Ministry boundaries.

Second, we will inculcate a mindset of fiscal prudence amongst all our agencies to various measures to promote value-for-money practices.

Third, we will build a collaborative Government in the delivering of e-services, so as to tap the potential technology to improve government service delivery with the Government working hand-in-hand with the private and people sectors.

Ms Jessica Tan asked about the progress the Government has made in driving strategic outcomes through the whole-of-Government approach. As policy issues become increasingly complex and cut across traditional Ministry boundaries, the need to augment the current approach to inter-agency collaboration has become even more pressing. Our public agencies have increasingly to work together as one networked Government to address strategic challenges. For the Ministry of Finance, this means that we have to access outcomes holistically from the whole-of-Government's perspective, and not compartmentalised by individual Ministries in order to allocate funds to achieve the best outcomes for Singapore. The Singapore Public Sector Outcomes Review (SPOR) which was published by the Ministry in December last year captures this intent. It takes stock of the collective efforts by the different Government Ministries acting together beyond the individual Ministry remit to address strategic challenges facing our nation and assess the progress that has been made thus far. This collective effort to monitor current and emerging policy issues guides our strategies and resource allocation for the future.

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12.30 pm

Notwithstanding the inherent difficulty of coordinating efforts across agencies, the report shows that Singapore has done well overall. How do we assess this? We look at the outcomes. Our economy remains internationally competitive, more people are satisfied with the local living and working environment and Singaporeans are proud of our nation.

Let me now illustrate with three examples of what is meant by promoting whole-of-Government outcomes. The first example relates to public satisfaction with Singapore's living environment over the years. In 2003, 70% of the public was satisfied with Singapore's living, working and leisure environment. In 2009, this rose to more than 83%. This achievement was a result of collective efforts made by a number of our agencies to enhance the quality of life in Singapore in very much the same way that Ms Jessica Tan has described. Some of these initiatives include the renewal of our public and private housing estates, the development of surrounding recreational areas such as the Southern Ridges and the Changi Waterfront, the beautifying and landscaping of the waterways and reservoirs under the Active, Beautiful and Clean Waters programme, and the promotion of arts and culture such as the building of the National Art Gallery. Singapore is now well regarded internationally as a more vibrant city to live, work and play.

Next is an example of Ministries working to jointly address issues relating to youth offenders through the Central Youth Guidance Office (CYGO). The Ministry of Education (MOE), Ministry of Community Development, Youth and Sports (MCYS) and Ministry of Home Affairs (MHA) are partners of the CYGO which was set up in June 2010 to maintain an overview of the entire spectrum of youth offending issues. The

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CYGO was also established to provide a platform where cross-cutting issues can be discussed, analysed and resolved in a more holistic fashion. Members can hear more about this under the MCYS' Committee of Supply (COS).

The third example has been well discussed but it is one which remains a challenge – that of sustaining our population in the face of our low fertility rate which has remained well below the 2.1 replacement rate in recent years. The National Population and Talent Division (NPTD), which was set up in the Prime Minister's office in January 2011, is to formulate and coordinate policies related to population and talent. Overseen by Deputy Prime Minister Wong Kan Seng, the Division's responsibilities encompass policy areas previously under the purview of the Ministry of Home Affairs, Ministry of Manpower, Ministry Trade and Industry and the Ministry of Community Development, Youth and Sports, to ensure that these inter-related policies come under one centre of responsibility to enable policy responses to be addressed, again, more holistically. Sir, MOF will continue to push for better public sector performance through more coordinated efforts across agency boundaries so as to reach our collective goal of building a better Singapore.

Let me now turn to Assoc. Prof. Dr Muhammad Faishal's question on the efforts made by MOF to instil fiscal discipline in public agencies. Fiscal discipline and prudence are hallmarks of the Singapore Government. We have put in place a two-pronged approach to ensure that public servants utilise resources prudently. Allow me to explain how. First, is the block allocation of budgets within which agencies have autonomy. MOF uses the block budget framework to instil discipline in Ministries' approach to budgeting while also

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providing Ministries with flexibility in their allocation of their funds. Each Ministry's budget is allocated after a rigorous evaluation of the funding requirements by MOF. The budget is then allowed to grow annually at the rate pegged to GDP growth. Periodic reviews are carried out to ensure that the block budgets remain appropriate over time. Ministries take responsibility for optimising the budgets within the allocated amounts. The block budget system ensures that the Government remains lean and keeps a tight rein on expenditure within the overall GDP growth.

As a complement to funding allocations under the block budgeting framework, MOF uses their manpower management framework to allocate manpower resources prudently. Under this framework, public sector agencies have been allowed limited headcount growth to meet our growing challenges but at the rate no more than Singapore's resident labour force growth rate. This establishes discipline in the use of manpower resources and encourages productivity improvements across Government. At the same time, we also ensure that the framework is dynamic enough for the Government to respond to the changing environment effectively. For example, we have provided additional headcounts to MCYS for FY2009 to 2011 for new programmes, such as the Wellness Programme, as well as temporary increases to support the overseeing of the recently concluded Youth Olympic Games. In this way, we ensure that Government remains lean while remaining responsive to changes.

The second prong in our approach to ensuring fiscal discipline is to build a value-for-money mindset. The value-for-money (VFM) review office, under the Accountant General's department, takes the lead in this. The value-for-money office complements the block budget framework by conducting regular reviews

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of Government projects and processes to ensure accountability in spending, value for money and fiscal discipline within the public sector. For example, the VFM office found, in one of those reviews, that there was scope for better utilisation of common facilities, such as carparks and training facilities, by some agencies. MOF has since been working with the relevant agencies to promote higher utilisation of such common facilities.

To cite another example, the VFM office noted that a significant number of statutory boards was producing hard-copy annual reports. Some had added costly design features, such as hard covers, art papers and embossing. Following the review, MOF issued a circular to remind agencies to produce their annual reports in a cost-effective manner. A basic template was also provided for reference. As a result, agencies have taken creative steps to cut costs for publishing annual reports. For instance, IE Singapore now publishes its annual report entirely online, saving 30% of its production cost.

Sir, Assoc. Prof. Dr Muhammad Faishal asked how we can prevent over expenditure on large-scale projects, as was the case for our hosting of the Youth Olympic Games (YOG), while Ms Jessica Tan has emphasised and asked how we are ensuring the strong management of large public projects. The Minister for Community Development, Youth and Sports, Dr Vivian Balakrishnan, had previously elaborated in this House on the cost escalation of the budget for the YOG, hence, I will not repeat his detailed explanation except to reiterate that this was the first of its kind. In fact, both the International Olympic Committee and ourselves started from scratch. It was a challenge to arrive at accurate estimates. In this case, the Government would have proceeded with the YOG even if the full cost had been known upfront as the benefits exceeded the costs. Nonetheless, we agree it is important for us to derive

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as accurate an estimate of the costs of major projects as possible. MOF will continue to improve our projections and processes.

I wish to inform Members that in June 2010, MOF introduced a new measure to further strengthen the financial management of large public sector development projects. Under the MOF gateway process, projects above $500 million are subject to stage approvals for concept, design and implementation. A new panel, the Development Projects Advisory Panel comprising members with extensive expertise and experience in project management and development, will examine the specifications and design of the projects at the early stage of project conceptualisation. This process optimises the project's design and provides the most up-to-date cost estimates at the point of project approval. These measures will help reduce the likelihood of downstream cost over-runs.

In addition, MOF has set up a new centre for public project management in January 2011 to provide advisory services on project design and management to public sector agencies. This centre will also help to enhance the coordination of the pipeline of public sector development projects. Through our many measures to ensure fiscal discipline and value for money in our public spending, we will continue to make sure that public expenditure is allocated and made wisely.

Sir, I will now go on to address MP Zaqy Mohamad's question on how we are building a collaborative Government that uses the Internet to share ideas, engage and work hand in hand with Singaporeans.

Over the past three decades, Singapore's e-Government programmes have successfully leveraged advancements in technology to deliver convenient e-services for citizens and businesses.

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These efforts have not gone unnoticed. We are encouraged that today, Singapore is recognised as an e-Government leader internationally. Having said that, rapid technological advances have led to significant changes in our operating environment over the last few years. Singaporeans are becoming more Net-savvy and are increasingly making use of the Internet to interact with one another and to share our resources.

NCMP Ms Sylvia Lim, during the Budget debate, had asked about web accessibility for people with disabilities. Sir, we adopt an inclusive approach to our e-Government efforts. Our web standards have incorporated key aspects of the worldwide web consortium's web content accessibility guidelines, which is an internationally adopted standard developed for persons with disabilities. Some examples are the inclusion of captions for pre-recorded audio content and allowing users to resize text by up to 200% without assistive technology, and all Government corporate websites will need to comply with these requirements by June 2012, and all other Government websites and e-services by December 2013.

The Government is constantly tapping on new media to reach out to and connect with both citizens and businesses. This year, MOF worked with REACH to develop a Budget 2011 microsite to garner public feedback. Members of the public could follow and respond to real-time discussions posted on the website. Since it was started in December last year, we recorded more than 67,000 page views. Our MOF Facebook page also saw a three-fold spike in activity on Budget Day.

Sir, looking ahead, citizens and businesses can expect to enjoy more

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convenient services and new platforms to collaborate with Government as part of the new e-Government masterplan which will be launched in June this year. Let me just preview two new initiatives. The first is the "One Inbox", an electronic mailbox where subscribers can receive electronic correspondences from participating Government agencies in place of hard copies. This not only helps to reduce the time taken to receive the letters but also it is especially useful for those who need to access the mail when travelling overseas. Singaporeans can look forward to having the "One Inbox" in 2012.

In the second half of this year, we will also launch a first-stop portal called "data.gov.sg". This initiative will facilitate the sharing of Government data with the public and to promote the co-creation of applications and services with individuals and companies by tapping on Government data. We are already seeing some of these co-creations happening today. For example, Quantum Inventions has developed a customised dynamic navigation system which pools together real-time traffic information from LTA and road users on current road conditions. Users can search, save and share routes and locations with friends over Facebook.

Overall, within the Government, we have been leveraging technology to improve productivity and reap cost savings. To date, we have launched 31 integrated Government projects resulting in an estimated cost savings of some $140 million. On the issue of training and development, public officers involved in new media communications and engagement are sent for relevant training courses organised by both the Civil Service College and other private sector providers. These courses help officers better understand the new media landscape and leverage new media in the organisations.

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12.45 pm

Mr Zaqy Mohamad has also raised a question on the SOEasy project. Sir, we are in the process of rolling out SOEasy to Government agencies progressively, and MOF and IDA are working with Government agencies to verify the ICT expenditure pre- and post- the SOEasy project. Besides cost savings, there are also intangible benefits, such as new collaborative tools like instant messaging for public officers across multiple agencies, smooth and swift delivery of new ICT services for all agencies as well as more regular and non-intrusive security updates for the entire public service.

In terms of IT procurement, the key consideration for best sourcing is value-for-money and not cost alone. This is true for any other Government procurement. Public agencies must state the evaluation criteria upfront in the invitation to tender and quote which will include other considerations besides price, such as quality and innovation. Agencies will evaluate based on these criteria, and award the contract to the proposal that offers the best value-for-money.

Sir, I would like to add that there are ample opportunities for the SMEs to compete. When IDA announced that 350 IT projects worth $1 billion were lined up for FY2010, the majority of these projects were smaller scale initiatives worth less than $500,000 in value. These projects would provide opportunities for SMEs to participate in the tender process. SMEs can also come together as a consortium to bid for larger projects.

Sir, I shall now turn to the issues raised by Members on how we can ensure that Singapore remains a good place to do business. Although we have done well in building a pro-business environment and have been ranked favourably by the World Bank's Doing Business report, our challenge is to maintain this well-earned track record into the future.

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One of our key planks is building a competitive tax system. Er Lee Bee Wah has asked if we should review the income tax of sole proprietors and limited liability partnerships (LLPs) to be in line with companies. Sir, today, sole proprietorships or partnerships are not taxable entities. Instead, we levy personal income tax on the sole proprietor or the individual partners. This means the sole proprietor is subject to the progressive schedule of personal income tax rates, ranging from 0% to 20% and enjoys personal income tax relief.

For example, a sole proprietor or individual partner with $20,000 of taxable income, after deducting personal income tax relief, would not have to pay personal income tax, whereas a company with the same taxable income will have to pay corporate taxes of $1,275. Our tax treatment of sole proprietorships or partnerships is consistent with the practice in many other tax jurisdictions, such as Hong Kong, Malaysia and United Kingdom. What the Member has suggested is effectively to align the top personal tax rate of 20% with the corporate tax rate of 17%. Sir, there is no pressing competitive need and, therefore, little policy reason to do so. Indeed, most countries do not align their personal and corporate income tax rates. More importantly, the decision to adjust the top personal income tax rate should be evaluated based on its merit rather than its relativity to the corporate income tax rates. Ultimately, the decision to organise a business as a sole proprietorship, partnership or company is a commercial one that needs to take into account various tax and non-tax factors. So, businesses will need to decide for themselves what legal form best suits their needs.

Nevertheless, I would like to assure the Member and other Members that MOF takes a long-term view of the tax system. We look ahead to identify future trends,

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challenges and threats, and shape our tax system accordingly. Towards this end, we have developed a whole-of-Government tax masterplan which lays out strategic themes to better guide public agencies in formulating tax proposals. These long-term changes to our tax structure reinforce our need for a diversified, competitive and progressive fiscal system that will strengthen Singapore as both a business hub and an inclusive society. The changes could not have taken place over just one budget cycle, or even two or three. They require long-term planning and gradual implementation.

Sir, let me now turn to Ms Jessica Tan's question on the measures put in place by the Ministry to support businesses given Government's focus on productivity. Government plays multiple roles in helping businesses become more productive. One such role is that of a policy-maker, putting in place right incentives, such as the Productivity and Innovation Credit scheme, to encourage businesses to take the transition to productivity-driven role. Equally important is our role as facilitator where we aim to ensure that Government's interface with businesses remains efficient and user-friendly, thereby helping our businesses become more productive themselves. We would do more to facilitate business processes.

Let me just quickly run through two initiatives. The first is Singapore Customs' Trade Facilitation and Integrated Risk-based System (TradeFIRST). This system integrates trade facilitation, risk management and compliance elements into a single holistic platform. Instead of going through multiple assessments by different officers for different schemes, each company will have an appointed account manager responsible for conducting a single holistic assessment for that company.

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The second example relates to the introduction of a simplified income tax Return Form C for small corporations with annual turnover of not more than $500,000. This is because smaller companies tend to have more straightforward business transactions and tax deductions and, therefore, the majority of the items in the current form do not apply to them. IRAS targets to implement this from Year of Assessment 2012. About 60% of the company base will benefit from this.

Sir, let me now take a few minutes to explain how we are strengthening the market for cross-border finance and improving access to growth finance to develop globally competitive local enterprises. These are the areas that NMP Teo Siong Seng has touched upon. The Government shares Mr Teo's sentiments on the need to boost availability of cross-border financing and access to patient growth capital to further support the growth of a vibrant SME sector. In addressing the gaps in this area, Government has adopted a market-based approach to ensure that the solutions, firstly, complement existing private sector players and, secondly, are sustainable and subject to commercial discipline. We are also inclined to take a more measured and considered approach because we want our intervention to be efficient and customised to meet the unique needs of our corporates.

Indeed, SMEs face hurdles for two main types of cross-border financing needs. First, there is inadequate access to trade and internationlisation finance, especially for emerging markets. Secondly, there is limited capacity in the market for long-tenure budget finance. Let me just touch briefly how we are addressing these structural constraints.

Sir, we currently have several trade and internationalisation financing schemes with IE Singapore partnering private

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financial institutions to provide Government support. These schemes have catalysed export-related loans worth about $4.7 billion over the past five years and have benefited more than 2,200 SMEs. However, we recognise the current schemes are constrained by the relatively under-developed export credit insurance market and the reduced risk appetite of the financial institutions post the financial crisis.

Risk-sharing is less effective in facilitating financing where existing market players lack capabilities to underwrite the risk. Also, our SMEs who typically have to internationalise at a relatively early stage as compared to their counterparts often do not have sufficiently diversified portfolios to obtain insurance or individual transactions. We have conducted a detailed feasibility study on the possibility of setting up a full-fledged institution to address the trade and internationalisation finance gaps in Singapore. However, we found that there are insufficient economies to do so. Such an institution will crowd out commercial financing institutions from a significant part of the market base that they are already serving. We are therefore inclined towards improving on the current scheme-based approach.

One possibility is an outsourced approach to target the delivery of the trade financing schemes to better meet the needs of SMEs. Under this model, we will engage private providers to administer a trade and internationalisation finance programme for the Government in return for a fee. These providers were the expertise in risk assessment and underwriting and can customise finance terms to match the risk profiles of transactions. The approach will be company-centric and it will be an improvement from the current approach of a fixed set of schemes and conditions for all firms. Companies will benefit from support that is better tailored to their

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financing needs and more responsive to market conditions. Under the outsourced approach, the Government will continue to provide support in the form of risk-sharing and premium subsidies which are also currently being provided under the internationalisation finance schemes and loan insurance schemes.

But I would like to assure Mr Teo that there is scope for new products that may be relevant to SMEs but not available currently, such as single-name credit insurance and guarantees for overseas investments. We will provide an update of the study of the outsourced approach by the second half of this year. In the interim, companies can continue to tap on the existing trade financing schemes.

Let me now move on to project financing which was also brought up by Mr Teo. As he has observed, locally-based banks shy away from cross-border financing, including ship financing due to their capital-intensive nature and the perceived high risk of the shipping industry. The Government recognises that shipping is a capital-intensive industry requiring financing support. And therefore, as part of Budget 2011, the maritime sector incentive wordings, companies will be exempted from paying withholding tax on the interest payments on loans that they take for the construction and purchase of ships. This will help reduce the cost of financing the ship construction and purchase of ships.

There is currently limited capacity for a large-ticket, long-tenure project finance especially in emerging markets. As mentioned by the Minister for Finance in the Budget speech, let me reiterate that Temasek Holdings is in discussion with potential partners on establishing a project finance institution that is financially and commercially viable and sustainable. This initiative will benefit many sectors that require project financing, including the maritime sector.

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Mr Teo has also touched on investment capital for SMEs. Raising capital by smaller companies is inherently challenging. Hence, in December last year, the Government launched the Core Investment Programme (CIP) with the aim to nurture globally competitive companies by catalysing the supply of patient growth capital to such companies. Mr Liang Eng Hwa has also raised a similar question during the Budget debate. Under Phase one of CIP, we expect about $200 million or about 40% of the total capital to be catalysed to be channelled to SMEs with annual revenues below $100 million.

However, I should add that it is not the intent of the Government to pick winners through the CIP by providing special consideration or added incentives for SMEs in certain industries. The selection of the investee companies will be left to the private fund managers to decide. But I foresee that innovative and growth-oriented enterprises across all sectors will naturally be investment targets under this programme.

Mr Liang also suggested for part of it to be set aside to nurture and support young entrepreneurs, in particular, those with innovative and creative ideas. I would like to clarify that the CIP is primarily targeted to provide longer term equity capital for growth-staged companies that already have revenue streams and are poised for the next stage of growth. There are currently sufficient Government schemes that support entrepreneurship and early stage start-ups, such as SPRING's SEEDS scheme, where the Government co-invests with the private sector in high-growth start-ups.

Sir, let me now address the cuts raised by MPs Assoc. Prof. Dr Muhammad Faishal, Mdm Ho Geok Choo and Mr Teo Ser Luck relating to the Government's

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efforts to develop capabilities in the accountancy sector. The Committee to Develop the Accountancy Sector (CDAS) was convened to review the accountancy sector and submitted its final report in April 2010. One of the key recommendations was the establishment of the Singapore Accountancy Council (SAC). This will be a high-level council tasked to develop and implement a holistic strategy to transform Singapore into a global accountancy hub. The SAC will coordinate and synergise the efforts of all stakeholders in the accountancy sector, including professional accountancy bodies such as the Institute of Certified Public Accountants of Singapore (ICPAS), the universities, polytechnics and private institutions, accounting services firms, businesses and accounting professionals. The SAC is expected to be established in early 2012 once the requisite legislation is in place.

Prior to this, we have established the protem SAC in September 2010 to set up the governing framework and implementation roadmap for the CDAS recommendations. Four sub-committees have been formed. These are namely, firstly, the Singapore Accountancy Qualification Programme; secondly, the Accountancy Services Research Centre and accountancy sector development fund; thirdly, the Chief Financial Officer (CFO) Institute and, fourthly, other sectors of excellence.

Our target is to implement the first phase of initiatives by early 2012. These would include the launch of the new qualification programme and other training programmes such as internal audit. We also hope to establish a network of CFOs, and have in place the rudiments of an Accountancy Services Research Centre by then.

1.00 pm

Mr Teo has talked at length about the role of ICPAS. I have earlier explained the role of the SAC as one of overseeing and

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coordinating efforts across the whole accountancy sector. ICPAS, as the largest professional accountancy body in Singapore, is the key stakeholder and it is expected to continue with its work of developing and enhancing the interests of its membership, for example, by conducting professional development courses. It is heartening to know that ICPAS is prepared to restructure itself in order to play an even greater role. There is clearly complementarity in ICPAS' and SAC's mandates.

As to the impact of the post-graduate accountancy qualification on our accountancy graduates, currently there is no available information that comprehensively captures the contribution of business derived from overseas by our accounting firms. But we will be discussing with the larger accountancy firms to see how we can track the contributions.

Sir, may I just take a few more minutes to finish my reply?

The Chairman: Yes, all right, we have time.

Mrs Lim Hwee Hua: The keen competition for accounting talent across industries in Singapore and internationally is a key challenge for us, given the limited number of local accountancy graduates each year. A deep talent pool is critical to the development of Singapore into a leading global accountancy hub in Asia. Therefore, we need to develop the Singapore-branded, post-university professional accountancy programme.

The new qualification programme (QP) will be an additional option for accountancy graduates. And the QP will be comparable to other internationally recognised programmes. More importantly, the QP will also provide a pathway for graduates from non-accountancy back

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grounds to enter the profession. This will help us to enlarge the talent pool and attract persons of diverse professional backgrounds from Asia and around the world.

Finally, the point about uses for the Accountancy Sector Development Fund. This will be established under the purview of the SAC to support the implementation of the recommendations and also to improve the capabilities of the accountancy services sector. On our part, the Government is prepared to provide seed funding to build up the fund so that it can start off on a strong footing. And some of these will revolve around building value-adding capabilities for specialisation pathways as well.

Sir, I have elaborated in my speech on how MOF will take a comprehensive approach towards its key focus of ensuring a high performance and accountable Government, fostering a favourable environment for business, and to develop capabilities in the accountancy sector.

The Chairman: We have about 10 minutes for clarification.

Mr Zaqy Mohamad: Sir, I would like to ask a question on GST. I think the Minister for Finance has given a comprehensive reply in his Budget reply. Many Singaporeans are concerned that there is a potential increase in GST. It is just elections talk but I think it has shown to be one of the more effective means to redistribute wealth. What are the Ministry's considerations before increasing GST? Is it a likelihood that is less likely, now that we have new revenue streams, such as the revision to NIR, as well as the revenue stream from the IRs?

Mrs Lim Hwee Hua: Mr Chairman, Sir, I believe the Minister for Finance has actually addressed that quite adequately

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in the Budget Statement. I will encourage the Member to read the Hansard . As I recall, he did say that our projections for revenue have been made for the next five years and we do not target a particular source of revenue. We look at it holistically.

Ms Jessica Tan Soon Neo: Despite the limited time, I must thank Minister Lim for sharing with us and responding to the questions that we have raised, sharing with us in a comprehensive manner about high performance Government, and looking at accountability. I was glad to hear about collaboration and an inclusive Government. We look forward to the Data.gov.sg co-creation initiative with first-stop portal as well as the One-Inbox because I think the One-Inbox definitely will be addressing not just the collaborative Government but really looking at how to make citizen interaction more effective.

We also appreciate the measures that were shared with us with regard to continuing to make Singapore a competitive place to do business as well as developing capabilities in accountancy.

So, with that, Sir, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

The sum of $598,335,700 for Head M ordered to stand part of the Main Estimates.

The sum of $144,626,400 for Head M ordered to stand for part of the Development Estimates.