HEAD M - MINISTRY OF FINANCE

Sitting resumed at 3.30 pm

[Mr Speaker in the Chair]: Debate in Committee of Supply resumed.

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

High performance 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.

Mr Chairman, Budget 2010 calls for a focus on driving productivity and innovation for sustainable growth and quality service. What is the Government's strategy to take the lead and, as one would say, walk-the-talk, to ensure efficient use of resources and streamlining of processes to improve the effectiveness and the quality of service.

There are five areas that I would like the Minister to clarify. How will the Government ensure that, one, these sources are allocated to areas which

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deliver value and service excellence to citizens and businesses. Two, public agencies move towards high-value activities and away from activities and programmes that are no longer relevant. Three, public service staff are developed and trained to understand the principles, techniques and skills related to improving the quality and productivity of Government services as well as in decision-making. Four, improvement and processes are made to enable our public officers to solve citizen issues effectively. And, five, measures are put in place to reinforce and recognise citizen-centric service quality and excellence.

In driving for productivity, what specific measures is the Ministry taking to encourage and leverage on the whole-of-Government approach to ensure more effective citizen services? And what is the Government doing to ensure that regardless of which Ministry or agency that citizens go to for assistance, service or information, that they do receive the appropriate service and not have to manage the complexity of having to deal with multiple agencies to resolve their problems or, as we say, the many silos of services and therefore they have to deal with these silos. So what steps are being taken for the Government to catalyse innovation for productivity growth?

Accountability and budget allocation

Mr Low Thia Khiang: Sir, the Budget Book serves as a public document on the proposed Government revenue and expenditure for each financial year. It provides accountability to MPs and members of the public in the usage of Government funds. However, the information provided in the Budget Book seems to be getting lesser with each financial year. For example, there were 728 pages in tbe Budget Book for FY1994/1995 and only 593 pages for FY2000/2001. For this year, the Budget Book has 417 pages. I am not suggesting that the more pages in the

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Budget Book, the better it is, but I find the current Budget Book not useful enough for one to understand the individual programme function and major changes in expenditure, if any, or major items of our Ministries. For instance, in the old Budget Book, under the Ministry of Health, I can see specific subventions given to each restructured hospital. Under hospital Services Programme, I can see some detailed expenditure such as rental, utility, official celebration and mass media expenses, etc, and also under new OOE. But in the current year's Budget Book, under Services Programme of MOH, I see one consolidated amount list like subventions and the breakdown under OOE is rather brief. Some of the expenditure listed are simply classified as running costs without details provided.

I understand the Ministry of Finance (MOF) has been innovative over the years to allow each Ministry the flexibility to spend public money efficiently. One of the initiatives is to allow each Ministry to have budgetary discretion by block budgeting. While this flexibility may be good for the Ministry, more transparency on expenditure is needed to assure accountability. There should be a balance between flexibility and accountability for the financial resources entrusted to the Ministry. I would like to know how MOF ensure accountability and transparency of Government expenditure to the public.

Sovereign Wealth Fund management

Mr Inderjit Singh (Ang Mo Kio): Sir, I would like to raise some points regarding our Sovereign Wealth Funds (SWF). Firstly, both the Government of Singapore Investment Corporation (GIC) and Temasek are operated as private funds, with larger risk appetites today compared to the past. Both have made losses in recent time and it is timely that the Government gives them a more conservative mandate since their investment outcomes invariably impact the reserves

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of Singapore and our future. We may want to perhaps learn from China where in today's papers it was reported that their SWF China Investment Corp (CIC) booked US$10 billion unaudited profit for 2009 compared to the losses our SWFs made last year.

Sir, last year, I also brought up the need for Temasek to refocus on Singapore and was told that in doing so, we will validate some of the concerns overseas over our SWFs having political objectives. However, if the Government is already setting overall returns objectives, risk thresholds and tolerance limits for our SWFs, then I see little problem in Temasek investing actively in promising locally-based companies. I think we should move away from the mindset that helping local companies would compromise the objectives of Temasek as long as we have a clear mandate, objective and investment philosophy for Temasek, and, in fact, for other funds that we may set up.

I also would like to clarify the rationale for setting up Seatown as a new investment vehicle under Temasek. First, what is the need for this fund and how does its investment philosophy and risk appetite differ from that of Temasek as a whole? I think we need to be clear about the mandate of Seatown and if it is different from Temasek, then how can two investment philosophies come under one company and under one management? Would there be a conflict of interest as such and should we, in fact, set up a third SWF called Seatown rather than putting all of it under Temasek?

Sir, on EXIM bank, I would like to comment on the idea. This was mooted by the ESC. I would also like to remind the House that a similar recommendation was made a few years ago when I was heading the Finance Advisory Committee

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of SPRING's Board. But the Government's response at that time was not positive. I think it found that there was no need for it. But many developed countries, in fact, have had similar schemes to help their companies, so why not Singapore? I am glad that this has finally become a reality through the ESC's recommendations.

There are some very good examples of EXIM banks that have worked in Canada and Japan and we should look into how we can emulate some of their successful strategies and they have done really well. However, I feel strongly that unless we have a focused agency working with companies managing the EXIM bank, we may not succeed. So I hope that we do not farm this out to a private bank because they may not be able to focus on the task at hand. I also think that it is necessary to study our Internationalisation Finance Scheme which was supposed to help our companies internationalise and help them finance their international operations. This has been in place for many years but I understand that it has not been successful in achieving the objectives and too few companies have benefited from the scheme. This is despite the fact that many of us at it, proposed refinements of the scheme and still it did not work. It would be wise for us to learn about the failure there so that when we implement the EXIM bank, we will be successful in achieving our objective.

I hope the Minister will try to understand why the Internationalisation Finance Scheme was not successful so that the EXIM bank can learn and do it right when implemented.

GIC's investment and financial health

Mdm Ho Geok Choo (West Coast): Sir, in the last 10 years, compared with other Sovereign Wealth Funds, like Abu Dhabi Investment Authority and the Norwegian SWF – GPF, GIC's portfolio has certainly performed better. With a big portfolio, it

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is understandable that GIC may not be as nimble as the smaller fund managers. What is important is that GIC has been able to preserve and guard our national reserves well.

Fund management is risky business. At end March 2009, GIC's portfolio suffered a loss of more than 20% in Sing dollars. These losses were a result of the 2008 global economic downturn. GIC has been releasing its financial report for the past two years but Singaporeans are expecting to know more.

As long as information is market sensitive, GIC, like other fund managers, has a responsibility to ensure that it does not take positions that may lead to speculation and chaos in the market. However, where it warrants a clarification, GIC should be more forthcoming in its disclosures.

Would the Ministry enlighten us on GIC's stake in UBS and the subsequent $9.5 billion paper loss it has suffered? How does GIC intend to ride out the loss? GIC is also helping to underwrite the sale of new shares by Prudential to help pay for its US$35.5 billion purchase of American International Group's (AIG) Asian unit, AIA. What are the implications for GIC?

In January, GIC announced that it had recognised losses on its investment of US$675 million on the Peter Cooper Village and Stuyvesant Township project. Newspaper reports suggest that GIC had written down US$575 million in mezzanine debt. What is the actual amount lost on this project? How are we recouping our loss?

The Chairman: Mdm Ho, your time is up. Mdm Cynthia Phua, your turn, please.

Prime land used for bus interchanges

Mdm Cynthia Phua: Mr Chairman, Sir, in limited land resources, there is always

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competing use and market price should be allowed to determine the use unless the use is critical. The highest and best use price should be imputed. For bus interchanges, the interchange is essential but the bus parking is not. Here, I would like to declare my interest as the company I work in do tender for the integrated developments at these neighbourhood centres. What is the cost of the space for the Land Transport Authority (LTA) for the use of the prime land for bus parking in a neighbourhood centre?

The market cost based on the last tender in Clementi Central is an average of about $1,800 per square foot. That is the average cost for the built-up area that is including the upper levels of the shopping centres. If it is solely on the ground, the average cost is about twice the pricing and that is $3,800 per square foot. If proper costing is not imputed by the Ministry of Finance for the use of public service such as bus parking, the highest and best use of the land will not happen and the bus interchange will get bigger and bigger. And this is already happening as I understand that the LTA has specified bigger area for bus parking for the Bedok North site, ie, more bus bays than the Clementi site.

And with such a requirement, it will occupy the whole ground floor of the future retail complex and all shoppers know ground floor is the best place for any retailer. Can the Ministry let us know the value it imputed for the bus interchanges?

Property tax on HDB flats

Mr Chiam See Tong (Potong Pasir): In November 2009, it was reported that IRAS decided to raise taxes on HDB flats. The economy has not recovered. With depressed salary and unemployment, many Singaporeans are still struggling to buy a flat because of high prices. I would

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request that the IRAS will not implement the decision to increase the property tax on HDB flats for at least another three years or until the economy picks up. I do not think that the Government is so poor that they have to squeeze every ounce from Singaporeans who are already finding it hard to make out a living in this struggling economy. Seventy percent of Singaporeans comprising the middle and lower income families will be affected.

Diesel car tax

Mr Cedric Foo Chee Keng (West Coast): Sir, in Budget 2008, Minister Tharman announced the revision of the special tax for Euro-IV diesel cars. As a result, since July 2008, the annual special tax for a Euro-IV diesel car will be computed based on $1.25 per cubic centimetres of energy capacity, subject to a minimum of $1,250 a year.

This is an improvement compared to what was previously four times of the equivalent road tax for a petrol car. Notwithstanding the revised diesel tax, 99% of the passenger car population in Singapore still runs on petrol, while cars running more efficient engines including diesel IV and V are still a small minority.

Sir, to encourage the use of "greener" vehicles, I would like to propose to the Minister to change the current special diesel tax in favour of taxes to be "charged at the pump" based on volume usage rather than at a flat rate per car per year. This seems to me to be more appropriate because in other words, what we are doing would be to make the tax a variable tax which translates to a variable cost to the driver rather than a fixed cost, just like what we do for petrol taxes.

This would be consistent with the goal of minimising car usage and, more importantly, such taxes "charged at the pump" is also consistent with our goals

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on energy conservation as well as environmental protection.

3.45 pm

However, if such a scheme is implemented, I would urge the Ministry to also consider the effects that it may have on the incomes of our taxi drivers, most of whom are using diesel vehicles, to ensure that they are not adversely affected by it.

Road tax

Mr Hri Kumar Nair (Bishan-Toa Payoh): Sir, I would like to ask the Minister if he is proposing to amend the road tax formula in particular for clean diesel vehicles. There are two aspects to my query. First, in relation to the green vehicle rebate, currently, only owners of brand new green vehicles are entitled to green vehicle rebates. To encourage a greater use of low carbon transportation, the scope of the green vehicle rebate scheme would be extended to include imported used green vehicle with effect from 1st July 2010. The definition however of low carbon transportation is currently applicable to CNG petrol biofuel vehicles, petrol electric hybrid vehicles and electric vehicles. If the policy is to promote green vehicles, then why are clean diesel vehicles excluded?

Let me give two examples. First, a Mercedes Benz C Class petrol propelled 1800 cc has a CO 2 emission of 216 grams per kilometre. The petrol CNG propelled vehicle is 170 grams per kilometre but the larger capacity CDI vehicle Euro IV compliant is 139 grams per kilometre. So the higher capacity lower emission. A Toyota Prius has a CO 2 emission of 104 grams per kilometre but a Volkswagen's Polo Bluemotion, which again is Euro IV compliant vehicle, is only 99 grams per kilometre. What should not be overlooked is that diesel is cheaper and gives far better fuel economy than petrol

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engines. Less fuel is burnt, less cost incurred and less harmful pollutants are emitted per kilometre driven. So why are clean diesel engines then excluded from the rebate and why are they taxed higher than equivalent petrol vehicles?

The second aspect is the continuing lack of distinction for the tax levied on the different Euro standards for diesel engines. Why do we classify Euro V and VI engines together with lower technology diesel engines for the purpose of the tax when the former are clearly more efficient and environmental friendly? I understand from the last time the Minister spoke in this House on this issue the concern was the amount of particulate emission and the matter was being studied. Could the Minister tell us whether the study has been completed and what the results are?

Development funds for social concerns

Miss Penny Low (Pasir Ris-Punggol): Sir, the revolutionary Indian Aravind non-profit network is famous for its eyecare services and an intralocular lens factory called Aurolab. Since 1976, it has done 3.6 million eye surgeries and laser procedures, treated 29 million patients either for free or a low fee, and yet made $7.9 million on revenues of $20 million in 2009, and all these in US dollars. Through disruptive supply chain innovation, Aurolab manufactures two million lenses in a year sold at between US$2 to US$10, exports to 120 countries, and has a global market share of 7%. Today, it continues to challenge conventional pricing models and supply chain with more products.

Sir, Aravind could have set itself up as a profit maximising "hungry hippo", but the founders decided on the higher value of compassionate capitalism, and turned Aravind into a social enterprise that brought sight to the underpriviledged millions, who would otherwise remain blind. However, in the profit maximising world, the idea of compassionate

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capitalism was considered berserk, so Aravind's founders have to mortgage their homes to raise $55,000 as their seed funding. Fortunately, their persistency paid off and foreign funds in the form of Acumen Fund, Gates Award for Global Health and others came to their rescue as they expanded.

Sir, in Singapore, passionate and able social entrepreneurs (SEs) meet with the same challengers as Aravind's founders. We lack the ecosystem and access to financial fuel that can help SEs blossom. There is no incentive for the setting up of social venture fund, SE banks or loans for social good. The 250% tax advantage given to charities with IPC status is attractive, but its mandatory charity status runs contrary to the handup approach taken by SEs. To argue that therefore SEs should be subject to the same rules as private sector is to say that perhaps R&Ds too which are good for the long-term socio-economic growth should also not enjoy any financial incentives or tax advantage.

In UK, social enterprises are supported with Community Interest Companies (CIC) which carries an asset lock and a community interest test. These funds are empowered with a 5% Community Investment Tax Relief (CITR) given to companies who invest in the Community Development Financial Institutions (CDFIs), which in turn invest in community development organisations and projects. CICs are limited by shares, but have the option of issuing shares that pay dividend to investors. In so doing, investors can look forward to financial returns as well as motivate the staff to do well. To protect the asset lock, the dividend to private investors is subject to a cap. In US, low profitability limited liability company (L3C) was introduced in 2008, as a profit generating entity with a social mission as its primary objective. It builds on the Programme Related Investment (PRI) scheme to tap on the

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potential US$6 trillion going to charities. Both schemes direct good money to high impact, sustainable organisations to solve social concerns and encourage sector growth. Match funding is another concept that is worth exploring as catalyst to fuel philanthropic dollars.

Sir, what do Bill Gates, Warren Buffet, Jack Ma and Andrew Carnegie have in common? They are all believers in social entrepreneurship and strategic philanthropy. If Singapore is to benefit from the rise of Asian wealth and philanthropy and to develop ourselves as a philanthropy hub, the Government would need to play a more proactive role in developing funds for social concerns. Only then, can we build a more inclusive society and have more inclusive growth.

Pro-business Government processes

Ms Jessica Tan Soon Neo: Mr Chairman, we have been discussing during the Budget debate on the need to deepen skills and encourage innovation of enterprises to raise productivity and enable enterprises to compete and capture new opportunities. As mentioned in the Budget speech, the window of opportunity for Singapore is short and given that other cities, including those in Asia, are developing rapidly and catching up with Singapore.

During the various dialogues that we had with business leaders to get their reactions from the Budget, many highlighted that it is complex to understand the criteria even of existing schemes available as well as time consuming to apply for them. Their feedback was that there are various schemes for Budget 2010 are welcomed, but they would wait and see how easy it is to access these schemes to innovate and to upgrade their businesses. So what measures can the Government take to

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simplify the processes to enable organisations to access and leverage available initiatives and schemes in a timely manner to enable them to build capability and to compete and grow their businesses? The focus needs to be on simplification and timely access for companies that have potential to leverage the appropriate schemes.

I will reiterate that it is not about hand-holding businesses. Being pro-business is critical in attracting businesses with potential to use Singapore as the base for their business as well as to retain Singapore enterprises to locate and operate their businesses from Singapore. The point is about how we will make it easy enough for businesses to begin, run and maintain their operations in Singapore. This will have the right impact on the jobs that will be created or lost and the growth or loss of the cluster of small businesses and those on the supply chain that support and are dependent on these businesses.

I am not referring to just having schemes to incentivise companies to operate in Singapore. We should also assure that Singapore remains pro-business so that enterprises will continue to build the capabilities in Singapore. Government regulations should not be seen as prohibitive, of course inconveniences for business operating in Singapore such that administrative cost of doing business in Singapore is impacted. Singapore must ensure that we remain attractive for enterprises, big or small, local or foreign, to operate and grow their businesses. I would like to ask the Minister to share what measures are being taken to ensure that Singapore stays pro-business.

Export-import (EXIM) Bank for SME financing

Mr Teo Siong Seng (Nominated Member): Mr Chairman, the idea of having

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a bank to support SME has been advocated by the Singapore Chinese Chamber of Commerce and Industry as far back as 2003. In the past few years, local enterprises, both big and small, have been encouraged to expand overseas. However, SMEs face many hurdles in doing so.

Let me give one example. A local construction and engineering company, WEC Engineers and Constructors Private Limited, set up in 1972, is currently bidding for a multi-million dollar construction project in the Middle East. Part of the bidding process requires WEC Engineers to provide a performance bond and insurance. The company also encounters great difficulty in getting a bank in Singapore to provide project financing required. Despite the fact that WEC Engineers has a history of 28 years, the financial institutions here still require the company to provide high collateral before approving the loan.

To expand overseas or to take part in overseas projects, SMEs need the necessary financial resources. However, financing through traditional banking channels is not forthcoming as SMEs are constrained by their size and lack of collateral. This means that they cannot build up their track records and with no track records and credibility, these SMEs would not be able to expand or secure projects. It is a vicious circle.

The Economic Strategies Committee (ESC) has identified the need to develop a broader and a deeper base of Singapore enterprises of which some can be globally competitive. We fully support this call. Our SMEs must be given the chance to plug into the world markets. If we succeed, we would then be able to truly build an external wing for our economy. Therefore, the proposal of developing a specialised financial institution like the Export-import (EXIM) Bank is a big step in

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the right direction. It will bridge the much needed gap in cross border financing.

Countries and regions like China, Japan, South Korea, Germany and Taiwan have set up such financial institutions. A good example is the Small and Medium Enterprise Credit Guarantee Fund (SMEG) set up in Taiwan in 1974. Taiwan's SMEG has assisted in fostering the growth of SMEs with good potential. This may be a useful model for us to study. For the EXIM Bank in Singapore to achieve the intended purpose, it must be easy and convenient for SMEs to obtain quick financing for operations and expansion overseas. Only then can SMEs seize business opportunities in an increasingly competitive and open world market. This EXIM Bank should not just operate purely on commercial returns, but should also assume some risk-taking positions. Otherwise, it would not be different from any other financial institutions. Moreover, such financing facilities should not be limited to just "Made in Singapore" products. We should also take into consideration the key pillars of Singapore's economy that we want to grow. For example, Singapore is an international trading hub with many local companies dealing with import and re-export of goods. We should continue to nurture this sector.

I would also like to propose that the EXIM Bank's facilities be extended to shipping. Shipping is an important contributor to our economy. The direct value added contribution of the maritime sector to Singapore's GDP has grown to about 7%. Today, there are more than 5,000 maritime establishments in Singapore, employing over 100,000 people. A number of foreign shipping companies have chosen Singapore as their headquarters or regional bases. The capital-intensive nature of the industry means that the shipping sector will require financing. An EXIM Bank would be a useful instrument to extend the range of financing solutions available to ship

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owners and operators with a good track record, and will assist the growth of Singapore as an international maritime centre and a hub for shipping investments.

By extending the EXIM Bank services to these sectors which are traditionally our strengths, we can expect positive multiplier effects which would benefit the economy at large. The business community is keenly awaiting the details of the proposed EXIM Bank!

Development of the accounting sector

Mdm Ho Geok Choo: Sir, to make Singapore an attractive business and talent hub for Asia, we should focus on the development of the accounting sector as part of our strategy. And to help the accounting sector gain more currency, I would like to propose a body to help set strategic directions for the accounting sector. The body could help establish a strong network between Singapore and the international accounting community. It could foster thought leadership, look into research and development activities for accountancy and related activities. To lend an international voice to its deliberations, we could have representatives from global accountancy related organisations.

Sir, such a body would transform the accounting sector and help it move forward in the local and international context. To create demand and recognition for our accounting staff, specialisation is necessary and the accounting sector should be able to create expertise in areas like internal audit and risk management expertise and valuation expertise. To solidify Singapore's status as an accountancy hub, special attention and effort should also be accorded to the development of Chief Financial Officers.

Sir, what is MOF's strategy with regard to

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the strengthening of accounting institutions and nurturing of accounting talents to help our accounting firms compete internationally?

4.00 pm

Mr Chairman: Mr Zaqy, take your two cuts together, please.

Government co-innovation platform

Mr Zaqy Mohamad (Hong Kah): Mr Chairman, the co-innovation platform is a good means to develop growth companies that have potential to provide innovation and support through Government and international goodwill projects. It is a good approach to identify potential champions within the various sectors. I would like to ask the Minister which are the sectors that the Ministry of Finance (MOF) plans to focus on and what are the indicators of success for this platform to promote research and development. Can the MOF comment on the take up of tax relief incentives for R&D over the last three years? One feedback is that it is generally the large companies that are participating in such initiatives. So, the question is – is this the Ministry's target group and what more could be done to garner more participation from the mid-size and small players in the industry?

The other feedback concerns the issue of IP ownership in such collaborations, so is this something that the Ministry should be looking at and is there something that we can do to promote greater participation to overcome this?

Future direction for e-Government

I have to commend the Government for delivering efficient services to citizens and businesses through the whole-of-Government e-Government initiatives. Some projects have delivered cost savings for the people, businesses and for the Government. I am heartened that the next

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wave of e-Government projects plans to put more emphasis on the front face of the Government. Hopefully, this translates to better communication, interaction and participation from businesses and citizens.

What is the MOF's directions for the next e-Government innovation beyond iGov2010? How does the initiatives plan to meet citizens who are becoming more sophisticated, want to be engaged and expect the Government's services to match to those by private sectors and consumer technologies? What is the approach to empower civil servants to work seamlessly and respond faster to the public and establish greater collaboration between the public, private and people sectors? How can we ensure that senior citizens and the needy are not left out of this engagement?

Sir, one feature of the iGov2010 is the implementation of large-scale consolidation projects such as the SOEasy initiative. Can the MOF comment on the progress and measures of success of large-scale initiatives of iGov2010? Have they delivered up to expectations and are there lessons learned that can be applied to future large-scale initiatives? Given the high-risk nature of such projects, has the Ministry also studied the impact of such large-scale projects on the small and medium enterprise sector, given that many have given feedback that they no longer have access to Government contracts that have been consolidated under such initiatives?

Assoc. Prof. Dr Muhammad Faishal Ibrahim (Marine Parade): Sir, we have witnessed rapid development in the ICT environment over the last decade. Over the years, I understand that the Government had used the ICT to enhance its services and integration process. However, much has changed today. There has been drastic advancement in technologies, Singaporeans' lifestyle and the level of engagement of the different

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stakeholders in our society and with the regard to the ICT. I feel that we need to capitalise on these changes to enhance the way the Government engages its stakeholders, thus, sustaining its relevance today. In the spirit of Budget 2010, I feel that this calls for a great leap and a surge of innovation in using the platform of the e-Government in engaging not only those within its ambits but also the stakeholders outside its organisation. These include linking the services of the Government and the private sector to the people. I feel that the Government should integrate its capabilities via the ICT together with that of the private sector to cater to the needs of the lifestyle of Singaporeans and beyond.

With the availability of hand held and high-tech handphones and other equipment, this will certainly change the way we live and enhance our integration and engagement via e-services platforms of the Government, private sector and other stakeholders. Therefore, I would like to ask the Minister on the plans laying the future direction for e-Government as we move into the next decade.

The Second Minister for Finance (Mrs Lim Hwee Hua): Mr Chairman, Sir, first let me thank hon. Members for their comments and suggestions, and given the constraints of time, I shall endeavour to elaborate on the policy intent and address specific comments wherever possible.

The issues that Members have raised reflect the opportunities and challenges that Singapore faces today and how the Government will ensure that, as an economy, we are well equipped to tap these opportunities. These centre around four broad areas.

Firstly, the need to ensure high Government performance, efficient resource utilisation and accountability. Secondly, suggestions to enhance our tax regime, in particular leveraging on it to

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achieve social and environmental objectives. Thirdly, measures to aid businesses in their economic expansion and transformation. And, fourthly, preparing for the future through the next wave of e-Government innovation.

Sir, I will address each of these in turn and, if time permits, to take on the related issues that Members have raised during the Budget debate last week as well.

First, on Government performance resource, utilisation and accountability. Member Jessica Tan asked about the Government's plan to drive productivity and innovation within the public service. Sir, there are many aspects to productivity growth and I quote Deputy Prime Minister Teo who said, "The factors which contribute to productivity include the quality of the systems, the processes, technology, organisation and workforce within enterprises, the attractiveness of their product and services to markets and leadership and management to bring all these factors together." Hence, we know that productivity growth requires everyone to play his part, not just the individual but also the enterprise. The public service, too, has to play its part. Deputy Prime Minister Teo has mentioned that the Head of Civil Service will be overseeing the public service's productivity drive and that the public sector will continue to emphasise training and improvements to processes and to the delivery of quality service to the public.

The Government recognises that the public service can itself be more productive and, as a regulator and a facilitator, the Government can continue to play a role to help businesses enhance their productivity. In the context of this afternoon's debate, however, let me explain how MOF is ensuring effective allocation and use of resources.

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Sir, the Ministry of Finance has instituted mechanisms to drive productivity growth through the optimal allocation of resources. Firstly, through the re-investment fund. Every year, a budget is set aside for investment in new areas that support whole-of-Government strategic outcomes, cross-agency collaboration and innovation. This is a mechanism which prioritises and redistributes resources to Ministries with proposals for new and worthwhile projects on a competitive basis. Through the re-investment fund, the Government has provided $1 billion a year over the last three years to fund new Government initiatives. These include, for example, the ABC Waters Programme that is helping to transform our water bodies and parks into aesthetically pleasing and vibrant places that everyone can enjoy.

Secondly, value management. Value management is a process that seeks to achieve better value by scrutinising the specifications of large infrastructure projects upfront at the conceptual design stage. One such example is the Downtown Line 1 where the value management process yielded savings of about $200 million through the use of the most optimal method of constructing tunnels between the Chinatown and Cross Street stations.

Thirdly, the block budget manpower management framework and economy drive mechanisms, which are examples of measures designed to instil discipline over the use of resources by public agencies while according them maximum flexibility and autonomy to derive the best value from these resources. I would elaborate on the block budgeting system later on in my speech.

Further, MOF works closely with the public agencies to achieve higher productivity by pooling resources at the whole-of-Government level. For example, as a consumer, the Government aggregates demand for economies of

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scale through joint procurements. To illustrate, service-wide demand aggregation of contracts for the supply of fuel and office furniture led to cost savings of 12% and 20% respectively. Likewise, agencies can learn from each other's best practices and enjoy cost savings by coming together to develop shared IT systems and applications.

Sir, it is important for me to highlight that productivity improvements, in the context of the Government, also includes innovation and this is really at the heart of our productivity drive. MOF introduced a Public Sector Innovation Framework in 2008 to encourage experimentation, test-bedding and capability building within Ministries and statutory boards.

We are also seeking to enable productivity growth in the economy at large via partnerships with the private sector through the Co-Innovation Platform, and e-Government. I will again elaborate on these areas further in my speech.

Sir, let me now move on to Member Low Thia Khiang's question on the amount of information in the Annual Budget Books and how we strike a balance between budgetary autonomy and accountability. The primary purpose of the Budget Book is to provide the annual estimates of revenue and expenditure of the Government as required by the Constitution. In fact, the Constitution does not require the Government to publish programme descriptions in the Budget Book but MOF has chosen to include these, along with key performance indicators (KPIs).

Explanations for material changes in the Ministry's expenditure from the previous year can be found under Section III of the Budget Book entitled "Expenditure Estimates By Heads of Expenditure". The information provided in this section is intended to help readers

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understand how the sums voted to each Head of Expenditure have been appropriated. In addition, should Member Low Thia Khiang and Members wish to know further line item details of spending by Ministries, they can obtain the detailed information from the "Expenditure Control Document", copies of which are found in the Parliament Library. I wish to add that the three volumes totalled more than 1,500 pages. Over time, we have been providing more information, not less, contrary to the MP's assertion. Let me just show Members very quickly the Budget Books [ holds up books ]. These are two of the volumes, so it is quite a tome.

Sir, the Budget Book also includes KPIs which provide information on the agencies' achievement of objectives through their programmes. Over time, these indicators have evolved from being just input-based indicators to outcome measurements, wherever possible.

Recognising that the issues facing the public sector are becoming increasingly complex and intertwined, MOF has been working with Ministries to identify key strategic outcomes at the whole-of-Government level. And these will be published in the Singapore Public Sector Performance Report, which will be released some time this year. The report will provide an overview of how well the public service is collectively achieving whole-of-Government (WOG) strategic outcomes.

Furthermore, MOF has a Budget website to reach out to a wider audience. And in this website, you can find a write-up, summarising the spending trends of the year based on the four sectors of Security, Social, Economic and Government Administration. In addition, each Ministry publishes a summary of their spending highlights on this website.

Sir, let me now move on to elaborate how MOF's block budget system ensures

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an optimal balance between budgetary flexibility and accountability. At its core, block budgets, which have been the basic foundation of Singapore's budgetary framework for the last ten years, seeks to establish limits to Ministries' expenditure by capping their spending as a pre-determined percentage of GDP. These limits are tied directly to Singapore's economic performance, which is also the key determinant of Government's revenues. By pegging Ministry budgets to the GDP, MOF ensures that the Government, as a whole, spends only as much as it expects to collect in revenues on a sustained basis.

Compared to the line-item method of budgeting we practised in the past, block budgets accord Ministries greater certainty on the funding that they can expect to receive over a three to five year period. Furthermore, Ministries will take responsibility for optimising and re-prioritising their programmes within the allocated block budgets.

Notwithstanding these budgeting flexibilities, sufficient frameworks and checks have been put in place to ensure proper accountability of expenditures. Firstly, MOF reviews and evaluates the strategic expenditure plans for each agency on an annual basis against the desired outcomes set out. Secondly, major development projects require the approval of the Ministerial Development Planning Committee. Thirdly, Ministries are subject to the Manpower Management Framework, which limits the growth of their headcounts by the smoothened Resident Labour Force growth rate and this ensures that growth in public sector manpower does not outstrip that of the economy at large.

Next, the Accountant-General's Department undertakes regular Value-for-Money audits to assess programmes and

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projects of Ministries; and finally, the Auditor-General is constitutionally empowered to audit and report on the accounts of the Government and this includes reviews of key financial systems and controls.

4.15 pm

Sir, this House itself plays a role too. Parliament has its own Estimates Committee which scrutinises the Government’s Budget, questions the Government on its Budget estimates and processes for managing expenditure, and suggests improvements. Moreover, the Parliament also has a Public Accounts Committee which examines various accounts of the Government, including the Auditor-General’s Report.

Sir, let me now move on to optimising land assets. Member Cynthia Phua spoke about the need for Government agencies to be aware of the opportunity cost of using prime land for bus interchanges.

Sir, allow me to share some history behind bus interchanges. In the past, bus interchanges were built by HDB as part of its town planning and infrastructure provisions. Many are, therefore, located within the town centres so as to facilitate the transfer of passengers between trunk and feeder bus services.

Today, as part of its efforts to optimise land use, the Land Transport Authority (LTA) works closely with the Urban Redevelopment Authority (URA) and the Housing Development Board (HDB) to redevelop the bus interchange sites from stand-alone developments into integrated developments, for example, commercial development with a bus interchange on the ground floor. Such integration achieves the twin objectives of setting aside prime space within our estates for key infrastructure, while enhancing their value by capitalising on the steady stream of public transport

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commuters. The redevelopment also allows LTA the opportunity to right-size the space required for the bus interchanges.

To determine the appropriate size for a bus interchange, LTA applies a set of space norms for the various components such as driveway and bus park lots. These space norms are reviewed regularly to optimise land take, while ensuring that operational requirements would continue to be met. This is an example of how the Government continuously reviews its land use to unlock the productive yield of our land assets. Every 10 years, URA also conducts the Concept Plan Review to plan ahead for the future so as to optimise land use, taking into consideration inputs from the various stakeholders. The Minister for National Development elaborated on this during the Ministry of National Development’s COS debate.

On MOF’s part, we have put in place measures that encourage the optimisation of land use and the realisation of maximum value. Land cost, at market rate, has been made explicit to Ministries through the application of the Resource Management Framework. Under this framework, public agencies are charged an imputed rent on the land so that they are mindful of the cost of the space of property they use. Should there be development potential beyond the current use – as a bus interchange in this case – Ministry of Finance would certainly review, with the public agency concerned, the possibility from an optimisation perspective.

Next, on the management of Government investment companies. Member Inderjit Singh has suggested more conservative mandates for GIC and Temasek as their investment outcomes directly impact the reserves of Singapore.

Sir, in May 2009, in response to a Parliamentary Question, the Minister for

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Finance had explained to Members that there is a distinction between the investment approaches of Temasek, GIC and the Monetary Authority of Singapore (MAS). Let me just recap. The MAS is at one end of the risk spectrum. As a central bank, it is the most conservative, with significant holdings in liquid, mainly fixed income instruments. GIC is fairly conservative, with a globally diversified portfolio spread across asset classes, mainly in the public markets. Temasek is at the other end of the spectrum. It is largely an equity investor, a value-investor aiming at long-term returns. Temasek is exposed to significantly higher risk than GIC and MAS, but has also delivered higher returns over time as expected. In contrast, MAS will have more stable but lower returns over time.

The respective boards of MAS, GIC and Temasek make their own decisions on asset allocation, but the Government regards the whole-of-Government assets from a holistic perspective. The Government regularly monitors and reviews the overall long-term performance and risk profile for the whole-of-Government assets, at various points in a market cycle.

Sir, moving to a more conservative mandate as a knee-jerk reaction to the recent downturn would not be prudent, as this could risk compromising the ability of GIC and Temasek to deliver long-term sustainable returns. And both GIC and Temasek have thus far delivered creditable returns.

It is important for GIC and Temasek as long-term investors to be able to maintain their long-term orientation and ride out market cycles. Nonetheless, the execution of their mandates, through specific investment strategies and approaches will evolve and adapt to structural changes in the investment environment. For example, while Temasek reiterated its focus on long-term value in the updated Temasek

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Charter released in 2009, it has increased its exposure in Asia, excluding Singapore, due to its belief in the deep potential of these markets.

The Government is also assured that the boards of GIC and Temasek have in place risk management frameworks and the proper processes to take risks prudently, while maintaining their long-term orientation.

Sir, Member Ho Geok Choo has requested for an update on GIC and its investments. Let me begin by noting that the recent financial market crisis brought about the sharpest stock market fall since the Great Depression. Investments of GIC as well as other investors worldwide were inevitably affected.

Nevertheless, as noted in the last GIC annual report released in September 2009, the GIC portfolio has recovered more than half of the losses sustained in FY 2008/2009, in line with the broad recovery of global stock markets since the market trough in March 2009. The performance of the portfolio will be updated after the audited full year results are ready. GIC typically releases its annual report in September/October each year.

The Government will continue to assess GIC’s investment performance over the long term, in line with our objective to grow our reserves in a sustainable manner.

As noted previously in this House, the Government does not judge the performance of GIC by individual deals but on its overall portfolio performance. In this regard, it is not the Government’s practice to discuss the performance of GIC’s individual investment deals.

I should add here that GIC takes very seriously every decline in the value of its

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portfolio and in the value of individual investments. However, it is not realistic to avoid losses on every investment as that would require GIC to be completely risk averse.

While GIC has made losses on some investments, in this case its investment in Stuyvesant Town/Peter Cooper Village, it has made gains on others. The only reasonable way of evaluating GIC’s performance is to look at how the losses and gains stack up and how its overall portfolio performs across market cycles.

Overall, both Temasek and GIC have so far delivered creditable returns on their portfolios over the long term as well as during the six-year cycle between March 2003 and March 2009, which marked the points of the dot-com bust and credit crisis – in other words from trough to trough.

Sir, Mr Inderjit Singh has asked how the setting up of Seatown fits into Temasek’s overall investment framework. Seatown is a global investment company that is a wholly-owned subsidiary of Temasek with its own board and management. It is no different from Temasek’s other investment-related subsidiaries, for example, Fullerton Fund Management Company, which was set up in 2003 as an Asia specialist offering investment products and solutions to its clients.

As shareholder, the Government assesses Temasek on the performance of its overall portfolio over the long term. I wish to reiterate again that the Government neither influences nor interferes in Temasek’s investment decisions, which are guided by its own board and management. In this case, the board and management of Temasek have considered and approved the setting up of Seatown as part of its overall investment strategy.

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Next on Temasek II, Mr Inderjit Singh has suggested setting up a Temasek II to invest actively in locally-based companies. For GIC and Temasek, the Government’s position remains that they should continue to operate on a purely commercial basis in order to provide good long-term gains. Requiring Temasek or GIC to invest so as to fulfil other objectives would distract them from their respective mandates. In any case, Temasek is not precluded from making its own decision to invest in local enterprises where there are attractive opportunities and, indeed, it has done so, for example in its investments in Hyflux, Fraser and Neave (F&N) and Olam International.

Even if the proposal is for a company to be set up independently of GIC and Temasek, such an approach may not be the best way to nurture local companies. Rather, the Government should identify and bridge market gaps, where they exist, so as to support a thriving ecosystem of locally-based enterprises and leave the private sector to take the lead in identifying worthy investment opportunities. It would be neither sustainable nor appropriate for the Government to step in to finance local enterprises that cannot themselves locate private funding, since our ultimate goal is to nurture globally competitive companies.

Indeed, the Economic Strategies Committee (ESC) considered the matter carefully and sought to identify financing gaps in the market to nurture globally competitive companies. It recommended that the Government create conditions to catalyse, rather than supplant, private financing for SMEs in doing so.

The Government has accepted the recommendation and announced the co-investment programme as part of Budget 2010. Under this programme, the Government will mobilise up to $1.5 billion worth of growth capital by seeding a range of funds over 10 years, for which

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the Government will contribute up to half the capital or $750 million. A key feature of this programme is that it will leverage private equity expertise in evaluation, making and managing investments so as to ensure market discipline.

Sir, I would now turn to the taxation issues raised by the various Members.

First, I would like to provide some clarifications to Mr Chiam See Tong’s comments on property taxes for HDB flats. Sir, property tax is imposed on the ownership of properties in Singapore, including HDB flats and is based on the Annual Value (AV) of each property. Annual Values are determined yearly according to the prevailing market rents that each property can fetch. The property tax for HDB flats in a given year is based on market rentals data from the previous year.

The previous AV revision for HDB flats was carried out on 1st January 2008, based on rentals values in 2007. In 2009, the AVs for HDB flats should have been adjusted upwards because rentals had by then jumped by more than 30% through 2008 over 2007. However, the Government decided to defer the increase in AVs for HDB flats in 2009 in recognition of the weak economic outlook and uncertainties in rental trends at that time. The annual review of AVs for HDB flats resumed in January 2010.

HDB rentals have stabilised after a moderate decline from late 2008 to the middle of 2009, and have since begun to rise. As the current values of HDB rentals are significantly higher than levels observed in 2007, IRAS proceeded to raise the AV this year. Nonetheless, the Government has provided a one-off rebate to help HDB owner-occupiers adjust to the January 2010 AV revision. This was in the form of a 50% property tax rebate, with absolute amounts of between $50

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and $120 per flat. This rebate cost the Government $88 million.

With the new 2010 property tax rebate and the ongoing 1994 rebate, all one- and two-roomers will continue to pay no property tax in 2010. In addition, under the new progressive property tax regime just announced in 2010 which will take effect from January 2011, each HDB owner will enjoy tax savings of up to $240, arising from the exemption of the first $6,000 of AV. All HDB owner-occupiers will thus pay less in taxes. To recap, this new progressive system of property taxes for all owner-occupied homes will cost the Government about $230 million a year.

4.30 pm

Sir, it is not advisable, as Mr Chiam has suggested, to disrupt the regular revision of AVs as it would lead to a larger than manageable increase when accumulated. Instead, the Government will continue to explore possible forms of transfers, when necessary, to help the needy in a targeted manner.

Next, I would like to assure Members, Mr Cedric Foo and Mr Hri Kumar, that our current vehicle tax structure already serves to encourage the use of more fuel-efficient and environmentally-friendly cars. For example, road taxes, which are levied according to engine capacities, already favour smaller cars which tend to consume less fuel than larger cars.

We also provide the Green Vehicle Rebate (GVR) to encourage the adoption of fuel-efficient vehicles. This rebate is calibrated so that a typical hybrid car, which is greener and more fuel efficient, does not attract higher upfront ownership taxes than the equivalent conventional car – despite the higher Open Market Value (OMVs). The objective of the GVR is to

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level the playing field for green vehicles in our system for upfront vehicles taxes, and leave motorists to weigh the additional cost of green cars against their fuel savings in their buying decisions. Clean diesel cars are not much cleaner than petrol cars; although more fuel-efficient, they emit more particulate matter (PM). Moreover, the OMVs are not materially different from petrol cars.

Currently, we impose a volumetric tax on petrol to discourage the excessive use of vehicles. Ideally, diesel should be taxed on the volume consumed as well. However, we have not introduced a volumetric tax rate on diesel used for vehicles, as diesel is also used for non-transportation purposes such as powering portable electricity generators. Instead, a special tax was introduced for private diesel cars as a proxy. This special tax also took into account the higher particulate matter emissions of diesel cars.

In Budget 2008, in recognition of the improved emission standards of Euro IV diesel cars, the special tax rate for Euro IV diesel cars was revised from four times the road tax to $1.25 per cc with effect from July 2008. And this in effect ensured minimal differences in fuel consumption costs between Euro IV diesel and petrol cars. For a typical 1,600cc Euro IV diesel car, this change translates to a reduction in the annual special tax of about $1,000.

In determining the special tax to be imposed on Euro V diesel cars, the emphasis should be on the desired outcome or performance of the car concerned rather than the technology. Thus, the Government will consider the fuel-efficiency and emissions standards for Euro V diesel cars relative to both Euro IV diesel and petrol cars. Furthermore, as Member Cedric Foo has rightly pointed out, the move should be towards a volumetric basis for charging rather than

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the existing fixed special diesel tax. As the Member has also noted, any such move would, however, require careful consideration of the transitional issues, which include not just taxis but also other public transport and commercial vehicles, and other off-road users.

Sir, next, let me address Member Penny Low’s suggestion of incentives for social enterprises, which are businesses set up to achieve social objectives, in order to let them flourish and in a bid for Singapore to be a hub for the rising Asia social investment dollar.

Sir, we also recognise and note the important role that the social economy can play. The question is what is the best way for the Government to support social enterprises. Ultimately we want to nurture social enterprises that have sustainable business models because these enterprises would then have the largest impact and the highest chance of succeeding in their social mission.

Giving social enterprises special tax privileges over conventional businesses will not help them to develop as sustainable and competitive businesses. Moreover, our social enterprise sector is still in its nascent stages. Most of our social enterprises are very small outfits and do not have significant amounts of taxable profits. Hence, further tax incentives beyond the generous ones that we already provide to our start-ups and SMEs are unnecessary.

Our focus has been on building up the competencies of our social enterprises to position them for sustainability, while not compromising their businesses’ competitiveness and resilience. Social enterprises can tap on seed funding from the Ministry of Community, Youth and Sports through the ComCare Enterprise Fund to cover start-up costs, including their training needs.

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Sir, however, we recognise that there is scope to see how we can do more to help grow this sector. We will study the overseas examples which Miss Penny Low has described to see if there are models of Government support for social enterprises that are suitable for our local context.

Next, let me also address Miss Penny Low’s suggestion to promote greater philanthropy. We agree wholeheartedly with this. That is why, in Budget 2010, we extended the 250% tax deductions for charitable contributions, which means that Government is literally contributing up to 50 cents of every dollar donated to charitable causes. In fact, for the universities, the Government also provides one-for-one direct matching for donations, so that for every dollar received, the Government actually contributes up to 75 cents.

Sir, let me now move on to the pro-business Government initiatives. This year, the Government introduced a number of incentive schemes to spur productivity in businesses. Many Members have expressed similar sentiments to Member Jessica Tan's comment on the importance of keeping the application processes simple so that more businesses can truly benefit from the schemes.

Sir, MOF agrees that the incentive schemes must indeed be simple so that all businesses can benefit from them in an easy and timely manner, while ensuring that the schemes remain relevant to achieving the intended policy outcomes. I would like to assure Ms Tan that we will administer our tax incentives with this objective in mind.

Take, for example, the recently announced Productivity and Innovation Credit, which is an economy-wide initiative to spur all businesses to upgrade themselves and to invest in activities along the innovation value chain. This scheme is kept simple so that all

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businesses, even the smaller ones, can understand and benefit from it. Under the scheme, businesses simply claim the enhanced deductions as part of their normal tax filing process. In general, no application is required. Businesses automatically qualify for these tax deductions so long as they spend on any of the six pre-stated categories of innovation-based activities.

MOF has also taken the effort to ensure that the qualifying criteria for these deductions are clear, specific and not overly restrictive. This gives businesses more certainty upfront on whether a potential investment can qualify for the scheme.

The scheme also allows some businesses to convert their tax deductions or allowances into a non-taxable cash grant. To apply for this, a business only needs to fill in a declaration form at the point of claim at the end of the financial year. And again, this is done together with its annual tax filing. Upon receiving the form, IRAS will process the claim and credit the cash grant into the business’ account within three months.

Given that the Productivity and Innovation Credit is meant to be a broad-based scheme, the process will be much simpler than the targeted grant schemes, where businesses have to submit an application along with the supporting documents, pass through selection criteria and meet required commitments.

I would therefore like to reassure Member Jessica Tan that the Government has streamlined and will continue to streamline regulations, simplify processes and keep administrative costs low. Even though Singapore has been ranked first in the World Bank’s "Doing Business" Report for four consecutive years from 2007 to 2010, we do not take our ranking lightly

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and will strive to ensure that we continue to be a favourite place to do business.

Sir, let me now move on to the cuts on EXIM bank. The Government reviews our policies to support enterprises regularly in response to market trends, new opportunities and gaps. As more of our companies go abroad and the scale of their overseas operations grows rapidly, it becomes imperative to address gaps in cross-border financing. And these are points which both Mr Inderjit Singh and Mr Teo Siong Seng have made pertaining to the Export-Import (EXIM) Bank.

Today, IE Singapore has a suite of financing schemes that support the internationalisation of our companies including the one that Mr Inderjit Singh has highlighted — the Internationalisation Finance Scheme (IFS), which provides support for asset and project financing overseas.

Fundamentally, our schemes today are market-enabled, leveraging on commercial banks to facilitate financing to companies through risk-sharing with the Government. There are, however, structural constraints to this approach, as support from our schemes is limited to the sectors and markets that the commercial banks have appetite for. Therefore, the development of a market-based institution for cross-border financing is one issue that the Government is studying very carefully to facilitate the next wave of growth. The study is expected to be completed in a few months’ time.

Sir, it is the right time to consider this as Mr Teo Siong Seng has noted: The number of Singapore companies internationalising has increased; and besides large companies, SMEs are internationalising more actively than before.

As we evaluate EXIM banks and Export Credit Agencies (ECAs) around the

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world, we must, however, avoid replicating the experience of EXIM banks abroad where under-performance or political interference has resulted in long-term subsidies out of the Government’s budget as this is an approach we cannot afford. Instead, we should consider examples in countries like Hong Kong, Sweden and Canada, where EXIM banks or ECAs have clearly-defined mandates to operate commercially and to generate positive returns on capital. These institutions have independent, professional management and use specialist market expertise to assess risks and viability of projects. As a result of their ability to generate commercial returns, they can sustain their operations without Government subsidies.

Adopting a commercial orientation has other benefits besides sustainability. First, a commercially-run institution would be more responsive to the needs of its customers, including SMEs. For example, it would have the commercial incentive to ensure that its products and services meet the needs of its customers, or that the process to obtain financing is not too burdensome.

Second, as the institution develops expertise ranging from trade financing to internationalisation and project financing, it would also naturally want to expand its business to finance both exports and overseas operations and projects, as Mr Teo has suggested.

Third, we would expect a commercial institution to be constantly looking out to roll out new products and services to serve its customers better and to generate more revenues. And in doing so, it will catalyse innovation in the private sector market for cross-border financing. By drawing cross-border financing opportunities to Singapore, the institution will encourage existing players to strengthen their teams here while attracting new market participants.

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Hence, with such an institution in place, companies that go abroad – both SMEs and large companies – will have better access to financing support than today. While Mr Teo highlights shipping, any sector in which viable Singapore companies have competitive advantages would stand to benefit from this initiative.

Sir, next on the accounting sector, I agree with Member Ho Geok Choo that it is important to develop the accountancy sector to solidify Singapore’s position as a leading financial and business services hub in Asia. Having a deep competency in accountancy will enable the growth of our enterprises in and beyond Singapore.

Since 2000, the accountancy sector has generated contribution of about 0.4% of our GDP – similar to the legal sector’s contribution of annual value-add of about $900 million to Singapore. This is poised to increase in tandem with the surge in demand for accountancy services in Singapore and the region. The Asia-Pacific market alone is expected to be worth US$38.3 billion by 2013.

In December 2008, my Ministry established the Committee to Develop the Accountancy Sector (CDAS) to review the accountancy sector. CDAS, which comprised public and private sector representatives and accountancy professionals, plans to transform our accountancy sector into a modern, trusted and high value-adding Global Accountancy Hub over the next 10 years. The Committee’s strategy overlaps with Mdm Ho’s views that Singapore needs to enhance sector-wide professional capabilities and to develop a stronger international outlook.

4.45 pm

Today, many international professional bodies have established, or are establishing, their presence in Singapore. Within this context, the Committee is

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recommending to strengthen the Institute of Certified Public Accountants of Singapore (ICPAS) into a global professional accountancy body; and to develop a post-graduate structured professional accountancy qualification to strengthen and broaden the talent pool of accountants. In addition, to add to the richness of services that Singapore can offer, the Committee intends to develop and build distinctive niches and specialisations such as Chief Financial Officers, internal audit services and valuation.

Sir, merger and acquisition (M&A) activities should strictly be market-driven, and the recent announcements in the Budget are designed to help facilitate but not direct such corporate activity. Nonetheless, our accountancy sector can play an enabling role in M&A activities, as transaction advisory, financial due diligence and valuation. This, in turn, could further deepen the expertise here.

The Committee also hopes to develop Singapore into a leading global centre in Asia for accountancy professional development and education and to attract regional talents into Singapore. To help promote Singapore's sector internationally, the Committee is also proposing to anchor practice leaders and Centres of Excellence in Singapore. It would encourage regional and international work to be done from Singapore and to eventually build up a critical demand. CDAS will submit its recommendations to MOF in April 2010.

Sir, the Government will commit $450 million over the next five years to start a Public-Private Co-Innovation Partnership. This initiative is to spur private sector R&D by bringing together Government agencies and companies and co-develop innovation solutions.

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Mr Zaqy Mohamad has sought further details on the scope and measures of success. Sir, the Co-Innovation Partnership will focus on innovations that can meet public sector needs, and which can eventually be exported to the region. For a start, we will look at areas such as urban mobility, energy efficiency and environmental sustainability.

We would seek to increase the number of public-private collaborations, and innovative products and services. However, we will not just focus on numbers. The Government recognises that risks are inherent in the innovative process and accepts that not all collaborations may succeed. However, the emphasis should be on creating opportunities for public and private sectors to innovate together.

Last but not least but still on the theme of innovation, Members Zaqy Mohamad and Muhammad Faishal Ibrahim have asked how MOF is responding to the rapidly changing ICT landscape to meet the needs of increasing sophisticated Singaporeans.

Sir, on the iGov2010 masterplan, many of the integrated Government projects are still in progress and will only be completed over the next one to two years. I would just like to highlight that the operative word is not consolidation but integration, where agencies with similar needs come together to jointly leverage on technology to achieve better outcomes. There is a whole range of integrated Government projects and some are smaller scale ones which SMEs can be involved in.

Sir, MOF notes that our citizens are becoming increasingly Internet-savvy. They are used to accessing information and securing services over the Internet. They are comfortable with downloading music and applications using iPhones and other mobile devices. Many are also socialising and sharing resources on

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Facebook. Our citizens now expect the same convenience and easy access in their dealings with the Government.

In fact, with emails replacing snail mails as a main mode of communication, some customers expect Government replies and actions to be instantaneous and, moreover, favourable, failing which they will become demanding or even unreasonable.

As much as we would like to, it is not always possible for Government agencies to satisfy all their customers. Also, big statutory boards like LTA and IRAS each receives tens of thousands of correspondences in a month. It would be impossible for their CEOs to reply to each one personally.

Sir, allow me to give you one such example of someone who emailed the LTA repeatedly, to insist that the stretch of road in front of his house be re-surfaced instead of being patched locally. Now, road re-surfacing is expensive and should be undertaken judiciously. LTA explained this to the writer, but he did not accept LTA's explanation. He then replied with phrases like, I quote,

"Mr Yam, I would like you to personally reply to this email of mine and explain to me and the residents why LTA would not want to re-surface such and such a road completely. And please do not hide behind your staff to get them to respond on your behalf."

LTA acknowledged his second last letter and promised to reply soon, but this only met with further unhappiness. Again I quote:

"I would like my resolution letter from LTA to be responded personally by Mr Yam Ah Mee. For your information, I am a CEO of a large financial services company, and I will always take it upon myself to respond and sign off any letters/emails if they require my personal attention."

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And for good measure, he copied his latest email to the Prime Minister.

For the CEO of LTA to personally respond to thousands of mails would be impractical as well as highly inefficient for the organisation. What matters, or should matter, is for the CEO to ensure that there are proper internal processes to give timely, considered responses to citizens.

Sir, please do not get the wrong impression that we have a lot of demanding customers. We have many customers who appreciate the services of our public agencies. Many have in fact written in to express their heartfelt appreciation for our agencies' attention and service standards. Our public officers are encouraged by these letters of commendation and will try even harder to serve their customers better. I have provided this example to illustrate the ever-rising expectations of the public, which has been fuelled by technology.

The Government will always endeavour to improve on its service standards. However, whether it is the public or private sector, we know that good customer behaviour begets good service. Let us work together to develop a culture of good customer behaviour and good service delivery.

With your permission, Sir, I will ask the Clerk of Parliament to distribute the handout. [ Handout distributed to Members .]

As I have just mentioned, the Government is committed to improving our public services to delight our customers and to keep up with new technological trends. To support this role, the Government will also evolve from being just a public services provider to a platform provider. It will set and referee the rules in the ecosystem to allow the enterprises or individuals to freely

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innovate and create value-added services. In other words, the delivery model will change from "Government-to-You" to "Government-with-You".

For example, the Government can facilitate the discovery and use of publicly-available Government data by putting them on a central portal for downloading in machine-readable formats. A common map platform can also be provided to share Government geospatial data.

Sir, we are mindful that this move towards a "Government-with-You" model does not rely on technology alone. On our part, public officers need to embrace a new mindset that some services can be developed and delivered more effectively through collaboration with the public.

Sir, to sum up, MOF has taken a comprehensive approach in addressing the multiple challenges and opportunities ahead of us. On the expenditure side, we have devised programmes and initiatives to make sure that our resources are carefully allocated to worthwhile projects and, second, efficiently used to achieve the intended objectives.

We will also use our tax regime to help promote social and economic objectives. We strive to keep our tax regime competitive to give businesses and individuals incentive for enterprise and effort, and support economic imperatives at different phases of our development. We also keep our overall system of taxes fair, so that everyone pays some tax but the better off pays more.

By adopting a "Government-with-You" approach, MOF seeks to work closely with businesses and citizens to further create new value. We recognise that some of the best ideas are out there in enterprises and the wider community, and

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thus would be adopting a collaborative approach to create new services for our people.

The Chairman: I can only take a few interventions because there are a few Members – Mr Low Thia Khiang, Mrs Mildred Tan and Miss Penny Low – in that order, if we have time.

Mr Low Thia Khiang: Sir, the Minister referred to the two books that she had. If I am not wrong, one of which is called Budget Highlights. She referred to the annexure. But the figures in the annexure were global figures. What I am asking for are figures which could provide certain depth so that we can understand the expenditure at a certain level. She refers also to the budget control document. Yes, I have seen it. This thick – two volumes and the words are very small, and I think it is too much to chew. I would expect and I hope MOF can provide a budget book which is, at least, with certain depth, rather than superficial information like what the annexure provides. She also said that there is a Public Accounts Committee which would look at the Ministry of Finance's expenditure. I would like to say that, so far, I have not been a Member of the Committee, and I believe that the Committee, most of the time, comprised PAP Members.

Mrs Lim Hwee Hua: Mr Chairman, Sir, I am slightly confused by what Mr Low truly wants in terms of detail because he had asked for more specific line item details to which I have duly pointed out the direction. And then, he goes on to say that those were too many details. Let me just explain that the way we have organised information is really to make it as easy as possible so that in the main Budget Book, one gets a good overall view of all the different Heads. And if one were interested in the line items, one can go on to the two control documents. In addition, the Budget Highlights that he

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has referred to really provides also some of the summaries and highlights. If at all, I would think that people will be complaining about overload of information rather than under.

As regards his comments about the Public Accounts Committee, the Public Accounts Committee is appointed by the Committee of Selection so that is strictly up to the discretion of that Committee.

Mrs Mildred Tan: Sir, I thank the Minister for a comprehensive explanation on the Budget and how it works. Can I ask the Minister of Finance about the two points that I had raised earlier during the Budget debate, that of the inclusion of a organisation design for tax deduction and the withholding tax for mega events?

Mrs Lim Hwee Hua: Sir, for process and organisational redesign, indeed, they can be instrumental in many companies to improve enterprise productivity. However, the challenge is in defining what exactly would be classified as process of organisational design for tax deduction purposes. I would go on to add that to implement most of these organisation redesign initiatives, businesses often have to acquire new equipment to automate the new processes, train their employees, to reskill them, and both these activities would qualify anyway. So they should adequately cover what the Member has suggested.

As regards the exemption for mega events of the withholding tax, to attract more international rated acts, performances and so on, the Government has reduced the withholding tax of non-resident public entertainers from 15% to 10% for five years from Budget Day. Our withholding tax rate for royalties is already low by international standards at 10%. And Singapore has a wide network of tax treaties that can actually reduce the rate even further, such as to 5%. In addition, organisers of approved events

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can also apply for direct grants from STB under the Tourism Development Assistance Scheme, particularly under the Business Events in Singapore Scheme.

Miss Penny Low: Sir, I want to thank the Minister for distributing this which I think it is a very good example of how the private sector and the public sector can work together. In conjunction with that, I would like to also get her comments on my suggestion during the main Budget speech on the "Wiki Me" idea which is really a seamless collaboration between the public sector and the people sector.

Next, I would also like to seek clarifications from the Minister, first, by thanking her for her support for the SE sector. And I agree with her that many of the SEs are relatively small at this moment. But I wonder if it is a chicken-and-egg question, given that there are a lot of very good, potentially big SEs, that are actually chopped off by the lack of access to finance at the moment. In the past few years, more than 200 SEs have been established in Singapore and more are coming on-stream.

Last but not least, on the IPC's tax incentives that are available for charities, the point here really is that most SEs seek double bottomline which means financial sustainability as well as social returns. And because of that, many of them do not want to establish themselves as charities because charities are inherently a handout approach. They want a hand-up approach.

By asking them to apply for charity status so that they can qualify for the 250% tax incentive, it would actually be a "slap in their faces".

5.00 pm

I wonder if the Minister could consider studying the examples that are given and also think about what could be adapted to suit the local context.

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Mrs Lim Hwee Hua: Sir, indeed the Wiki-Me could be a useful initiative to build community self-help and bonding. In fact, we note that today some 8,000 residents in Sengkang are already turning to sengkang.com to get to know their neighbours, organise activities and provide useful information and tips ranging from renovation to neighbourhood safety. And there are many such active digital " kampungs " created by spirited residents. In fact the Straits Times noted that there are at least 10 such " kampungs " serving the various estates.

The Government would be happy to support such initiatives and we welcome suggestions on how we can facilitate the process of getting such active community involvement. For a start, the digital " kampungs " can make use of the common map platform to provide map-based services when the platform is ready. This is indeed a good example of the type of collaboration under the Government-With-You approach that we would like to undertake. As regards the question on Social Enterprises, I would like to confirm that we would continue to study the different forms and to see how best we can promote social entrepreneurship here.

Mdm Cynthia Phua: Sir, this is a very short clarification. The Minister has yet to respond to my Budget suggestion on Town Councils asking for the Productivity and Innovation Credit. Can the Minister let us know whether she is agreeable to extending this credit scheme to the Town Councils?

Mrs Lim Hwee Hua: Sir, all tax-paying entities can claim the enhanced deductions on expenses under the Productivity and Innovation Credit Scheme that they incur to produce income. The cash conversion option, however, is only available to companies, partnerships and sole proprietors with at least three local employees. This is because the intention

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of the option is to help business enterprises, especially SMEs, with cashflow needs for their expenditure on innovation. Nonetheless, MOF will review how we can support other entities such as Town Councils in the effort to upgrade productivity.

Ms Jessica Tan Soon Neo: Sir, let me take the opportunity to thank Minister Lim for taking the trouble to cover the range of questions that we had on behalf of the GPC as well as Members of the House. Thank you for the comprehensive replies and for providing the information. I look forward to the Government setting the example in terms of driving innovation and productivity. And we look forward to seeing the Singapore Government Public Sector report, which is coming out sometime this year, to see the examples of how that has driven impact.

So with that, Sir, may I seek your leave to withdraw my amendment.

Amendment, by leave, withdrawn.

The sum of $546,431,600 for Head M stand part of the Main Estimates.

The sum of $126,555,400 for Head M stand part of the Development Estimates.