ANNUAL BUDGET STATEMENT

ANNUAL BUDGET STATEMENT: **** Debate resumed.

The Minister of State for Defence (Assoc. Prof. Koo Tsai Kee): Mr Speaker, Sir, this recession is not the first, nor will it be the last. But this recession is unique because it is happening in the context of the global recession on an unprecedented scale. The IMF and International Labour Foundation predicted, to horrors, that 51 million workers will lose their jobs this year. The headline news in Singapore is scary. Projected GDP growth of -2% to -5% for this year, 2009. But, Sir, the reality on the ground is not as bad as the headline suggests because we have three solid pillars of support – the family, the community and the Government.

Out of this unwelcome mayhem, Sir, at least one encouraging phenomenon has come out of this recession. And that is, how we, as a nation, have responded to the crisis vis-a-vis countries like Iceland, the region around us and indeed the rest of the world. To be sure, Sir, Singapore's recession is severe, -5%. The worst case

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scenario is severe. But we are not "Iceland on the Straits". In Singapore, there is no panic and no demonstrations, no strikes and no violence. Indeed, some people think the situation is not so serious that Government should dip into the reserves.

Sir, it is interesting that the Wall Street Journal Asia 's (WSJA) editorial on Friday to Sunday, 23-25 January, 2009 called "Singapore Limits", pinned the causes of the recession on the Government's policies on regulation, industrial policy and the CPF scheme. The article suggested that if only the Government had freed the reins of regulation, allowed the market to make decisions and encouraged domestic consumption (by not siphoning money into government pensions with what Wall Street Journal called "measly returns" compared to long-term investments) the economy might have been different today.

The article conveniently ignores the fact that this recession is global. No country, no economy, is immune from this global meltdown, whatever economic policies were adopted. The fact is that those countries which did the opposite from Singapore, ie, those countries which condoned financial oversight, encouraged profligate consumption and practised the "go-as-you-pay" pension schemes as opposed to our fully-paid up pension schemes, suffered even more collateral damage.

If Singapore had followed those WSJA's prescriptions, Singapore could well have become "Iceland on the Straits". But we are not Iceland, the country which is going bankrupt. It (Singapore) is not really bankrupt because of several reasons.

First, unlike Iceland, this Government does not need to go to the IMF or any other country to ask for funds. Such funds may not always be available, nor

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will they come without strings attached. In the Asian financial crisis of 1997, IMF's aid to countries, like Indonesia and Thailand, came with restrictive conditions which actually exacerbated the crisis in those countries. IMF specifically forbade the recipient countries from doing what USA and Europe and many countries are doing now, ie, bailout the culprits, bailout the financial system.

Sir, when I was a younger MP, I sat in this House, over there, listening to some MPs, with good intentions, asking the Government to run only a balanced budget, never a surplus budget, because money taken away by the Government chokes off private capital – if we have more, they have less. If they have less, the economy does not grow. They argued that the Government had already enough money in the reserves. Too much money in the reserves suffocates private capital resulting in lower consumption and investments. Those MPs are not in the House today. If they were here, they would perhaps say, "thank goodness, this Government did not listen to us". If there were no reserves, Sir, the Government would not be able to guarantee the bank deposits without printing money. Neither will the Government be able to fund the deficit budget. Without the reserves, we would be like the Icelanders facing endless winters.

Sir, the second reason why the sovereign credit triple A (AAA) rating of Singapore is unaffected, is because Singapore does not print money to fund this budget deficit. Our reserves are strong and more than available to meet this and another crisis. This is not the case with many countries. The credit rating of many countries are already under review. New Zealand is one. A good sovereign credit rating is important even though we are not borrowing from overseas or issuing debt to fund this

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deficit. A country's credit rating influences investors' decisions to invest in Singapore. It also tells investors that there is a future, that there is a tomorrow, beyond this crisis.

Sir, the third reason why we are not Iceland is because our financial system is strong. There is no bailout for our banks because they are still solvent and are still profitable, albeit less so than in previous years. In contrast, many of the banks in the developed countries (biggest US banks and UK banks) are already insolvent without the bailouts.

Sir, we have escaped the worst of the financial crisis because our financial regulators have done a good job. But they cannot please everybody. What I found most incredulous in the WSJA article was the allegation that 'Singapore workers and business invest a total of 34.5% of wages into the state pension fund, but receive less than a 2% return from the Government.'

Sir, I think WSJA is still living in the yesteryear world of high rates of interests, the world of Madoffs and the world of sub-primes. Investors, today, no longer ask for the 'return on investment'. Change the preposition. Investors only ask for 'return of investment'. We are lucky just to get back our capital.

In today's economic landscape, CPF returns are dream investments. Those of us with money in the CPF and not invested, get the best returns. CPF Board, I am reminded, pays a base rate of 2.5% per annum, and a higher 3.5% for the first $60,000. And there is more, of course. On top of this is the added bonus of an appreciation of the Singapore dollar vis-a-vis the global currencies. The Singapore dollar is only below two major currencies – yen and US dollar. If we measure the Singapore dollar against pound sterling or the Aussie dollar, the CPF return for the year 2008 is well over 30% for 2008.

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With the weak economy and the strong US dollar, something must give way. So, I think the Singapore dollar is the best investment, for many years to come.

Sir, the WSJA also recommended domestic consumption to replace exports to balance the economy. That was the problem, going ahead, which should be more like a domestically-driven economy. Sir, this is a fallacy. Singapore is a tiny red dot. Singapore is not China. We produce very little for the local economy, for our local consumption. The Chinese economy is big and it can be self-sufficient. If Singaporeans were to spend more and more in Singapore, the leakage to the rest of the world will be bigger and bigger. It does not solve the problem.

And, finally, Sir, WSJA questioned the bureaucrats' wisdom in trying to pick winners in 'financial services', in 'biotechnology' and what they called 'gambling.' This is an old argument. Financial services, biotechnology and gambling – they say, do away with all these three.

We place our bets on everywhere. We placed a little more bets on financial services, biotechnology, not on gambling, but on tourism. In areas like financial services and tourism (what WSJA calls gambling) the results are good, even though there is a temporary setback. Once the Integrated Resorts (IRs) are up and running, the tourists will be back and the good and clean money will be in our banks.

We are a successful financial model. So, the industrial policy makers have got it right, that is why we were caught in the tail wind of this global turbulence. If we were not a financial hub, we would have escaped much of this financial turbulence. Once the global economy recovers, good money, clean money and good jobs will return to Singapore. Wall Street, as we

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know it today, is a cowboy town. Fortune suggested that Wall Street should be in jail. Shenton Way is not so exciting but it is safe and the money will grow.

It is only in the area of biotechnology that there remains some skepticism and, I think, quite valid because biotechnology, life sciences are high-risk investments, and it is a high-risk industrial policy card. But, to be sure, there are many remarkable successes in biotechnology in Singapore. But we have to be realistic, Sir.

Even the world's largest pharmaceutical company, Pfizer, has had to re-assess its areas of research. The patent of Pfizer, indeed the world's most successful drug, is not Viagra, it is Lipitor. But the patent for Lipitor will end in 2011, two years from now. So, what is Pfizer going to do? Instead of spending more money to search for Lipitor II (Lipitor brings in a quarter of Pfizer's revenue of almost US$40 billion, that means it brings in almost US$10 billion), Pfizer has decided to switch research direction from cardiovascular diseases to elsewhere, because they think research in this area is too high-risk, too competitive. Pzifer is laying off hundreds of top scientists, and how much did they spend outwardly a year? US$7 billion on R&D.

Our bet on biotechnology is small beer in the world of Pfizer. I think Wall Sreet Journal Asia (WSJA) is wrong. We need to formulate our own programmes to get out of this crisis. This Budget is an excellent opportunity to showcase successful economic model and social cohesion. Few countries can do what we have done. We have the resources, we have the will and we have the social cohesion to put these two packages together. It is only in a crisis that the mettle of our nation is tested and, I think, this is the Budget that will bring us to greater heights.

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3.45 pm

Mr Ong Ah Heng (Nee Soon Central): ( In Mandarin ): [For vernacular speech, please refer to Appendix A.] Mr Speaker, Sir, the $20.5 billion Resilience Package in this year's Budget introduced by the Government will help our Singaporeans save their jobs and also help the businesses to survive in this economic recession. This Budget can be said to have looked after all the industries and people from all stations of life, particularly the ordinary folks in the middle and lower strata of societies.

Many of our Members who spoke before me had mentioned about the features of this Budget. This Budget seeks to encourage the banks to extend their facilities to the businesses, particularly the SMEs so as to increase the company's cash flow and to enhance their competitiveness. It will help the individuals and families, and also to increase expenditure in education and healthcare.

The response from the business community on this Budget is very positive. As the President of the Chinese Chamber of Commerce and Industry, Mr Chia Tian Phua, said, "This is the biggest ang pow given by the Government to the business community." He hopes that the employers will make full use of this handsome present to retain their present workforce, raise the morale of the staff so as to overcome this crisis. For the workers, the Government has also introduced a $5.1 billion package in the form of Jobs Credit. It also seeks to help the professionals, managers, executives and technical staff (PMETs) to participate in skills upgrading programmes.

To the workers, they feel that this is something that the unions have been fighting very hard for them all these years, to make sure that they have the opportunities to be trained and upgraded.

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For Singaporeans, every family and every individual would benefit from the $2.6 billion package, for example, with a double GST supplement and more rebates for service and conservancy charges, rebates on rentals as well as property tax. In my constituency, most of the people are from the middle and lower income group. They are not well-educated and have no big economic theories. When I meet the people, they would tell me, "Oh, it is very good!" But, they would go on to say, "Tell the Prime Minister, we want more. The more the merrier."

Mr Speaker, Sir, what I want to say today is that we should not only look at what Singaporeans perceive of this Budget. What are the views of the people outside Singapore on this $20.5 billion Resilience Package? On 30th January, the Lianhe Zaobao carried an article originally published in Malaysia’s Nanyang Siang Pau as the editorial on 27th January. It says that this Budget in Singapore, apart from setting many new records, is also a policy which is far-sighted and beneficial to the people. It remarked that, most importantly, the Singapore Government does not resort to floating foreign loans, but makes use of the surpluses accumulated by the Government all these years to pay for this expenditure. The Government's approach of not leaving behind debts for the future generations and its very prudent financial policy enable them to make this sort of provision during a crisis like this. It says that during this sea of darkness, it is like a beacon that shows the way for the people of Singapore to move forward in the right direction. This is what a Malaysian newspaper has written about us.

I would like to quote another article which was published in Lianhe Zaobao on 14th January 2009. It was something taken from a Thai newspaper – an article written by Nitipoom Nawarat, entitled "A Comparison between the Prime Ministers of Singapore and Thailand" . He says that

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politicians in Singapore, on their first day in office, are able to show their strength by the words they say. The political views expressed by the Prime Minister and his Ministers are like a compass that leads all Singaporeans to move in one direction. In his concluding remarks, he says that the purpose of his article is to let the people in Thailand make a comparison between the Prime Minister of Thailand and that of Singapore. What the Singapore Prime Minister has said, he puts it into action. But in Thailand, too much time is spent on politicking. I think Mr Low Thia Khiang should read this. He said that the Thai government has spent too much time talking about politics, but we have not seen any actual action. This is what a senior journalist in Thailand wrote about Singapore.

A friend of mine, a businessman who has just come back from Indonesia, told me that the Indonesian government is spending about 71.3 billion rupees, that is, about S$9.4 billion to stimulate its economy so as to deal with this global crisis. He remarked that Indonesia was learning from Singapore. But he said that many people in Indonesia were not happy. Why? Because Singapore, as they said, is just a little red dot with only 4 million people, yet the Government is introducing a S$20.5 billion package to help its people. The population of Indonesia is many, many times that of Singapore. How could a S$9.4 billion worth of package be enough?

Mr Speaker, Sir, when we look at the Budget, we look at it from different angles and perspectives. Opposition Member, like Mr Low Thia Khiang, has his own stand because he is in the Opposition. If his stand is the same as that of PAP, there is no need for him to be an Opposition MP. So we have different views. The poor people would have the poor people's perspectives. The rich people, the managers, would have their own views

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too. But, as the Prime Minister has said, we should give more assistance to the people in the middle and lower strata. PM has told us that when the economic prospect is not so clear, the Government may also introduce some off-Budget packages to help the people.

As reported in the newspapers today, many ordinary citizens are saying that it is not enough. But the Prime Minister has given this undertaking. If the economy is really getting worse, then there will be off-Budget packages to help our people. As Nitipoom Nawarat has said, what the Prime Minister of Singapore has said, he will put it into action.

Mr Speaker, Sir, the Prime Minister worries for the people of Singapore. But he is not a medicine that can cure everything. We must work. Take the job, even it is just a simple job, one that is not so glamorous. Even then, we have to work hard. The Government, the grassroots organisations and the charitable organisations can only help you, if you help yourselves. We cannot serve you the three meals everyday. So long as you work hard, although you may earn only $800 or maybe just $1,000 a month, you will feel that it is very meaningful. You should be proud of yourself. The support from the Government and the community plus your own effort, I am sure, will be able to tide you over this problem, particularly the people from the middle and lower-income group. We should not sit there and complain about this, complain about that, and air all sorts of grievances. I think we should encourage ourselves. We must tell ourselves that we are still much better than the poor people in the other countries.

Mr Speaker, Sir, so long as the middle and lower-income people, the unemployed people, have this sort of attitude, I am sure we would be happier and much better than many of the people in the other countries. Be assured that there are

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always people, the community organisations and the grassroots leaders who will be supporting you.

Mr Speaker, Sir, I support this Budget.

*Cols. 1595-1598.

3.57 pm

Dr Lim Wee Kiak (Sembawang): Mr Speaker, Sir, last year, this time during our Budget debate, we were all debating on how we were going to spend the previous year's surplus of $6 billion. There were some Members in this House who felt that the Government should be more generous with the handouts rather than saving the surpluses for rainy days. And it seems that not only the rainy days are here, a storm is here. Members were questioning the accuracy of our budgetary process and asking why there was a huge surplus. I had advised Members that we should look forward and not backward. But this year the situation is completely different. We are facing the worst global financial crisis since nation building. It shows how fragile and how volatile the global financial system today is. No matter how good a fortune teller our Finance Minister is, there is no way he could have seen this coming.

The Government has for the first time in the history of Singapore dipped into our well-guarded and well-protected national reserves to fund two unique and innovative programmes, one of which is the Jobs Credit Scheme. The Jobs Credit Scheme effectively puts all Singaporean and Permanent Resident employees in Singapore partly on the Government's payroll for the next 12 months. So everybody is a civil servant now. This unprecedented move, I believe, is the first in the world. As it is the first in the world, there are many unknowns and there are many, many queries and many, many worries on this.

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Many asked whether the money is well spent or it will be like water being poured into the sand. Our sympathy is for those who have been retrenched and for them, it is like water delivered to a person who had just perished due to dehydration in the desert as it is too late. But it is better late than never as we do have other programmes such as SPUR. Hopefully, they will spur them on and they can find a job as soon as possible with "Train and Place" and "Place and Train". Even for those who are severely dehydrated now and are on the brink of death, there is no guarantee that with the water, they will survive or the water will reach them in time as some may be siphoned away by employers for their own personal gains rather than saving the businesses and saving jobs. Is the Jobs Credit too much geared towards employers? I think many members of the public have asked, "Could part of the money be used to pay for the employee's CPF instead so that the employee can bring home a little bit more bacon for support in this financial storm?" We have all learned with dismay how many billions of the US government rescue funds were siphoned away

as bonuses to bank executives, after they were disbursed in the US. How effective is the Jobs Credit Scheme in saving jobs and what is the worst case scenario? Is it 10% unemployment? Even with Jobs Credit Scheme being announced after 19th January 2009, we keep receiving news of more retrenchments in the pipeline. Will the money be well spent or will it be just water pouring into sand? This is the question for which I hope the Minister for Finance can shed some clarity.

The Singapore national reserve was painstakingly built up dollar by dollar and by the sweat and blood of all Singaporeans from the past and current generations. Being a Singaporean means you are an equal stakeholder to the reserves. As the famous quote from a credit card advertisement says, "Membership

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has its privileges". Should the reserves used in the Jobs Credit Scheme treat Singaporeans and permanent residents alike? I do acknowledge the contributions by all our permanent resident employees but I do feel that Singaporeans, perhaps, should enjoy some preferential treatment if the reserves are being utilised. I would think that the Jobs Credit Scheme should have tilted slightly to the advantage of Singaporeans rather than to treat Singaporeans and permanent residents the same. I hope the Minister for Finance will help to clarify this point too.

There have been many calls during the past financial crisis for the use of the reserves to cushion Singaporeans but they were all dismissed. In fact, it is a sacred cow. I presume, unlike the past crises, this crisis is much more severe. The use of our National Reserve has brought about many questions: Under what circumstances can the Government propose to use the reserves? Were the previous crises considered as too mild? If so, why were drastic measures such as CPF cuts justified? Senior Minister Goh has highlighted some rules to the use of the reserves over the weekend. I would like the Minister for Finance to give this topic greater clarity in this House and to all Singaporeans. Should some ground rules be set so that this episode does not become precedence for the future government to use to squander away our reserves? If not, we can become another Iceland in the near future.

I am equally concerned with the health of the goose that lays our golden eggs. The National Reserves is all we have built up over the past 44 years. Should we not be extremely prudent to use the reserves only when we really need to do so? Yes, the Minister for Finance has mentioned that we can actually fund all the programmes highlighted in the Budget using this term – Government savings. But of course, we do not know how

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prolonged this particular storm or tsunami will last, and it is prudent for the Government to keep some savings just in case we need to use it in the short term.

The two temporary and extraordinary programmes such as the Jobs Credit Scheme and the Special Risk-Sharing Initiative, which are to be funded by our reserves, will cost $4.9 billion. This is not a small amount. Singaporeans are concerned about the health of our reserves, especially with this financial crisis. Our reserves and investments must have also taken a hit and decreased like all asset classes in the global market. How much of our reserves is left after spending on these two programmes? Can the Minister for Finance assure the House that our goose that lays golden eggs, year after year, will continue to do so after this withdrawal and after this financial shock?

Last of all, I would like to ask the Government to consider allowing the people to share the burden with the Government. The burden of the financial storm should not be borne by the Government alone. Can the burden be shared with the people? If the Government is to be allowed to use the reserves to cushion the storm, then can the Government allow the people to use their own reserves to cushion this storm too? Can the Government temporally relax the regulations to allow people to dip into their Special and Retirement Accounts for their mortgages and other needs during this crisis on short-term basis? Similar to safeguarding our reserves so that the piggy bank is not broken, guidelines can be drawn to safeguard the excessive drawdown on our Special and Retirement Accounts. And similar to the Government, the people can continue to contribute to build up their reserves after this financial crisis is over, when good times return.

With that, I support the motion.

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4.04 pm

Er Lee Bee Wah (Ang Mo Kio): Mr Speaker, Sir, please allow me to speak in Malay.

( In Malay ): [For vernacular speech, please refer to Appendix A.] I congratulate the Minister for Finance for outlining a comprehensive Budget this year.

Singapore is different as it stimulates the economy without using foreign loans. Even though we are now facing uncertainties and anxieties, every Singaporean must have a positive attitude, and be happy that the huge spending incurred this year will not burden us when we repay it in the future.

Although the downturn has not reached its most critical level, we must take necessary preventive measures to prevent its effects from worsening. Fighting an economic downturn is like fighting a disease. We must overcome it immediately or face the risk of needing more resources to overcome it. Hence, I support the Government's bold step to use the national reserves.

If, previously, we have not been frugal, we may not have these reserves to use. Instead, we, and our future generation, might have to face possible higher taxes and other financial burdens.

I share some peoples' concern, including Dr Lim Wee Kiak's, on using national reserves. For now, it is a necessity. Hopefully, we will not take this path for the long term. And not only that, we also hope to be able to pay back what we took out from the reserves.

The implementation of the Jobs Credit Scheme is a creative and comprehensive solution. It is a move with a long-term view, compared to making use of the CPF. The speculation on CPF cuts caused many sleepless nights for my residents as

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many of them depend on the CPF to pay for their homes. For that, we must thank the Minister for Finance. My constituents now feel relieved with the Jobs Credit Scheme.

I do not understand why Mr Low Thia Khiang did not support the Jobs Credit Scheme. It is important to stay employed in these turbulent times. It gives direction and dignity to a person, so as to continue living without fear and with optimism. It is impossible to provide unconditional compensation to each needy person. For the common good, we must emphasise the importance of self-sufficiency. I am happy that the Government places importance on staying employed.

Thus, the Government must do something to ensure that the flow of water and the river is not blocked. This brings us to an old problem that is linked to the way we manage the inflow of foreign workers.

I would like to know if there are other measures to limit foreign workers, especially the low-skilled ones. My constituents are willing to accept jobs in places like coffee-shops but those job opportunities have been taken up by foreigners. Do we need so many low-skilled foreign workers? My constituents welcome jobs that are nearest to their homes and not difficult to do. With that, I feel that the Government must ensure that these jobs that are wanted and can be done by Singaporeans can be made available to Singaporeans.

The Budget promises to increase job opportunities through the public sector and subsidised training. However, the Budget does not offer concrete help to the elderly and those who were retrenched. Furthermore, some of those who were retrenched felt that the Skills Programme for Upgrading and Resilience (SPUR) is irrelevant as they already have the skills and qualifications. Instead, age becomes

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a hindrance for them to be re-employed. They want to work but the employers do not want them.

The Jobs Credit Scheme is a good initiative to help them stay employed but it is only a temporary measure. A fishing rod is useful only if there are fishes in the water. If there is no demand for goods and services, companies will be forced to retrench workers. The Government must help those who are retrenched to get jobs again or provide temporary help for them to go through these difficult times.

( In English ): Sir, I will continue my speech in English.

With spendable income on the decline, personal income tax reduction would come as a considerably huge respite for many. I sympathise with the many residents who expressed their disappointment at the absence of personal income tax cut and no increment in the income tax rebate. The impact of the income tax rebate is limited in comparison to a personal income tax cut. The rebates are the same as last year's, no increase. If the recession is expected to worsen this year, it seems only logical that the rebates should be more than last year's.

Speaking of personal income tax, the tax instalment break does not offer much in reducing financial burdens for retrenched workers. Although the unemployed now have greater leeway to sort out their finances, they will still have to set aside money for income taxes, which would be a difficult task. Even if they do find a job by this year, their happiness would be short-lived as they may find themselves grappling with two income tax payments for both 2008 and 2009 next year, an equally mammoth task if the economy is still in the doldrums. Should the Government consider "forgiving" a taxpayer from the lower and middle income group if he stays unemployed for

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a period of time and can prove that he has been applying for jobs, but without success? Waive the tax for this group altogether for Year of Assessment 2009!

The disparity between corporate tax and personal income tax has further widened. This puts professionals practising under LLP companies at a greater disadvantage than ever, in comparison to their corporate counterparts. At this juncture, I would like to declare my interest as my company is a LLP. We do not enjoy any tax incentive that corporate companies get. LLP companies and corporate companies are both profit-driven, in spite of having different business structures. The reduction in personal income tax will not only be welcomed by the public at large, it will also place LLP companies on the same starting line as corporate companies, consequently increasing their competitiveness.

The 1% corporate tax reduction should take place in this Year of Assessment, instead of 2010. Already, businesses are struggling to survive. An earlier tax reduction would be more opportune.

Large companies and SMEs are not the only businesses that are reeling from the recession. One of my residents confided in me his inability to maintain his small business – a problem which I believe applies also to other small-time business owners. His shop rental has increased by 20% since last July by HDB. His utilities bill for last quarter has gone up by 27% and on top of all that, he has to pay conservancy charges and cope with increased cost and lowered demand for his services.

*Cols. 1599-1602.

A 15% rental rebate for a year is simply insufficient, considering that "the worst has yet to come". I seek clarification if the 15% rental rebate is based on the new rental fees or the old rental fees. If the rental rebates are

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computed based on the latter, I propose they be readjusted and lowered in accordance to this year’s cooling property market before the rental rebates are computed.

I am concerned that there is no indication of any measures that make it mandatory for landlords to pass on savings from property tax rebates to their tenants. I believe the main purpose of the 40% property tax rebate is to lower business cost by helping tenants to obtain a reduction in their rental. The Government should take on a more active role in ensuring that landlords will reduce rents for tenants. Similarly, how can we be assured that taxi operators will pass on road tax rebates to taxi drivers?

I applaud the Government’s decision to share risks in bank loans. If banks are encouraged to do their part in lending, the $5.8 billion will offer cash-strapped businesses with much needed reprieve. However, some banks are dissatisfied with the 20% risk factor that remains. In these uncertain times, the risks of lending large sums of money to companies with weak balance sheets and declining sales are magnified. If banks remain skeptical about lending money to such businesses, what can be done to allay their concerns?

Some businesses have given me feedback about the hassle of bank loan application processes. Apparently, their applications are screened and subject to approval from three bodies – the bank, SPRING and the insurance company. How long is the entire process expected to take? Time is money. Time is of the essence. This complicated multi-tiered process of loan application must be simplified. Otherwise, it is highly possible that we may encounter instances whereby when a loan is approved, the company has sunk beyond redemption and the workers have been retrenched.

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( In Mandarin ): [For vernacular speech, please refer to Appendix A.] Singapore’s high growth in various aspects is something which we are proud of. We are glad that the Government, while striving to seek counter measures to cope with this global recession, has not forgotten the major objectives of sustaining our development. It is necessary for Singapore to maintain its status as a world-class education centre. More importantly, we must continue to provide affordable world-class education to our students.

The short-term study assistance scheme is an excellent idea. It can help our students overcome the obstacles brought about by the economic problems, so that every citizen will have a fair chance to study, and all our students will benefit from this scheme and concentrate on their studies without being affected by the economic recession. I would like to plead on behalf of the polytechnic students. Unlike the junior college students, polytechnic students do not enjoy concessionary bus and MRT fares. I believe that this economic recession is the best time to correct this anomaly. We must adopt a two-pronged approach to further expand the scope of this assistance scheme, to cover part of the students' transport cost. At the same time, the Government should urge the transport operators to extend the concession to polytechnic students as well. With this assistance, many parents will have their children’s educational expenses reduced substantially.

There are many pro-family measures in this year’s Budget, but there is still room for improvements. All along, the various tax rebates and GST subsidies are pegged to the size of the flats and the family income. This Budget is no exception. For example, $1,500 is the upper limit for the application for the various Government assistance schemes. Let me give an example to demonstrate how different families will cope with their income. For a

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small family of just the husband and the wife, it may be barely enough if they are frugal in their family expenses. However, with just one bread-winner in the family to support his aged parents, his wife and two school-going children, the $1,500 may be just enough to cover the basic necessities in daily living. Should someone in the family fall sick, or when the electricity tariff is adjusted upwards, this family will be in a predicament, and this is quite a common situation. I have come across quite a number of such families.

For just a couple, not much space is required. A 3-room housing is more than enough. But for bigger families, a 4-room unit with bigger space is certainly necessary. Therefore, the way we measure the family financial situation by the family income and the size of the flat they live in, needs to be fine-tuned. Other factors such as the family size and other expenses such as educational and medical expenses should also be taken into consideration.

Although the Budget this year can be said to be pretty comprehensive, I would like to give a few suggestions, particularly, those that have not been covered in the Budget.

For companies that are absolutely making no profit, the 1% cut in corporate tax has no relevance at all, because they need not pay any tax at all. Undoubtedly, these companies need more help than those companies which are merely facing declining profits. The Government could grant them rebates in public utilities to lighten their burden. The savings thereof can enable the companies to be more flexible and to improve their operations. This is completely in keeping with this Budget’s objective of improving the capital liquidity of these companies and enhancing their competitiveness.

Health is wealth. During an economic recession, one way to prevent extra

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expenses is to stay healthy so as to avoid medical expenses. Although medical expenses in Singapore are still affordable, they are not cheap. In these difficult times, medical expenses are still a hefty expenditure. Unfortunately, we do not have the special privilege of total immunity to all diseases, particularly illnesses that come with ageing, and chronic diseases that require long-term treatment and medication, e.g. cancer, diabetes, kidney failure, etc. Some of these patients could not afford even the basic treatment. As such, the lower and middle-income patients, particularly the unemployed, need medical assistance imminently.

I hope the Minister would consider these suggestions and solve the problems of these people.

With that, Sir, I support the Motion.

*Cols. 1603-1606.

Mr Yeo Guat Kwang: ( In Mandarin ): [For vernacular speech, please refer to Appendix A.] In a very popular Hokkien song entitled "Work Hard to Win", there is a line that says "30% depends on luck, but 70% depends on your own efforts." In this Lunar New Year period, we see a great number of politicians from various nations going to the temples to pray because of this financial crisis. But, fortunately, our Singapore Government believes more in the second part of the lyric, that is, 70% depends on our own efforts. We want to do our best to help the poor and those who need help. At the same time, we want to strengthen ourselves, so that we can be ready when the time is better. The People's Action Party is a party that works for the betterment of our people.

While we are faced with this global economic crisis, there are some people who are shooting themselves in their foot. Week after week, the International Monetary Fund (IMF) keeps adjusting the

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growth forecast downwards. I think what we need is not to shoot ourselves but to put in concerted effort, with one heart and one soul, to turn the tide and reverse the course of events.

Before the crisis, just as the Teochew people were saying, "If you do not have, you complain that they have not, but if you have, you say it is stinking." In this time of crisis, it is better to have something than to have nothing. We should adopt a positive attitude. Even if the fish stinks, squeeze some lemon juice on it, it can still fill your stomach. At least, you do not have to walk around with an empty stomach.

Sir, at this time last year when we were talking about this movie "Money No Enough", many people were saying that at the end of the movie, not only money was not enough, the tissue paper was not enough. It was a very touching movie. Now, in this Budget, the Government is also saying that money is not enough. But just like the old mother in that movie, she opened up her old biscuit box, took out the money that she had been keeping for a long time, and handed it to her son, so that he could tide over his crisis. I think this type of "saving for a rainy day" attitude should be maintained. Most importantly, we have better hope that the money in the biscuit box is enough to tide us over this difficult time, and that we would be able to reverse the course of events. In the end, we will be like the brothers in that movie, we could put the money back into the biscuit box, so that it could be used again in future.

Different people have different attitudes, just as Mr Low Thia Khiang has said. He said we should cut down on our defence expenditure. I do not understand! In Chinese, there is this saying " ju an si wei " or "Be prepared for danger in time of peace". Now that we are facing a crisis,

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are we talking about " ju wei si jiang ", meaning in time of danger, think of lowering. The Chinese characters are very interesting. The character " jiang" or "lowering" is also the same character for " xiang ", meaning surrender. So, in times of crisis, are we going to think of " jiang " (lowering) our defence budget and then think of " xiang " (surrender)? Certainly not! At this time of crisis, we must think of how to become stronger.

At this time, we hope that these packages introduced in the Budget would be of greater help to our people. There was this caption in the Wanbao which said, "$5 billion to help the bosses pay salaries". In this package, we see that the Government has put a lot of thought in it. I hope that the employers should have conscience. They should be good to their workers. The Government is trying their best to help them make ends meet so that they do not have to retrench their workers, and the workers will retain their jobs, and hence have the income to support their families.

On the Workfare Income Supplement (WIS), I am very happy that the Government is increasing it to 50%. This will further help 438,000 workers with monthly income of less than $1,500. That is, in a way, giving them a pay rise of 15%. There is this taxi driver who was reported in the Wanbao as saying "I do not know what this Budget is all about, but I do know that last year I did not get the money because I was not informed, and I did not top up my CPF account. As a result, I did not get my WIS last year." I hope that the Government will help, and the relevant authorities will be more flexible in dealing with all these applications. Even if some applicants may be late in topping up, we should not work by the book. We should help those people who need help, so that they will not be deprived of this benefit which they are rightfully entitled to.

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Not just the Government, the business community should also consider the predicament of the self-employed. We know that these self-employed people have to look after themselves. We should not leave them to fend for themselves. Although they are self-employed, in this economic crisis, they are also quite seriously affected as their income could also be seriously reduced. I hope that, apart from the tax rebate and the other rebates, the Government would also look into the problems of these self-employed people and give them some form of assistance. Perhaps we could top up their Medisave account so that they would also benefit from the WIS scheme.

Mr Speaker, Sir, this WIS or the Jobs Credit Scheme have also given rise to some arguments that the benefits given to the employers may not be passed down to the workers. I remember that in my younger days when I was staying in a small kampung in the Bukit Timah area, my neighbour was a poultry farmer and he reared a lot of chickens. He told me that so long as you keep your chickens well, you would have fresh eggs to eat. So in this critical time, we are very clear that we need to have healthy chickens so that we would have eggs to enjoy. The enterprises or companies must maintain their competitiveness. If they survive, it would mean that our jobs are retained. So, if you help the businesses, you are also helping the individuals, and more importantly, we should not look at it negatively. Try to save as many jobs as possible, save as many companies as you can. That is the spirit! Just do it! As our NTUC Secretary-General, Mr Lim Swee Say, has said at this moment, to a person who is unemployed, the unemployment rate is 100%. We should help in any way we can.

The $5.8 billion Risk-Sharing Package is something which many of our companies are full of praise for and they are hoping that the Ministry of Finance and

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the Monetary Authority of Singapore (MAS) would have better coordination with the various banks and financial institutions. It is often said that a classic movie may be very good but that may not be very popular. Many companies and businessmen are worried that they may not be able to benefit from this Scheme. It looks like that the banks are only giving the life-saving devices to those who have not fallen into the water and those who are already in the water, they would not be given these life-saving appliances. They will not be saved. So let us hope that we will help everybody so that this Package will be good and, at the same time, popular as well.

Yesterday, I attended the Metro Company's "Learning Journey" known as the Customer-centric Initiatives. At the function, NTUC Secretary-General, Mr Lim Swee Say, announced that a $100 million service industry Resilience Package will be launched. This is indeed a booster shot in the arm for the service industry. The Managing Director of Metro told me that every year in December, it was boom time for his company – the most profitable month of the year. But last December was the only time in more than two decades that he suffered a loss during this festive season. He told me that in this situation, in the economic crisis, we are like running on a treadmill. We run very hard but we seem to be running on the same spot. We do not seem to be heading anywhere, yet we need to keep on running, otherwise, we will fall down. If you carry on running, then you will be fit. Once the thunderstorm outside stops, you can go outside and run faster than others. I think such an entrepreneurial business spirit is something that all our businessmen should emulate. I hope that all our companies would have this sort of fighting spirit.

With the support of this Budget, we will be able to work for a better tomorrow. During the Lunar New Year, I received a very special SMS. It says our

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Prime Minister has asked the various Government departments to be warm and helpful to the people. The message was: The Prime Minister's Office sends you wishes for strength and vigour as you get older; The Minister for Environment and Water Resources sends you wishes that your money will pour in from all quarters like water; The Minister for Home Affairs sends you wishes for your safety in your everyday lives; The Minister for Defence sends you wishes for peace and contentment in the place you live in; The Minister for Trade & Industry sends you wishes for good business and prosperity; The Minister of Health sends you wishes for strength and health; The Minister for Foreign Affairs sends you wishes for good relationships and connections all round; The Minister for National Development sends you wishes for happiness and comfort at home. If you want a bigger house, you can have a bigger house. If you want a smaller house, you can have a smaller house. In other words, if you want to upgrade to a bigger flat, you can go for a bigger flat. But if you want to downgrade to a smaller one, MND can be more flexible so that we could downgrade to a smaller one. Your loan repayment period can be extended, and the waiting time for a new flat can be shortened. I sincerely hope that the Minister for National Development will seriously look into how to satisfy your needs. At this time, I hope that all the Government Ministries will be more pro-business, pro-people so that in this time of crisis, everybody could be reassured and encouraged to fight together for a better tomorrow. The Minister for Education sends you wishes for good results in your studies; The Minister for Community Development, Youth & the Sports sends you wishes for good community spirit with help and support coming from all quarters; The Minister for Transport sends you wishes for smooth and easy passages to everywhere you want to go; The

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Minister for Manpower sends you wishes for a good and auspicious start in your new working year; The Minister for Law sends you wishes for fewer parking tickets and less fines; and the Minister for Finance sends you wishes for plenty of money to use. As for me, I wish you good luck and success in everything you do. This is what our people are looking for too.

I would like to quote from what MP Seng Han Thong has inscribed in his personally-designed new year card, "Team Singapore, work harder. We should not give up even in a time of crisis!"

*Cols. 1607-1612.

Mr Yeo Guat Kwang: 4.39 pm

The Senior Minister of State for Foreign Affairs (Mr Zainul Abidin Rasheed): Mr Deputy Speaker, Sir, in a word, the Budget is extraordinary. In Malay, it is luarbiasa , or beyond the norm. It is no longer the SOE or the so-and-so budget for the Standard Operating Environment, but SOE as SoExtraordinary. In the spirit of the Budget highlights presented by Finance Minister Tharman Shanmugaratnam, it is now also SOEasy to appreciate where the Government was coming from to meet the challenges of the impending testing times.

Mr Deputy Speaker, Sir, I rise in support of the Budget 2009.

In the US, President Barack Hussein Obama has proposed a US$819 billion economic stimulus recovery plan, and experts are saying that it is still not enough to get out of the current mess the banks on Wall Street have left the state of the economy in America. Not a single Republican voted for it, saying it is wasteful and would not be effective, as it tilted heavily towards new spending

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instead of tax cuts. Similarly in Europe, much of the bailouts seem "Money Not Enough".

In the famous five-day World Economic Forum in Switzerland this week, world leaders and economic experts grappled with what to do. The Dean of the Lee Kuan Yew School of Public Policy, Prof. Kishore Mahbubani, said, "Everybody's lost in Davos". The roundtable wrapped up two days ago in the atmosphere of doom and gloom that it began, with a realisation that the depth of the crisis is still unknown and the solution remains elusive. Premier Wen Jiabao of China called on the world to act in concert as, he said, "We are in the same boat." We sink or swim together.

What about our Budget, Sir? Have we done enough? Will it again be a case of too little, too late? These must be some of the questions Singaporeans are asking. By Singapore standards, this year's Budget is indeed a record. For the first time in our modern history, we have decided to dip into our reserves. It is unprecedented. So much so, it has left many among the more conservative and sober businessmen, worried about the signal which Singapore Government wanted to send. It must be that bad for the normally tight-fisted and prudent Singapore Government to release its hold on our national reserves, a sacred cow held dearly and closely to our hearts. Many a time, many Singaporeans had tried and pressed the Government to relent and release the reserves, including the last recessions in 1985, 1997 and 2001/2003, but let us also remember that sauce for the goose is not necessarily sauce for the gander. Let us not kill the goose that lays the golden eggs.

Even Senior Minister, Mr Goh Chok Tong, had declared that "if this is not the rainy days we have all this while built and kept our reserves for, then what is a rainy day?", only to caution, practically in the

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next breath, that this does not mean "breaking the piggy bank". Yes, it does not take economic experts to know that there will be more that needs doing. While Prime Minister Lee Hsien Loong has promised "more", if and when needed, perhaps to be reviewed in six months' time, like the Budget Supplement also dished out during the last recessions, I believe it is better to do the saving in two or three steps, rather than rushing in blind. I believe there is no right or wrong answer as to what would constitute an appropriate formula for such supplementary help. Nevertheless, there are still many Singaporeans who might have been disappointed that the S$4.9 billion from the reserves was too small and too conservative a move for such an extraordinary and pressing time. And it is for this reason, I would like to urge Minister Tharman to elaborate on the basis as to how the Government decides what formula to use when deciding to dip into our national reserves. While there are always Singaporeans who would want more of the sacred cow slaughtered, there will be equally, if not more, who would urge the Government to be conservative, prudent and not to be trigger happy at dipping into the national reserves. To the latter group, this sacred cow needs careful nurturing and rearing, and to beware of the temptation to break the piggy bank. In other words, it is not halal, not allowed, to rob our own piggy bank.

Sir, I would like to applaud the Resilience Package introduced by the Government. Jobs, jobs and more jobs must be the way forward for our people , if we want to prepare our people for the realities of today's challenges. Yes, more is also given to help the needy, but we would want our people to meet the challenges with dignity rather than develop a crutch mentality. We are happy that Minister Tharman has chosen creative approaches through Jobs Credit and reskilling through SPUR for workers and professionals. This indeed is more

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than the "SPUR" of the moment. I agree to the need to encourage our workers to earn their "SPURS" and sharpen their skills and competitiveness. This will stand them in good stead for the longer term, especially when the economy turns for the better and we want to be there to exploit the new opportunities that will surface.

I will not touch on the business stimulus package which Mr Inderjit has dwelled on at length but suffice to say that it will go a long way to bring about better confidence and optimism, something lacking these days in the private sector.

One area which needs due attention is the support programme for families and direct assistance to households. I applaud the slew of assistance programmes announced, from GST Credit to S&CC and rental rebates, which will certainly help when many people are expecting reduced incomes and bonuses. The personal income tax rebates of 20% is welcome, although many wished that the cap could be pegged higher. Even the middle class too, Minister Tharman said, will receive significant benefits. I would, however, urge the Government to monitor this group and the benefits they receive, as many still feel the middle income squeeze and they often feel neglected.

I am most happy to see more Government funding for the Self-Help Groups (SHGs) and the VWOs. The increase of $15 million for VWOs is rather small, but the total amount dished out ($220 million) is a significant support for the organisations that help make a success of our Many Helping Hands approach. Similarly, I welcome the additional $4 million to be given to the SHGs over the next two years, to a total of $9 million a year. The additional funding to the CCC-ComCare Fund to $7

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million a year over the next two years will also help encourage the SHGs and grassroots organisations to play a more active role, in addition to the role played by the CDCs. As one of the Mayors, I would also like to encourage better bonding and synergy of roles between the CDCs and the GROs. The Government should incentivise that with more funding.

At the NECDC, we are already extending our hands to the GROs and are working with advisers and VWOs to enhance our help to the needy, particularly in job and financial assistance. On top of national projects, the NECDC is devoting more of its resources (from $1.4 million last year to $3 million this year) to neighbourhood programmes to fill the social and service gaps, after taking into account national programmes. But this must also be done with bonding and better harmony in mind. In the early 70s, I was told that if the economy could grow at 6.5%, we should be able to take care of all our people, including the lower income, particularly the lagging Malay and Indian communities. They relatively are behind in terms of skills and income. Now, with a shrinking economy, they will most likely be affected first. To avoid income gaps growing and resources being diverted to more economic programmes, the Government must ensure that there is enough allocation of funds for bonding programmes to continue.

( In Malay ): [For vernacular speech, please refer to Appendix A.] Sir, although generally we accept that the Singapore Government is a secular one, and the Government also does not want to be seen as taking the side of any particular group, especially in religious group activities, I feel that the Government must also consider the importance of supporting programmes that promote the spirit of inter-religious harmony and inclusiveness. The Inter-Religious Organisation (IRO) is one example. The Inter-Racial Confidence Circle (IRCC) is another.

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They have been making excellent progress in promoting inclusive behaviour and they deserve greater support. Recently, I was at the funeral of the late Mr V R Nathan, Chairman of the Hindu Endowments Board, and I was very amazed, happy and felt assured when I saw leaders of different faiths paying their last respects and offering prayers for the late Mr Nathan. It certainly made the family of the late Mr Nathan value the role that he had actively played in promoting life values based on IRO's ideals.

Similarly, when I attended a meeting in Gujarat, India last month, I was able to visit the Gandhi Sabarmati Ashram. Gandhi, as we know, is a global figure who gave a great deal of attention towards inter-religious relations and harmony, and rejecting violence. The role played by icons like the late Mr Gandhi had an effect on me. We need to draw lessons from his life values to promote similar values in Singapore. With economic growth rates expected to decline, we must ensure that the harmonious lives that we have built together all these years through thick and thin, will be maintained and further strengthened.

We have to strategise to ensure that no matter whether the economy grows or declines, it will not affect our race relations in Singapore. We hope that more assistance will be given to the Self-Help Groups and the VWOs, because they play an important role to ensure harmonious life in Singapore. As we are still celebrating the Lunar New Year, let me end with a Chinese saying, " Ren ren wei wo, wo wei ren ren " – All for one and one for all.

*Cols. 1613-1614.

4.53 pm

Mr Liang Eng Hwa (Holland-Bukit Timah): Mr Deputy Speaker, Sir, thank you for the opportunity to speak on the

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Budget. I will essentially cover three areas; firstly, my brief thoughts of the Budget package; secondly, my position on the decision to draw on our reserves; and thirdly, the lessons we can learn from this global crisis that is unfolding before us.

Sir, a stimulus package to the tune of 8% of our GDP, chalking up basic deficits of about 6% of the GDP and requiring a dip into our jealously guarded reserves is, to use a simple description, gutsy. The task has fallen on our shoulders now to scrutinise and debate these gigantic Budget measures and, hopefully, forge a national consensus on the course of action we will take in this economic crisis, the worst of our lifetime.

Around the world, governments are also urgently coming up with economic packages to resuscitate their respective economies. For example, the US government is currently pushing for a US$819 billion stimulus package through the Senate.

In Singapore's case, the Resilience Package is no ordinary Budget package. Given its massive size and the daunting circumstances that we face, the package must pass what I call a "3-Ts Test", borrowing a methodology from a US Senator scrutinising President Obama's Stimulus package.

The three "Ts" are: Timely, Targeted and Temporary.

First, the timeliness of the package. Urgency as well as staying ahead of the curve is among the key imperatives of Budget 2009. By staying ahead, I am not only referring to the fact that we have brought our Budget forward by one month but, more importantly, the pre-emptive nature of the measures. The full impact of global de-leveraging has yet to take its course, and we may see the economy worsen in the coming months. So the sooner we prepare companies and

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Singaporeans for the further fallout ahead, the better their chances of surviving and weathering the downturn. These urgent measures now, to stimulate bank lending like the SRI and subsidise wages under the Jobs Credit Scheme, combined, could make a difference as to whether businesses will decide to lay off workers or to downsize their business. We can only hope that these measures would buy them some time as they find financial leeway to keep their company solvent and viable. Speed is paramount here. So with regard to the first "T", I salute the Government for the timeliness and urgency displayed in this Budget.

The second T-test is that the package must be targeted. By now, we are clear the key focus of the Budget is about saving jobs and minimising long-term damage to our economy. The crisis started with the financial sector and has severely hit the valuations of financial markets. It has now moved on to the real economy, and companies across a broad spectrum are suffering as demand collapses. Foremost, on the minds of many businesses now, is to keep the cost low and to remain solvent. Hence, I agree with the Government that at this stage, the focus must be to help companies stay funded and incentivising them not to lay off workers. The Jobs Credit Scheme, which is pegged to each worker a company employs, will in some way slow down the retrenchment.

The Government has also correctly identified that the root cause of the present credit crunch is that banks are more careful in lending in these troubled times. It has tackled this head-on, by taking on a significant share of the lending risks of our banks. And in my view, this is the most effective supply-side measure. If countries around the world are also in a similar position to do what we have done, to offer such risk-sharing schemes to their

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banks, I am sure it would alleviate the global credit crunch and greatly lessen the impact of deleveraging. Given the multiplying effect of leverage, this measure can be more effective than any pump priming stimulus.

Also, I support the Government's approach to target the supply-side measures, rather than attempt to shore up demand. In a small, open economy like Singapore, there is no way a Keynesian-style government spending can mitigate, let alone substitute lost global demand. Given how much we import, we will, in fact, be stimulating the economies of our trading partners rather than our own.

The third T-test is that the package must be temporary. The size of the Resilience Package goes beyond what our operating revenue is able to fund. Even with contribution from NIR and NII accounted for, we would still run into an overall deficit of $8.67 billion. Other than borrowing or tapping whatever is left of our current savings, dipping into the reserves is the only option we have left.

Clearly, this level of spending would be unsustainable if it becomes recurrent or built into long-term programmes. If we lose our fiscal prudence, the ramifications are serious; we could be losing our AAA ratings status, or cause a run on the Singapore dollar. Hence, I am glad that the Minister for Finance has given assurance to the President that such significant spending is exceptional and the measures taken are temporary. We must continue the practice of balancing our annual budget over the term of office.

Sir, while we are glad that we have ample ammunition to tackle the current crisis, we have to be mindful that the use of such fire power will also come with heavy responsibilities. Budget 2009 will most certainly be remembered for the unprecedented draw on our national reserves to fund the package. Such a

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move has very significant long-term implications. From now on, surely, we will have one eye on the reserves every time we are confronted with a painful economic downturn. And with the size of our reserves greater than the size of our GDP, it is tempting to look to it as the ultimate perfect, painless solution to our woes. Our accumulated national savings are our last, and crucial, line of defence in any crisis. Would the Government's move to guarantee all bank deposits last year held any water had it not been backed up by the size of our reserves?

As for the current crisis, the Finance Minister has cited the extraordinary circumstances we face and the temporary measures we are undertaking as chief reasons that warrant the dip into the reserves.

I am convinced by the case that the Government has put up, and support the draw on the reserves. I must admit though that this is not the scenario I had envisaged for such a move, which is more of a catastrophic situation that could undermine the survivability of this nation, such as a natural disaster, terrorist attack or a pandemic. Nevertheless, at this juncture, we urgently need a strong response to prevent more job losses and minimise lasting damage to our industries. We need our industries to stay afloat, keep their capacities intact to benefit from the recovery when it comes.

Even so, the watershed decision to draw on our reserves will be an important reference point and benchmark for future Governments. We must, as a matter of precedent, establish precise and transparent principles that govern the tapping of the reserves. Questions such as the circumstances that warrant such a move, the processes involved and how much we can spend, must be debated in this House.

Here are some measures I would like the Government to consider:

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Clarity in the economic benchmarks for the dip. We suffered three quarters of sharp quarter-on-quarter contractions and two quarters of year-on-year contractions, with worse times to come. Are these economic conditions a basis for future drawdown? Would the basic budget deficits of 6% of GDP be another threshold for consideration?

Should we restrict the tapping of the reserves to fund only temporary measures, such as the Jobs Credit Scheme and the Special Risk-Sharing Initiative (SRI) in this instance, as opposed to long-term Government programmes?

The Constitution was recently amended to allow immediate spending of up half of our Net Investment Returns. In very difficult circumstances such as now, is it not better that as a principle, that we build changes into this 50% spending rule in favour of more current spending, rather than drawing on the principal amount of our reserves?

The principles that govern how we spend our reserves will influence our long-term survivability as a nation. At stake, are our national values as well as how we would deal with future adversity.

Mr Speaker, Sir, even as we inject much-needed resources into the economic bloodstream and do our best to weather the downturn, it is important to reflect on how the world got into this state in the first place.

The global economy today is in bad shape, and by all accounts, promises to get worse. Some political leaders and observers have even been quick to predict that this tsunami of economic hardships could trigger the end of capitalism. For example, French President Nicolas Sarkozy, who came to power on a right wing ticket, actually declared laissez-faire capitalism over. He said, "The idea of the all-powerful market that must not be

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constrained by any rules, by any political intervention, was mad."

Historically speaking though, booms and busts are part of the economic cycles. Why then does this latest recession seem particularly damaging? Some say it is because of a free market system that has gone unchecked for the past 20 years. There are clear examples of excesses: reckless lending in the US housing market under a low interest rates environment, gross mispricing of risk by market participants, inflated compensations paid to company executives, and ­the list goes on.

Indeed, liberalisation and deregulation has become the norm in the last two decades. Governments, on the other hand, got smaller and turned lassez-faire , believing that the market would sort out its own problems.

Today though, it would be too much to expect the market to unravel this mess on its own. Too many parts of the system have been broken, and life would never be the same again. Even Alan Greenspan, the highly-respected former Chairman of the US Federal Reserve and a staunch believer in the free market, said that the meltdown had revealed an inherent flaw in the economic model he had propagated his entire life.

In his testimony to the US Congress back in October 2008, he said, "This crisis has turned out to be much broader than anything that I could have imagined. Those of us who have looked to the self-interest of lending institutions to protect shareholder's equity – myself as a specialist – are in a state of shocked disbelief. A critical pillar to market competition and free market system did break down."

The consequences of market failure have led to a dramatic swing to

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governments, the capital of last resorts, for help and intervention. In the past few months, we have witnessed shareholdings of many iconic financial institutions changing hands from private ownership to government ownership; we have seen massive private and corporate de-leveraging taking place, only to be offset partly by rising government leveraging to fund more spending and bailouts. We have observed that governments rushing out stimulus packages to substitute the collapse of private demand.

It is, therefore, timely for a serious re-examination of what some call a "savage" capitalism model. Yes, the free market has brought decades of prosperity but it has also grown too aggressively for its own good and has to be reined in. In other words, the balance between the visible hand of the state and the invisible hand of the markets will be recalibrated.

As Nobel Laureate economist Joseph Stiglitz puts it succinctly: "Capitalism may be the best economic system that man has come up with, but no one ever said it would create stability. Government regulation and oversight are an essential part of a functioning market economy. The market, on its own, is not enough."

China is well aware of this. Over the last 15 years, it has partially privatised industries so that local companies can tap on foreign capital and expertise, while continuing to assert control over more volatile sectors such as financial services. In such chaotic times, this cleverly-struck balance between the free and the managed markets, has served the country well. China is now looked upon as a source of economic stability in this crisis.

What then are the lessons here for Singapore? On the whole, we have adopted a pragmatic, rather than ideological, approach to managing our economy. Our markets are free, yet tempered with careful deregulations, and

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we retain the option to intervene whenever necessary to correct anomalies. In strategic sectors, we have, by and large, retained complete or partial state ownership, but they are always subjected to market-based governance and industry best practices.

We should not feel apologetic for our occasional interventionist approach. After all, as an island state with an open economy and yet no domestic economic hinterland, it is only in our best interest that we do so. Some of the unique interventionist measures we have taken, for example, in the management of our Singapore dollar within a trade-weighted band or the third party war risk liability insurance cover by the Government for Singapore Airlines in 2003 has served us well and are necessary.

In recent years, however, I have observed that the Government has leaned increasingly in favour of the market. Statutory boards, for example, are being corporatised one after another. Temasek-linked companies such as CPG Corp, Sembcorp Logistics and the only three major power generation companies have also been divested in swift succession.

In addition, there continues to be misalignment of interests between the public and private sector in some areas. In the public transport sector, for instance, balancing the needs of commuters and the interests of shareholders of the listed public transport companies remains a formidable task. We still hear of Public Transport Operators (PTOs) not willing to shorten their bus headways or run new routes because of shareholders' interests.

Mr Deputy Speaker, Sir, this crisis is the starkest reminder to us that without a watchful eye, the market can spin out of control. We cannot assume that everyone in the private sector will always act in its

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long-term interest, and even less so, in the interest of the public.

The crisis could have lasting impact on the way Singaporeans live their lives and the way our economy functions. We may even have to contend with slower GDP growth going forward in the lower leveraged world. The Government should undertake a review of our economic model and in areas of strategic sectors, continue to strengthen its visible hand. In a political economy like ours, we cannot afford to take a market purist approach.

In my view, our aspired model should be to continue to be a balanced market economy, where there is room for private corporations of all sizes, nationalised companies, co-operatives and social enterprises to co-exist and work towards benefiting both corporate bottomlines and the public at large. In areas where public interest cannot be possibly aligned with the private's, we should look to the state or social co-operatives to fulfil that role. After all, we have one of the best social co-operatives in the world – NTUC FairPrice – which sets exemplary benchmarks in terms of social responsibility.

Finally, let me paint a picture of the Singapore I have in mind. It is not a corporate jungle, a chaotic and mercenary place where only the ruthless and savage survive. Instead, what I envisage is a true Garden City, still vibrant but well-tended environment where material wealth is not the be-all and end-all, but simply a means to fulfil our dreams. We can build that value system.

With that, I support the Budget.

5.09 pm

Mr Siew Kum Hong (Nominated Member): Mr Deputy Speaker, Sir, thank you for allowing me to join the debate on the Budget Statement. I will touch on three aspects of this Budget: the use of

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the reserves, the Jobs Credit Scheme, and the amount of help for the retrenched and unemployed.

First, the unprecedented use of our reserves, to fund the Jobs Credit Scheme and the Special Risk-Sharing Initiative. I applaud the Government for taking this step.

Our reserves have always almost bordered on the mythical: Singaporeans speak of them proudly and reverently, but we know so little about these fabled reserves. Using them now sends the right signal about just how dire the situation is. It assures Singaporeans that the reserves are not sacrosanct, that they are not being accumulated for the sake of accumulating them, and that they will be used when it is necessary to do so. If the worst economic crisis the world has seen in six decades, does not merit the use of the reserves, then nothing ever will.

But I have some concerns about the process in which the use of the reserves is being approved. We have always been told that the reserves are a hard-earned strategic asset of Singapore, and that the Elected Presidency is necessary to safeguard them. And yet, there has been precious little information about the deliberations of the President or the Council of Presidential Advisers, in giving in-principle approval to use the reserves.

The Government should ask the President and the Council to publish detailed reasons for their decisions. This is the first time we are using the reserves. It is, therefore, a golden opportunity to define the principles for doing so. The Elected Presidency is all about the process for using the reserves – so it is important to ensure that the process in this instance is transparent and clearly articulated.

The Government has stated some principles for using the reserves, but

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principles articulated by the Government do not – and more importantly, should not – bind the President. After all, the President is supposed to be the independent check on the Government in its use of the reserves. The President is the guardian of the so-called second key to the reserves. It would therefore be helpful for the President and the Council of Presidential Advisers to publicly explain to Singaporeans, why they approved the use of the reserves, and what principles they intend to adopt moving forward. Doing so would buttress the institution of the Elected Presidency.

These principles and guidelines do not have to be legally binding or even binding on subsequent requests to use the reserves. But they would certainly provide helpful guidance if we ever want to use the reserves again. Now is the time to set a sound foundation for the future.

This is all the more important, given that this Government has actually accumulated sufficient reserves during its term to fund the Jobs Credit and SRI Schemes. The Government should therefore ask the President to explain whether and why he is satisfied with the Government's reasons for not using its accumulated reserves.

I now turn to the Jobs Credit Scheme. It is one of the lynchpins of the Budget, and it seems to have caught the imagination of Singaporeans. Call it what you will, but it is fundamentally a wage subsidy for employers. It equates to a 9-percentage-point cut in the employers' CPF contribution rate. It will cost taxpayers $4.5 billion, and will be funded by our reserves.

The objective of this scheme is to save jobs. But how effective will it be?

Clearly, the effectiveness of the scheme for each employer will depend on the proportion of its costs attributable to

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wages. If wages form just 10% of an employer's overall costs, then the Jobs Credit Scheme will reduce its total costs by up to 0.8%. On the other hand, if 70% of costs are wages, then the scheme will reduce total costs by a maximum of 5.5%. These are theoretical maximums, based on improbable assumptions of 100% local employees, all earning $2,500 per month, or less.

The Minister has explained that the global economic crisis is caused by a worldwide collapse in demand. Simply put, there is massively reduced demand for the goods and services produced by our economy.

Last week, the Economic Development Board (EDB) released a report on the manufacturing sector's business expectations for the next six months. This report paints a shocking picture of just how dire things are expected to get. An across-the-board negative outlook for the first half of 2009 for manufacturing, with similarly negative forecasts for output and employment for Q1. For instance, 92% of data storage firms and 81% of precision engineering firms predict a drop in output.

When demand falls off a cliff like this, many businesses will face a drop in revenue far exceeding 8%. Businesses will have no choice but to cut costs to stay afloat.

In this context, I suspect that the Jobs Credit Scheme will turn out to just a band-aid. Yes, it will provide a temporary cushion for businesses, especially SMEs.

Yes, it will make employers a little bit more reluctant to lay off locals. Yes, whatever protection it creates will probably benefit the low-income more than the high-income. But it will still only be a band-aid at best, in stopping job losses. And what a very expensive band-aid it will be. Citigroup’s head of Singapore research, Dr Chua Hak Bin, has

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pointed out that if the Jobs Credit Scheme helps to save 50,000 jobs, then the cost of saving each job is $90,000 – three times the median annual salary of each job in Singapore. Even if it helps to save 100,000 jobs, the cost of saving each job is $45,000 – still 50% more than the median annual salary.

And contract workers, who are probably most at risk when a business cuts staffing costs, may not benefit from the Jobs Credit Scheme. Contractors are usually hired by employment agencies and farmed out to companies. The agencies will be the ones receiving the subsidies. They have no incentive to pass it on to the companies. Unlike with property tax rebates, the Government has not asked these agencies to pass the savings on to their customers. And so, the scheme could make contractors, who form a growing proportion of the workforce, even more vulnerable than they otherwise would be.

I agree with people like NUS Prof. Shandre Thangavelu, who has said that the Jobs Credit Scheme will only have a short-run impact on the retrenchment behaviour of employers. Even the MOF team who designed the Scheme is unable to predict just how many jobs it will help to save, and for how long. Mr Poon Hong Yuen, who led the team that put the Scheme together, said "If just because of this, they rethink retrenchments, then I think it is already quite an achievement."

I would praise the Ministry for its willingness to take a chance on the Jobs Credit Scheme. I think this sort of policy risk-taking is important and helpful. But I do not think the risk will pan out in this instance. And I think Mr Poon sets a surprisingly modest target. At $4.5 billion, I would expect more. The Jobs Credit Scheme will end up benefiting capital owners disproportionately. It will reduce business costs, but I do not expect it to save very many jobs, and even then not

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for very long. It is essentially a special transfer to capital owners, such as business-owners and entrepreneurs. And considering that around 50% of the Singapore corporate sector is foreign-owned, a big chunk of this transfer will leak out of Singapore.

Today’s Straits Times Forum carried a letter from someone who works in an SME, praising the scheme. But if you drill into the details, it is clear that the business was not considering retrenchments in the first place. Instead, it is considering using the Jobs Credit funding to invest further in its business. In these times, that is not a bad thing. But it clearly shows up the limitations in the Scheme’s ability to achieve its stated goal of saving jobs.

The Jobs Credit Scheme will have, at best, a marginal impact on businesses’ decisions on whether to retrench. Businesses facing collapsed demand will still retrench. Businesses doing well will reap a windfall benefit. MNCs will still, by and large, follow their corporate headquarters’ directions on retrenchments. True, the Jobs Credit Scheme is not meant to be the complete answer. It is not a panacea. It is one piece of the puzzle, albeit a big centrepiece, and there are many other measures to reduce business costs and help businesses through this difficult period. But the question must be whether spending $4.5 billion on the Jobs Credit Scheme produces the most bang for the buck for Singaporeans.

This is a handout for businesses. But we have always opposed handouts for Singaporeans. Why are businesses different? In giving all this money away to businesses, are we somehow being psychologically held hostage to the ideological dogma that the best way to

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help Singaporeans is to help businesses, instead of helping Singaporeans directly?

This Budget does little for the retrenched and the unemployed. The various elements that made up the GST Offset Package first announced in 2007 have been enhanced. The amount of GST Credits for each household has been doubled, and there are additional S&CC and rental rebates. But let us be honest with ourselves. These are mostly enhancements of measures previously announced to alleviate the pain from the GST hike in 2007. But the coming storm will inflict much more pain and much more suffering than the GST hike of 2 percentage points did. To equate the two is to severely understate the impact on Singaporeans in the coming year. They are simply incomparable. It is inconceivable to me that the exact same tools used to soften the impact of the GST hike could be enough to address the worst recession we have seen in the past 60 years.

In the past few weeks, various Ministers have spoken about the need to save jobs. Rightly so. Saving jobs has to be the No. 1 priority. I may disagree on the effectiveness of the Jobs Credit Scheme in achieving this goal, but I do not argue with the goal itself. But I would go on and argue that helping those who have lost their jobs deserves to be the No. 2 priority.

Prevention is better than cure, so the saying goes. "Better than", not "instead of". When prevention fails, we still need a cure. Saving jobs is only one side of the coin; the other side of the coin must surely be to help those whose jobs are not saved. This Budget seems to have produced the singular oddity of a one-sided coin, where we concentrate so much of our efforts on saving jobs, but do so little to help those who do lose their jobs. It is almost as if the retrenched are being dealt a double-whammy: the first hit

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is the loss of their jobs, and the second hit is the lack of assistance for them.

To be fair, SPUR does have something for the unemployed. An unemployed low-skilled Singaporean who attends training courses to learn new skills can get an allowance of $4 per hour. A PMET who undergoes a professional conversion programme (PCP) can get an allowance of up to $1,000 per month. But SPUR is not without problems in implementation. It adopts the co-payment requirement of so many government measures. This strict insistence on a 10% co-payment of course fees means that trainees must still fork up an upfront fee. This can be difficult for many, since they by definition have no source of income. We should provide trainees with interest-free loans for the co-paid amount, with repayments in instalments and possibly interest-bearing after the trainee finds a job, which can be monitored through the CPF system.

Also, the PCPs will be unattractive to most retrenched PMETs. Some retrenched PMETs will have skills that are obsolete, and PCPs will be appropriate for them. But the majority of retrenched PMETs will have skills that are not obsolete. They were retrenched not because they are in sunset industries, but because their companies needed to cut costs. Their skills will be in demand when the economy picks up again and the economy will pick up again. They do not need and they do not want retraining for a new profession, because they will in all likelihood continue doing the same thing once the economy recovers. And in most cases, that is the rational choice, if only because retraining for a new profession means starting all over again at entry-level pay, wasting their accumulated experience in their existing profession. For these retrenched PMETs, SPUR does not provide meaningful assistance. For these retrenched PMETs, the Budget has little

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else. For these retrenched PMETs, there is little help forthcoming.

I spoke about the Government’s approach to helping Singaporeans in my Budget speech last year. I spoke about my disappointment at how we put so much more emphasis on GDP growth than on helping less fortunate Singaporeans. I criticised this Government’s approach to social assistance of being willing to let Singaporeans suffer rather than risk any wastage of public funds to help them.

This year’s Budget again does not risk any wastage of public funds in helping Singaporeans. But it does risk wasting public funds in helping businesses. Even in these tough times, we do not give away money with no strings attached to individual Singaporeans. But it seems that these tough times justify giving away money with no strings attached to businesses regardless of whether they are prospering or despairing.

Last year, I was criticised for being reckless and dangerous. At the risk of being called the same or worse this year, I will have to press on. I continue to believe that it is possible to craft targeted social assistance schemes to help the unemployed, that minimise the risk of eroding the work ethic. I have a few suggestions and I hope that I can articulate them clearly enough.

I ask the Government to introduce some form of unemployment insurance. In 2007, we introduced social risk-pooling for longevity risk, which is the risk of living longer than we expect or can afford to. Why not social risk-pooling for retrenchment? Not unemployment as such, but targeted for retrenchment with low benefits. This can be restricted so that only workers who are retrenched with payouts below a certain stipulated amount, say the lower of three months of the last-drawn salary or a stipulated quantum, get a few hundred dollars for so long as they remain unemployed, up to a

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maximum of six months or longer, provided they seek re-employment during this period. This is targeted and limited. This will not sustain long-term unemployment, but is intended to tide over those who have been retrenched while they find another job. The payout will be small, but the assurance to those retrenched could mean so much. And if the Government will not introduce unemployment insurance on a permanent basis, then I ask it to consider unemployment benefits for the retrenched, just for this year. It can be limited to workers who were retrenched since last November or who are retrenched this year. The amount can be limited to the lower of half of the last drawn salary or $1,000 per month, capped at a maximum of six months of payments. Just like the Jobs Credit Scheme, it is a one-off scheme in light of the worst recession in 60 years.

But I know that realistically, both of these options will not be acceptable to this Government. And so I ask the Government to introduce a temporary assistance loan scheme, loosely modelled after the UK’s social fund. It should be made available to unemployed Singaporeans including the recently retrenched, to provide small loans for certain approved purposes. We can call this the No Jobs Credit Scheme. Examples of approved purposes could include medical expenses that are not covered by insurance, MediShield or Medifund – for whatever reason – or expenses not covered by ComCare for whatever reason. To avoid abuse or misuse, the loan amounts could be disbursed directly to the persons charging for these bills and expenses. The loans should be interest-free and payable in small instalments once the borrower starts working again, perhaps by deductions from salaries through the CPF framework. Such a scheme would reduce the incidence of folks in desperate need for cash going to

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loan sharks or maxing out their credit cards, which would result in a downward spiral of crippling interest at a time when they could least afford it.

I also ask the Government to introduce more special transfers to the low-income. The doubling of GST Credits and the additional S&CC and rental rebates are helpful, but they are very small in size. Inflation hit 6.5% last year, and even in this recessionary environment, there will be a time lag before prices go down. As it is, there have been some reports in recent weeks suggesting that some food prices could still be going up. More special transfers in the first half of this year will help the low-income cope, until such time as disinflation kicks in. This will also provide a helpful fiscal boost, given that the MAS' own Monetary Model of Singapore shows that direct transfers to the low-income has a high fiscal multiplier for the Singapore economy.

Sir, I do not see these suggestions as reckless or dangerous. I do not think they will necessarily result in a bloated bureaucracy. And even if they require some more resources on the part of the Government for implementation purposes, that should not, in and of itself, automatically rule out policies that could benefit Singaporeans. Maintaining a lean government is a means to an end and cannot be the end in itself.

I know that there is ComCare and it plays an important role in helping needy Singaporeans. Today’s edition of the TODAY newspaper carried a useful reminder of that scheme. But it is an ad hoc scheme that is highly discretionary, and only intended for three to six months of assistance. That time frame may be too short for retrenched workers in this recession. The discretionary element in the scheme does not give workers the all-important assurance and security that a formal scheme provides. These times are already so uncertain, why add to the

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stress of retrenched workers by making assistance uncertain as well? I think we can, and we must, do more and do better for Singaporeans who lose their jobs. When Franklin D Roosevelt was inaugurated for his second term as the US President in 1937, he said in his inaugural address, "The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little."

This year, there will be many amongst us who will have too little. Economists have forecast anything between 30,000 and 300,000 jobs lost over the next one to two years. But this Budget does little to provide for them. What then is the extent of our progress? Singaporeans will have to judge for themselves.

Mr Inderjit Singh: May I seek a clarification? I fail to understand the Member's argument that the Government will be wasting money in the Jobs Credit Scheme and businesses gaining unnecessarily when actually if the company retrenches, they will not get the Jobs Credit amount from the Government. And if the company keeps the employee, they will spend a lot more to keep the employee than the $300 that it is going to get. So I did not understand how the Government is going to waste money. In fact, I see this as a positive approach to saving jobs. If they are not going to save jobs, they are not going to get the money. So can the Member explain this?

Mr Siew Kum Hong: Mr Deputy Speaker, Sir, I think Mr Singh may have misheard me. I do not believe that I said anywhere in my speech that the money will be wasted in the Jobs Credit Scheme. I do not think I used those words "the money will be wasted".

What I did was to set out the stated objective of the Scheme, which is to save jobs and to reduce retrenchments. What I argued was that I do believe that the Scheme will achieve that stated objective. I do not

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think the money will be wasted in so far as we understand the term "waste". I do think that the money will reduce business costs. I just have doubts as to whether it will save jobs.

Ms Indranee Rajah (Tanjong Pagar): Sir, may I seek a clarification from the Member on that particular statement as to why he doubts it would save jobs? The Jobs Credit Scheme is to encourage the employer to retain employees. By retaining the employees, it will save jobs and thereby achieve the stated objective of saving jobs. Can the Member explain why he thinks it will not achieve the stated objective of saving jobs?

Mr Siew Kum Hong: Mr Deputy Speaker, Sir, I have explained in some detail in my speech. I will be happy to send a copy of my speech to Ms Rajah if she so wishes. But let me just repeat myself a little and I will be brief. My argument is that in a situation of falling demand when the revenue of the business is falling through the floor, the wage subsidy will not save jobs. Businesses will cut jobs anyway, simply because it is not sustainable. And my argument is that the Jobs Credit Scheme makes too little of a difference in the face of such an overwhelming collapse in demand. And I have said this in my speech that I believe that there will be a temporary but small effect. It will be temporary, and the retrenchments will continue after that.

Mr Zaqy Mohamad (Hong Kah): Mr Deputy Speaker, Sir, a point of clarification. I do understand that Mr Siew has mentioned some of these points about why he has doubts that the Scheme will save jobs. I do not know whether he has based it on any statistical indicators. I am not sure if he has any basis for this conclusion.

Mr Siew Kum Hong: Mr Deputy Speaker, Sir, I am happy to clarify details of my speech but it seems that Members

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want to engage me in an argument. Be that as it may, Sir, in my speech, I have laid out an argument based on logic. I do not have the statistics on the extent that demand has collapsed, but I will point Mr Zagy to the EDB's report released last week.

We are, basically, across the board in the manufacturing sector. Businesses believe that demand will drop in the first half of the year, in the coming two quarters. There was a lack of detail in that report on the extent that demand will drop. But I think it will be significant given the uniformity of opinion. That being the case, if demand drops substantially, and revenue drops substantially, there will be 3%-5% reduction in the cost structure, because the Jobs Credit Scheme will not help.

Mr Heng Chee How: Point of clarification, Sir. If the Jobs Credit Scheme serves to increase the flow of revenue into a company and at whatever state of demand that the company is facing but with a better cash position, would it not last longer? And if the company were to last longer, would it not then be able to keep more jobs for more workers longer and avoid the pain for more workers, the very pain that he argued so passionately about saving workers from?

My other clarification, Sir, to the Member is that if he believes that the $4.5 billion set aside for the Jobs Credit Scheme for saving jobs, which objective he does not disagree with, is not cost effective, then what other ideas would he have that would be more cost effective and yet save jobs?

Mr Siew Kum Hong: Sir, on the first point whether the Scheme will have the effect of saving jobs because it reduces

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cost, my argument remains that if there is a drop in demand which far exceeds the savings and the reduction in business expenses, then jobs will be lost. A rational business will have no choice but to cut jobs, because it cannot keep on making losses, month after month. My argument is that the Jobs Credit Scheme will provide very temporary relief in that sense. It will have the effect that Mr Heng refers to, but it will be temporary. It will not last for long and then the job cuts will resume. That is my argument. I may be wrong. I wish I am wrong, but I do hold that opinion.

On the second point whether I have any alternative suggestion as how to save jobs, I wish I did. And if I did, I certainly would have expounded upon it in my speech instead of criticising the Scheme. The reality is I do not. When we are faced with collapsing demand, when we are in an open economy where we cannot prime the economy and stimulate our own demand, the reality is that job losses will be inevitable. In which case, the question should be, what do we do to help people whose jobs are lost? Can we not apply the $4.5 billion and better use it to help Singaporeans? That is the question I pose. Obviously, I do believe that we can.

Mr Deputy Speaker: Let us move on with the debate. Ms Irene Ng.

5.37 pm

Ms Irene Ng Phek Hoong (Tampines): Sir, one historic decision in this year's Budget is the drawdown of our hard-earned reserves for the first time.

We have been prudent to accumulate such a resource in good times, so that we can draw from it in critical times like this. This is possible because of the hard work and sacrifice of the previous generations of Singaporeans.

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The first generation, who survived the trauma of separation and the resulting economic challenges, are slowly disappearing from the scene. They were exposed to a suffering that transcended any anguish about lost jobs and threatened homes. They knew that if they did not pull together as one people, Singapore would not survive as an independent state and might very well lose its sovereignty on worse terms. They demonstrated a certain moral strength and the determination to succeed against all odds. They have seen through various cycles of economic downturns, and understood that Singapore has to live on its wits.

Sir, in contrast, I feel that our younger generation today has largely grown up believing that the good years are the natural course of things – and almost as a matter of right. They expect a continuing bonanza of the good life. Some exhibit a low threshold of pain and expect the Government to come running with help at the drop of a hat, and not caring much if others, such as the elderly, might be suffering more than them and deserve more help. This crisis will be a test of their resilience and their sense of community.

Sir, in some ways, the Government might have been too effective in minimising the effects of the economic downturns thus far. Its reflex is to step in to pre-empt problems and to put in place effective measures so that the people will not suffer the worse effects of a recession. To use an analogy, it is like a hyperactive builder securing the house before a gale comes so that the people living within the house can sleep soundly and have a roof over their heads. But because they do not feel the devastating effects of the gale, they think the builder has not been doing enough. He should also prepare food and pay for the curtains. We have to be careful not to breed a crutch mentality and the what-about-me mentality.

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Sir, in this respect, I want to take issue with the Nominated MP Mr Siew Kum Hong's assertion that the Government is not doing enough for the retrenched and those who have just lost their jobs. If he has worked with us on the ground, he can see that we have approached it with the many-helping-hands approach from the grassroots, working with the VWOs, working with many different agencies to deliver help to those who need help. And we always assure our residents that if a person needs help, he will get it. We are increasingly seeing a number of them coming to our meet-the-people sessions asking for financial assistance and we never turn them away if we know that they have just been retrenched and they need financial assistance.

Sir, I can assure the Nominated Member that we share with him the sympathy for the retrenched. On our part, we are doing our best to meet their needs. He should say three to six months, but we also go beyond that on a case-to-case basis.

Sir, I agree fully that it is always good to prepare for the worst, to protect our workers as much as we can, and to use this crisis to position ourselves to ride the crashing waves that will come, as we always do when we face an economic crisis. It is not for nothing that this Government is known for being farsighted. But I would like an assurance from the Government that its decision to draw from the reserves was made carefully and was not an over-reaction.

Some analysts seem to think that the Singapore Government might have been overly conservative in its forecast. Sir, the latest report of Asian Intelligence , published by the Political and Risk Consultancy, noted that "the Singapore government is the most pessimistic of any government in Asia when it comes to

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projecting how its economy will perform in the coming year." It added, "We do not think this is an indication that Singapore’s economy is that much worse off than other economies of Asia as much as it is an indication of Singapore having one of the most conservative governments when it comes to telling its population what to expect in the coming year." Sir, I would like the Finance Minister’s views on this. I have always been under the impression that the reserves would be drawn only in a crisis of catastrophic proportions, when it has to do with our survival.

Once, many years ago, I remember being told that our reserves were just about sufficient for sustaining our population for about six months – should the need arise, such as times of war. True, we may never need to go to war. But just like we continue to spend a significant chunk of our budget on the Defence Ministry despite the recession, we should make sure that we continue to build up our reserves for those possible life-and-death situations.

Can I ask the Finance Minister for an estimate of how long would it take for the Government to reinstate this projected $4.9 billion drawdown from the reserves? Or are we quite comfortable at the rate that the reserves have been accumulating over the years, providing more than enough for any life-and-death contingency?

This is also the first time that we have asked the President to exercise the second Key. In this respect, I agree with Nominated Member Mr Siew Kum Hong that we should lay down a procedure where the President makes clear his decision why he agrees or disagrees to turn the second Key to release our hard-earned reserves. It must be made clear that the President exercises his decision

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independently on advice of his advisers and not a rubber stamp for the Government.

Sir, we cannot assume that we may not face mortal threats. What has gotten us here thus far is essentially our human capital – capable, farsighted and honest political leaders, a hard-working and resilient people and a strong united Singapore spirit. We cannot be sure that we will always have all three factors in place.

If we take the example of Iceland, no one would have foretold that Iceland would become technically bankrupt today. Just a year ago, it was ranked by the United Nations Human Development Index as the most developed nation in the world, and its per capita GDP was twice that of Singapore's. In less than a generation, Iceland had transformed itself from Europe's poorest country into one of its richest. But just as quickly, it had descended into the abyss of bankruptcy. If this rapid change of fortunes can happen to Iceland, what is there to prevent Singapore, another small country, very exposed to external forces, from also facing such life-and-death situations in the future?

Then there is the sinking scenario faced by Maldives. Its President has said that his government will start saving to buy a new homeland in case global warming and sea level rises cause the Maldives to disappear. Now, I would think that it would not be cheap to buy an alternative homeland. And even if they have the money to do it, it is unlikely that another country will cede territorial sovereignty over land purchased by the Maldives.

But Singapore, too, is an island. We too are not spared the effects of global warming and sea level rises, although I have been assured that we will not sink at least within the next 100 years. But being

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farsighted, it is prudent for us to take measures to protect our coastlines, as I am sure we are, and we can be assured that for as long as possible Singapore will still be here. But even so, I would urge the Government to work through all the worst-case scenarios when the use of our reserves would be most critical to Singapore’s survival, and make sure that our reserves are more than sufficient for these various life-and-death scenarios. After setting sufficient funds aside for these scenarios, we can then allocate a proportion for exceptional economic emergencies, as at present.

Sir, the financial reserves are clear and quantifiable. But what of the other kind of reserves that we will all need to sustain us through the economic gloom. I mean, of course, that unquantifiable, intangible quality of human resilience and solidarity, without which the financial sums might not be used most effectively, or what I would call our social reserves.

Our social reserves come from the bonds that we build across the different races, the mutual support we give one another, regardless of race, language or religion, from the experiences that we go through together, but the tough times that we survive together and learning that we can count on one another.

One of the founding principles of Singapore is equality for all citizens, regardless of race, language and religion. And we work very hard to promote community bonding across the races in an effort to create a unique Singaporean identity we can all be proud of. A champion of this approach has been the various CCCs which operate in every part of Singapore offering community support to all citizens regardless of their backgrounds. Through our ComCare and other social programmes, the grassroots have organised many schemes and reached out to citizens who need help, not caring for the colour of their skin. This builds a sense of solidarity, of being

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one big family, that we can count on one another in times of need.

Surely, this race-blind approach in giving assistance is far better than ethnic-based ones. In an economic crisis, communal divisions can open up and be accentuated unnecessarily if problems that arise from the economic recession are viewed through an ethnic prism. We have to be clear that this is an economic problem, and not an ethnic one. During such times, the opportunity arises for us to show our multi-racial strength, to help anyone who needs help, regardless of race, language and religion and thereby strengthening our national identity and Singapore spirit.

Yet, I want to point out that the Nominated Member has asked why the Government is increasing funding to the CCC ComCare Fund to only $7 million a year for the next two years but giving $9 million more to the ethnic-based self-help groups. If we look at the numbers, we have 84 CCCs on the island, compared to the five ethnic-based self-help groups – CDAC, Mendaki, AMP, Sinda and the Eurasian Association.

Sir, I have voiced my views on ethnic-based self-help groups since my years as a journalist, long before I joined politics in 2001, and they have not changed. But recent events have reinforced my concerns. I noticed that some self-help groups have expanded their programmes, duplicating the roles of our Community Development Councils (CDCs), and they seem to be competing with one another. I am not sure if this is a healthy trend, whether it unites us as a people or divides us. For instance, the CDAC has launched a scheme to subsidise kindergarten fees for needy Chinese families. This is on top of MCYS' subsidies through the Kindergarten Financial Assistance Scheme. On the face of it, this is a good scheme. As an MP, I can now apply to CDAC for my Chinese residents for such subsidies. But

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what about for my Malay and Indian residents?

Similarly, CDAC has launched a one-stop centre called CDAC@Bukit Panjang. Built at a cost of $275,000, the centre will provide tuition and enrichment classes for children, job matching and career counselling for adults, and courses to keep the elderly actively engaged.

Sir, I have no doubt about the intentions of the people behind these projects. They are good, they are laudable. In fact, I know some of them and I have the highest respect for them and they are not to be faulted for wanting to do their best for the organisation that they are in charge of. But please allow me to sound a note of caution.

We must realise that the Chinese, being the majority, often have greater access to resources and connections. The minority races may not say it out loud, but we have to be mindful of what sort of message we are sending out. If I remember correctly, the ethnic-based self-help groups first started to help level the playing field for the minorities. In any case, is it not the job of CDCs to provide a one-stop centre for all races – from job matching to financial assistance? Why the wasteful duplication of resources? If the CDCs are less than effective, is it not better to fix that problem, rather than encourage an ethnic-based approach to fill up the gap?

Sir, it is a fallacy to believe that people will only help people of their own race or work harder at helping them. It is wrong to perpetuate this fallacy. I know many Singaporeans do not subscribe to this thinking, and this is confirmed from my own experience on the ground.

The Chairman of my Malay Activities Executive Committee (MAEC) is Mohd

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Azahari. He is also the Chairman of a Residents' Committee. He has tied up with a VWO called TOUCH Young Arrows, to provide free tuition for needy families at the RC. This is open to all races, and he is proud of it. And I am proud of him and his RC for taking this multi-racial approach. The RC leaders identify children of low-income families by various means, such as the RC's walkabouts and through its events. I also refer cases to them from my meet-the-people sessions. We should build up such capabilities on the ground, leveraging on our multi-racial grassroots organisations.

Sir, I am not arguing that there is no role at all for ethnic-based self-help groups in our many helping hands approach. They have a role but it should perhaps be more in outreach, communications and in certain programmes which tackle specific ethnic-related problems, than in running the programmes that deal with the problems generic to all, such as job-matching or financial assistance because the person is retrenched. The programmes for helping residents in a downturn, funded from our scarce reserves, should be uncompromisingly multi-racial.

Sir, in pre-independence Singapore, our forefathers who came from distant lands had no choice but to rely on their own communal groups for validation and support. They knew they could not turn to the colonial government. The different groups were also segregated. Those were the days of divide-and-rule under the British colonial government. There was no sense of national identity.

Since the PAP took power in 1959, it has worked hard to integrate the people of all races, to provide for their needs while giving them opportunities to progress together. We should not regress to pre-independence days of emphasising ethnic-based assistance. We should instead progress single-mindedly towards our vision of a united people, regardless

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of race, language or religion, and use such times of crisis to reinforce this vision.

Sir, when reading up about the problems of Iceland, I came across one report in a Canadian newspaper, The Globe and Mail , which said, "However Iceland plays its cards, its hand is a bad one. Perhaps its best hope lies in its sense of itself as a people united by a history of survival and a cherished culture."

What is our cherished culture as a people? They must be those common to all, something we, as Singaporeans, believe is worth upholding and fighting for. If our island were to someday be in the position of Maldives, where we have to worry about whether our island will vanish down into the water, will we think of finding a homeland for ourselves as one people, or will we want to break up into our separate races and return to where our forefathers came from?

Sir, no society is immortal. As Rousseau said, "If Sparta and Rome perished, what state can hope to endure forever?" Even the most successful societies are at some point threatened by internal disintegration and decay and by more vigorous and ruthless external forces. In the end, will Singapore suffer the fate of Sparta and Rome, and other human communities? Historians have noted that some societies, confronted with serious challenges to their existence, are able to postpone their demise and halt disintegration, by renewing their sense of national identity, their national purpose and the cultural values they have in common. During this time of crisis, let us make sure we get our fundamentals right, not only in the economic sense, but also in our sense of self as a nation.

Mr Siew Kum Hong: Mr Deputy Speaker, Sir, a point of clarification for Ms Irene Ng who has mentioned me in her speech. Ms Ng says that I do not appreciate the good work that goes on on

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the ground. I agree with her for not being involved in the grassroots. But just let me clarify the point that I made in my speech which she referred to. My point, and I think this is a difference in fundamental philosophy and approach, is that an ad hoc approach, such as we have today, is inherently uncertain and does not bring certainty to those who need help, those who need assistance, and that is not helpful to them. So, I advocate for a more formalised structure, and I think that is the difference. And that is the clarification I would ask Ms Ng to appreciate.

Ms Irene Ng Phek Hoong: Sir, I also want to make clear that the Nominated Member should be assured that there is certainty of help. It may seem to be ad hoc , but there is certainty of help. If any resident comes to us who needs help, he can be certain there will be help given to him in time of need. There is no uncertainty about that.

5.54 pm

Dr Lily Neo (Jalan Besar): Mr Deputy Speaker, Sir, this is a challenging time for all of us. The issues that confront us within and beyond this Chamber may be the most pressing issues in my 13 years in Parliament. The magnitude of the crisis at hand could potentially dwarf the 1997 Asian financial crisis, and undermine the very fundamentals of the global economy that we know today. As we conduct a post-mortem of the recent failures of the free market economy, the need for sound governance and regulatory system has never been stronger. We have an opportunity to design and execute sound, strong and sustainable policies aimed at economic growth and stability.

Three key challenges confront us today. First, the expectation of our Government to steer our country out of the crisis. Second, understanding and acting upon the complexities of the financial system. And, third, dealing with

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emerging global forces beyond our control.

The weight on our shoulders has never been heavier. Just as we have successfully navigated our country away from crisis during the 1997 Asian financial turmoil and SARS in 2003, our citizens expect us to do the same today. Thankfully, we are in a stronger position than most other countries to do so. Our reserves are strong, our financial fundamentals are sound, and we have proven ability to adapt in a dynamic environment. However, the highly evolving nature of the crisis means that the impetus on us to formulate sustainable policies is more critical than ever before.

The second challenge for our Government will be to try to make sense of the current situation. The magnitude, scale and nature of this crisis are unprecendented. Industry experts had noticed, prior to the unfolding of this crisis, that there had been historical aberration from long-standing models, strategies and conventional wisdom, resulting in market-wide inconsistencies. In spite of these inconsistencies, policy makers of other countries adopted a laissez-faire attitude in reaction to the migration of risk away from the official and private supervisory bodies that possessed the expertise to conduct the necessary oversight. This failure to distinguish and react to this transformation has resulted in what we see happening to the global economy today. It appears that any form of recovery would be contingent upon us.

It is therefore imperative that our Government Ministries develop a better understanding of this new economic environment and respond and adapt accordingly. We must be willing to seek new sources of policy-related information

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and improve upon current policy instruments. We should also critically examine outmoded fixtures and mindsets, learn from the mistakes of the past and develop strong contingencies for the future.

In this light, the MAS will almost certainly have a bigger role to play. It may have to improve upon its ability to conduct appropriate oversight on activities that have migrated outside sophisticated jurisdiction. It will have to adopt forward-looking regulatory approaches to deal with these complexities by reviewing its current rating mechanisms and examining new monetary policy aspects. We have thus far done well to boost confidence in our banking system with our Government's guarantee on all bank deposits of individuals and corporate here. It is backed by $150 billion worth of Government reserves which runs till 31st December 2010. Such policies will help stabilise our economy while we look towards finding sustainable solutions to weather the crisis. However, the impetus to learn

and do more is more urgent than ever before, in an ever-evolving global and financial landscape.

This brings me to my third point – the impact of an evolving global and financial landscape. Newsweek editor Fareed Zakariah has characterised this phase in history as the "rise of the rest" in his book, The Post-American World , which President Barack Obama has studied carefully. He speaks of the rise of emerging BRIC economies of Brazil, Russia, India and China. Over the next decade, these BRIC and other emerging economies will shift from being export-oriented to being major consumers, significantly affecting the world trade balance. China and India are already significant consumers of global commodities and will continue to do so with an increase in their upper and middle classes. We have done well to recognise this shift and must continue to formulate

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appropriate responses to accommodate the emergence of these economies. While the US retains its importance to us and will continue to do so for many years, we must also be adequately prepared to "rise with the rest".

In light of these three challenges, it is imperative that our domestic policies provide the necessary stability. I am happy to see that this year's Budget is focused on providing this stability. Its focus on job protection and helping viable companies stay afloat is critical in this current climate. Stable companies, fair job prospects and employment stability will boost our peoples' confidence in our economy and are critical steps towards weathering this financial environment.

It is in such environment that we can better ensure that our workforce remains productive and relevant. This will shore up "social capital" and, hopefully, prevent the emergence of an unemployment crisis. Our people remain our most valuable resource. We must do all we can to enable them to do well by providing them with the best environment to develop their skills and to equip them with new and relevant skills with which to compete in a global labour marketplace. I am encouraged by the ample opportunities provided by this year's Budget for the retraining of our workers to meet these challenges.

This economic downturn provides us with a unique opportunity to bridge the income gap I have spoken about over the last couple of years. Our income gap has widened, and it has not only affected our lowest income group. The incomes of our majority middle class have stagnated in the past six years, except for last year. This may potentially engender the emergence of an underclass, resulting in social and political instability. We now have a unique window of opportunity to bridge this gap by focusing on long-term sustainable solutions.

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We agree on one of these solutions – that education and training remain central to achieving more equitable wealth distribution. Knowledge is the primary source, and a society's true wealth and qualifications typically enable workers to move up the job ladder into better paying careers. The challenge is in formulating a wide-ranging and sustainable policy to ensure that our people reap the long-term benefits of staying relevant in a rapidly evolving economic landscape. I would like to suggest two key areas of focus – the management of skills upgrading programmes and a focus on lifelong learning.

We may look into setting up a central management system targeted at our lower and middle-income groups. This will ensure better flexibility and use of human resources, focuses on educational investments, and promotes skill qualification and mobility. This centre will aim at giving our workers an edge, by developing critical technological skills relevant to today's marketplace. This may mean micro managing individuals to equip them with effective and sustainable skills. This may include the programmes to improve English language proficiency, advanced computer literacy and problem-solving skills. The emphasis will be on improving the skill-sets for individuals that are relevant to the current market and match them with relevant industries. This may also require an adjustment of current policy to incorporate considerations for reimbursements for knowledge requirement regardless of work internships or attachments in this economic downturn. I am hopeful that this approach may help these trained individuals to better take care of themselves with better employment and opportunities when the economy recovers.

My second suggestion is on another favourite issue that I have been championing over the last couple of years.

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Lifelong learning is critical for our society and our people to continue to thrive in a rapidly evolving global environment. I feel this change has to be eventually adopted at all levels of our society including the workplace. But it should start today at our primary educational level. We have to prepare our children to meet the challenges I have spoken about today, and as they are likely to have to switch occupations and specialties in their mid-careers or even earlier. Imbuing in them a passion for learning from a young age will help them better meet these challenges and enable them to be flexible when change comes. I hope our policy changes will accommodate and favour this transition.

Sir, we stand at the precipice of a new era of change – one that we may not necessarily have control over. However, we can prepare ourselves for whatever eventuality that this era has in store for us. We must strive on our fortitude as a nation in our spirit of endeavour, industry, innovation, and perseverance that has seen us through 44 years of nationhood and will see us through this next challenge. We need to continually revise our own policies and be prepared to formulate new ones to address the challenges ahead and to remain competitive in the global arena, while continuing to ensure the socio-economic well-being of our people. With our people as our greatest resource, and with hope in their future, our Government has never been more critical.

Sir, I support the Budget.