DEBATE ON ANNUAL BUDGET STATEMENT

ANNUAL BUDGET STATEMENT: Order read for Resumption of Debate on Question [15th February, 2007].

"That Parliament approves the financial policy of the Government for the financial year 1st April, 2007 to 31st March, 2008.". - [Second Minister for Finance].

Question again proposed.

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The Senior Minister of State for Foreign Affairs (Mr Zainul Abidin Rasheed): Mr Speaker, Sir, thank you for allowing me to speak on the Budget. I rise in support of the Budget.

After the speeches made yesterday, many would have felt that there is not much left to say. Practically everyone yesterday said "Aye", even Opposition Member Mr Low Thia Khiang, his comments on the GST notwithstanding.

First the celebrations. Many, inside and outside the House, have described the February 15th Budget as an early ang bao . Yes, Singaporeans deserve the big red ang bao, and, if I may add, Xin Nian Kuai Le and Gong Xi Fa Cai .

Sir, yesterday, Mayor Amy Khor mentioned that some Singaporeans considered this Budget as "made in heaven". This reminds me about a Chinese belief that they need to please the Kitchen God with sweet goodies to avoid being bad-mouthed by the Gods. It seems that our Second Minister of Finance - some might consider him the God of Prosperity - has done the reverse and provided the goodies for his followers to be happy about. Thus, you can see how much sweet words have flooded yesterday's session.

In fact, this spirit of giving by the Government was already felt in my Eunos Aljunied GRC even before the Budget was announced. If you were to visit Eunos before the Chinese New Year, you will see, for example, we have converted an old marketplace into a nursery and, in fact, the buzz, the spirit and the feeling were so good that all residents enjoyed the opportunity. Even the Bougainvillea flowers which we all normally see in red, pink or purple, there are actually so many of them with multi-colours - just to show how happy they are. But we will also remember that the Bougainvillea is not

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just about colours, it is also about resilience. It is a plant that, I think, many of you must have noticed that we planted along the ECP on the approach to the airport, is really very resilient and it can withstand harsh weather conditions. So, we want our people to enjoy the colours but at the same time to be resilient too. This is what our Budget is all about.

Prior to this, during CCC and other grassroots meetings in Eunos, there was much concern raised about many issues, including cost of living, cost of healthcare, transport and employment. But after the Budget was announced, even the more outspoken grassroots and community leaders were at a loss for words. There was too much to chew and benefit from. While all that has been fed - including the Workfare Income Supplement for low-income workers, CPF restoration, corporate tax cut and a generous offset package to cushion the impact of the GST - are welcomed, there are still holes that need filling. This I know, especially if I use my experience working at the North East CDC.

While the CDCs started off basically as a tool for bonding and social cohesion, before long, they moved to become important vehicles to help the needy. With the support of MOM and WDA and MCYS, and with feedback from the ground and lessons from how inadequate some of the earlier measures were, the CDCs now can perform their job more confidently.

With your indulgence, Sir, allow me to cite the approach taken by the North East CDC to reflect the route we took and how we have moved up the ladder to make Singaporeans realise the importance of Workfare as a way out and for the future. When the economy slowed down, the North East CDC introduced what we call JAB, ie, to combine both jobs and bonding as our priorities. Realising that

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there were serious mindset problems in facing the challenges of globalisation and economic restructuring, we felt that jobs alone were not sufficient as workers were not ready to benefit from the new job opportunities. We then went on to introduce what we call JELL, or Jobs, Employability and Life-Long Learning, as a new thrust. Training and retraining was of prime concern. Now we call our programmes BCG, or Bonding, Care and Gain. In short, to give our fellow Singaporeans a boost for their efforts to continue to be relevant in today’s market and globalised world, we need to show care while we galvanise the support of the grassroots and the other better-off Singaporeans to help and bond too.

I relate all these just to emphasise that help is not just about short-term programmes. We have to continue to be nimble and adjust as we go along. The Government has done so, and this Budget proves so, but Singaporeans, especially the low-income workers, cannot afford to see the wood for the trees.

Workfare is a short-term measure to help workers during the difficult times as they train and retrain and make themselves more employable and enjoy better and more sustainable salaries for themselves and their children.

Fortunately for us, Sir, more and more Singaporeans - and this experience I see at the CDC - realise this. Compared to the first six months when we first introduced the assistance programmes, Singaporeans are now better prepared to stay focused on the long term and understand that these are short-term measures and that they would have to help themselves in the long term. Of course, there are those who still refuse to change and even abuse the programmes, but they are being identified and given help in changing their mindsets.

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This is where the Government can do more to provide the resources for more people, especially at the grassroots level, to be trained to help out. MCYS has announced more funds for capacity building at the grassroots level and we hope that more grassroots and community leaders would respond to the call of many helping hands.

Having said that, Sir, may I now turn to what Minister Tharman said about globalisation. I quote: "Our prospects have never been better. The key is globalisation." We all agree. However, we also realise that globalisation is a very big word. I am not sure how many of our fellow Singaporeans, especially those from the low income groups, understand that.

This debate is a good opportunity to try make more people understand this phenomenon. The debate notwithstanding, I am glad that the Prime Minister would be having a post-Budget dialogue with grassroots leaders too to ensure that they understand not only the goodies but, more importantly, the fundamentals behind our policies and what globalisation means for Singapore.

There is need for more of the message to be understood on the ground. I understand that MOF also encourages such dialogues at the ground level to reach out to as many Singaporeans as possible. This is indeed to be encouraged and I urge more Singaporeans to use such opportunities to better understand not only the goodies in the Budget but also what globalisation and its challenges are all about. It is not just about working and opportunities overseas but its impact locally, especially in terms of what it takes to be relevant, what skills do we need, what training and retraining do we need to continue to be employable. Be they the types of jobs available, the importance of immigration - this is one area some Members had spoken about

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yesterday, and if not carefully handled and properly understood could even bring about problems in terms of cohesion in our society - and what new colours competition will take as we face globalisation.

In short, we have to go global. And only if we understand its challenges do we avoid any Singaporean being left behind. The last thing we want is that while more and more Singaporeans benefit from going global, a section of the society, especially the low income, lags behind and, worse, feel marginalised. If we understand those challenges, then it should also make us understand why we need the GST and its hike too. Do not get too taxed by the GST debate but instead see it as a formula for us to Grow Strong Together (GST).

Before I end, Sir, allow me to say a few words in Malay.

( In Malay ): [For vernacular speech, please refer to Appendix A.] Mr Speaker, much has been said about this Budget. It is creative, has a long-term view and is generous. For me, the Budget can be described as something which is considerate and humanitarian (berhati perut ) . I say so because it not only covers programmes that can help the lower income group especially, but more importantly so that we can understand what is really the essence and the philosophy behind this Budget, the need to have long-term measures, whether in terms of understanding the need for GST, the reduction in corporate tax or the programmes to assist our workers in getting training and retraining and to prepare them for the challenges of what we call "globalisation".

It is important that we do not misapprehend the reasons behind the Budget. It contains a lot of goodies and assistance. When we talk about assistance, I would also hope that more

*Cols. 2025-2028.

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efforts be taken so that more Singaporeans will understand what is the available assistance, how they can benefit from them so that they can get out of the circle of problems that they face. This will demand that they have knowledge and new skills so that they will remain relevant in this globalised world. Like many Members of Parliament who conduct their meet-the-people sessions, I too have seen many Singaporeans who do not understand what programmes are available for them. One such example is the HOPE programme. I am puzzled as to why some people still do not understand that there are available assistance and measures for them to take advantage of these programmes, not just for their self-interest but also for the interest of their children’s future. I hope more could be done and that dialogues and reach-out programmes could be conducted so that more of our people can understand the available assistance programmes and how they can benefit from them.

At the same time, we have to undertand the true meaning of globalisation. It is not just about finding jobs or working overseas. Like the many news and anecdotes that we have seen in television and read in the newspapers, we want to encourage more of our people to understand the available opportunities and take steps to ensure that together these opportunities will be taken advantage of. This will further strengthen our economy in the context of a very competitive world. We also need to understand that globalisation means that we need skilled manpower from all over the world. It also means that a more aggressive policy will be needed to seek out the talented manpower so that together with Singaporeans, we can increase our competitiveness in facing the challenges of this globalised world.

Therefore, if we do not understand what are the issues of globalisation and the effects of globalisation, we will feel

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squeezed. We will feel that competitiveness will not benefit us. We will feel as though the talents that could be brought into Singapore will burden us. But they are actually to our advantage. Therefore, if we understand the concept and philosophy behind globalisation, we will not only be more prepared with the required skills, but we will also be prepared to embrace the changes that the Government will introduce, whether in terms of immigration or tax policies. In short, we must welcome the short-term programmes to help us overcome short-term problems and, at the same time, take measures to ensure that we equip ourselves in terms of education and skills and also knowledge for future needs. We do not want a similar situation like during the Congress on the Knowledge-based Economy organised by the Malay community where the leaders were looking ahead to the challenges of KBE, but the community was not yet ready. We need the community to also understand the issues and challenges related to globalisation and to take full advantage of the available opportunities.

12.50 pm

Mr Lim Biow Chuan (Marine Parade): Mr Speaker, Sir, thank you for allowing me to take part in this Budget debate.

Sir, I have been sworn in for barely two weeks when the Prime Minister made the announcement about the impending increase in GST from 5% to 7%. My heart sank when I heard the news, as I was certain that this announcement would not go down well with Singaporeans who are already complaining that the cost of living has gone up. True enough, within a few days after the announcement, I received many unsolicited emails, SMSes and feedback about how regressive the consumption tax would be. Many of the

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feedback were unhappy expressions against the Government.

After listening to the explanation from the Prime Minister and the other Ministers, I held back my own judgement and waited with bated breath to see how this Government could make the consumption tax non-regressive. I also kept assuring my grassroots leaders and my residents to have faith in the Government and that the Government would provide suitable offsets to compensate for the increase in the GST.

Sir, after hearing the Budget Statement from the Second Minister for Finance, Mr Tharman Shanmugaratnam, I am much relieved. Indeed, the Budget Statement is a well-balanced Budget which shows that the Government has well thought ideas and plans as to how to improve the lives of Singaporeans and to plan for the future.

Like many other Members before me, please allow me to, firstly, compliment the Government on its vision of preparing for our future by having growth opportunity for all. The Government's plans to build capabilities for the future and its plans to strengthen the social security system by restructuring CPF and introducing the Workfare Income Supplement are commendable. With such well thought through directions, I submit that this year's Budget Statement would give many Singaporeans confidence that the country is in the good hands of Government leaders with strong vision for the future.

Secondly, Sir, I wish to thank the Government for the various offset measures to help Singaporeans cope with the GST increase. $1.8 billion alone would be given in the form of GST credits over five years. Although I understand that any increase in GST is never welcomed, however with an ageing population and increasing competition for foreign

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investment, it is increasingly apparent that the present direct tax regime is inadequate and hence the need to shift to an indirect form of taxation. But like the speaker before me, Mr Zainul, I feel that the Government needs to explain more about the reason and the need to shift the tax incidents to indirect taxes.

A few Members of this House yesterday had expressed disappointment about the lack of an income tax cut. Whilst I would personally be very happy with a cut in income tax, I do recognise that any cut in income tax would necessarily mean less revenue for the Government to fund its expenses and help packages. This revenue must come from somewhere, and this may mean that the offset packages would be lesser for those who need this help the most. So, I would be slow to ask the Government to be more generous.

I am very pleased to note that the focus of these offset measures is on the poor, the needy and the elderly, as it rightly should be. The poor and lower middle income group would be the ones who would have the most difficulty adjusting to the effects of globalisation, and it is right that the most help is given to this group of people.

I would also support the Government's strategy of having Workfare Income Supplement as a way to encourage those who can work to carry on working and to be as self-reliant as possible. To me, this is a far better option and outright cash handout to residents who then have no incentive to work, and this may lead to a crutch mentality. I am talking about mental crutch and not fiscal crutch.

Sir, there are two groups of people whom I am concerned about. The first group comprises Singaporeans who, because of globalisation or economic restructuring, are caught with negative assets and either lower income or no

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income. They may be having their own purchased flats or even private properties which are now below valuation, but because they have lost their jobs or they are unable to find similar paying jobs, they are caught in a situation where they are not eligible for Government aid because of the assets they own, but yet they struggle financially because of their loss of income.

Quite a few other MPs have spoken previously about the need to help this group of lower middle income Singaporeans who are caught in the middle. I add my voice in urging the Government to find some way to provide financial relief to them. The best way to help this group is really to help them find a job that will pay a reasonable wage as before, to enable them to apply their experience and to use the skills that they have learned over the years. But until they are able to get back on their feet, the Government should consider them to be eligible for short-term financial assistance, whenever necessary. If nothing else, Sir, we should be sympathetic towards their situation. However, looking at the difficulties that some of them faced like not being able to get a HDB flat because they have just sold a private property, frequently at a loss, or like not being able to get a HDB loan, one cannot help but feel for their frustration.

Sir, there is a second group of Singaporeans and this would be a group of middle income residents who are eligible for financial aid and, here, I would say they do not wish to have financial aid. They have worked hard for their income and they desire to stretch their income to have a better quality lifestyle in Singapore. But because of the various increases in transport fares, utilities charges, medical charges, postage, ERP charges and now GST, they feel squeezed because of the inflationary pressures in the cost of living in Singapore.

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Mr Speaker, Sir, I would urge the Government to consider how we can address the concerns or aspirations of some of these Singaporeans as they form the middle and upper tier of our society. They feel alienated from the Government because the Government policies do not seem to benefit them. They really should be happy because of their greater wealth or higher income earning ability and they have done well in life. But somehow or other, many of them feel that the better option for them is to migrate where they would be happier in another country.

Even as Singapore tries to attract skilled and talented foreigners to Singapore, we should also put in our own effort to persuade our own Singaporeans that they too are talented in their own way and they too have a bright future in their own homeland. Are our fellow Singaporeans leaving the country because of the increased cost of living? Or is it because of the pressures of living in a competitive society? Or is it that they do not feel appreciated by the Government who feels that they are not talented enough? Or is it because of the school system which determines their children's future from young?

Next, Sir, please allow me to speak about the social security system. I accept the basic principles which underlie the social security system which is that of self-reliance, mutual support within the family, supplemented by the Government only to the extent necessary. But, within this system, I do not believe that we need to see Singaporeans living in abject poverty before we extend a helping hand to them. I believe that it is not unreasonable for some lower income Singaporeans to say, "Look, I have some small savings. But I really need them for a rainy day. Can you give me some kind of help now because I need some form of

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financial assistance?" Or other Singaporeans may say, "Can you give me some help now, even though I have two children who can give some allowance? But I try not to rely on them because they too have their own families to look after." And for some older residents who say, "Yes, I have made a small profit from the sale of my HDB flat. But I need to set them aside for my future medical bills." And some would save for their coffin or funeral expenses. So can you allow them to rent a subsidised flat from HDB?

At the end of the day, it is really a matter of balance of deciding when to help them and how much to help them. They are not so poor that they will be eligible for all the schemes for the needy. But they are definitely not considered well off by any standard, that they should be considered as not needy. The main point, Sir, is that the Government should not just turn them away because these people do not fall within the basic guidelines for financial assistance. I would urge the Government to consider allowing the CDC or the VWOs

to exercise some flexibility in assessing how to help some of the Singaporeans who are caught in the middle ground so that assistance can be more holistic in nature.

Finally, I would like to state that I support the Government's initiative to promote research and the injection of $500 million into the National Research Fund. However, the total sum of monies to be invested in R&D is a huge amount, some $2 billion of Government expenditure all in for this year. I wish to urge the Government to consider providing regular updates to Parliament each time there is a major sum of expenditure for research and development. This will help provide more transparency as to the process by which the Government uses large sums of money for research and development expenditure.

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Who decides what areas of research and development to concentrate on? How much should the investment be? What are the criteria for investment? How does the Government ensure that the huge amount of monies set aside for research and development related expenditure is properly spent? Some members of the public have already raised concerns about the area of focus for research, and I think that these concerns should properly be considered and addressed by the Government.

With this, Sir, I support the Budget.

1.01 pm

Miss Penny Low (Pasir Ris-Punggol): Mr Speaker, Sir, the Budget is indeed one that reflects its theme: "Ready for the future, Ready for the world."

It has sought to address the present concerns of the lower-income groups and senior citizens and takes a long-term perspective in anticipating and preparing them for the future. The comprehensive GST package is inclusive, giving to all, including $100 to those who do not need it. Perhaps, a website and other mechanisms could be set up to encourage people to donate this money with ease. The Workfare bonus tried its best to cover all grounds, from the self-employed to the lower-wage workers, and served as an important and permanent wealth redistribution mechanism to narrow the increasing Gini coefficient. A subtle but landmark change is paying the bulk of it into the future needs of this population via their health and retirement accounts via the CPF. Although most people would prefer upfront cash, few would have the discipline to save consistently for their future needs. It is a welcome move.

However, I was hoping that the Government would go further to address the issue of ageing population and retirement funding. I have spoken long on

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this subject matter before. Hence, I will not repeat my points. Perhaps it is still cooking in the PMO, with Minister Lim Boon Heng leading the charge on the ageing population issue. Nevertheless, I have filed a cut on it.

Despite a good Budget, dialogue sessions on the ground revealed two groups of people feeling left out, ie, the middle-class and the homemakers. They both felt that their contributions were not duly rewarded. The middle-income reflected that while the safety nets are available to the lower-income group and the high-income earners can take care of themselves in the long term, they need help to build their future needs too. The homemakers, too, reflected that their financial future is insecure, as marriages and children are no longer reliable insurance policies. They, too, want their CPF accounts to be topped up. It is a tall order to craft a perfect Budget, but these concerns do need to be addressed through perhaps innovative means. Overall, I think the Budget is well received, as it delivered good news and ang pows to redistribute wealth as well as hopes for the future.

My colleagues have spoken long on the redistribution of wealth. Hence, I shall focus on the other half of the Budget, which is getting ready for the world. In tandem with the Budget's theme, we must examine if our fiscal and non-fiscal measures are aligned with the global winds of change. Hence, I will focus on the three power shifts that have been sweeping across the world in an unprecedented manner.

First power shift - West to East (Reinventing relevance)

The first power shift refers to the shift from West to East. With the rise of three billion people from China, India, Russia and Southeast Asia, the trade route is increasingly shifting from the Atlantic to

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Asia. It is clear and presents opportunities extraordinary in Asia. However, the booming economies have also crept northwards from Southeast Asia to North Asia. Hence, a critical question: where is Singapore in this shifting power equation? Will Singapore still be in the nexus of the power shift or will we be sidelined? What steps can Singapore take to ensure its place in the regional and global arena? The Government appears to be in tune with this power shift. Physical geography was all the rage in the Asian trade routes. It may not be so in a borderless world. Whether Singapore can continue to be a nexus in this changing knowledge-driven trade route will depend largely on three factors.

One, is the ability to attract, groom and retain talent, its trade-link strength, and its responsiveness to fast changes. To ready itself for a 6.5 million population, we are transforming the cityscape with ABC plan and adding plenty of entertainment places to develop Singapore into an ultra-attractive and liveable island for its residents. Undoubtedly, major infrastructures like transport, ICT, housing and living environment would undergo visible transformation. These are exciting measures to develop Singapore into an attractive haven for investors, professionals, workers and, of course, locals.

To reposition itself as a hot-spot both regional and globally, PM Lee, SM Goh, MM Lee and, of course, Minister George Yeo have led the charge to strengthen our trade ties via FTAs and mutual investment plans. The result - a robust relationship with China, India, Vietnam and the traditional partners like the US and Japan. In the immediate neighbourhood, however, I think we will need to work harder. Perhaps doing so through strengthening the ASEAN ties and platform would augur well in the long term.

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In this Budget, the Second Minister for Finance, Mr Tharman Shanmugaratnam, has also announced watershed measures to compete with the rising hotspots around the world. A 2% cut in the corporate tax rate, various measures to help employers lower the tax burden and cost of engaging in new technology, a long overdue but much welcome plan to focus on the SMEs, and even a rise in the broad-based tax, ie, the GST, are all strategies to boost economic activities and ensure employment of its residents. This Budget should also be read with the previous budgets in mind, where resources were poured into economic restructuring and deepening of our economic capabilities through the NRF. I think our Government deserves a pat on the back for its vision and leadership. The question, however, is how can we effectively translate this vision into reality. How would our current R&D investments be translated into operational capabilities?

Recently, the NRF also announced a $500 million plan to invest into the IDM sector. How will this be spent and what are the desired outcomes? The Intelligent Nation 2015 plan intends to put Singapore at the leading edge of technology. It is a Web 2.0 platform that plans to leverage information to lower cost, improve productivity and connectivity in a knowledge-based global economy. In Singapore, the IDM sector grew 13% per annum, from $480 million in 1986 to $3.8 billion in value-add in 2003. It currently employs 50,000 employees and contributes an average of $75,000 value-add per IDM worker. In 2005, a Microsoft study revealed that, globally, from now until 2009, the total IT spending is set to rise from US$437 billion to US$562 billion. Some three million additional IT jobs, an estimated US$190 billion in net tax revenues would be available for the governments in Europe, Latin America and the Asia Pacific. Hence, I think the investment into

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the Intelligent Nation 2015 plan is a step in the right direction.

To do this effectively, an extensive ecosystem, comprising the related vendors, channels, services and IT professionals that drive the industry, needs to be nurtured. Microsoft, for example, engages some 700,000 big and small companies worldwide, including software developers and distributors, hardware producers, system integrators, and so on. In Singapore alone, it engages just under 2,000 companies. To achieve a multiplier effect, it uses both a top-down and bottom-up active partnership approach to build its ecosystem. It purchases from the small players, but also empowers them with joint marketing dollars, co-funding of staff, combined development matrix and helps them build skills and enlarge their business. The result? Its partners generate some 90% of Microsoft's revenue.

Hence, my question is: how can we replicate such win-win ecosystem which is extremely helpful and critical to our SMEs? We need to ask: how well are our local SMEs leveraging on the ICT infrastructure to increase their productivity? In fact, the SMEs hire more than 50% of the workforce but contribute less than 30% of the GDP. MNCs, on the other hand, hire 35% of the workforce and contribute more than 50% of the GDP. How can the Budget help SMEs to embrace technology to increase productivity and business opportunities? Building a superb infrastructure is only half the story. If the adoption rate is poor, it might end up as a white elephant. I shall elaborate on this during the COS debate on the need to build an ICT ecosystem to leapfrog the growth.

From the ecosystem to environment, the next big wave - climate change opportunities. I was surprised that this year's Budget made little effort to tap on the growing opportunities in the climate

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change. I was in Davos for the World Economic Forum in January. Delegates arrived raving about their climate change initiatives. As part of the Forum of Young Global Leaders' Climate Change Task Force, we launched a Love Earth Movement, with Shimon Peres, Vinod Khosla and Claudia Schiffer as our spokespersons. We had anticipated 200 guests, but the turn out doubled. I am not sure if it was the Love Movement or Claudia Schiffer who attracted the overwhelming response, but it was clear that the climate change issue is no longer a mere Green Peace agenda. In fact, it has turned from Green to Gold, with green collar jobs, green funds and green dollars featuring big on the business agenda. If we have signed the Kyoto Protocols, issued green building guidelines and, now, intend to build capabilities in alternative fuel, should we not ride the big Green to Gold Opportunity Wave to bring more jobs and dollars home?

However, the climate change opportunities can only be successful if tackled holistically, with changes in consumer behaviour too. Hence, I would like to see efforts, whether through legislation, moral suasion or incentives, to be given to green behaviour. A few years ago, BP's CEO, Lord John Browne, initiated a 'looking for CO2' effort to reduce greenhouse gases. The initial process costs $20 million but saved BP a handsome $650 million. By 2006, the savings reached $1.5 billion, all in US dollars. Lord Browne said they "set out to do good ... and ended up doing well." What about us? I think a good start would be the public sector, which is the biggest consumer of energy. Tweaking our transport transformation plan to include bicycle and wheelchair lanes in new towns and on new roads is another completely thinkable, albeit out-of-the-box option. In short, can we be more responsive and be on top of the ICT and Green to Gold Wave?

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Second shift - Shift of economic clout from producers to consumers, ie, from mass production to customer-centric mindset

The Industrial Age Ford-black car one-size-fits-all mass production method suffers an ever decreasing profit margin. With high cost and high standard of living, we need to fetch a premium on our factors of production. To illustrate, Nokia wins by producing phones with highly customisable exterior cover, with a wide array of options to personalise the software content, such as the ringtones and wallpaper, so that each user can have a unique product in hand. In the February 2007 Time Magazine , Bill Gates was asked about the NEAR future technology, he replied that "TV will be sent over the Internet, and then you do not have to think about channels. If there is a news segment, and you'd like soccer, we'll show you more about soccer. If there's another city which where you want to know the weather, that will be in your news report ..... the computer will have a camera where it can recognise who's there. A mirror won't just be a mirror, it will be a digital mirror where you can try out different outfits and get advice. Maybe it will say, 'Hey, you don't look good in it.'" I would add that a standard package of creative and innovative products may not be sufficient. It has to be customisable to suit the unique individuals, in order to be the ultimate winner.

Is Singapore ready for this brave new world? Are our Government, businesses and people ready for this paradigm shift? Since our most precious factor of production is human, and our service industry is a rising contributor to the GDP, developing a service culture is critical. MOM launched Go the Extra Miles (GEMS), a nation-wide campaign to promote good service. Four Million Smiles

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was rolled out to welcome the World Bank-IMF delegates last year. Yet, last November, it was reported that Singapore's ranking in world service standards dropped from 17 to 26. In contrast, Hong Kong jumped from 10 to 4. So, does the nation really understand that good customised services go beyond mere smiles? A campaign can create the needed smiles, but sincere, personalised and creative solutions to fulfil customer needs must come from the hearts and heads. Where should we start? Since the public sector is a major employer and has a leading effect on the rest of Singapore, I will focus on the need to cultivate a world-class civil service for a top-tier First World economy.

To be sure, we have an efficient administration that is the envy of other countries. Yet, while efficiency is its strength, creativity is not. Ministers and parliamentarians tend to be mission-driven, but they, too, are limited by their bureaucrats' interpretation of their intention into policies and procedures. The civil service translates them into simplified boxes and game-rules that are fair to all, have no room for corruption, and often easy for everyone to understand because it adopts the common denominator. Over the years, we have streamlined processes to the point of flowchart yes-no clarity. Hence, anything that falls within the box or norms can be treated expeditiously. This has worked so far, in a world where mass production and standard answer are the norms. But what happens when the query is innovative and original? I think it gets lost in the lallangs sometimes.

Feedback from the private and people sectors points to growing frustrations with the rigidities and follow-the-rules mentality amongst the civil service. A social commentator, in the form of Jack Neo, the movie maker, devoted an entire movie to this end. His film, "Just Follow Law", maybe an exaggerated caricature of the black-and-white paper-filling, "please

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submit written proposal first", "sorry not my department" bureau-craziness,

but it is a reflection of the frustrations felt on the ground.

To be fair, efforts like ZIP, Cut Waste Panel and the Pro-enterprise Panel have helped. However, the marketplace changes far outpace the slower mindset change in our civil service. We need to move much, much faster, or risk losing our talents and businesses. Surely, there are good examples too. One is found in the case of MDA and a film production company called MegaMedia. Their partnership has gone on to grow MegaMedia as one of the largest HD producers in Singapore and also a major distributor of HDTV in the region.

Surely, the civil servants are neither good nor bad. In their personal life, they are just as creative as you and me. But once they arrive at their office, they "just follow law". If we quantify this loss in dollars value, it might add up to a mega sum on lost opportunities. I suspect that they may not be as cold-blooded as it seems. They are possibly frustrated that although they too want to innovate, there are restrictions in place. So better 'play safe' and be kiasu . Perhaps, it is the minority, but such behaviour is linked to yeast and it needs only a small amount to affect the whole dough.

So what can be done? I suggest that the Budget allocates some resources to the civil service to upgrade their innovation and emotional quotient, maybe we call that IEQ. I would like to suggest the right to make mistakes. This practice by large French corporations assumes that only persons who do not make mistakes are the ones that did nothing new. Instead of getting a blemish in their record for failed attempts, they get rewarded for taking risk and get a blemish for not innovating. Perhaps, we should adapt their system to incentivise adoption of innovations by civil servants. Only then

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can Singapore support an innovative culture.

Another suggestion is active secondment of the civil servants to the private and people sectors or even international agencies. This will not only provide our civil servants with an experiential understanding of customers' needs, but also enrich their perspectives on redefining customer-centric services. Examples of countries running similar initiatives include Luxembourg and UK. In fact, the UK government has an initiative known as Interchange which even permits private sector individuals to be seconded to the civil service. Vacancies and corresponding job responsibilities in various Ministries and the private sector are posted on the web portal. Such mutual postings reduce administrative cost and improve mutual understanding and effectiveness.

Another seemingly unrelated but critical measure is in improving our PMETs' capabilities, many of whom are also in our civil service. The Budget recognised the need for lifelong learning, but it did not go far enough to address the urgency. As our economy moves up the value chain, the PMETs form the backbone of our economy and play a leadership role in guiding our workforce. In the long run, our competitiveness, especially in the local enterprises and SMEs, will have to depend on our PMETs' capabilities. PMETs are our next generation business leaders who will assume top positions in MNCs and SMEs in the next five to 15 years. If our PMET layer is weak, this will blunt our competitive edge. If we become overly dependent on overseas PMETs, we will suffer. Being a revolving door for second-class PMETs will hardly help us to become a top-tier first-world economy. We need to allocate more resources to upgrade our PMETs, lest it becomes our weakest link.

To sum up, having an effective civil service and a proficient PMET layer to

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lead the charge in shaping our economy and service culture would augur well in the new power equation where customer needs are paramount.

Third shift: Institutional power to individual power

The third shift, from institutional power to individual power. Tom Friedman said the world is flat. The third shift sees power moving from the traditional and institutional centres to the periphery. Power has become widespread, as vertical command and control structures give way to horizontal networks of social communities and collaborative platforms. This is especially prevalent in the e-arena, as evident in the ohmynews.com where every citizen is a reporter, and more recently, more than half a million netizens got behind a Chinese blogger - Mr Rui Chengang, to rid Starbucks from the Forbidden City. During the NKF saga, I think there were some 15,000 signatures done on the on-line petition as well. The new found freedom in the e-arena has translated into e-voices that critic government and change social values and norms, especially amongst our younger netizens. It has also created countless little brothers vis-a-vis the big brother, as seen in ST's Stomp, YouTube and a surveillance society.

So what can the Government do and how can the Budget help? Obviously, Government needs to redefine its role and form a new social compact with its people. It must recognise that it needs to partner the private and people sectors more wholeheartedly, and encourage the growth of responsible civic organisations, as well as inculcate national pride. This means investing into our people and spending more on cementing our social compact. The Budget announcement to develop Singapore into a Philanthropy Hub is a good start. Removing the three 20:80 rules will certainly spur the growth of a

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multi-billion dollar philanthropy industry as well as civic organisations. They are two sides of the coin. The global trend in philanthropy is the strong emergence of strategic philanthropy. Made famous by the US$71 billion worth of Melinda and Gates Foundation, the more than $100 billion strong global funds, these philanthropic dollars look for strategy investment in transformative and sustainable for-profit as well as not-for-profit enterprise. The idea is to ensure that each dollar can achieve a multiplier effect on meeting social gaps.

The sister of this strategic philanthropy is social entrepreneurship. Social entrepreneurs (SEs) are individuals who address social needs with a business model because they believe that the market is the most powerful and sustainable place to match needs with viable products and services. They are innovators who transform social needs into market niche. In other words, they help solve the Government's challenges at a discounted rate or even for free! Hence, my call here is to ask for more space, resources and investments into social entrepreneurship. It is also to ask for more facilitation of philanthropic dollars to jumpstart local social entrepreneurs.

Please let me declare my interest as the Founder of the Social Innovative Park or SIP, a non-profit organisation that seeks to educate, empower and enhance social entrepreneurship. To relate my experience, since our inauguration about a year ago, we witnessed tremendous interest from the people and private sectors to join us. At SIP, we have successfully brought in five major corporate partners who have expressed keen interest in giving us some 3,000 employee-volunteers as well as a group of social entrepreneur incubatees. We have also motivated and created a social entrepreneur TV series which is currently screened on CNA every Friday night, called the "Changemakers". These results

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would not be possible without the encouragement of MCYS, but more is needed to boost the sector. In particular, the mere $3 million social enterprise fund appears more like a market teaser than a serious effort at boosting social entrepreneurship. We need more serious dollars if we want to build a self-reliant society and enforce the many-helping-hands approach. These dollars must have its priority in empowering local social enterprises. The civil service must also ensure its role as the facilitator and not the person doing social entrepreneurship. It must facilitate and empower local bottom-up initiatives and create a conducive environment for its growth.

More tax incentives and dollars should also go into kick-starting an integrated approach to corporate philanthropy. In the US alone, corporate philanthropic foundations pour some US$30 billion into their endeavours every year. In the words of Mr Rochelle Lazarus, Chairman and CEO of Ogilvy & Mather Worldwide, "the debate about whether corporate philanthropy is right for the bottom line is long over. The market has spoken and said it cares whether companies are good citizens; ... Engaging your company in corporate philanthropy is now part of being a good CEO". Ogilvy is also a corporate partner of SIP. Another of our partner, salesforce.com, incorporated this philosophy right from its inception. The result? A legendary rise to become a billion dollar company in eight years! It has attributed part of its success to its 1+1+1, and now a recent plus one, model - equity, profits, employee time and the green movement. In fact, most of its social projects and bottom-up, ie, initiated by its employees or requested by social groups. 85% of their global workforce is active in philanthropy. They currently support more than 1,000 NGOs worldwide.

One social entrepreneur that salesforce support is John Wood. John

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resigned from Microsoft to bring education to children in developing countries to break their poverty cycle through his SE called "Room to Read". With strong support from corporate partners, local agencies and entrepreneurial knowledge, John's six-year-old venture is now found in 1,000 villages in six Asian countries, with 2,000 libraries and one million books in store for about a million children, and offers 1,000 scholarships. He wants to be the Microsoft of the charity world, a trusted global brand. A key element of his success was found in his customised solution models. He relies on native program officers who are personally invested in their national education and familiar with local rules and culture to tailor its development approach to meet local needs. Perhaps, our civil service can also study this customised solution approach to better help our local SEs.

On national pride, I think we should foster that with great urgency. On 23rd February this year, the Straits Times reported on how the lack of local support diminishes the chance of a Singaporean chef shining on the world culinary stage. Another guy, Jack Sim, founder of the World Toilet Organisation (WTO), laments that he loves his country but his country does not love him. Apparently, he was initially rejected by MEWR for Singapore to host the World Sanitation Fund Forum. This forum will see a thousand delegates comprising UN agencies, funders and global experts. He said that he was told that if it was successful elsewhere for the first year, they might consider to host it in Singapore in the second year. Fortunately, when Prof. Tommy Koh heard that it was moving to Thailand, he garnered enough support for it to be held here. Jack said that, "Everywhere, WTO is accepted and supported except in Singapore. The answer I got was: prophets are usually not welcome at home." Jack's family has applied for Australian PR. How can we

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keep talents like him? Why are we not proud of our own local talent and how can we inculcate national pride so that we can turn the four million smiles into four million ambassadors?

To send a strong signal of trust and support, I suggest that we rationalise this spirit in respect to Lifelong Learning Fund, to move from a training institute-centric fund to an individual account, allowing our fellow Singaporeans to bear responsibilities in determining their career pursuit. This will send a strong signal to our people to be responsible for their own livelihood with a little help from the Government. In US, to encourage the SMEs, projects under ---

Mr Speaker: Ms Low, you have two minutes left. Please wind up your speech.

Miss Penny Low: I will do so in one minute. In US, to encourage the SMEs, projects under certain dollar value are also reserved to local tenders. Similarly, if we reserve just 20% of the annual Government spending expenses which amount to about $6 billion, I think this will create a great demand floor for our SMEs.

To conclude, the present Singapore is built on a strong foundation by a resolute and hardworking population, under astute Government guidance. In the rising power of the three shifts, the essence to survive is to recognise and harness opportunities by responding appropriately. This is an exciting time as well as a time for risk and innovation. Let us go forth and encourage our people to dream, experiment and think of how to build a creative and dynamic society, a culture that truly exemplifies the can-do, will-do and do-well spirit. May we progress in unity.

Sir, I support the Budget.

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1.30 pm

Mr Wee Siew Kim (Ang Mo Kio): Mr Speaker, Sir, thank you for allowing me to join in the debate.

Since the Budget announcement, I have heard positive feedback from many of my residents as well as from the businesses. Many perceive it as a generous Budget that has taken into consideration the needs of the various segments of the population.

While no one welcomes a tax increase, there is widespread acceptance of the rationale for the need to raise the GST. The offset package is much appreciated and the pain taken to address the needs of the less fortunate in our society has not gone unnoticed.

Putting aside the dollars and cents of the Budget for a moment, I would like to focus on the signals that the 2007 Budget had sent.

First, the 2007 Budget continues to demonstrate that we are a forward-looking country. The Budget clearly shows that Singapore continues to plan for its future. We are well aware of our strengths but also the challenges of globalisation and as a small nation amongst bigger neighbours. But we are not daunted. We will continue to forge ahead with confidence, position Singapore well to meet the challenges and punch above our weight.

Second, the Budget has laid plans for a vibrant city that is plugged into the world. Singaporeans and people from all around the world alike will want to live, work and play here. Singapore aims to provide a First World living environment that many have and will be proud to call home and country.

Third, the extensive, broad-based support of the initiatives in the Budget

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shows that we are taking great steps in achieving our goal as a more gracious society. It caters to the needs of the elderly, the lower-income, the sick and the young. The message is clear - as long as one does his or her fair share, no one will be left behind.

Singapore a forward-looking country

Let me elaborate on the first point - Singapore looks ahead with confidence. Riding on the crest of three consecutive years of economic and employment growth, this confidence can be easily brushed aside as a good feeling which a rising tide brings in. The skeptics will have us believe that at the next economic downturn, this confidence would evaporate and all the issues and worries that confound a small nation state would bubble up to the surface again.

I sincerely believe otherwise. Yes, growth is important and we will continue to strive for growth to ensure that the next generation - our children - would enjoy a high standard of living just as we are now enjoying a standard that is way above what our parents had experienced. While confidence can be partially attributed to good economic performance, I also believe Singapore’s confidence comes from our people who have proven that we have got what it takes to pull together and confront adversity.

Over the last few years, we have weathered multiple crises as a nation and come out stronger. We have undergone two economic downturns within a six-year span and we took the necessary bitter medicine in order to recover. SARS struck us from the blind side and we pulled together. When we woke up one morning to terrorism threatening to tear through the threads of our multi-racial society, we faced it as a rational people of all colours and faiths determined to preserve the harmony that we have enjoyed as a nation.

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As a small nation, we also have had brickbats thrown at us from our neighbours but we continue to stretch out to offer aid and continue to be in pole position to push for regional solidarity because it is for the good of the region. All these had built our resilience as a society; confident in our role and place in the sun. And in this Budget, we continue to build on our strengths, continue to forge new horizons, and continue to plan for the future of our nation.

One tangible evidence of our relentless focus on building the future is the commitment to ensure that every child has a first-rate education. And we have seen the results from the significant rise in general educational levels over the years. The unwavering focus on education had certainly borne fruits. Singaporean managers, executives, and workers are highly sought after. The hallmarks of discipline, dependability, diligence and rigour of our work force set us apart and ahead. But the pressure is relentless and we cannot afford to rest on our laurels lest we fall behind. We must continue to provide additional avenues for Singaporeans to advance and train themselves.

With the advent of the Post Secondary Education Account, the onus of keeping up, of taking the initiative to keep oneself ahead are firmly in the hands of the individual. Each student can choose how he or she uses the money. The Government has truly put life-long learning within the reach of all students. In addition, the increased Polytechnic subsidies for older students are extremely welcomed as workers can expect to be trained and retrained several times in the course of their work life.

However, I seek the Minister's consideration on two points that had often been raised in my interactions with my

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residents. The first is the desire of our young to take a second diploma or degree. They have met with rejections from our educational institutions. I hear that the rejection is underpinned by the belief that in allowing them to take a second diploma/degree in alternate fields, it would deprive other students of an opportunity, especially if the courses are subsidised. Clearly, the desire to stem out waste of scarce resources from students' extended stay in educational institutions is understandable. However, with our new mindset of providing life-long learning opportunities, I seek a relaxation of this constraint. Allow eligible students who may have made a wrong choice or have found a new interest or who are capable to pursue second diplomas/degrees the ability to do so.

Secondly, give a second chance to those students who had not fared well or had wasted their opportunities by failing to be diligent or had come under the influence of bad company but realised their mistakes later. Our education system must be more tolerant of failures and our students given additional chances to try again. This is the entrepreneurial spirit that we are trying to foster, so let us start with our young. Let us re-examine the rules that hinder second opportunities in the pursuit of learning and eradicate them.

Singapore as a vibrant city

The second signal from the Budget was about Singapore embracing globalisation and providing first-world living for all. Today, Singaporeans are internationally mobile and many are working in all corners of the world. Increasingly, we must develop the hardware, the software and the heartware to connect our people from all over the world to Mothership Singapore. Earlier I spoke about national confidence that comes from a collective determination and

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consciousness borne out of surviving adverse challenges. This is part of the Singapore software and heartware.

This Budget also laid out the promise of the hardware. To Singaporeans and to the foreigners who set up home here, a vision is painted - a future vibrant city in green and blue. In true Singapore style, we are not selling empty promises. It is built on concrete plans. The early phases of this vision have already materialised in drawings and pictures and are being rolled out.

The future city of Singapore - painted vividly in words, and more excitingly in pictures and models - is certainly where all of us want to stay and grow old in. The environment is a key part of the pride we have in Singapore. Wherever I go and travel, whenever I hear of Singapore being referred to as a garden city, it brings out the pride in me, and I am sure it brings out the pride in all of us. Hence, PM's vision of a Singapore - green and blue - would excite Singaporeans young and old, and will excite new Singaporeans as well.

It is encouraging to hear that close attention would be paid to the heartlands where Singaporeans spend much of their leisure time. Large swathes of older estates would be rejuvenated. This is eagerly awaited. At Jalan Kayu, my residents are looking forward to building an extension to our void deck community centre with a stand alone multi-purpose hall and street soccer facilities. We hope to incorporate the green and blue environment too by having a garden on the roof of the multi-purpose hall and skyways to directly link the third or fourth floors of nearby blocks of flats to the roof garden. It would certainly soften the harsh and jarring outlines of the CC extension and create an environment that all my residents would be proud of. To make this a reality, I hope for inter-agency cooperation among the People's Asso

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ciation, HDB, NParks, MEWR - a lot of people working together. With the hopes of our people raised by this vision, I hope that the Ministers in charge of the different agencies would allow a collective approach to this project. It is a small start but it could well be an exemplary showcase.

Staying for the moment still in the heartlands, I would like to speak about another heartware programme - the Lift Upgrading Programme (LUP). The LUP is often an eagerly awaited improvement for the older blocks of flats. Understandably, there is a limit to expenses and this is by stipulating a cost cap per benefiting household unit. While the residents benefit from lifts on every level, they also hope to enjoy additional enhancements in the process, eg, decorative tiles, security cameras, planters, better lighting, etc. Grassroots leaders tasked with helping to reach many of these decisions on what to have strive to create an environment that the residents can also be proud of. We are proud that our HDB flats are attractive and very different from the drab and often under-maintained public housing of many other countries.

To be able to provide residents with enhanced value add from the LUP, I would like to suggest a modification of the cost cap per benefiting unit calculation. This cap can be used initially for the identification of the blocks that are eligible for the LUP. However, once this hurdle is crossed, let the cost be looked at from an accumulated precinct basis. This way, all the blocks in a precinct could be treated in a collective manner to achieve an overall look and common enhancing features post-LUP. As the blocks in a single precinct are often of different designs - point blocks, segmented blocks, common corridor blocks - by moving away from a cost cap on a single block basis once the eligibility is determined, I believe, would be able to better meet the overall needs of the

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residents and enhance the precinct living environment.

_Singapore as a more gracious society
_

The last signal that I detected in this Budget is that great strides are being taken to inculcate the characteristics of a gracious and compassionate society that we strive to be. Hence, it is encouraging that informal workers not only merited a mention in the Minister’s speech but they are also recognised and treated no differently from self-employed persons. These informal workers do odd jobs on an ad hoc and often erratic basis. For many of them, if there is no work, there is no food. These are the people who are generally lower skilled and with a lower education. For many of them, the new economy no longer requires their skills that they had been trained in. But many still retain good work ethics and prefer to be independent than to receive hand-outs. This is not to downplay the Workfare programme and its merits. It is about creating the additional opportunities for these people to earn a livelihood. Hence, I repeat my previous calls, which I have been making for several years now, to make it easier for these people to become small stallholders or hawkers. The present approach of tendering out all stalls in the market and hawker centres makes it almost impossible for some of them with limited means to attempt to start making a living this way. Maybe a cooperative to facilitate the entry of small, poor stallholders and hawkers could be looked into.

The Senior Citizens' Bonus recognises that retirees and aged citizens dip into savings for their daily expenditure. The additional $1,000 is definitely very welcome. Every year, we celebrate Senior Citizens' Week to recognise the contributions of our aged residents. At the same time, we reinforce the younger citizens' appreciation for the generation that had toiled and built the Singapore that we enjoy today.

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However, amongst these senior residents are some who are not well educated and not accustomed to planning ahead. As a result, they land themselves in a predicament of being a non citizen in the land they had lived, worked and grew old in. Many had worked here, contributed economically, but somehow never got around to being a PR or a citizen. Some have children who are citizens and have served National Service. In their golden years, they yearn to be Singapore citizens, not only because most see this as their only home where their roots are but in reality they also have nowhere else to go. Many feel that their PR or citizenship applications had not made progress because of the concern that older people put undue stress and burden on Singapore's social and health services. I have seen the appeals of many of these residents.

So I am asking that the hard-nosed argument that they are no longer economically contributing be reconsidered. While I understand that the working population of today and tomorrow would have to shoulder a heavier burden, I believe that this is a burden willingly shouldered. I hope that the Government would consider giving due consideration to the applications of such older residents when they seek to be PRs or citizens. This is a gesture of compassion, one of gratitude that these people too had played a role in Singapore's formative years, and recognise that they too deserve to be given the benefits of having given most of their productive lives to this country.

Population - adoption

From my call of allowing some older people to be PRs and citizens, I want to turn to the other end of the age spectrum - adoption of children. People adopt children for various reasons. Some adopt because they love children but are unable to conceive; some adopt because they

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want to enjoy the joys of parenthood or feel that life is not complete without being a parent but they were unable to have their own. Others adopt because they genuinely believe in wanting to do good, to provide care and love to the less unfortunate who are unable to fend for themselves. The adopted and their natural children live side by side.

So, as a more gracious society, could we not encourage, facilitate and simplify the rules and procedures for adoption of children? Suggestions to aid this process include the provision of financial incentives and to simplify the entire adoption process.

Government to provide financial incentives or relief for child adoption

The Government now provides certain tax rebates to parents with a third child. Just, recently, the period of maternity leave to mothers was increased. All these have been done to encourage and assist with parenthood. Similarly, the Government can consider providing a one-off financial subsidy to eligible individuals or couples looking to adopt a child. This subsidy could be used for any purpose that goes towards making the adoption easier and more affordable, for example, paying for adoption proceedings, purchasing clothing, education, not unlike a baby bonus.

Reduce paperwork and costs

The entire adoption process for a child born in Singapore could also take as long as 10 months. When I look at 10 months, I thought somebody made a benchmark which actually produced their own child. But to adopt a child born out of Singapore is subject to even more compliance requirements and the entire process will certainly take much longer. And I do understand issues do emanate from the countries as well. Where it is within the control and ability of the Government to

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simplify and reduce the adoption process time, we should do so. For example, shorten the time to complete the Home Study Report (HSR). This HSR essentially states if the potential adoptive parent is suitable to adopt a child and provide a caring home environment. This HSR typically takes about six weeks to complete.

The current adoption procedure also requires one who plans to adopt a child born outside of Singapore to obtain a dependant pass before the child may stay in Singapore with the adoptive parents until the court proceedings are completed and the Adoption Order granted. The court proceedings, together with the related paperwork, can sometimes take five to six months and the process is costly and time-consuming. The MCYS could look into the need for the dependant pass and security bond requirements, as well as the necessity for a court order. Legalities should not stand in the way of, or delay the opportunity of allowing, the child and parents to start bonding and creating a home environment as soon as possible. Is the HSR not itself the basis for all these to happen?

Singapore has also signed a Note of Agreement on the adoption of children from the PRC. Entering into such bilateral agreements will certainly help smoothen the adoption processes between countries. Singapore could also look into similar agreements with other Asian neighbours, such as Malaysia and Indonesia.

With the need to grow our population, and as we welcome new immigrants, I believe that we should similarly ease the adoption process as the adopted children raised and nurtured in Singapore homes ought to be just as worthy citizens.

Mr Speaker, Sir, I would like to make the concluding part of my speech in Mandarin.

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( In Mandarin ): [For vernacular speech, please refer to Appendix A.] In my constituency, there is a group of people who need more concern and help. Another group of residents whom I meet in my constituency and whom I feel ought to be given more attention are the single parents. There are many single parents. To take care of their children, they need to be brave and strong. I appreciate the policy of encouraging families to stay together. I too appreciate that if assistance is too readily available to single parents, it could potentially accelerate the break-up of some family units.

However, just as the HOPE scheme strives to ensure that the second generation has a better start in life with a roof over their heads, with their education expenses catered for, many children growing up in low income single parent families need exactly the same head-start in life. We must recognise that they exist in our midst.

Sir, bold moves have been made in this year's Budget. These bold moves put us on a path that secures this country's future. That no one gets left behind is certainly the hallmark of a gracious society. We must continue to do more for the less well-off, the elderly, the aged, and the children from low income broken families.

Sir, I support the Budget.

*Cols. 2029-2030.

1.53 pm

Ms Eunice Elizabeth Olsen (Nominated Member): Mr Speaker, Sir, thank you for allowing me to participate in this debate.

Sir, I am not sure whether my bad cough is due to eating too much bak kwa and pineapple tarts during this Chinese New Year or an allergic reaction to the

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GST increase. Considering this is the second time I have fallen ill in three Budget debates, maybe it is the latter reason.

This year, the Goods and Services Tax increase is one of what I would consider the two most important elements in the Budget, and the other is the Workfare Income Supplement scheme, which I will touch on later. In a way, both are linked, as the Government kept saying in the run-up to the Budget announcement how the GST is being increased to help the poor. Of course, this reason cannot be the sole consideration for, or consequence of, increasing the GST. Without a GST hike, how possible would it have been to cut corporate taxes to 18%? This tax cut will cost the Government $800 million a year at a time when it is clear that we need to spend more on an ageing Singapore population. And so the Government has turned to GST to increase its expenditure, including social spending.

The big question is: have we done enough till now to avert the need for an increase in the GST? I am sure it was a decision the Government did not take lightly. Can the Second Minister for Finance elaborate on what alternatives were explored to keep up both the Government expenditure and our economic competitiveness at the same time?

In the World Competitiveness Landscape report last year by IMD, the Swiss business school, Singapore ranked in the middle tier, behind the likes of Hong Kong, Ireland and Finland, in the measure of government contribution to country competitiveness vis-a-vis the contribution of economic performance. To what extent does this suggest that the dual concerns over Singapore's competitiveness and social needs can be addressed in a better way than combining a corporate tax cut with a GST hike?

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For one thing, many MNCs have relocated their investments from Singapore to China which ranks lower in competitiveness, but not to Ireland whose corporate tax rate is 12.5%. Why are businesses and talent not flowing to tax-free countries, like Brunei and the United Emirates, if low corporate taxes are the main factor? Is it not because their economies and geographies are different from Singapore's? So, what makes us think that the kind of foreign direct investment and talent we want are the same as those that would flow to the Eastern European economies - those that the Second Minister for Finance said have become serious competitors - or for that matter Hong Kong, which is not looking for manufacturing investment as much as we are.

Logically, a reduction of corporate tax which, firstly, benefits shareholders who belong mostly to the wealthier segment of society, combined with an increase in a regressive consumption tax like the GST, serves to widen the income gap. Therefore, I think, a stronger case is needed to increase the GST. Is there a cost-benefit analysis of the reduction in corporate tax rates? The GST increase will be permanent, and Singaporeans ought to know how much more investments and jobs the corporate tax cut can be projected to bring in vis-a-vis the increase in GST they will be paying.

Would it not make better sense to wait until we get a clearer idea of the range of income we can expect to draw from the reserves as a result o the proposed revisions to the Net Investment Income formula before we go ahead to raise the GST? How do we know the income is not enough to preclude the need for a 7% GST or even a 6% GST?

Sir, if the GST hike truly cannot be prevented, then our focus should be on whether the funds it generates are used for social spending and whether they go

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the distance, especially for those who need it the most: lower income Singaporeans. In the words of our Senior Minister, the benefits must outweigh the increase in prices.

As the GST increase will be a permanent one, I would like to ask the Second Minister for Finance what happens to the additional subsidies for healthcare, education and conservancy charges in five years’ time. Will they be discontinued? It seems that the offset package to deal with the GST increase is not too dissimilar with past packages such as the Economic Restructuring Shares or Progress Package.

However, I think there is a much clearer recognition this time that although we may benefit from globalisation, there always will be a group of Singaporeans who need help from their country to keep up. It is, first and foremost, the responsibility of this Government to ensure there is a safety net for this group. I do not see this as planting the seeds for an entitlement mentality to take root, but rather as a note of encouragement to those who are willing to help themselves.

With that in mind, the WIS scheme is the most positive feature of this year’s Budget. Singapore now has a means to rebalance the playing field for lower income Singaporeans living in a changed world. The implementation of Workfare as the fourth pillar in Singapore’s social safety net is a recognition of market realities - that globalisation will exacerbate the income disparity between the rich and the poor. Given how unabashedly capitalistic the Singapore system is, I hope that Workfare is a sign that we not let the market be a substitute for democracy and democratic principles, one of which is to ensure that no one gets left behind. The politics of class and social inequality caused by an accelerating income divide could not be more

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detrimental to our national interests. There will always be income disparity, but it is how we manage it, so it does not become an income divide that is entrenched and cannot be bridged, that counts. Workfare is a crucial step to demonstrate and nurture the sense of social integration that the nation of Singapore needs.

Looking to the future, and some possible scenarios, for example, if Singapore’s Gini coefficient continues to increase, and the income gap continues to widen, can the Second Minister for Finance say if the WIS amounts or the qualifying income criteria, as the case may be, would be suitably increased? Likewise, as our population increases from 4.5 million and, therefore, when our GST revenue rises above $1.5 billion a year, or the GST rate is increased again, would the Workfare amounts or the criteria be adjusted accordingly?

While some Members in this House might in time like to see less people on Workfare, I think it is logical that self-sufficiency, especially in a globalised economy with a regressive consumption tax, follows a bell curve. We should always extend the

helping hand of Workfare to the bottom 20% of income earners to remain true to the objectives of the scheme and to the interests of lower income Singaporeans and the nation as a whole. We cannot call ourselves an inclusive society, otherwise.

However, the WIS scheme is not a silver bullet that can alleviate all the pressing social needs of the lower income, especially in their retirement. How likely is it that the bottom 20% to 30% of income earners would reach a self-sufficient level to last throughout their retirement, even on the wings of Workfare? If any sense of complacency creeps in, I worry more that it will strike our policy planners than our Workfare recipients. Even with Workfare,

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I think we should look to have a multi-tier pension and healthcare system with an important role for social risk pooling.

While this may take some time, one thing that can really help the lower income groups is to improve the interest rates of their CPF funds. The current baseline of 2.5% for the Ordinary Account is too low, especially if GST is going up this year and in the future. Should we not rethink how we peg CPF interest rates? Even Malaysia's Employee Provident Fund pays a higher interest of 5.5%. With the way Workfare here is calibrated, it is quite clear that the Government's priority is to build up the CPF accounts of the lower income. If this is so important, then should not higher interest rates be set for CPF funds, including Medisave and Special Accounts?

On a final note on Workfare, what of those "aunties" and "uncles" who scour the streets and our estates to collect drink cans, old newspapers and cardboard boxes to sell for recycling just to earn a few dollars to put food in their tummies for the day? It hardly seems that the WIS scheme is within their reach, even to contribute to Medisave. Yet, they are making an effort to find a means of income, however paltry, no different than how workers who qualify for Workfare strive to stay employed. The former, in fact, need more help. What can be done for them? If the Government is willing to help 438,000 Singaporeans through Workfare, it should be more generous to the fraction of Singaporeans who need help from the Public Assistance Scheme. The monthly aid should definitely be increased in view of the GST hike.

Sir, I am under no illusion that the Government can provide all the solutions to our social issues and concerns. In the economic aspect, Singapore has done well compared to the rest of the region. But if

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we want to climb to the top half of the First World league table, it is time to measure our successes differently. It is time to give equal weight to our nation's social progress, and be seen to do so. We need to be as ambitious about forging our very own Singapore national culture and strengthening the relationships among all Singaporeans as we are about growing our GDP and signing Free Trade Agreements, and be seen to do so. In this, Singaporeans have as much a role to play as the Government. Concepts, such as national identity, social cohesion, empathising with the less fortunate - these are goals we should aim for with renewed vigour. As a Malay Singaporean friend of mine aptly put it, we need to add more perasaan and semangat into our nation. In order for us to be a more inclusive society, we need more feeling and spirit.

First, let me address the issue of perasaan or feeling. There are two things we can do. Firstly, we can find ways to celebrate volunteerism so that Singapore becomes a conducive place for volunteering to be a way of life. Otherwise, how can the "many helping hands" approach be a successful and sustainable sacred cow? Without volunteers, it would be more of a red herring. So we should aim for a higher volunteer participation rate this year. The MCYS' key performance indicator for the estimated volunteer participation in 2007 is 15.5%. There is no change from last year, and only a slight increase from 2005. Of course, we should strive for quality and quantity, and Singaporeans should volunteer because they feel they want to and not because they think they need to.

Secondly, we can find various ways to pay tribute to our elderly. Singapore's success is founded on the hard work of our parents and our grandparents. Our First World aspirations and achievements are built on their sacrifices. We stand on

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their shoulders. We should look to the elderly as gems in our society, as a valuable and priceless resource of our country, not just as workers but as citizens. We would need a rather qualitative KPI here. We would need to listen to the feedback from the elderly Singaporeans through the media and other official channels like REACH to gauge how we are faring in our policies and our personal interaction with them.

Now, let me talk about semangat or spirit. Mr Speaker, Sir, the creation of Post-Secondary Education Accounts for young Singaporeans and the support for lifelong learning to all Singaporeans are examples of how to infuse some semangat in this year's Budget. In order for Singapore to fully imbibe in the "can do, will do, do well" attitude, however, I think it is important we allow room for failure. Speaking of globalisation, just think of the dot.com bust a few years ago, and then look at the world around us today.

In Singapore, the tried and tested is so often the path of choice. I can see examples of how we are trying to foster alternative paths, such as in education, but are we ready to shake off the shackles of fear of failure in all aspects? Sometimes, it seems we have convinced ourselves that we are too small to risk failure, and this is seeped through various levels and ways of thinking. But the notion that we cannot afford to fail or take risks is a hurdle in the journey to bigger and better things. Failure is one of the best teachers. ERC Holdings, for example, one of the Economic Development Board's many partners, helps budding entrepreneurs with their start-ups. One of their mission objectives is to help struggling enterprises. They are turnaround specialists. This is a great initiative, and I think we should give failure more publicity - from those who have it around to those who are still trying. If next year's Budget could include

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these stories, and not just the straightforward runaway success stories, then it would have even more semangat .

Finally, Sir, I would like to say this Budget places the focus back again on the value of the Singapore citizenship. The creation of the PSEA, support for lifelong learning, wages and savings supplements - these are good ways to enhance the value of the Singapore citizenship. I believe it is important to focus on the value, rather than the cost of the Singapore citizenship which unfortunately I thought was the case last year when the cut and subsidies for permanent residents and foreigners in education and healthcare were announced. It is not good for the semangat of this country when we start focusing on costs to evaluate if we are getting a fair deal as Singapore citizens. We should focus on how much of an enabler the Singapore citizenship is. Does it enable us to gain an advantage in education? Does it give us a cushion against the unrelentless market? Does it enable us to exercise our vote? Does it give us semangat ?

Sir, I support the Budget.

2.07 pm

Mr Chiam See Tong (Potong Pasir): Thank you, Sir, for allowing me this opportunity to join in the debate.

Hong Kong's corporate tax rate is 17.5%, 0.5% lower than Singapore's. There is talk that Hong Kong may lower its corporate tax rate to 16.5%. The Hong Kong Legislative Assembly shall be meeting today to decide whether its corporate tax rate shall be lowered further. Hong Kong has a lower corporate tax rate than Singapore. Yet, it has no GST. Does Singapore need to raise its GST by a further 2 percentage points? Not necessary, says a writer in his letter to the Forum page, if land sale is seen as revenue.

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Government never sells to the public land in fee simple, that is, freehold. It only sells leases with 30 years, 99 years or whatever length the tenure it decides. After the expiry of the leases, those lands revert to the Government. In any event, IRAS treats the earnings of multiple sales of land within a year not as capital appreciation, but as income and are subject to tax. The returns on land sales can be treated as revenue by the Government. If the Government is not obsessed with having a budget surplus on every Budget day, but only aims for a balanced budget, there is no need for a GST hike. It only has to use cash generated by land sales to balance the budget. The two percentage point increase in GST will raise an additional $1.5 billion in revenue. This, according to the Minister, is needed to cover for the loss of revenue in implementing Workfare and the lowering of the 2% corporate tax. The proceeds from the sale of land are in excess of $4 billion. This sum of $4 billion is more than the sums spent on Workfare and the loss of taxes when the corporate tax is lowered. They can easily be used to pay for the loss of revenue.

The 2% increase in GST would hit the poor harder than the rich. The rich would not feel the effects of the raise in GST. But the poor certainly will. Generally, the hike in GST is regressive in that the percentage of income spent on goods liable for taxation is higher among the low income groups. Regressiveness is often increased by a practice of applying the same tax to cheaper brands as to the more expensive ones. The GST, unlike other taxes, cannot be used flexibly as a weapon for fighting inflation and maintaining economic stability. It would appear that as long as the economy is good, there is every likelihood that the GST rate will increase. Increases shall be a feature of the Budget until the 10% mark is reached. The last time the

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Government distributed giveaways through the Progress Package, many people were unhappy because their incomes were wrongly determined and they received less of the payouts. Those poor people happened to be living in private housing but were classified with the rich. This time round, I hope the Government would finetune their efforts to determine the recipient's income more accurately.

I have called upon for the abolishing of the estate duty in this House before. I now support the call made by Mr Inderjit Singh to scrap estate duty. Estate duty collected by the Government each year is not significant. Singapore shall be better off if estate duty is taken off the statutes book.

Globalisation has forced the Workfare Income Supplement scheme upon the PAP. I support the concept of this scheme. Its principles are sound. The income gap between the better paid workers and the lower paid workers must be narrowed. Singapore is a First World country and its workers should not be paid the Third World wages. The WIS scheme is a good thing. But at this present moment, I cannot accept its mode of implementation, that is, one-off payment and not permanent. The WIS scheme should be implemented in the spirit for which it is intended, give meaningful help to the low wage workers. The WIS should be paid, for a start, twice a year, and to be made permanent. I do not think that the WIS scheme will create a crutch mentality because the workers must be working first before he can receive a wage supplement. There is no free meal for him. The worker must be working first before he can receive help.

Now, I would like to mention two groups of people. The first group is the housewives and the second group is the contract workers, especially the contract workers working in the airport. The

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housewives are our true nation builders. They work unheralded quietly at home, taking care of the family and children, bringing them up to be good Singapore citizens which our nation so much depends and relies. I think at the next Budget, the Minister should reward them with something.

The second group is the elderly contract workers. Almost every time I am at the Changi Airport coming back or leaving for an overseas trip, I am confronted by elderly workers there, pushing their trolleys. They complain to me about their work.

They are contract workers and do not receive CPF and other perks which other workers normally receive. I hope the Minister can also look into their plight and reward them. After all, these elderly workers have given a lifetime of work to society and, in their twilight years, they should be given something back.

Through the Workfare and various CPF changes, the CPF balances of most workers will increase, but many are worried that their savings in Medisave are not enough to meet their medical needs. In fact, my feedback tells me that there are many workers whose Medisave accounts are already depleted. Can the Minister do something for these aged poor patients who need medical help badly, maybe to top up their Medisave accounts whenever they fall below $2,000? I hope the Minister will look into this as the insufficiency of funds in their Medisave accounts is widespread.

2.18 pm

The Parliamentary Secretary to the Minister for Community Development, Youth and Sports (Mr Teo Ser Luck): Mr Speaker, Sir, thank you for the opportunity to speak on the Budget.

First, I would like to commend the Second Minister and his team for a great

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effort in coming out with a Budget that has made some very bold moves. It is daring in expanding help and keeping Singapore competitive, but I would not say that it has shifted in our fundamental principles of making sure that the needy get help and making sure that those who can help themselves would get help from the Government. What it has done is that it has led the way in showing what needs to be done in our current circumstances with a sense of urgency.

Some say this is a hong bao Budget. If that is the case, the hong bao comes in different shapes and sizes, some big, some small. the difference is that you get hong bao only once a year for Chinese New Year although I am no longer entitled to that. But, in this case, the hong bao Budget is for the whole year round. So, when you give the hong bao , you cannot take it back and it is for the entire year. You distribute hong bao throughout the year.

As such, the hong bao must go to the right persons with the right amount and for the right reasons. So, the signal and the message must also be sent out very correctly and clearly. This is because, after the Budget was announced, like the rest, I was very excited, I was glad of the outcome until two young students 16 years of age asked me a question. They have kept track of the Budget announcement. I think that is a very good thing to do. They start young. But they asked, "Mr Teo, everybody seems to be getting some bonus. What about us?" At that point, I was hoping that they were not going to ask for baby bonus at the age of 16. They said, "We work part-time and our income is below $1,500. Should we not get financial help to have more pocket money?"

Of course, I went on to explain the principles of the Budget and why and where the help is going to and what is in

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it for them, which is in education and their investments, and that whatever is for their parents would be channelled down to them as well. But they gave me the puzzled look and I hope that they actually understood what I was telling them. However, it is not the first time I get asked, because when the Progress Package was given out, I was asked a similar question by a 17-year-old polytechnic student, ie, where would he stand? Would he get his Progress Package?

I am not suggesting that we should give less. In fact, I think we should give to the needy, the bottom percentile, but we should give out appropriately, send the right message to the young that we have a good Government not in giving you the fish but in teaching you how to fish and, when you cannot find the fish, we will help buy some for you for a limited period of time while you keep trying to find the fish. It is important in the Budget of knowing that you have to earn before you take. So we do not want to build a generation of takers. We need a generation of earners who earn their keep, and givers, those who are willing to share.

This Budget is no doubt generous. Because it is generous, more are now looking for what is in for them and the size of their hong bao . I think it is important to note that this Budget is about giving you a helping hand so that you can help yourself. And it is not just a giveaway. We should really avoid for the Budget to becoming a real real hong bao .

All said, this Budget is about change. It changes and challenges the thinking and rationale of how we view the future and how we prepare for the challenges. It is trying to help us not to be too conservative. It talks about opening up, evolving and following the pace of the market. That, in itself, is to me a

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fundamental shift in the thoughts. There are four major elements, namely, GST increase/offset packages, CPF, Workfare and corporate taxation.

The Budget looks after the needy and poor with GST offset packages and a string of assistance. No one would have liked to pay more. But what other alternatives for revenue sources? Direct taxes? That would not happen. More are asking for reduction, so there is no way we could increase, and I certainly would not ask for it. If we are asking to tap on our reserves, I would question, is that a prudent approach? I think the question here is, if we could not obtain enough from other sources, how much do we exactly need, and is GST increase the only way?

Workfare is a good scheme. It makes sure you are self-reliant with a job so that you can be financially independent in the long term before being rewarded with a Workfare bonus. The question again is: with Workfare Income Supplement scheme and Workfare, would a worker be encouraged to stay at $1,500 and below and not wanting to go beyond that? But Workfare's intention is to help encourage you to stay employed longer. My only concern is that it may motivate an individual a different way. So, we will have to ensure that the signal is sent out correctly.

By increasing CPF contribution, we recognise that the economy is now doing well and we have to reward the workers who can face the future with confidence. I refuse to believe that CPF resuming to 14.5% would increase the cost of business as the economy is getting better, and it is an important strategy of talent retention rather than losing them because, when we lose them, it costs more to hire them again or to hire an additional person.

Reducing the corporate tax rate to keep us competitive, but that comes with

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a price. We lose a revenue source, we need to find a replacement. Like some Members of this House who asked if increasing GST or indirect taxes in support of keeping us competitive, how long can that be sustained and what is our threshold level? My question is: even with the lowering of corporate tax, how attractive is this for investments and investors and how long can we maintain this competitiveness? All this would require a growing and stable economy, continuing foreign direct investments, and good governance of the funds in order to sustain the competitiveness.

The reduction from 20% to 18% attempts to keep us competitive for foreign direct investments (FDIs), the partial tax exemption for the growth of SMEs, and the more important message is to use this gain for the small and medium enterprises to venture outwards, and the 80:20 rule exemption attracts financial flow of philanthropy operations. Are these attractive enough compared to the other countries? We make many comparisons with Hong Kong. Hong Kong's corporate tax rate is 17.5%. We have now brought it down to 18%, and today Hong Kong is going to make some new announcements. For SMEs with $500,000 chargeable income, the effective tax rate is 12.5%. For income tax rate, it is generally lower in Singapore. But for the really rich and the senior talents, Singapore is higher compared to Hong Kong.

But we have been voted the country with the lowest risk to do business in. With all this, we would have thought surely we are now ahead. But I would just say that we have only levelled up with Hong Kong. We have definitely put in the hard work and effort to make Singapore more successful. But the fact remains that we do not have a mass market behind us. Hong Kong has it. It has China. At the end of the day, to any business person or company, proximity to the target market is critical. Foreign direct investment in

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China is around $70 billion. In Singapore, it is $8 billion.

I had a personal experience when I was living in China and Hong Kong. I had to recommend a location of an operations centre for a multinational company. It was between Singapore, Hong Kong and Shanghai. So we went through due diligence, calculated the costs. Singapore came up cost lowest; Hong Kong, salary and labour cost higher; and Shanghai, there was an uncertainty on infrastructure and the availability of talent. So, on paper, it looks like we have the lowest cost. But the investor chose Hong Kong because it is still closer to China, and I saw many of my friends lost their jobs.

But I am not even going to suggest to continue pushing down the corporate tax rate or pushing up indirect taxes like GST. But then again, we never know. Singapore is so affected by external factors that it may become inevitable to keep corporate tax rate lower and lower whilst indirect taxes may just go up to replace the loss of revenue. We need a really effective way to manage this and decide what is the strategic direction in moving forward. Should we just concentrate on pricing, which is the tax rate, or we have to concentrate on the product, the kind of investment that would be put in into Singapore?

So, Singapore has been competitive in its positioning as a hub. If we are to compete as a gateway or a hub, we need to identify which market we are positioning as a hub in service to, ie, which area. If we still position ourselves as an Asia Pacific hub, I would advise not to, because there does not seem to be any more competitive advantage as an Asia Pacific hub. In the north, we have Shanghai, Hong Kong or other first-tier or second-tier cities of China doing better today that can serve as a North Asia hub. So, you fly in your cargoes, bring your investment in close to the target market,

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you do not really need to pass through here. And if we try to be a Southeast Asia hub, then it is important for the countries of ASEAN and Southeast Asia to come together as an integrated market to be effective. But the way things are going at the moment, I think it will take a while, especially when Indonesia and Thailand are both major markets of ASEAN. Then again, even if we do come together, is it sufficient for the growth we are looking for?

So I would suggest we should be a hub to the world in different sectors. I think that is the direction the Government is taking today. It is the right approach. We have to be unique, special and, if possible, be the first-mover or innovator. We cannot just talk about the current life-science investment or biomedical science sectors all the time. We need to reinvent ourselves even in sectors that already exist, eg, IT, logistics, education, health, tourism, energy - lots of opportunities. We have to keep innovating and take risks, trial and change.

We have to make sure we secure air rights to key countries. We have to be connected to all major continents like a spider web where we are right in the middle and can reach any place, do business in any country with ease, using Singapore as the stepping-board.

People make the difference, so we need to have a good mix of both local and foreign talents in this country, if we ever want to be called a hub. Like many Members of this House, we need to retain the best local talents, but we also need the best foreign talents from all over the world to be competitive, because there are some skills sets that are just not available here. We need to learn from the skilled professionals around the world. We know that, if that is successful, we would have created jobs and opportunities.

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There is no other way to be competitive but to accept the fact that having foreign talents is necessary. Attract them to come. If that means lowering income tax, we have to consider it.

Singapore must be positioned to the world as a whole package, ie, people, knowledge, infrastructure, stability, a lot of excitement, buzzing and cost-effective to operate and live in, and risk-free.

While the environment may be risk-free, the Government or the public sector, I would hope, should be expected to take some risks and change in its approach towards investing in new sectors or projects. We have to be open to let the private sector or even the people sector take the lead while the Government supports and facilitates. It

cannot be leading and trying to do everything all the time. You can also not pretend to be experts in all fields. Most importantly, it should not set up road blocks and make the process to success that much more difficult. I have said this before. We can always depend on ROIs. But in some ventures, there are just no ROIs or NPVs or track record to talk about. So we should not be too quick to jump to conclusion or turn down opportunities. Who would have thought YouTube or Goggle or some other companies are so successful today and not have been a sure winner when they started out? A straight "A" student may not necessarily turn out to be an ace corporate executive. So I say, let the expert do the job. Let the private sector take the lead, if necessary, and we will support them because we cannot be everywhere.

All that said, this is an all-encompassing Budget. That is a change catalyst. It paints a vision and charts the direction for change that instils confidence in all of us about the future of Singapore. It may be bold to some extent, but it is necessary and long overdue. If we do not do that, we risk being not able to catch

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up with other countries in the region. It could be Hong Kong today but it could be Shanghai tomorrow or central and East Asian countries' emerging economies could be next to take away the business from us. But we can take heart that we are in the right direction with this Budget and there is no turning back as we embark on this new journey.

Sir, I would like to make a short speech in Mandarin.

( In Mandarin ): [For vernacular speech, please refer to Appendix A.] Mr Speaker, this year's Budget has something for everyone. However, this is also the start of a great change for us. The Budget looks after the needy and poor with GST offset packages and a string of assistance. Corporate tax has also been lowered to keep us competitive. Employer CPF rate has also increased by 1.5% to ensure that our employees do not feel left out.

Besides the lower income group, there is also the middle-income group and their age ranging from 25 to 41 years. This Budget is a generous one, it has something for everyone. However, it is important to note that this Budget is about giving you a helping hand and not about taking. Cost of living is also on the up; therefore, it is important that we help the middle-income group to cope with increasing costs. The middle-income families are the foundation of our society. Although the Government has stressed that we should continue to increase productivity and knowledge, not only at work but also at home, the Government should also ensure that they provide some assistance to help them cope with daily living. For most of them, they do not need direct financial assistance but, to a certain extent, they do have their concerns and needs. For example, we can listen to their needs; offer them some subsidies so that they will have more confidence in working. Also, they do understand that

*Cols. 2031-2034.

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the Budget does not put them as a priority group and they are used to that. So we need to find out more about their needs in order to engage them actively and integrate them into our society.

This Budget hopes that Singaporeans will have more confidence and be optimistic about our future. The Government may still make some slight adjustments in this aspect in our Budget, to ensure that job opportunities are available and so on. We hope that more opportunities will be created to allow our corporations to move outwards when our economic outlook is good and economic cooperation with many countries is also improving. But we do understand that Singapore is very much open to external influence, so we need to continue to work hard and re-invent ourselves, and increase our wages and foreign investments in Singapore.

During the process, we will inevitably face competition from Hong Kong and other countries. Although corporate tax has been lowered, it does not mean that we will continue to stay competitive because investment is not determined solely by this factor but by an overall environment, such as the stability of the country.

Primarily, we hope that Singapore is the country that moves forward constantly. We hope that our citizens will be well protected mentally, that is, all these should not be taken for granted. We need to have a common goal and to stay united if Singapore hopes to continue to move forward and stay vigilant, despite there are certain measures that need to be taken, such as the increase of GST.

I have a small suggestion which I hope is significant. It can also be quite complicated. I hope that the relevant authorities can try to convey this message in a simpler method so that the average Singaporean can understand the message, and that is, the can-do, will-do attitude.

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Sir, I support this Budget.

2.35 pm

Mr Arthur Fong (West Coast): Sir, thank you for allowing me to participate in this Budget debate.

I speak in support of the Budget of 2007. I also take this opportunity to congratulate the Second Finance Minister, Mr Tharman for his maiden Budget Statement but, nonetheless, unprecedented in many ways - socialist in caring for the people and has a longer term aim to boost Singapore's competitive.

The economy has been improving for the last two years and it is likely to continue to do well. Our Government has revised upward our economy to be growing between 4.5% and 6.5%. Although slower than last year's overall 7.9% growth, the forecast for 2007 economic growth is still quite respectable by any standard.

We are on the right track. A better economy has created a total of 123,000 employment opportunities thus far. What is even more worth celebrating is that more than half of these jobs created are going to Singaporeans. Infusion of foreign talent into our economy will help boost the diversity and dynamism of our workforce and we should be happy for this too.

The word from the small and medium-sized enterprises these days is not only difficult in finding good help but also holding on to the good ones. This sets the stage for better remuneration for our workforce and in extension, a better quality of life for all round. The fact that we have received hardly any negative feedback after the increase in 1.5% CPF

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contribution suggests the overall increase in unit business cost is well absorbed through higher productivity. The bullishness in the property sector, a bit uneven, is another article of faith in what we are doing.

Foreign investors are showing their faith in our real estate through stepping up good top-end properties. Although the inflation in real estate prices has not been broad-based yet, it is slowly but surely dwindling the supply glut. It has not helped some of those in negative equity yet. But those with real estate to sublet are reporting improving rental rates of about 30%. And I read with interest that in my division of Clementi, rental rates for the four-room flats have gone up by 30%.

With our twin effort of targeting a population of 6.5 million and liberalising immigration policy to attract more foreign talent, the prospect looks bright for the property sector. It is spilling over to the construction industry that has been sleepy for several years now. In 2006, the construction industry had increased by 41% to about $16 billion. The pace of growth had continued into 2007 unabated. This sand, or lack of it, causing the construction industry to grind slower but certainly not to a halt, but we have contingency plans.

The competition for foreign direct investments globally is a fierce battle field. It is worse in Asia Pacific, what with two foreign direct investment sucking giants like China and India? Notwithstanding this, Singapore can be quite proud of what we have achieved. We have managed a respectable slew of high level of foreign direct investments here. The latest, of course, is Google, setting up a research and development arm here. Google attributed choosing Singapore because of our very vibrant info-communications technology. We have good infrastructure and continue to invest

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in them. We spare no effort in improving the pro-business environment to help the 7,000-odd multinational companies here and 130,000 SMEs. With a lower corporate tax of 18%, our pro-business advantages can only get better from here. It is an exciting time. We have much to look forward to. Our international standing is good and will only get better hereon.

The future landscape of Singapore looks exciting with the slew of programmes on the table. By 2010, the Integrated Resorts should be up and running and so is the Singapore Flyer, the Ferris-wheel icon in Marina South. We have plans to provide clean and beautiful water within our living environment. Plans are on the way for a new Sports Hub within the Kallang area. And to boot, we are providing for a population of 6.5 million.

In this regard, while we have paid attention to the physical surroundings, expatriates that I have spoken to over the past few days are a little concerned that we could become like Hong Kong. Merrill Lynch, in fact, made a front page news calling a sell in Hong Kong because of the congestion and pollution. We must guard against this scenario. With a bigger population expected, more flats need to be built to accommodate them. There will be more people on our streets and there will be more cars on the road. Stress levels will increase, work and family life will be a hard balance and as an end result, we might not be an attraction to foreign talent then.

On the GST, in lowering our corporate tax rate to 18%, we cannot avoid being linked to Hong Kong. Thus, when Hong Kong initially toyed with the idea of a GST and then not willing to go forward, people in Hong Kong cheered. We, on the other hand, increased it by 2%. Lowering corporate tax, the net effect is that Singaporeans' burden is increased while foreign companies' loads are lightened.

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These are conclusions of some. Sir, I think this is rubbish.

Sir, within the financial circle, there has also been murmur within that the GST might not be the best and only option. They asked, "Does Singapore need the GST for fiscal purposes given that there are other revenue avenues?" For starters, many point to the high revenue that land sales have generated that has helped places like Hong Kong manage with a budget surplus.

Sir, while I am convinced that the conditions that we are in are different, I am convinced that the GST is probably the best longer term solution for us. We would need to communicate better our agenda with the people. I am not sure whether a lot of Singaporeans on the street understand why or are convinced.

Sir, many of my colleagues have already spoken about Workfare and I do not think I will be wrong to say that many governments will be studying how the Singapore Government pulls this off, just like our CPF system. Workfare will, no doubt, be something future participants of the Singapore Cooperation Programme will be asking about.

I related to the House during the debate on the President's Speech about how a Mdm Wong had asked for education financial assistance for her two children. Her husband works as a taxi driver, taking home about $1,000 and she is not used to working after having stopped work for 15 years to look after her two children. Probing further, I found out that all her children's education bills and related expenses, except for pocket money, were taken care of by MOE and the school's assistance programme. She had, in fact, asked for an income supplement for her household but used her children's education expense as an opener. Sir, with Workfare, her self-

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employed husband, with Medisave in his account, will benefit the family. And over the next five years, her service and conservancy charges and usage bills will help the family. Her children will benefit from the PSEA and various offsets announced by the Second Finance Minister. If she can bring herself back to work, the family will indeed fare pretty well. Sir, that is a big "if" - if Mdm Wong would go back to work.

Workfare will encourage people to work and to stay in the job. However, I am concerned that for Singaporeans like Mdm Wong who can work and should work and now needs Workfare to prod her to work. It is a situation, I hope, we will not denigrate to. Where are the work ethics here? Where are the self-help and self-reliant spirit in this case? I also hope that we are not creating yet another unhappy lot where each year there will be a clamour to ask for more. Maybe Mr Jack Neo may come up with a sequel 3 to "Money No Enough", scripted around Workfare.

This case that I just shared with the House should serve as a shot across the bow for us to continue to inculcate self-reliance in our people. While the Government constantly comes up with programmes to help the needy, we must ensure that the needy will also have the self-determination to help themselves. I am therefore heartened to hear the Minister remind the House that our people should not lose their self-reliance. This is crucial for us to flourish as a nation.

Sir, Singapore has been lauded for our high home ownership policy. This policy has served us well and would continue to be one of the pillars of the way to organise our society. However, several factors are emerging in our society - a cause for rethinking and maybe a refinement to our high home ownership

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policy. Primary to these factors are a greying population, four in 10 are turning 55 who have Minimum Sums of about $90,000 and a low birth rate. We have talked about dependency ratios for some time now. There will be less young folks supporting the older folks. It would therefore make more sense for our people to retire with more cash rather than just assets. We have tried to do this with reverse mortgage, but I am not sure that this is catching on. The scenario before us is one of a greying population, a greying group, one with one child or with no children or single elders. In this instance, the quality of life for this greying group is to have cash in hand rather than a HDB flat worth $200,000. The way to help a greying population with little or no dependence is the provision of more rental flats perhaps, thus allowing them to cash out of their flat at age 55 or 60 or when they retire. While I have not worked out the details of this call, I am urging the Government to review this high home ownership policy with our changing society and the factors that I have mentioned.

Sir, I support the Budget.

2.48 pm

Mr Chan Soo Sen (Joo Chiat): Mr Speaker, Sir, like more than the 20-over Members before me, I rise to support the Budget Statement. In fact, I think this is an excellent Budget. It encourages competitiveness. At the same time, it also shows care to the less successful, giving, at the same time, without affecting the work ethics. In fact, it continues to encourage work ethics.

I am very optimistic that with this kind of a spirit, Singapore will continue to develop and surge ahead, and there will be more that we can then use to support the people who are less successful. Since I said that I agree with many of the statements that have been made before, I

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will just highlight four particular groups which I thought I will just add some additional comments.

Firstly, I think the group of neighbourhood shops that has contributed towards community cohesion feel that somehow in this Budget, they have not been given so much attention, because they look at things this way. They face very strong competition. They face a change of consumer pattern and preferences. Some of them bought their shops when the price was high and thereafter servicing the loan and facing the few years of difficult times. They also feel that the CPF employer's contribution has gone up, and the cost has increased. Some of them also face rental increase and they feel that there are relatively not many good things in this Budget for them. I hope that we could give some recognition to the fact that these neighbourhood shops have contributed towards community cohesion. In fact, if we think of the good old days when we were young, one thing that reminds us of where we stayed was the very, very friendly neighbourhood shops, the shopkeepers, the coffee shops, and so on, that we spent our time in. If we could give them some rental and property tax rebates in recognition of the contribution that they have made to community cohesion, and some of these benefits really cannot be costed, I think that will provide them with some encouragement to go on and it can add to the richness in community life.

The second group that I thought deserves some mention are the PMETs - the professionals, managers, executives as well as technical people. We know we have got Workfare. We know we have made very good progress in terms of job placements. But then my experience and many of my residents in Joo Chiat are PMETs. Some were retrenched. I have been trying to help them to look for jobs and really, so far, the success in this area

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has not been very encouraging. I also see my own friends, my primary school classmates, some work in the banks. A few years ago, if Members remember, there were retrenchments in the banking sector and these boys - I came from a boys' school - I never saw them cry when they were in primary school, I saw them cry when they were in their mid-40s and early 50s.

We know that we have low-skilled, low-income workers. But as we go ahead, we are going to have more and more better-educated people because our education has been progressing over the years, and these people, because of globalisation, managerial delayering and outsourcing, shorter technological cycle and all the various reasons that we are familiar with, they will face the risk of having to change jobs and having to look for new jobs.

We say that they look forward to income tax reduction and did not get it. In fact, for many of them, the greatest fear is what to do if they were faced with this prospect of losing their jobs. I think we should put more resources into preparing this group of people for this prospect, helping them to find new jobs, to go for retraining and even invest in some counselling services to help them as well as their family tide over these difficult years, plus maybe educating them to be more realistic in their expectations as well as to prepare for the ups and downs in the cycle.

Mr Speaker, Sir, I mentioned that I am going to mention four groups. So I will mention the last two groups in Mandarin.

( In Mandarin ): [For vernacular speech, please refer to Appendix A.] Mr Speaker, Sir, for the last two groups of people, I feel that we should express something to encourage, support or assist them. I can use Mencius' words to summarise this: "To Look after the elderly, as well as

*Cols. 2035-2038.

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one's own; look after the children, as well as one's own" (老吾老以及人之老，幼吾幼以及人之幼). We have mentioned earlier that family ethics and morality are very important. This is to maintain the stability in our society. These words from Mencius reflect the thinking of Confucianism for an ideal society and ideal family. I feel that our Budget should look after the older group of people in the society because we will eventually grow old one day. If we do not want to grow old, then we will have to leave this planet earlier. The older people have already contributed to the society. We are doing the same too, eventually we will grow old, and realise that we have contributed to the society. Therefore, it is important that we make every effort to cultivate and develop a sense of respect for the elderly before we grow old ourselves. Only when we have cultivated this kind of value, will the elderly people in our society feel treasured and respected by the country.

When we go to the clan associations, people have also mentioned that in many societies, older people will get certain privileges or concessions. For example, in public transport, MRT and bus services, they give them concessions. When they go to a cinema show, they take part in cultural activities, they travel, they also have concessions for admission tickets. Why is it that Singapore seems to be inadequate in this aspect? Can we do something more? We need to put in some more efforts in this area.

In this regard, if our MRT and bus companies feel that they are not able to do something adequately, then the Government's budget should include some assistance to them. We can print senior citizens’ concession cards for those who are 60 or 65 years old. There should be no fixed target. We should give them some kind of special concession. Personally, it is not very much, but to our

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senior citizens, this is a very important initiative. To those people like me who are not old enough yet, I think we know that we have not been forgotten. We know that the society has not forgotten the old people. We can be certain that when we grow old and become old, we will get the respect we deserve. This is the meaning of the quotation that I made from Mencius.

As for taking care of our children as well as other's children, I am not saying that we should give concessions to young people. What I mean is that for those caregivers who are looking after the children and they are not working, they do not receive anything from Workfare. In this regard, can we also give them some kind of support and encouragement?

Several of my colleagues in Parliament have mentioned about the role of housewives and house husbands. I will also mention another group of people, ie, the grandparents who look after the grandchildren. In our traditional families, there are three generations under one roof. However, our housing policy has become so successful that the three generations under one roof are slowly dwindling in number. For the grandparents, they can make a great contribution by looking after their young grandchildren. If we encourage grandparents to look after their grandchildren more, then the senior citizens or grandparents will feel that they can contribute to the family. The young people also will know that they have more people to look after them and they can also learn the traditional values from the grandparents. From these traditional values, we can learn a lot of family values as well. If grandparents can play a greater role to look after their grandchildren, then when their grandchildren are grown up, their family values will certainly be stronger. In this way, the pro-family values will be transmitted from one generation to another.

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Sir, I hope that the Government will consider giving housewives and house husbands more encouragement and support for their contributions to the family. We should not forget that the grandparents look after the grandchildren.

Mr Speaker, Sir, I support this Budget.

Mr Speaker: Order. I propose to take the break now. I suspend the Sitting and will take the Chair again at 3.20 pm.

Sitting accordingly suspended

at 2.58 pm until 3.20 pm.

Sitting resumed at 3.20 pm

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[Mr Speaker in the Chair]:

ANNUAL BUDGET STATEMENT: Debate resumed.

Mrs Jessie Phua (Nominated Member): Mr Speaker, Sir, I rise to join my colleagues in complimenting the Second Finance Minister for a caring and forward looking Budget.

Thanks to the leadership of this House and the resilience of our people, things in Singapore are looking rosy. The economy is looking up and the Prime Minister's move towards an inclusive society with first world status for all is motivating and enticing.

But, as a sports administrator, I cannot help but feel a little dismayed that while the corporate tax cut along with the package of goodies proposed for this year's Budget was much anticipated and welcomed by all, sport has been left out of the Budget's radar. While it is understandable that more focus must be given to address the impact of the increase of the GST, it may be

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noteworthy to remember that the sporting fraternity is not sheltered from the effects of the GST increase either. We have the EDB, WDA, Spring Singapore, just to name a few to keep the economy buzzing.

The Budget focus, rightly, was aimed to keep our development on track, without leaving anyone behind. Without leaving anyone behind? Where's sport in all this? Why am I asking more for sport?

Sport, as we know, builds character, instills discipline and promotes teamwork. It complements what our education system does to help our next generation develop. As evidenced by our recent successes at the Asian Games and the ASEAN Cup, sports can bind a nation.

Furthermore, as our Health Minister constantly reminds us, sport makes for a healthy lifestyle. With more people playing sport actively, staying fit, it will lead to less need for healthcare. But I realise that sport cannot just ask for money. There is tremendous room for sportsmen and their sporting association officials to improve. We need to inject more talent, managerial as well as on-field talent.

We need to improve sport's standing in society for two main reasons: to get more people involved in sport and to build greater confidence in supporting sports. Only then can we realise our dream of developing a rich and meaningful sporting culture in Singapore.

Much work needs to be done but for the present time, I have noted four key areas for us to consider working on as an inclusive society or Singapore Inc., if I may call it so. They are: funding; full-time athletes; schools; and bonding through sport.

Funding

The major perennial problem facing National Sporting Associations, or NSAs,

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is the lack of adequate funding. It is heartwarming to note that more and more companies are setting up Corporate Social Responsibility Committee, CSR Committees as they are called, in recognition of the need to be seen as being more socially responsible rather than just profitable. Of notable mention are companies like HSBC and Creative Technology.

HSBC donated more than $1 million last year in support of charitable and other worthy causes. Most outstanding of their community support is the conservation of the Chek Jawa Beach on Pulau Ubin and the TreeTop Walk at MacRitchie Reservoir Park. Also up to $300,000 is available to the National Arts Council and the National Youth Achievement Council to help talented youngsters. Last December, founder of Creative Technology, Mr Sim Wong Hoo donated $20 million worth of shares in support of the arts, education and help for the aged. These acts of kindness more than just touched the heart of every Singaporean. They displayed to us that some of our more successful corporate citizens are very responsible, community-oriented corporate citizens.

There is no question that a good number of our Government-linked companies and multi-national companies also contribute to community causes. My point is this: are their contributions enough? Are they too little or spread too thinly to make that difference? Are they getting the same kind of recognition like HSBC and Mr Sim Wong Hoo?

This year's Budget overtures made to grow the philanthropy segment is very encouraging, as it means that there is now a growing pie from which we can tap from. All these put together, the question before us then is this: how then can we harness this pool of funds for it to be redistributed to make that visible and

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meaningful difference to the community? As I fly the sport banner, I would of course hope that a reasonable percentage of this be channelled to sporting causes.

Indeed, I must add that as Singapore develops, there will be more foundations set up too. Not forgetting that in the very near future, we will also have the IRs coming on-stream. It is perhaps not just opportune but crucial time for the MCYS and the Singapore Sports Council to consider the setting up of an elite sport marketing management group to tap on this.

In the wake of the NKF and Youth Challenge, and the rugby and swimming sagas, it is totally understandable if private or corporate citizens are hesitant to donate. How can they be comforted that their hard-earned monies are truly utilised for worthy causes, not to fatten some pay cheques or install golden fixtures in some CEO's toilet?

The fact that monies contributed will be closely monitored to ensure that good corporate governance and total professionalism are in place will certainly extend that much needed assurance to the donating public. Whilst the registered charities already have this concern addressed by the set up of the Commissioner of Charities, this elite sport marketing management group could extend the same beneficial effects to sports. Additionally, a concerted "Singapore Sport Inc" marketing strategy will certainly have more pull and be able to bring in more sponsorship dollars than the micro-level marketing by the respective sport. And may I even go so far as to suggest that this marketing could take on different forms. Of course, whilst marketing mega marquee sporting events is very much up their avenues, they should also explore tie-ups, adoption, partnership programmes where household names, like OSIM and Eu Yan Sang, be encouraged to partner sports like table

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tennis, swimming or even bowling! NSAs will benefit immensely not only from the additional cash funding they can get from these partners, but, more importantly, because they are now identified as "partners", so to speak - the good corporate governance culture that these companies operate under will rub off and influence NSAs to be more professional.

Investing in our people

The Government's emphasis to continuously invest in its people must be applauded. I wish to take this opportunity to highlight two additional areas that deserve some attention. They are: full time athletes and sport in the schools.

Full time athletes

The current wave that sport is riding on is unprecedented - the sporting successes achieved by our athletes at the SEA Games, the Commonwealth Games as well as the Asian Games have grown by quantum leaps. Just as the wheels are picking up momentum, the important thing to do now is not just to keep the pace - more importantly, it is to increase the speed.

In sport, there are no accidental champions. Every Singapore athlete who has won for Singapore has put in more than his fair share of sweat and blood. Part time athletes training some days of the week, some months of the year - do they really have the right to claim their place on the rostrum at the Asian Games or even the Olympic stage?

Please allow me to share with you an insight into the Asian bowling scene, something I am a little bit intimately connected to. In preparation for the Asian Games in 2006, the Korean national bowling team went into centralised training one year ahead of the Games. Living in an army camp environment, they trained six days a week, eight hours a

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day. In the year 2005, the Korean keglers won 80% of the medals of all the major championships in Asia and at the last Asian Games in Doha, they emerged top with 11 medals. This is just an example of the far changing sporting arena that our athletes have to compete in.

Whilst the sporting fraternity at large has no reason to question the funding and support given to our foreign-import athletes, we do question why are Singapore-born athletes denied the same level of support and assistance in their quest for sporting excellence. This double standard policy must be addressed. Whilst our pool of sporting talents may be small, what we lack in numbers, we certainly can make up in quality. The belief system must be in place to extol full commitment and total dedication from our athletes. They must know that they are not second-class citizens within our shores and that in the eyes of their fellow Singaporeans, they rank equal to their foreign-import counterparts.

Schools

I have to compliment the Ministry of Education for the tremendous buy-in and promotion of sports in the school. The buzz for sport has certainly been raised at the schools much to the delight of all of us in the sporting fraternity. Can we do more?

On my wishlist for the schools is that the average Jane or Joe, or Mei Ling or Ahmad, be able to participate in sports, just for the fun of it. The fun part of sport has unfortunately been much neglected - even the PE lessons are centred on getting the students to pass the NAPFA tests! Understandably, in a 40-week cycle of the school year and topped by limited resources and funding, it is perfectly logical for schools to recruit only the most talented athletes into the school teams to win for the school.

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In this digital age where recreation for the kids often hovers between a click on the mouse or venturing outdoors for more sporting adventure, it is so very important for all of us to constantly work hard to make that second option just an attractive and easy one to take up!

Is it then possible for the MOE, together with MCYS and the Singapore Sports Council, to work hand in glove with the grassroots bodies, in this case, the NSAs, to help catch those who seep through the sieve? Help these kids kindle a sporting interest that may hopefully be lifelong. I am sure our Minister for Health looks forward to future generations of healthier and fitter Singaporeans who look at sport as a lifestyle.

Also worth exploring is the possibility of engaging our national sporting icons to give back to the community - by running clinics for these very kids. It is not unreasonable to ask for, say, five hours a month from our Li Jia Wei, Ronald Susilo or Remy Ong. Talk about connectivity - successful athletes who have benefited from community support, returning to give back to the community.

Our sport promotion initiatives for the schools - whether it is MOE driven, MCYS/SSC initiated, or NSAs operated - can definitely yield much better result and resounding health benefits if we can all work closely together to mend some of these loopholes.

Sport bonds

The sporting arena is the great equaliser in society, regardless of race, economic class, religious background, it unites and gels us as Singaporeans. The intrinsic benefit of sport is far-reaching, the life skills it imparts, like goal-setting, perseverance, teamwork: values which are so very important to instil in our

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young Singaporeans so that they grow up to be strong in both body and soul. In order to be better positioned to face the social, economical and political challenges ahead, we must work hard to build stronger and more agile generations of Singaporeans. The can-do spirit and the "never-say-die" heart must be in place to make that difference, and sport can help in this development.

Sport in Singapore deserves more than just token advocates in the high rungs of society. Just as the sports officials work hard to grow their sport, I believe that, as parliamentarians, we have just as important a part to play to help sport in Singapore continue to grow.

I believe in this Government when it says that no one gets left behind - that we are an inclusive society. Let us not forget to bring sport into our fold in our march forward.

To strike gold at the Olympic stage is a very achievable goal, and it can be achieved sooner if we work hard at realising this dream as a team of four million hearts and souls beating as one.

Mr Speaker, Sir, my call is a consistent one. I urge everyone - GLC, MNC, Government, school, Singaporean - to pay more attention to sport and its development. It is not only inclusive to do so, it is good for our overall health as a nation.

With that, Sir, I support the Budget.

3.41 pm

Mr Gautam Banerjee (Nominated Member): Mr Speaker, Sir, I would like to begin by congratulating the Second Minister for Finance for articulating so clearly Singapore’s economic strategy and development roadmap for the next five to 10 years.

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In communicating his vision for our future, the Minister was unequivocal about Singapore fully embracing globalisation. The Minister sees globalisation as an important engine which will continue to power Singapore’s economic growth and prosperity. He illustrated how globalisation is working to Singapore’s advantage, pointed out some of the challenges it poses and outlined how Singapore would respond to these challenges so there would be ample opportunities for all Singaporeans.

In my address today, I will cover three areas:

First, I will share my perspectives on globalisation as a key driver of the Singapore economy;

Second, I will identify three important groups of stakeholders who all have important roles to play in our economic journey; and

Third, I will examine whether any of these stakeholder groups require additional Government attention or assistance to enable them to contribute fully to our national economic agenda.

I will now share my perspectives on globalisation and its importance as a key driver of the Singapore economy. Singapore has very little choice but to embrace globalisation. We are a small city state that punches well above its weight, not by accident but because we had the foresight to plug ourselves into the regional and global economy right from the outset.

We are a major hub economy, a regional financial services centre and a preferred destination for multinational companies operating in this region. Our strategy of engaging multinational companies, welcoming foreign direct investment and having an international

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mindset, accompanied by business-friendly policies, has served us well.

The World Bank recently published a league table which showed that Singapore’s ranking among the world’s largest economies improved the most in the last 20 years. Between 1984 and 2005, Singapore crept up the world rankings from 59th to 39th position, a rise of 20 notches. Other East Asian countries which were plugged into the global economy also did well compared to countries which had a purely domestic focus. Taiwan, for example, improved 14 notches and Hong Kong 12 notches.

The global business environment, however, is changing rapidly because of fundamental changes in the nature of value creation, in the competitive landscape, in technology and innovation and in traditional business models. Value creation, for example, is increasingly based on intangibles, such as knowledge, ideas and innovation. New value chain models are beginning to appear in which companies are increasingly in strategic and collaborative relationships with their suppliers, a departure from arrangements based solely on cost. The competitive landscape has also changed dramatically as millions of young people from China, India, Brazil and Eastern Europe, who had hitherto been excluded from the global economy, have obtained access to capital, technology and education. The change in global demographics away from the West to Asia Pacific will also have a profound impact on where wealth will be created and where the future corridors of economic power will be located.

What does this all mean for Singapore? On a positive note, the new landscape means lots of new opportunities which, as the Second Minister for Finance so elegantly expressed, play to Singapore’s strengths. But it also makes our economy more volatile and dependent on external factors that are beyond our

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direct control. For example, the value of our annual exports today is significantly higher than our annual GDP.

If there is a slowdown in the US or one of our other major trading partners, it would have a significant adverse impact on our economy.

As a small city-state with a large external wing to our economy, we also have to be wary of other risks which could easily derail our economy, such as pandemics, terrorism and natural disasters. We are also vulnerable to external social instability and vulnerability to policy changes by foreign governments, as the recent survey by Political and Economic Risk Consultancy (PERC) suggested.

We need to recognise these risks and be prudent in the way we manage our economy. We have to balance current spending with the need to build up our resources for the future. Mr Speaker, Sir, I believe Budget 2007 achieves this fine balance.

But prudence alone is not sufficient. We also need to have speed and agility in quickly adapting to changes in the global economy. Our past economic success has been built on these principles. Going forward, we need to adhere more steadfastly to these principles, if we are to take full advantage of globalisation while managing its downsides. Above all, we need able and trustworthy people to be in charge of our economy.

Sir, this leads me to my second point. If globalisation is to play such an important part in driving and shaping our economy, we need to recognise the stakeholders in our economy who are impacted by globalisation. May I suggest to you that there are three distinct groups of stakeholders whom we need to actively engage and partner with, so that we can journey ahead with speed and agility,

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avoiding the political road bumps and social potholes along the way.

The first and most important group, of course, are our fellow Singaporeans. Singapore citizens are the mind, body and soul of the nation. The second group consists of corporations, both local and foreign, who have invested in and operate out of Singapore. The third group comprises non-Singaporeans who live and work in Singapore, sometimes outside of Singapore and help us to achieve our economic goals and objectives.

The first two groups of stakeholders are already receiving a fair amount of proactive attention from the Government and, in the case of companies, Government agencies, such as IE Singapore and the Economic Development Board. The 2007 Budget Statement, for example, has introduced a number of very helpful measures to assist low-wage Singaporean workers who may have been adversely affected by globalisation. These include restructuring the CPF, Workfare and the GST offset package. These measures will help to build a more inclusive society and promote social cohesion and harmony which are essential, if we are to stay focused on implementing our economic strategy and not be distracted by social tensions and instability.

But what about attention to the third group of stakeholders? Have we done enough to ensure that we have sufficient new talent to energise the economy and enable us to go the full distance?

Sir, my next point concerns the third stakeholder group, ie, the non-Singaporeans. This is not an easy group to deal with because of the diversity within its ranks - ethnic, economic, cultural and mindset. Included in this group are the traditional "expatriates" who are brought to Singapore by their employers usually for fixed periods to

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serve a particular need. These individuals are usually well taken care of by their companies and enjoy a wide array of benefits, such as housing, schooling for their children, transport and home leave allowances. In many cases, they also get the benefit of "tax equalisation" which effectively shelters them from differences and changes to the Singapore tax rate relative to their home country.

However, a growing group of foreigners who are now living and working in Singapore do not belong to this financially privileged expatriate group. Who are they? Well, they are highly skilled individuals who have made a conscious personal decision to come and work in Singapore. They have picked Singapore over their home country or other competing locations. This group of foreigners is often described as "expatriates on local terms" because they enjoy little or no fringe benefits. They have to take care of their own housing and schooling needs for their children. They do not enjoy any tax equalisation and they have to provide for their own retirement.

Why are they here? I guess it is another facet of globalisation. Talent is mobile and moves to centres where there are good career opportunities and which afford an attractive lifestyle. Singapore has been able to attract this talent pool from all parts of the world - the UK, Europe, Australia, New Zealand, South and Southeast Asia, China and even as far as South America and Africa.

Why are they important to us? I submit to you, Sir, that our ability to attract such talented individuals and successfully integrate them both in the workplace and in our society is a critical success factor if we are to grow our economy at a consistently healthy rate. Simply put, Singapore has a lot of homegrown talent but not enough if we want to remain competitive in this highly

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competitive globalised economy. And due to our lack of natural resources and small hinterland, we cannot afford not to be competitive.

Sir, the shortage of skills and talents is one of the main threats to our long-term growth and prospects. This is the view of a majority of CEOs who participated in one of the latest global CEO surveys which sought the opinions of more than a thousand distinguished CEOs from 50 countries, including companies in our region.

The worrying news is that the competition for such talent is global and fierce and getting fiercer by the day. Some years ago, when my firm placed recruitment advertisements in regional newspapers, we were able to draw several hundreds of applicants. Today, the same advertisements have far fewer applicants. This is because we are no longer competing only with cities such as London, Hong Kong, San Jose or Sydney for talent. New centres, such as Shanghai, Bangalore and Dubai, have emerged. In time to come, other cities in Eastern Europe, the Middle East, India and East Asia will all be competing with us for the same talent pool.

It was interesting to note the comments of the Minister for National Development which were reported in the press on 10th February 2007 and in Parliament yesterday. These suggested that, according to the Concept Plan, Singapore's population could be 6.5 million. This may be just the number that planners are using to base their projections for planning purposes. But it does represent a significant increase from the 4.5 million we have today.

Based on the current birth rate of about 1.2, compared to a rate of 2.1 that is required to keep the population of Singaporeans steady, it is clear that the bulk of any future growth in our

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population would have to be imported. So the group that I mentioned actually falls into two subgroups, namely, those who are here and whom we presumably want to keep, and new talent from overseas that we have to attract to Singapore. So the message is clear. Not only will we have to fight to get the talent in the first place, we will also have to find ways of making sure it does not leave.

Sir, but the 2007 Budget has virtually nothing to offer this group of individuals who, I believe, are important stakeholders and partners in our economic journey.

A reduction in personal income tax rates would have been viewed positively by the group who are already here. They are faced with having to cope with an increase in the cost of living, particularly a steep increase in residential rental rates. Soon, they will be hit with the full force of the GST hike, with no corresponding offsets, nor will they benefit from the increase in employers' CPF contributions.

Sir, perhaps, at this juncture, the Government feels that Singapore is still able to attract its fair share of talent from overseas and there is no necessity for any fiscal incentives or encouragement. This may well be true. After all, we are a competitive destination, with an excellent infrastructure, a pleasure pollution-free environment, a low crime rate, all of which contribute to a comfortable and gracious lifestyle.

But in my view, there are some features which we must add to this admittedly attractive environment, in order to keep us ahead of the increasing competition for foreign talent. Low personal tax rates are just one of them. But the cornerstone of any strategy aimed at attracting foreign talent for the long term has to be to create an environment which focuses on the longer term needs of this group. In short, they need long-

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term financial security and the fiscal support to have families, which is now only available in respect of Singaporean children. Employer-sponsored pension arrangements are something many of them will have taken as a given. But they arrive here to find that there is very little available, as far as long-term security is concerned.

In this context, it is easy to say, "Yes, but if they become Singaporeans, then they get all these benefits, CPF included". The point this misses, as most long-term "expatriates" will tell you, is that Singapore grows on you. Quite often, they were just passing through with no plans to stay, or were here for a defined short term. Forcing them into decisions early before they have had a chance to feel comfortable here in general and, in particular, asking them to give away their links (emotional and physical) with home, namely, their passport, is more likely to frighten them off, rather than encourage them to make plans for a longer-term association. There needs to be something that fills the transition, and something significant.

Because our "local" foreign talent pool happens to be outside the political mainstream, it should not mean that their voices should go unheard. By listening to them, we not only help them to make the decision to stay, but we also learn what is likely to attract others to choose Singapore in the future. At present, and as far as I am aware, we do not have a mechanism for the Government to obtain formal and regular feedback on matters affecting this stakeholder group. Given the strategic importance of the group to Singapore's future growth and prosperity, we should seriously consider setting up formal channels for regular feedback so that appropriate action can be taken on a timely basis.

We must not make the mistake of treating our foreign talent pool as

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transient migrants. Instead, we should make them feel as comfortable as possible from the outset by being inclusive in the way our policies are framed and in our informal dealings and mindset. This will give these individuals the confidence and courage to make Singapore their permanent home and help attract the steady stream of new talent from overseas that we need, if we are to achieve our economic growth targets.

Sir, I do not pretend to have all the solutions to these issues, but what is clear is that they need to be moved up the rankings of importance. Singapore has been second to none in planning and putting in place its infrastructural "hardware", but we need to ensure that our software continues to be best in class because, ultimately, knowledge, innovation and creativity will be the difference between the winners and losers of tomorrow.

Sir, I support the motion.

3.56 pm

Ms Sylvia Lim (Non-Constituency Member): Mr Speaker, Sir, thank you for allowing me to take part in this debate.

Sir, the Second Minister for Finance has outlined increased social spending in the years ahead. This is to be expected of any government faced with an ageing population, an increasing income gap and the threat of an underclass developing if the income gap is unchecked. Looking at the Budget offerings, I support the principle behind supplementing low wages and keeping our low-wage workers employed.

In an earlier television forum, the Second Minister for Finance had said that the increased social spending over the next five years would be between $2 billion and $4 billion more each year. Indeed, this has been borne out by the

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figures in this year's Budget estimates. The total expenditure for FY2007 amounts to an increase of about $2.4 billion over the previous year.

Sir, as articulated in the speech by the hon. Member for Hougang yesterday, we in the Workers' Party are not convinced that there is a need to raise Goods and Services Tax by 2% this year. Whether there is a need to raise it at all in the future would depend on the financial information and projections available to us at that time, including the impact of such an increase on our citizens.

Sir, the Budget Statement suggests that we will be losing some revenue from the proposed tax restructuring. Key items mentioned were the reduction in the corporate tax rate and some indirect taxes. But the key question is this. Assuming that we do not raise GST, what is the likely net position? Will we still have enough revenues to fund the additional social spending of $2 billion to $4 billion per year? The first question we want to ask is why revenue from land sales is excluded from the Budget? According to the Budget papers, the revenue from land sales amounts to about $4 billion to $5 billion per year. And as mentioned by the hon. Member for Potong Pasir earlier, this figure by itself is more than sufficient to pay for the increased social spending of $2 billion to $4 billion per year.

Economists have noted that excluding land sales from the Budget is overly conservative and not in line with international standards. The argument is that such revenue is recurrent in nature rather than capital due to the fact that the Government deals with land usually through leases which generate regular revenue. Among those who have criticised our conservative accounting is the International Monetary Fund. They have said that the Government's definition of budget balance underestimates the

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strength of Singapore's fiscal position, as operating revenue excludes a substantial portion of investment income and earnings from land sales. Last year, the IMF advised that the authorities should take steps to compile and publish the consolidated public sector accounts, in line with international accounting standards.

Sir, perhaps the Government is excluding land sales from the Budget because it fears the volatility due to market conditions and we cannot assume the revenues will always be there.

I believe the Prime Minister had used the adjective "lumpy" to describe such revenues in the past. This is a reasonable concern. However, Sir, even if we do not take the entire $4 or $5 billion income from land sales, surely, we can budget based on a portion of the average revenues over the last few years, for example, instead of budgeting based on $4 billion, we could project based on, say, half, eg, $2 billion. Surely, the volatility cannot be so severe that we will have a year where land sales generate no revenue at all.

Sir, the Organisation for Economic Cooperation and Development (OECD) reported in May 2006 that the Budget principles adopted by the Singapore Government tend to under-report its true fiscal strength. Perhaps, it is time to adopt the international benchmarks to reflect the true position.

Net Investment Income contribution

The next question is on the NII. One missing piece of this GST debate puzzle is the impending change to the definition of the Net Investment Income.

We have been told that the Constitution will be amended to include realised capital gains as part of NII which,

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up to now, is only restricted to interests and dividends. How much additional revenue will be available after the change? In response to our question in Parliament in January, the Second Finance Minister has said that the Government was still working out the formula with the President and the details will only be available in the coming months. He mentioned that they were working on minimising the volatility of the flows.

However, the Prime Minister told Parliament in November 2006 that "a significant part of the returns (on reserves) are capital gains". He noted that on average, we should expect a buffer from the new NII definition. Based on the size of the Government's investments, some economists have provided guesstimates that capital gains could boost NII by another $2 billion to $3 billion per year.

Sir, the Government has been telling us that it is "not sufficient" to rely on the expected increase in NII to fund social spending. Hence, we need to raise GST. But how are we to assess whether that statement is valid or not, if we have no idea about the formula to be used and some ballpark figures about what we can expect from the NII?

Since it is only a matter of months before the Constitutional amendment is tabled, why not discuss this whole question of GST increase together with that amendment? It may turn out later that we find that the NII amendment itself can contribute, say, an additional $2 billion and that we can manage the volatility on the flows. When and if that happens, there will be no need to tax the people via the GST increase. Instead, by implementing the GST increase now ahead of the NII amendment, the Government is not being fair to those interested to find out whether the GST increase is really needed.

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Increased revenues from personal income taxes, statutory board contributions and stamp duty

The next question, Sir, concerns the increased revenue from other sources such as personal income tax, statutory board contributions and stamp duty.

The Government's projection for FY 2007 showed an increase in collections from personal income tax by $480 million. The statutory boards are expected to also contribute $410 million more in FY 2007 over the previous year. Together, these two receipts are expected to show an increase of close to $1 billion in the coming FY.

As the property market recovers and more people buy and sell property, the Government's collections in stamp duty increased significantly last year. It was reported in the Business Times that stamp duty revenue rose 61% last year, which was the sharpest increase of all tax revenues collected. The amount of $1.3 billion in stamp duty collections was about half a billion dollars more than the average stamp duty collected annually in the preceding five years.

Of course, a reasonable question for us to ask is whether the uptrend in these revenues will continue. I have also noted that there is a possibility of a reduction in personal income tax rates in the future. However, the Government prognosis for Singapore is high growth in the next five years, growth which, to quote Minister Mentor, "would take us from being in the lower half of the First World to the upper half". Accordingly, Sir, I believe it is reasonable for us to expect increased revenues from these sources as well.

Effect of corporate tax rate cut

Sir, the next question is what is the likely effect of the corporate tax rate cut. Will the Government revenues suffer

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because of this? We have been told that the corporate tax cut will cost the Government $800 million per year. However, a Business Times' report of 12th February noted that the buoyant economy last saw corporate tax revenue increased by 17% to $8.3 billion. Analysts noted that if companies continue to do well, then the tax collections, even under the reduced rate, will not suffer. I accept the Government's point that there is a worldwide trend of reducing corporate tax.

KPMG conducted a tax survey covering 86 countries which noted that corporate income taxes across these countries had fallen between 1993 and 2006. However, the same study noted that the corporate tax cut, more often than not, pays for itself. Citing Ireland as an example, it noted that the tax cut stimulated growth which in turn enabled Ireland's GDP to go into double digits and attract foreign capital and talent.

Sir, since this is clearly the goal of the Government as well, does the Government not expect that the cut will stimulate growth and compensate for the people's loss in tax revenue? Will the corporate tax reduction reduce the corporate tax collected? The data suggests that the Government may end up better off.

Impending revenue from casinos

Sir, next is the question of the Integrated Resorts. How much will these contribute to the tax man's coffers? The IRs, we are told, will be operational in 2009. Under the Casino Control Act, the casino operators will need to pay a tax of 5% of gross gaming revenue from premium players and 15% of gross gaming revenue from non-premium players. Casino memberships will also generate turnover which will be taxed. This is not to mention the collateral businesses the Government expects to be

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boosted in the accommodation, food and beverage and retail sectors.

How much tax revenue can the Government expect from the IRs? This remains to be seen, of course. Nevertheless, if the expectation of analysts is accurate, the annual casino taxes could reap between US$1 billion and US$2.5 billion a year which in Singapore dollars is between $1.5 billion and $3.8 billion. These amounts are equivalent to a GST hike of between 2%-5%. If the Government were willing, it could manage its existing revenues prudently without increasing GST and then wait till the casino taxes kick in around 2010 to assess the position again. This is only three years away. According to Government expectations, Singapore will continue to do well in the next five years. If so, we should be able to manage for the next three years till the casino revenues come in.

Timing

Lastly, Sir, I would like to touch on the timing of the announcement of the GST hike. In November, the Prime Minister rightly asked about whether we should increase GST now or wait. He was worried then that Hong Kong might reduce its tax rates further and introduce a consumption tax themselves. That is now proven to be unfounded as the Hong Kong government decided to hit the public backlash and find other funding for its budget.

Singaporeans have noted that the announcement of the GST increase came at the first Parliamentary sitting after the May General Election. They have also noted that the ruling Party did not forewarn Singaporeans at the polls that this might be one of the first items on its agenda, if re-elected. According to Senior Minister, he told the press later that when

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the ruling Party goes to the polls, it will concentrate on telling the people just the good parts and think about how to fund its promises later. In the same vein, is the Government planning its agenda around the Election cycle once again, ie, increase GST now, manage the fallout and assess the situation before holding the next GE?

Based on the additional revenues from other sources, I do not believe that the GST increase is needed now. So why is the Government doing this? The GST increase is a convenient way to tax the people to have a broad-based revenue source. The Government wants to be in a comfortable fiscal position and has decided that the people will pay.

Sir, exactly one month ago, I met a man aged about 60 at Ang Mo Kio. He was telling me about his disillusionment with the Government and the sequence of events leading to the GST hike. And as a feedback of ground sentiment, I would like to just tell the House his message to the Government and it was this, "Love people, not things; use things, don't use people."

4.09 pm

Ms Lee Bee Wah: Sir, please allow me to deliver my speech in Mandarin.

( In Mandarin ): [For vernacular speech, please refer to Appendix A.] I rise in support of the Budget speech by the Second Finance Minister, Mr Tharman Shanmugaratnam. In crafting this year’s Budget, the Minister is like a renowned Chinese calligrapher. With a few brief strokes, he is able to say many things in not so many words, unfurling much wisdom without sacrificing content.

This year's Budget has taken into consideration the needs of all strata of the society, from the lower income to the middle and upper income groups, the sacrifices of our national servicemen have

*Cols. 2039-2040.

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not gone unnoticed, and not forgetting the retired civil servants who have in the past worked relentlessly and made exceptional contributions to the country.

However, this year's Budget has not attempted to address the needs of a particular group. They are our home-makers - housewives or house-husbands. Yesterday, a few of our fellow MPs have raised this issue, and I think it is extremely important. Therefore, I will reiterate this message again. The stay-at-home spouse plays a crucial role in supporting the family. They have selflessly performed their roles and some of them are even involved in voluntary work in the various grassroots and charitable organisations. As such, they have made a great contribution to our nation. Their task is not an easy one as they have to support the family, look after the children, attend to the needs of the husband and in-laws and be responsible for the family’s well-being. In this regard, they should also reap the rewards along with the rest, and be given due recognition. One form of reward for these homemakers is to explore the possibility of their husbands contributing CPF for their spouses who are home managers. It is indeed heartening to listen to the men and working women talking about the Budget during the Lunar New Year gatherings and discussing how much they will benefit. However, I do also notice that the housewives could only sigh and remain silent.

Let me quote the late British politician, Ms Eleanor Rathbone. She said, "There is, I suppose, no occupation in the world which has an influence on the efficiency and happiness of the members of nearly all other occupations so continuous and so permeating as that of the working housewife and mother."

Sir, I now move on to talk about our elderly folks. I notice a trend of more and more elderly people looking for

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employment in their golden years, but those jobs available for them are mostly lowly paid ones, such as cleaners, machine operators and salesmen, etc. My question is whether this trend has any implications for us. Is it telling us that the lower income families are finding it difficult to make ends meet and, therefore, the old folks have to come out and work to supplement their household income? Or is it because their children are not providing them with adequate financial support? Or is it because the old people are finding it really boring to stay at home and, as such, they would rather go out to work and keep themselves mentally occupied, and be financially independent? I have heard of a trend in the US for older people to keep working beyond 65 years old.

I understand it is a very difficult task to get the low-income group to think of savings for their retirement and old age. This is something which is important for all Singaporeans, irrespective of income group. I do not know whether the Government can get the insurance industry or any financial group or even the unions to work out a savings scheme like the endowment fund to give the lower income group an opportunity to save something for their old age.

( In English ): Mr Speaker, Sir, please allow me to continue my speech in Malay.

( In Malay ): [For vernacular speech, please refer to Appendix A.] Mr Speaker, allow me to give my views on education. I commend and support the Government's move to give top-ups of up to $400 per year to the Post-Secondary Education Account (PSEA) for every Singaporean child aged 7-20 years old in 2008 and 2009. Older children and those from the low income families will get higher PSEA top-ups.

This policy is very encouraging as it motivates learning and provide oppor-

*Cols. 2041-2042.

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tunities for those from the low income families to upgrade their standard of living through achievement in education. In this spirit, I would urge the Government to be more generous with top-ups given to the lower-income families. The cost to further their higher studies is not cheap and the top-up will not be able to meet this cost.

The Government should also consider expanding the list of approved institutes to include the many universities that are offering courses through schools or private institutions in Singapore.

We should remember that not all students are capable of scoring good grades to ensure them a place in distinguished universities, like NTU, NUS and SMU. Students who are not able to get a place in these universities should be given an opportunity to further their studies through other avenues. Many of them may be late developers and would require a longer time to attain excellence in education. We should encourage this group of students and provide them with opportunities to further their studies.

Considering that the usage of CPF savings to buy shares has been permitted, I would like to suggest to the Government to consider seriously the usage of CPF savings by those who wish to upgrade themselves through part-time Diploma or degree courses. Using CPF savings to upgrade oneself is a more valuable investment than buying shares. This will enable Singaporeans to better prepare themselves in facing the challenges of a globalised world. This is also a good way to help PMETs.

As an added measure, I would like to suggest to the Government to set up a not-for-profit institute of education to run these post-secondary courses so that many more people can get a leg up on the social ladder.

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( In English ):

Helping SMEs

Sir, next, I will move on to the internationalisation of local businesses. The Government has eloquently spoken about the need for our local business, especially the SMEs to venture abroad. However, the global environment is often fraught with over-powering currents for the SMEs that may prevent them from staying afloat. As such, I feel that the Government should consider getting the bigger boys in the Government-linked companies to work together with the local SMEs when they venture abroad. When these big corporations get a project abroad, instead of sub-contracting to foreign companies or start their hiring spree, they should consider tying up with our SMEs back home. This way, they will be helping to give them a headstart and shorten their learning curve by taking them under their wings. Of course, the SME chosen must be able to deliver and be competitive at the same time. For the big Government-linked corporation, working with a home-grown SME will have its advantages because there will be no cultural gap and they also have a better understanding of each other. This will help our local SMEs to have a wider reach and expand their horizons, as well as gear them to globalise their business.

Car owners and road tax

Finally, I note that the 8% rebate on road tax for owners of passenger cars and motorcycles is indeed the Jack-in-the-box in this year's Budget. The concern among those who benefit from this is that they may end up paying back 8 percentage points more than what they are going to receive if they read the Government's policy on road transport accurately. I can only voice their concern that this road tax rebate which is tabulated in the Finance Ministry's statement as Benefit for Individuals and Households will not leave

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them having to pay a lot more when the policy to charge motorists based on road usage is implemented.

Sir, before I conclude, I would like to touch on some points that Ms Sylvia Lim mentioned just now. This is not to start a Ah Huay versus Ah Lian debate. I just want to comment that spending on social services for the greying population by Government cannot be taken for granted. Only prudent and good government like ours can do so.

Recently, I went back to visit my mother during Chinese New Year and I met up with my friends and, of course, all of them congratulated me.

They said, "Wow, Bee Wah, you're going to get rich very soon."

I asked them, "Why do you say so?"

They said, "Oh, you can get any licence that you want. Of course, you'll get rich very soon."

I said, "Excuse me, this is Singapore."

And they were telling me that for the politicians, if they did not know how to make use of the advantage and make sure that the pocket is fat, that is not a politician, in their definition or in their dictionary. But I assured them that, in Singapore, the politicians are here to make sure that we take care of our residents and take care of our citizens. So, if we do not have a good government, we do not have a prudent government, we can never think of spending on social services.

The other point is that we increase GST only when it is needed. This made me think: are we going to be ruled by the Chinese proverb " chuan dao qiao tou zi ran zhi" ? In Chinese, wo xu yao de shi hou, wo xu yao le, wo ming tian increase

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GST liang ba xian. My mother always tells me that when you want to pass motion, you have to find a toilet first.

When I was studying in the UK, I met friends from Myanmar and Cambodia. They said, "Bee Wah, I really admire you. How I wish that my country has Mr Lee Kuan Yew and the PAP."

Conclusion

Sir, let me conclude by once again congratulating the Second Finance Minister for presenting a Budget where the lines are clearly drawn and the policies clearly defined. The Minister has transformed what could have been just another annual Budget into a platform where we can pin our hopes for a brighter future. The Minister has perhaps realised the thoughts of the Spanish painter and sculptor, Pablo Picasso, when he said, "There are painters who transform the sun into a yellow spot, but there are others who, with the help of their art and their intelligence, transform a yellow spot into the sun."

Mr Speaker, Sir, with this, I support the motion.

4.28 pm

Ms Irene Ng Phek Hoong (Tampines): Mr Speaker, Sir, this is a "breakthrough Budget" for our workers. It represents an unprecedented new commitment to help our workers meet the challenges of living in a fast-changing, globalised economy. Our workers, especially the lower-income and older workers, are very encouraged by the generous Workfare Income Supplement and the GST offsets.

In this regard, I am quite puzzled by the NCMP who criticised the GST rise without any regard to the generous GST

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offset that is given to the people, especially the lower income. It is incredibly generous. I talked to the residents on the ground. They could not believe the figures. It is 19 years' worth of offset for one-roomers, 16 years for 2-roomers and 10 years' worth of offset for 3-roomers. This is incredibly generous and does not fall into any election cycle, as I see it.

Those who criticise the Government for giving a generous budget during the election should rethink their view. This is not an election year, as far as I know. But the Budget has gone down so well with the public that some are saying that this is even better than the election budget last year. Indeed, it is very generous and I would like to thank the Second Finance Minister for this. I would think that the NCMP from the Workers' Party would be more focused on the state of the working poor, on their prospects for the future, on their need to level up their income and the way that we can fund our WIS to make sure that it is a sustained help to them. Instead, she focused quite singularly on our revenue with little thought about how we can help our working poor, how we can get better jobs for them, how we can level up their incomes.

Sir, in my speech, I would like to focus on how the latest Budget moves will impact on Singapore's cohesion as a society over the longer run, and whether Singaporeans can look forward confidently to a better future with sustained growth. In this regard, I would like to highlight three "givens" and raise some issues which I hope the Second Finance Minister would address.

The first given is the widening income gap. It will intensify over the years. It will grow even wider, especially as globalisation picks up pace. We know that the higher-skilled will earn even more and

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the lower-skilled will see their wages spiral downwards or stagnate. This is a world-wide trend.

Ms Irene Ng Phek Hoong (Tampines): 4.32 pm

Madam, a good measure of income inequality is the Gini coefficient, which takes values from zero to one.

The larger the coefficient, the more unequal the income distribution. In Singapore, the Gini coefficient rose from 0.442 in 2000 to 0.472 last year. This is based on income from work per household member. It is sobering to note that we have a higher Gini coefficient than the US figure of 0.469 in 2005. This would give us a rough idea of where we stand in terms of income inequality on the global scale. If we factored in the Progress Package last year which was skewed towards the lower-income, our Gini coefficient was lowered to 0.439. In other words, it narrowed the income gap. I would expect our Gini coefficient this year to also be moderated because of our Workfare and the GST offset package but the question that we have to ask ourselves is, what would be an acceptable income gap in this society. What degree of income inequality can we tolerate? Is there a Gini coefficient number or a range that we should aim for or work towards from the scale of zero to one: is there a golden mean?

It is important for us to come to a consensus on this because if we want to commit funds to WIS to make sure that the income gap is narrowed, we must have a certain goal as to what level of inequality we want to diminish. If we want to commit additional funds every year, it means that more and more revenue would have to be sought for it as the gap will widen every year as globalisation picks up pace. It has to be a sustained effort to keep looking for funds

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to sustain our WIS which will increase over the years as the income gap increases.

Another trend that needs to be studied is that the ranks of those earning below $1,000 a month has grown larger over the years while those earning $1,000 to $4,000 a month has shrunk. For example, the latest labour force report shows that the percentage of workers earning less than $1,000 a month has expanded from 16.6% in 2001 to 18.5% last year. Over the corresponding period, the percentage of workers earning $1,000 to $4,000 a month fell from 64.7% to 60.1%. As for those earning above $4,000, the percentage rose from 18.8% in 2001 to 21.3% last year. This would indicate that we are becoming less and less of a broad middle-class society and with more moving downwards, forming a larger pool of lower income workers below a thousand dollars and the top is also getting bigger and the middle is shrinking. We have long tolerated income disparities in the belief that if people are motivated and worked hard enough, they are able to lift themselves up in our vibrant economy.

This budget signals clearly the recognition that the rising tide of economic growth does not lift all boats but, in fact, can sink the sampans in this vast turbulent ocean. In the past budgets, we used to throw our low-skilled and low-wage workers the occasional rescue package, a life jacket here, a life buoy there, maybe train them with better boating skills, patch up some leaks in their sampans and hope that they would stay afloat and stay the course. This year, for the first time, I think we are adding an entirely new structure to their sampan and I think that is the sail and the sail is the WIS. This will enable them to catch the wind of progress and hopefully keep it in the right direction. A worry is that the employers may try to whittle down that sail into a handkerchief. Why do I say this? Some employers, always looking for

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ways to cut costs, may use the WIS as an excuse to lower their wage costs further, especially for contract workers with little bargaining power. They can tell the contract worker, "Look, to me, your job is worth only $800. I don't pay you CPF now but you want me to pay the CPF so that you qualify for Workfare. Fine, I will pay the CPF, but I will calibrate your base pay, lower it so that in all, I am still paying $800 plus CPF." In other words, for the worker, his real wages have gone down but the employer will tell the worker, "You should go for it because with the WIS, you are not worse off. In fact, you might be a little better off."

I would urge the Government to take note of this and to monitor this closely and to caution employers who use the WIS to drive down real wages in a bid to cut costs. If this practice becomes widespread, then it defeats the purpose of Workfare which is to level up the pay and savings of the lower income so as to narrow the widening income gap. We should remind employers that this Budget has already helped to reduce business costs by cutting the corporate income tax as well as by reducing the employer's CPF contributions for low-wage workers. The WIS belongs to the worker and the NTUC will keep a close eye on this to make sure that it is the workers who benefit from the WIS.

Mdm Deputy Speaker, besides the income supplements to the lower-income, another effective way to reduce the Gini coefficient is to get as many members of the household to work as possible and this will raise the income per household member.

There is an army of housewives out there who are looking for work but cannot find suitable jobs. Not enough is being done to help them find jobs to supplement their household income. They have family responsibilities. They are looking for flexible work hours, they are looking for arrangements that would allow them to

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also take care of their children but increasingly, the trend at the work place is towards longer and longer shift work. 12-hour shift work is beginning to be the norm and there is little or no flexibility. Part-time and flexible work arrangements are still scarce and many women have come to see me at my MPS to look for jobs. They lament how difficult it is to juggle their family responsibilities with long shift work or how unpredictable work schedules make it hard for them to plan childcare and transport arrangements. For many, the low pay and poor prospects do not make it worth their while. It is no good telling them not to be choosy about jobs. It is not a question of being choosy. It is a question of priorities and practicalities. Some women, faced with most of the burden of taking care of families, are forced to choose jobs that pay less or, in the case of stay-at-home mothers, nothing at all.

Some 10 years ago, the Government used to have a back-to-work scheme for women but it was allowed to lapse and was not revived. In fact, I am not sure whether it even took off. With the Government's push for women to have more babies, we would expect them to face mounting pressures to juggle family responsibilities and to also look at how to find work and to be forced to make difficult choices. With the WIS, it may now be worthwhile for stay-at-home mothers to return to the workforce. I would urge the Government to pay special attention to this group as every year, they feel left out from the Budget as if they are invisible. I have heard my fellow MPs ask for special bonuses to the housewives and I would add my voice to that call but, more than that, to help housewives to get back into the workforce so that they can benefit from the WIS.

Mdm Deputy Speaker, a recent white paper by the Japanese Government

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estimated that if a woman graduated from university, worked full-time for six years and then put her career on the hold for six years to have children, the indirect opportunity costs would have cost her a total of up to S$1.53 million by the time she hit the age of 60. I am sure that our figure for Singapore women would also not be too far off. We should recognise this. Last year, I made an argument for stay-at-home mothers from the standpoint of equal treatment and opportunities. Today, I want to add another principle to that argument and, that is, of social inclusion. They should not be left out of our social safety net and should be helped to find their way in. As Health Minister Khaw Boon Wan said, 200,000 housewives are not covered by MediShield.

My constituency, Tampines Changkat, will be piloting a programme to reach out to housewives to encourage them to get back into the workforce so that they can benefit from the WIS and the Medisave top-ups from the Government. We will be working with NTUC and Northeast CDC to find suitable jobs for them. The problem is how to encourage more companies to offer flexi-work and part-time work. Do we need to resort to legislation to give workers the right to ask for flexible work arrangements, the way some countries such as UK has done, if persuasion does not work?

In Singapore, part-time work as a proportion of total employment remains low, at 6.3% last year. This is dismal compared to UK with 24%, Germany with 22%, Japan with 26% and Netherlands with 36%.

In 2004, our Government committed $10 million to a fund called a Work-Life Works! Fund to promote Work-Life strategies at the workplace, especially flexible work arrangements. Can I ask the Second Minister for Finance to review if this funding is adequate and to step up the pace of progress in this area to show

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the Government's seriousness in creating job opportunities for all?

Can the Government also consider setting up perhaps a Workfare Opportunities Fund that the MPs and grassroot leaders can draw from to create job opportunities on the ground, at the constituency level in the informal sector for housewives and retirees, just the way that we have a ComCare fund for the CCC that the grassroot leaders and MPs can draw from for programmes for the people, to make sure that they can level up, and these are for creating job opportunities at the local level, so that they can benefit from WIS, so that they can get jobs in the informal sector? To give an example, in Tampines Changkat, we have started a Sunday market for retirees and housewives to set up some stalls to just make some pocket money. It is a weekly market; it is extremely popular. It has about 100-200 people taking part in the Sunday market every week and they sell all sorts of things. It is being organised by our volunteers but with some funds, we can do more to train the housewives and retirees there to be more enterprising and to also promote the market and their wares.

It has made a difference to the lives of some residents. One of them is Mdm Yap Kwee Lian. She is 43, a housewife. She has three children (aged 16, 14 and 7). She sells second-hand goods. She is, in fact, a "karang guni" woman. She collects old clothes but which looks reasonably new, able to be sold. She collects electrical appliances, toys and she sells them and she is able to make about sometimes $100 on a good day. Her husband is a taxi driver. So she needs the money to supplement the household income as the husband's job is erratic. She used to work before, when she was 16. She has worked her way up from a cashier, promoter, accounts clerk earning about $800 a month at her peak, but she stopped work in her 20s to look after her

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children. So the Sunday market gives her hope that she could at least earn some income, help to raise the family, make sure some bills are paid. She told us once a nice story. She felt so lucky that she won an electrical flask in a lucky draw and she sold it at the Sunday market for $12, enough to pay some of her bills. This is such an enterprising effort that we should reward on the ground and if they could qualify for WIS, and I worry that they may not understand how they can qualify for WIS. That would be a problem if the Government had such a good programme but they are not able to avail themselves to it.

So I would urge the Government to help us to make it simpler to apply for WIS on behalf of these enterprising housewives who do have informal work through CDC activities and through the initiatives of the grassroots. We will be mobilising grassroots leaders to explain to them that they can qualify for Workfare if they put some money into their Medisave and that will help housewives to have some Medisave savings as well as to be covered by MediShield.

Another group which we should encourage back to the workforce is singles who look after their elderly parents. I have come across single women who are unable to go to work because they have to take over the responsibility of supporting and looking after their elderly parents as their married siblings have their own family responsibilities. Some who can afford to hire a maid will do so, so that they can work but many find this a struggle. It would be remiss of me not to thank the Second Minister for Finance for reducing the foreign domestic worker levy by $30. This is helpful but a more meaningful gesture, for the singles, is to extend the foreign maid levy relief to singles who hire maids to take care of their elderly parents. I know that the Government's explanation made ad

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nauseum is that the foreign maid levy relief presently is to encourage married women to continue working as they raise their families. That is well and good and I support that, but do we not also want to encourage single women to continue working so that they can look after their elderly parents? I would accept the Government's argument, perhaps 10 years ago, when we did not have so many ageing parents with us, but the household structure has been changing and so has our demographics with more elderly and more singles among us. I would urge the Government to review its stance for the foreign maid levy relief to be made available to the singles so that we can be relevant to today's realities.

The second given is an ageing population with longer life expectancies. Retiree households form part of the lowest rung of society, drawing no income. I think more than any other group, these retirees need the WIS for working after 62. They need incentive to continue working. But instead, what happens on the ground is that their pay is cut and so is their CPF. If they manage to find an employer to re-employ them after 65, their pay and CPF is cut even further. And according to the latest MOM's report on older workers, published this month, older workers on full-time jobs tend to work longer hours compared to those younger, even though their pay is lower. It is sad that our elderly have found themselves in such a situation.

I have seen several residents in their 70s who come to me at MPS literally begging for work because they have many household bills and medical bills to pay. To their credit, they do not want to be on welfare. They are willing to take any job, even as a cleaner, but the brutal fact is that it will be hard for them to compete for jobs with a young foreign worker. The problem is more acute for older women,

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as a recent MOM's report shows. I would urge the Government to consider giving a more generous WIS for those above 62, and to be even more generous for those working above 65, while reducing their CPF further so that more employers will be encouraged to hire them. In other words, increase our WIS for those above 62, cut the CPF even more, and even more for 65.

The NTUC is working very hard to ensure that those above 62 are re-employed. We need our tripartite partners to work hand in hand with us to make this a reality on the ground.

Sir, the third given is that we live in an unpredictable region where anti-Singapore sentiments simmer and bubble beneath the surface and sometimes boil over. We see this in the chaotic storm over Temasek's investment in Shin Corp. The latest twist in the saga is the threat by Thai authorities to take over Shin's assets, such as the Shin Satellite, by voiding the contracts and not paying the market rate for its assets.

Sir, I want to quote a PERC report on this which was published recently. It is an Asian Intelligence Report on Nationalism Risk. It commented on the anti-Singaporean rhetoric in Thailand, and it noted, "some of the official statements condemning the island state have been bizarrely extreme." It went on to comment that Thai opinion poll showed that the scare campaign against Singapore is popular because it is also regarded as a heightening of the campaign against Thaksin.

Sir, commercial deals and business investments can be held hostage to the drama of domestic political intrigues, what confidence can Singapore investors have, not to mention international investors, have in Thailand, and how can investors take a long-term view of the country's economic prospects? When

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Temasek invested in Thailand, it was with a view of showing confidence in the country's growth and to prosper our neighbours. We also wanted to grow with them. It was this same long-term view that we invested in Indonesia.

Temasek now holds significant stakes in Indonesia's biggest mobile telecommunication operators, PT Telkomsel and PT Indosat. There are also calls in Indonesia urging the Indonesian government to buy back Temasek's Indosat shares.

Amidst the rising tide of economic nationalism, Indonesia has also slapped a sand ban on Singapore. It is useful to highlight, at this point, that Singapore is among the top investors in both Thailand and Indonesia. We have been very restrained, rational and measured in our responses. In that same rational frame of mind, we should take stock and rethink our aggressive regional investment strategy, given the rise of nationalistic fervour in these countries.

Sir, the PERC report on Nationalism Risks, which I quoted, warned about Thailand that,

"Under the current military-controlled government, nationalism may have a freer rein than usual because xenophobia is most pronounced among the military and senior bureaucrats. And they are the groups now in charge."

As for Indonesia, the same PERC report on Nationalism Risks said that many of those using nationalistic arguments are "really simply trying to protect their own personal interests." The report also noted that the problem is that this discourages foreign investment from flowing into Indonesia. It said that "Foreign companies now do not know where they really stand or if they are really wanted."

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Indeed, this is what Singapore companies are wondering, and they are making their own assessments. I note from newspaper reports that Singapore investments in Thailand fell by 88% last month compared to the same period last year. I would not be surprised if Singapore's investments in Indonesia also reflected the same pattern.

Sir, Singapore wants to prosper its neighbours by encouraging its investments to its shores, but the actions of our neighbours raise the question on whether we should reprioritise and re-allocate our limited resources. If I may quote that PERC report again, it commented that such nationalistic fervour from our neighbours, such as Thailand and Indonesia, could hurt the ability of our government-linked companies to invest abroad, which is a central part of their growth strategy.

Given this, I would like to ask the Second Finance Minister if it is timely now for us to review our globalisation strategy and the way we invest in the region.

In conclusion, this Budget is a very forward-looking one and it shows that this Government is one that sincerely cares for the people at all levels and has put in place the measures that will ensure our sustained growth over many years.

With that, I support the Budget.

4.49 pm

Dr Muhammad Faishal Ibrahim (Marine Parade): Mdm Deputy Speaker, I would like to begin my speech by echoing my parliamentary colleagues' calls in congratulating the Second Minister for Finance for his vision and farsightedness in delivering a Budget that would put Singapore in good stead to face the challenges of the 21st century. Similar to my colleagues who have spoken earlier, I too received positive feedback about the Budget Statement. Many people, I have

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met, mentioned that it is a Budget of a unique and world-class government.

This Budget is consistent with the President's Address in November 2006, in which he touched on the effects of globalisation and how the challenge would be for our nation to respond bearing in mind the diverse needs of our people. I am glad that our response has been swift and that this Budget would not only spur Singapore towards greater heights and bridge the income divide but also lay the foundation of a uniquely Singaporean social culture - Workfare.

Singapore Brand - The Workforce

Singapore for the past 40 years has branded itself as a nation for its most valuable commodity - an educated and hardworking workforce. Its Government is also known to the world for being incorruptible, pragmatic and farsighted with a disciplined and prudent management approach of its economy.

We have built our successes on this notion and our brand has been well received with many countries wanting to learn from our expertise and experience. As such, we welcomed the world to our shores and realised that the way to go was to build a spirit of cooperation whilst putting our nation in good standing with the world. We have also provided opportunities for our people to go beyond, realise their potential to achieve success and contribute at the world stage.

As such, we have prepared our nation well to embrace globalisation, the phenomenon of the 21st century. Our education system is poised to prepare our people with the high skills and knowledge needed to manage the technology that symbolises the globalised world. We also have a sound fiscal policy with our economy in tandem with the global

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backdrop; the results and outcomes clearly reflected in the Minister's Budget speech. I am confident that we are ready to face the world in the many years to come.

Challenges of globalisation

But as the Minister has pointed out, globalisation, like in most developed economies, has brought about challenges for certain segments of our society; notably the low income and those structurally unemployed.

We have identified this growing phenomenon, within which lay the basis of our inclusive approach of not leaving anyone behind. Among my constituents, there are those who are caught in the downside of globalisation. During my weekly MPS and block visits, I have met a segment of my residents with a diverse range of issues; those who would need jobs, financial assistance, in need of rental flats, upgrading and senior citizens issues, such as being disabled because of age. As such, it was with great eagerness that I looked forward to the unveiling of this Budget to know how my residents as well as those in the other constituencies would benefit from it as well as contribute towards the development of Singapore.

The Budget - signal to the world

Madam, I see this Budget as having a two-pronged reach approach. One that would put Singapore on solid ground to engage the world while the other puts in place a process that will manage the downside effects of globalisation. It also lays the foundation for our next generation to be equipped with the skills and knowledge and further cultivate our brand of an efficient and effective educated workforce.

This would also send a signal to the world of our intent and directions to be a "vibrant global city" and our brand of

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nation building. It reinforces our belief of a clear NO to going down the road of a welfare state but a unanimous YES to a holistic national culture of continuous learning, ensuring employability and embracing globalisation - a process that goes beyond just by providing GST offset handouts.

Besides just cultivating our workforce, I would also like to applaud our nation's vision and efforts in making Singapore a global city with distinction. I am most appreciative of the Ministry of National Development's plans to renew and rejuvenate our HDB estates to realise our vision of providing a "first-class living environment" for our people. I am pleased as well as excited to hear of the upcoming transformation of our heartlands with the building of park connectors, water front living concept and the latest modern facilities which would revolutionalise the way Singaporeans live, work and play. Imagine how far we have moved from the days when our people were living in kampong to where we are today. I believe that this holistic renewal process would certainly enhance the attractiveness of our heartlands and improve the quality of life for all.

As our heartlands' landscape and the property issues evolve to meet the various needs of Singaporeans as well as contribute towards Singapore's progress, it is important that our housing policies are always kept relevant to meet these changing needs. In addition, we should continue to look at the relevance of the available housing options for the different segments of our society.

'Heartware' - a Nation Building Process

Now, let me touch on the concept of "Heartware - a Nation Building Process".

Madam, in defining our brand and vision of a global city, it is important that we rally our people towards this cause.

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How do we ensure that the people understand our vision, the directions that we are taking and getting them on board? How do we reach out to the people to better understand the many schemes and programmes that we have, especially to those in the lower end of our society? We have provided the material solution through this Budget and our master plans but I believe we need to complement this process with the heart and this could be done through the concept of 'Heartware'.

Two weeks ago, two days before the Budget Statement, during my MPS, I met one of my residents who has been out of job for some time. During our conversation, I was surprised to find out that he was not aware of the upcoming Budget which I had expected to be the talk of the town. He was more concerned about getting a job and the immediate means needed to support his family. It was then that it dawned upon me that despite the wide publicity and the availability of our schemes and programmes, more can be done to reach out to this group of people which includes the aged, the disabled, low-income or even some segments of the middle income Singaporeans. How do we measure up to this challenge?

I believe that the solution is to continue in our effort to expand the number of partners, as well as enhance the role of our existing partners in reaching out to the people. For example, we could enhance the role of VWOs, self-help groups and other civic groups in this process. What is needed is a coordinated effort to reach out to the people, and if done effectively, would reflect the 'heartware' process of our nation. Workfare would put us in good stead to prepare our people for the future but 'heartware' would contribute to our nation building journey of a 'compassionate society that leaves no one behind'.

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Other challenges for Budget 2007

Madam, let me touch on other challenges of the Budget.

Today newspaper, published on Thursday, 15th February 2007, reported that the WDA helped 22,125 unemployed people find jobs last year through programmes, such as Job Redesign. However, how do we reach out to those who despite the efforts of these organisations are still unable to find jobs or work because of old age or illness? They may not be eligible for Workfare. To address this issue, I would like to call upon Singaporeans to support the Prime Minister's call during his Chinese New Year message for greater strengthening of ties within the family especially to those with aged parents and/or family members with illness. The family is the most important basic unit of society. United, it is a formidable force that could withstand any challenges. Disunited, it causes sorrow, mistrust and its eventual breakdown would lead to an unnecessary burden to the society.

I have also received feedback that, from the employer's point of view, increased benefits from the reduction of corporate tax may not be enough to attract them to hire elderly workers due to prevailing mindsets of our society. This, however, has to change and we should give our older workers a chance. This would definitely require 'heartware' of intense ground work in negotiating and buying over such employers especially those from the smaller companies.

Lastly, as we move

towards Workfare, there is also concern from some quarters that this may stimulate an increased motivation, especially among housewives between the ages of 35 and 45 to seek employment. This may cause additional pressure and strain to the family units,

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especially those with children or elderly parents. As such, we would need the necessary childcare and elderly support frameworks to meet the needs of these families.

Mdm Deputy Speaker, please let me continue my speech in Malay.

( In Malay ): [For vernacular speech, please refer to Appendix A.] Mdm Deputy Speaker, this Budget strengthens the message in the President's Address delivered in Parliament that the country will take the necessary measures to lessen the effects of globalisation. This will also form the foundation of Singapore's Workfare culture, which is unique and will ensure lifelong employability and learning of our people.

Similar to other citizens, a number of them in our Malay community also face hardships which are brought on by globalisation. However, I am relieved that we are now prepared to tackle this challenge. Recently, our Malay MPs have launched an initiative so that our Malay community will benefit from the globalisation era. We have to take up this opportunity and other opportunities, including those that are offered in this year's Budget, to overcome challenges posed by development and enhance the quality of life of our people.

As we are happy in receiving opportunities, especially benefits and goodies from this Budget, we must continue to be thrifty and save up for the future. This must be part of our culture. This practice is necessary to ensure that we have sufficient funds to provide for times of emergency or when the world's or our country's economy becomes less vibrant. There is a Malay saying which says, "Be prepared for a rainy day." At the same time, we have to avoid the habit of excessive spending or spending more than the income earned. We have to think it through before being involved in use-

*Cols. 2043-2044.

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first-pay-later schemes which will only land ourselves in debts for a long period of time. I have met a few residents in my constituency who are facing hardships as a result of debts from use-first-pay-later schemes. One of them shared with me that they did not think it through when deciding to purchase items from these schemes. With more debts, our ability to provide for our daily needs and also education expenses for our children will be affected. Education is the catalyst for a fast-paced development and progress for an individual, family, community, country and also civilisation. Therefore, we must invest for the future generation by making full use of schemes, such as the post-secondary education account.

However, we must also spend quality time with our families and ensure that the development of values and personalities of our children will not be affected. Nothing is more precious than a happy and loving family with children who respect their parents and also others.

We will together face all these challenges and I am confident that in future, we will be a community which is proud in celebrating our common progress and achievements with other Singaporeans.

Mdm Deputy Speaker, allow me to continue my speech in English.

( In English ): Mdm Deputy Speaker, despite the notion from some that there are areas or gaps that the Budget may not have addressed, I believe what is important is that the Government has put in place a systematic and innovative socialist concept of redistributing its wealth to meet the needs of its people. In addition, this Budget would ensure a competitive tax system for an economy like Singapore to brace and reap the benefits of the coming globalisation forces to our shores. These include the high potential of increased number of big

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spenders and tourists and their anticipated increased consumption of local goods and services due to the Integrated Resorts. Our tax rates would also make us an attractive place for investments and top talents to stay.

We should continue to improve our comprehensive needs identification process, review and enhance our measures, assistance schemes and programmes to ensure that they continuously address the aspirations of all Singaporeans. I believe that providing the foundation for a thriving economy is the best handout for all Singaporeans. A thriving economy would provide the job opportunities and our workers would eventually enjoy the surpluses through increase in wages, year-end and performance bonuses.

Mdm Deputy Speaker, I fully support the motion to approve the Government's financial policy for the Financial Year 2007/2008. I am most glad that this Budget would put us in good stead to face the challenges in the years ahead and would especially benefit Singaporeans. What I would hope to see more is the complementing "heartware" where all Singaporeans together would ensure that no one is left behind. I believe that the morale and spirit of our people must never be broken, and we all have a part to play to support our people as best as we can and make Singapore the best liveable city.

5.06 pm

The Senior Parliamentary Secretary to the Minister for Education (Mr Masagos Zulkifli B M M): Mdm Deputy Speaker, I rise in support of the motion.

I am happy with the optimistic outlook of the Singapore economy that the Second Minister for

Finance, Mr Tharman Shanmugaratnam, has stated. Singapore is set to grow a good 4.5%-6.5%. Yes, the times are good and the outlook is too. But if the analogy for the NCMP requires a more elegant treatment, as given by Ms

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Lee just now, we should not be the proverbial grasshopper which consumed away the good stuff thinking it would yet last. The Government is the proverbial ants who take advantage of the good times so that we are always ready to protect our citizens when the bad times come. And today, the cycle between boom and bust is shorter and more frequent.

Mdm Deputy Speaker, our growth will be contributed by the tourism industry. Mr Lim Hng Kiang announced in February that an increase of 10% in tourism receipts is targeted for 2007 or $13.6 billion. This augurs well for our retailers and service sectors. Arrivals are also expected to reach 10.2 million visitors or up 5% from last year. Tourism is rightfully "a key contributor to economic growth."

While manpower, hotel rooms, and service quality will remain to be the key concerns of the tourism authority, we must be equally concerned with the underlying attractiveness of Singapore as a tourist destination. We do not have natural resources that will attract eco-tours nor ethnic cultures we can showcase as different from the region. Whatever we have created, we have built it on a clean and green city concept, which tourists admire and our population enjoy.

In years to come, Singapore is going to be an even better city to visit. If I may quote from a report from Today , the Minister Mentor is optimistic of Singapore becoming what the paper quipped as a First World City, Upper Tier. Today described this new city in these terms:

"Think Paris, with its beautiful 19th century buildings, its cafes and kiosks and the life bustling along its boulevards. Or London, teeming with scores of nationalities that give it such an international flavour ... "

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Because the Ministry of the Environment and Water Resources' ABC Water plan will be a large part of this plan towards the city, MM also beseeched us to do our part to keep our waterways clean. Indeed, PUB has to remove 15 tonnes of litter daily from our various river sources. The weight of this is the same as three new army 5-tonner trucks. I do not know what volume this translates to but, if you imagine the equivalent weight in water, a water tower of one metre square in cross section, will be 15 metres high, which is litter stacked up six storeys high everyday!

This is my concern. Tourists will abandon our city, if it is also not clean. But you will say that we are clean. I think we have to make a clear distinction between being clean and being cleaned up. We know we are probably more of a green and cleaned city than a clean and green city.

My family and I took a campervan holiday in New Zealand some time back. What was outstanding was the pristine state of the natural environment and the strong concern and care of the population to maintain it so. While there were many campervans travelling everywhere, nobody dumped their waste or litter indiscriminately, everyone did it in designated places. They kept it in their campervan all along the routes. There was no litter around. In fact, there were no janitors around picking up litter along the many remote nature tracks. It would be impossible to do so.

This is not the same when I went hiking up a mountain in a developing country which I will not mention. There was trash along all the way, even though there were enough trash cans around. In many developing countries people litter indiscriminately and nobody picks up after them. We are fortunate that, in our country, we do not see as much litter

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around; but the reason is that somebody is paid to clean up after some of us who litter often. I think it is sad that we need to spend a lot of money to clean up after our messy habits. It is even sadder that about 7,000 people were fined last year, double the number in 2005, and that we still need to enforce Corrective Works Order to about 120 of them every year for the last three years to ensure a clean environment.

The schools take a lot of time inculcating care and a healthy concern for the environment, but somehow this habit seems to get lost along the way when we grow up. Like Ms Indranee and other colleagues in this House, in my walkabouts, I always get complaints about litter in the corridors, common areas and, worse still, those thrown from the higher floors. In fact, on my way to work, I could still see some streets littered with empty bottles and cans.

Let me share with you an anecdote from Mr Mah Bow Tan. He was at the World Cup football match in South Korea. The crowd was cheering and, of course, in a crowd like that, people were littering away and throwing confetti and such. But as the match ended, everyone took out a plastic bag and cleaned up the area around them without regard to who littered in the first place. There was no need for a big squad to clean the mess up after a match.

If we do this in our corridors, our compounds, and take pride and ownership in the cleanliness of our surrounding because we count them as our home too, we will incur less cost in our cleaning crew. This may even translate into lower conservancy fees and perhaps more budget surplus. In private houses, if we separate bulky items, paper and food in our trash, we actually need them to be collected only once a week. Do you notice that our private houses have a trash can each adorning their front gate like part of

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their landscaping? Because garbage collection happens every day.

Perhaps we should look more at incentives and not just fines to inculcate care for the environment. Perhaps we should have a No-Trash Week in private estates especially, and get ourselves to separate our bulky trash like paper and cartons, and squash our cartons and bottles from the food wastes in separate bins, and think before we buy anything that we will throw later. When I was living in Australia for three years, garbage was only collected once a week. Perhaps we can do it in Singapore twice rather than once a week, for a start.

Many crises have since passed and, like the Minister for Finance said, the future is bright. This is therefore the best time ever to dedicate effort and resources to build in ourselves a consciousness about the environment, something previously not urgently addressed in view of the recent difficulties in our country, but it has never been unimportant.

This era, indeed, is one where it is hip to be environmentally-caring. We should ride this wave. The community and not just schools should provide opportunities for students and our young to participate in activities that will heighten their awareness for environment care. Organisations like the People’s Association should use this opportunity to rally the young especially to take up this cause. The media should give the NGOs who constructively add to this effort more airtime.

In conclusion, when it comes to hygiene, tourists will behave the way locals do. Just look at the toilets in our big hotels. It is clean not because someone cleans it only; it is because it demotivates people from messing it up. But we have to be clean out of habit,

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rather than our current state of paying for someone to clean up for us.

I hope, as we move to become a First Class City, Upper Tier, we must also have programmes and resources so that we do not remain a people with Third World littering habits.

Mdm Deputy Speaker, in Malay, please.

( In Malay ): [For vernacular speech, please refer to Appendix A.] I am happy with the optimistic outlook of Singapore’s economy as provided by Second Minister for Finance, Mr Tharman Shanmugaratnam. Singapore’s economy is expected to grow 4.5% to 6.5% and the tourism industry is expected to grow by 10% or 13.6 billion in 2007. Tourism is the key contributor to the economic growth. We have to be concerned about the attractiveness of Singapore as a tourism destination. All tourist destinations are built on the concept of a clean and green city that can be enjoyed by tourists and our own people.

Minister Mentor has reflected on Singapore's ability to be a First World City, Upper Tier and the ABC programme as the main pillar of this vision. Minister Mentor hopes that we ensure that our waterways are clean. However, PUB still has to clean up 15 tonnes of rubbish every day and this is my concern. Tourists will leave our city if our city is not clean. Although our environment is clean, we have to differentiate between being clean and being cleaned.

Our schools have inculcated the love of the environment in students but this habit seems to be lost when we grow up. Perhaps, we can consider having incentives and not just penalties to sow this feeling of love for the environment. If we clean up our corridors and five-foot

*Cols. 2045-2046.

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ways and are proud of the cleanliness of our surroundings as these are the places we live in, we will be able to reduce the cost of cleaning the surroundings.

Tourists too will do as what the locals do. Just look at the toilets in our major hotels. They are clean not because there are people cleaning them, but because the users are motivated not to dirty them. I hope that as we move into becoming a First World City, Upper Tier, we will have programmes so that we will not remain as people who have the habit of littering.

5.16 pm

Dr Ong Seh Hong (Marine Parade): Mdm Deputy Speaker, I support the Budget Statement. However, please allow me to raise some concerns on this otherwise celebratory Budget.

Madam, I am concerned with the Government's intention to widen the definition of the Net Investment Income (NII) to include capital gain. The details of the definition of this capital gain to be included in NII and what portion is allowed to be used has yet to be announced. Nevertheless, I urge the Government to " sai si ", to think thrice and to move very prudently on this matter.

We have always guarded our national reserve very carefully. Only until a few years ago, we started to allow the use of NII. Even then, the Government has adhered to a very prudent and conservative spending of up to 50% of NII contributions. Moreover, the NII definition is limited to dividends and interest income. The usage of NII has so far enabled us to avoid budget deficits for many years. This amounted to about 1.6% of our GDP in the past five years.

Madam, the policy of using only half of this interest and dividend income

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without touching the capital gain, though conservative, has allowed our assets to continue to grow in tandem with the growth of the underlying asset class as well as the economy. Once we start to touch on the capital gains, the situation will change.

If my grandfather had the foresight, which he had not, to buy a 20,000 square foot land in Bukit Timah at less than $2 per square foot some 40-50 years ago, the land would have fetched me at least $10 million now. This is a conservative estimate. The capital gain would be $9,960,000. If I were allowed to spend the capital gain, the original dollar of $40,000 would not buy me any property at all. Even if I were to spend only half of the amount, the remaining $5 million will not get me anything close to what I have just sold. Even with $10 million, I may not be able to get back the same type of property of similar size and location, especially so if the economy is booming.

Madam, if we allow capital gain to be spent away, how do we prevent any irresponsible government in future, to sell away our long-term held assets, in order to realise the capital gain so that they can spend them on some of the promises they gave to their electorate?

For more volatile assets like equity, the problem could be even worse. Let us say, in a market bull run, up until these two days where the market has major corrections, the price of some blue chip counters, I was told, have gone up a few times, three or four times over the last one year. Let us say, we bought a counter at $1 and we sold it at $2. When the price goes up to $4, we will not be able to get back also the same quantity of shares that we held previously. And then, we may lose in the long-term gains for this asset.

I do not know what is the exact portfolio mix of our Singapore reserves,

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but the shear size of it implies that they must have been well allocated and diversified across different asset classes and also spread over many geographic regions. With this well diversified portfolio, some of our investments will do well this year and another set of investment probably will perform well the next year. Overall, we should achieve a constant long-term growth. However, if we always take profit whenever there are capital gains and spend away all or part of the capital gains, then over the longer term, we will not be able to enjoy the consistent growth that we are used to and our "real" asset value, net of inflation, may remain stagnant or even diminish over the years.

There is also a technical problem on which currency we should calculate our capital gain. Should it be Singapore dollars or any international currency? Either one would have its problem. For example, our investment in a foreign currency would appreciate in Singapore dollar term if our Singapore dollar weakens. Should this be considered as a capital gain? I will argue against this. In fact, a currency quite often reflects the strength of its underlying economy as well as its reserve backing. If our dollar weakens, it probably means that our economy is not doing so well. In fact, there is more reason that we should not take profit and we should preserve this asset in order to give a stronger backing to our currency.

Next, I would also like to touch on protection of some of these strategic investments. Some investments may be made for strategic reasons and should be held for long-term national interest. However, the personnel in charge of our investment may change over time while our strategic interests probably do not change so often. Allowing capital gain to be realised and spent away may also be very tempting for future governments to lose sight of our national strategic interest and sell off these strategic investments.

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Madam, I understand our Government will need to find new sources of funds other than from taxation in order to fund all these various new programmes and initiatives to keep our economy competitive while helping our people. However, there is a Chinese saying, " fu bu guo san dai ", which means the wealth in the family does not go beyond three generations. Many businessmen always lament that the first generation works very hard to accumulate their wealth, to make the first pot of gold. And the second generation will continue to work to grow it. Then comes the third generation who spends and splurges it away and wipes out what the family has accumulated.

I know this is definitely not the intention of our Finance Minister and the Government to open the floodgate for our future generations of leaders to wipe out our national reserves. But in view of the potential downfalls I have just alluded to, I urge the Government to seriously reconsider this proposition to include capital gain in the NII.

If the Government still wants to push ahead, I would like to make the following suggestions:

First, to limit the capital gains to those investments made during the term of the government and the gain that is made during the term so that the government of any term will not be able to take profit of good investments made by previous governments.

Second, to set a minimum rate at which the total asset size must grow before any gain can be realised. This minimum rate can be pegged at a certain percentage, say, 2%, above the inflation rate.

Third, to set the maximum amount of NII that can be used in any one year,

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expressed as a percentage of the total asset size. That, we can work out the number.

Let me explain why I made suggestions (2) and (3). For example, if inflation is 2% this year, then our asset must grow by at least 4% before any capital gain above this 4% growth can be realised and used. Moreover, we have capped the total amount of NII that can be used. The reason for these two guidelines is that it will ensure that our assets will continue to grow and capital will continue to grow, and to discourage any over-reliance on NII.

I have three more suggestions:

Fourth, to exclude capital gains due to fluctuation of currency exchange rate.

Fifth, we need to draw up a list of strategic investments to be protected.

Sixth, to set up an Asset Disposal Committee which will deliberate independently on any proposal to dispose of any of our strategic investments.

With that note, Mdm Deputy Speaker, I support the motion.

5.25 pm

Dr Lily Neo (Jalan Besar): Mdm Deputy Speaker, the Second Finance Minister, in his Budget speech, said that we have to prepare now for the challenges of an ageing population and must ensure the well-being of the senior citizens. I agree with him wholeheartedly. He also said that this Budget is about preparing Singapore for the future and Singapore will have to spend more in the future for the needs of older Singaporeans. Singapore has enjoyed economic success under the PAP. We have a world-class infrastructure and the highest homeownership in the world. Our education and healthcare systems are also

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internationally-renowned. The PAP Government has also proven to be capable in dealing with crises and challenges over the years. I believe that we shall do just as well in this new challenge to prepare for an ageing population.

The issue of an ageing population is not new, and it is one that many developed and developing nations are facing and will one day have to address. The impending demographic shift in Singapore is alarming. Our over-65 population is projected to grow by 372% from 2000 to 2030 - faster than in other ageing societies, such as Japan, 54%; Germany, 63%; and China, 170%. Life expectancy will rise by some four years by 2020 and 10 years by 2050.

There are already indications from the ground that these concerns will soon take centre stage. The next generation of seniors will have varying needs and aspirations, and it is this growing lobbying group that will invariably have an exerting effect on many of our policies.

I wish to highlight six areas that require our immediate attention.

Finance

Mr first point is on retirement financing. The current CPF system may require revisions to cater to the needs of retirees. Our society is rapidly evolving towards an ageing population, smaller family sizes and thus fewer children to depend on, and higher dependency ratio. In 2005, only four in 10 Singaporeans aged 55 have the mandatory amount in their CPF accounts.

There may be a need to implement instruments to supplement the current CPF system. Of immediate concern is the lack of a viable compulsory insurance scheme for Singaporeans for retirement purposes.

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I would like to suggest a mandatory universal annuity insurance scheme to ensure that all Singaporeans are self-reliant, and able to provide for basic retirement needs. This scheme makes it mandatory for Singaporeans to pay for a universal insurance fund using a percentage of their CPF. Members are already allowed to use their CPF for investments, housing purchases and MediShield.

This scheme establishes a common insurance fund that is redistributive in nature. Contributions could be progressive in nature, and lower-income groups could receive Government top-ups to fund their contribution. The advantages of such a scheme are better economies of scale, lower premiums and higher pay-outs.

Employment

My second point is on continuing employment. We should consider raising the current retirement age to 65 and explore avenues for upgrading and employment for older workers. There are benefits in retaining older Singaporeans in the workforce for both employers and employees. Employees remain socially, physically and mentally active, and continue to be financially self-sufficient. Additionally, more than half of Singapore companies surveyed agreed that the retirement of older workers means the loss of valuable skills and knowledge. There is further evidence to show that while there is some decline in mental and physical capacities between the ages of 50 and 70, it is minute and may be compensated for by changing the working environment and working practices. HSBC's recent Future of Retirement Survey also revealed that two-thirds of Singaporeans believe they should bear the financial cost of their own retirement. These indicators support calls to extend the compulsory retirement age and to nurture lifelong employability of workers.

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Healthcare

My third point is on the need for strategies to ensure the health quality of Singaporeans. Increased life expectancies due to advances in modern medicine will pose new challenges to our healthcare system. It is imperative that proactive measures be taken now to address these challenges.

There are a few key areas to improve on. First, we may need to review the 3-M system in light of extended life expectancies. Increased public awareness of this system will help address public concerns about healthcare affordability.

Second, we could place greater emphasis on preventive care, particularly in the prevention of common chronic diseases. We could also ensure better care for newly afflicted patients to prevent full-blown complications.

Third, we need to look at developing a home-care system which is currently non-existent. This would help many semi-ambulant patients receive care and treatment in their homes.

Fourth, we need to manage and alleviate increasing demand for and dependence on acute hospital beds. Improvements and enhancements to step down care and community care may be viable solutions.

Finally, we may need to look at ways to improve the capabilities and capacities of geriatric medicine to meet the needs of this changing demographic.

Housing

My fourth issue deals with the need to revise current housing concepts and policies to cater for the elderly.

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We should look into ways to improve the design of homes that are elderly-friendly. These designs should enable the elderly to live independently in their own homes. Such policies will complement existing policies and initiatives in HDB estates outside individual units. Modification of the inside of HDB homes with elderly-friendly features and gadgets will enable many to stay on their own safely for as long as possible; therefore, this should be made available. We could also look into developing retirement villages with such facilities that are affordable to the lower-income group. Subsidies could be given to encourage private organisations to provide affordable living arrangements.

We could also look at increasing the number of studio apartments. These apartments are already in greater demand and will continue to be amongst the elderly. Rental HDB flats will continue to be popular, particularly with the lower-income group.

A two-pronged approach could also be useful to ensure that both retirement funding and housing needs are taken care of. This could be done by improving the current reverse mortgaging scheme to provide liquidity for retirement and, at the same time, provide affordable housing at retirement.

Social activity

Mdm Deputy Speaker, I shall deliver my last two points in Malay.

( In Malay ): [For vernacular speech, please refer to Appendix A.] Fifth: Social. Promotion of active and healthy living should be made widely available island-wide through the availability of Centres of Activity for the Retired or Elderly (CARE) that emphasise on physical, mental and social well-being with meaningful activities. Inter-generational gap will widen with the

*Cols. 2047-2048.

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increasing number of nuclear families. Policies that enhance inter-generational bonding may need further review.

Sixth: Social Safety Net. The number of destitutes is going to increase substantially with an ageing population. Those with no immediate family members to fall back on will increase due to decreasing family sizes. The expansion of our social safety net has thus to be planned and provided for, especially during the good economic years to cushion the lean years so as to take care of the needy in our society.

Mdm Deputy Speaker, I support this Budget.

5.40 pm

Mr Ong Kian Min (Tampines): Mdm Deputy Speaker, I support the Budget Statement delivered by the Second Minister for Finance. In view of the time constraint, I will not repeat the commendations and the issues that have already been raised, but go straight to the one point that I would like to make.

We are often reminded that Singapore is a city state. For a country that is also a city, it is all the more important for us to find ways to level up Singaporeans from the lower-income group. The cost of living in the city is always higher, just like every big city. But for Singapore, there is not much space to go outside of the city. In larger countries where there is a countryside, one can choose not to live in the city itself with its high cost of living, congestion and hectic high-pressure lifestyle. There is the rural countryside where one can be less engaged economically, enjoy a more relaxed pace of life, lower housing cost, bigger houses and lower living expenses. Flourishing cities such as London, New York, Shanghai and Sydney are bustling, fast-paced, competitive and yes, can be

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unavoidably expensive. However, they are cities situated in bigger countries where people are able to exercise their choice to live either in the capital, a smaller secondary city, a breezy suburb or out in the quiet countryside.

We do not have slums or squatters. We do not have a vast hinterland with rural areas where cost of living and cost of housing are much lower. HDB is helping as many Singaporeans as possible to own their homes with various schemes and measures, but some are still finding it a struggle to afford a home in any part of Singapore. In a city state like Singapore, how can a resident reduce his cost of living? The option to move somewhere significantly cheaper without having to migrate to another country to maintain a similar lifestyle is not open to him. If a 3-room HDB flat in Marine Parade or Bishan proves too expensive, one can consider Woodlands or Jurong and save about $70,000, but that is as far as it goes. All other costs do not differ much within our little red dot of less than 700 square kilometres. This lack of options is especially troubling to the lower-income group, as the minimum cost of living, in a first-world city, which ranks highest in Asia for its quality of living may be far beyond their modest means. Therefore, we need to raise their income and I believe Workfare is a very good way of achieving that.

Workfare will raise income and provide social security for the lower income group while encouraging them to stay employed. This is especially relevant now that life expectancy is longer and expenses can get correspondingly higher. I, therefore, support the GST increase, as this will give the Government an additional means to fund Workfare and address the widening gap between the higher and lower-income groups, and allow us to tilt the field a little bit in favour of the lower-income group so as to maintain a tenable balance for the inclusive society that we strive for.

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Madam, besides Workfare, we should also look at other ways that can help all Singaporeans to achieve a stable degree of self-sufficiency so that we are able to cope with the reality of the high cost of living that comes with a city state we live in. The Second Minister for Finance has highlighted that the income of the top earners has increased much faster than the lower end of our workforce. The top earners command international wages, but the income of lower-wage workers is being held down by globalisation.

We are doing much to help raise the income of low-wage workers with schemes like Workfare. But salary is only one aspect. While the low-wage workers rely on his salary, the top earners have two income drivers or income streams. The first is their salary income that they earn from their work, and the second is the returns from their investments or the assets that they have accumulated. With the stock market having risen to record levels last week and the increase in property prices at the top end, the top earners have become much richer in the last year or two. And I believe our Gini coefficient that Ms Irene Ng mentioned just now is even larger because in Singapore, capital gains on investments are not treated as taxable personal income.

Madam, I have an analogy. It is like two power-boats moving on the water, not the sampan or sailboat that Ms Irene Ng mentioned just now, but two power-boats. The power-boat of the top earners has two high-performance outboard motors. The first is the wages they earn which go up at a much faster rate with higher increments year on year. The second is the investment returns they get from their capital and assets which increase at a compound rate year after year. These two income engines power their boat forward - both engines not

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only churning at full throttle but increasing their horsepower output continuously year after year. Whereas the power-boat of a low-income earner has only one outboard motor, which is the wages he earns, struggling to maintain his power output with small annual increments. And maybe another low-performance motor producing meagre returns from a small capital. How can the income gap not widen? How can the wealth gap not widen? Therefore, the logic behind the saying "the rich will get richer".

Madam, I am not suggesting that we hold back the high income earners. Other countries have tried and failed. We simply cannot tell them to keep still and let others catch up.

Therefore, we need Workfare. We need to resolve structural unemployment and to increase the wages of the lower-income group. But I believe not enough is being done to even start to bridge the gap between the returns the ordinary man is getting from his assets and the returns the high net worth is getting.

The well-to-do have access to a multitude of means to help them grow their capital. Private bankers and professional fund managers are more than happy to service them and help them grow their money for a fee. This expertise is not available to the common man. I think we must find ways to improve the returns an ordinary man can get from his capital and help every Singaporean to create and build wealth. Madam, by the "capital of the ordinary man", I am referring to his money in his CPF.

Many of the programmes designed to strengthen our social security system are linked to the CPF. Employer CPF contribution rate will be increased. Most of the Workfare will be paid into the CPF. But what are we doing about the CPF itself? Are we making our CPF money work harder for us? Are we maximising

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the returns from our CPF? I am a voluntary Executive Committee member of the Financial Planning Association of Singapore and this subject is close to my heart.

Warren Buffett, who was a Great Depression baby born in the year 1930, started with almost nothing, but he became the second richest man in the world that he is today by growing his capital at an annual compound rate of return of 24.7% over the last 50 years. I just want to refer to the example Dr Ong Seh Hong mentioned just now of his grandfather. He wished his grandfather had the foresight to invest $40,000 at two dollars per square foot in a piece of land in Bukit Timah which after 40 years today would be worth $10 million, and that is an increase of 250 times. But if his grandfather had the foresight to invest with Warren Buffett 40 years ago, his $40,000 would have become $218 million today. So that is the example of the power of compound interest. So just imagine again, if every Singaporean on turning 21 years old gets a sum of $1,000 earning 24% returns per year compounded, by the time 40 years later when he retires at the age of 62, his initial capital of $1,000 would have grown to $5.5 million, surely more than sufficient to meet all his retirement needs. In such a situation, I do not think we have many of the problems of a greying population that we face today. Now, perhaps, we think the returns of 24% per year is wishful thinking. Temasek Holdings, in 32 years, grew its total portfolio value from S$350 million to S$129 billion (that is, from S$350 to S$129,000 million) but even with new capital injections along the way, I believe the compounded annual growth rate of Temasek Holdings was comfortably double digit. Private bankers conservatively are expecting to get for their high net worth clients 8% to 10% a year for a balanced portfolio. Top pension funds

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are looking to achieve 10 to 12% growth per year on a sustainable long-term basis.

Therefore, Madam, we should make our CPF money work harder. I would like to pose this challenge to the CPF Board. Can the CPF Board help the ordinary CPF depositor grow his money by 8 to 10% per year? Over the long term, over 20, 40 years, with compound interest, the money sitting in our CPF account will definitely be much more than the 2.5% we are getting now from our Ordinary Account or the 4% from our Special Account or the Medisave.

Is the high net worth individual or his private banker satisfied with a return of 2.5% or 4% per year? Surely not. If not, why should the CPF depositor?

The CPF Investment Scheme should be reviewed and revamped. The present CPF Investment Scheme is no more than a share trading account with a brokerage firm. Figures from CPF Board showed that the majority of CPF account holders lost money when they traded in stocks and shares using their CPF money. Maybe more will make money in a bull run like the present one that we are seeing but that only encourages more to jump in and take a gamble in the stock market. Now we all know that there are bull runs and there will be corrections and bear markets. When the bears come, I think more ordinary people will lose more money. There are other investment schemes, such as unit trusts and mutual funds available to CPF investors, but how do they assess and choose which to invest in? Not all funds perform well.

I would like to suggest that the CPF Board take on a more active role as pension fund manager, rather than just a bank paying interest at 2.5% or 4% per year. The CPF has played a crucial role in financing our infrastructure development in the early years, and is still a key element in our home ownership scheme

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as it sets the concessionary interest rate for HDB mortgage loan. We can still retain these social purposes but, at the same time, make our money work harder and maximise the returns we are getting. We can start with the funds that the CPF account holder would otherwise have for share, gold and unit trust investment. For those without any money left in their Ordinary Account, they should be allowed to use their Special Account or Minimum Sum as these are meant to be kept over the long term for their old age.

CPF Board should either manage this pool of money itself as an umbrella fund of funds or facilitate CPF depositors pooling their money together so that they can tap the expertise and services of professional fund managers, to invest in a greater variety of assets and funds. CPF Board can help by actively assessing the performance of the fund managers, and when circumstances change, investment philosophy change or key fund managers leave, CPF Board can take the decision to shift in or out of these underlying funds. Such diligence and scrutiny is not available to the ordinary person who may continue ignorantly to hold on to certain unit trusts and investment funds even though they are under-performing. Instead of leaving them to fend for themselves, I think the CPF Board should be active in helping its members to maximise their returns, just like investment advisers and private fund managers are doing for the high net worth customers.

Madam, I think I know how the CPF Board will respond to my suggestions. Let me try to pre-empt them. Firstly, they may say the interest earned on CPF savings are risk-free returns, and high returns mean high risks. To that, I would say that Temasek Holdings, Warren Buffett, George Soros and a whole host of top private bankers would disagree that

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they are taking excessive risk to achieve the kind of returns they are getting.

Secondly, CPF Board may say that it publishes the Semi Annual CPFIS Funds Report which CPF members should read to educate themselves and to be more aware. I would like to ask how many of us here have actually read that report and, anyway, when I read it, it says it only serves as a simplified guide, it is not designed to offer investment advice of any kind, and, in fact, it cautions those who require investment guidance to engage their own investment adviser.

Madam, the difference between 4% and 10% per year may seem small but over the long term of 40 years to retirement, an initial sum of $10,000 at 4% per year will only become $48,000, but at 10% per year compounded will see it growing to $453,000, almost 10 times more. This will surely make a very significant and meaningful difference to our retirement sum. I would like to, therefore, urge the Government to restructure the CPF to go beyond paying interest on our CPF savings and to take on a more active role in managing our assets more like a pension or investment fund manager.

With that, I support the Budget.

5.55 pm

The Minister, Prime Minister's Office (Mr Lim Swee Say): Mdm Deputy Speaker, from the labour movement's point of view, this year's Budget is a win-win Budget. The cut of two percentage points in corporate tax rate is a win for businesses. So this is a pro-business Budget because with the reduction in corporate tax, companies will have more profit and, as a result, be able to not just reward the workers better but, more importantly, also invest for the future and continue to grow.

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At the same time, this Budget is also a win for the workers because the 1.5 percentage point restoration of employees' CPF and the introduction of Workfare as a permanent feature of our social safety net are important for the long-term welfare of the workers. So it is a pro-worker budget as well.

Last but not least, this is also a pro-Singapore Budget because, with the increase in GST, the Government will be able to do an even better job in ensuring that the Singapore economy will be competitive and the society will be cohesive. Therefore, the labour movement welcomes fully this pro-business, pro-worker, and pro-Singapore Budget.

Having said that, the question in our minds is: does this mean that, with such a good Budget, all our problems are solved? Does it mean that the problems of low-wage workers would disappear? Does it mean that the economy of Singapore will always continue to grow? Does it mean that Singapore will always make progress as a successful nation? The answer is probably "no". No matter how good the Budget is, it is only part of the solution, it is not the entire solution.

So I would like to talk about, from the labour movement's point of view, how workers should look at this Budget and how to work together to achieve even better outcomes, better still, the best outcome for all Singaporean, for all workers.

Sir, Bangkok is the spa capital of the world. There is a street in Bangkok, a very vibrant place. On that street alone there must be about 20 to 30 spas. The place is very vibrant, especially at night. You can choose any of these spas, you get good services from foot massage to body massage. They charge 200 bahts per hour, about eight Singapore dollars an hour, and the place is very vibrant because many customers go there since it is competitive and convenient. But yet,

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not too far away, if you take a cab, ten minutes away, there is another cluster of spas. Customers go there not because it is more convenient and better, but because it is cheaper since they charge only 90 bahts per hour. So for customers who believe in "cheaper is better", they take a taxi to go to that place and they pay 90 bahts an hour. Yet, ten minutes away in the other direction, there is another cluster of spas. They compete differently because charging 200 bahts per hour means the profit margin is small. They will have to depend a lot on volume. So these spas decide to compete differently. They offer massage with something special - the room, decor, music, food and ambience are fantastic. For that, they charge 1,000 bahts per hour. In other words, you look at the spa capital of the world, they have spas competing on 200 bahts for the mass market, 90 bahts for the “cheaper is better” type of customers, or 1,000 bahts per hour on the basis of differentiation.

In our local terminology using our local language, we describe the 200 bahts-per-hour spa which is based on convenience, competition, high volume with low profit margin as "giam tan" business. "Giam tan" means profit margin is small but you survive on big volume. For the 90 bahts-per-hour kind of spas, they call it the "pai tan" or the "bo tan" type of business. And for the 1,000 bahts, I think you have guessed it, it is called the "ho tan" business. So when we ask our local businessmen what business they are in, they will say either "ho tan", "pai tan" or "giam tan". Of course, the management consultants cannot make money if they use terms such as "giam tan", 'ho tan" or "pai tan". So they come out with very creative terminology. They describe the 200 bahts type as "blue sky economy" - under the blue sky, crowded place, highly competitive, low margin, big volume. And those competing on low cost, low price, they call them the "red ocean". And those going for the high margin, they call them

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the "blue ocean". Why "blue ocean"? Because the "blue ocean" is a beautiful ocean, not too crowded. If you can survive in the blue ocean, you have the whole catchment to yourself. Why "red ocean"? Because in "red ocean", people undercut each other, they engage in cut-throat business. When you cut the throat, blood will flow and the blue ocean will turn to red ocean.

In Bangkok, the spa capital of the world, the three types of economy co-exist - "red ocean", "blue sky", "blue ocean". In fact, not just in Bangkok, all over the world, these three categories of economy co-exist. In Singapore, it is also the same.

Some of our companies are competing under the "blue sky". Our factory workers, for example, for a long time, their wages have been stuck at about $1,000 per month. Sometimes, the workers will ask the union leaders, "Union leaders, can you do something for us? Raise our wages." But we could not. Why? Because workers in Singapore are paid $1,000 per month. Workers in China are also paid $1,000 per month. But the difference is that ours is 1,000 Singapore dollars and theirs is 1,000 renminbi. After conversion to US dollars, we are about five times more expensive, in terms of labour cost per hour. As a result, because of the "blue sky" competition, just like the many spas in that little street, nobody dares to raise their charges beyond 200 bahts because when you do that, you will be out of business. It is the same thing. Wages in Singapore for the rank and file workers, for some of them at least, when they are caught in this very intense "blue sky" competition, their wages cannot go up.

Yet, there is another group of workers whose wages also cannot go up. Sometimes the wages may even drop

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because they are the "red ocean" workers. Yesterday, several fellow MPs talked about their concern for cheap sourcing. With more companies embarking on outsourcing, and if more and more of them were to engage in cheap sourcing, then over time, more and more of our workers could be caught by this cut-throat competition and, as a result, become workers sinking or floating in the "red ocean". Because of this very intense "blue sky" competition and "red ocean" competition, we have now institutionalise Workfare, making it the fourth pillar of our social safety net. This is the reason why the labour movement welcome this very much. When the Prime Minister announced the setting up of Workfare as a permanent feature, the labour movement cheered. We cheer because on the ground, we can feel the pain suffered by these low-wage workers and we believe that the Workfare as the fourth pillar of safety net will come as a relief to many of them.

Having said that, over the last few weeks, there have been a lot of discussions about what is the purpose of Workfare and why do we tie Workfare to Medisave? Why do we tie Workfare to CPF? Why not let informal workers enjoy the Workfare in the form of cash instead of Medisave? The argument is that low-wage workers need the dollars today, not tomorrow.

The labour movement strongly support and are 100% behind this linkage of the Workfare to Medisave and CPF. Let me explain. Instead of talking to you in theory and concept, let me give you two real case situations and make a comparison. There is a gentleman, his name is Mr Prunari, 46 years old. He used to work as a general labourer with CPF. Until two years, he left the job, and today, he is working as an informal worker. He works and he receives pay, but he does not pay CPF. He does not make CPF contribution. He does not make Medisave contribution.

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Every dollar he earns, he brings home. He is happy with that. But now, he has other problems. He is living in a 4-room flat together with his wife and two children. His wife is not working and is a full-time housewife. He alone has to service the housing loan. The housing loan repayment every month is $550. Before he became an informal worker, he had no problem servicing the housing loan. Because, under the CPF, he has an Ordinary Account and the money in the Ordinary Account was enough for him to service his housing loan. After two years of not topping his Ordinary Account, he now has $4,000 in his Ordinary Account. But his problem is that he has old OA money, but not new OA dollar because he has stopped contributing to his CPF for the last two years. At the rate things are going, within about eight to 10 months, he will be running out of money in his OA Account. So in the future, every dollar of $550 monthly repayment would have to come from his own pocket. This is his first problem.

His second problem is that he has not been contributing Medisave. If he , his wife and the two children were to fall sick, who is going to fund his Medisave, where is he going to find the money to join the MediShield? So medical care is the second problem. His third problem is that today, he is 46 years old. If he continues working this way until he reaches the retirement age of 62, will he have enough money in his Special Account for his retirement? He does not think so. And we do not think so too. So here we have an informal worker doing his best to earn a living, taking home every dollar in the form of cash, but yet running into growing problems compared to those days when he was paying CPF. He has no new OA, no new Medisave, and in the future, no Special Account for retirement.

Here is another situation. Ms Lee Peck Lian, 63 years old. She worked almost her

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entire life as a hawker, earning about $600 per month for the last 30 years. But, fortunately, for her, over the last 30 years, she had faithfully made her Medisave contribution. Today, her 3-room flat, I believe, is fully paid by her and her husband. So she does not have to worry about her housing loan. After working 30 years as a hawker, she decided to stop working as a hawker and, instead, she became a restroom cleaner in a hawker centre some two and a half years ago. She now earns $700 per month. With overtime of $400 a month, she is making about $1,100 a month. Because of the years of contribution to Medisave and having completed paying her housing loan, she now has $12,000 in her Medisave Account and Special Account. Over the past 2 1/2 years, because she had been contributing to CPF, she had accumulated another $3,000 in her OA. On top of that, every month, because she is now 63 years old, she pays 7.5% of her salary in the form of CPF and her employer pays 3.5%. So every month, she adds another $121 into her CPF Account. So when Workfare announcement came, she was very happy. Why? Because on top of $121 she is contributing to her own CPF account today, under the Workfare, she will be getting another $677 in CPF top-up. She will also get another $274 in cash. Because we have reduced the CPF employee's contribution rate, her take home pay will go up even more.

So here we have two situations - an informal worker without CPF, a formal worker with CPF. Both are low-wage workers. But the formal worker, because she took pains to contribute to CPF, as a result, her housing need is addressed, her medical care is addressed, her retirement saving is addressed as well.

Let me put it this way. The reason why the labour movement fully supports the linkage of Workfare to Medisave and CPF is because we do not look at

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Workfare simply as a means to supplement the income of low-wage workers. In fact, we believe there should be a much bigger, much more important objective behind the introduction of Workfare. In other words, through Workfare, we not only want to encourage workers to look for jobs, but more importantly, we want workers to join the Singapore's social safety net. This social safety net today has got three pillars - housing through OA, medical care through Medisave, retirement through Special Account. And we believe that, by linking Workfare also to CPF scheme, in fact, we now have a complete system to attract more and more workers to join this social safety net. It is indeed very important that they join this safety net.

( In Mandarin ): [For vernacular speech, please refer to Appendix A.] Mr Low Thia Khiang said that the Singapore Government is not sincere in helping the informal workers. From the labour movement's point of view, I am not quite sure why he said this. Does it mean that $1 of Workfare in the form of CPF top-up is not real money? Or is it smaller in value? No, it is not. Every dollar is a real dollar, it is genuine and not counterfeit money, and it is not smaller in value. Also, does it mean that low-income workers do not need to have a house for them to live in? Does it mean that they will not fall sick? Does it mean that they will not retire forever? Therefore, I disagree with what Mr Low Thia Khiang said. He said that the Government lacks sincerity. However, from the labour's point of view, I say, in fact, our Government has a very good intention.

( In English ): The purpose of Workfare is to supplement the income of the low-wage workers but, more importantly, to help more and more low-wage workers and informal workers, in particular, to join the social safety net.

*Cols. 2049-2050.

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Let me also say that there is another important purpose of the Workfare which is to find ways to help our workers to keep growing their total wage pie. The problem faced by low-wage workers is that if their wage pie is small, it does not matter how we cut the wage pie, whether it is today's cash or tomorrow's CPF. This eventually is still "money no enough". So the way to really solve the low-wage workers' problem is to find ways to enlarge their wage pie and that can only be done if we can find ways to upgrade and enhance their productivity. That is the reason why the labour movement, over the last two to three years, has been working very closely with the Ministry of Manpower, Workforce Development Authority and Singapore National Employers Federation, through a tripartite effort, to find ways to help our workers to upgrade, redesign and recreate their jobs.

I am happy to say that over the last two to three years, we have been getting some promising results. Yesterday and today, quite a number of MPs have said that if we feel that cheap sourcing is the cause of the problem and that best sourcing is the solution, then the Government should take the lead. Here, I am happy to say that, in fact, several Government agencies have taken the lead. This afternoon, I would just like to mention two examples. The first example I want to quote, in terms of adopting the concept of best sourcing, is the National Environment Agency (NEA). NEA manages 27 hawker centres. For the last two to three years, the NEA had been adopting a performance-based, best-sourcing approach. For example, there is a company called Horsburgh Engineering. It is a very responsible company. The company does not believe in engaging in "red ocean" competition. It believes in competing under the "blue sky" by ensuring that productivity and quality of service are good. Because of the performance based, best sourcing approach adopted by NEA,

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Horsburgh Engineering, even though they are not the lowest cost supplier, has been able to secure 11 out of the 27 hawker centre cleaning contracts.

To clean the 11 hawker centres, Horsburgh employs 400 cleaners. What is even more exciting is that two to three years ago, 70% of the hawker centre cleaners were illegal foreign workers. But today, in the case of Horsburgh, 90% of the cleaners are actually Singaporeans. You may wonder why. Why is it that 2 1/2 years ago, Singaporeans did not take the job, and today, two to three years later, 90% of them are Singaporeans?

The cynical one will say that, "Oh, now, the workers have no choice. They are forced to take on these dirty, lousy paying jobs." But that is not the truth. The truth is that, over the last two to three years, the NEA has been, firstly, doing industry development by upgrading industry and, secondly, manpower development by upgrading the skills of the workers. As a result, of the 400 cleaners, 85% of them are more than 40 years old. The oldest is 70 years old. They are now earning between $900 and $1,300, depending on how productive they are, how hard they are prepared to work. Compared to two to three years ago, the total wage has gone up by 20% to 30%; in some cases, in fact, almost 50%.

More importantly, every one of them is National Skill Recognition System (NSRS) certified. So they know the proper way of cleaning. At the same time, I am happy to say that every one of the 400 is entitled to annual leave, insurance, medical coverage and every one of them is on CPF. This sounds like music to the ears for Mdm Halimah. This is in fact the case where workers are not exploited under this "blue sky" competition.

Another example is NParks. NParks has, since 16 months ago, decided to embark on the best sourcing initiatives.

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NParks manages 52 parks, 233 neighbourhood parks and 21 connectors. They have about 32 maintenance contracts with the industry to maintain all these facilities. Of the 32 contracts, 17 of them are now under this Best Sourcing initiative. How does it work?

In the past, NParks would call for a headcount contract. For example, NParks says, "Look, I am calling a contract for 10 workers. Please bid." When they specify a headcount, what happens? Companies will bid based on a headcount of 10. If you were to look at the competitive bids, eventually the one who submits a lower bid would win the tender. But since the headcount is fixed, what it means is that the dollar available per worker has also come down.

But under Best Sourcing, NParks adopts the concept of performance-based system. In other words, they do not specify the headcount. They just specify the performance standards needed, and every week and every month, NParks officers will go around assessing the quality of the work. If the contractor scores 80% or more, they get full payment. If they score only 75%, they get 88% payment. If they score less than 59%, they get zero payment. So, it is truly a performance-based system. As a result, under this programme, the contractors would make sure that they do the best possible job with as fewer workers as possible. Why? Because if you do the best possible job, you get higher payment. At the same time, with fewer workers, higher productivity per worker, they can reward each worker with a higher salary. As a result, the workers are better motivated.

Again, I am happy to say that, under this Best Sourcing initiative, the wages of about 195 Singaporean landscaping technicians have gone up from $1,050 per month two years ago to an average

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pay of about $1,200 today, ie, a 15% increase.

Madam, I want to emphasise the point that when we look at Workfare this year, I hope that we do not look at it in the narrow sense of just asking about how many dollars in cash, how much in CPF for each individual worker. Of course, this is important, but it is also important that we do not lose sight of the bigger picture. The bigger picture is to help our low-wage workers to grow their wage pie, and that can only be done if we ride on the introduction of Workfare, help more workers to upgrade their skills and jobs and, at the same time, bring them onto the social safety net. In other words, I would like to repeat what many MPs have said in the last two days. We are happy that Workfare is a permanent feature of the Singapore social safety net, but we hope that the individual recipients do not become permanent recipients of the Workfare incentives.

Let me now go on to touch on the issue of the middle-income workers. A few fellow parliamentary colleagues mentioned that many of the middle-income workers feel that they have not been as well looked after in this particular Budget as compared to, say, the low-wage and other categories of workers.

I want to share a labour movement perspective. When I first joined the labour movement in 1996, I visited Japan. There, I met with a union leader and I asked her: "In Japan, what is your main concern?" She said that, in Japan, they believe that if the workers were to chase after money, money will run away from the workers. But if the workers chase after jobs, money will run to the workers. She went on to say that, "Better still, if we can get workers to chase after jobs and jobs chase after workers, then all will be well because, if the labour market is

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tight, wages will go up." I am happy to say that, in fact, this is what is happening in Singapore. It is something that I hope more of us will pay attention to.

In a recent report released by the Department of Statistics on key household income trends, it is very interesting if we look at the overall average household monthly income from work per capita, ie, taking the average income earned per month from every household divided by the number of persons per family. So it is the dollar income per month per person from work. In 2002, on the whole, throughout Singapore, the average income from work per capita per household dropped by 2.1% from the year 2001. But last year, it went up by 5.7%. Why is it so? Because 2006 was a good year. The economy grew strongly, companies and industries were profitable, bonuses went up and, as a result, average income per capita went up by 5.7%. In fact, everybody benefited from this rise in average household income per capita.

Take, for example, the bottom 30th percentile. The increase in per capita household income went up by 5.2% to 6.6%. So it is not an insignificant increase. The middle-income group, ie, the 40th to 50th percentile, went up by 4.2%-4.6%, and the top-income obviously is the happiest group because it went up by 8%. In other words, creating jobs and growth is the best Workfare for the middle-income workers because, with a tight labour market and profitable industries, there would be more to share for everyone. The question is, will we be able to continue to create high growth, strong job growth in 2007, just like in 2006? The answer is that it may be yes, it may be no. May be yes, because we have all the right strategies in place; may be no, if we are not able to meet the global competition.

The good news is this. In the world out there, there are still many good

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investments and good jobs for us to chase after. But the bad news is that more and more countries and economies are going after these good investments and jobs. Just three days ago, on Monday, on the front page of the Straits Times was a report headlined "India going all out to woo wafer fab plants". Why is India all of a sudden interested in competing for wafer fabrication plants? Because if you look at wafer fabrication plants, firstly, it is capital-intensive. Every wafer fabrication plant will cost about US$1 billion to US$2 billion to build. Secondly, it is technology-intensive. Thirdly, it is manpower-intensive. Every wafer fabrication plant will create about 1,000 jobs. So, for such investments, there is high-tech, high capital and high manpower demand as well as good paying jobs. Obviously, these are good investments that many countries would want to compete for. So the bad news is that more and more people are competing for all these good investments.

Where does that leave Singapore? On the whole, I would say that the outlook is still positive. Why? Because it is very difficult to satisfy the demand of these wafer fabrication plant investors. For example, wafer fabrication is water-intensive. Every plant will consume about half a million to one million gallons of water every day. More importantly, the water must be very pure because they are dealing with integrated circuits. They also need a big piece of land because you cannot stack wafer fabs one on top of another and make them high-rise factories. As I mentioned, they need a lot of manpower, about 1,000. And not just any manpower, but well-trained, skilled and professional manpower. On top of that, all these integrated circuits (ICs) do not take ship; they go by air. So you must have good air cargo logistics services. In fact, it is not easy to attract this kind of investment. But precisely because it is so difficult to compete for wafer fabrication investments, it gives us a better chance

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of succeeding. Why? Because the more difficult it is, the more we can run ahead of the competition.

Take water, for example. We have not much water. But PUB came up with NEWater. As a result, today, almost every wafer fabrication plant in Singapore no longer uses PUB water. They have all switched to NEWater. It is cleaner and cheaper. In terms of land, we have limited land, but URA did a rezoning and, over the last 10 years, we created not one, two, three but four wafer fab parks, from Woodlands, Tampines and Pasir Ris to Ang Mo Kio. In terms of manpower, do we have enough manpower? Over 10 years of development, we have attracted about 14 to 15 wafer fabrication plants. Today, there is a cluster in Singapore.

The total employment is 15,000 people working in the wafer fab plants. And the interesting thing is that if you look at the operator's level, in fact, about two-thirds of them are foreign workers. But at the PMET level, 80% are Singaporeans and PRs. In other words, because we are smart and receptive enough to bring the foreign workers and foreign talents from around the world, as a result, not only are we able to create an industry cluster and 15,000 good-paying jobs, most of the good-paying jobs go to Singaporeans.

Madam, the fact that we have succeeded in creating the wafer fabrication cluster, notwithstanding all the limitations we face in the form of water, land, etc, has given us a lot of confidence that if we continue to apply our minds, upgrade our capabilities, expand our capacities, invest in the future, there is no reason why we cannot continue to succeed in this difficult world of globalisation. Yes, globalisation is challenging and will result in the same implications for all economies. But we all know that globalisation will lead to unequal outcome. Those that are able to respond to globalisation will become

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winners and those that are not able to respond to globalisation will turn out to be the losers. And we have been a winner in the world of globalisation all these years and we must continue to enlarge the pie, create more jobs, grow our economy, so that there will be the best outcome for all levels of workers.

Last but not least, this Budget is also about investing in our future. Earlier, our parliamentary colleague, Ms Lee Bee Wah, said that we should not leave it to chance or chuan dao qiao tou zi ran zhi . I agree with her fully. Singapore of today did not happen by chance. We created the Singapore of today, and we will continue to create the Singapore of tomorrow. We must all recognise that the "blue-ocean economy" of yesterday has become the "blue-sky economy" of today. The "ho tan" will become "giam tan" because of globalisation. Likewise, the "blue-sky economy" of today will end up to be the "red-ocean economy" of tomorrow, and the "giam tan" will become the "bo tan" or "pai tan" because of globalisation.

Do we have a choice? Can we run away from globalisation? There is no way. China started off with manufacturing. They are now moving into services. India started off with services but is now moving into manufacturing. So when all these competitors start to come in to cover all areas, the only way for us to do is to keep creating new space for ourselves in the blue ocean. Of course, if we are big and fast, that is ideal. America is quite close to that, ie, big economy, very dynamic, innovative, so it is a good example of big and fast. But being small and slow is certainly a deadly combination. So, for Singapore, we cannot try to be big. Even if we go to a 6.5 million population, it is still small. So we cannot be big. But we must make sure that we never end up being slow. Because if we are small and slow, that

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would be the end of Singapore. If we look at Singapore today, we are small but we are fast. And precisely because we are small and fast, as a result, in the latest report published in September last year by the World Economic Forum, Singapore is today one of the top five most competitive economies in the world, together with Switzerland, Finland, Sweden and Denmark. What are the common features of these top five most competitive economies of the world? Interestingly, they are all small and fast. And this is the reason why we must continue to remain small and fast so that we can continue to grow, prosper and create a better future for all.

Sir, please allow me to conclude in Mandarin.