SINGAPORE INDUSTRIAL PROMOTION BOARD BILL

[Mr SPEAKER in the Chair]

Order for Second Reading read.

The Minister for Commerce and Industry (Mr J. M. Jumabhoy): Mr Speaker, Sir, I have the recommendation of His Excellency the Governor to proceed on this Bill. I move, "That the Bill be now read a Second time."

Hon. Members will recall my statement to this House on the 7th of November in connection with the question of encouragement of industries. I promised then that I will bring up as soon as possible the necessary legislation to this House to set up an Industrial Promotion Board. The need to establish such a Board was felt by the International Bank Mission and formed one of their recommendations in their Report on the economic development of Malaya.

Whilst we want to encourage new capital to come in and set up new industries, we must not forget that we can accelerate in this sphere of expansion if existing industries could be helped to expand and if existing small factories could be assisted in modernising, so that they can manufacture more competitively, thereby, enabling them to widen their market and consequently to increase their production. In fact, if we can produce more competitively, we may be able to overcome, to a certain extent, the tariff obstacles in neighbouring countries. In Singapore, Sir, we have many small factories and some of these factories could so expand if they had the necessary funds. This Board will become the instrument through which Government could give the necessary financial assistance to such deserving enterprises. It does not follow, however, that the Board will be restricted to assist only industries which are existing.

I would invite the attention of hon. Members to clause 4 of the Bill which gives the Board powers to promote and manage new undertakings in case of need. It is proposed, Sir, that the Board should start off with a revolving fund of $1 million. All applications for loans will be considered by the Board on their merits and the Board will decide on the terms and conditions attached to every loan it advances. The Board will be a body corporate with perpetual succession and a common seal. Its membership will comprise a Chairman, a representative of the Financial Secretary, a representative of my Ministry and two other Members, all of whom will be appointed by me with the prior approval of the Governor in Council. The Chairman and the two Members already mentioned will be appointed from persons having practical experience of matters relating to banking, finance, industry and trade administration. The Board will be responsible for its own day-to-day transactions but may be given broad directives by the Governor in Council on matters appearing to them to concern the public interests.

I am sure, Sir, that this Bill will be welcomed by hon. Members. Sir, I beg to move.

Question proposed.

2.34 p.m.

Mr G. A. P. Sutherland (Nominated): Mr Speaker, Sir, the objects of the Board, as defined in clause 4 of the Bill, appear to be wholly laudable and cover a very wide field and the powers of the Board, as defined in clause 5, are themselves very wide and high-sounding but I take it that the Singapore Industrial Promotion Board, when it is established, will, in fact, be, as it were, a pilot plant for a larger industrial credit corporation such as the Federation Government has in mind to establish. The Explanatory Note states that the Industrial Promotion Board will have -

"...at its disposal a revolving fund to enable loans to be made to local industrialists who lack the capital to acquire the equipment necessary for expanding their production on the most advantageous economic basis."

Apparently, this sum is to be $1 million which, presumably, will be voted by the Assembly as indicated in clause 6. Now, $1 million does not strike me as being a very large sum to dispose of and I shall be obliged if the Minister for Commerce and industry will indicate what is meant by "a revolving fund?" I myself have a fair idea in banking circles what is meant by "revolving" but this type of loan would be granted by the Board, almost certainly, on a long-term basis and I shall like to know, when the full amount has been absorbed, whether a further $1 million will be voted for the disposal of the Board or is it the intention that as advances are repaid which, presumably, will take a very long time, the amounts that have been repaid will then become available as part of the revolving loan. I should like some clarification on that point, Sir.

2.36 p.m.

Mr Lim Koon Teck (Paya Lebar): Mr Speaker, Sir, we welcome this Bill. If we are to criticise it at all, it will be only to say that perhaps it is long overdue and the amount allocated for it is not sufficient to meet the needs.

During the past year, I have been greatly disturbed by the difficulties met by small industries throughout the country, and due to factories having to close down, more and more people are being thrown out of employment.

I do hope that as soon as the $1 million which we are asked to vote today is absorbed in loans to finance and promote industries, Government will come forward to request further replenishments of this amount.

2.38 p.m.

Mr Lim Choon Mong (Serangoon): Mr Speaker, Sir, we support this Bill. This is a good Bill. The principles are that it will help local industries and small factories to improve their products and modernise their plants. However, having been informed that the amount of money that is going to be allotted to help industries here is $1 million, I ask: how much help will these small industries be getting? I had a talk with the office-bearers of the bee-hoon manufacturing industry who, I think, closed down their factories some time last year and they have, since then, been seeking the assistance of the Government. The talk revealed to me that they will require somewhere in the region of $300,000 to help them buy machinery, modernise their plant and produce goods that will compete fairly with imports from other countries. Now if we have $1 million and if we are going to help this class of manufacturers to the full, we will then be expending about one-third of that money. Probably, the next category of industrialists coming along for assistance will be those of soap factories and that might absorb another one-third of that $1 million. Again, recently, we had the biscuit factories closing down with some of them moving into the Federation and that might absorb another one-third. Therefore, we will have all the three-thirds absorbed and if one will not revolve, it will come to a standstill. I think that if help is going to come from Government, we must try to help these people even more. I do not think that assistance in the matter of loaning them money is all the answer. If you are going to manufacture goods for local consumption, the population of Singapore is only over a million and no matter how much food you can produce to feed the people, it will only be on a small scale. The aim that we must have is that we must manufacture goods not only for our own consumption but also for export. Now, if we are going to manufacture goods for export, then I think that the most important thing is to find markets for the outlet of our goods. I have said this before and I am repeating it again. Singapore is a small island with the Federation of Malaya as its main hinterland. Taxation by the Federation of Malaya is hitting us hard. Industries are not going to expand in Singapore but they are going to shift over to the Federation. One of the industrialists of the soap factories recently said that they will save roughly $150,000 in tax a year. If this be the case, no matter how much help we can give them, we will find expansion of industries, whether light or heavy, not in Singapore but in South Johore, probably around Johore Bahru. If we have been considering ourselves as being part of Malaya, it will be the duty of the Government to come to a better understanding with the Federation and if we must be taxed, at least it could be made more preferential than the Empire rates as a gesture of good neighbourliness and our close connection with the Federation. However, the Federation Government is not the only market which Singapore has been having all these years. In fact, we trade a great deal more with countries like Indonesia, Siam and Burma. It is not possible to ask businessmen to help themselves in negotiating with the various Governments on ways and means of improving trade. Here is a case where Government can try its very best to see that conditions for our traders will be improved. No doubt, the answer will be, "These are foreign countries; they are independent states; they do not depend on us for anything; and whatever they do, they are responsible to themselves, and they look after their own interests." But I suggest that no matter what, Government must find a way whereby trade between these territories can be made more favourable for Singapore and, of course, even if we find a market, we must still remember that we will be faced with very keen competition from such manufacturing countries as Hongkong and Japan.

The aim of the Singapore Industrial Promotion Board should be to help industries to such an extent that they can produce goods at a cost, if not comparable with that of goods imported from other countries, at least at the same price as what we pay for them. I think that if these methods are adopted and sincerely carried out, then there is a hope that this Board will be able to do much more.

2.45 p.m.

Mr Lim Cher Kheng (Changi): Mr Speaker, Sir, everyone of us has read through clause 4 of this Bill; it reads as follows:

"The Board may in order to facilitate the industrial and economic development of the Colony promote and assist in the financing, management, or establishment of -

(a) new undertakings;

(b) schemes for the better organisation and modernisation of and the more efficient carrying out of any undertaking; and

(c) the conduct of research into the industrial potentialities of the Colony."

Sir, the project is so nice and imaginative and it looks so practical and enchanting. I, for one, will take off my hat if the Minister for Commerce and Industry can carry out these objectives but, unfortunately, Sir, the fact which faces us today is that many factories have closed down since last year and many more still will follow because of the imposition of import duties by the Federation of Malaya. So now the Government introduces this Bill but, to me, it looks like a mockery to our local industrialists. They will simply laugh at us and say, "What are these crazy Assemblymen doing this for? We are faced with the danger of closing down our industries and yet they talk of doing so many nice things and thinking up wonderful plans in connection with this Singapore Industrial Promotion Board." Therefore, I wish to put this suggestion to the Government that, if they sincerely believe that this Bill is essential and important to the people of Singapore, they should try to have very close co-ordination with the Federation of Malaya. I understand that they have a similar organisation there and so the Singapore Government and the Federation of Malaya can have a pan-Malayan Industrial Promotion Board, otherwise we can plead with the Federation Government not to impose unreasonable import duties on certain articles for certain industries which they promised us.

Sir, I see no reason to support this Bill and waste our time discussing it.

2.48 p.m.

Mr Lee Kuan Yew: Mr Speaker, Sir, as a pilot scheme, we do not oppose this Bill. We face the problem of an entrepot economy if we view Singapore by itself. In fact, in the long run, if we take Singapore just by itself, there is really no point in having this Industrial Promotion Board. But I notice in the Explanatory Note given at the end of the Bill, it reads:

"The Report of the International Bank Mission on the Economic Development of Malaya recommended that consideration should be given to the establishment of a pan-Malayan institute of industrial research and a pan-Malayan industrial credit institution."

I do not think for many years to come, even taking Malaya as a whole, that it is possible to have complete State ownership of capital and of industrial potentials. Hence, in our desire in common with all other Asian countries to expand industrially and rapidly, we have to attempt all kinds of not quite orthodox socialist schemes to try to do in ten or twenty years what European nations have taken about a hundred years to do.

There are however two dangers in this scheme. As I see it, there are two difficulties: first, the Board should act as an industrial research institute. Now, is this industrial research institute going to carry out research only on Singapore potentials or on a pan-Malayan basis? If it is to carry out research only on Singapore potentialities, then I suggest that we send the Industrial Promotion Board to Hongkong where they carry on, I am told, a very lucrative, if perhaps an ephemeral entrepot trade, and that is the end of the matter. If we are to carry out research of lasting value, then it must be on a pan-Malayan basis and there must be co-ordination with the Federation. I think that the latter view of a one Malaya has become accepted in the political thinking of all political Parties in Singapore, though once upon a time, we had curious "organisations" like the Progressive Party which believed that Singapore should go it alone.

The second difficulty - this is an even graver one - is that as an industrial credit institute, it becomes a sort of a jackpot into which friends of influential politicians could dip their fingers. Some countries in South-East Asia have tried this technique.

Sir, if a proposition is a sound one, whether to start a new industry or to expand an existing one or to modernise it, there will always be sound, hardheaded, if somewhat ruthless businessmen, like Mr Sutherland, who will advance that money-

Mr Sutherland: Not so.

Mr Lee Kuan Yew: What is not so: that he is ruthless or that he is a sound business-man?

Mr Sutherland: Sound.

Mr Lee Kuan Yew: He has decided obviously to pack up from South-East Asia and advisedly so

Mr Sutherland: On the contrary.

Mr Lee Kuan Yew: - because people like him, I think, will find it very difficult to get on with the national industrial plants that may spring up as a result of such Industrial Promotion Boards. But, as a matter of logical argument, I do not see how we can explain this. If it is a sound business proposition, a bank will advance it. If it is not a sound business proposition and the whole capital may be lost, then the Industrial Promotion Board should not advance. Where then is this in-between class that, where although a bank will not advance, yet it will be right, it will be good for the economy of the country and it will be a fair risk for the Board to advance money? I hope to be enlightened on this particular category of enterprises by the Minister for Commerce and Industry. I would like to know what would be the sort of directives his Government has in mind for the Industrial Promotion Board. But we must warn him that if we try to do foolishly what other neighbouring South-East Asian countries have done, all we will succeed in doing is to create a corrupt, effete and decadent group of quasi-political opportunists who will start all kinds of scatterbrained schemes to enrich themselves and those in power with whom they conspire. That must never be the object of this Bill.

2.55 p.m.

Mr R. Jumabhoy (Telok Ayer): Mr Speaker, Sir, there is no harm whatsoever to have this Industrial Promotion Board. Singapore, as I have said before, has not got anything of its own raw material resources to supply its own industries to manufacture anything cheaper. On the other hand, as the first necessity to produce or manufacture anything, you must have low costs of labour or handling charges which you have not in Singapore. Then you have to compete with other countries from all over the world. We are just starting to learn. Many countries have experimented and succeeded with their industries. What I would suggest is this. We have at present no hinterland which can take our products without imposing any duty. Where are we then to sell except to Singapore and to outside countries? In Singapore itself, we have plenty of competition from foreign imports produced on a scientific basis and mass-produced. I can visualise one thing good that this Industrial Promotion Board can do to this City and that is to promote small-scale industries or cottage-industries. You can employ our idle population who sit at home, possibly the ladies who do not want to come out and work in factories or the children during their leisure hours. This lesson can be learnt very easily-

The Minister for Health (Mr A. J. Braga): Child labour.

Mr R. Jumabhoy: Not child labour at all. Those children who have spare time can help their mothers or sisters or old parents in producing something to help themselves. In this case, we can easily seek the help of the E.C.A.F.E. experts. Various advanced countries today like India and Ceylon have established very good centres for their cottage and small-scale industries. I think that if we are to proceed on those lines, we will be truly helping our own population but to institute a research for big-scale industries, I think it is quite outdated unless you have a vast hinterland and if at all you have to do it, it should be on a pan-Malayan basis.

3.00 p.m.

Mr J. M. Jumabhoy rose-

Mr Speaker: In reply?

Mr J. M. Jumabhoy: In reply, Sir. Mr Speaker, I would like to assure this House that this scheme, at the moment, is a pilot scheme and the part where it is considered a pilot scheme appears in the footnote at the end of the Bill where it says that $1,000,000 will be provided for the Board and I did mention also that to start the Board off, the Government propose to provide $1,000,000. The legislation need not be considered as pilot legislation because as and when the Board requires more funds and as and when this Assembly provides the Board with such more funds, the scheme can be expanded. It is my intention, when I find that $1 million is not sufficient, to come up to this House and ask for more funds. I am glad the reaction of Members of the Opposition is that they consider that $1 million is not enough and that makes it easier for me to approach this House for more funds when needed but I would like to draw hon. Members' attention to clause 6 which states:

"...the Minister may make advances to the Board from such moneys as are voted for the purpose by the Legislative Assembly."

Therefore, the Board is not tied up with just a million dollars which I am proposing to provide in the first instance and I understand that the resolution to provide this $1 million will be coming up in the next sitting and will be moved by the Hon. the Financial Secretary.

Mr Lee Kuan Yew: What is a revolving fund?

Mr J. M. Jumabhoy: A revolving fund is a technical term. It means a fund from which you lend out money and as the money comes back you lend that money out again to somebody else. It keeps on revolving and, as suggested by Mr Sutherland, it is possible you might find that the money does not revolve sufficiently fast enough. If that happens, I will come up to this House for more money.

Mr Lee Kuan Yew: Down the rat-hole.

Mr J. M. Jumabhoy: I think that the same point was raised by the Member for Serangoon (Mr Lim Choon Mong) and the Member for Paya Lebar (Mr Lim Koon Teck): whether more money would be provided, and I give this assurance that I will not hesitate to come up to this House for more money.

Mr Lim Choon Mong: If it is justified.

Mr J. M. Jumabhoy: I want to compliment the Member for Serangoon on his ability at mathematics in working out that the $1 million will be exhausted in three instalments of $300,000 but I must sound a note of caution that this Board should not - I repeat not - be regarded as a Board to give out money to all those who come and ask for it, just for the mere asking. You will notice in the Bill that a rough system is provided on how the Board will grant the loans. Clause 4 (2) says:

"...the Board shall have due regard to the economic and commercial merits of any undertaking it promotes, assists, finances or manages and shall also take into consideration in considering such economic and commercial merits, the economic merits of any other undertaking in which it has an interest and the economic requirements of the Colony as a whole."

So, for the Board to advance a loan, the major considerations are: What are the economic requirements of the Colony; whether the applicant fits in with the economic requirements of the Colony as a whole; if he does, whether he has a proper business proposition or not? Also the Board can appoint one of its members to sit on the managerial board of the undertaking it finances to keep an eye on its activities. Now I think that also deals with the question raised by the Member for Tanjong Pagar (Mr Lee Kuan Yew). He mentioned that the Board will be a jackpot into which friends of influential politicians could dip their fingers, etc. Sir, that was one of my worries too because I have seen that happening in other countries and I have been very careful here to see that the powers of the Minister are minimised and that more powers are given to the Governor in Council, so that if you have a Minister who may probably try to use his influence, you will find that the matter will go to all the other Ministers in the Council of Ministers.

Mr Lee Kuan Yew: They share it equally.

Mr J. M. Jumabhoy: Well then, you can say that the whole of Singapore is corrupted, if it comes to that.

Mr Lee Kuan Yew: We must not assume that the P.A.P. will-

Mr Speaker: Order.

Mr J. M. Jumabhoy: I hope not. The Minister has no say about whom the money should be given to. It is the Board that will decide and the Minister is entirely out of the picture as far as that is concerned.

Now we come to the defeatist speech of the Member for Changi (Mr Lim Cher Kheng) and other Members who have referred to this question of Federation duties. That question, Sir, has been referred to in this House many, many times in the last two months.

Mr Lim Choon Mong: It is very important.

Mr J. M. Jumabhoy: I admit that it is important. I have spoken on that question myself, Sir, in this House and even this morning, I did mention it when questioned by the Member for Queenstown (Mr Lee Choon Eng). Sir, I have said before that the adverse effect of these duties is causing me grave worries. We have taken the matter up at the highest possible level with the Federation Government and they have promised consideration but beyond that, you cannot force their hand. It is absurd to say that you can force another Government to do what you want them to do but what you can do is to make an approach, make them realise our difficulties and, as good neighbours, hope that they will co-operate with us. They have promised to consider the matter. The Hon. the Chief Minister and the Minister for Finance of the Federation are not here at the moment; they are both in London, and I hope again to pursue the matter further when both of them return. I admit, Sir, that some of our industries are badly affected and some of them may have to close down. Probably, some of them are thinking of going across to the Federation but I say that if any industry wants to go across to the Federation, it is having a shortsighted view. We, Sir, in Singapore offer port facilities that are the best in the East. We have a highly developed banking and insurance system. We have highly developed business skills here and though an industry, in Singapore, may find that it comes up against tariff barriers across the Causeway, it can more effectively deal with the export market outside Malaya. That is what I said in my introductory speech to this Bill: if we can bring down the cost of our production and if we can produce more competitively, then we have a chance to survive and overcome the tariff obstacles. It is no use taking a defeatist attitude and saying that just because of this tariff policy of the Federation, we should sit back and do nothing about it. That is a defeatist attitude, Sir.

The Member for Serangoon mentioned about trading with Indonesia. Sir, he is not aware of what my Ministry has been doing in the past. Two months ago - I believe, in September - certain new regulations came up regarding barter trade, restriction on shipping, and so on, and we took the matter up strongly through the Indonesian Consulate here. Within a week, I am glad to say, we managed to put matters right and to revert the position back to its level where it was before the new regulations had come in. I have not publicised these things because I do not consider it will be any good publicising all these things. We are dealing with foreign Governments and we must be very circumspect in our references to them. We want to maintain friendly relations with them and, as has been mentioned by the Member for Telok Ayer (Mr R. Jumabhoy), we have nothing of our own as we are an entrep�t trading community. In order to get more employment for our people, we are now trying to develop our industries but we have to be very careful how we talk about other Governments and we have to see that we maintain a friendly attitude towards them, so that we can go on trading with them.

I wish to say, Sir, that this Bill is not a mockery as what the Member for Changi said. Probably, you can call this Bill "timely succour".

There was mention of "curious organisations" like the Progressive Party. Well, Sir, we have to thank this curious organisation a lot for the difficulties we experience with the Federation now! If the Labour Front had been in power, you would not have had this, probably.

Now, the clause that provides for the Board to carry out research is clause 4 (1) (c). That is a provision made in this Bill just in case we find it necessary that the Board should carry out research into the industrial potentialities of the Colony. It is to give the Board more power. It does not necessarily follow that the power will be used. It is possible that the research may be carried out by a separate organisation entirely but in case we find that we are limited in scope and we want to do it on a small scale, it is possible that the Board can do it then. That is why we have given this power to the Board.

The Report of the International Bank Mission on the Economic Development of Malaya recommended the establishment of a pan-Malayan institute of industrial research and a pan-Malayan industrial credit institution. Sir, my colleagues and I on this side of the House will be the first to admit that the ideal approach to the economy of the Malay Peninsula as a whole would be on a pan-Malayan basis but we have found that we have not been able to get agreement on a pan-Malayan basis from the Federation Government and therefore we have to do it now on our own. But this does not close the door to a future merger of two such separate institutes in Singapore and in the Federation if, at a later date, we find that we come to some political agreement. The answer to all this pan-Malayan approach is that it is a political answer and not an economic answer. Economics are dictated by political ideologies.

There was reference made, Sir, to cottage industries. Personally, I am not convinced that we can have much cottage industries here because we do not produce anything much that would go into these industries, but that is something to which I have never closed my eyes and which we will have to investigate. If we do come across any sort of possibility of establishing cottage industries, we will not hesitate to give it our full attention. I can give that assurance to this House.

Question put, and agreed to.

Bill accordingly read a Second time.