CONTROL OF MANUFACTURE BILL

Order for Second Reading read.

10.26 a.m.

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

Mr Speaker, Sir, I wish to assure hon. Members that unless radical changes in Government's economic policy are undertaken quickly, time is running out for us in Singapore and soon we will be facing a situation much worse than what we have recently seen, in the form of gangsterism, because of unemployment, and other anti-social activities.

Hon. Members will recall that I outlined Government's adoption of a policy of selective protection for local industries in this House on the 13th of August this year, when this Bill had its First Reading that day. I stated in this connection that outside manufacturers wishing to manufacture their products here will, as a general rule, be required to come to an arrangement with the local manufacturer or intending local manufacturer, if any, of the same product or failing which with interested Singapore citizens. I further indicated that such an arrangement should either be on a partnership basis with at least 49 per cent of the shares held by the local interest or on the basis of the local interest manufacturing under licence of the outside manufacturer. If after a reasonable time there is a lack of response from local interests or if such an arrangement cannot be made to my satisfaction, the outside manufacturer will be given permission to set up his own undertaking.

It might well be asked why Government considers it necessary at this stage to introduce legislation to control the manufacture of goods. The reason, Sir, is simple. It will be quite obvious that if protection is given, some outside manufacturers who up to now have enjoyed Singapore as a wide open market may suddenly find restrictions placed in their way. They would find that the local manufacturer who up to now was treated by the Singapore Government as an orphan, would now be in a position to capture the Singapore market from them.

Also the operation of protection would act as an inducement to local capital to invest boldly in new industrial enterprises because they could now hope through Government's intervention to get a fair share of the local market. Thus it is expected that large sums will henceforth be invested by local capital in industries.

The result of all this would be that some of the outside manufacturers who up to now have been satisfied with supplying Singapore from outside may either have to gradually give up the Singapore market or be forced to open a factory here.

With the strong consumer preference in Singapore for imported goods, these outside manufacturers opening a factory here and manufacturing their well known brands and marketing them in Singapore again, could have a very tragic effect on local investors. Local investors who might have in the meanwhile invested huge sums and would just be getting on their feet could suddenly find the whole ground cut from underneath their feet by these outside manufacturers and their investment vanish into thin air.

If no check was exercised to prevent this happening, who would dare to take the risk and invest?

Up to now, Government has had no powers to check or control outside operators, especially from the sterling area, from opening factories here as and when they liked, provided they did not make big demands on immigration control.

This Bill, Sir, is aimed at giving Government the necessary powers to exercise such checks.

Government's aim at present is to ensure that all and sundry are carefully selected before they are allowed to come in. It is only equitable that where a local industry already exists, such local industry should not be allowed to be swamped by outside manufacturers of the same product whose sole reason for coming in at this stage would be to "jump" the protection. However, as I have already indicated, where there is no local industry and no local interest in the manufacture of a product, then the outside manufacturer will be welcomed with open arms.

In practice, control will be achieved by making it a condition that no person may set up a manufacturing concern here after the 13th August, 1958, without having first obtained a licence. The issue of a licence will not of course absolve the licensee from complying with the requirements of any other written law in force. The licence will be issued on payment of a nominal fee which is not designed as a revenue measure.

As investment in a manufacturing process is likely to be considerable, it is necessary to provide that a licensee is not at the mercy of politicians more than is absolutely necessary. Thus a licence is made valid for 15 years and renewable thereafter for further periods of 15 years at the discretion of the Minister. Therefore, the licensee has a clear 15 years' run provided he fulfills the conditions laid down in the licence. The Minister will have the power to refuse the issue of a licence or to issue a licence subject to such conditions as he deems fit. In case of such refusal the applicant has no grounds to grumble, because he has not made his investment yet. However, once a licence is issued it is Government's intention that there should be as little interference as possible with the industry and the investor is assured of this by the fact that the licence is to be valid for 15 years.

There is provision in the Bill for the Minister to revoke a licence if the conditions stipulated therein by the Minister are not complied with, but in such cases the licensee is safeguarded by the provision that the Minister is obliged to inform the licensee in writing of such revocation and the grounds thereof and the licensee has the right of appeal to the High Court against the Minister's decision. Until the High Court makes a decision, the Minister's revocation cannot be enforced.

It will be noticed that existing manufacturers on the 13th August, 1958, are exempted as regards goods they have been manufacturing as on that date, but it would be in their interest to apply and obtain a certificate to that effect under clause 12 (3) so that there could be no grounds for doubts later on.

One other aspect of the Bill is that enabling the Minister to grant an exclusive franchise to a single manufacturer by restricting to him only the grant of a licence for a particular manufacture. Hon. Members will appreciate that it will be difficult to lay down hard and fast rules as to the criteria to be applied before any manufacturer may be considered for the grant of such a franchise. Each application for franchise rights will be most carefully studied and must of necessity be decided on its individual merits. However, the underlying basic principle that will be applied is whether the manufacturer concerned will find it uneconomical to operate having regard to the amount of his initial capital outlay and the size of the local market if a competitor were also to come into the field intending to manufacture the same type of goods. I should emphasise that the grant of a franchise is not by any means intended to restrict or stifle local competition but is a measure which should be available for use very sparingly and selectively as and when the occasion arises. I can, therefore, assure the House that the granting of exclusive franchise rights will be kept to a minimum and will be subject to very close scrutiny.

This Bill, Sir, will also act as the instrument through which Government could enforce its industrial policy from time to time.

Now, Sir, getting away from the narrow confines of the Bill to the broader policy announced recently by me on the economic front, we have accepted the principle of protection for our industries. This is a departure from the timeworn, shall we say, half-truth of maintaining the free port status of Singapore. I say that it is a half-truth because it is a half-truth that has been blown up by interested parties to an extent where it has come to be believed in as if it were gospel truth, but the fact is that Singapore has not been a perfectly free port, shall we say. We have had restrictions of all sorts. We have had restrictions on the dollar exchange. We have had restrictions on exports of certain goods to certain countries laid down by the United Nations, embargoes, and so on. An ideal free port should be a trading community which would be occupied only in trade or in matters allied to the trading activities of the place or in services to the community who are engaged in trade. An ideal free port should have no restrictions whatsoever on immigration, currency, imports and exports. That would be an ideal free port but we are far from that. In fact, we have not been an ideal free port to quite an extent, but we have maintained some sort of a semblance to a free port and I am quite sure that if my policies are applied selectively on protection, we will continue to function as an entrepot trading centre without much loss to the entrepot trade and, at the same time, we will be able to give protection and thereby bolster up our industries. However, this policy of protection has got to be administered very delicately and with a balanced outlook and there should be no fear of favouritism in the carrying out of this policy. It is only then that the policy could work. In fact, since announcing the policy and setting up the panel, I have already been swamped by various manufacturers' associations who now feel that they have the right to ask why I have not appointed members of manufacturers' associations to represent the associations on the panel. I have stood up against it and told them off that I am not going to create any vested interest on that panel. I want independent men capable of exercising independent judgment, not men representing manufacturers - otherwise the Chambers of Commerce will come forward and say, "Where is our interest?" and then you have all the trade unions sitting round a table and quarrelling with one another and you will get nowhere. That is the thing that the Minister has got to fight against in the application of this policy and if the Minister does not fight against that, then I can assure the House that the whole policy may end in Singapore losing a lot of its trade. The key to this policy is the application thereof.

Manufacturers' associations have come up to me and blithely suggested that I should exclude just five words from clause 12 (2) which reads:

"The provisions of this Ordinance shall not apply to any person who is engaged in the manufacture of goods on the 13th August, 1958, in respect of such goods."

"in respect of such goods" - five words. They said, "Please delete those words," and I said, "No." All they want is that existing manufacturers should be given carte blanche to manufacture anything they like. A cigarette tins manufacturer could then come to some sort of an understanding with an outside cigarette manufacturer and manufacture cigarettes and torpedo Government's policy which I have just announced. I said, "No, but we are not going to touch your investments in the field in which you have invested and in which you are producing." And that is a cardinal principle. Do not touch anybody who has already invested in some industry, but when it comes to a new line of production, he is as much new as anybody else. That is the main thing, that political pressure will come to bear on the Minister, whoever the Minister may be. Favours will be asked and the Minister has got to resist it. If he resists it, then only will the policy be a success.

Unfortunately, Sir, today Singapore is in a difficult position and yet the people of Singapore are not aware that the key to all their difficulties lies in the economic situation. Sometimes the newspapers use bigger headlines about gangsterism than about a drastic change in the economic policy, even though according to a certain newspaper the protection of industries might have given rise to Sir Stamford Raffles turning round in his grave. Headlines about gangsterism appear everyday in the papers - in the English papers at least -but it is time now that the people of Singapore are made to realise that there must be drastic changes in our economy, and unless those drastic changes are coming on quickly and without delay, we are heading for a bad time.

I would appeal, Sir, to the Opposition that if they have got good grounds for asking me to consider the Bill going to Select Committee, I shall consider it but I am not prepared to give way to any dilly-dallying request. If there are good grounds, I shall be prepared to consider committing the Bill to Select Committee. If I have missed out certain important points, then I will be prepared to consider that, but if they are not very important points, then I say let us take the Bill through its Third Reading today and give the Government the necessary powers to enforce this policy as quickly as possible.

Sir, I beg to move.

Question proposed.

10.44 a.m.

Mr R. Jumabhoy: Sir, it will be a great tragedy if this Bill is pushed through all stages today. I would suggest that this Bill be committed to Select Committee. The main reason is this, that this Bill is a great departure from the free trade policy of Singapore which has been maintained throughout the last century. The other reason is this. It would be better if such a measure were to come from a fully elected Government and not from the present colonial Government. I must define why I say it is a colonial Government. The present Government runs under the Rendel Constitution which is a colonial Constitution with its ex-officio and Nominated Members. Her Majesty's Government has granted us reforms which cannot be pushed off very long. They should be implemented very soon. Then, Sir, if that is so, it is for the masses in their own interest to elect a Government and to formulate an economic policy which they want for their own benefit.

Now, Sir, coming to the free trade policy, the Minister has said that Singapore is not a free port with its immigration control and other regulations. That may be so but it is a free port as far as trade is concerned. The growing unemployment and all these considerations have come about today after the present coalition Government has come into power since April 1955. Have they not at heart the interest of the people - the way they are running the Government and their heavy travelling expenditure which could have otherwise been saved for the masses!

Sir, the position has been that this novice Government - I must call it "novice" - has experimented and experimented and has reached nowhere today. Now, Sir, they want to push through the Bill. The Minister has just said that if valid grounds are given, he will think of appointing a Select Committee. The most important reason is its departure from the free trade policy and when you are taking this measure, it is the public who should give their views before the Select Committee, such as manufacturers, merchants, traders and consumers. It is for them to express their views so that they can be considered by the Select Committee.

On the question of protection for goods, the protection for what type of articles is not disclosed in this Bill at all. This might be disclosed when the Bill comes before the Select Committee and then the public can give their views very freely. Sir, therefore, I would suggest that Government should not force this Bill through today but that it be committed to Select Committee.

10.46 a.m.

Mr Lee Kuan Yew: Mr Speaker, Sir, it is with considerable trepidation that I follow the Minister for Commerce and Industry, and the gentleman who I think is well qualified to be a prospective Minister for Commerce and Industry. I would like to preface my remarks by saying that I would not like to say anything today which would prejudice the merits of this Bill. I fully agree with the Minister when he says that a new unencumbered approach to our economic problems is necessary - an approach not blinkered by catchwords, slogans and phrases like "free port", "free trade", in a very quickly changing South-East Asia. But I would be reluctant to pass this Bill without having had sufficient time not only for ourselves to consider it, but to consider the views and the opinions of those who are more expert than ourselves on the repercussions of such a protection system.

Mr J. M. Jumabhoy: May I, Sir -

Mr Lee Kuan Yew: I think the Minister will have ample opportunity to reply. If he wishes to raise a point of order, I shall yield but if he just wishes to make an explanatory note of what he has said in his speech, then, of course, I do not think it necessary.

Mr J. M. Jumabhoy rose -

Mr Speaker: If the hon. Member will give way.

Mr Lee Kuan Yew resumed his seat.

Mr Speaker: Yes, Mr Jumabhoy.

Mr J. M. Jumabhoy: Sir, I beg leave just to correct him because I think he has misunderstood the whole thing. This Bill has nothing to do with protection. Protection is enforced by administrative action.

Mr Lee Kuan Yew: I hasten to assure the Minister that I know exactly what he has in mind, the mechanical arrangements: (1) the right to manufacture; (2) the using of the administrative powers under the various import licences to prevent the import of goods of the kind which are being manufactured under licence. That is fully understandable but there are further repercussions arising out of this Bill.

As I was going to say, my first impression on reading the Bill was that it was reminiscent of the great days of the East India Company when Queens granted to their subjects exclusive monopolies to exploit or otherwise enrich the nation by having an exclusive preserve of a certain part of the world. Since we only have a little island, then we can only grant little concessions like the exclusive right to manufacture cigarettes, soap, matches, toothpaste, toothpowder and other essentials which people must buy. They are bound to give profit to whoever manufactures them, particularly if you have a benign government that arranges that there is no competition with imported manufacture. But I was astounded to hear the Minister admit that he gave only a two-month period of consideration to this imaginative departure from normal industrial trade policies in Singapore.

I ask the Minister to consider this point. The licence that is to be granted is for 15 years with an optimistic renewal option clause of another 15 years. Now, in 30 years time, I may be a very old man, and I doubt if I will be alive, whereas the system that we see existing in South-East Asia and the State of Singapore which is to come into being next year will still be here, though I wonder if there will be such a person known as the Minister for Commerce and Industry in the State of Singapore. That is beside the point. The present Government can only give manufacturers an insurance of seven months.

I have said before that I do not want to have to say anything in the course of this debate which would challenge the merits of this Bill because the Bill has merits. But I do urge the Minister to send this Bill to Select Committee in order that the full implications can be considered. There is no need to hurry at this last moment in a radical departure of economic policy. I would just like to draw his attention to certain aspects of the Bill just to show him, since he has more or less invited us to give reasons for it to be committed to Select Committee, why he should do so. There are a considerable number of provisions for which rules must be made, and he has provided for them in an omnibus clause in clause 11. For instance, in clause 6, this right of appeal, the Minister revoking a licence and giving grounds for his revocation and giving the right of appeal to the aggrieved licensee to the High Court. The rules will have to be prescribed: the procedure and the issues that will have to be placed before a judge on whether to oppose the policy of the Minister, whether he is to oppose or revoke the Minister's decision, the grounds on which these things have to be done.

But what is most important though not provided for in this Bill, are provisions to ensure the employment of local people. Now, Sir, we all know that the purpose of this Bill is not to create a thriving industry in Singapore to compete with Hongkong, Japan or the big industrial countries in South-East Asia and Asia. The purpose is to provide some form of local industries even though it may not be competitive, and as efficient as those in Hongkong, Japan, India or China. The essential goods listed by an economist today in one of the English newspapers are soap, sweets, matches, cigarettes and all the other non-elastic consumer goods. You can eat the best sweets in the world or Tai Hong sweets; it will come to the same. It does not make any difference. You can strike a match made in Sweden or strike a match made in Singapore. It really does not matter. But unless we are really competitive, these factors cannot become a significant factor in the economic life of South-East Asia because we can only give protection insofar as consumption by 1½ million souls in Singapore is concerned. We cannot give protection for the consumption by 7 million people in the Federation, over 1 million in the Borneo territories and 70 million in Indonesia.

Now, all these factors must be carefully weighed and considered, and I recommend to the Minister that if the object is to create employment, then there must be sufficient provision in this Bill to lay down an employment policy because the object is to give employment and nothing else. His answer may well be that there are sufficient immigration controls to bring about the desired result without having it specifically set up in this Bill.

All these matters we will have to discuss. We want to hear all these things and we can best hear them in Committee, not a Committee of the whole House because then we will have to rush through the Bill today but in a Select Committee. Sir, at the end of the Second Reading, I hope to catch your eye to move that this Bill be sent to Select Committee and I hope the Minister will indicate that he is sufficiently satisfied to make my motion unnecessary.

Mr Soh Ghee Soon (Cairnhill): Sir, I would also like to persuade the Hon, the Minister for Commerce and Industry not to push through the Bill through the remaining stages today but to let it go to Select Committee. From what' he read out just now, it seems to me that he is suggesting a great change in the trade policy of Singapore which I feel is a good thing but then it is only his side of the story. We do not know the other side of the story and in a major change like this, we need time to study the Bill carefully before we pass it. That is why I am asking him to accede to our request.

10.58 a.m.

Mr Lim Cher Kheng (Changi): Mr Speaker, Sir, it is seldom that I can agree with the Member for Tanjong Pagar but in this particular debate I am bound to agree with him on the major point especially that this Bill should be committed to Select Committee. The Minister has informed us that the persons selected on the panel were those who had nothing to do with the interested parties. Therefore public opinion. especially that of the interested parties should be heard in Select Committee and maybe a policy can be formulated in respect of the control of manufactured goods.

Despite the lengthy and detailed statement made by the Minister for Commerce and Industry - and we know that he is able and hard-working - the most important point which he has touched upon is the failure of the local industries which is only too obvious and now he speaks of opening up new industries. I wish the Minister for Commerce and Industry will inform this House how many established industries have been forced to close down. I would draw the attention of this House - and I have said this very often - that the most important thins to solve is the economic instability of Singapore. The tariff imposed at the Johore Bahru causeway is detrimental to the development of local industries. So unless Government can assure this House that a Pan-Malayan economic policy can be formulated to include the Federation of Malaya Government and the Borneo Government whereby our products can be considered as their own, then our home market consisting of just 1½ million people, as the Member for Tanjong Pagar has pointed out, is too small for the establishment of any new industry. Already the old industries cannot maintain themselves and now we are talking about new industries. Therefore I wish the Minister can assure this House that this Pan-Malayan economic policy is under way, otherwise this Bill is only just a scrap of paper.

11.02 a.m.

Mr Tan Siak Kew (Nominated): Mr Speaker, Sir, I must say that I have the greatest respect for the Hon. the Minister for Commerce and Industry for his grasp of Singapore's economy, and especially his enthusiasm in seeking to remedy that situation. I think he has already appreciated that Singapore is too much dependent on its entrepôt trade and, in view of the increasing population and the increase in unemployment, in the years to come we must have something - that is the development of industries - to supplement that economy. This Bill - the Control of Manufacture Bill - is one of the steps which he proposes to extend to something like a quantitative import control and a customs tariff. Although the Minister did say just now that it is not to protect, I see here in the explanatory statement that it is "to protect the local manufacturer". There is an element of protection and no doubt the measures of protection will come later and that, as the Minister has indicated, will be in the form of a quantitative control or a customs tariff.

Now, although the Minister has rightly diagnosed the ill, I think this is quite the wrong remedy and it is bound to do more harm than good to Singapore. As Singapore now stands, the entrepôt trade is still our mainstay and it still feeds us. Any measure of quantitative control or by a customs levy is bound to have repercussions on that entrepôt trade. We are bound, for instance, to antagonise our existing customers and we cannot afford to have their retaliation in whatever form later on. As the Chinese saying goes, I think this is a case of slashing off the flesh to remove a minor sore. Quantitative import control or a customs levy is simply going to take it out of somebody's already existing business in the hope of conferring some benefit on the other fellow who is in industry and whose interests the Minister thinks he can protect. Many hon. Members have mentioned that whatever we aim to protect is only for one and a half million persons. You cannot even protect so much because there are bound to be people who would not like to buy, for instance, locally produced cigarettes. There is only a very small section that you can possibly hope to protect and it would be, I think, a wiser policy to isolate that and give it whatever protection it deserves without disturbing the overall freedom of this entrepôt trade. We know, Sir, that, generally speaking, all sorts of controls will tend to breed corruption and inefficiency and, as the Minister has mentioned, this Bill is so much dependent on the Minister's application and honesty himself that it is quite dangerous if the powers which the Bill proposes fall into less sincere and honest hands.

I see in this Bill, as the Minister has admitted himself, in clause 4 (1), it already breaks a very cherished principle on which Singapore has grown and thrived, and that is the principle of free trade and free enterprise. This clause reads:

"Every application for a licence shall be made to the Minister in the prescribed form and the Minister may issue or refuse such licence."

Now I think the object of the Bill is to promote industry and I do not know under what circumstances the Minister is likely to refuse a licence to manufacture.

Clause 5 (1) says:

"The Minister may in issuing a licence impose such conditions as he may think fit to impose and such conditions shall be set out in the licence."

Now what sort of conditions does the Minister have in mind? Is it the suitability of the place or the suitability of the manufacture? Under existing laws, these are governed by other laws. Perhaps the Minister has in mind that the licensee should manufacture up to a certain quota and that he should use a certain type of machinery chosen for him by the Minister?

Then clause 5 (2) reads:

"When issuing a licence to engage in the manufacture of any goods the Minister may undertake that for such period as he may determine no further licence shall be issued for the manufacture of such goods."

In other words, the Minister may decide on preferential treatment or even create a monopoly.

It is proposed in this Bill that those who have already established business before 13th August, 1958, are to be exempted. In other words, these people who have already had their business and who are exempted from the Bill would also not be entitled to this generosity of a franchise.

Sir, we have touched on controls this morning. We have also touched on the strategic stockpile of rice. This strategic stockpile is everytime running into difficulties, and in any case it is a burden on the taxpayer. It is an alternate boon and woe to the traders concerned. So controls, if they are not very necessary, should hot be imposed at all, and in this case I think they are not necessary because they are aimed at benefiting only a very small portion and they will, if imposed, have great repercussions on our entrepôt trade.

Sir, the Nanyang Siang Pau of the 25th August has this to say. I quote excerpts:

"If Singapore hopes to have any success in its policy of protecting its industries without at the same time seriously hurting its entrepôt trade, the first requisite must be to have the co-operation of the Federation, because Singapore's own manufactures and its imported manufactures which it is proposed to limit quantitatively or by a customs levy have hitherto all depended on the Federation as its chief consuming market. If Singapore cannot get the co-operation and support of the Federation whose consuming power is four times that of Singapore itself, whatever measures taken to protect its industries will just be a waste of effort. We question whether with only the causeway separating and Federation industries having such a big consuming market compared with Singapore's own negligible consumption anyone seeking investment would not at once reject the latter and invest in the former? Therefore, if the Federation would not regard our close economic co-operation as being important because of our propinquity and exempt Singapore industries from import tax or even concede a preferential treatment, we shall find it even hard to maintain our existing industries. To expect new industries in the circumstances would just be an extravagant hope. If the Singapore Government do not first bend their efforts toward removing this barrier and instead try to plan measures which are bound to more or less harm our entrepôt trade, in order to protect industries, it is just abandoning the body and chasing the tail.

According to the Chief Economic Adviser to the Chief Minister, Dr Benham's calculations, Singapore's import of produce, foodstuffs, and industrial goods amounts to between three and four billion dollars a year. Roughly one-fifth of this is retained for own consumption. As much as two-fifths of this is re-exported to the Federation, and the remaining two-fifths is re-exported to Indonesia and other neighbouring countries. In other words, the Federation takes from Singapore imports yearly at least 1½ billion dollars. This amount is an important factor in our entrepot trade.

Singapore importers of foodstuffs and consumer goods invariably take the Federation's and Singapore's consumption together into calculation in determining what and how much to buy from abroad. Of these they estimate that the Federation will take 75 per cent to Singapore's 25 per cent. If it happens that there are intermittent demands from Indonesia, Thailand or other neighbouring countries, as is the experience for quite a number of years now, their usual method is to satisfy these demands from the stocks reserved for Singapore's consumption and replace them immediately afterwards from abroad. This is the usual pattern of their trade."

Mr Speaker: Order. I would like to remind the hon. Member of Standing Order 30 (6) which reads:

"A member shall not read his speech, but he may read extracts from books or papers in support of his argument, and may refresh his memory by reference to notes."

I read in the word "extracts" extracts and not the whole article, and if the hon. Member can assure me that what he is reading are, in fact, extracts, then he can proceed.

Mr Tan Siak Kew: I beg your pardon, Sir. It is not the whole article which I am reading, but these are very relevant points. As I have said, these are excerpts from the article. To continue, Sir:

"If the intended protection of industries takes the form of quantitative limitation, there may be a shortage which could force up prices. Hitherto Singapore's entrepot goods are not higher priced than the origin of production; at the same time they can be bought in small or big lots and ready goods can always be supplied. If a quantitative limit were imposed leading to this advantage being lost, Federation customers of Singapore importers will seek to import direct from origin suppliers.

Further if a custom's duty levy were imposed, goods that are intended for the Federation must be considered to be exempt; but the storage of these goods whether in public or private warehouses would present such difficulties in administrative control as to create all sorts of problems resulting in an increase of cost and thus lowering the chances of the Federation customers buying in Singapore.

Generally speaking, Singapore has already lost quite a lot of entrepot business for quite a number of years to Indonesia, Thailand and other neighbours, because of these countries' policy of trading direct with origin suppliers, and if before we get the co-operation of the Federation we should pursue this protection policy with its very doubtful purpose and lose this big and reliable consuming outlet, it is in the ultimate simply not a sensible step."

Sir, I will also read to you extracts from the Sin Chew Jit Poh of Monday, 8th September, 1958:

"Those who say that the entrepot is slipping is talking nonsense. Our biggest entrepot is with Indonesia. In 1955 the figure was 200,000,000. In 1956 it increased to 230,000,000. In 1957 260,000,000. In the first five months of 1958 it has already amounted to 200,000,000.

We sympathise with those who think we cannot entirely depend on entrepot. But they must be very careful when they think of replacing the free status of this port by a protective customs tariff. They must take in consideration the situation as a whole lest they have both hands empty.

The introduction of customs tariff can easily lead to a preponderant stress on treasury revenue and lose its original objective of protecting industries. By whatever method you use, the burden will fall on the shoulders of the people.

It will give rise to lobbying by the various industries and ultimately benefit a small number of industrialists and victimise the whole consuming public.

A protective customs tariff is only one of the many methods to promote industries. In order to avoid this affecting our entrepot trade which is still the mainstay of Singapore, we must first try out other methods by giving direct or other indirect assistance to the industries concerned. The cost will not be small but it must be recognised that revenue from customs tariff are also borne by the people ultimately -"

Mr Speaker: Order. I hate interrupting the hon. Member, but I think I must rule that he is, in effect, reading somebody else's speech. The hon. Member could, of course, read extracts but he should then relate those extracts to his own speech. As it is, all that we have heard during the last five minutes is, as I have said, in effect, the speech of somebody else not in this Assembly.

Mr Tan Siak Kew: Sir, this is in fact a translation by myself and not somebody else's speech. They are all extracts which I think are relevant to my argument. However, I am nearly finishing and if you will allow me, I will just proceed with another one or two sentences:

"- and does not fall from the sky. From the standpoint of Singapore as a whole, any other method would be better than a customs tariff in order that the status of a free entrepot may not be shaken."

We know, Sir, unfortunately, that the Federation is not giving us any preference or it has refused to give preference to our manufactures; but if we are to introduce some import control, quantitative or otherwise, then the articles just referred to like matches, soap and so on, we would eventually have to tax those which are coming out from the Federation. Whether that is desirable or not I do not know, but I think any customs control will have to encounter some difficulty in Empire preference which is after all reciprocal, and it is sure to intensify ill will against us and they could retaliate in more ways than one. So is it really worth while that we should pursue this measure at all?

The position is like this - somewhat similar to a story which I have just been told. The story goes like this. There are two ladies travelling in the same compartment of a train. The window was open. One lady said, "The window must be closed, otherwise I will freeze to death." The other lady said, "You cannot close the window, because if you do, I will suffocate to death. In fact, I am equally sure of that and as a further precaution, I will demand that the fan should also be switched on." The other passengers said, "No, thank you both. We are quite comfortable as we are. If you switch on the fan it will be too cold, and if you close the window it will be too hot." So that is the position - what to do? I think the Minister, in proposing these protective measures, is evidently saying, "Close the window, because we have got to protect this lady from freezing." Now what will happen to the other lady is that she will immediately be suffocated to death, not to mention the extreme discomfort to the other passengers. Would it not be a more sensible thing to isolate the freezing lady than attempt to protect her on that spot?

Sir, any industry in Singapore which needs this kind of protection cannot be big, because any big industry cannot just depend on its local turnover to survive. Therefore, I think it will be more justifiable, if the industry is worthy of it, if a direct subsidy or direct protection by whatever other measures could be given to it, instead of jeopardising the entire entrepôt trade in the hope of trying to confer some benefit to just a very small section of the people. As other hon. Members have suggested, I hope that this Bill will be committed to a Select Committee and studied further, and I hope that eventually the Government will see their way to withdrawing this Bill, as they have already withdrawn the Luxury Tax Bill on similar objections.

Mr Lim Choon Mong (Serangoon): Mr Speaker, Sir, I think there is some merit in this Bill. All of us say that Singapore is dependent on its entrepot trade, but must we always be dependent on our entrepot trade? Can we not take a second line and emulate the example of small island countries like Hongkong and embark on a programme of industrialisation? I certainly feel, Sir, that if there is work to be done and if it can be done by the people of Singapore, then the people of Singapore should be given a chance. If there is money to be made and the people of Singapore can make it themselves, then we should allow Singapore to make such money. In this world, everything must start on a small scale. In places like Japan and Hongkong which only started manufacturing early this century, they must start as small manufacturers. They must first supply their own needs, but because labour is cheap and because of other prevailing conditions they were able to start not only supplying themselves with the goods they needed but also exporting to countries that had been exporting to them. And today I think Hongkong is exporting to England the goods that England was at one time exporting to Hongkong.

However, Sir, the merits of this Bill must be balanced with other points which we must consider very seriously. I feel that if we can keep our entrepot trade and yet go on with industrialisation, then I will want the two assets instead of one, but we will have to go on very cautiously weighing every fact first before we make such a move. When I look at this Bill, I see there are quite a number of flaws and loopholes which must be plugged. It will involve the Government in a great deal of work - licensing new factories, exempting many people, and issuing certificates. Then I will be thousands of certificates to be issued, many licences for new factories. This work alone is going to be tremendous.

There is another point, Sir; when we talk about manufactures offered for sale to the public, even small manufacturers come in. The man in the street who probably manufactures a few bottles of sauce or some sweets or toys on a very small scale will have to come and get his licence or his exemption. It may cause him a great deal of inconvenience and it may take him a long time to understand what the Government have in mind.

The second point is this, we want to keep our entrepot trade and at the same time encourage local manufacture. Let us take the example of cigarettes. We will say that all cigarettes which come in must go into bond and be re-exported. Local cigarettes can be manufactured and sold. But you must not forget, Sir, that Johore is so very near and though local cigarettes are on sale some people here prefer the brands that are imported. They might go over to Johore to buy their requirements for their own consumption. That is a loophole that we have to look after.

I hope the Government will consider seriously the suggestion that a Malayan customs union would be the best solution. I have heard it said that there should be a customs union not only for Malaya and Singapore but also to include such territories as North Borneo, Sarawak and Kuching; and if we establish that, our markets will be bigger at least when we consider local consumption. That idea was mooted during the last Area meeting of the Commonwealth Parliamentary Association there and I think it should deserve support from this Assembly if ever such a move were made.

I certainly feel that the points raised both by my colleagues and other speakers previous to me deserve deep consideration, and that this Bill should be sent to a Select Committee so that the people who will be greatly affected by this Bill will be able to voice their opinions on it.

11.34 a.m.

Mr Goh Tong Liang (Bukit Panjang): Mr Speaker, Sir, I have not been and am not a business man, but the House certainly knows that the Nominated Member, Mr Tan Siak Kew, is a business man of considerable experience; so I would ask the House to take heed of what he has asked it to do, and that is to send this Bill to a Select Committee for further consideration.

11.35 a.m.

Mr J. M. Jumabhoy rose -

Mr Speaker: Mr Jumabhoy, in reply?

Mr J. M. Jumabhoy: In reply, Sir, It is unfortunate, Sir, that not only are the Members of the Opposition not aware of our serious economic position but they are not even aware of the implications of this Bill. The Member for Telok Ayer talked about discussing in Select Committee the principle of protection, when there is no reference at all to protection in this Bill. Protection is going to be carried out by the Government by Administrative action. Quotas, if necessary, are going to be placed on imported goods under my authority, the authority which I have under the Control of Imports and Exports Ordinance. Customs duties are going to be imposed by the Financial Secretary under his authority which is derived from the Customs Ordinance. This Bill has nothing to do with protection as such. The only thing this Bill seeks to do is to protect the local manufacturer from being swamped by the outside manufacturer of well-known brands, because the outside manufacturer is going to lose his market. Up to now, the outside manufacturer refuses to come in and wants to employ outside labour to sell his goods to the people of Singapore. He has been cajoled, he has been asked, he has been begged by us to come in. We have given him all sorts of promises - pioneer industry status, tax exemptions, this and that - but he says, "No, I do not trust the people of Singapore and their politicians. I refuse to come in." Then some time later a local manufacturer says, "Right, I dare to invest in this thing." He puts up $500,000 and manufactures something here. Then he says, "Now, will you give me protection?" And you say, "Imports from outside are prohibited." The outside manufacturer with Brand X, which is a well-known brand, then decides to come in and manufactures Brand X here, and the local man who has invested, half a million dollars loses his investment because the outside manufacturer has a well-known brand and Singapore consumers run to buy that brand. That is all that this Bill seeks to protect - nothing else. In the Select Committee, Sir, I am doubtful whether the principle of protection can be discussed, because there is not one clause in this Bill which talks of tariff protection or quantitative restriction protection. What have my hon. friends from the Opposition side got to show to the public about their knowledge of the economics of Singapore? During election time they go to the country and shout all sorts of things. Yet what are they going to do for this country? Is what they have said about this Bill, which is of vital importance, all their knowledge? The reference to protection in the explanatory statement:

"... It provides power to regulate the setting up of industries on a planned basis and to protect the local manufacturer."

That is to protect the local manufacturer from the ravages of outsiders who come in to cash in on a protected market - I see now some hon. Members walking out of the House; they dare not listen.

Sir, the Labour Front in its "Principles and Aims" says in paragraph 7:

"To fulfill the urgent needs of the country's rapidly growing population the Labour Front stands for the reorganisation of its economy now cast in the role of a milching cow."

The entrepot trade is not a milching cow, but servicing by outside manufacturers in a wide open market in a world which has closed its doors everywhere by tariff protection and quantitative restrictions - a wide open place for every manufacturer to dump his goods - that is where we are a milching cow. That is what we seek to prevent by this Bill, and hon. Members have not yet understood the full implications. "A departure from the free trade policy maintained for over a century," says the hon. Member for Telok Ayer, who is not in the room now. That century-old policy cannot be applied today. The world has changed - the fact must be realised - and we must change with the world. If we do not, we are going to be left behind. Do they realise that or not? There are people of the old generation who believe in going to races, drinking in high society, and so on, and they say, "Let us keep that century-old policy." The moment you talk of a change, they are frightened, because they believe in a conventional world, a world in which they have been brought up. They do not understand that which the hon. Member for Tanjong Pagar understands very well, and that is the world has changed and we must change with the world; if not, we are doomed.

The hon. Member for Tanjong Pagar says, "Why so late?" Exactly. In my statement, Sir, last month to the Assembly I said, "It is now approximately two years, Sir, since I gave an indication that some measure of protection might have to be considered." Sir, this policy is not a hasty one and the Member for Tanjong Pagar misunderstood me this morning. This policy of protection has been under consideration for two solid years, and I say again, that after careful consideration, Government has come to the conclusion that the principle of protection must be recognised for our industries and Government will therefore commence taking immediately all necessary steps to implement this policy, and reference of this Bill to a Select Committee is not going to stop Government from giving protection to industries. This Bill merely deals with one aspect of it, and that is to protect the local manufacturer from being swamped by the outside manufacturer because of his well-known brand. Nothing else.

Sir, the hon. Member for Tanjong Pagar misunderstood me when he said that I answered him that the policy had been under consideration for two months. That was in respect of the statement I made this morning on the people's sector of industry, and for the last two months I have been working pretty hard on it. However, I will come to it later. Sir.

I think it would be best for me to answer the Nominated Member, Mr Tan Siak Kew, first because he has raised the most points. He says that protection by quantitative restriction or by tariffs will mean taking it from one hand and giving it to somebody else. That is precisely the point, Sir. It will take the profits and the wages of labour from the outside manufacturer and give them to the man inside Singapore. It will also cut the cost of freight, because, for most of these products, the raw materials are drawn from Asia and they are carted all the way to Europe and America. Now they can be carted to Asia and the consumer goods will be produced here. So if any hon. Member has any opposition to it, let him say so now, including the Member for Tanjong Pagar, if he has any, and I am sure he has not.

"Controls will tend to breed corruption and inefficiency," Mr Tan Siak Kew says, "and it will be dangerous if powers fall into less honest hands." The answer is with the citizens of Singapore. If they wish to elect corrupt, inefficient and less honest men to fill these Front Benches, they are welcome to it. Let them have such people. Why should we bother about it? We try to provide laws to be administered by efficient, honest and incorruptible Ministers as far as possible. If the people of Singapore choose otherwise, they are welcome to their choice. It is not for us to judge.

Mr Lee Kuan Yew: Are not you people part of the people?

Mr J. M. Jumabhoy: We are, and we will do our best to see that they do not choose such, people!

Sir, the creation of monopolies or a franchise is only an enabling clause in the Bill. In fact, nothing can bind a successive government from changing its mind. It is an enabling clause and there is nothing to it. In fact, it is just one clause in between others. I think undue stress has been laid by the Opposition on it.

Mr Tan Siak Kew has quoted, Sir, the possible conditions under clause 5 (1). The condition I think would be not on the amount of protection but rather that the local manufacturer should not come to an arrangement with any foreign manufacturer in which he holds less than 49 per cent. Take, for example, a small man making, say, a thousand cigarettes a day. The foreign man comes in because he cannot bring his cigarettes in. And he says, "Look here, I will pay $500 a month. Let me manufacture cigarettes here." So the foreign man "jumps" the protection, comes here to manufacture his cigarettes and then tells the Government, "I do not care tuppence for you!" And that is where the restrictive conditions will come in. You give a licence to the local man but he cannot come to an understanding with a foreign manufacturer without the permission of the Minister, and the Minister will see that the local man gets a fair share and that it is not an eyewashing arrangement for the outside man to come in and "jump" the protection barrier.

Sir, the articles in the Nanyang Siang Pau and the Sin Chew Jit Poh were quoted. I think it was good that they were quoted. I have read these two articles with interest and I do not think there is any merit in both of them. "The Federation is the chief consuming market - four times the market of Singapore." That is not correct, Sir. The population of the Federation is four times that of Singapore, but the consuming power of Singapore as compared to that of the Federation is 40 to 60, because Singapore is an urban community and we have a higher purchasing power in Singapore. The Federation is mainly a rural community, and the purchasing power is less. Therefore the consuming ability is 40 for Singapore to 60 for the Federation - not 20 to 80.

"Since Singapore is a negligible market, would it not be that most investors would reject Singapore and go to the Federation?" That is precisely what has happened. Factory owners who were about to go to the Federation stopped in their tracks when I made the statement about protection last month. It has been going on since the last one year. Factories have shifted to the Federation. They have had to close down because of the tariffs, but the moment I made this announcement, they stopped and we are now retaining these factories. They are thinking twice - and yet, Sir, we are told about century-old policies and asked to think about it. By the time you think about it, you will have lost all your factories. Nothing will have been left here to think about.

Dr Benham was quoted by the Nanyang Siang Pau - "two-fifths of the foodstuffs go to the Federation." Exactly, Sir, and I have in my statement made it very clear that "under no circumstances will the operation of protection be allowed to interfere in any way with the entrepôt trade in produce, processed produce and textiles or raw materials". We are not going to touch foodstuffs and such things, Sir. We are only going to touch consumer goods and it might interest hon. Members of the Opposition to know this - if at all they study such things, which I do not think they do, because most of them, especially my hon. friend the Member for Tanjong Pagar, study only slogans to catch the political ears of the people. But as to the economic aspect, I do not think they have an economic policy, because they have never announced it. Sir, about 70 to 75 per cent of our trade is in these items - Arecanuts, canned pineapples, sago, sugar, raw coffee, tea, cloves, pepper, cigarettes, copra, rubber, jelutong, gum dammar, aviation spirit, kerosene, liquid fuel, palm oil, coconut oil, tapioca flour, cotton piece goods, artificial silk piece goods, tin. It varies. In 1951 it was 86 per cent. In 1956 it was 74 per cent. In 1957 it was 70 per cent. Nearly three-quarters of our entrepôt trade is not in the consumer goods which are going to be affected by protection. It is in these produce and textiles and processed goods and therefore the fear that our entrepôt trade is going to suffer, and foodstuffs - "two fifths of it go to the Federation" - are going to suffer, is unfounded and due to non-understanding on the part of the persons who make these suggestions.

"Storage may be a problem." Bonded warehouses can overcome this problem. Other countries have done it. Why cannot we do it? Then the hon. Member quotes again, "Singapore has lost business in the past due to the direct trading activities of countries like Indonesia and Thailand." Exactly, that is what I have been telling the House for the last two years, and that is why we have got to open our eyes and do something about it - so that we will have something to fall back on when we lose more of our entrepôt trade - and that is coming - because in this present competitive age no country can afford to go to a middleman if it can help it. That means that if direct trade progresses, we are going to get less trade, which means that unless we do something on the industrial front we are going to be in a jam. I give figures - the hon. Member's figures were all for single months, but here are the comparisons. In 1955 our imports were 2,865,000,000 - it is not just the increase in figures we have got to see, but the difference between imports and exports, the balance of payments. Our exports were 2,781,000,000. In 1956 there was a jump in imports - 3,098,000,000; exports remained almost the same at 2,732,000,000. In 1957 imports were 3,277,000,000 - a jump again over the previous year; exports remained almost the same - 2,773,000,000. The result is that whereas exports have remained stagnant at around 2,700,000,000, imports have kept on jumping by roughly 200 million a year. The gap from 84 million in 1955 went up to 365 million in 1956 and 504 million in 1957; and that is the danger signal. As the imports increase, it shows that there is more consumption at home, and even if employment is a criterion - and employment is a big criterion, I will admit - it should not be the only criterion. We have got to produce more at home, not only just to find employment, but to cut down on our imports, because very soon you will find that you will not have enough money to import goods. Now our dollar is a dollar which operates in a whole area, but supposing later on with a Central Bank in the Federation or something else you find that you have to rely on your own prestige, your own economy - not on one that is bolstered up by the economies of surrounding countries like Malaya, Borneo, Sarawak - then you will find that your Singapore dollar will start fluctuating, if this state of affairs goes on. You have got to see that you import less and make what you can at home. The same story continues during all the months this year, if hon. Members of the Opposition care to read the statistics, which I doubt they do.

Then another false argument, that is that the burden will fall on the shoulders of the people. That means the cost of living will go up. That is not so, because most of the goods that you consume here are manufactured in Europe or America, and labour there is as high as, if not higher than, in Singapore. Therefore you save on the cost of labour because Singapore labour is cheaper. You also save on freight. In many cases, you save on exorbitant profits made by these outside manufacturers because of their names.

Is it desirable to have a tax on articles coming from the Federation? The Federation has decided it is desirable to have a tax on articles coming from Singapore.

Mr Lee Kuan Yew: On a point of clarification, Sir.

Mr Speaker: If the Minister will give way.

Mr Lee Kuan Yew: I would like to ask the mercantile mind how this really helps him in the argument. He says labour is cheaper here. Then we dispense with freight. Therefore the cost of living will go down. But to my non-mercantile mind, it appears to me that if that is in fact the argument, then protection is unnecessary, because we would be able to compete with the outside commodity. Where am I wrong?

Mr J. M. Jumabhoy: The hon. Member is perfectly right and he is perfectly wrong. Where he is wrong is that though the people of Singapore can shout about Merdeka, when it comes to buying goods they stick to their prejudices. They will buy English, American or German goods. They will not touch anything made in Singapore - that is where the hon. Member is wrong - unless we force them to buy Singapore-made goods. Even India had to do it after independence, because even there the people were prejudiced, because in a hundred years of colonialism you have been brought up and steeped into that sort of thing. And you will not get out of it easily.

Mr J. M. Mason: Nonsense!

Mr J. M. Jumabhoy: Another false argument put up was: is it worth while to have protection? Why not have a direct subsidy? Government will give, say, a direct subsidy of $20 million to industry to keep the trade open. For whose benefit? So that the outside manufacturer can push his goods in and make his profits in the Singapore market; and the Government collects from the taxpayer, through other methods, and gives a subsidy to local factories? Now, is that the right way of doing things? You tax a local man, to pay a local factory, and you let the outside man make his money on it. Is it not fairer for the outside man to be made to pay or to be stopped?

Sir, a customs union with the Federation would be a very good idea, but I do not think it is practicable in the political field as yet. If we could have a Pan-Malayan economic system, that would be the most desirable thing; but as hon. Members know, it has not been achieved. Even India, Sir, has this sort of legislation to prevent outside manufacturers from opening factories.

Sir, we now come to the hon. Member for Tanjong Pagar. He has not got any really good argument why this Bill should go to Select Committee. I suspect, Sir, that he is trying to gain time. because he is not aware of the implications himself. But if the hon. Member, as he always professes to be, is on the side of where the good of Singapore lies, then I say he should not advocate any delay in the passing of this Bill, because it is designed to assist the Singapore man. And the reply I made earlier about two months' consideration did not apply to this Bill or to the protection policy, but only to the statement I made this morning. He drew attention to one or two clauses. He says the judge will have to approve or revoke the decision of the Minister on policy. That is not true. The judge will have to decide on the case purely on factual grounds, whether the conditions laid down by the Minister have been observed or not - not on the policy. The Minister can revoke a licence if he is satisfied that the conditions which he has imposed have not been complied with, and the man can go to the Court and say, "I have complied with the conditions, but the Minister is not satisfied and has revoked the licence." The judge then has to rule factually whether the conditions have been complied with. It is a decision on facts, not on policy. Policy is a matter for the Minister, not for the judge.

"Provision to provide for employment" - you cannot provide in any law provisions for so much employment to be given and that sort of thing. That is a fluid matter. Some industries can give more employment; some can give less; but you cannot force anybody to give so much employment, because then it will not be a business proposition. But as I say, it is not only employment that I have in mind, but also the creation of wealth here by additional productivity and the cutting down on imports, and the retention of that portion of the value of the goods consumed here which accrues to the outside manufacturer through the wages paid to labour. It is true that we can give protection only for the Singapore market, but an industry is like an infant - you have to give it a helping hand when it first learns to walk. Once it can walk by itself, it can learn to run by itself. If you can give an industry a helping hand in the initial stages by giving it a market - even though it may be small - on which it can rely, then you will give it an opportunity of expanding later and entering a foreign market. But let me assure hon. Members this. While we are having compunctions about protection and putting up barriers here, other countries have gone right ahead. Sarawak has recently raised the duty on soap, and when the local manufacturers wrote to Sarawak, they said, "Sorry, that is our policy." And here we are, thinking a hundred times about retaliatory measures against us. The Ottawa Agreement of 1932 set up preferential treatment between the Commonwealth countries. Is that not the creation of protective measures for countries in the Commonwealth? Anyhow, Sir, I do not admit that any valid argument has been put up for sending this Bill to Select Committee, but because I do not want to come in the way of democratic procedure, I have no objection if the Bill is referred to a Select Committee. But I would like hon. Members to understand that I would like this measure to be passed as quickly as possible - if possible by the next sitting of the Assembly. And, Sir, I would like a ruling from you whether, since this Bill makes no reference to tariffs or quotas or things like that, such matters would be admissible in Select Committee?

Mr Speaker: I have been asked to rule quite hypothetically. My answer, of course, is that if and when those matters come up in Select Committee, it is then that I will give my ruling.

Question put, and agreed to.

Bill accordingly read Second time.

Committed to a Select Committee consisting of Mr Speaker as Chairman and such Members as may be nominated by the Committee of Selection. (Mr J. M. Jumabhoy).