ECONOMIC DEVELOPMENT BOARD BILL

Bill committed to a Committee of the whole Assembly.

Assembly immediately resolved itself into a Committee on the Bill. -[Dr Goh Keng Swee].

Bill considered in Committee.

[Mr SPEAKER in the Chair]

7.21 p.m.

Clause 1 ordered to stand part of the Bill.

Clause 2 -

Question proposed, "That clause 2 stand part of the Bill."

Mr Rajah: Mr Speaker, Sir, in clause 2 of the Bill, "industrial enterprise" is defined as-

`"industrial enterprise" means any sole-proprietorship, partnership, company or co-operative society wheresoever registered or incorporated under any law for the time being in force relating to companies, co-operative societies or business and [this is the point, Mr Speaker, Sir] engaged in mining or in the manufacture or processing of goods;'.

So there are those who are engaged in mining; there are those who are engaged in the manufacture of goods; and there are those who are engaged in the processing of goods - three kinds of businesses. I can understand the last two categories, namely, the manufacture and processing of goods. Might I ask the Minister what sort of mining business does he propose to conduct in Singapore?

Dr Goh Keng Swee: Sir, I do not know why the Member for Farrer Park believes that the activities of the Economic Development Board should be confined to Singapore. There may be occasions to engage in activities outside Singapore as a complement to the industrial effort in Singapore.

Mr Rajah: Is the Minister seriously suggesting to this House that, if a company is established in Singapore, as there are indeed many now having their registered head office in Singapore but indulging in mining operations in the Federation - mining for iron or tin or anything like that - he is going to utilise the taxpayers' money in Singapore for the financing and advancement of this company which is exploiting the mineral resources in the Federation to the betterment of the Federation Government?

Dr Goh Keng Swee: Mr Speaker, Sir, it could be mines anywhere? But the point is this. I do not think it will be proper for us to so constrict the activities of the Board as to disallow them to engage in such operations. After all, Mr Speaker, Sir, there is, in the jargon of the economists, such a term as "forward and backward" integration. That is, when industries either go forward to absorb marketing processes or go backward to take under their charge the production of raw materials which are necessary for their existence. As I have said, this is just a piece of permissive legislation. There may be occasions when it might come in useful or it might not come in useful. This, I think, is a matter which we should leave to the Board.

Question put, and agreed to.

Clause 2 ordered to stand part of the Bill.

Clause 3 ordered to stand part of the Bill.

Clause 4 -

Question proposed, "That clause 4 stand part of the Bill."

Mr Rajah: Mr Speaker, Sir, under clause 4, the Minister has power to appoint a Chairman of the Board, and he shall be a full-time officer of the Board. Mr Speaker, Sir, if you will run your eye down clause 5. Under clause 5 (1) (b), it says the Director of the Board shall be appointed under section 7 of this Ordinance, which says that the first of these Directors shall be appointed by the Minister and that all subsequent Directors shall be appointed by the Board. Mr Speaker, Sir, I would like to know from the Minister why it is necessary to have a Chairman of the Board, who is going to be a full-time officer of the Board and who probably will be paid a fairly high salary and, at the same time, have a Director of the Board who possibly will be paid a very high salary. Would it not be enough if we had only one person, and we call him either the Chairman or the Director?

Dr Goh Keng Swee: Mr Speaker, the answer is quite simple. It is likely that the first Director of the Board will be a person appointed from overseas. He will be an industrial economist who has experience in such matters. It would obviously be undesirable to leave the whole management of the Economic Development Board in the hands of an expert who is not a Malayan. This is then, therefore, in order that policy matters and local background information can be made continuously available to the Director of the Board. It will be an advantage if the chairman of the Board, who will be a Malayan, is appointed. It does not follow, of course, that the Chairman of the Board will draw a very high salary. Perhaps I may remind the Member for Farrer Park that the Chairman of the Housing and Development Board draws no salary, no allowance, no transport allowance, and he works more than full-time.

Mr Rajah: Mr Speaker, Sir, I am fully aware that the present. Chairman of the Housing Board is doing that, because he is the present Chairman, and because he does not want the money, so he says. But if he were desirous of getting the money, he could have got it. So, if the Minister can assure me that the Chairman of the Economic Development Board will perform his functions in the same way as the present Chairman of the Housing Board is performing his, then there would be no objection. But the point I am raising is this. It would appear that under clauses 4, 5 and 7 of this Bill, we are going to have two very highly paid officers of the Board, both of them sitting on the Board and both of them being members of the Board. I would suggest that if it is necessary to have a technical officer to be paid, then he should be paid and remain as an employee of the Board, and not as a member of the Board. I think it is very undesirable to have two very highly paid members of the Board drawing perhaps $2,500 each.

Dr Goh Keng Swee: Mr Speaker, Sir, when you have a Board that will have at its disposal a sum amounting to $100 million, I do not think the question of salary would be a matter over which one should quibble for any length of time. What we want is the quality of the men and if we can get the right type, then I say he is worth the salary which we will give him.

Question put, and agreed to.

Clause 4 ordered to stand part of the Bill.

Clause 5 -

Question proposed. "That clause 5 stand part of the Bill."

Mr Rajah: There is just one point. Mr Speaker, Sir. Under clause 5 (1) (d) the Minister proposes to have the banking interests, the manufacturing interests, the commercial interests, labour, professional and academic interests represented. As far as I can see, there are six separate interests which he seeks to represent. But he has only five bodies. How does he propose to have the sixth interest represented by these five bodies, unless he treats "professional and academic interests" as one interest?

7.30 p.m.

Dr Goh Keng Swee: That is exactly so, Sir.

Question put, and agreed to.

Clause 5 ordered to stand part of the Bill.

Clauses 6 to 8 inclusive ordered to stand part of the Bill.

Clause 9 -

Dr Goh Keng Swee: Sir, I beg to move,

In page 4, line 2, after "officer", to Insert "or servant".

This amendment is necessary in order to be consistent with clause 8 where a distinction is made between an officer and a servant of the Board.

Amendment agreed to.

The Chairman: Perhaps the Minister could now move formally.

Further Amendments made:

In page 4, line 5, after "officer", to insert "or servant". -[Dr Goh Keng Swee].

In page 4, line 8, after "officer", to insert "or servant".-[Dr Goh Keng Swee].

Clause 9, as amended, ordered to stand part of the Bill.

Clause 10 ordered to stand part of the Bill.

Clause 11 -

Question proposed. "That clause 11 stand part of the Bill."

Mr Rajah: Mr Speaker, Sir, where a public authority or an authority borrows money from the public, it is normally the case that provisions are inserted in the Bill for sinking funds to be created, so that that authority will from year to year pay into that sinking fund, contributions which would eventually be utilised to redeem the loan. I notice that in this Bill these provisions are missing.

Dr Goh Keng Swee: Mr Speaker, Sir, the provision of sinking funds would be, appropriate in the case of public authorities where the money is used to establish an enterprise or a utility of some sort; then a sinking fund is necessary for repayment or for replacement of its capital assets. But in the case of the Economic Development Board, loan debentures may be used not so much against a specific project but as part of the process of the financial activities of the Board.

In other words, it may borrow money to lend to other persons against assets which are already there.

Question put, and agreed to.

Clause 12 ordered to stand part of the Bill.

Clause 13 -

Question proposed, "That clause 13 stand part of the Bill."

Mr Rajah: Sir, clause 13 gives certain rights to the Board. It says:

`(1) Where any industrial enterprise which is under a liability to the Board under an agreement makes any default in repayment or otherwise fails to comply with the terms of its agreement with the Board, the Board shall, without prejudice to any other rights or remedies which it may possess under the law, have the right to take over the management of such industrial enterprise, as well as the right to sell and realise the property pledged, mortgaged, hypothecated or assigned to the Board.'

Mr Speaker, Sir, at this stage I am not saying that this is not a proper clause. What I wish to draw the attention of the House to is this - that in clause 15, which we will come to in a minute, Mr Speaker, Sir, the provisions which enable the parties to go to court also arise in circumstances where the powers of the Board are concerned under clause 13. That is the point I wish to make now.

Dr Goh Keng Swee: I think it is a repetition.

Mr Byrne: The rights of the Board in these matters are set out in clause 13. The procedure for the enforcement of these rights is set out in clause 15.

Mr Rajah: Sir, as I understand clause 13, if I may put it simply, whenever a breach of an agreement takes place, the Board has statutory powers under clause 13, when it becomes law, without prejudice to any other rights or remedies which it may possess under any other law, to take over the management of such industrial enterprise. So that once there is a breach of an agreement within the meaning of clause 13, then the Board has the right to take over the management of the industrial enterprise. It also has the right to "sell and realise the property pledged, mortgaged, hypothecated or assigned to the Board." So the statute confers the right on the Board to sell and realise the property mortgaged in the circumstances envisaged under clause 13. So that my point, when I come to clause 15, Mr Speaker, Sir, will be this - since you already have the statutory powers under clause 13 whereby you can take over the management or sell and give a good title, why then must you go through this rubber-stamp process of going before the Court and getting it to chop things, when you already have the powers?

Dr Goh Keng Swee: Clause 15 provides for the necessary processes that have to be set on foot in the event the management of the defaulting enterprise disputes the right of the Board, either in general terms or in detail, to take over its assets and the management.

Mr Rajah: Is the Minister suggesting that before the Board can take over the management of such an industrial enterprise, or before a sale of the mortgaged properties can be effected, steps must be taken under clause 15?

Mr Byrne: Mr Speaker, Sir, clause 13 sets out the rights of the Board in cases of default, and clause 15 clearly sets out the procedures.

Mr Rajah: Am I to understand that the contention of the Government is that the Board cannot, of its own accord, exercise the rights conferred on it by clause 13 without going through the processes laid down under clause 15? I do not read those two clauses in that way.

Dr Goh Keng Swee: Mr Speaker, Sir, I think clause 15 is invoked only where, as I have said before, the defaulting enterprise contests the rights of the Board. Where there is no such dispute as to the rights of the Board, then the Board can proceed in a normal manner without recourse to the Court.

Question put, and agreed to.

Clause 13 ordered to stand part of the Bill.

Clause 14-

Question proposed. "That clause 14 stand part of the Bill."

Mr Rajah: Sir, clause 14, to my mind, raises certain points which, if I am right, might operate to take away some of the effectiveness of this Bill. Clause 14 reads as follows:

`Notwithstanding any agreement to the contrary, and without prejudice to any other rights or remedies which it may possess under the law, the Board may by notice require any industrial enterprise, to which it has granted any loan or advance, forthwith to discharge in full its liabilities to The Board-'.

And then, Sir, it sets out a series of circumstances - (a), (b), (c), (d), (e). And in (1) it goes on to say:

`if for any reason it is necessary in the opinion of the Board to protect the interests of the Board.'

Mr Speaker, Sir, you will notice how wide a clause that is. So that in itself it could have read, omitting (a), (b), (c), (d) and (e):

`Notwithstanding any agreement to the contrary, and without prejudice to any other rights or remedies which it may possess under the law, the Board may by notice require any industrial enterprise, to which it has granted any loan or advance, forthwith to discharge in full its liabilities to the Board if for any reason it is necessary in the opinion of the Board to protect the interests of the Board.'

Now, that is a very wide clause. If that is the law, let us take these circumstances. There is an industrial enterprise which has been started and is doing well. Some bank has advanced it monies. Say the bank has advanced it $50 million or $10 million, and then that enterprise needs further money. The bank declines to lend further money. This industrial enterprise employs, say, a thousand persons. It is in the national interests that this enterprise should be kept alive as a going concern. This enterprise goes to the Government, puts its case before them, and in the circumstances Government might feel that this is one of those cases where Government should help and then Government advances $10 million to this enterprise. The bank, Mr Speaker, Sir, do not forget, has already advanced $10 million or $50 million as the case may be. And then after the Government have advanced this $10 million, they decide to call in the loan and say to this enterprise, "Will you discharge in full your liabilities to the Board?"

Now, the question I ask the Minister is this - is the Board going to be a preferred creditor or is it going to rank in pari passu with the bank? Now, if the intention of the Bill is to make the Board a preferred creditor, Mr Speaker, Sir, then I am submitting to the Minister that a bank would be very loath to lend monies to any business enterprise of the nature envisaged by the definition of "industrial enterprise" because any subsequent loans made by the Board would become a preferred debt and the bank might be defeated by virtue of the provisions of clause 14.

7.45 p.m.

Dr Goh Keng Swee: I think clause 14 does bring about a state whereby the Board would become, in effect, a preferred creditor if the Board so desires to exercise its powers under this clause.

Sir, there are various reasons why this is necessary. It is obvious that the dictates of financial prudence would determine that the Board should be given certain protective powers. I am not so much interested in the hypothetical arguments put forward by the Member for Farrer Park. What is more to the point is this. In the present situation in Singapore, insofar as the supply of bank credit loans to industry goes, the facilities are limited and the terms are not as attractive as would be the case with trading concerns. Speaking entirely from memory, I would say that the proportion of bank credit loans going to industry is extremely small, probably of the magnitude of five per cent, and I suspect most of these to be more in the nature of short-term loans against goods or raw materials in store or finished goods in godowns.

Industrial financing hardly exists as a practice in bank finance in Singapore today. Therefore, the situation which the Member for Farrer Park has described would not, in fact, be a serious problem at all. It would be a completely different matter if we had, say, private industrial banks engaging in loans on a substantial scale. If the Board were to act in an unreasonable manner independently, and even in opposition to private banks, then the ill-effects which the Member for Farrer Park has described may come into being. As it is, what we are doing really is to discuss a completely hypothetical proposition.

Mr Rajah: Sir, I am glad the Minister has dispelled that and if he has balanced the problem and thinks that that should be the position, I have nothing further to say. But I put this further proposition to the Minister.

Supposing an industrial enterprise were indebted to its trading creditors to the extent of $600,000 or $1 million. While it is so indebted, it goes to the Board and gets a loan of $1 million or $2 million, and subsequently the Board recalls that loan. Is it the intention of Government that the Board's loan should over-reach the other trading liabilities and defeat them, and that the Board should get preferential treatment rather than the legitimate trading creditors who had lent money or supplied goods prior to the Board giving the loan?

Dr Goh Keng Swee: I should say it is a matter of policy. These reserved powers of the Board should be used with great circumspection. So far as possible, where legitimate trading and financial interests are involved, the Board should, as I have said, be most circumspect in the use of these reserved powers. If the Board were to exercise these powers indiscriminately, then I should say that the effect would be harmful not only on the enterprise immediately concerned, but it may have adverse consequences on other debtors to the Board. I think these are matters which can be left to the good judgment of the Board itself.

Mr Rajah: Sir, I wonder if matters like this should be left to the good judgment of the Board. [Interruption] The Minister might think I am wasting his time, but I think there is point in what I am saying. Many people would not say I am wasting his time.

Sir, there are many problems which arise over this. If these enterprises should go into liquidation or bankruptcy, then who is the preferred creditor? It is not good enough merely for the Minister to assure this House that the Board will use its discretion, because the people who trade with these enterprises will want to know. If the laws are not equitable, then people will refuse to trade with these enterprises and, instead of helping industrial expansion in the country, the net result of this legislation might well be that these people will think twice about trading with these enterprises when they know that the Board, on giving these enterprises money, will become preferred creditors and defeat them.

Dr Goh Keng Swee: Mr Speaker, Sir, we are being driven into this detailed argument, as I have said, over a completely hypothetical proposition. I do not see why the Member for Farrer Park should deny the Government the right to say that the Board will be manned by people capable of making sound business policy decisions and that they will exercise these reserved powers which are necessary where public money is involved. I have gone as far as to concede that if these powers were to be exercised indiscriminately, then the objectives of the Board would be defeated. I think the Member for Farrer Park should be satisfied with the recognition I have given to the point he is trying to make.

Question put, and agreed to.

Clause 14 ordered to stand part of the Bill.

Clause 15-

Question proposed, "That clause 15 stand part of the Bill."

Mr Rajah: Mr Speaker, Sir, I think I have made my point on the Second Reading of the Bill that clause 15 merely gives powers to the Board to go to the Court where they themselves could act under clause 13, except possibly under clause 15 (1) (c); but insofar as clause 15 (1) (a) and (b) are concerned, the Board already have the powers under clause 13. There are various places here where the Judges are called upon to make interim orders, and there are places where the Judges are called upon to make certain orders and they are not left with any discretion. For instance, under sub-clause (7) of clause 15:

`If no cause is shown on or before the date specified in the notice under subsections (4) and (6) of this section, the judge shall forthwith make the interim order absolute and direct the sale of the attached property or transfer the management of the industrial enterprise to the Board or confirm the injunction.'

Under this sub-clause, Sir, the Judge can only do this specified thing. He cannot do anything more than that. But what the framers of this sub-clause have failed to appreciate is that they have not given the power to the Judge to cancel the interim order. Without the cancellation of the interim order, none of these orders can take place. They have gone on to tie the hands of the Judge by saying, "You shall do this and that," but they have not allowed him to cancel the interim order. Without the cancellation of the interim order, I do not see how sub-clause (7) can work at all. But that is for the Minister for Labour and Law to decide.

Mr Byrne: Mr Speaker, Sir, my friend the Member for Farrer Park is well aware of the construction of this particular clause.

This clause deals with cases of default where an enterprise reaches agreement with the Board. In those circumstances, there is provision for an application to be made by an accredited officer of the Board to the High Court for the reliefs set out in paragraphs (a), (b) and (C). These reliefs are designed to protect the interests of the Board, and I cannot see anywhere in the procedures that are set out in clause 15 that the Judges of the High Court are treated as rubber-stamps, as claimed by the Member for Farrer Park. Let us look at it, Mr Speaker, Sir. Take the case of an application made for the transfer of the management of the industrial enterprise to the Board on default. If the House will look at sub-clause (4) of clause 15, the procedures are set out there. Let me read sub-clause (4):

`Where the application is for the relief mentioned in paragraph (b) of subsection (1) of this section, the judge shall grant an interim injunction restraining the industrial enterprise from transferring or removing its machinery or equipment and issue a notice calling upon the industrial enterprise to show cause on a date to be specified in the notice as to why the management of the industrial enterprise should not be transferred to the Board.'

That is a judicial process, Mr Speaker, Sir, for an interim injunction and notice to show cause. Then sub-clause (5) provides:

`Before making any order under subsection (3) or subsection (4) of this section, the judge may, if he thinks fit, examine the officer making the application.'

There is the application that is made under sub-clause (1) - the application for the reliefs set out in paragraphs (a), (b) and (c). Then there is the procedure for the Judge to examine the officer who makes the application. There is also the procedure for the notice to show cause which must be served upon the defaulting enterprise.

Mr Speaker, Sir, we go on to sub-clause (6) which reads:

`At the same time as he makes an order under subsection (3) of this section, the judge shall Issue to the industrial enterprise a notice accompanied by copies of the order, the application and the evidence, if any, recorded by him, calling upon It to show cause on a date to be specified in the notice as to why the interim order of attachment should not be made absolute or the injunction confirmed.'

Then a notice to show cause issues on a date to be specified in the notice as to why the interim order of attachment - if it is a case of attachment - should not be made absolute or the injunction confirmed.

Then sub-clause (7) goes on to provide:

`If no cause is shown on or before the date specified in the notice under subsections (4) and (6) of this section, the judge shall forthwith make the interim order absolute...'.

Here is the case where an opportunity has been given to the enterprise to show cause, and when it has failed to do so then there is power for the Judge to make the interim order absolute and direct the sale of the attached property or transfer the management of the industrial enterprise to the Board or confirm the injunction.

Sub-clause (8) provides:

`If cause is shown, the judge shall proceed to investigate the claim of the Board and the provisions of the Rules of the Supreme Court, 1934, shall as far as practicable apply to such proceedings.'

So that there is, right through these clauses, the proper legal procedures which must be followed before the Judge makes his orders and I cannot see how it can be claimed by the Member for Farrer Park that, by virtue of clause 15, it is the intention of this Government to turn the Judges into rubber-stamps.

Question put, and agreed to.

Clause 15 ordered to stand part of the Bill.

8.00 p.m.

Clauses 16 to 22 inclusive ordered to stand part of the Bill.

Clause 23 -

Question proposed, "That clause 23 stand part of the Bill.

Mr Rajah: Just one point, Mr Speaker, Sir,In clause 23 (b), on the 4th line from the end, it says:

`... freed and discharged from any trust whatsoever, but subject nevertheless to the provisions of this Ordinance; and

(c) all liabilities and obligations of the Singapore Industrial Promotion Board which may have existed immediately prior to the coming into operation of this Ordinance shall be transferred to and vest in the Board.'

I can understand paragraph (c), Sir, but I cannot understand (b) when it says that merely because all the liabilities and obligations are transferred from the previous Board to the present Board, any trusts that were attaching to the previous Board shall be "freed and discharged". Could the Minister explain what that means?

Mr Byrne: Mr Speaker, Sir, "Upon the coming into operation of this Ordinance all liabilities and obligations of the Singapore Industrial Promotion Board which may have existed immediately prior to the coming into operation of this Ordinance shall be transferred to and vest in the Board" by operation of law. Mr Speaker, Sir, once that situation obtains, all previous trusts are discharged under paragraph (b).

Mr Rajah: Mr Speaker, Sir, I would have thought that if all the liabilities and obligations of the previous Board were to be taken on by the future Board, then the pharse "freed and discharged from any trust whatsoever" in paragraph (b) is quite meaningless. You cannot have any trusts attaching to it freed and discharged. Yet the Minister is trying to say that any obligation - and a trust is an obligation - has been taken on by the new Board. It seems to contradict itself.

Mr Byrne: Although they are freed and discharged - from any trust whatsoever, Mr Speaker, Sir, these liabilities and obligations do not escape the provisions of paragraph (c). All these liabilities and obligations, Mr Speaker, Sir, are vested in the Board by the operation of paragraph (c).

The Chairman: In other words, the obligations remain.

Mr Byrne: They do.

Question put, and agreed to.

Clause 23 ordered to stand part of the Bill.

Clause 24 ordered to stand part of the Bill.

Bill reported, with amendments; read a Third time and passed.