TARIFF ADVISORY COMMISSION BILL

4.09 p.m.

Order for Second Reading read.

The Minister for Finance (Dr Goh Keng Swee): Mr Speaker, Sir, I have His Excellency's recommendation that the Bill be proceeded with. I beg to move, "That the Bill be now read a Second time."

Sir, our entrepot trade has brought prosperity to Singapore and will continue to do so. But the expansion of this sector of the economy is not expected to be large enough to give jobs for all our unemployed. There arises, therefore, an urgent need for industrialisation in Singapore to create employment opportunities for our rapidly growing population. This need is generally accepted. In order to industrialise, sufficient incentives have to be made available to induce local and overseas capital to flow into manufacturing industries. The Government have done much to provide these incentives: first, in the development of adequate public utilities, roads and other facilities to make possible rapid industrial expansion; second, in the establishment of the Economic Development Board which will actively encourage industries and assist businessmen with technical, industrial and financial assistance; third, in providing industrial estates and sites for factories to be constructed and purchased on an extended payment basis and at reasonable rates of interest; fourth, in providing tax exemption on profit for five years for new industries through the Pioneer Industries Ordinance, 1959; fifth, through technical advice and assistance; sixth, through an expanded vocational training in the Polytechnic, trade schools, secondary technical schools to create sufficient numbers of skilled workmen needed in industry.

There is, however, one other field which has not up till now been fully exploited. This is the levelling of tariff duties on a selective basis on imported goods to protect the local industries in order to allow for their expansion and to encourage the establishment of new ones in Singapore. The reason for the agitation against the use of tariff protection is mainly that of the possible unfavourable effects they have on our entrepot trade. However, our brief experience in protective tariff has shown that the effects could be reduced to a minimum or even be eliminated if tariff duties are imposed with due care on selected com modities only. There should not be an indiscriminate or general imposition of tariff duties.

So far, the Government have accorded tariff protection to two imported articles, namely, soap and paint, and this action has not caused any unfavourable effect on our commercial interest, nor has it reduced or adversely affected our entrepot trade, The decision to impose tariff duties on soap and paint was made after considering the reports of the respective committees appointed under section 11 of the Customs Ordinance. However, both committees encountered difficulties in obtaining information, and it was clear that the machinery as provided in the Customs Ordinance has serious weaknesses. One over-riding difficulty was that of obtaining accurate and reliable information. The committee did not have the power to compel interested parties to divulge such information. The delay in submitting their findings has been due, in a large measure, to this, and in particular to the difficulty encountered in ascertaining specific information on prices of imported goods.

It is essential, if the development of manufacturing industries is not to be delayed, for a proper Tariff Advisory Commission to be set up with the necessary authority to obtain whatever information it needs to assess whether any particular industry requires tariff protection. Without this authority, the Commission will not be able to function quickly and effectively and the Government will not have the necessary data on which to reach a proper evaluation. The purpose of the Tariff Advisory Commission Bill now before the House is to overcome the weaknesses that now exist in operating section 11 of the Customs Ordinance, and to vest the required statutory powers to obtain the necessary information in the Tariff Advisory Commission to be established under this Bill. When such information is available, the Government would be able to make decisions on the basis of properly ascertained facts.

The provisions of the Tariff Advisory Commission Bill are mainly procedural and can be briefly stated as follows:

1. The Tariff Advisory Commission will consist of a Chairman and between two and four other members. The Commission can also co-opt on an ad hoc basis one or more persons with special knowledge of the matter under inquiry.

2. The Minister may refer to the Commission to inquire and report on any of the following matters relating to:-

(a) The granting of protection for the encouragement of any industry in Singapore, including any industry which has not commenced production but which is likely to do so if granted equitable protection.

(b) The modification or abolition of any prevailing customs or other duties levied for the protection of any industry.

(c) The action to be taken where the industry is taking undue advantage of the tariff protection granted to it.

(d) The effect of protection of the general level of prices in Singapore.

(e) Any anomalies that may result from the working of protective duties.

(f) The manner in which protection in relation to any industry has, been working.

The Commission may, inter alia., require any person to produce documents and provide information under oath. The Tariff Advisory Commission will, after investigation, make its recommendations in a report to the Minister and he will take whatever action he deems necessary.

Hon. Members will note that the intention of the Bill goes beyond merely the imposition of protective tariffs. The Bill empowers the Government to initiate inquiries on protected industries & should, for instance, any of these take undue advantage of protection by failing to reduce costs and prices where they can do so. It is not the purpose of protection to bring about high costs and inefficient producers, and the Tariff Advisory Commission will be charged with the duty of keeping constant surveillance on the workings of protected industries.

Because the Bill affects the interests one way or another of many sections of our economy, I intend to commit this Bill to Select Committee so that all concerned may have an opportunity of submitting their views.

Sir, I beg to move.

Question proposed.

4.19 p.m.

Tun Lim Yew Hock (Cairnhill): Mr Speaker, Sir, we support the principle of the Bill, but we must point out to the Government that while it is a good thing to consider the imposition of a protective tariff to help the industrialisation programme of the Government, they must not lose sight of the fact that the biggest factor to encourage the inflow of foreign capital for industrialisation is the political climate and the industrial atmosphere. The political climate in Singapore today is most unhealthy. We have a Government which is so fond and so proud of telling the world that it is -

Mr Speaker: Order. We are now on the general merits and principle of the Bill. I cannot see how what the Member for Cairnhill is saying has anything to do with the general merits and principle of the Bill.

Tun Lim Yew Hock: Mr Speaker, Sir, in moving the motion, the Minister did give an account of the various factors which he considered would induce foreign capital to flow into Singapore for industrialisation. I was just trying to point out to him that he had overlooked one most important factor, and that is the political climate and the industrial relations climate, both of which are most unhealthy and very discouraging, so much so that no matter what plans the Government may have to encourage the inflow of foreign capital, they have failed miserably.

Sir, there is one point on which I would like to congratulate the Government. For the first time since they came to power in 1959, they have come to realise that the members of a board or a commission shall not be Members of the Assembly. Previously, when they had 43 Members on their side, they insisted that Members of the Assembly should have a right to sit on a board or commission, and every time it was a P.A.P. Assemblyman and nobody else. While it is a good thing, Sir, that Members of the Assembly are now not permitted to be appointed to the Tariff Advisory Commission, may I ask the Government to remember this too; that they should not continue with their evil practice of loading commissions with men who will only play the P.A.P. game? In order to make this Tariff Advisory Commission a success, I hope the Minister will appoint men of integrity, men who will work with the interests of the country at heart, and not men who will only work for the P.A.P.

Sir, in clause 6, the Commission has powers to co-opt one or more members who possesses special knowledge of any matter relevant to any inquiry. But if a person is so appointed because of his special knowledge, he will come up against clause 8. He will have either a direct or an indirect pecuniary interest. How is that going to operate? To appoint on an ad hoc basis a person with special knowledge of a particular subject and yet to say that if he has a direct or indirect pecuniary interest he should not be present - perhaps the Minister can explain that. Perhaps the Government will, in full realisation of their past mistakes and the folly of their industrialisation programme, come to an awakening that the only way to solve the unemployment problem is to see that their industrialisation plan succeed; and the only way to make it succeed is to see that the political climate is healthy and that the industrial relations field is conducive to the inflow of foreign capital.

4.25 p.m.

Mr David Marshall (Anson): Mr Speaker, Sir, this is a Bill to assist in nibbling away at the free port status of Singapore. If we can accept the principle that individual Ministers can have vast powers to place tariffs on articles, then, of course, we can say that the Bill is helpful in that they have the assistance of a Commission, though itself appointed by the Minister.

What I rise to sound a note of warning on, Sir, is that there does not seem to be adequate appreciation of the long-term danger of nibbling away at our free port traditions. The Minister for Finance has told you that for the past few months, we have had a duty on soap and a duty on paint. The one on soap, Sir, I think, is a matter of one month, and he says there has been no adverse effect on our economy. He shows very little regard, Sir, either for the intelligence of this House or he himself has very little understanding of the factors to imagine that one or two' duties over an extremely limited period of weeks could affect the picture sufficiently to prejudice more than a, century of tradition of free port for Singapore. But the matter of these individual tariffs is cumulative in effect, Sir, and as we add tariffs, then the information will seep through and the knowledge will expand that Singapore is no longer a free port. It is that, Sir, that can and seriously adversely affect our entrepot economy. The Minister pays passing tribute to our entrepot economy, but seems to think of it as no more than secondary to his industrialisation baby.

Sir, I accept that industrialisation can become an important element in this State's economy. But I do say that it cannot replace our entrepot economy which must at all times be the cornerstone of any financial policy. An economy so little understood by the Minister that he seeks with derision to inquire what purpose there could be in an exploratory mission to such vast areas of potential commercial activity as India and China. With that attitude, Sir, one can destroy, not in the next two years, but one can lay the basis for the destruction of our economy. I am not unaware of the possible importance of what the Minister calls selected cases of tariffs. Those selected cases must be of a character which really bring in a considerable amount of employment and have little international repercussions or at least repercussions on our international trade. I would be far happier, Sir, if the provisions which seek to amend the Customs Ordinance, which are coming after this Bill, were of a character which would permit this House to pass judgment on the tariffs recommended by the Tariff Advisory Commission. But that is not to be, and I rise in opposition to the general principle of nibbling away by individual Ministers at the free port reputation of this island.

4.30 p.m.

Dr Lee Siew Choh (Queenstown): No one from our side, Sir, can quarrel with the intention of the Bill to provide an edifice for an industrial complex unless he believes that Singapore can survive on entrepot trade alone. The need for necessary tariff protection for Singapore's industries is obvious. Industries cannot grow in the teeth of formidable competition with foreign goods that come into the Singapore market through the free port and across the Johore Causeway. What appears to be undesirable in this Bill is the absence of any provision that makes it incumbent on the proposed Tariff Advisory Commission to keep the people informed.

Clause 15 (2) of the Bill confers on the Commission unwarrantable powers of secrecy with regard to the proceedings of the Commission. Furthermore, there is no provision to publish the reports of the Commission upon which the Government's decision of protection for industry is based. The people therefore are deprived of the right of access to the necessary information and documents without which sound judgment may not be possible. We do not like to see a repetition of what happened recently when the Government took a decision to give protection to the paint manufacturing industry in Singapore. The Government did not publish the report of the Advisory Committee although action was taken. We are not unaware of the necessity for the maintenance of trading secrets in individual firms in the industry, but we are of the view that the proceedings of the Commission should, as far as possible, be open to the public unless and until the Commission decides otherwise. We would like the people to have free access to the findings and recommendations of the Commission.

We are also puzzled, Sir, over the timing of this Bill. It is common knowledge that an early realisation of the common commodity market is out of the question whatever the Outcome of the political schemings and machinations as regards Malaysia and the P.A.P. merger. The last time we heard about the common commodity market was the joint communique announcing the plan to appoint a team of international experts to study the problem. We would like the Minister to inform the people of Singapore whether such a team has been appointed. If not, is there any likelihood of one being appointed, and when?

Dr Goh Keng Swee: On a point of elucidation, Sir.

Dr Lee Siew Choh resumed his seat.

Dr Goh Keng Swee: To the question from the Member for Queenstown, I have already explained the latest developments with regard to the appointment of these experts.

Dr Lee Siew Choh: The Minister can amplify, Sir.

Mr Speaker: Order. It is not a question of amplification. I think the Minister has pointed out that he has made a statement, and if the Member for Queenstown is not satisfied, he can say how he is not satisfied.

Dr Lee Siew Choh: It is possible that I did not hear him when he gave the explanation, but he can always repeat it for the benefit of all of us.

Anyway, we would like to know whether the government-to-government talks on the common commodity market between Singapore and the Federation are still going on. What we cannot understand is, how does the P.A.P. Government reconcile its contention that Singapore will not be able to survive without a larger economic unit with what is implied in the present Bill which pre-supposes the viability of Singapore's industrial development? We believe that the economy of Singapore is viable and, as such, any measure that Government wants to take to strengthen this viability will be welcome.

Mr Speaker: Mr Minister, in reply.

Dr Goh Keng Swee: Mr Speaker, Sir, three Members of the Opposition from three different Parties have given three different versions of the intention .of this Bill and of what it hopes to achieve.

In a sense, of course, their criticisms have cancelled out one another, as I will shortly explain. First, the Member for Cairnhill says that the political climate is unhealthy and that industrial relations are at the present moment not conducive to investment of capital in industries. Now, Sir, I would agree with the second proposition, but certainly not with the first. I would have thought that the political climate is eminently healthy to attract capital. The Government is carrying on with its long-term plans for merger and Malaysia. We see the Barisan Sosialis, who only a year ago predicted the October Revolution, now in despair sending troops of little kids down the desolate streets of Singapore each Sunday. I would have thought that the political situation is extremely healthy other than, of course, for the Communists and their stooges in the Barisan Sosialis. We have debated the matter of industrial relations in this Assembly, and I do not think I want to say much more about it except that this Bill is intended as a long-term measure and we must not be dissuaded by temporary inconveniences. We are certainly not going to wait until the industrial scene is as peaceful as it can be. I suggest, Mr Speaker, Sir, that will come about after merger and Malaysia.

Now one nagging criticism which the Member for Cairnhill always brings up in this Assembly is that the P.A.P. always appoint P.A.P. men to P.A.P. Boards, as if this is a thoroughly reprehensible practice. May I suggest that this practice is carried out in every democratic country? When Mr Churchill was the Prime Minister and the Conservative Government was the government of the day, they appointed Conservatives to important posts in the Boards. There is nothing wrong with that. The Member for Cairnhill can hardly expect the P.A.P. to appoint `his cronies to important positions. May I suggest, Sir, that the persons that we have appointed to important positions are doing a very good job of work? For example, Mr Lim Kim San, who is the Chairman of the Housing Board, has really done a magnificent piece of work, building low-cost houses at all-time record in Singapore. He does it for free. He is not taking any money.

Mr David Marshall: Is he P.A.P.?

Dr Goh Keng Swee: He is not P.A.P. But unlike the Member for Anson, he can see a good Party and he can respect good men when he sees them.

Sir, I do not think I will dwell at length on what the Member for Cairnhill says on the conflict between a man with special knowledge and the same man having a direct interest in the industry concerned. The sort of special knowledge which the Tariff Advisory Commission might want would be purely on account of technical knowledge of some kind or other. For instance, in the investigation into qualities of toothpaste and so on, they may find that they need the services of a chemist or they may want the services of a special type of accountant for analysing the import prices of certain things. Insofar as a general knowledge of any particular industry is concerned, the Tariff Advisory Commission will have men who have some knowledge of such an industry. But as I say, in assessing and evaluating data, they often do require experts of one sort - chemists, physicists, accountants or even mathematicians, for all I know. That is the purpose of this particular clause. The reason is that when the Minister is making the initial appointment, he cannot foresee the types of problems which the Tariff Advisory Commission may encounter.

Sir, you will recall that the Member for Anson started his ministerial career as Singapore's first Minister for Trade. Therefore, one would have thought that he had benefited from his experience in his first ministerial post. But his speech has given me quite a contrary impression. He says that one of the damaging long-term effects of the Bill would be that people would know - that knowledge would seep through, in his own words - that Singapore is no longer a free port, and that this would eventually, if not immediately, affect our entrepot trade adversely. With due respect, Sir, I suggest that it is utter and complete nonsense. Singapore's entrepot trade is done by businessmen. There is no mystic about it.

Perhaps I had better explain the simple economic fundamentals of this so-called entrepot trade. It looks very nice if you talk about entrepot trade or international trade, but the basic element is quite simple. Singapore is in the centre of South-East Asia. It has sea communications with hundreds of little ports along the coast of central and south Sumatra, Borneo, the east coast of the Malay Peninsula, good rail and road communications with southern Malaya. It is because of these excellent sea, road and rail communications that we are best equipped to supply these people with goods that they want at the lowest possible cost. Secondly, because of a highly developed transportation system, we are best equipped to buy from them the goods that they produce. It is as simple as that. It does not depend on subjective or psychological attitudes.. It does not depend on whether knowledge seeps upwards or downwards or backwards. So long as our port is sufficient and so long as steamship lines and railways operate sufficiently, it will continue to serve as a supply base and as a market for our neighbouring territories.

Sir, I must congratulate the Member for Queenstown on some of his words. He shows a spark of understanding which I never suspected existed in his mind. He puts the position very, nicely when he says this: that we must support tariffs unless we believe that Singapore can live on trade alone. The Member for Anson is opposed to tariffs because he thinks it will damage the entrepot trade. Quite unlike the Member for Queenstown, he believes that we can live on tirade alone. Any man who can believe in such an absurd proposition. Mr Speaker, Sir, is beyond convincing by rational methods, so I will not attempt that.

The Member for Queenstown says the secrecy provisions of this Bill are regrettable, although he acknowledges that there are instances where trade secrets have to be preserved. But he thinks that the sittings of the Commission should be in public, unless the Commission decides otherwise. Sir, clause 15 (2) of the Bill says that the sittings of the Commission shall be in private unless the Commission decides otherwise. So I do not see any real issue between the Member for Queenstown and myself. There may be a subtle difference, but it is beyond my mind to comprehend it.

Then the Member for Queenstown winds up with a discourse on the viability of Singapore's economy to flourish in isolation. I have no doubt that in saying these words he has in mind what Tunku Abdul Rahman said recently about closing the Causeway.

Dr Lee Siew Choh: You encouraged the Tunku.

Dr Goh Keng Swee: I encouraged the Tunku, Mr Speaker, Sir? On the one hand, they say, "Why don't we have a common commodity market?" If I could encourage Tunku Abdul Rahman to such an extent, may I suggest, Mr Speaker, Sir, that we would have got a common commodity market. No, Sir. These people have been doing things and frightening everybody. They do not know. They may not know it. And they have already brought upon themselves a foretaste of what will happen to Singapore should there be no merger. Then they will bring upon themselves far greater misfortunes which we will not dwell upon at this stage.

Dr Lee Siew Choh: False hopes of the P.A.P.

Dr Goh Keng Swee: Sir, they always accuse us of hoping that retribution or disaster will befall them, and we keep on saying that our only purpose in drawing their attention to a future disaster is to tell them, "Please don't do these foolish things. You only bring disaster upon yourselves." Sir, all our admonitions have always been greeted with scepticism perhaps, but I suspect that inwardly they are becoming more and more convinced that what we say will happen and is truer than they would like to admit.

Now, Sir, viability of Singapore's economy in isolation - to me this question is a purely academic one, because if you were to deliver a lecture on this subject to, say, a group of professional economists you must define various things: what do you mean by isolation? Do you mean that the people of Singapore (1,700,000 of them) should live in isolation as, say, Robinson Crusoe did in the past? That sort of isolation, I say, is not possible because you cannot grow enough food to feed 1,700,000 people. Therefore, what degree of isolation do you mean? And this presupposes all kinds of political relationship with our neighbours. A friendly Federation would be of immense economic benefit to Singapore. They can even help us to bring about a common commodity market without any further trouble. On the other hand, a hostile Federation can not only cause acute discomfort to Singapore but tremendous loss. This proposition is so obvious that I do not think any sane main will argue the case out. But I raise this point because I think there may be an impression among some Members that with merger and Malaysia, why have this? Will it no longer be necessary? When you have a common commodity market, why do you want a separate Tariff Advisory Commission? I would say that whether there is a common commodity market or not, there is need for this Tariff Advisory Commission. If there is no common commodity market, then we have, of course, a tariff against the rest of the world, including the Federation of Malaya, since the Federation are not prepared to co-operate with us and have a joint industrialisation programme. Then we go it alone and must impose a tariff on products manufactured in the Federation of Malaya and exported to Singapore. But even if there were a common commodity market, obviously from time to time there would be instances when the Government would consider whether this industry should be established and, if so, would the imposition of a protective duty assist the position of the industry? If you have a tariff duty and you have this industry, how do you gauge the value of the new industry and employment against consumers having to pay slightly higher prices? As I have said, the same problem will confront the Government whether we have a common commodity market with the Federation of Malaya or within Greater Malaysia or whether we go it alone.

Mr Speaker, Sir, as I have said, this is a basic departure from the laissez-faire policy of the State. It is for this reason that we are committing this Bill to a Select Committee so that all interested parties can ventilate their opinions before the Select Committee.

Question put, and agreed to.

Bill accordingly read a Second time.

Committed to a Select Committee consisting of Mr Speaker as Chairman and five Members to be nominated by the Committee of Selection.-[Dr Goh Keng Swee]

Mr Speaker: Is it convenient to suspend?

Dr Goh Keng Swee: Yes.

Mr Speaker: I suspend this sitting. I will take this Chair again at 5.30 p.m.

Sitting accordingly suspended at 4.56 p.m. until 5.30 p.m. Sitting resumed at 5.30 p.m.