MARKETS FOR LOCAL PRODUCTS

Mr Bernard Rodrigues (Telok Blangah): Mr Speaker, Sir, during the past few months, I have noted with gratification that various Ministers of our Government have gone on record to the effect that Singapore is in favour of regional economic co-operation. The distinct impression given is that the greater the scope for such a common market, the more Singapore is in favour of it.

From the trade unionists' viewpoint, this makes a welcome change from the headlines in the newspapers about warnings given by the Government to the trade unionists and workers of Singapore that they must first learn the A B C of economics and must not endanger the economy of Singapore by making exorbitant demands on the employers. From my experience as the Executive Secretary of the Pioneer Industries Employees' Union, I can assure Members of this House that the average wage-level prevailing among the pioneer industries is the lowest in Singapore. This is only an incidental point, but it lends emphasis to my contention that the workers in the pioneer industries recognise the gravity of the economic dilemma of Singapore by restraining themselves in order that the pioneer industries may remain viable and competitive in the international market.

[Mr Lim Cheng Lock in the Chair]

6.50 p.m.

Mr Bernard Rodrigues (Telok Blangah): I have said that the Singapore Government has made references to the desirability of regional economic co-operation. The success of our industrialisation project does not depend only on the workers in the pioneer industries being reasonable in relation to their demands for better wages and working conditions, but also on the industrialists' ability to find outlets for their products. It is high time that Members of this House were told that, if the industries in Singapore find difficulty in disposing of their products, it is not because the high cost of labour in Singapore has helped to price the industrial products of Singapore out of the international market, but because of other factors. One is the trade barriers erected by foreign countries out of political or economic consideration. Another is the psychology of the consumer who prefers to stick to well-known brands of goods. Even in Singapore, our local consumers prefer the imported brands to the locally manufactured brands when the goods concerned are identical in every respect except the brand name.

I do not seek to minimise the fact that the cost of labour has a direct bearing on the cost of the final product, or that the cost of labour in Singapore may be higher than that prevailing in countries such as Malaysia, Taiwan and South Korea which have the same ambition to industrialise their economy just as we do in Singapore. But the real reason, I think, why our industries are not able to expand as fast as was expected is the smallness of the domestic market in Singapore.

Singapore, an island Republic of 220 square miles with barely two million population, generally speaking, does not have a domestic market large enough to work any modern industry at its optimum level. The wage level of labour has no direct bearing on the optimum size of any industry. On the contrary, the higher the wage-level may be, the more conducive it may be to an industry reaching an optimum level of production because of the greater purchasing power of the workers. This is by the way; but my point is that in the absence of a sizable domestic market, it is vital that we find an international market to serve as an extension to our local market.

One of the ways in which we can develop such an international market to offset the sheer physical limitations of our domestic market is to have a common market arrangement with our neighbouring countries. I appreciate that there are many difficulties in the way of concluding a satisfactory common market arrangement, as the participating countries may have widely different interests. Even during the two years when Singapore was in Malaysia, we could not arrive at a common market arrangement which was provided for in the Malaysia Agreement. When the machinery was finally set up for a common market. Singapore was expelled from Malaysia and that was the end of the expectation of a common market between Singapore and Malaysia.

Considering the many difficulties that are in the way of the formation of a common market, I envisage that the problem of having a broader market than is provided for by our domestic market may be resolved by a series of bilateral trade pacts between Singapore and other interested countries. It is encouraging to note that fruitful efforts are being made by Singapore in this direction. I have in mind the bilateral trade agreements made by Singapore with Russia, Rumania, Bulgaria and other Eastern European countries. I am sure it is also the fervent wish of all Members of this House that the Singapore Government should continue to succeed in its efforts to reach bilateral trade agreements with as many countries as possible.

In this context, I must express my considerable surprise that there has been no trade agreement with one country in particular with which we have considerable trade. I refer to the Republic of China which, as you know, Sir, last year supplied to us $217 million worth of various forms of manufactured goods, while taking from us in return not more than a few million dollars worth of rubber and other commodities. This is a most unfavourable flow of trade between the two countries, particularly in view of the fact that the goods supplied by China are similar to those which are being manufactured by our pioneer industries in Singapore. This trade with China is a double tragedy in the sense that we are losing valuable foreign exchange to China and that these Chinese goods are undercutting the products that are being made in Singapore. The reason why China is able to sell its goods at fantastically low prices, which may have no relation to the cost of production, is perhaps that it wants to obtain foreign exchange -

Madam Chan Choy Siong (Delta): On a point of order. Sir. Can the Member for Telok Blangah speak a little slower, as I think the Interpreters are finding it difficult to follow him?

Mr Lim Cheng Lock: Will the Member speak a little slower so that the Interpreters can translate?

Mr Bernard Rodrigues: For the benefit of the Member for Delta, I will repeat what I have just said.

The reason why China is able to sell its goods at fantastically low prices, which may have no relation to the cost of production, is perhaps that it wants to obtain foreign exchange at any cost. While we sympathise with China's efforts to obtain scarce foreign exchange, the survival of Singapore must take precedence. I hope the Government will take firm steps to have bilateral trade agreements with countries such as China with which we are having a disadvantageous balance of trade. If we cannot make countries such as China buy more from us, then we must impose trade quotas and tariffs to discourage such countries from selling more to us. I am of the opinion that a severe curtailment of the import of Chinese goods will not prejudice the welfare of Singapore, as our own industries can supply a similar range of products.

It is necessary for Singapore to put its relationship with our neighbouring countries on a business-like basis. In saying so, I have in mind that the attitude of certain foreign governments toward Singapore is not founded on a rational policy of mutual co-existence but on purely emotional reaction towards the existence of Singapore as an independent socialist Republic. In such circumstances, I repeat, pending a common market arrangement between Singapore and other interested foreign countries, some attempts must be made to equalise the flow of trade between Singapore and other countries, especially those countries who are selling more than buying from us. Otherwise, we will have the most undesirable situation in Singapore where we have sacrificed our scant capital in creating and developing our capacity for industrial production which will grind to a halt through our having insufficient outlets for our industrial products.

7.01 p.m.

Mr Lim Kim San: Sir, I welcome the constructive attitude of the hon. Member for Telok Blangah and I am glad to be given an opportunity to explain in more detail the efforts being made by the Government to increase our market.

However, before proceeding, I would like to take up one point which the hon. Member has mentioned. It is not the high cost of labour alone that will price an industrial product out of the international market. There are also other factors. No one will dispute the contention that cost of labour is not the only factor influencing the competitiveness of a country's products. However, the cost of labour is one of the more important factors.

Wages are never too high "per se". They may only be too high in comparison with what is paid in other competing countries. As has been very rightly pointed out by the hon. Member for Telok Blangah, we have to compete with products from Korea, Taiwan and Japan, where the wages may be lower than those prevailing in Singapore. It could be argued, of course, that in other countries, for instance, the United States of America, wages paid are much higher than those in Singapore. It has never been disputed that a large market is the primary factor for the success of our industrialisation programme, and steps have been taken and will continue to be taken to enlarge the market for Singapore goods.

The market for Singapore goods can be divided into two parts - (1) the local market, and (2) the export market. Our local market is small, with less than two million consumers. This market is further restricted, as has been pointed out by the hon. Member, by brand consciousness of our consumers. Local consumers have been repeatedly asked to buy more Singapore goods, and whilst it is difficult to wipe away such brand consciousness overnight, it is my belief that our consumers are taking greater pride in Singapore's products and buying more Singapore-made goods.

The Government is allowing double tax deduction on market development expenditure, including advertising, in respect of locally-manufactured goods. The Trade Division, together with the Economic Development Board, is sponsoring exhibitions, trade expositions, and fairs to make local products better known to consumers. Government departments and statutory bodies are increasingly buying more local products.

One of the ways to increase our international market is by participation in free trade areas, regional agreements, common markets, and the like. Unfortunately, Sir, we must have partners with whom to conclude such agreements or arrangements. As the hon. Member has pointed out, there are many difficulties in the way of the formation of these arrangements and agreements.

[Mr Speaker in the Chair]

7.05 p.m.

Mr Lim Kim San: There are some dangers, too, such as the danger of being included in a region which would not offer us what we hope to find as a market and may damage our relations with other parts of the world, or endanger our entrepot trade. We have to be very careful in this field, perhaps more careful than countries which do not have such a large entrepot trade as Singapore has. However, the Export Promotion Centre, which was formed specifically with the objective of finding an expanding market for Singapore goods, and the Ministry of Finance are continuously and carefully studying all possibilities which may materialise and to take advantage of such opportunities and situations.

We have already concluded trade agreements with the U.S.S.R., Rumania, Poland, and other countries. We are sending trade missions to these countries in August this year. This mission will comprise 30 persons, including businessmen and officials, They will go to seven Eastern European countries to consolidate the results obtained by the first negotiations held in Singapore. To publicise Singapore products in the international market, the Export Promotion Centre has started an active campaign in the foreign Press. Singapore has been widely advertised in at least two important magazines circulating in the European market. Singapore is also participating actively in foreign exhibitions and fairs where it is considered that there are possibilities of expanding its market by such participation.

In one or two months' time, our Export Promotion Centre will be sending industrialists to Zambia where opportunities of finding markets for Singapore products are good. Our efforts in promoting exports of domestic products are showing results. In 1963 $277 million worth of domestic goods were exported. This increased to $345 million in 1965 and $400 million in 1966, To encourage export-orientated industries, I have in my last Budget speech announced fiscal incentives for such industries. Results should show in 1968. I have also set up a working party to study schemes for export credit insurance which will be an important tool at the disposal of our exporters.

With regard to the hon. Member's comments on trade with China, Members should bear in mind that we cannot always work solely on the principle that we will only trade with countries which buy an equivalent amount of goods from us. A trade deficit with one country is often counter-balanced by a trade surplus with another. That is how international trade works.

Finally, Mr Speaker, Sir, I would like to assure the hon. Member that we are quite aware of the dangers of dumping, and where goods similar to those that are manufactured in Singapore are being dumped here, active steps will be taken to see that our local industries are not endangered.

Question put, and agreed to.

Resolved,

That Parliament do now adjourn.

Adjourned accordingly at Ten minutes past Seven o'clock p.m. to a date to be fixed. APPENDIX I(Cols 0071-0072)