RISE IN COST OF LIVING

The following Question stood in the name of Inche Mohd. Ariff Bin Suradi -

Inche Mohd. Ariff Bin Suradi: To ask the Minister for Finance whether he is aware that the cost of living in the Republic has gone up rapidly and if he is taking any steps in the matter.

Mr Tang See Chim: Inche Mohd. Ariff Bin Suradi.

Inche Rahamat Bin Kenap (Geylang Serai): (In Malay): Question No. 6.

Dr Goh Keng Swee: Sir, for some months there has been public concern over increases in the prices of certain commodities, especially foodstuffs and household articles. The reasons for these price increases are often confused in the public mind. As a result, there have been adverse comments on Government's industrialisation pro gramme which has been blamed for the increase in the cost of living. I wish to go into these matters in some detail as it is important that the blame should be attributed to the right quarters. The real reason for the widespread concern over the increase in the cost of living, especially among the poorer people, lies in the substantial increase in the cost of rice. Over the last 18 months the price of rice has gone up by 14 cents a katty. To people with large incomes this increase in price will cause no hardship. But if we consider the effect on a typical working family of, say, a man with a wife and three children, we can see that it bears very harshly on them. A family of five may consume about 100 katties of rice a month, and the price increase means that a wage-earner has to bear the additional expenditure of $14 a month. To a family earning $200 a month - this is a typical working class family income - this represents a very substantial increase. It is nearly equivalent to a pay cut of $14 a month, and the extensive grumbling that goes on now is the consequence of this.

What can Government do about the price of rice? First, we must find out why the price has gone up. Is it due to profiteering by our rice merchants, or is it because the world price of rice has increased? If price increases are the result of profiteering, then Government action to lower prices can be taken by taking measures against profiteering. But there is rio evidence that our rice merchants are profiteering. The real reason is that there has been an increase in the world price of rice because of the general shortage of supply. Rice exports from Burma have gone down in recent years. Thailand is suffering from a drought. The war in Vietnam has not helped to increase rice production in that country. And indonesia continues to be a large buyer in the world market. So the increase in the cost of living due to the increase in the price of rice is due to external factors beyond our control and has nothing to do with the Government's industrialisaton programme.

[Mr Speaker in the Chair]

2.46 p.m.

Dr Goh Keng Swee: So long as people want to eat rice, they must pay for the extra cost. But they can economise by eating less rice and more wheat products, such as bread and noodles, as our Deputy Prime Minister has been advocating. Wheat flour, of course, is half the price of rice.

There has also been a substantial increase in the price of canned meat imported from China. Chinese exporters have increased their prices, and there is statistical evidence that this has happened. Here again the reasons lie outside our country and beyond our control.

As regards day-to-day food supplies, certain items have gone up in price, such as cabbages and potatoes, while others have gone down in price, such as red chillies, onions, spinach, chai sim and 1ong beans. These are normal fluctuations in the market and are not of great significance.

Some months ago there was an attempt made to speculate in matches and sugar. When these commodities were produced in Singapore, import duties were imposed on foreign products so that the local manufacturer could capture the domestic market. Some people, thinking that they could make money, tried to raise the prices of sugar and matches. But it was soon found that local suppliers were adequate to meet the market demand and prices reverted to normal. So while imported matches are more expensive, the price of the local product remains the same. If people want to buy imported matches at twice the price of the local product, there is nothing one can do about it.

This brings me to the subject of Government's policy on industrialisation and its effect on the prices of goods. We must assure the local manufacturer a substantial portion of the domestic market for the products he is manufacturing. To do this, import duties are imposed on foreign products. Naturally thit means that the prices of imported articles go up. The Trade Division of the Ministry of Finance keeps a continuing survey on prices of locally-manufactured goods. When local manufacturers commence production, they are directed not to increase their prices unless there is good reason to do so, as, for example, an increase in the price of raw materials. In nearly all cases, the local manufacturers have accepted their obligation in good faith and have maintained good quality and reasonable prices. Here again some local consumers are attached to the brands of goods which they are used to buying, and these imported goods definitely cost more than the local products. If you want to pay more for imported condensed milk, mosquito coils, chocolates, toilet soap, singlets and matches, you cannot complain about the increase in the cost of living, because you can buy local products at the same price as before and of comparable quality. For instance, Cadbury chocolates used to cost 35 cents a bar. As a result of import duties, they now cost 50 cents a bar. Van Houten chocolates, which are produced in Singapore, continue to be priced at 35 cents a bar. If you are very fond of Cadbury chocolates, you may continue to buy them. You will then be contributing to the revenue of the Customs Department. If you buy the local product, you do not make this contribution but you will be contributing to the income and employment of your fellow citizens. You can take your choice in this matter.

In two or three instances there are grounds for suspecting local manufacturers of either having inefficient high cost management or making excessive profits. The cure here, in the first instance, is to improve management efficiency. In the second case, it is to ask the manufacturer to reduce his prices. The sanction that can be applied in both instances is the reduction or abolition of import duties on these commodities. I will not hesitate to apply this sanction should the circumstances of the situation justify such action.

Mr P. Govindaswamy (Anson): As the Hon. Minister for Finance has accepted the fact that people earning below $200 will incur an additional expenditure of $14, will the Minister consider increasing the salaries of people drawing low pay?

Dr Goh Keng Swee: The answer is "No".

Mr Teong Eng Siong (Sembawang): (In Mandarin): Will the Minister consider requesting all shops selling foodstuffs to exhibit price tags on their goods (especially rice) for public information?

Mr Speaker: Mr Teong, the subject matter of your supplementary is actually a substantive question. It is down today for written answer. So your supplementary, in fact, anticipates a matter that is before the House.

Mr Teong Eng Siong: (In Mandarin): I would like to ask the Minister whether he would consider instructing all rice sellers to exhibit price tags to help the buyers. Some of the shops have already done so.

Dr Goh Keng Swee: I do not believe that exhibiting price tags could reduce the price of rice. But if the hon. Member believes that it will, and has confidence in its efficacy, then we can give it a try.

Mr Teong Eng Siong: (In Mandarin): Sir, what I mean is that if there are price tags, the purchasers will know the actual condition of the market, because now and then, whenever there is any incident, the seller -

Mr Speaker: Mr Teong, supplementaries are not explanations.

Mr Tang See Chim (Choa Chu Kang): Mr Speaker, Sir, would the Minister for Finance consider setting up a committee whose sanction is necessary if any local manufacturer wishes to increase the price of his products?

Dr Goh Keng Swee: There are committees in existence to consider applications from manufacturers who wish to increase the prices of their goods.

Mr Tang See Chim: Does it mean that the present position is that no local manufacturers can increase the prices of their products unless the increase is sanctioned by the committee that is in existence?

Dr Goh Keng Swee: They are under no legal compulsion to keep their prices at any given level. But there is a gentleman's agreement between the Ministry and the manufacturers that price increases should be discussed with and agreed to between themselves. For this purpose, the reasons for any price changes are put forward to an interdepartmental committee of officials who will make recommendations to the Minister.

Mr Tang See Chim: What sanction would there be then should a local manufacturer breach this gentleman's agreement?

Dr Goh Keng Swee: The sanction I have mentioned, Mr Speaker, Sir, is the abolition of tariff protection.