PROMOTION AND PROTECTION OF LOCAL INDUSTRIES

Mr Bernard Rodrigues asked the Minister for Finance, with a view to promoting and protecting local industries whose production capacity can meet the demands of local consumption, if he will consider prohibiting the importation of products similar to those of such local industries.

Mr Ramaswamy (for the Minister for Finance): The policy of the Government with regard to protection of local industries is quite clear. The Government is prepared to grant protection to industries if several factors are satisfied. Firstly, the industry must be in a position to supply a major part of the local market. Secondly, the industry should result in a net gain to the economy by way of foreign exchange savings, local income generated and local employment created. In addition, the industry should as far as possible be one with some export potential. The industry must show evidence of being willing and able to compete in the export market. Thus it can be seen that the productive capacity of an industry alone is not sufficient to conclude that it should be protected. There are other no less important factors to be taken into consideration. In considering the actual measures to be adopted, we have learned through experience that prohibition of imports is not the best means.

Firstly, such prohibition does not set an automatic limit to the extent to which local prices can increase.

Secondly, prohibition of imports would mean that the local industry would be divorced from the competitive pressures of new designs and improved quality which are constantly being developed by industries abroad.

Thirdly, prohibition creates a situation which opens the administration to business pressures and enticements. It also results in a very high premium for the imported products, which encourages smuggling.

For these reasons the Government would prefer to grant protection in the form of import duties. There are, of course, cases where quantitative restrictions on imports are necessary in the initial stages of an industry's existence. In such cases, the Government is prepared to consider such measures.

Summing up, the Government is prepared to consider measures to protect local industries from imports, but does not consider prohibition of imports as the best means of doing so.

Mr Teong Eng Siong (Sembawang): (In Mandarin): Mr Speaker, Sir, the Government has imposed a quota on textiles and singlets. As a result of this, there is an increase of ten cents or so in the price of singlets. Does the Government have any measures to prevent price increases?

Mr Ramaswamy: Firstly, I think this supplementary question does not arise out of my answer. Secondly, the Finance Minister explained very elaborately about this yesterday.