ANNUAL BUDGET STATEMENT

Order read for resumption of debate on Question [3rd December, 1968], "That Parliament approves the financial policy of the Government for the financial year 1st January, 1969 to 31st March, 1970." - [The Minister for Finance].

Question again proposed.

3.02p.m.

Mr N. Govindasamy (Telok Blangah): Mr Speaker, Sir, I rise in admiration, but not wholly in support, of the business-like Budget that has been forcefully and persuasively presented by the Minister for Finance. The Budget, as I see it, can be divided into two parts. One deals with the need for an increase in the Government's revenue. The other spells out the precise manner in which the increase may be effected.

There is no denying the validity of the Minister's contention that with Singapore assuming the responsibility for its own security and defence, it is necessary to find funds to train our citizens and equip them with the military hardware for our own defence. That is, as the Minister has pointed out, defence in the event of limited warfare - not warfare involving the super-powers. A convincing case has been made out for such realistically qualified defence of our Republic.

It follows logically that new taxes have .to be imposed to make possible such defence. A snag here is that taxation does not seem to be conducive to the promotion of industrial development. The difficulty has been overcome, however, by adopting a policy of indirect taxation which is to be borne by those sufficiently affluent to bear it. The general impression seems to be that the Budget is as fair as can be in the circumstances. But I prefer to leave it to those Members in this House who represent the interests of the employers to point out in detail how the Budget is not expected to have any disincentive effect on the economy.

For my part, I prefer to touch on the disincentive effect of the Budget on the workers of Singapore. It is with some temerity that I attempt to point out such disincentive effect, as the Minister has thrown out a challenge to us to say that the proposals contained in the Budget are not necessary or correct. It is my intention, however, to try to avoid the challenge by restricting myself to pointing out the omission from the Budget of proposals that seem equally necessary and correct to me.

I am concerned with the effect of, for instance, the imposition of 15 per cent tax on made-up garments which include underwear. Two reasons have, been advanced for such a tax. One is that it helps to promote our local industries. The other is that those who prefer imported foreign goods can very well pay for their preference. Granted that the reasons are valid, I do not think the duty of the Government should end with the imposition of tax alone. The reason why local consumers prefer to pay more for foreign goods than for the locally manufactured equivalent is simply that the former is far superior in quality. That being the reason, there seems hardly any justification that the taxpayer should in- directly continue to subsidise our local manufacturers who have been accorded enough privileges or incentives to make' the other citizens appear to be second-class, as it were. The need for some sort of quality control of locally manufactured goods seems reasonable before the Government starts penalising local consumers for alleged bias against local goods.

In conjunction with quality control, it seems equally reasonable that there' should be some sort of retail price control or restriction The Government has not been averse to enacting legislation to curb fringe benefits obtainable by our workers. But when it comes to' enacting legislation to restrain the greed of our domestic breed of entrepreneurs, the Government seems to drag its feet. Yet time and time again, it has been observed that the increase in the retail price of any goods on which a tax is imposed is more than proportionate to-the amount of the tax. To illustrate this point from my actual experience, I inquired about the price of a certain imported brand of briefs and singlets the day after the publication of the' Budget, and I was not surprised to find that the price had increased from $1.20 to $1.60 a piece, representing a jump of 33 1/3 per cent. If I have to pay this 33 1/3 per cent increase, I would rather that it goes into the Government revenue to be utilised for the general benefit of all than for the particular enrichment of a few. The insult to injury is compounded when it is realised that if the Government were to' rescind the 15 per cent tax next year, the price of the brand of underwear to which I have referred would be decreased by not more than ten per cent, if at all. This is borne out by our sad experience after the devaluation of the sterling in November 1967. The Prime Minister optimistically affirmed that by maintaining the parity of the Singapore dollar the workers of Singapore were given, in effect, a 14 per cent increase in wages. It would be interesting to know how many imported British goods had their prices reduced by 14 per cent, if at all. I would not be surprised if the answer is none, given the avarice of the entrepreneurs who hold Singapore to ransom.

The licence to plunder given to the local importers and their business associates would not be so damaging if it were not for the fact that a resultant near-monopolistic situation is created for the local manufacturers of a range of protected goods. It is ironical that the local taxpayers who subsidise the so-called "pioneer" industrialists by way of tax exemption are abused and slandered if they try to get their money's 'worth by buying imported goods rather than contributing to the bulging pockets of the local industrialists. It is not surprising that the Singapore Manufacturers' Association is full of praise for the Budget which enshrines the principle that money begets money. The ordinary citizens who form the vast majority of the population have repeatedly been admonished by the Government not to rock the boat and to place national interests before their own selfish interests. Yet the local manu facturers, who continue to churn out inferior quality goods, such as "Malcoa", which are no substitute for imported brands, such as "Milo", and which have to be forced down the throats of the local consumers, are frequently complimented on their profit-orientated attitude and their non-competitive incompetency. The ridiculousness of the whole situation may be summed up by reference to commonplace goods in daily use, I refer to "Lux" soap, for instance, which when imported costs 25 cents a piece but when locally produced costs 60 cents a piece and looks less like soap. I should think the credibility talk about the benefits of industrialisation becomes more increasingly apparent and painful to the local consumers who must foot the bill both ways - tax exemptions as well as higher prices. It may also be mentioned that the Minister has wide powers to impose quotas and other restrictions at any time whenever he deems necessary. Such quotas and restrictions only lead to a spiralling cost of living in the absence of any legislative restraint.

The industrialists, however, would be fools if they do not take advantage of the artificial, near-monopolistic situations handed to them on a silver platter in the sacred name of development. The remedy is for the Government to enact legislation on quality control and retail price control or restrictions. The need for legislative restraint on our industrialists and developers is imperative, particularly from the long-term point of view. The Minister has, for instance, proudly referred to the number of hotels mushrooming in Singapore. Yet, in knowledgeable quarters, it is widely held that Singapore hotels are on the way to pricing themselves out of the tourist trade in this region. The damage done to Singapore's reputation as an inexpensive tourist centre, when the present shortage of hotel accommodation in the region is over, would be disastrous and irreparable. I have been given to understand that the organisers of packaged tours catering for major segments of the tourist trade are already beginning to leave Singapore out of their itineraries, as the high hotel prices in Singapore eat into their profits. Such being the situation, it is high time that the Government took some measures to balance the short-term interests of the entrepreneurs, who invest their capital here for profits, against the long-term interests of the ordinary citizens who make Singapore their home.

It is said that absolute power corrupts absolutely. Substitute "monopoly" for "power" and we will not be too far wrong. The Budget contains, for instance, a proposal to levy a 15 per cent tax on the sale of liquid petroleum fuel for cooking purposes. The justification is that such fuel is being sold at too competitive a price in relation to the rate charged for the Public Utilities Board gas. But the point is that vast areas of Singapore are not piped for the supply of P.U.B, gas. If the residents of a huge private housing estate, such as Serangoon Gardens, for instance, were to make applications for gas connection, it would be years before their applications can be considered. I would imagine that the Ministerial reply would be that the residents in private housing estates are more affluent and, therefore, in a better position to withstand the economic squeeze than the residents in Housing and Development Board housing estates. The only way to disprove such assumption is apparently to conduct a survey on the per capita income of the residents in the respective estates. If such a survey is not feasible or practical, then a rough count of the per capita distribution of cars, excluding those for commercial usage, may be of some help.

This brings me to my last point, which concerns the state of the economy. The Minister has proudly pointed out that the economy of the Republic, while not exactly booming, has developed at a satisfactory rate and shows every indication of maintaining its momentum. A reference has been made, however, to the per capita gross domestic expenditure of Singapore as standing at $1,940 which represents a six per cent increase over that of last year and which conceivably gives Singapore a standard of living second to that of Japan in Asia.

The figures cited, however, relate to the average pattern of distribution of gross domestic expenditure. It may be interesting if the Minister can arrange for the publication of data relating to the median distribution of gross domestic expenditure. Judging from the percentage of the population who have no other sources of income than the meagre allowances doled out by the Social Welfare Department, I would estimate that one-fifth of our population has a per capita gross domestic expenditure of not more than $400. We must also remember that non-citizens are not entitled to any Social Welfare relief.

My point is that every year the Government progressively and in-directly reduces the vote allocated for Social Welfare relief, with the result that those dependent on the dole find it increasingly difficult to survive. The' vast majority of these unfortunate people are in their present predicament not because they are malingerers but because they cannot obtain employment. Some cases are particularly tragic because they represent the casualties in the transition of Singapore's economy from entrepot trade to manufacturing industry. There is no retraining scheme for the retrenched employees of import-export houses which closed down as a result of import quotas and tariffs. As these employees have meagre savings or are too old or possess unwanted skills for alternative employment, they have no choice but to go on the dole.

In view of these circumstances, it would be extremely cynical of the Government to pursue its policy of promoting a rugged and robust society to the logical conclusion of starving the unemployable citizens to death. With the present rates of Social Welfare allowances, the recipients are condemned to an equally miserable fate of living death. Thus, I hope the Government will find some way and the neces sary funds to take care of our citizens who are hapless through no fault of their own. But, at the same time, I wish to congratulate the Government on presenting a reasonable Budget. The only trouble, from my viewpoint,, is that it leaves too many loose ends to strangle the ordinary citizens.

3.23 p.m.

Mr Ho See Beng (Bras Basah): Mr Speaker, Sir, "painless" has been the keyword used by the press to' describe the Budget statement presented by the Finance Minister. There has also been all-round applause and praise from the tycoons of the various Chambers of Commerce and the business community. But the views of the ordinary man-in-the-street the workers and the wage-earners - have yet to be heard. Sir, as a trade unionist, I am from the second category and I will speak my mind dispassionately. Mr Speaker, Sir, I would, like to join, with some reservations, the Chambers of Commerce and the business community in congratulating the Finance Minister on having presented a com mendable Budget statement.

There should be no doubt among us of the need for Singapore to have an adequately equipped defence system of its own capable of meeting any possible eventualities on a limited scale. I do not wish to sound belligerent. This is an age where things are most unpredictable and events change most rapidly. ASEAN was formed hardly one year ago; today it shows signs of crumbling. Indonesian confrontation came as suddenly and unexpectedly as the present estrangement of relations between Malaysia and the Philippines. So is the sudden and 'dramatic turn of events in the Vietnam war. So it may be for Singapore and our perdition if we allow ourselves to be caught un awares.

Despite the United Nations and the balance of terror among the nuclear power nations, mankind is far from having achieved the elimination of war among peoples and nations. The super-powers can restrain, or even connive at conflicts on a limited scale among small nations, but they cannot, even in their own interests, prevent a localised conflict if one of two, or both, small nations are determined to have it out on the battlefield. So let us not deceive ourselves. The world may not be able to survive a full-scale war among the super-powers, but it can afford a hundred wars among the small nations. We must be realistic. We must be equipped for our own defence in the eventuality of a small nations' war and, if possible, in partnership with our other immediate counterparts in the Commonwealth.

Mr Speaker, Sir, under the circumstances, the Government is certainly right in having given priority to defence expenditure in the new Budget, and I am in complete agreement with the Government's decision and the Finance Minister's explanation regarding the annual expenditure on defence, which is $314 million or near ly a quarter of the total Budget expenditure.

Mr Speaker, Sir, may I draw the attention of this House to the Minister's comment on the state of the economy of Singapore? As in the previous year, the Minister's statement on the gross national product and economic growth sounds most encouraging and optimistic - Gross Capital formation up by 17 per cent and gross domestic expenditure up by 7.7 per cent over the previous year. Trade has also surged upwards by 14.5 per cent, although there is a considerable deficit balance of $960 million. This is really very surprising to me.

I would be inclined to be as optimistic as the Finance Minister had it not been for the fact that figures quoted without qualification can prove to be most puzzling, especially for the public. I refer in this respect to the 7.7 per cent increase in gross domestic expenditure quoted by the Minister, which he said was associated with the rate of investment in fixed assets undertaken by the economy. I would be happy if the Minister for Finance could clarify whether this figure represents the value of real growth in gross domestic expenditure, over and above the increased cost of living, or the rate of inflation in the economy. In other words, the crucial question here is, has our standard of living really increased?

With our new industries at their infant stage and the protection accorded them, an increase in the cost of living would appear quite inevitable. Many locally produced goods are by no means cheaper than those imported formerly. In fact, many items have actually become more costly. But this increased cost can only be justified provided the net income generated locally and foreign exchange earned or saved by our new industries is greater than the increase in cost to local consumers if the establishment of the new industries has resulted in such increased cost. For in such a situation increased cost will be offset by greater increase in income and net addition to gross national product, and our standard of living will have actually improved. The Budget statement presented by the Finance Minister would certainly have been more meaningful had it provided a breakdown of figures of the position of industries to show that such a positive effect has actually taken place. Mr Speaker, Sir, there is another grey area in the Finance Minister's statement which needs to be clarified. I refer to the ominous substantial trade deficit of $960 million which our economy suffered in the first nine months of this year, which the Minis ter has only seen fit to mention but not explain. A deficit of this size is certainly not a feature of a buoyant economy. In the absence of facts and figures, one could only speculate and arrive at many implications.

Firstly, what is the implication of this deficit in respect of our manufacturing industries? As our manufacturing sector has to depend almost entirely on imports for its raw materials, plant and machinery, is this a sign that we are unable to export enough to pay for the purchase of these imports, which if allowed to continue in the long run, will mean that our industries are not actually self-generating and will run into a dead end and be doomed to failure? What is the position of our exports in the competitive export market? Much publicity has been given by our Government to the numerous trade pacts and trade missions which we have carried out in our export drive. But, sadly, hardly any substantial information has been given in regard to the extent of the success of these efforts.

Further, are there any other avenues for us to boost further our export sales to secure improvement in our trade balance in the short and; long run? Sir, I refer in this context to the home markets of the foreign industrialists now operating in Singapore. Our Government has provided very generous concessions and innumerable incentives to foreign investors. But, are these same foreign investors and their governments willing to open their home markets for our products? It is a well-known fact that parent companies and governments of foreign subsidiaries, in their own interests, are often quite unwilling to open their home markets to the products of their foreign subsidiaries.

Here, I would like to give an example. For instance, the Yamaha motor cycle manufacturing company have a factory in Singapore. They manufacture motor cycles but their parent company in Japan will not allow us to export these locally-made motor cycles for sale in Japan or even to any other country for sale there so long as the parent company of Yamaha has established a market there. In other words, the motor cycles manufactured in Singapore can only be sold to the local people. Or we have to find new markets in the international field. Therefore, instead of earning foreign exchange, we are losing foreign exchange because we have to use our foreign exchange to buy machinery and raw materials, if the Government is not careful in selecting investors and allow any Tom, Dick and Harry to come in, I think it is not helpful to our economy.

Sir, if we can make successful inroads into the home markets of foreign investors, which the Puerto Ricans and the Japanese have achieved in the United States, then perhaps the future of our industries could be more secure and certain.

Secondly, what is the implication of this deficit in respect of our overall balance of payments and foreign exchange position? What is most perturbing about this deficit is that it has cropped up in the midst of the British withdrawal, which in itself will have considerable adverse effects on the balance of payments position.

Sir, I now wish to draw the attention of this House to the proposed tax measures introduced to meet increased expenditure on our defence commitment. Generally, the Government is treading very skilfully in this matter. The proposed tax measures on the seven items mentioned are expected to raise $35.8 million in a 15-month period. The burden of these taxes, in aggregate, will not be really heavy on the economy as a whole. This, however, has been made possible partly by the defence fund campaign which has raised nearly $10 million, a measure which the Government was indeed farsighted enough to have taken to forestall painful tax measures.

However, there is one item in these new tax proposals which is not beyond criticism. The Minister for Finance's arithmetic on public utilities consump tion does not appear to be very convincing. It appears that the Minister has conveniently divided the different economic classes of Housing and Deve lopment Board flat dwellers according to the amount they pay in their monthly PUB, bills. If a couple is working as teachers and their total salary is, say. $1,000. They stay in a Housing and Development Board fiat, their P U.B, bill for two persons surely will not be more than the bill of a poorer family consisting of a husband, wife and eight small children. The imposition of a tax on essential services really deserves a more realistic and equit able criterion to back it up. Surely a family consisting of ten persons will use more water and electricity than a couple.

The Minister for Health (Mr Chua Sian Chin): Have small families then!

Mr Ho See Beng: With the new PUB, rates, I can foresee great hardships for large families with small incomes. Likewise, I can see increased hardships for rural folks engaged in subsistence farming, as well as for hawkers and small business proprietors. Contrary to what the Minister has claimed, I am quite convinced that the new P.U.B, rates will be regressive and the lower income earners will be hit most.

Further, this is the second time in two years that the Government has decided to increase P.U.B, rates. The poorer class of the economy is definitely not going to react favourably to this.

Instead of increasing public utility rates, I would propose increased indirect taxes on the higher income earners, such as the property-owning class. There is, for example, no reason why people living in mansions and bungalows should not be asked to pay a little more on the assessment rates for their property. Likewise, increased road tax could be levied on bigger vehicles owned by the higher income group. In other words, it will be more fair and equitable if the $11 million could be raised from taxes on luxury items enjoyed by the higher income group.

Surely, Mr Speaker, Sir, this is not asking too much from a socialist Government.

3.41 p.m.

Mr Seah Mui Kok (Bukit Ho Swee): Mr Speaker, Sir, I rise in appreciation of the financial policy of the Government for the financial year 1st January, 1969, to 31st March, 1970. The Budget presented by the Minister for Finance seeks to find practical solutions to seemingly insoluble problems and has done so with considerable success. The main problem of finding the necessary funds for many competing wants appears to have been solved by the proposal to impose new forms of taxation in such a manner as to be reasonable and acceptable to the people of Singapore.

The bulk of the increase in Government expenditure is shown to be caused by the need to provide for our own national security and defence. As a result of the proposed British withdrawal from Singapore by the end of 1971, the Government has wisely made provision to increase the strength of our armed forces, that is, the Army, the Navy and the Air Force, to a level which is consistent with the safety of our Republic. While no one who has the interest of the Republic at heart will deny the necessity of incurring the heavy cost of our own security and defence, it is a source of constant anxiety and worry that new taxes or increases in existing taxes may have to be imposed over the next few years in order to shoulder the burden of military defence. It would be most helpful if the Minister for Finance can give an assurance that any future increase in the expenditure on the defence forces and installations during the coming years will be phased out in such a way that it will be painless and fair to all. It is true that no one can foresee the future and that one cannot give any assurance of the actual size of our defence force and installations in the future by reason of the fact that new circumstances and events may arise which cannot be foreseen now.

My main concern is that while defence is necessary for Singapore, the burden of paying for any increase in defence expenditure ultimately falls on the working men. The Government has decided to raise the necessary funds for our defence expenditure by means of indirect taxation in such a manner as to ensure that the taxes are paid by those who can afford to pay. On the surface, its explanation appears to be valid, such as the graduated scale of tax on P.U.B. rates and the tax, for instance, on made-up garments. The Minister is correct in saying that if people persist in buying goods of foreign origin when their equivalents are beng manufactured locally, it is only fair and reasonable that they should be made to pay for their choice.

[Mr Deputy Speaker in the Chair]

3.45 p.m.

Mr Seah Mui Kok (Bukit Ho Swee): It is appreciated that we require foreign investment in order to be able to create sufficient employment opportunities for our continuously increasing labour force. And to induce foreign investors to come here, we have to provide a minimum domestic market for the products made by the factories in Singapore even if they are supposed to be export-orientated. In this respect, I must acknowledge that the Government has been singularly successful in wooing foreign industrialists to invest their capital and know-how in our Republic. The list of foreign operations which have or are intending to set up factories in Singapore read like an excerpt from Who's Who of the industrial corporations of the world. It appears that the new Employment Act and similar legislation have helped to conjure up a congenial climate for the industrial development of Singapore.

While the workers of Singapore have generally reconciled themselves to the fact that the Employment Act and other legislation seeking to restrain the workers from demanding higher wages and better working conditions are necessary sacrifices which have to be tolerated in the interest of the Republic, the Government should also make it clear to all foreign investors not to take undue advantage of the situation. Workers in Singapore are pragmatists who believe in hard work. All that they ask of employers is fair treatment and an equitable return for the hard work they render to their employees. It is surely reasonable and equitable for workers to ask for decent wages and an adequate bonus when their employers make sizable profits.

Mr Speaker, Sir, we, the leaders of the N.T.U.C., however, shall always extend our fullest co-operation and assistance to the Government and to the employers in our common effort to ensure our survival and to maintain our present prosperity during the next few crucial years. We appreciate that in the final analysis we have only ourselves to depend upon for the continuing political and economic viability of the Republic. We know for a fact, and this I emphasise, that the world does not owe us a living and that if we want to continue to enjoy the privilege of living in a separate and independent Republic, we have to pay dearly for that privilege by our own sweat and labour. But in the far-sighted and logical proposals enunciated by the Government in the Budget, the Government has shown that it can provide the competent and determined leadership to see us through all our difficulties in the next few years.

Sir, I wish to place on record my sincere appreciation of how the Government has taken great pains to ensure that the necessary new taxes are borne by those who can afford to pay them. The Minister for Finance has done an excellent job of finding the necessary funds in an unobtrusive fashion for equally necessary expenditure to be spent on defence. But while such new taxes are intended to fall on those who can afford to pay them, I must add that in the end it is the common working men who have to bear the new taxes. It is simply common sense that faced with the extra expenses that have to be met, for instance, because of the levy on P.U.B, charges, the employer will simply raise the prices of his products to meet the extra cost, Thus, my only regret is that the Minister for Finance has not seen fit to incorporate into his Budget complementary or supplementary legislation comparable to that of the Employment Act to restrain profiteers from passing the burden of indirect taxation to the consumers, the majority of whom must be the workers.

3.50 p.m.

The Minister for Education (Mr Ong Pang Boon): Sir, I should like, first of all, to draw the attention of the House to certain salient features in the 1969 estimates of educational expenditure.

Members will have noticed that for the first time in the history of the Republic's Budget, Education has dropped to second place behind Defence as the State's biggest spender. This does not mean that we are spending less on Education in order to spend more on Defence. It does show, however, that there are other and more urgent demands on the public purse than Education and the order of priorities has, at least for the time being, changed.

The 1969 estimates of educational expenditure are presented, also for the first time, under two main departments: General Education Department and Technical Education Department, each with its own P.E., O.C.A.R., O.C.S.E., and development estimates. This reflects the importance which my Ministry places on technical education, and the separate administrative machinery which has been created to implement the new policy.

The ordinary estimates for the Education Ministry totals $198.8 million for the next 15 months. On a proportionate basis, this works out to $159 million for 12 months or a 4.8 per cent increase over the 1968 estimates. Compared with previous years, the 1969 provision represents a very small increase indeed - for example, in 1965, the percentage increase was 13.8 per cent, 1966-19.7 per cent, 1967-11 per cent, and 1968 the percentage increase was 5.8 per cent. Much of the increase in 1969 is due to normal increments in the personal emoluments of existing posts. Of the 362 new posts created for 1969, 336 are for the Technical Education Department and only 26 for the General Education Department. This again underscores the new emphasis on technical and vocational education.

Similarly, out of the total provision of $30.9 million in the development estimates for the Education Ministry for the next 15 months, $21 million, or slightly more than two-thirds of the total, is earmarked for the Technical Education Department, leaving only $9.9 million for the General Education Department. The Technical Education Department will have sufficient funds to carry out major development projects to provide the necessary facilities for the massive expansion of technical and vocational education. On the General Education side, only minor provision is made for replacements and extensions of existing schools. On an overall basis, there will still be enough places in primary schools for a number of years to come, although the population shift to new satellite towns and major housing estates has created shortages in certain areas, and consequently it will not be possible for all Primary 1 pupils to be admitted to schools near their homes.

As the estimates reflect the changes in educational policy, I should like to take this opportunity to outline what these changes are, and to explain briefly the rationale behind the changes:

(a) The present vocational schools will be abolished. As from next year, those who are not successful in the Primary School Leaving

Examination and who are 14 years of age and above, will not be posted to vocational schools. However, they will be given the opportunity to apply for admission to special classes which will be organised by the Adult

Education Board. These classes will provide intensive instruction in languages and training in certain basic skills to enable them to seek employment or further vocational training in the various new types of training establishments set up by the Technical

Education Department. Pupils who are in Vocational I this year will, however, continue with Vocational II next year.

(b) The secondary school system will be re-structured so as to direct a much larger number of pupils than at present to technical education. Begin ning with Secondary I classes next year, a new common curriculum will be introduced for all Secondary I and II pupils in all types of schools and in all four language streams. This new curriculum provides for all boys and 50 per cent of the girls to take a combination of academic and technical subjects, including workshop practice. Domestic Science-will be a compulsory sub ject for all girls. However, for girls who are also taking technical subjects, Domestic Science will not be an examination subject and a modified syllabus will be followed.

The introduction of this, new curriculum for Secondary I and II will mean that the streaming of students into academic, technical, or commercial education will not be undertaken until Secondary III. The objections which have been raised hitherto against streaming from Secondary I have thereby been removed.

(c) After completion of Secondary II, students will either proceed to Secondary III and IV and then on to Pre-University as at present, or branch off to a variety of new educational establishments to train as craftsmen and technicians.

(d) For students who branch off to technical training after completing Secondary II, four industrial training centres will be established to provide courses in electrical, building and metal trades.

These courses, varying in duration between six months and two years, will concentrate on the acquisition of a specialised skill through practical work.

Each course will lead to the award of a Trade Certificate, and the acquisition of a number of Trade Certificates will qualify the holder for the craft certificate awarded by the vocational institutes. Students who have completed

Secondary II can also compete for direct entry into vocational institutes of which two more will be established by 1970.

A National Technical Institute will also be established by 1970 to train industrial technicians. It will provide advanced craft courses for those who have completed courses in vocational institutes.

The changes which I have just listed call for a heavy outlay in new plant and conversion of existing facilities. Four new vocational institutes will he established, two of them to function in their new premises in 1969 and the other two in 1970. Six vocational schools will be paired with six academic schools within the same compound with improved workshop facilities to provide for a technical stream. Three other vocational schools will be converted into industrial training centres to provide a variety of short-term trade courses and another industrial training centre will be established at Telok Blangah, making four centres in all. Twenty units of centralised workshops will be created to provide practical training for all the boys and 50 per cent of the girls in Secondary I and II, and additional machinery will be installed in three of the nine existing technical schools to convert them into technical high schools offering courses from Secondary III to Pre-U classes. Pending the construction of its own building, the nucleus of the proposed National Technical Institute will be housed temporarily in the Singapore Vocational Institute in 1969 to provide courses in advanced mechanical engine ering practice and shipbuilding. The Singapore Vocational Institute itself will be expanded with the addition of a three-storey building to provide for an enrolment of 2,500 as compared with the present capacity of 2,000.

[Mr Speaker in the Chair]

3.59 p.m.

The Minister for Education (Mr Ong Pang Boon): To provide the necessary teachers for the swing towards technical education, a massive training and retraining scheme is already under way. In August this year, 371 general education teachers began their 36-week part-time re-training to become craft teachers in one of three subjects: Metalwork, Woodwork and Basic Electricity. Another batch of 85 general education teachers have been selected to undergo full-time re-training conducted by the Economic Industrial Development Agency. At this point, I must add that teachers have responded admirably to the re-training scheme. The training programme will move into top gear next year with the expansion of the technical wing of the Teachers' Training College. This will be carried out with the assistance of the United Nations Development Programme.

Members are no doubt aware that the Government has emphasised technical and vocational education since 1960. These changes in technical education have been proposed so that the education can meet more effectively the manpower needs of our industrialisation programme. It is widely recognised that the present predominantly academic type of education has produced an inadequate number of skilled workers and technicians. The shift to an education with a larger technician content and practical training will cut down the number of unemployable secondary school-leavers and increase the inflow of skilled manpower to our rapidly expand ing industries.

Changes in other aspects of educational policy will also be made. The emphasis on the improvement of the quality of education at all levels will continue. Steps have been taken and will be taken to improve school curricula, textbooks, teaching aids and techniques, teacher training and further training, educational testing, health education and extra-curricular activities.

Greater stress will be laid on bilingualism in schools. Increasing use will be made of the second language as the medium of instruction in certain sub jects. In 1966, Mathematics was taught in English in Government Primary I Chinese-medium classes on an experimental basis. As the experiment proved successful, it was extended to Primary II classes. This year, English is used for teaching Mathematics in Government Chinese Primary I, II and III classes, and in Malay and Tamil Primary I classes. The same language is used this year for teaching Science in Government Chinese Primary I classes and in all Malay and most of the Tamil Primary I classes. The use of English to teach Science and Mathematics in non-English medium schools will thus be extended gradually to Primary VI and it is expected that the same gradual process will be introduced in Government-aided non-English medium schools beginning in 1970. On the other hand, a start has been made this year to use Chinese as the medium of instruction for civics in English-medium primary classes for pupils whose second language is Chinese. It is intended that the same arrangement will apply to History by 1970. As an added measure to increase language proficiency, oral tests in the second language will be introduced next year in the Primary School Leaving Examination.

Bilingualism must be emphasised in schools if we are to build a multi-racial society with a national identity. It should be obvious that a small community of two million people cannot survive in four water-tight language compartments, with no common language of communication. In the past, our efforts to promote bilingualism were confined to increasing the allocation of time to the second language and im proving teaching methods. It has become clear that these measures by themselves are not enough to produce the desired results. This is because children have little opportunity to use the second language outside the periods allotted to it on the timetable. By using the second language as a medium of instruc tion, children would be exposed to that language for a much longer period and, moreover, would be compelled to speak it, write it and use it as a tool of communication. For those children whose second language is English, it is logical to use that language for teaching Mathematics, Science and eventually technical subjects, since English has long been accepted as an international language in these fields. For the other children whose second language is Chinese or Malay or Tamil, it is equally logical to use the second language for teaching subjects which have affinities with their own language and culture, subjects such as History and Civics.

Some doubts have been expressed in the press on the wisdom of using the second language as a medium of instruction. The critics fear that the teachers who are called upon to teach Mathematics and Science in English in non-English medium schools may not themselves have a sufficiently good command of English. I should like to give the assurance that everything possible will be done to avoid such a situation. The changes in the language medium of instruction in certain subjects will be carried out in gradual stages. As many English-medium trained teachers as we can spare will be sent to non-English medium schools to teach Mathematics and Science. In addition, intensive three-year courses in English with a scientific language bias will be organised for those teachers who are currently teaching Mathematics and Science in the Chinese, Malay or Tamil language medium to enable them to attain proficiency in the English language for teaching these subjects. Another nagging fear is that the use of the second language as a medium of instruction might lead to a lowering of standards in the first language and in the subjects taught in the second language. On this point, surveys conducted by my Ministry have shown that there is no basis for such fears. For example, English was first used in 1966 to teach Mathematics in certain Government Chinese-medium Primary I classes. A survey conducted at the end of a year revealed that these children had gained fluency in English without any loss in their standard of attainment in Mathematics and Chinese. Moreover, the use of the second language as a medium of instruction is introduced gradually, beginning with Primary I, and every effort is made to ensure that syllabuses and textbooks are carefully graded and chosen.

A suggestion has been made that a Regional Chinese Language Centre should be set up similar to the Regional English Language Centre established in Singapore under the auspices of the Southeast Asian Ministers of Education Council. I welcome this sugges tion as a means of further improving the teaching of Chinese both as a first and as a second language. However, I must point out that the Regional English Language Centre was established with substantial foreign aid, amounting to 50 per cent of the total capital cost and recurrent cost for five years. If similar financial assistance is available for a Regional Chinese Language Centre from private sources, particularly from the large Chinese dailies and publishers who have a vested interest in seeing more readers of Chinese publications, I am sure that the Government will be only too willing to consider such a project.

All these changes pose a challenge to both teachers and pupils, but it is a challenge that has to be taken up. Bilingualism in our schools must succeed if we are to build a cohesive yet tolerant society, and technical education must also succeed if we are to keep pace with the new status of Singapore as an independent and forward-looking state moving towards rapid industrialisation and urbanisation. With the co-operation of teachers, pupils and parents, succeed we shall.

4.10 p.m.

Mr Ho Kah Leong (Jurong): (In Mandarin): Mr Speaker, Sir, although defence expenditure has increased to $337 million, our wise Minister for Finance has been able to surmount this problem of increased expenditure by good budgeting. I must congratulate him on this. If I am not wrong, he must have deliberated hard and long over the preparation of the Budget. I believe those people who are rational will undoubtedly welcome it in its present form. In my opinion, there are two aspects to the Budget.

First, the increase in defence expenditure does not seriously affect social services and development in other fields. We all know that in order to safeguard our independence in the present age, we must modernise our defence system. Of course, we have to spend large sums of money to achieve this.

From the Budget Statement of the Minister for Finance, we learn that the defence build-up of our country will proceed step by step so that we will not have to bear an unduly heavy burden. We are not like many other countries which build up their defence at the expense of social services and in the end their societies deteriorate and they cannot but come under military rule. Our defence expenditure will be met out of the economic growth in our revenue. Expenditure in other fields, such as education and social services, will have to be at a standstill. At the same time, necessary funds are allocated to sectors needing additional expenditure. This course is very judicious, so that we can make at least normal progress. Our per capita domestic expenditure has also increased from $1,682 in 1967 to $1,940 in 1968. Our gross national product has also been increasing every year as a result of the diligence of our people and the stability and economic progress of our country. Our economic growth will be slowed down if our people do not work hard. We will then have to choose between doing away with additional expenditure on defence or social services and resorting to increased taxes. All this is not to our liking. If in the few years ahead when the British are withdrawing we can face the trials and overcome the economic problems, our future will be bright.

Secondly, it is a general feeling that increased taxation is not something which all the people welcome. Nevertheless, the seven new items of taxation to be imposed next year are mild. They are taxes which the people can afford. I believe the decision to impose these seven types of taxation has been arrived at after very exhaustive deliberations. The taxation is based on democratic socialist principles. The aim is to make those who are most able to bear the burden pay more towards the national expenditure. This new taxation will bring in about $35 million, which is only about one-tenth of our total defence expenditure. This additional amount of revenue is not merely to maintain our military requirements. After taking away $40.7 million, there is a deficit of $11.7 million which will be met from the reserve fund. The new taxation will not affect incentives for investment which are now being given to industry. This is a judicious policy; otherwise investors will fight shy of coming here and, as a result, there will be difficulties in our industrialisation efforts.

Sir, with regard to the revenue and expenditure for next year, there will be a deficit of $11.7 million. If I am not mistaken, this is the first time, since the Government came to power, that the deficit is of such a size. If there has not been too wide a range of new taxation, it is because the Government do not want the people to bear too much of the burden. According to the Finance Minister, in the first nine months of this year, trade figures show that imports reached a figure of $3,840 million and exports $2,880 million. There is therefore a trade deficit of $960 million. There are many items of international income derived from shipping, insurance, tourism, etc. Although no exact calculations have been made, these items are estimated to reach about $600 million. Subtract this sum from the trade deficit, there is still a deficit of $360 million. If this condition were to continue year after year, I would like to ask the Finance Minister whether this would affect our foreign exchange.

Sir, I now wish to talk about the problems of industrialisation. It is undeniable that industrialisation has been going on at a tremendous pace. At the moment, we have 174 factories employing 18,000 workers. In addition, the Government has set up three institutions, namely, the Development Bank. the Jurong Town Corporation and INTRACO, to help develop our commerce and industry. I believe our indus- trialisation has a bright future. The centre of industrialisation is now at Jurong. Seven years ago Jurong was a barren land. But now 3,600 acres of land have been developed. About 137 factories are in production, employing 14,000 workers. However, as the Minister for Finance has pointed out in his Budget Statement, there is an urgent need to improve the social amenities of Jurong Town. This is true. At the moment, there are no social amenities and facilities for recreation which one would expect in a normal town. There are not enough housing and medical facilities for the workers there. They should be provided with sufficient social and cultural facilities. Their needs in these fields should be satisfied. House occupancy is said to be 99 per cent. Some of the houses there are occupied by military personnel at Taman Jurong and other personnel from abroad together with their families. There is a lack of good transport. Although most of the -'workers in Jurong Town are now staying there, their families are still staying in urban areas because of the lack of social amenities and transport in Jurong Town. Workers have no intention to settle down there. I do not know whether the industrialisation policy is being properly implemented. Otherwise how could these considerations have been overlooked? Or could there have been some other reasons why the workers and their families have not been provided with social amenities? It is only recently that these shortcomings have been discovered by the authorities. It is only now that the Jurong Town Corporation is thinking of providing these social amenities.

We also know that the Corporation is trying its best to develop Jurong into a tourist centre. In the vicinity of the Jurong River, there will be "artificial islands". There will be a floating rest aurant, an aviary for birds and an 18-hole golf course, etc. Of course, it would be a good thing if Jurong could be developed into a tourist centre. But I do not think the ordinary workers there have the time and leisure to play golf, to see the birds in the aviary, or to go to the floating restaurants and bars to enjoy themselves. I hope the Minister for Finance will seriously consider the question of providing practical social amenities and recreational facilities for the workers so that they can actually enjoy themselves. At the moment, what the workers need is a place where they can rest or take part in recreational activities.

Although there is a community centre in Jurong Town, it was not built according to plan. It is only a centre made by merging several flats together. Moreover, it is quite far away from the majority of residences of the workers. It does not meet the needs of the population there.

I would like to suggest to the Minister for Finance that a "Workers' Cultural Centre" should be set up in the most populous part of Jurong Town. Here they can take part in various activities which would benefit both their minds and their bodies. We hope a gymnasium with facilities for games and sports will be provided. We hope, too, that reading rooms and rooms for recreational activities will be available at this cultural centre. We can ask the trade unions, the employers' association and the Jurong Town Corporation to help in the management of this centre. We can also ask the People's Association for their assistance in this matter.

I would now like to talk about some of the other problems relating to Jurong Town. First, the increased rent of factory sites in Jurong Town. In the beginning, when the Government wanted to encourage the setting up of factories there, the rental was low. It was six to nine cents per square foot per year. With the prospect of a common market with 'Malaysia, many industrialists invested in Jurong. There are at the moment 137 factories in production. This achievement, of course, is attributable to the efforts, co-operation and contributions of the Government, the employers and the workers. Sir, I have learnt that the authorities concerned have tried to increase the rental of the land by as high as 50 per cent. I feel that we should discuss these matters frankly and face the realities of the situation. At present, the factories in Jurong appear to be doing quite well and they may be getting good returns for their investments. But there are many pioneer industries which are unable to make any profit this year owing to lack of markets. Therefore, to increase the rent of factory sites is generally not a wise move. This is an additional burden on the factories which are not making money, and may be a factor leading to their closure. I feel that the attitude of the authorities in encouraging industries should be more realistic. We should not ask the established factories to give up their vacant land in order to induce more investments and establishment of new fac tories. We should help the manufacturers in Jurong to solve their problems and help them develop. In my view, the Government should give consideration to individual cases in respect of rent increases. The Government should not increase the rents of those who are just able to make ends meet. If Government intends to increase the rent, a decision should be postponed.

The next point which I wish to cover in my speech is fire prevention. I do not know whether the Government intends to set up a fire station on the Jurong industrial site. There is none in existence there. The two nearest fire stations are in Queenstown and Bukit Timah, at least seven miles away from Jurong Town. If there is a fire at the Jurong industrial estate, by the time the fire engines arrive, the factories will have been burnt down. I hope the Minister for Finance will take note of this.

Sir, the next point concerns industrial waste. This is a problem confronting our industrialists in Jurong. No doubt there is a dumping ground at Lim Chu Kang. It is convenient for large factories with plenty of industrial waste to hire lorries and dump the industrial waste at Lim Chu Kang. But for the small factories with a small amount of industrial waste, it is uneconomical for them to hire lorries. If they are to combine their resources, it is also quite inconvenient because of the varying amounts of industrial waste produced by these small factories, and also because of the time factor. Therefore, I hope the Ministry of Health will send more rubbish trucks to Jurong to take away the industrial waste from the light industries section.

Sir, the supply of water for industrial estates is of great importance.

Mr Speaker: Mr Ho, Standing Orders require you to confine yourself to the general principles of 'Government policy and administration as set forth by the Minister for Finance in his Budget Statement. It appears you are going into matters of detail. As there are many other Members who wish to speak on the Finance Minister's Budget Statement, please confine yourself to the general principles and omit reference to the details.

Mr Ho Kah Leong: (In Mandarin): Sir, I am coming to the end of my speech. According to estimates, the con sumption of water by the various industries is 5,000 million gallons a year. I understand that sometimes the supply of water is interrupted, as a result of which there is great inconvenience and production in the factories is interrupted. If the supply of water is to be interrupted because new pipelines are being laid or for any other reason, I ask that adequate notice be given to manufacturers in order to minimise inconvenience to them.

Sir, to sum up, Jurong Town at the present moment is in reasonably good shape. It is becoming a self-sustaining ,town. But the Government should pay more attention to it. Otherwise we will not be able to attain our objectives.

Sir, I support the Budget Statement of the Minister for Finance.

4.38 p.m.

Mr Teong Eng Siong: (In Mandarin): Mr Speaker, Sir, a few months ago the Minister for Finance gave a warning that the Budget for next year would no longer be a painless one. When the warning was given, people from all walks of life were uneasy and anxious.

Not only were there fluctuations on the Stock Exchange, but there were also many rumours that taxes would be increased. Some said that the licence fees for radio and television would be increased by a hundred per cent. Others said that driving licence fees would be increased two-fold and that duties on petroleum, tobacco and liquor, and road tax would be increased. Even the duty on daily necessities such as soap, toothpaste

Mr Speaker: Mr Teong, I think it will assist in the debate if you speak on the Finance Minister's tax proposals rather than on the rumours that circulated before his Budget Statement.

Mr Teong Eng Siong: (In Mandarin): Sir, that will be the main theme of my speech. But such rumours were very widespread. However, on the 3rd of this month, the mystery surrounding such rumours was lifted, for on that day the Minister for Finance announced seven tax proposals. They include a tax on P.U.B, bills, a small duty on liquid petroleum gas, a tax on telephone bills and a tax on made-up garments. There will also be changes in three old taxes, namely, a new basis to value a motor vehicle on which the additional registration fee is levied; the revision of stamp duties; and the levy of a fee of two per cent for motor vehicles on transfer of ownership. These tax proposals are mild in nature. They have been able to usher in a Merry Christmas and a Happy New Year to our people. For these measures, we thank the Minister for Finance.

His Budget Statement was well received by people from all walks of life. Although defence expenditure will reach the enormous sum of $337 million, the revenue from new taxes will be $35 million, about 10 per cent of defence expenditure. That is why the people praise the Government for its intelligent and prudent tax proposals. These new taxes are quite fair and in accord with the tenets of democratic socialism. For example, the 10 per cent levy on P.U.B, bills will not affect the lower income group. Under this tax proposal, those whose bills fall between $10 and $20 a month will have to pay five per cent. Those whose bills exceed $20 will have to pay the full rate of 10 per cent. Those whose bills are under $10 are not affected at all. There are about 58,000 consumers whose bills do not exceed $10, which is 25 per cent of the total. The number of consumers whose bills fall between $10 and $20 is 73,000, which is 32 per cent of the total. They will pay about $1 a month in tax. Forty-three per cent are consumers whose bills exceed $20; they are well-to-do. They have radio and television sets, refrigerators and other modern appliances. Therefore, it is not unreasonable to ask them to make some contribution to our defence expenditure.

As regards the tax on telephone bills, the poor people will not be affected. Only wealthy people can afford to install telephones in their houses. Therefore, it is not unreasonable to ask them to pay $27 additional tax a year. As for users of business telephones, it is within their means to pay $37.50 per line per year.

It is questionable whether a tax should be levied on imported made-up garments, because most of these imported garments are bought by the lower income group. They are not only cheaper than the locally-manufactured garments, but they are also of good quality. As they are cheap, they should not be taxed. As the Government has levied a 15 per cent import duty on made-up garments, their prices have increased, and this is an added burden on the poor people. Although the Minister has said that we are manufacturing enough for local consumption, from the consumers' point of view, however, they prefer to buy clothing which is not only cheap but also of good quality. There are two reasons why these imported goods are welcomed by the consumers. Firstly, they are cheap and, secondly, they are of good quality and durable. Therefore, if we want our people to use locally-manufactured goods, our manufacturers must raise the standard of their goods and their prices should not be higher than those of the imported goods. Only then can we make locally-manufactured goods attractive to our consumers. To impose taxes on imported garments is, therefore, not wise since the Minister can obtain revenue from other sources, such as increased taxes on expensive liquor, cosmetics and other luxury goods.

There is another point which I do not understand. Why does the Minister not impose taxes on garments made of fur? In my opinion, these garments should be taxed because it is only the wealthy people who can afford to buy them, and it is right that they should make some contribution to our defence.

Mr Speaker, Sir, it is gratifying to note that notwithstanding the substantial increase in defence expenditure, no cut has been made in the expenditure on rural development for which the sum of $2,215,000 has been allocated. This shows the Government's concern for the welfare of the rural people. This is in keeping with our Party's objective of establishing a more just and equal society and it is therefore praiseworthy.

The next point I wish to deal with is our economic growth. I will quote some figures given by the Minister for Finance. He said that our economic growth is still in good shape. For example, in terms of total investment, we have $606 million, which is an increase of 17 per cent. In the first nine months of this year the total trade figure was $6,720 million, representing an increase of 14.5 per cent. In the first six months of this year there were 174 pioneer firms in production, an increase of 47 firms over last year. We have a total fixed investment of $436 million, an increase of 19 per cent, and in terms of total industrial production we have $472 million, which is an increase of64 per cent. These pioneer industries employ 18,780 workers, an increase of 5,380 over last year. At the same time, 56 new factories are being constructed.

We can see that Singapore is rapidly becoming an important industrial country in this region. It is also noteworthy that we have an even more rapid expansion in our ship-building industry. This new industry not only earns a great deal of foreign exchange for our country, but also provides many employment opportunities for our people. We have already converted the Sembawang Naval ease into a shipbuilding yard capable of absorbing over 3.000 ex-civilian employees from the British establishment. This is a clear indication of the Will and capacity of the Government. As the Member for Sembawang, I wish to congratulate the Government on its success in converting the Naval Base to civilian use.

Mr Speaker, Sir, the defence expenditure for next year comes to $337.5 million, which is more than 33 per cent of our total expenditure of about $1,024.89 million. In spite of this, there has been no substantial increase in the taxes, and for this, we must pay a tribute to our Minister for Finance. In fact, we need only have about $117.3 million in cash to pay for all this expenditure. The sum of $156.3 million for the purchase of military equipment is on credit terms and we can also obtain a sum of $63.9 million from the United Kingdom Defence Aid funds. But I would like to ask the Minister for Finance about the �50 million of aid promised by the British Government. I hope the Minister can give more details on this matter.

As Singapore is a newly independent country, it is necessary for us to establish a suitable defence system, because without it there will be no security. What is the reaction of our people to this important problem? In my view, the people have already shown that they understand the significance of defence and have given the Government positive support by responding to the call for National Service and the National Defence Fund. Therefore, if anybody should say that it is a wrong policy to establish our own defence, then they are, in my view, either short sighted or have some axe to grind. We should not endorse this pessimistic capitulation.

Sir, from next year, great emphasis will be placed on technical and vocational education. This will mean a great reform in our educational system. This reform is undoubtedly necessary because only then will we be able to meet the increasing demand for technical per sonnel in industrial expansion. Although some restrictions have been imposed on the expenditure for health and social services, we have enough resources to look after the welfare of the people.

Sir, in short, the Budget can be described as rational and fine. It is based on sound principles, and also at a time when our country is undergoing changes, it does not increase the burden of the people. At the same time, it has also created a better atmosphere for economic expansion and to attract foreign investment. Our people have every reason to expect that 1969 will be a better year.

Sir, I fully support the Budget of the Government.

4.55 p.m.

The Minister of State for Foreign Affairs (Inche A. Rahim Ishak): Mr Speaker, Sir, when independence came to us three years ago, our immediate preoccupation at that time was to find ways and means by which to promote economic growth, as if out of nothing. Today, looking back, we can take comfort from, and have a sense of pride in, the achievements of these eventful years. What economic progress has been attained is undoubtedly the result of effective organisation, realistic planning and a disciplined approach to our numerous problems. Compliment must of course be paid to the untiring efforts of industrialisation and it is on industrialisation and also trade which the hon. Member for Sembawang has, I think, given me justification to make this general comment on policy in relation to foreign affairs. Because without industrialisation and trade, there will not be marketing, and without marketing with foreign countries there will be no trade representatives. I think trade representatives have to go along with political representatives in the way of High Commissioners and Ambassadors.

However, Mr Speaker, Sir, we must not overlook the fact that another element which has made all the achievements possible is our adherence to a realistic policy - one which seeks the maximum number of friends on the basis of equality and mutual respect, non-alignment in bloc rivalries and the desire to trade with all countries irrespective of their political ideology or their systems of government, so long as such trade is to the mutual benefit of these countries.

This realistic approach to problems of international relations has indeed paid dividends. For looking around us, the results of these policies should be evident to all of us. We have in Singapore diplomatic missions, consular offices and trade representations from different countries in the world, many of whom adhere to diverse policies and take different postures on international issues. I would say even belonging to different blocs. But what is important is the fact that we would not have counted so many diverse friends to our credit, if not for the fact that the permanent premises on which our foreign policy is 'based is something on which others cannot find fault with us. Foreign policies may change but the premises on which these policies are founded must always remain unaltered. Our basic principles of a non-communist, democratic, socialist state will forever remain unchanged. That I am confident will be the case with us now and in the future. For who can blame us for these premises? Our fundamental ob jective is to enhance the prosperity and the security of Singapore. We are simply for Singapore. We are anti nobody, just pro-Singapore. For this is the case in fact with every country in the world, and I would say this is the right of every nation to pursue.

The other, which is the philosophy of our foreign policy, is how we should see the world around us and interpret the changes and instability outside our frontiers. For is it not in the light of these changes that any country will have to make whatever adjustments that are called for in their foreign policy and enhance its security and prosperity?

We must therefore be flexible in our policies towards other governments and states. We cannot afford to be one-track minded. Indeed we have to adopt a policy of open-mindedness in our relations with other governments and states. At the same time, we have to be firm, consistent and rational in our postures. As a government and people we cannot and should never allow emotions to get the better of us, because this can only lead to irrational, insensible action. Governments and states we have learnt are primarily motivated by self-interest, and there is nothing unusual or extraordinary about this. At the same time, we also know that this motivating factor of self-interest is not inconsistent with friendly external relations with others. This is the reason why difficulties between governments and states encountered one day are more often than not resolved and overcome the next. International relations or intercourse between states is not something which started with the League of Nations or with the United Nations or with the present-day regional groupings and alliances. They started ever since human communities made contact with one another from time immemorial. The only difference is that since human societies became more complex, the social, economic and political problems which arose with greater sophistication needed equally sophisticated solutions. And international relations is merely a manifestation of the external complexities within states and between them. So to be inflexible in our attitudes towards other states and governments is to be like the proverbial ostrich and reflects immatu rity. No problem is beyond solution; no difficulty is too great. We must never be overawed by international problems, however insoluble and great they may appear to be at the start. Singapore believes in having a warm heart and a cool head in its relations with other nations.

Mr Speaker, Sir, Southeast Asia, of which we are an integral part, is in a state of turbulence. There have been troubles and anxieties for the past 20 odd years, since the end of the last World War. A look into recent history should confirm that wars and revolutions, racial conflicts and economic disintegration, communism and colonialism, all have plagued us in Southeast Asia. Be that as it may, the question that arises is how we in Singapore should perceive this turbulent world around us and take intelligent steps in our own interest to overcome these problems. In the history of nations, such a crisis is not new. The same could also be said for Southeast Asia. But like all others, we in this region must benefit from the lessons of history, for the fact that emerges from history is that mankind has seen such turbulence and crises in different ways. Some see in them nothing but danger. They accept them as inevitable and succumb to the gloom and hopelessness which such a mood generates. Others have seen in such turmoil challenges as well as opportunities and it has not been uncommon for some to face these challenges and successfully tackle them with resoluteness and self-confidence.

Singapore has seen many crises in the past and, going by past experience, I am confident that the people of Singapore will also rise to new challenges if and when they arise. During confrontation many people thought that this thing called confrontation was insoluble. Many threw up their hands in despair. Many secretly and privately thought Sukarno was right. Yet our patience and, of course, circumstances proved that it could not and did not last. I am sure that in the coming years they will see these challenges more as an opportunity to put things right in the interest of Singapore, rather than give way to gloom and despair. It is, therefore, inevitable that we in Singapore must not only appreciate the challenges ahead but must understand the nature of the problems that face us, if we are to take measures which are necessary to insulate ourselves against the problems well in advance.

This is precisely what the Budget, which has been presented by the Minister for Finance for the coming 15 months, seeks to do. As a realistic people who support realistic policies, which are intended to serve their best interest, I am confident that the people of Singapore will rally to the call, as they have always done in the past. For they know that we are a tightly packed society in an island of two million people, with no natural resources and not even an adequate supply of water. The people of Singapore know that the Government has always pro moted realistic solutions to their problems. They know that since the P.A.P, came to power in 1959, we have consistently followed our major goal of giving our people all the opportunities to develop their human potentialities and to give them a better life. They are conscious that we have consistently maintained these policies and I am confident that they will perceive the objectives which - as the Minister for Finance has outlined in the presentation of this Budget - aim not only at furthering this major goal but also seek to ensure that what we achieve is always available to them and to succeeding generations.

Mr Speaker, Sir, people in all walks of life are conscious that a new element has loomed over our horizon. They realise that the British decision to withdraw in 1971 and not in the mid-1970s has made it imperative that we seek alternative measures to secure our independence. What this means is that with British withdrawal, we also have to make ourselves self-reliant in matters of defence and this has to be done not within eight to ten years, as we had originally envisaged, but within three years from now. Judging by the enthusiastic support which our people have hitherto given us in respect of the challenges posed by other problems, I feel confident that Singapore should be able to be reasonably self-reliant in matters of defence, with the assured support of its people for the measures that have been proposed. Of course, the objectives have been clearly outlined by the Minister for Finance in the presen tation of the Budget and it should be obvious to everyone what we mean when we say that we intend to be self-reliant.

It is a fact of international life that small countries have always had to live in the shadows of bigger ones. In recent years, there was reason to hope that the shadows which big nations cast over the smaller nations would grow shorter and less threatening. There were indeed encouraging signs at one time when big nations joined others in the establishment and recognition of ethical norms in international relations. It is loudly proclaimed that adherence to the principles of sovereign equality of all states; that respect for the territorial integrity of other states; that non-interference in the internal affairs of other states; and that the renunciation of the use or threat of force in the settlement of disputes between states are the foundations on which relations between countries are to be conducted. It is even said often that the old doctrine of spheres of interests, or spheres of influence, in which a dominant power could dictate to the state living in its shadows, is clearly repugnant to universally accepted principles of international conduct. But the sad fact of international conduct today suggests that what may be an ideal may not necessarily be a fact.

We do not dispute the fact that the ultimate security for small countries like us depends less on wasteful expenditure on armaments and more on building and strengthening the international forces of peace. Mr Speaker, Sir, we in Singapore are convinced that only the strengthening of the climate for peaceful relations and greater co-operation between nations, both big and small, can help save arms expenditure and enable us small countries to use the money to combat poverty, ignorance and disease, which are our real enemies and whose defeat is both rational and worth while. But if we are to go by what is going on around us, notwithstanding these ideals, I am afraid we cannot help but believe that every dollar spent on arms, though wasteful, is a necessary expenditure under the circumstances, at least until we have satisfied ourselves that we have attained that measure of self-reliance in defence which is necessary for us small countries, or at least until the forces of internal peace can come to our aid. Until such time as nations can achieve these goals and view relations with one another in a realistic fashion, I am afraid we cannot be complacent about such questions and ignore our responsibility to become self-reliant for our own security.

In this world of interdependence, our objectives of a better life for our people can be achieved in many ways. We recognise that not least among them is by co-operating with other countries, particularly those around us and closest to us as well as others which are more advanced than we are. This is the kind of co-operation which, in our view, will be further enhanced only if conflicts between nations, and particularly the bigger nations, are brought to an end. It is increasingly dawning on the minds of world leaders that we can no longer seek solutions to international problems in terms of past memories but should realistically look for these solutions in the present circumstances and with future objectives in mind. In other words, we must not go back to the glories of the past, imaginary or otherwise. We must look to the present and to the future with optimism. We must bury the dead past. That is why Singapore looks hopefully for an end to irrelevant conflicts in this region and other regions, which for the last two decades have distorted relations not only amongst us in Southeast Asia, but also amongst countries outside Southeast Asia. Our salvation lies in us - the countries of Southeast Asia - cooperating and pooling our resources in order to progress and advance.

We have decided to join and support the Association of Southeast Asian Nations - ASEAN. We have not done this for nothing. We are in ASEAN because we believe that the pursuit of regionalism is in the interests of all of us in Southeast Asia. We have absolutely no illusions about regionalism and even though ASEAN is presently having some difficulty, we are convinced that this is but a temporary phase and one which other successful regional organisations have experienced in their early years.

This is even the case with the United Nations, and although one hears frequent criticism of the United Nations and its role in world affairs, its short comings and failures; though one hears the United Nations described as a big talk-shop; though one knows that the United Nations has not been able to do much in areas of conflict like the Middle East; though one knows that the wasteful war in Vietnam has been what it has been for several years in the past because the United Nations has been helpless; yet the fact remains that no member organisation, whether big or small, in the United Nations has been able to convince its members that the best course is to scrap it. All members of the United Nations believe that the organisation should continue.

So rather than concern ourselves with trivial and transient issues, it is important that we should pursue the more formidable and long-term challenges which ASEAN has been established to face and solve. Whatever others may say, Singapore is determined to see that regardless of the minor difficulties ASEAN must continue. Whatever the differences, recent tensions in the world have proved that it is always better to go on talking on problems, however insoluble they may appear, rather than pretend that they do not exist. There is a saying in Malay, Mr Speaker, Sir, that however annoyed one is by the nuisance created by the mosquito buzzing near one's ears, one should never seek a solution by burning the mosquito net.

There is one other aspect of regionalism and interdependence upon which I wish to touch. We in Southeast Asia can be described as developing nations. We are at varying degrees of under-development. Co-operation between economically weak and politically unstable situations, with all the best of intentions and mutual goodwill, cannot, I am afraid, ensure rapid growth and development. To achieve this, we must also co-operate with more advanced friends in other parts of the world in a joint enterprise or in several joint enterprises for our common prosperity and advancement. But our more advanced friends are not going to be encouraged to help us if we cannot co-operate and make regionalism work successfully. They are not going to be encouraged to help us if we quarrel among ourselves over small issues. They will naturally ask how we are to work together on bigger and more important matters if we cannot solve and settle minor problems. This is the problem faced by members of regional groupings and alliances which, for some reason or another, cannot get along with one another. This is the question which they should pose themselves and try to answer honestly. However, this alone will be insufficient, for co-operation among ourselves alone will not make for speedy advances towards modernisa tion. On the other hand, they will be slow and difficult, for the simple reason is that co-operation among poorer countries is not always the best way of growing rich materially and spiritually in a short space of time. We believe that co-operation in Southeast Asia must, therefore, involve not only asso ciation among ourselves but that these associations must be complemented with association with friends, rich as well as the not so rich in the world. I think, if the big powers realise that they have more to gain by co-operating both with themselves and with others to help less advanced countries, the less the occasion for big power conflict and rivalries and the ever present danger of major conflict in our area. To that extent, Singapore will support any move for co-operation among ourselves in Southeast Asia, and any approaches which show a sincere and practical desire by the big powers to assist in the genuine development in the region, instead of drawing small countries into big power conflicts, will be welcomed and supported by us and other small countries.

It is quite often mentioned by us and by others that small nations do not have the power to influence events in the world. Mr Speaker, Sir, this is very true. This is so true that only a few months ago we have seen how a relatively small country like Czechoslovakia was subjected to intrusions by a very much more powerful country. But the question is, collectively small countries can, given the right circumstances, given the right leadership and with good intentions, assert their moral influence in influencing world events. To that extent, Singapore will co-operate in pursuit of its policy of non-alignment in influencing world events, not by itself alone but in conjunction with other countries in the world which pursue policies which are not detrimental to the interests of others and which certainly do not interfere in the internal affairs of small countries like Singapore.

Mr Speaker: Order. I will now suspend the sitting of the House and take the Chair again at ten minutes to six o'clock.

Sitting accordingly suspended at 5.24 p.m, until 5.50 p.m. Sitting resumed at 5.50 p.m.

[Mr Speaker in the Chair]

Debate resumed.

The Parliamentary Secretary to the Minister for Finance (Mr Tang See Chim): Mr Speaker, Sir, the Minister for Finance promised a not painless Budget. However, as it turned out, he has, with his usual accomplished skill and financial wizardry, framed a Budget that raises the necessary money in such a fair and equitable way that there could be only praise for him. When a taxpayer pays willingly and congratulates the Finance Minister in the process, you can be sure that the congratulations are genuine and that the tax is fair and equitable. In fact, the showers of praise and the congratulations are causing embarrassment to my Minister. At close quarters, I see that he is suitably embarrassed. I shall not embarrass him any further, but shall reply to some of the points raised by the Members who have spoken so far.

The Members for Telok Blangah, Bras Basah and Bukit Ho Swee raised the question of the 15 per cent tax on imported made-up garments. The Members for Telok Blangah and Bras Basah complained of the tax. The Member for Bukit Ho Swee, on the other hand, said that the tax was equitable. I think both the Members for Bras Basah and Telok Blangah want to have their cake and eat it too. On the one hand, they complained that the tax will be a burden on the workers. On the other hand, they said that we must create more employ ment for our workers. I would have thought that the Members for Telok Blangah and Bras Basah should be the last persons to complain of the tax which, in fact, helps the local garment industry.

Mr Ho See Beng: Point of clarification, Mr Speaker, Sir,I am sure I did not complain of the 15 per cent tax on imported made-up garments. In fact, I agreed with the Government. What I complained of is the 10 per cent levy on P.U.B, bills.

Mr Tang See Chim: I am glad the Member for Bras Basah is not complaining of the tax. Therefore, I need only confine myself to answering the Member for Telok Blangah. As I was saying, this tax, in fact, helps our local garment industry. As we all know, the garment industry is employment intensive. It employs a lot of workers. The fact that this tax helps the garment industry is borne out by the fact that the President of the Garment Manufacturers' Association welcomes the tax.

The Member for Telok Blangah, however, says that foreign garments are superior in quality. I wonder how he gets this impression. Sir, as you know, our garments compete very effectively with foreign products, especially in the United States of America and in the United Kingdom markets, so much so that these two governments have to put a restriction on the entry of our products into their markets.

Mr N. Govindasamy: Point of clarification, Sir,I just want to find out whether the Parliamentary Secretary is wearing imported underwear or locally-made underwear.

Mr Speaker: The hon. Member must avoid personal questions.

Mr Tang See Chim: Sir, I am wearing locally-made garments. My shirt, socks and under-garments are all locally made.

The Member for Telok Blangah also complained that, as a result of our protective policies for industry, the prices of goods have gone up. I do not know how the Member could have got that impression. He must be quite unscientific, for I have here the latest copy of the Monthly Digest of Statistics which keeps a consumer price index. The volume I am quoting from, Sir, is the November issue, Volume VII, No. 11. At page 117, it gives the consumer price index. The base is 100 as at April/May, 1960. For January 1968, it is 113.5 points. For September, lo and behold, Mr Speaker, Sir, it is 111.1 points. According to this price index, which is collected by the Statistics Department -and it is the authoritative price index for Singapore - the cost of living has in fact gone down. The Member for Telok Blangah should have a look at this consumer price index. If he can convince me that the prices have gone up and give evidence to support it, I shall definitely look into the matter.

Sir, the construction of the consumer price index is based on retail prices. Weights are given for various goods. I should ask the Member to be more scientific than just say, "Prices have soared up." In fact, the expression he used was "spiralling of prices". He is using a very technical term but his statements are based not on facts but on feelings. It is true that the prices of one or two items might have gone up, but there are comparable substitutes in the market. For example, if the Member is taken in by an advertisement saying that by using a particular brand of toilet soap he could get a complexion as smooth as that of nine out of ten film stars, he has got to pay for that belief. There is a comparable brand of soap in the market. Why does he not use it and help the local industry? In fact, he will be helping his own fellow men to get employment. Why must he buy an imported brand of soap? I think his fellow men should ask him that question, and he must be prepared to answer them.

The Member for Telok Blangah also raised the point that hotel charges are too high and that package tour agents are beginning to leave Singapore out of their itinerary. Sir, I can only say that he has not produced any evidence whatsoever to substantiate this charge.

Mr P. Govindaswamy (Anson): Mr Speaker, Sir, a point of clarification. Will the Parliamentary Secretary say whether the tax on made-up garments will be levied on imported dhotis and sarees?

Mr Tang See Chim: I am sure sarees can be made in Singapore. I do not see any reason why our women folk cannot look nice in locally-made sarees. I am sure they will look equally charming.

On the question of tax on liquid petroleum gas, the tax is three cents per pound and not 15 per cent as stated by the Member for Telok Blangah. This is necessary in order to make not only the gas of the Public Utilities Board but also its electricity competitive with petroleum gas.

On the question of per capita income of workmen, I understand that the Labour Department keeps a record of the figures of the average yearly earnings of the workers. These figures show that the workers' earnings have been going up over the years, though not very dramatically. I think I have replied to the Member for Telok Blangah and I now come to the points raised by the Member for Bras Basah.

The Member for Bras Basah quoted 'from the Budget speech of the Minister for Finance and said that the difference between imports and exports, or the trade gap, is somewhere in the region of $1,000 million. This figure, of course, covers only goods imported and exported, and does not take into account services like insurance, port services and the rest. These services normally make up the deficit, as is very eloquently shown in our reserves. Surely, the acid test is whether our reserves go up or 'down, and I can assure Members that our reserves have been going up year by year and are now in a very satisfactory state.

The Member also complained that 'certain foreign investors come and invest here and yet do not open their own home market to the products manufactured in Singapore. What does the Member expect? Surely, the idea of attracting foreign investment here is that we should create employment opportunities for our own people. The question of where they sell the products does not really matter. As long as the products can be sold, whether in the home market of the foreign investor or elsewhere, that is what really matters. In fact, some of these foreign investors do come here with their market. One such example is Bridgestone Tyre Company Limited. In any case, even if foreign investors do not come here with their market or do not open their home market to our products, I think the best thing to do is to help these foreign in vestors find their market rather than complain about them. Does the Member really mean to say that if they do not open their home market to us, we should not allow them to come in, thereby resulting in no factories being opened and unemployment?

The Member also complained that the 10 per cent tax on the Public Utilities Board bills fall very heavily on the working class and that it is a regressive tax. I am afraid he has not read the speech of the Minister for Finance very carefully, because the Minister for Finance did say that more than 32 per cent of the consumers need only pay half of the tax, that is, 5 per cent, and more than a quarter need not pay any tax at all. I am sure this is not a regressive tax.

I now come to the points raised by the Member for Jurong. I think he brought up the same point made by the Member for Bras Basah, and that is the trade gap. I have already answered that.

The Member also complained of the lack of social amenities in Jurong and asked for an improvement. The Government is very conscious of this particular aspect. That is one of the reasons why the Jurong Town Corporation was established with a view to bringing about an improvement in the social amenities in Jurong. The other reason for the establishment of the Corporation is the better management and the rationalisation of development, etc.

The Member for Jurong also proposed that a workers' cultural centre be established in Jurong. I would advise him to look into the possibility of using community centres for this purpose. I am sure the facilities there can be utilised for this purpose.

Mr Ho Kah Leong: (In Mandarin): Mr Speaker, Sir, 1 would like to clarify that I did mention the problem of a community centre in Jurong Town. I said that the present community centre was not properly built. It is only an assorted collection of several flats and is situated quite far away from the workers' homes. That is why it cannot be used for cultural activities.

Mr Tang See Chim: Sir, there are many community centres in Jurong and I would recommend the Member to make use of the facilities there, if the existing community centres are too far away from the workers' homes, perhaps he can make representation to the People's Association for the establishment of additional community centres in order to incorporate cultural activities into the community centres.

The next point the Member touched on is about the Fire Brigade. He complained that the nearest Fire Brigade is at Bukit Timah. That is true, Mr Speaker, Sir. But, as far as I can see, it takes about 10 minutes to go from Bukit Timah to Jurong Town. The roads are wide and the traffic is smooth flowing. Of course, it is not possible to have fire brigades everywhere. Singapore is such a small island and land is precious and priorities have to be given to industries and factories.

The Member for Sembawang also raised the point that imported made-up garments are cheaper and more lasting. I have spoken on this point and I do not intend to say anything further.

However, the Member for Sembawang suggested a tax on furs. As we all know, Singapore is in the tropics and very few people here wear furs, if at all. It is an item only for sale to tourists and it will not benefit our tourist trade if we put a tax on any articles that are likely to be bought by them. It would be as foolish as putting a tax on cameras, because, after all, Singapore has a reputation of being a shopper's paradise and we must do everything to maintain that reputation.

Sir, I believe I have answered all the points raised. As other Members are waiting to speak, I shall not hold up the proceedings any further.

6.16p.m.

Madam Chan Choy Siong (Delta): Thank you.

(In Mandarin): Mr Speaker. Sir, I am afraid that what I am going to say has been said by other Members. However, I would like to enlarge on what they have said.

When the Minister for Finance warned that the next Budget would not be painless, people from all walks of life were mystified. They were worried that in, future they would be asked to bear more taxes. This is only natural because everyone knows that the British forces will be withdrawn from Singapore between 1970 and 1971. As Singapore lacks natural resources, we have to depend on our entrepot trade and industrialisation for our livelihood. How then are we to get the money for the necessary build-up of our defence as a result of the withdrawal of British forces from Singapore?

Another point is that we adhere to a non-aligned foreign policy. We will not stretch out our hands to beg for aid from the big powers to help us with our defence expenditure. So the only thing that the people can expect is increased taxation. It came as a surprise to those people who had been expecting a painful Budget when the Minister for Finance proposed only seven mild taxes on the 3rd of this month. This was contrary to their expectations and they were naturally pleased. As a matter of fact, the majority of the people realise that increased taxation is unavoidable in order to fill the gap in our defence expenditure. Everyone is prepared to make sacrifices. This is an indication of the people's patriotism.

The main feature of the Budget is that it reflects the prosperity of our commerce and industry and the increasing confidence of investors. Therefore, the people are proud of this Budget. In the context of a turbulent Southeast Asia, ours is a clean and honest government for a newly emergent nation. What is very precious is that we have shrewd economists like the Minister for Finance. We are relieved to know before Christmas that there is nothing worse in the Budget. We have been fortunate in not following in the footsteps of some of our neighbouring countries whose economy is on the verge of collapse. This is because of the prudence of our Minister for Finance and of the precautions which have been taken by our Government. This is something of which we are proud. Therefore, Mr Speaker, Sir, you will agree with me that if there is a Nobel Prize for a Minister for Finance, our Minister for Finance deserves to win it! The future development of our country still needs the collective effort of persons like the Minister for Finance and other Ministers. I am sure that Singapore will shine like a beacon in turbulent Southeast Asia.

On the whole, the new tax proposals affect only a minority of people. 'There is nothing much to criticise about the new taxes. But from the financial point of view, I think there is some defect. The basis of taxation should be reviewed. The only fair way of going about it is to impose taxes propor tionately on the people who are able to bear them. The burden of taxation must be fairly distributed. The raising of revenue must not be the sole factor. Taxation must also reflect the financial policy of the State. The trend of modern economics is just the economics of finance and nothing else. This is a very weak foundation, in other words, the development of commerce and industry cannot be divorced from financial factors imposed by financiers. Although Marx said that the use of currency will die out one day, it was Lenin who did not oppose the use of currency - "The Central Economic Planning Committee is in the sole control of the country's finances." it means that it is not enough to depend on political influence alone to solve the financial problem of a country. According to this analysis, it is clear that the Minister for Finance had already taken into account both the financial administration and practical factors before he presented the Budget to this House. He was able to balance both these factors to a certain degree. When elaborating on the seven new taxes and adjustments to the old taxes, he said that in imposing a tax on P.U.B, bills, some consideration would be given to the industrial use of public utilities. This is in order not to reduce the competitive position of the local industries. The Minister has also proposed to exempt industries from the new levy on public utility services. In other words, the new tax will not hamper our economic growth and industrial expansion. All this is being done to attract more foreign investments and to make our goods competitive in price.

However, we must turn our thoughts to these new taxes. In my view, there is one outstanding feature about them. The emphasis on the burden of the tax is on the poor people. The Finance Minister gave an explanation for increasing the rate of tax on public utility services. I will now dwell on this explanation. According to him, there will be about 25 per cent of the consumers who will fall within the category of those whose PUB, bills do not exceed $10 per month.

6.32p.m.

This category is exempted from the new tax. Those consumers whose bills fall between $10 and $20 a month constitute about 32 per cent of the total consumers. On this category a rate of five per cent is levied. In the view of the Finance Minister, consumers whose monthly bills range from $10 to $20 a month are quite well off financially and they should not be classified in the category of poor people.

Mr Speaker, Sir, I wish to point out, first of all, that this tax, as explained by the Finance Minister, is neither clearly defined nor evenly spread. In fact, consumers in the range of $10 to $20 per month can be included in the category of poor people. The majority of consumers in this range are poor and the additional tax will have an adverse effect on them. At least they will be affected psychologically. Those affected by this new tax are not rich people. They belong to the hard-toiling type of people. This burden is particularly felt amongst those who are not rich. For example, if a family uses $20 worth of public utility services a month, we can say that it belongs to the $300 income group. But we must not forget that human beings need water and lighting. A bigger family will, therefore, need a greater supply of water and electricity even though its income is only about $300 per month. If you take a family in the $300 income group which has eight members, the consumption will be substantial. In other words, the consumption rate of public utilities is no indication of the financial position of the family.

I am fully aware of the fact that tenants in Housing Board flats use more public utility services than those whose monthly P.U.B, bills come up to $10. This is because of the size of their family. But their income may be within the range of $200 to $300 per month. They are now worried about the new tax because of the size of their family. They are worried about the high cost of public utility services. We cannot assume that, because a family's P.U.B, bill is $20, it belongs to the well-to-do group and should be taxed accordingly. That is a wrong assumption to make. If we carry this assumption too far, it will give rise to a great deal of ill consequences. For example, consumers whose bills amount to $20 may be classified as the lower middle income group. In addition to the normal P.U.B, expenses, they will now have to pay these additional taxes. As a result of this increased burden, they will not allow their children to make use of electric lights for reading at night. They may have to switch to kerosene lamps. As a result, their eyes will suffer. We will then have more and more shortsighted people in Singapore in the future. Many families now use electricity or gas for cooking. The additional levy on public utility services will force them to use kerosene cookers or even bottled gas as a substitute. The additional cost of water will also induce them not to use sufficient water to wash their clothes clean. These are the adverse consequences we have to consider.

Merchants and traders use neon lights for advertising purposes. However, we do not have to worry about the big businessmen. But what about the small businessmen? As a result of the increased cost of public utility services, they may pass on the increased cost to the consumers by raising the retail prices of goods and services. Consequently, the people will again suffer.

Let us consider the rural areas. We are now encouraging the rural people to make more use of electricity and water. In other words, we are installing electricity in the rural areas.

[Mr Speaker in the Chair]

6.40 p.m.

Madam Chan Choy Siong (Delta): We are cutting down the provision of stand-pipes in order to encourage the rural people to install water-pipes in their own homes. The additional tax on public utility services will be a burden on the rural people who are already poor. They are, in fact, poorer than the urban people. They will thus hesitate to install water and electricity in their homes. As a result, they will not be able to enjoy these modern facilities. In my humble view, the Finance Minister should give further thought to the new forms of taxation. He should look further into the question before he makes a final decision.

Is there no way of increasing revenue other than by increasing the levy on the public utility services? Cannot we impose additional taxes on luxury goods? Cannot we do it by way of purchase tax? In my view, it is only by increasing the taxes on luxury goods and purchase tax that we are able to get money from the rich. For example, refrigerators, air-conditioners, perfumes and cosmetics for women and a host of other luxury goods can be considered for tax increases. These are the articles used by the upper middle class or the middle class people. More revenue will come from these sources than from the levy on public utility services.

According to statistics, the yield from this new tax on P.U.B, bills will amount to $11 million per annum. [f we were to substitute this tax with purchase tax and taxes on luxury goods, we might be able to get more money from the people who should be taxed. Our budget will then be nearer to perfection. It will then be in keeping with the Government's policy of looking after the majority of the people, particularly the poor.

Mr Speaker, it is gratifying to note that, due to the efforts made by the Ministry of Finance, we have been able to attract a large amount of investments into Singapore. I think this is a very important feature in the Finance Minister's Budget Statement. As a result of the continuous flow of foreign investments into Singapore, we are able to give more jobs to our people. Our economy is given another boost.

I wish to draw the attention of the Finance Minister to the fact that amongst the investors coming to Singapore, there are very few women investors. As far as I know, there are many wealthy women in the world. Although these rich women are not so aggressive as their male counterparts, they are financially well off to be able to invest in our markets. We should not overlook them because of their lack of aggressive ness. If we are able to attract them to invest here, we can perhaps get additional substantial investments. As regards the women in our own country. the Finance Minister should find ways and means to encourage them to invest locally. This will be of great assistance to our national economy. For example, our women may have property like jewellery and other precious ornaments. They bought them because of the fear that their cash may be stolen. They bought them as a form of investment. This is because there has been no encouragement from the Government for our women to make proper investments. lf the Government can set up a women's investment bureau, perhaps our economy will be better off in future.

I hope the Minister will give consideration to these problems. I give him my full support.

6.46p.m.

Mr P. Govindaswamy: (In Tamil): Mr Speaker, Sir, the British troops are withdrawing fast from this region. Since the announcement of the accelerated withdrawal of British forces from Singapote, no one inside and outside this House has any doubt of the need to build up our own defence forces quickly. However, apart from the consideration of national security against possible external aggression, one side issue of the withdrawal is the mass increase in unemployment. This increase, Sir, is over and above the present serious unemployment situation resulting from the large turn-out of school leavers year after year. The resultant economic problem poses such a formidable challenge that many Finance Ministers even of the affluent countries would rather quit their posts than stay on. Taking this into account, Sir, I cannot help congratulating our Finance Minister on his courage and brilliant rendering of his annual Budget Statement.

Side by side with the military build up, the Minister outlined his plans for economic growth and, in this respect, he quoted gratifying figures of achievement in our industrial expansion. Foreign capital is continuously being poured in and the Minister is optimistic that the factories in Jurong and other industrial estates will continue to grow in number and in size. I would like to share his optimism, but industrialists, both local and overseas, have repeatedly warned that with our population of two million, the prospects of industria lisation would be dim unless our industries were oriented towards exports.

I understand that among the factories already engaged in the export trade, some have secured repeat orders while others have not gone beyond their first order. I am sure the Minister is aware that the establishment of new factories will only serve as a temporary relief in our unemployment problem. And unless these factories can be sustained, the situation will quickly be reversed, to the disappointment of everyone. The sustenance of any factory depends on the quality and price of its products. As I see it, the Government, by its economic incentives like relief from income tax and other concessions, has succeeded in attracting foreign investors to set up factories in Singapore. And by the Employment Act, it has succeeded in improving efficiency which is supposed to cut down the cost of production. But nothing seems to have been done, from the statement of the Finance Minister, to regulate the quality of products. Sir, I consider this most essential now. Otherwise, our export-oriented factories receiving their first export order would also have received their last export order. Therefore, I earnestly suggest that the Minister look into this matter as soon as possible.

In the raising of revenue, the Minister has announced four new taxes. On the basis of distributing the burden according to individual ability, I feel that a five per cent levy on P.U.B, bills for those whose bills fall between $10 and $20 a month is to ask the lower middle income group to carry a proportionately heavier burden. It may be argued that this levy does not amount to more than $1 a month. But in the light of the increasing cost of living, the additional $1 means much more to this group than an increase of $100 to the higher income group. It should also be borne in mind that this group, although consisting of 32 per cent of the total, has a larger number of children. Any specific increase in taxation on this group, however small it may be, would be borne not only by the head of the family but shared out by the children as well. I therefore urge the Minister to reconsider the levy of five per cent on P.U.B, bills for consumers whose bills fall between $10 and $20 a month.

The Parliamentary Secretary to the Minister for Finance has said that this is not a high tax. His explanation is not satisfactory. Therefore, I hope the Minister will reconsider this matter. In conclusion, I am not unappreciative of the difficulties confronting our Finance Minister. Despite my remarks, to which I hope he will give due con sideration, I endorse his Budget Statement.

6.52 p.m.

Mr Ong Soo Chuan (Nee Soon): Mr Speaker, Sir, while many other countries find themselves in a state of serious concern over the international monetary crisis, we, in a newly emergent Singapore, must be thankful that we have achieved continuous economic growth and industrial progress during the past year. Despite the fact that we are faced with the prospect of British withdrawal and the problem arising therefrom in the l970s, we have been presented with a fairly mild change and what I might say a reasonable Budget in the circumstances for the coming year. I feel sure that this will most certainly be envied by others, and we Singaporeans can take pride in our achievements and what we hope for the future.

In this year's Budget, the Minister for Finance has brought realistic changes which, in the Minister's own words, dispel unwarranted gloom and reassure the people that the new taxation will not have any damaging effect on investment incentives. In fact, I would like to add that it establishes confidence for the future. Due to the accelerated withdrawal of British troops by 1971, the stability in this region can no longer be taken for granted. Readjustments have to be made to meet the changing circumstances. Therefore, it is inevitable that our defence expenditure will be increased if we are to be more secure and keep up with new developments.

Sir, the 1970s are drawing nearer and nearer. We must now start preparing and planning for the future. if we do not take cautious and steady steps to prepare for a more secure and brighter future, then we will live to pay for the consequences of our neglect. If that were to happen, future generations would judge us as having been selfish and leaving them to face a world of hardship and desperation. We in this House are all aware of the fact that changes are taking place with great and startling rapidity in this turbulent part of Southeast Asia. The whole security and political situation in Southeast Asia is in the process of change. Change, according to our Prime Minister, is the very essence of life. The moment we cease to change. to be able to adapt, to adjust, to respond effectively to a new situation, 'then we have begun to die.

To me, the changes that the Minister for Finance has brought to us in this Budget are realistic and the people can draw inspiration from it to overcome the problems of the crucial years ahead. In the Budget, we notice the change in the basis of the financial year in the presentation of the Estimates and the need to spend more on national defence. I support the move by the Minister for Finance to increase our defence expenditure on the ground that the real problems facing us are of a completely different world after the British withdrawal. The prevailing stability in this region will then vanish. The vacuum left by the British withdrawal makes it imperative that we establish an effective defence system of our own to maintain our security and preserve our identity. If we do not develop a strong and lasting emotional attachment to Singapore, then I am afraid our rich and strategically valuable island will be a tempting place for others, especially at a time when the fact of international life is for the nations to be increasingly driven by hatred and conflict against each other.

My Minister, the Minister for Foreign Affairs, in his speech in Bangkok on the 14th October, after examining the hard facts and harsh realities of Asia's political scene, warned us that today Asian countries live in fear not of Western imperialism but of one another's imperialism. This statement has made us realise the fact that the entire situation in this region does not encourage optimism about regional co operation, but instead if we look around us, we will notice that confrontation has overshadowed co-operation. Faced with such an unpredictable environ ment, it might be advisable to follow the French principle our destiny, our path, our policy be our own - in order to deal with the narrow-minded foreign policies of certain nations in this region. At the moment, it would be more appropriate that we devote more of our time and energy to ensure our survival by consolidating our national defence and working for economic growth.

The Minister for Finance, in presenting his Budget, has observed the objectives for the Republic as outlined by the President in his Speech to this Chamber on 6th May. The three objectives are: optimum use of the time available to build up an effective defence capability; greater economic growth; and enhancement of national consciousness of the problems that will come upon us in the next few years. A study of the above objectives will make it easy for us to understand the intention of the Minister for Finance to allocate $330 million, or about 30 per cent of the total expenditure, on defence, $364 million, or about 35 per cent, on social and educational services, and $108 million, or about 10 per cent, on economic services.

From the above expenditure for the coming 15 months, we notice that the Government is determined to build up an effective defence capability to ensure continuing security and that, at the same time, it has not forgotten the task to speed up our economic development. The figure of $35.8 million to be raised from the new taxes is relatively very low when compared to the amount to be spent on defence. It merely, in the Minister's own words, helps to pay for rather less than 10 per cent in defence expenditure to be incurred next year. Moreover, these new taxes have been so calculated by the Minister for Finance that families in the lower income group will not be affected, and they will not have the effect of impair ing incentives to economic development or discouraging and disrupting the flow of foreign investment. This is the price that the people could pay in order to build up an effective defence system at the minimum cost, and this cost is not too much for the people to bear. In fact, the price that we pay today to ensure a bright, secure and prosperous future is relatively low. Sir, you may agree with me that this is due to the economic growth which has reached the mark of 7.7 per cent since last year despite the British military rundown.

At the end of June this year there were 174 pioneer industries in production with a total fixed investment of $436 million and the combined output was $472 million. Investment and production increased by 19 per cent and 64 per cent respectively when com pared with the same period last year. This is another indication that enhances our belief that economic growth in our Republic is beyond doubt. Although the economic situation is bright, there is still the need to create confidence in foreign investors in order to encourage their active participation in our overall economic programme.

I am pleased to note that in the new Budget no disruption has been laid upon industries and the export trade. Since last year, some fiscal incentives have been designed to encourage export to oversea markets and expansion of productive capability to increase output. To meet our growing industrial expansion, recently the Jurong Town Corporation, the Development Bank of Singapore and INTRACO were formed to provide facilities to assist local and foreign potential investors.

Sir, a suitable investment climate in the field of economics is insufficient to attract investors without security. Today, many under-developed countries, though rich in natural resources, find it difficult to create a stable political climate to attract potential investors. As a result, the people in these countries are still backward and living in poverty. Fortunately for us in Singapore, we have a far-sighted government that has in the past few years started planning to build a secure and prosperous nation which will provide a better living for the people. But how long can we enjoy such a pleasant position will depend on the determination of our people.

The Minister for Finance has assured us that for the coming year the greater part of the cost of defence expenditure will be met by increased revenue due to economic growth rather than by new taxes. To me this is a challenge - a challenge for the best or for the worst.. The implementation of his assurance' can simply mean that if we are disciplined and dedicated to make the grade in our economic growth, new taxes would not be necessary to meet the cost of defence expenditure. If we are not disciplined and dedicated, we will have to face the consequence of our short-sightedness. There are some selfish people who think they can quit Singapore if something happens to it. Let me tell them that there is no alternative place to escape but to follow the Chinese saying, "Live here, die here."

We should instil into the minds of our people a deep concern not just for their personal future only, but also for the future of Singapore. This is the kind of thinking that is working directly to strengthen our effort in nation building. We are all aware that nation building is a long process and the task that we are pursuing to achieve it is difficult. But I am confident that our people, imbued with initiative and dedication, will be able to overcome these difficulties. Even the Prime Minister of Japan, Mr Sato, when he visited Singapore on 15th October, 1968, was confident that the course' which Singapore is following today, however thorny it may be, is the path leading to a bright and hopeful future.

In order to realise this expression of confidence and translate visions into realities, the whole-hearted efforts of the people must be harnessed to achieve specific projects. Plans must be laid now and concurrently the people must be wakened to devote their resources to the implementation of these plans. ideas and plans are easy to formulate. The difficult task comes after. The time has come for the people to realise the pitfalls ahead if the plans do not succeed. To this end, the Government must make a concerted effort to educate, the people to meet the task ahead.

I am confident that the people of Singapore will rise to the occasion, as they did in the past, to overcome whatever difficulties they may have to encounter. I may add also that I am confident that the people of Singapore, with their resourcefulness and initiative, will push Singapore to new heights of achievement.

Mr Speaker, Sir, let us with studied confidence look forward to a new era in the nineteen seventies.

7.12 p.m.

Mr Lim Soo Peng (Havelock): Mr Speaker. Sir, this Budget comes as a surprise in many ways. Most of us knew of the extensive military build-up and consequently expected substantial tax increases. Most of us, including those in business, knew how well our economy was developing. What we did not know was that we were doing so well that the heavy demand of military spending could be met almost entirely by normal increases in revenue arising from an expanded economy. Sir, this is a remarkable feat by any standard.

It is true that in most cases, non-defence expenditure had to have increases curtailed. I regard this as a rather small price to pay for our security. We all know how awful the burden of defence is. In most countries, including even developed ones, increases in military spending would have given rise to severe economic problems, if not led to bankruptcy. But here our Finance Minister does not even have to increase rates. All he needs is an addi tional $35 million in 15 months, representing about three per cent of his Budget, to pay for further economic development. I regard this as close to a modern miracle.

Sir, we were told that a preliminary estimate of our gross domestic expenditure for 1968 put the per capita figure of Singapore at $1,940. This figure must surely indicate that we are a rather rich nation in Asia.

The Finance Minister, in a speech at the recent opening of a new factory, said that our foreign reserves stand at S$2,000 million. With a population of around two million, our per head of external reserves is S$1,000. In Asia, only Japan and Thailand have more external reserves than Singapore. In June 1968, the external reserves of Japan were US$2,001 million and the external reserves of Thailand were US$1,051 million. Their respective populations, however, are 99.5 million and 32.7 million. Therefore, in terms of external reserves and on the basis of population, Singapore is ahead of Japan and Thailand. The per head of external reserves of Japan is 5560 and that of Thailand is S$96 as against ours of S$l,000. This figure must again put us well ahead of other nations in Asia, if not ahead of many prosperous nations of the West.

Having done so well in the year, it is no wonder that the public have responded favourably to the additional requirements of the Finance Minister. Furthermore, the additional sums required are for transfer to the Development Fund to expand further our economy. Therefore, I do not wish to touch on the new tax measures and the variations on the old ones. All of them appear to have been carefully calculated and designed to spread the load on those most able to bear them.

Mr Speaker, Sir, what I wish to touch on is the rather grim prospect facing us in the next three years. I have little doubt that our economy will ex pand enough to meet the increasing needs of defence. However, I do have grave misgivings about the outcome of the work of those Ministries whose share of economic increases will be siphoned off to the Ministry of Interior and Defence. I quite appreciate that without an adequate defence system, all economic and social development will not be to our good. But at the same time we have to ensure that we have something worth while to defend. I fear that if non-defence expenditure is kept at a standstill, not only will there be a standstill in the work of the Ministries concerned, but there may be a deteriora tion that will, in the end, be very costly to arrest and rectify.

While agreeing that our rate of defence build-up is necessary, I think that at the same time other Ministries should not acquire the defeatist attitude of doing nothing as far as improvements are concerned, The Ministry of Finance has set up a trading company and a bank on a commercial basis so that the additional expenditure involved will be more than met from commercial opera tions instead of being a further charge on Government funds. The Ministry of Communications now functions more like a huge business concern than like a regulatory Government department. The Ministry of Culture has formed a trading company to cut down the cost of production of radio and television programmes and at the same time to market those programmes locally and abroad. The other Ministries should follow suit. The Ministry of Education can, for instance, try to sell its excellent E.T.V, programmes abroad. The Ministry of National Development can, for instance, sell more of its housing and technical expertise to other countries. The Housing and Development Board should accelerate its sale of low-cost houses. At present, I do not think that more than 15 per cent of those who live in the low-cost housing estates own their own flats. The ideal would probably be about 50 per cent. I am not suggesting that the Government should go all out to compete with business enterprises. What I am suggesting is that, with some thought and imagination, the Ministries can in one way or another operate along commercial lines to cut costs and increase their income. Even if nothing more than an attempt has been made, the exercise will keep those Ministries which have a standstill budget for the next three years fighting fit until better times come.

7.23 p.m.

Mr Low Yong Nguan (Crawford) rose -

Mr Speaker: Mr Low, so that I may not cut you short in the middle of your speech, may I say that you have seven minutes. At half-past seven I must, under Standing Orders, call the Minister for Finance.

Mr Low Yong Nguan: Mr Speaker, Sir, the Budget and the Government's financial policy for the coming year have obviously been framed with an eye on and under overwhelming intimidation of the impending withdrawal of the British forces from Singapore. In the midst of extremely wild speculation, the Budget has been hailed as sensible and mild. But, Sir, I have my reservations and consider that the levying of a ten per cent tax on P.U.B, services is incorrect and untimely and that the allocation of expenditure in certain cases is unbalanced and not properly handled.

With regard to the 10 per cent tax on P.U.B. services, I wish to draw the Government's attention to the following considerations.

First, it was only on the 1st November, 1966, that the P.U.B, last raised its rates of charges.

Second, the Government has exempted some $14 million taxes on petroleum products consumed by the P.U.B. whose trade surplus for the coming year, as I understand it, is somewhere in the region of $26 million.

Third, as pointed out by the Minister for Finance, with the introduction of more efficient power generation systems, there could be a considerable drop in production costs resulting in still a higher trade surplus. Therefore, if the Government reimposes the tax on petroleum products, it will still be possible for the PUB, to maintain a reasonably high level of trade surplus which should fulfil the requirements of the World Bank Loan without having to throw the burden of tax on to the people at large, if this is clone, it will probably make the P.U.B, work harder and raise the level of its trade surplus and at the same time ensure that the services it provides are kept at the most efficient level.

On my point that the allocation of expenditure is unbalanced and not properly handled, I refer in particular to the Ministry of Foreign Affairs which has to live with only about one per cent of the total Budget. I beg to disagree with the Minister for Finance if this allocation is any indication of the importance he attaches to this Ministry. I base my consideration on the relative merits of the two Ministries the Ministry of the Interior and Defence and the Ministry of Foreign Affairs - which are both important to our security and prosperity.

The object of our defence build-up is "to achieve security in the long term so that the people can now plan ahead in whatever they are doing". This was declared by the Minister for Defence in his statement on 26th March. 1968. This is all very good if a more logical and realistic approach is made in all directions to attain such an objective. Sir, we are living in a turbulent area which has always been subjected to wars and conflicts throughout its history and where the political situation changes rapidly. I am sure that our very existence, security and attitudes are to a very large extent affected by conditions and decisions made more from without than from within this region or our country. If the Minister for Foreign Affairs is here, I am sure that he will agree with my observation in this respect. If this is the case, does the Minister for Finance not consider it of paramount importance that we must be in a position to project a true and clear image of Singapore overseas and that we must be kept adequately informed of world opinion?

Sir, I will quote an example to show how a foreign mission can help tremendously to prevent conflicts and to promote peace and security. I refer to the recent difficulties we had with our Indonesian neighbours. I am sure that the situation in Indonesia took a turn for the better because of the tactful handling by our Ministry of Foreign Affairs and the fact that we have a capable and gallant diplomat there. This goes to show that the returns from an investment in such a mission can bring us big dividends. Had it not been for the fact that we were able to afford this mission, and have it established, we would probably have had to pay a much higher price for an amicable settlement.

Sir, another reason for our defence build-up is to show to the world at large that we are prepared to defend what we have so that prospective investors will feel it safe to put their money with us. Does the Minister for Finance not consider it sensible that any prospective investor will first look around and see how well we are getting along with the world at large before he conies and invests here?

Sir, I would like to clarify two points. The fact that I am asking for more money for the Ministry of Foreign Affairs does not indicate my full agreement with whatever is being undertaken or pronounced by this particular Ministry. It is neither my intention to belittle the good work that the Ministry of the Interior and Defence has been doing in fostering a climate that is conducive to the continued peace, security and prosperity in our Republic, nor do 1 wish to deny that we have to be in a position to contribute substantially to any eventual collective defence agreement and be a party of importance in such an exercise as early as we can.

However, Sir, I am fully convinced of the importance of handling foreign affairs for us in Southeast Asia. If the Government neglects the contributions to the Ministry of Foreign Affairs, I am of the opinion that it is putting the cart before the horse and' that it does not have a correct and balanced approach.

Sir, I ask the Government to provide us not only with an alert, 'disciplined and well-trained crew, ready and capable of defending us from any danger and threat to our survival, but also with people who are capable of reading and interpreting signs of bad weather and of seeing us through the rough seas ahead so that we will come safely into port.

7.30 p.m.

The Minister for Finance (Dr Goh Keng Swee): Mr Speaker. Sir, my task this evening is made somewhat easier by the novel arrangement of introducing my Parliamentary Secretary at half-time. He has dealt with so many of the points raised by Members of the House that only a few are to be dealt with by me. However, since my Parliamentary Secretary made his speech, some speakers have raised a number of points and I think they deserve careful attention and consideration.

Many Members have said that the tax on P.U.B, bills is not such a good idea, particularly the levying of a five per cent tax on bills between $10 and $20 per month, The Member for Delta, the Member for Anson and, I think, the Member for Crawford have criticised this proposed measure in very clear terms. In fact, the Member for Delta thought that in some poor families children may be reduced to such straits that they will have to study by kerosene light. May I remind her of the "Three Character Classic", which no doubt she had read in her early childhood, in which there was a very distinguished scholar who studied by the light of glow-worms. We are still far from this desperate position. To all these people I just want to make this reply. Let us get down to figures. They say that a family earning $300 per month and having many children will have difficulty in paying this tax. In fact, on the average, they will pay only something like 75 cents more per month. I do not think a family earning an average of $300 a month -- according to the Member for Delta - would find it an incredible hardship to pay 75 cents more per month. Of course, there are so many of them that, collectively, we get about half a million dollars a year. That is a very tidy sum. I do not think one can despise half a million dollars a year. In defence, all I say is that the amount they have to pay is really small, the number of tax payers is large, and the total sum collected is not negligible.

The Member for Delta has asked me to think of ways and means to attract foreign rich women into Singapore. I confess I am very startled by this pro posal. It has never occurred to me just how to go about this job. If there are volunteers among the strong, virile and attractive Backbenchers to help us in this task, I am sure we might achieve something. The Member for Delta said that our women buy jewellery and perhaps they might be induced to sell the jewellery and invest in industry. I am not a prig in these matters, Mr Speaker, Sir, I see no harm in women buying and keeping jewellery. After all, it is a very good hedge against inflation. In any event, where Finance Ministers in poor countries have asked their women to disgorge themselves of their jewellery, they have all been singularly unsuccessful. So let us console ourselves with the thought that our Singapore women buy jewellery and use it. Let us hope that they look more attractive and raise the morale of the population.

I think the Member for Nee Soon has made what I consider to be a sober and constructive analysis of the problem that faces us. I would like to underline some of the points that he has made. The first is this. After 1971, with the departure of British military protection, we will be living in a nevi world. I do not think he is exaggerating the position when he says that it will be a new world and that in this new world it is as well that we have an adequate defence capability. He also makes what appears to me a very crucial point, when he says that apart from buying weapons and training people, we need to instil into the population a strong emotional attachment to the country. I wholeheartedly agree with him that this point must never be overlooked by the Ministry of Defence, by the Government, and by the general population. If we ignore this important psychological factor, we do so at our own risk.

Mr Speaker, Sir, the population of Singapore is really of recent migrant origin. Our society does not strike deep roots into the past. Therefore, the natural basis of patriotism which exists in older societies does not exist here. In fact, I remember reading the editorial of a local Chinese language newspaper just before the Budget and it was speculating on defence expenditure. The leader writer made this point. Although in terms of the legal constitution we may be an independent country, in fact we retain a great deal of the colonial heri tage - namely, a good proportion of the population live in Singapore not as residents of a home but as paying guests in a hotel. If there is prosperity, people 'enjoy it. But if there is adversity, they pack up and go to another hotel. This unfortunately is true of a good number of Singaporeans, it is as well that we recognise this fact. At the same time, we must also admit that among the younger people who have grown up here and are educated here, this strong emotional attachment is developing. We should see that it develops speedily and strikes deep roots in our society.

The Member for Nee Soon is entirely right in saying that without security there can be no stable basis for investment. In fact, security from disturbances both from within and from without is an essential pre-requisite to economic growth. He has correctly noted that in many developing countries which have failed to provide a secure framework of internal security and defence against external threat, no development of any kind is possible.

The Member for Havelock has drawn our attention to the strong position of our external reserves, the level now being some $2,000 million. He has compared it with the reserves of Japan and Thailand. Although in the aggregate both these countries have more external reserves than ours, in terms of per capita reserves, ours is between 10 and 15 times those of Thailand and Japan. I think his figures are correct, except that the Japanese have been increasing their reserves very fast in the last few months. He has asked how we compare with European countries. He may be interested to know that I have in my Ministry two German advisers who have been sent here by the International Monetary Fund. They have done calculations and compared the external per capita re serves of Singapore with those of their ~wn country - Germany. As you know, the Deutschesmark is the strongest currency in the world. But our per capita reserves are two and a half times those of the Germans. So I think, all in all. we are in a good position. Let us always keep our position that strong.

The Member for Havelock is entirely right in saying that the Ministries which are now suffering a standstill in their budget allocations should not despair. He has given us some proposals on how to raise income. It is not at all a bad idea. In fact, so far as the Ministry of National Development is concerned, they are carrying on with a very energetic plan to sell houses to the tenants. In the next few months the Housing and Development Board itself will launch a very extensive scheme to sell houses to the tenants. That part of his proposal is in hand.

Apart from getting income from various sources, and mind you, this sort of thing can be over-done, I think there is scope for ingenuity by officials. With the same money, if they can think of solving the problems in novel ways, if they can apply their minds in bold and imaginative ways, we can see not merely the maintenance of existing standards but great improvements in the standards of services provided. Let us hope that the non-defence Ministries will regard this as a great challenge and rise to the occasion.

The Member for Crawford raised a number of points. First, with regard to the P.U.B, he said that the P.U.B, has a surplus of $26 million. He thought that if we had reimposed the fuel tax, which could easily get us $12 million, it would not be necessary for us to have a 10 per cent tax on P.U.B, bills. First of all, the trade surplus of the P.U.B, is somewhat different from, say, the trade surplus of a private corporation. Supposing XYZ Company makes $20 million. That belongs to the company --the directors and the shareholders. But when the P.U.B, enjoys a trade surplus, all it means is that it will need less money from the Finance Ministry by way of loans. Therefore, in a sense, the trade surplus of the P.U.B, helps the Government in that we need to give them less money for their development expenditure. Therefore, to impose a fuel tax would mean that in the end, although we get $12 million from them, we will have to give them back $12 million for their development expenditure. That does not help us very much.

Now, more money for the Ministry of Foreign Affairs! Of course, no one will argue against the importance of having a good diplomatic service, having effective missions abroad which will influence friends and keep enemies at arm's length. We will agree to all that. The Member for Crawford gave the good example of our Ambassador in Jakarta who put up such a brave and resolute show in the face of very acute difficulties. We have a good man there and we have good men in other missions. But the trouble is that the supply of good, resourceful and perceptive Ambassadors is very limited. You may have good men who can become good Ambassadors, but they prefer to remain in Singapore and make money. After all, we do not pay our Ambassadors all that much money.

Mr Low Yong Nguan: Point of clarification, Sir. My point is that the Ministry has no money. That is the reason why we cannot pay them well.

Dr Goh Keng Swee: We have got to pay Ambassadors according to the salary scale of the civil service structure. If you pay the Permanent Secretary Grade C, which is about $2,300 all-in a month, you cannot pay the Ambassador $50,000 a month. This is what a successful businessman is making. Be that as it may, the supply of top-class diplomats is a greater limitation than money. Of course, it takes time to develop the Foreign Ministry. It is not merely a matter of getting staff and training them: there is the further problem of developing a tradition, inculcating professional skills and so on and so forth.

The Member says that we struck a wrong balance between the Ministry of Foreign Affairs and the Ministry of the Interior and Defence. I do not know. Of course, we agree that we have to get on well with other countries. But whereas you can take your time to develop your Foreign Service, you have three years only to develop "the muscles". That is why we are spending so much time and putting so much effort into our defence build-up. Of course, what encourages us or should encourage us and should assure other people is the fact that it is quite fantastic to regard Singapore's defence build-up as in any way offensive or threatening to other people, because, by our nature, we, as a trading centre, a small island with a small population, above all, value peace, security and stability. Wars and aggression are for countries with 100 or 200 million people. Small countries just want to be left alone to exercise their abilities and their talents for their own advantage. Unfortunately, in this part of the world and in the age in which we live, we are more likely to achieve these objectives and to get on well with other countries if we are respected rather than if we are despised. So whatever the correct balance may be in the next two years, it is quite clear in my mind that we have to proceed with the defence build-up. In the meantime, we are looking around for astute, resourceful and perceptive ambassadors.

Question put, and agreed to.

Resolved,

That Parliament approves the financial policy of the Government for the financial year 1st January, 1969, to 31st March, 1970.

Resolved, "That Parliament do now adjourn."-[Dr Goh Keng Swee].

Adjourned accordingly at Ten minutes to Eight o'clock p.m Appendix to Mr Speaker's Announcement(Col. 112)(Cols 0201-0204)