DEVELOPMENT LOAN BILL

Order for Second Reading read.

5.28 p.m.

The Minister for Finance (Mr Hon Sui Sen): Sir, I beg to move, "That the Bill be now read a Second time."

The Development Loan Act, 1972 (No. 6 of 1972), authorises a sum of $2,000 million to be raised by way of loan for the purposes of the Development Fund. To date, a total of $1,585 million has been raised under the provisions of the Act, leaving a balance of $415 million only to be raised. Although the Government will continue to seek as much in the way of external loans as possible from the Asian Development Bank, the World Bank and the international money markets to help finance its development programme, the need will remain to mobilise domestic resources by the issue of local stock or bonds. In order to meet the needs of our development financing, it is possible that more than $5,000 million may have to be raised over the next five years.

The Bill which is now before the House is necessary as new legislation since the Development Loan Act, 1972, cannot be suitably amended to increase the amount of loans to be raised. The Bill follows substantially the provisions of the Development Loan Act, 1972, except that the maximum sum to be raised under the Bill is $5,000 million instead of $2,000 million under the Development Loan Act, 1972.

Sir, I beg to move.

Question proposed.

Mr Hwang Soo Jin: Mr Speaker, Sir, I have only two points to raise. The first point is this. According to the Explanatory Statement, the cost of servicing the loan will amount to something in the region of $675 million per annum. That works out to 13.5 per cent of the principal sum. This appears to me to be rather high. I wonder what sort of investments we are going to put our money into, and whether the returns will be sufficient to cover what appears to be a rather high cost of servicing the loan.

The second point is that, as notice of the Third Reading of the Bill has been given, there was a press report of Government's intention to pass this Bill. I think it did cause quite a bit of alarm publicly - that this is possibly another measure to further squeeze local credit. But the Minister has just indicated that this amount could be raised in the course of the next five years. I am just wondering whether this, in fact, would be used as a sort of a credit squeeze measure.

Mr Hon Sui Sen: Mr Speaker, Sir, I can assure the Member for Jalan Kayu and this House that the intention of the Development Loan Bill is not to impose a credit squeeze upon the economy. I am quite aware that there has been some anxiety in the past, whether or not this Bill, in fact, has that intention. But this Bill is quite clearly of the same nature as the Development Loan Act, 1972, which enables us to raise money for development purposes. The idea is that we will require this amount of $5,000 million over the next five years on the basis that we will want to keep the growth rate of the Singapore economy at over 10 per cent per annum, which I hope it will be possible to achieve.

The point has been raised that the cost of servicing is on the high side. 1 should like to explain that this includes not only interest but also repayment of capital. Most of our loans are of five years' duration and also of longer terms, so that if the interest rate is of the order of six or seven per cent, then the balance is only about six or seven per cent which represents a repayment of capital over the period of the loan.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill.-[Mr Hon Sui Sen].

Bill considered in Committee; reported without amendment; read a Third time and passed.