ANNUAL BUDGET STATEMENT

Debate resumed.

Question again proposed.

Mr Teo Chong Tee (Changi): Mr Speaker, Sir, I would like to join my colleagues in paying tribute to the Finance Minister for giving us such a clear picture of our economic performance in 1976 in his Budget statement. In 1976 we saw a gradual recovery of the world economy. However, the economic situation was still gloomy because of the uncertainty of oil prices and the fear of another round of galloping inflation. Under such circumstances, industrialised countries were not too hopeful for a good economic performance. We in Singapore also faced the same problems and yet we managed to have a real economic growth rate of 7%, a satisfactory growth rate considering the overall economic conditions at. home and abroad. This, I should say, is due largely to our efficient Government in implementing our policy of diversified economic activities, which helps cushion the impact of world economic fluctuations on our country.

Our nation is a small nation, dependent on foreign countries for our requirements. We are therefore vulnerable to unfavourable economic developments in other countries. In other words, most of the factors that affect our economic growth are beyond our control. But our Government does not use this as a scapegoat for not being able to manage our resources well. On the contrary, the Government tried its best, manipulating the factors which were under its control so as to counter the unfavourable economic effects of the factors which were beyond its control. The fact that we managed 7% real economic growth rate whereas industrialised countries in the Organisation for Economic Cooperation and Development (OECD) managed only 5% real economic growth rate reflects the success of our Government's efforts.

The economic prospects for 1977 are not very bright. This is due to the slowing down of world economic recovery. Industrialised countries, fearing that another round of inflation will set in, are cautious in their economic development. Another restraint to economic stimulation is the uncertainty of the oil price caused by the split of the OPEC nations over the increase of oil price which resulted in the recent two-tier oil price. Therefore, as a whole, our economic prospects for 1977 do not seem too promising. However, the Government has a plan for action. In the efforts to further strengthen our economy, the Minister for Finance said that steps would be taken to strengthen our trade, investment and diplomatic offices in key centres to safeguard our economic interests. Greater efforts will be made to attract more investment from the United States, Japan, West Europe and West Asia and to maintain steady progress in our economy. With a firm economic base and the steps that will be taken, the prospects of achieving an annual growth rate of 6 to 8% are not gloomy. It is also hoped that the domestic policies drawn up by the Government will counteract some of the more negative effects of the world economic slowdown of our economic performance.

It is the aim of the Government to contain wage inflation in our country. Therefore, the Government has drawn up policies of orderly wage increases. Wage increases are based on the productivity of workers. It is largely due to the success of our wage policies that we are able to remain competitive in international trade. These policies are essential because of the present world situation. The industrialised countries were badly affected in the severe slump a few years ago and the slow recovery of the world economy that follows. As a result, the industrialised countries are faced with severe unemployment and spare manufacturing capacities. In order to solve their problems, these countries may reduce the prices of their manufactured goods to stimulate their economies. Thus we have to be prepared for such action by the industrialised countries. To remain competitive in international trade, we have to keep the prices of our manufactured goods low. Thus the need to control wage increases.

In recent years, increases in wages are based on the recommendations of the National Wages Council (NWC). This method of granting wage increases has favourable effects on our economy - it prevents workers from demanding excessive increases in their wages. However, it is not without criticism. There is a danger that employers may take advantage of the Government's restraint on wage increases by not granting wage increases to workers even though the productivity of the workers has gone up. Instances when employers pay large amounts of bonus to their top executives and yet refuse to grant pay increases recommended by the NWC to the workers have come to light from time to time. Perhaps the Government should give some attention to the problem before undesirable effects set in.

The NWC's recommendations for wage increases are based on the productivity of workers. However, measuring the productivity of workers is by no means easy. The only guide to the productivity of workers is the profit of the employer. Therefore, it may be better to make it compulsory for employers to grant salary increases recommended by the NWC. The NWC should recommend a range of percentage increases in salary. To make the increases in salary commensurate with the increases in productivity, increases in salary should be based on the profits of the employers. Thus employers must grant salary increases within the range recommended by the NWC. One may argue that those employers who are just breaking even or are making a loss will be forced to go bankrupt. If we look at it from the economic point of view, this may be favourable. Our resources are scarce and therefore we must make full use of them. If employers are not able to make optimum use of their resources, it is better that they go out of business so that the resources can be redeployed more efficiently elsewhere.

Sir, I would now touch on the question of tax increases and concessions. On the whole, the budget can be described as a relatively painless one, with increases in tax only for cigarettes and intoxicating liquors. Generally, it is very moderate and well received as it does not directly affect the livelihood of the majority of the people. Such increases will undoubtedly be passed on to consumers by the dealers, and the smokers and drinkers will certainly have to pay a higher price. The aim of increasing the tax on cigarettes. according to the Finance Minister, is to discourage smoking and not on revenue consideration since the yield in revenue will be offset by tax concessions. However, I doubt the increase in the price of cigarettes can be effective in discouraging smoking. Notwithstanding the fact that the Government has been making efforts to advise and urge people against smoking and the mass media have long ceased carrying advertisements on cigarettes and tobacco. the number of smokers has not decreased but tends to increase instead. Increase in the price of cigarettes has a very marginal effect on its demand because the demand for cigarettes is highly price-inelastic. Therefore, the people will continue to pay for the higher prices and will instead economise on other expenses. For example, if they save in their marketing by cutting down on more nutritious food, their health may be affected in the long run. I believe a more effective way to discourage smoking is to educate the people on the grave health hazards of smoking, and this can be done through the mass media and in the schools.

Sir, turning now to tax concessions, I would say that the general public is pleased to learn that the Government is very generous in granting certain tax concessions at a time when more revenue is required to cover the high expenditure. However, a closer examination of the tax concessions shows that only a very small fraction of the people stand to benefit, and the majority of them are from the upper middle-income group. In particular, the concession on estate duty will not benefit the lower-income group at all. Only people in the upper middle-income group and a minority in the lower middle-income group who own houses valued at more than $100,000 will benefit. For these people, paying $8,837.50 in estate duty for a $200,000 house is not a problem at all.

The changes in taxation seem to affect the have not' and not the have'. Both the rich and the poor consume cigarettes and intoxicating liquors. Thus, the increase in taxes for these items will affect both groups of people equally. On the other hand, those who will gain from the tax concessions are the rich. For the rich, the increase in the tax burden due to increases in taxes for cigarettes and liquors is offset by the gain in tax concessions. However, for the poor there is nothing to offset their extra tax burden. Thus the gap between the rich and the poor will widen.

The Government may have noble objectives in giving the four tax concessions. For example, the concession in estate duty is introduced to encourage home ownership, the tax concession on offshore income derived from Asian Dollar Market operations is given to further develop Singapore as a financial centre, and the tax concession on income from reinsurance business is to take advantage of our ideal location and good business infrastructure so as to develop Singapore into an important centre for reinsurance business. Such objectives are good for the country as a whole and I am not against them. What I am concerned is that the Government, being too pre-occupied with these objectives, may neglect the welfare of the lower income group and the poor.

5.15 p.m.

Dr Lau Teik Soon (Serangoon Gardens): Mr Speaker, Sir, the Minister for Finance concluded his Budget Statement with the remark, "The weather is getting fine and fair and our Ship of State is in good shape." I cannot agree more with him about the condition of our Ship of State but I am not as optimistic as he is with regard to the weather ahead. In fact, the Minister did hint of impending dark clouds in the horizon which could jeopardize his forecast, although he did not elaborate on them. But I think it is necessary to mention the problems and not just the prospects; and to point out the possible danger spots in the year ahead so that Singaporeans would not be caught unaware if a situation turns for the worse and a crisis develops.

Mr Speaker, Sir, the Minister has indicated that the Republic is likely to achieve a growth in GNP of between 6 and 8%. In his calculation, I wonder whether certain factors have been taken into consideration. Our economic growth is tied very closely to the performance of the OECD countries. Hence, it is in our interest to take note of a recent report in The Economist which states that, "there are reasons to suspect that prospects for the world economy are not as mildly rosy as the consensus predicts." The OECD countries are only likely to achieve growth rates of between 0 and 7%: Japan 7%, U.S. 4 1/2 - 5 1/2%, Germany 2 1/4 - 5 1/2%, France 4%, Britain 1 1/2% and Italy 0%. And even these expected performances have to be measured against the effects of certain events, including growing unemployment in Western Europe, continuing high inflation, economic strain between the EEC and Japan. slowdown in the oversea investments and the most severe winter in the history of the U.S. Further, there is the prospect of another increase in the oil price. According to the President of OPEC. the two-tier price system may not hold but any compromise solution would be "somewhere in the middle" between the 10 plus 5% decreed by eleven of the OPEC members and the one time 5% raise imposed by Saudi Arabia and the United Arab Emirates. Another complicating factor is the Arab-Israeli conflict and the commitment of the OPEC countries to provide assistance to the Arab confrontation states. Mr Speaker, Sir, I have mentioned these matters merely to reiterate the need for caution in our expectation of high economic growth. Our economic future is determined not only by the Government financial policy but also by the political, social and economic developments in the world at large.

The Minister mentioned in his Budget Statement the "modest beginnings in ASEAN economic cooperation" and he gave the examples of the five ASEAN industrial projects and the Preferential Trading Arrangement. I am not quite certain what the stage of implementation of each of these projects is; nevertheless. I am in full support of all these efforts. However, there is one area of ASEAN activity which the Minister failed to mention, namely, ASEAN's economic relations with other countries, in particular the industrial states, namely, the U.S., Japan and the EEC. According to a recent study, the ASEAN countries in 1974 took up only 2.9% of the world trade: the ASEAN countries exported 83% of the world's natural rubber, 80% of its palm oil. 68% of its' tin and 67% of its copra and coconut products. In that year, 61 .9% of their total exports and 57.5% of their total imports were with the industrial countries. Thus, it would seem to me that there is scope for the expansion of trade between ASEAN and the world, and that there is need to consolidate and expand ASEAN's trade with the industrial states.

In this connection, I welcome the ASEAN initiatives to hold separate discussions between the regional organisation and the United States, Japan and the EEC. The reality of economic life of ASEAN is the fact of interdependence between them and the industrial states. ASEAN depends on the industrial countries for capital. technology and equipment and the industrial countries depend on ASEAN for primary commodities and certain manufactured products. Besides consolidating trade with the industrial countries, ASEAN should explore other markets in other parts of the world, including West Asia, Latin America and South and East Asia. On this point, I would like to support the Minister's appeal to the manufacturers, traders, businessmen and if I may add, bankers, to devote more efforts to develop new markets for Singapore's products. Within the region, the recent initiative of the Government in concluding preferential tariff arrangements with the Philippines and Thailand should provide the impetus for the expansion of intra-ASEAN trade. According to the study mentioned above, the overall intra-regional trade in 1974 amounted to only 13% of the ASEAN total trade. I am certain that with the Singapore initiative and the move towards liberalising the present intra-ASEAN trade arrangements. Intra-ASEAN trade would improve, and this would benefit all the members of ASEAN. This would be in line with the ASEAN strategy to develop collective and national resilience to meet the problems confronting the states in ASEAN.

Mr Speaker, Sir, it is noticed that the Defence Ministry has the highest allocation for the financial year 1977-78, and this may lead critics to question the need for such expenditure for defence I think the need for a viable defence system for the Republic is imperative in view of the uncertain political developments in the region, and the Government must shoulder the responsibility to maintain a level of defence sufficient to meet any eventuality. And as far as the expenditure is concerned, it is high in terms of per capita GNP, but it should be pointed out that, in terms of the absolute amount and the size of the military manpower, the Republic spends the least for defence and has the smallest military force in comparison with other countries including all the ASEAN states, This is evident if we examine the Tables# below showing the comparison of defence expenditures and military manpower of the ASEAN states for the years 1972 to 1976. In view of this fact, there should be no hesitation on anyone's part to support the expenditure for the Ministry of Defence.

#The Tables read as follows Table I Comparisons of Defence Expenditures 1973 - 1976 (US$ millions) 1973 1974 1975 Total 1973-1975 1976 Indonesia 452 601 1108 2161 N.A. Malaysia 287 311 385 983 353 Philippines 172 312 407 891 410 Singapore 210 363 344 817 340 Thailand 358 430 542 1330 N.A. * Exclude foreign military assistance to Indonesia, Malaysia, Philippines and Thailand Table II Comparisons of Military Manpower 1972 -1976 (in thousands)* 1972 1973 1974 1975 1976 Indonesia 317.0 322.0 270.0 266.0 246.0 Malaysia 50.5 56.0 66.2 61.1 62.3 Philippines 31.0 42.7 55.0 67.0 78.0 Singapore 17.1 20.6 21.7 30.0 31.0 Thailand 150.0 180.0 195.0 204.0 210.0 * Numbers in Armed Forces, excluding reservists and para-military forces. Source: The International Institute for Strategic Studies. The Military Balance 1976-77, London, 1976. pp 79 and 81

Finally, Mr Speaker, Sir, I hope that the small tax increases on tobacco. cigarettes and intoxicating liquors will achieve the objective of discouraging the habitual smokers and drinkers from continuing these undesirable practices. To derive more revenue, I suggest the Minister should look into the possibility of imposing new or increased taxes on certain entertainment establishments, especially the nightclubs. Such an imposition will not only tax those who can pay, namely, the rich tourists, businessmen and executives on expense accounts but hopefully, it will also deter Singaporeans from frequenting such places.

In conclusion, I would like to join my colleagues in the House in supporting the Motion standing in the name of the Minister for Finance.

5.26 p.m.

Mr Yeo Toon Chia (Ang Mo Kio): (In Mandarin): Mr Speaker, Sir, the 1973 oil embargo and the quadrupling of oil prices brought about in 1974 and in 1975 world economic recession, production decline and trade stagnation. There was a widespread decline in the economic growth of advanced countries in the world, in some cases there was even zero growth. Although there were signs of recovery from the world economic recession. in the first half of 1976 there was fear amongst the major industrial countries that too rapid a recovery might spark off another spate of inflation resulting in their taking preventive measures. Consequently, there was slower economic growth in the second half of 1976. Against this background it is encouraging to note that the Minister for Finance has reported a 7% economic growth in 1976 in his Budget Statement announced on the 28th of last month.

Mr Speaker, Sir, after the war the sophisticated but high profit new industries like the oil industry, the petro-chemical industry and the electronic industry in the advanced countries have been fully developed. As a result of rising costs of raw materials and energy coupled with the growth in population, the costs of production have mounted and because of the growth in population consumption has been greater. With this trend there is going to be a shortage of raw materials if there is no recycling of used materials. So it will be quite impossible for the advanced countries to reach a double digit economic growth in the years to come. It will also be quite difficult for Singapore to achieve fast economic growth as in the early 70s.

Mr Speaker, Sir, over the past decade there have been industrialisation efforts in Singapore. But in the earlier stages of industrialisation the programme was carried out on a smaller scale and the production was meant only for consumption in Singapore and Malaysia. It had also been based mainly on light industries, such as food processing and the production of consumer goods. It is only in the recent four or five years that our industrialisation has entered a new phase, both in terms of capital and technology. We have since made great improvements quantitatively and qualitatively and our products have been exported to Southeast Asian countries. EEC countries and other parts of the world. But, unfortunately, the greater part of the capital and factories in Singapore are in the hands of foreign entrepreneurs. Local entrepreneurs take only a very minor place in our industries, although the Economic Development Board has an office on the promotion of joint ventures. where it collects and distributes information and data and renders assistance to prospective investors in joint ventures in order to promote our economic growth. But how many projects have materialised and are running smoothly under this scheme? I do not know. Local entrepreneurs do not seem to play a great part under the scheme. So our main task in the long-term interest of Singapore is to try and encourage more local capital to take the place of foreign capital in the major industrial sectors of Singapore.

Sir, no country in the world can remain isolated in its economic development by depending solely on its resources, natural or manpowerwise. It will also have to depend on external sources. For example. industrial powers like Japan and West Germany have in the short space of 20-30 years after the War relied gainfully on the supply of foreign capital and technological knowhow, coupled with the hard work and the assiduous learning of their peoples to become advanced industrial countries in the world. Sir, capital is an important factor in generating economic development. Therefore, for our continued economic development, we must create a favourable investment climate for our industries, just as the Minister has suggested in his Budget statement a third item of tax concession to strengthen our position as a financial centre to attract more capital to stimulate our economic development. Sir, we must also change the traditional investment habit of our local entrepreneurs. We have to inject more confidence in our local people for investments in our industries and provide the necessary service and safeguard relating thereto.

After more than three years of very serious economic recession, even developed countries as well as developing countries in the world are taking proper steps to stimulate their domestic economy and to cut down unemployment. So they step up their efforts in export in order to increase foreign exchange earning. Therefore, competition has been very keen in the world markets. In order to keep the competitiveness of our economy in the world markets, we should improve the quality of our products, raise our labour productivity and cut down on production costs. In this way, we will be able to produce cheaply and compete effectively in the world market. In addition, we must also launch an offensive to get into hitherto neglected markets. including the oil producing countries. There is, therefore, the need to step up a national export bureau to provide co-ordination in our export activities and to take charge of all services related thereto such as tariff exemption. export capital transference, export credit insurance, information collection, data dissemination, market research. etc. There should be more incentives and facilities to be provided for export promotion. Mr Speaker, Sir, we should have this national export bureau to provide our local industrialists and traders services and information and data to enable them to better understand the potential world markets so that they will be better equipped in their efforts to promote exports. This is a matter for immediate attention.

Sir, because we have international trade we are vulnerable to changes in the world economy, and therefore our industrialists and management must be able to make a quick and immediate response to changes in the world economy. There should be more flexibility in our economy so that we will be able to weather through difficult situations that may arise in the horizon. We should have this kind of able management personnel who would be able to handle our future commercial and industrial affairs and successfully develop further our economy.

Sir, following the greater economic cooperation among the ASEAN countries, there has been more commercial and industrial development in this region. Consequently, there is a greater need for more capital, industrial aid, managerial and technological knowhow. consultancy service, economic research and other services. This will further develop our financial and other services enhancing our financial position. As technical training and communication services will develop into new dimensions in this world, we should be able to make the best use of our existing infrastructure and other facilities in Singapore to assist in the mutual economic development of Southeast Asia. We can become a kind of financial and service centre or a factor for the development of economic prosperity and political stability in this region. In this way, we will not only be able to bring more wealth to Singapore but also provide better life for our people.

Sir, the total expenditure of the new financial year comes to $5,459 million with a deficit of $1,500 million. According to the Finance Minister, from this figure, we have earmarked $2,708 million for development purposes, to assist and stimulate our economic recovery. For the new financial year the total revenue of about $3,362 million will be sufficient to cover current expenditure. He further points out that we have already laid a sound foundation for our long term economic development and for a 6 - 8% economic growth rate in the coming financial year. I hope that our financial position will move ever onward, and I also like to express my support on behalf of my constituents for the Minister's Budget for the new financial year.

5.38 p.m.

Encik Sidek Bin Saniff (Kolam Ayer): (In Malay): Mr Speaker, Sir, 1976 saw an improvement in the world economy, a very encouraging situation compared to that prevailing in 1974 and 1975 when an increase in the price of oil had adversely affected the economies of not only the developing countries but also the advanced countries of the world. The rate of inflation for 1976 has shown that even countries with strong economies, such as the OECD countries, are still experiencing an inflation rate of about 8%. In fact, there are certain countries which have an inflation rate of 30%, such as Egypt, while some other countries like Nigeria even have a frightening inflation rate which rises to a peak of 40%.

Meanwhile, we can also see how the industrial countries in the OECD which are experiencing an inflation rate of 8% can still achieve a real growth rate of 5%. The United States particularly has moved one step ahead when the Chairman of its Council of Economic Advisers, Mr Charles Schultz, predicted a GNP growth rate of between 5.5% and 6% for 1977. It is certainly our hope that the growth rate in Western Europe and Japan for 1977 will also surpass the growth rate for last year because should this happen. stability would be brought about in the economic situation of the world as a whole.

Sir, in the 1977 financial statement our Minister for Finance has predicted that "barring major upheavals in the world economy, we should be able to achieve an annual growth rate of 6 to 8%." This is an optimistic prediction. In his concluding remarks, the Finance Minister stated:

[In English]

`We have weathered severe economic storms in the last 3 1/2 years. I hope nothing as shocking as the 1973 oil embargo and quadrupling of oil prices ever happens again. The weather is getting fine and fair and our Ship of State is in good shape The command should therefore be "Steady as she goes."

[In Malay] Actually, the hopes expressed by the Minister represent the universal hope of mankind at large. But only the human race understands how complex the human mind is. Human beings have spent billions of dollars on arms for various reasons, including the object of interfering in the affairs of others and breaching the peace. thereby causing those countries to resort to no other course of action but to prepare themselves for possible attacks so as not to be caught napping.

In this connection, the former Chairman of the Food and Agriculture Organisation of the United Nations, Dr Eugene Castro, made a statement. (Dr Eugene Castro has no relations with Dr Fidel Castro; should somebody want to write a book on a comparative study of both men. which I think will make interesting reading.) In his statement Dr Eugene Castro says that what he is troubled with is that should this world be free of war and there is no chaos, he is confident that the world will be able to support 10 times the world population of today in respect of food. This is a statement made more than 10 years ago and the complex situation of mankind is still continuing.

And now oil has become a weapon. Industrial countries like Japan with their economic miracle were also affected when the price of oil increased in the 1973-75 period because Japan. for instance, could not reduce the salaries of its workers so as to strike a balance with the increase in the cost of oil imports.

I feel, Mr Speaker, Sir, that the prediction of the Finance Minister about the 6-8% economic growth is very moderate. I think we can accept this cautiously, extra cautious in fact, or rather with `cautious optimism.' We know that whatever happens in the United States, Western Europe or Japan, it will affect us. We also know that the increase in the price of oil will adversely affect us.

Sir, another matter which is closer to home is that whether we like it or not two blocs have emerged in this region. One bloc is the Communist bloc of the Indo-Chinese countries (Vietnam, Cambodia and Laos) and the other bloc, including us, is ASEAN. We can see that what has been going on in the Thai-Malaysian border is not a healthy sign. All these matters, including peace and stability in Singapore, will be an important factor in determining whether our Minister's hopes and predictions will materialise or otherwise.

While all these matters should be watched by us closely, I feel that other positive measures should be taken. Firstly, our bilateral agreements with the Philippines and Thailand for a 10% tariff cut should be made a reality and extended to all ASEAN countries. Secondly. having achieved that, efforts should be made for a similar situation to be created between ASEAN on the one hand and Australia and New Zealand on the other. I feel that there are many similarities between us that can create better understanding which in the final analysis will benefit all sides. Thirdly, while in the economic field we must consolidate our strength. we must make efforts in politics so that this region, in particular, could fulfil the aspiration of the human race, namely, to live in peace, in mutual respect for each other's rights and settling problems with peaceful means and not through interference with the affairs of others or through conflicts or minor wars, killings and murders. Until now, people are asking whether we are good ancestors for future generations to take example from. I feel that this question can only be answered by making self-corrections. We must correct ourselves first. All human beings should correct themselves before putting the blame on others. I would like to quote from a Chinese proverb: "We point one finger at others but three fingers are pointing at us." If a Malay were to point at someone in a polite manner, he would do it with his thumb. In this manner, we find that four fingers would be pointing at our own self.

Mr Speaker, Sir, I support the Government's policy for this fiscal year.

5.50 p.m.

Mr S. Dhanabalan (Kallang): Mr Speaker, Sir, the Finance Minister in his Budget Speech summarised our basic strategy to meet the uncertainties and difficulties in the next few years when he said that we need a flexible approach in our development policy. Changes in the region and in the major industrialised countries will require us to change our own policies and priorities. The problem is how to get such changes in priorities to be reflected quickly and effectively in the actions of the civil service and other public services. During the high growth years between 1968 and 1973. the economy grew at an average rate of 15% and the manufacturing sector grew at a rate of 20%. (All these figures are in real terms.) It was natural, therefore, that goals other than rapid employment creation and high growth began to gain emphasis. We began to discourage labour intensive operations and laid greater emphasis on skilled labour and capital intensive industries. We began to be more particular about where each type of industry should be located. We set higher targets and demanded greater margins of safety in anti-pollution measures, industrial safety and health measures and so on. We did such a good job in some areas, for example, in discouraging labour-intensive operations that we now have to put in extra efforts to convince potential investors that there is a change in approach and that any viable export oriented industry will be welcome, With the change in the international economic environment we have to restate our order of priorities and convey this to potential investors as well as those in the civil and public services who have something to do with investments, be it in manufacturing, construction or service activities.

I think that there is not sufficient appreciation of the difficulties involved in achieving even the modest growth rate targetted for 1977. Those who are in the field trying to attract new investment know only too well how much times have changed. Unfortunately. the great sense of urgency and unity of purpose that characterised the administration up to the end of the 1960s and that enabled us to take such effective advantage of the boom years in the international economy seem to have faded away. We now have departments and services who are more concerned with their own immediate objectives. If the performance of such departments is even partly measured by the income they generate, the profit motive tends to become supreme. That department head who has the wider interest of the economy and who is prepared to yield the immediate maximisation of his own objectives becomes known generally as being soft-headed or weak. Moreover, if something does go wrong as a result of his flexibility, those who press for the flexibility will not be around to carry the can. In hindsight when things go wrong flexibility can easily be made to appear as stupidity. Is it any wonder then why some departments stick firmly to their own narrow objectives and are inflexible in their approach? The problem therefore is how to achieve flexibility in administration to ensure that some of the objectives that became feasible in high growth years are now re examined and modified.

It appears to me that some instrument must be found at a supra ministry level that can weigh the different aspects, set new order of priorities and make decisions when such problems arise. The Economic Activation Committee comprising very senior civil servants seems to be ideal for this. It does not have any decision-making powers at present. It should be reconstituted and delegated some decision-making powers. The EAC can then, on the basis of actual cases presented before it, formulate changes in approach, in emphasis, in order of priorities and override or confirm individual department's views and communicate these to the departments and services concerned through the decisions it makes on such cases. It may even be necessary to have a committee of two or three Ministers who can perform a similar function on those matters which are considered to be too sensitive to be delegated down to a committee of civil servants. These measures will greatly speed up implementation of investment decisions not only in manufacturing but also in other fields. I think this is very essential if we are not to frustrate investment promotion efforts or spend inordinate time and effort trying to convince various government departments on the need to be flexible when such time and effort should in fact be spent in working on potential investors to commit themselves to investment in Singapore. Having with much difficulty led the proverbial horse to the water we should not be pulling away the trough when it wants to drink.

Another matter that should receive more attention and which has been touched upon by the Member for Ang Mo Kio is the promotion of a class of local entrepreneurs who can compete successfully in the international market. Firms controlled and managed by local entrepreneurs probably account for about 45% of the workers employed and about 30 to 35% of the output and value added respectively of the industries covered in the Census of Industrial Production. But these firms account for only about 1 5% of the direct exports, although there are, of course, some indirect exports. Those who have followed the progress of our industrialisation know that very little local entrepreneurship has emerged that is able to make a mark in the export market. It is quite logical that those with ready foreign markets have been the target of our industrial promotion policy. We have rightly concentrated on attracting foreign investors. We should continue to do so and make it attractive for foreign investors to operate in Singapore because it is to our mutual advantage. But I think that at the same time it is necessary also to build up the share in our export industries which is controlled and managed by local entrepreneurs.

A look at Hong Kong with an export economy similar to ours will show how far we lag in the participation of local entrepreneurs in the export manufacturing sector. There are reasons, of course, for Hong Kong's lead in this respect. Firstly they had a group of refugee entrepreneurs from China and, secondly, many with potential to become professionals and administrators often found that the only avenue for their talents was for them to start something of their own. In the next few years. many of our own professionals who have been working in foreign owned and managed firms would have had about 10 years or more experience in their jobs. A few may be prepared to strike out on their own and set up their own small manufacturing operations for export.

How can we help them to get established? Government should study this problem, firstly to find out in which areas assistance can be most effectively given and set up a scheme to provide such assistance. The need may be in any one of the areas of capital. introduction to firms with technical know-how, training of workers, information about markets, etc. I say any one of these areas because if a would-be entrepreneur is lacking in all or most areas, no scheme can help him and in fact the use of public resources in such instances cannot be justified. I am afraid that with the success we have had in attracting foreign investment this aspect has been relegated to the background. I would urge the Ministry of Finance to give the subject more consideration.

5.57 p.m.

Mr Teong Eng Siong (Sembawang): (In Mandarin): Sir, on 28th February which was the 11th day of the first month of the Year of the Snake, which was still during the New Year season, the Minister for Finance brought a piece of good news to the people of Singapore. Apart from tax increases on liquor, tobacco and cigarettes, there have been no new taxes. Instead there are four tax concessions. This has enabled the people of Singapore to enjoy another year without painful increases in taxes. This shows that our Finance Minister is a person whom we can trust. He is a man who keeps his words of not raising taxes and he has now brought good prospects for the people.

As a matter of fact, people are very sensitive and alert whenever the Budget is to be presented, because any new tax will have immediate effect on the people. Therefore, on that day when the Budget was to be presented, the ROV was crowded with people who wanted to pay their road tax or to apply for new road licences. Some sensitive merchants were also trying to hoard tobacco and liquor in order to make more profit before new taxes were announced. All this shows that the people are quite acquainted with the parliamentary process. They are just like frightened birds whenever the budget is about to be presented. They are nervous and worried that new taxes will be imposed. Therefore, the budget which was presented by the Minister has been a relief to the people. This manner of budgetting with the welfare of the people in mind is laudable and will generally be welcomed by the people.

Without doubt the five basic elements of our long term development strategy for a sustained growth as announced by the Minister five years ago is realistic and feasible, It serves as a guideline for our economic development and points the way to our economic modernisation, We all know that because of the Government's good economic policy and strategy, Singapore has been transformed from an entrepot trading centre into a productive, industrialised country with enough employment opportunities for the people.

As regards employment figures. as of June last year a total of 870,400 people were gainfully employed, an increase of 4% over the previous year 1975. This shows that we are on the way to economic recovery, and this is very encouraging to all of us.

Mr Speaker: Order. It is now 6.00 p.m.