CENTRAL PROVIDENT FUND (AMENDMENT) BILL

Order for Second Reading read. 2.52 p.m.

The Minister for Labour (Mr Ong Pang Boon): Mr Deputy Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

The decision to convert Singapore Bus Service into a public company, the Singapore Bus Service (1978) Limited, has been announced in a joint press statement issued by the Ministry of Communications and the Ministry of Finance on 20th March 1978. Hon. Members will no doubt recall that in August 1974 the Government moved a team in to manage the Company when SBS was on the point of collapse. Experience has shown that, with sound management and motivated staff, SBS can provide a reliable and efficient service and, at the same time, make a fair return on capital so long as bus fares are not fixed at unreasonable levels. However, for SBS to offer the high standard of service required by the public, more and better buses will have to be purchased while depot and workshop facilities will have to be improved. The Government decided that it was necessary to float SBS as a public company and to have its shares listed in the Stock Exchange so as to provide capital to enable the company to invest in improved equipment and facilities.

Sir, this decision is also to enable ownership of SBS to be transferred to the general public, especially bus commuters and bus employees. SBS operates an essential service serving the large majority of the 2.3 million population who do not own private cars. It is vital to improve and to maintain an efficient and reasonably cheap means of public transport to commute half a million school children and another three-quarter million workers to and from schools and places of work. This is especially needed now that ownership of private cars is being discouraged by a series of taxes and levies.

The Government feels that it is in the public interest that the large commuting public and bus employees should take a direct interest in the policy and management of the public transport system. This means that they must be enabled to participate in the ownership of SBS. Recognising that the large majority of commuters as well as the more than 10,000 SBS workers lack the financial means to do so, the Government proposes that CPF savings be used for the purchase of shares of SBS (1978) Ltd. The rationale for this decision has been explained by the Minister for Finance at the last Budget session.

It is true that with the Government's assurance of an annual dividend of 7 1/2%, the additional capital of $20 million can be easily raised without the use of CPF. But then the ownership of SBS will fall into the hands of the wealthy few. This will defeat the objective of spreading ownership of our bus service among as wide a spectrum of the population as possible. It will also deprive bus commuters and workers of having a stake in SBS to ensure its efficient operation to their benefit.

The present Bill therefore seeks to amend section 29 of the Central Provident Fund Act to enable members of the Fund to use their balances to purchase stocks and shares of SBS (1978) Ltd. Regulations will be made consequent on approval of the amendment to limit the use of CPF balances to $5,000.

Let me assure the House that the proposal to allow CPF monies to be used for the purchase of shares of SBS (1978) was agreed to by the Government only after much careful consideration and as the Minister for Finance said during the Budget session "reluctantly". There is no other way if we want to give our bus commuters and workers a stake in the public transport system.

SBS (1978) will be a secure investment for bus commuters and workers. The House was assured by the Minister for Finance at the last sitting that it is Government's intention to ensure that SBS (1978) remains a viable company and pay an annual dividend of 7 1/2%.

Regulations will be made to require CPF funds withdrawn to be returned to the CPF account of the members concerned when the shares are sold. This will ensure that the purpose of CPF savings as provision for old age is preserved.

Sir, I beg to move.

Question proposed. 3.00 p.m.

Mr P. Govindaswamy (Anson): Sir, the purchase of SBS shares should not be made compulsory. It should be voluntary. If a poor man were to use all his $5,000 CPF savings to buy SBS shares, he will not know what will happen to his shares in one or two years' time. It is all right for him to use only a small portion of his savings to buy SBS shares but not all of the $5,000 on offer.

Dr Augustine Tan: Sir, I support the idea of spreading the ownership of the shares of the SBS so that the commuting public and the bus workers will have a stake in the bus company. This is a good move as it will help to ensure that the company is efficiently run. But at the same time I have certain misgivings because it is not just the workers who can ensure the efficiency of SBS, but management itself. So much hinges on the efficiency of management. While I can agree that the special Government Team of Officials has done a good job in the SBS, especially when there has been no fare increase over the last few years we cannot have this assurance that the future management will always be as efficient, because there is no criterion or yardstick by which we can measure this efficiency. If SBS were to turn to the Government or the Ministry of Communications and request for a fare increase, by what measure would the Government judge that it is fair and reasonable for the company to increase its fare? The company will simply say, "Our costs have gone up. Therefore, we must have this fare increase." Added to this is the guaranteed return of 7 1/2% which will make it easy for management to turn to Government and say, "Look, if you do not allow us this fare increase, we cannot give the 7 1/2% rate of return." So how do we go about monitoring and ensuring that the management is really efficient and that we do not have continual increases in bus fares on account of this guarantee?

Sir, the other matter concerns the principle behind the use of CPF funds. Up to now we have only allowed such funds to be used to buy houses or flats. That is all to the good because that gives the workers a stake in society and increases productivity and stability. But it is another thing to get the CPF itself to invest in shares like the SBS, because the CPF itself is so big that it can absorb or spread whatever risks there are of buying any particular share or any particular security. No contributor will be penalised in the event a share price goes down. But in this particular event, the proposal will therefore throw the burden of risk on the commuter or the bus worker who makes use of his CPF funds, to buy these shares.

Sir, so long as the PAP Government is here, I am sure this Government will always make sure that the management of SBS, and indeed of all the statutory boards and all those hundreds of Government enterprises, are being run by capable and efficient management personnel. But there is no assurance that this Government will always be here. If you get a government which is incompetent and which also appoints incompetent people to run things, then you can imagine the problems that can emerge in the future. If the concern is that we do not want the share ownership of SBS to be concentrated in a few hands, i.e. the rich buying up the shares, we can always have a law, like the Newspapers Act, which restricts ownership of shares to no more than 3% (I believe the figure is 3%). If we are concerned that the workers should have a particular stake in the SBS, why do we not get the NTUC to utilise its surplus funds to buy these shares on behalf of the workers, and eventually distribute these shares among the workers themselves on an instalment basis, rather than make them use their CPF funds for this particular purpose? Even SBS itself could have an incentive scheme for the workers; for example, if they have worked for a certain number of years they will be given so many shares. In that way they will participate in the ownership of the company and have a stake in the particular company.

Sir, I raise these few points because these are my personal misgivings about this particular proposal. I see the extension of the use of CPF funds in this direction as being an unhealthy one.

Mr Seah Mui Kok (Bukit Ho Swee): Sir, can we get an assurance from the Minister for Labour that bus fares will not be increased, at least for a period of three years, with the exception of an increase in the price of oil?

Mr Phey Yew Kok (Boon Teck): Sir, I rise in support of the amendment to the Central Provident Fund Act. The 10,000 bus workers and SILO which represents these employees of SBS welcome the announcement by the Government to turn SBS into a public company. We are glad to learn that a percentage of shares will be set aside for our bus workers. I would like to find out from the Minister what is the percentage of the 20 million shares to be set aside for the bus workers? If we want our bus workers as well as the commuters to have a stake in the company, I think the stake for the bus workers should be big enough to create an impact. I am sure that the bus workers welcome this move because we are given a chance to have this equity participation in the company.

Mr Ong Pang Boon: Sir, the purchase of SBS shares is voluntary. The Government is not compelling anybody to use their CPF to buy SBS shares. So the concern of the Member for Anson really does not arise.

In as far as the efficient management of the SBS is concerned, my colleague in charge of Communications will be answering those points raised by the Member for Whampoa when we come to the next Bill.

The Member for Bukit Ho Swee sought an assurance that bus fares will not be increased in the next three years. I am afraid I cannot give him that assurance.

As for the percentage of SBS shares to be set aside for the bus workers, that has not yet been settled because we have no idea as to the number of people who will be interested in SBS shares.

Mr Phey Yew Kok: Sir, can the Minister convince the Minister for Communications that each bus worker, assuming that every bus worker has sufficient CPF savings will be given at least $1,000 shares or an amount equivalent to the public or any other commuter?

Mr Ong Pang Boon: Sir, as I said, the question of percentage to be set aside for the bus workers has not yet been settled. But if the proposal made by the Member for Boon Teck that each bus worker be allowed to buy $1.000 shares is taken. it will mean that more than half of the 20 million shares will go to the bus workers and there will be very little left for the bus commuters. Anyway, Sir, the question will be decided when the time comes.

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 Ong Pang Boon].

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