ANNUAL BUDGET STATEMENT

Order read for Resumption of Debate on Question [5th March, 1982],

"That Parliament approves the financial policy of the Government for the financial year 1st April, 1982 to 31st March, 1983.". - [Minister for Trade and Industry].

Question again proposed. 2.47 p.m.

Mr Tan Soo Khoon (Alexandra): Thank you, Mr Speaker, Sir, for the opportunity to start off this debate.

I rise in support of the motion standing in the name of the Hon. Minister for Trade and Industry.

Notwithstanding the presence of an opposition in this House, the Hon. Minister would no doubt be receiving overwhelming support from hon. Members, for even the hon. Member for Anson was seen to be applauding him at the end of his lengthy Budget Statement some 10 days ago.

The Budget is not the "go-getter" Budgets of previous years. If anything, it will be noted not so much for what it tries to achieve but for what it does not try to do, and there are reasons for this. In preparing this year's Budget Statement, the Hon. Minister has sought the views of various business groups, trade unions, CASE, National University of Singapore, and I find this move a highly commendable one. I hope this is the start of future trends for future Budgets, and I hope too that as often and where it is possible and practical, other Ministers will also do what the Minister for Trade and Industry has done. He has told us that he has taken the views of these various groups into consideration "where appropriate". In view of the disappointment of businessmen that there is a lack of sufficient incentives in this year's Budget to stimulate business, I wonder if the Minister has considered that most of the views presented to him have not been too appropriate.

Much has been said about the fact that this year's Budget Statement is a cautionary one. There are, of course, good reasons for it being so, as the Minister has explained. This is not the time for giveaways. As any businessman worth his salt will tell you, during bad times one has to be extremely cautious and prepare for the worst, and I think that is what he is preparing for us and we know that the worst can be ahead of us. Last night we heard the news on television that prominent economists forecasted that America was heading for a deep recession, with a wave of bankruptcies so severe that it would be as bad as the Great Depression of the 1930s. The warning sounded by the Minister is not a new one. His predecessor had also sounded these warnings to us. Let me quote from Hansard (Vol. 39, col. 635, 5th March 1980):

'We face the uncertainty of superpower conflicts in the political and military arena. We face the certainty of higher fuel prices. We face the grim prospect of the region being destabilized by external forces, and the oil life-line being cut. . . . . we are sure of sluggish world economic growth cohabitating with inflation.

We, therefore, have the perfect recipe for trouble.'

Last year, again in presenting his Budget Statement, the Minister said, and I quote (Vol. 40, col. 354, 6th March 1981):

'We face difficult times. It is an uncertain world. There is disharmony between the superpowers. The political equilibrium in the world is precarious. We must be prepared for the worst but the worst must hold no fear for us. Recession, unemployment, higher oil prices, protectionism, regional conflict, security threats, international turbulence - all these threaten our livelihood. We cannot avoid getting wet in bad weather, but if we have made adequate preparations, we can put our raincoats on, and when we get indoors, change into dry clothes.'

Sir, these are the warnings which have been sounded to us previously. They have been sounded Again with good reason.

True to his background as a former banker, the Minister has not betrayed the prudence and conservatism that bankers are normally associated with when he warns us of the turbulence afflicting some of the most significant economies in the world. It is not without justification too, for the statistics bear him out: 16 million people unemployed in Europe, of whom 3 million are found in a now-not-so-Great Britain; 9 1/2 million unemployed in the United States, and 1/2 million in Australia. Certainly the outlook for 1982 is grim and the road so hazardous that to make any sweeping changes now in Singapore would amount to taking a risky gamble that we can ill-afford.

In the light of prevailing world conditions, the Budget is as practical and pragmatic as it can be. It will not set off fireworks but it will give us all a little breathing space in a world full of economic uncertainty. It is, in short, a "playsafe" Budget.

But there is another side to the coin: if we do nothing, we end up achieving nothing. True, there are positive aspects to the Budget. For one thing our housing programme will continue unabated and proper incentives have been introduced in the construction industry to enable it to mechanize its methods and upgrade expertise. And, most important of all, to make sure that Singaporeans get their homes faster. But what I am just wondering is if more could not have been done to pump-prime our economy at a time when increased efforts by all is so essential. Have we been so cautious in under-scoring the economic storms ahead that Singaporeans may in the end not be able to see the light at the end of the tunnel?

I would like now to make some comments on certain aspects of the Budget Statement.

Trade Protectionism

Sir, this is something which has bothered us for many years. It is a well-known fact already that to make ourselves less vulnerable to protectionism we have to continue restructuring our economy and move into the production of more higher value-added products. As the recession in the world economy continues, protectionistic action will increase and it will not be long before we discover who our friends are on the international scene. Take, for instance, the recent controversy in West Germany over the low fares offered by our national airline, Singapore Airlines. With memories of the Australian ICAP policy still fresh in our minds, we were treated to another example of protectionism. Singapore Airlines found itself the subject of a campaign of harassment by the West German authorities because it was in a position to offer better services to travellers at prices lower and more competitive than others, including of course West Germany's own Lufthansa. Under the pretext of cleaning up the so-called "discounting" mark9t in their country, they imposed barriers and difficulties on SIA. Throwing all principles of free competition to the wind, the West German authorities succeeded in excluding SIA from what is apparently a lucrative market and in which their own airline was unable to compete efficiently. In what must surely amount to plain deceit on the part of the West German authorities, SIA found itself forced to sell fares at published rates, thus losing passengers and invaluable revenue to other airlines which continued giving rampant discounts. Suddenly not one eye, but all eyes of the West German authorities were closed.

The lesson we learn from this episode is invaluable. Where national interest prevails and short-sightedness takes the place of international cooperation during difficult times, even the best of friends can turn against you. The doctrine of free trade, of which we are one of the strongest advocates, has yet to be universally accepted and under economically difficult conditions there will be growing trade friction amongst countries as governments, mindful of votes, hurry-scurry to protect their industries with quotas, tariffs, orderly market arrangements, product graduation schemes and what-have-you. What is more valuable a lesson to us is that we must be continually alert to changing circumstances and to re-adapt ourselves to meet these changes, and this we have done. The restructuring of our economy and the move into the production of higher value-added goods is our best bet in beating protectionism.

Inflation

The Hon. Minister has stated that inflation in 1981 did not subside as much as he would like it to have, mainly due to rising food prices. I quote him:

'Consumer prices rose by 8.2% marginally, less than in 1980. However, inflation in Singapore was again lower than the inflation in the industrialized countries and that of our neighbouring countries'.

Some consolation it is to the Singaporean to know that although he pays more for everything in general, his neighbours have to pay even more. Today the Singaporean pays more for a bus ride, for poultry, for pork, for a cup of coffee, for his clothes, for housing. And he has less to spend with as he finds that he has to contribute 4% more to the CPF. What he is interested in is not to be told how lucky he is to pay less than his neighbours, but what his Government is doing to make sure that the value of his dollar has not eroded faster than he can earn it.

Too often has it been said that our inflation is an imported one and that there is not much we can do about it. To some extent, I think this is true because a lot of our needs are imported. But in quite a number of instances I do not think the Government should just sit back. Take, for instance, the recent controversy over pork prices. As pig farmers, pork merchants and butchers, and even CASE, started to slice up one another in public as to who was to blame for the rising prices, those in the lower-income group watching from the sidelines found themselves with another hardship. With a lot of pussyfooting on the part of those concerned and less-than-firm action on the part of the Primary Production Department the man-in-the-street found himself facing higher prices for a very basic food item.

And it is not just with pork prices. Look, what happens each year around the festive seasons, especially during the Lunar New Year? Food prices shoot up astronomically. Let us not pretend that it is the law of supply and demand that determines prices. Clearly there are people exploiting the situation, pushing prices up at a time when they know everyone would like a little extra fish, meat, poultry and vegetables to celebrate a happy occasion. Consumers are at the mercy of profiteers, and what we would like to know are who are these profiteers? What is the rationale for allowing a few or a small minority to blatantly manipulate food prices for their own selfish ends and bleeding the consumer of his hard-earned money on a happy occasion? A festive occasion is a time for rejoicing. For many people, especially those in the lower income group, it is the time to enjoy the fruits of their hard labour. For them, it is one or two meals in a year with a little bit of the extras, not just for themselves but for their children so that they can all have a really happy new year. But when they end up paying more, they are forced to stretch their purse strings in order to have this enjoyable time, Clearly it is time the Government took steps to prevent this ripping-off of the majority of the people by the unscrupulous minority each time a festive occasion comes around.

Tourism

Rising prices, which I have just touched on, do not just afflict Singaporeans. Unfortunately it is creeping its way very quickly into one of our most important foreign exchange spinners, namely, the tourist sector. The Hon. Minister for Trade and Industry was right when he said that our hotel room rates "have increased substantially in the past few years and threaten to price Singapore out of the tourist circuit". Hoteliers would no doubt gleefully disagree with the Hon. Minister, pointing to healthy room occupancy figures and to glowing projections of three million visitors in 1982.

But they forget all too soon something very basic to our tourist industry. We have to ask ourselves why does the tourist come to Singapore. Is it because of our beaches where ocean waves roll continuously on to the sand? No, there are thousands of beaches with sand whiter than ours, with sea-water much cleaner than ours, tucked away in every corner of the world. And it is the same sun that shines everywhere. Is it for sightseeing? True to some extent, more so in days gone by.

What the tourist wants to see, whether it be in Singapore or anywhere in the world, is the quaint, the unusual, the picturesque, something very different from what he sees back home. Bugis Street has disappeared but in name. The fun of sitting at open-air stalls and tables along places like Albert Street and the thrill of wandering through Chinatown with its old buildings and oriental flavour have gone, as the old are torn down to make way for the new in the name of progress. If, finally, all there is to see in Singapore are our spanking-clean high rise buildings and man-made parks, then the tourist might as well stay at home where he can admire the grandeur of the Empire State Building, the Eiffel Tower, and Mount Fuji.

An hon. Member: London Bridge.

Mr Tan Soo Khoon: And London Bridge. We would be naive to expect the tourist to come that far to gawk at our OCBC Centre, or to see our Merlion spouting water at the harbour front, or to find out where Sir Stamford Raffles first stepped foot on Singapore some 163 years ago.

So what does that leave our tourist with? Well, for one thing, he discovers, on checking into his hotel, that the roof over his head which he will have for a few hours a day will burn a big hole in his pocket. That leaves him with possibly two things that could attract him to Singapore. Thanks to the efforts of the Singapore Tourist Promotion Board, he would have been, informed that this is a land of a thousand-and-one culinary delights, where eating is a national pastime and where the biggest and prosperous area of growth and development is around the waistline of its 2 1/2 million inhabitants. He would also have been told that this is the shopping paradise of the world where bargains galore abound.

So his appetite already whetted, it will not be too long before our tourist friend discovers, to his horror, that the cup of coffee in his hotel costs $4.00 and that a plate of chicken rice costs $12.00. And it is not just in the hotels where he will be amazed by the dazzling prices. At hawker centres, or some hawker centres, in particular one which is not far from the tourist belt, he will discover that there are those who are as eager as our hoteliers to charge him astronomical prices, only this time the place is not air-conditioned and the fellow serving him is dressed in a pair of shorts and slippers. And if our tourist would like to venture into some of our restaurants, he will find that, unlike the practice at home, our restaurants do not display their menu outside their premises for a little preview so that he can have an idea of the prices before entering. Nor will he find it easy to digest his food when, at the end of the meal, he is presented with a bill that does not give a breakdown of the items of food he has consumed but merely a lumpsum figure under one single item - "food", and also that he has to pay for the peanuts and towels which he thought came free.

The tourist who comes to take advantage of our shopping bargains will find that the interesting little shops that used to flank North Bridge Road and Change Alley are gone. Instead, he will find large shopping centres and swank departmental stores which are no different from what he finds back home. What he will notice is that prices here are not cheap after all. The shopkeeper, with whom he hopes to strike a bargain, will tell him of the high overheads he has because the developer of the building is charging him an exorbitant rent; the developer of the building would no doubt have already told his tenants, including our shopkeeper, how much it had cost him to put up the building because he had paid enormous sums to the URA in tendering for the land and another hefty sum in development charges to the Ministry of National Development.

What I am trying to say is that we face the danger of pricing ourselves out of the tourist market. And it would not be just rising hotel room rates that will cause it. If eating is no more a delight because it is so expensive, and if shopping is not so cheap after all, what else is there to draw tourists to Singapore? The tourist who returns home satisfied is our best advertisement, but he is not going to do us any service or any favour if the memories he takes back of Singapore are of high room charges, high food prices, expensive shopping and of having hardly seen anything interesting.

True, this does not explain why 2 1/2 million people came to our shores last year. But it is worthy to note that our closest neighbours are also competing very hard for the tourist dollar. They have got more reasonable hotel room rates. One of our neighbours has just removed import duties and taxes on a range of consumer goods that tourists normally buy home. Their shopkeepers have lower overheads and can obviously pass on lower prices to their customers, thereby undermining our position as a shopping paradise. Above all, our neighbours are endowed with natural scenic beauty that we sadly lack.

A thorough study of the tourist sector is what is needed. It has to be a probing one, encompassing everything from prices to attractions to attitudes of those in the services sector. We must learn why Hong Kong, which not long ago had more tourists a year than we had, is now trailing behind us. There is an important lesson to be learnt there. As in everything else, we cannot take things for granted in the tourist industry. We must take measures quickly before we unwittingly kill the goose that is now laying the golden eggs.

Tax Changes

A number of tax concessions have been given by the Hon. Minister. These are modest concessions not likely to create ripples of excitement but in line with the cautious approach he has adopted. I would like to comment briefly on some of them.

(1) The ceiling on tax relief for CPF contributions has been removed. In 1977 I spoke in this House on this subject and, as recent as four days before the Budget, I raised this matter again. I am glad that the cries of Backbenchers like myself are heard occasionally even if it has been a long time coming, even if it is few and far between. I hope the Hon. Minister will listen just as well to a lot of other suggestions that my colleagues and I on the Backbench will no doubt be putting to him during the course of this debate. While I am therefore pleasantly surprised by this concession, I must at the same time add that I am still a little bit disappointed that the same has not been done in respect of life insurance premiums. I am sure the Hon. Minister appreciates the need to encourage our people to take out life insurance policies especially our younger people, and I can think of nothing that could be more encouraging to them than an appropriate tax relief.

(2) Exemption for residential properties from estate duty will be revised to include the full value of any one residential property. Unfortunately, this concession will not benefit the majority of the people in the lower income group as at any rate they do not own large properties at all. It is easy to see that the rich, however, can now avoid paying some estate duty by putting as much as possible into one single property.

(3) Fixed charges in PUB bills will now be excluded from the calculation of the 10% tax charge. This concession in my opinion is not just modest; it is unshamedly cosmetic in nature and must have fallen short of expectations of a lot of people, including PAP Backbenchers. Water-borne fee, domestic refuse and sanitary appliances fees are but a mere fraction of a household's PUB bill. And 10% of that, Sir, is a mere, mere fraction of a fraction. I wonder how many homes there are that still have the bucket system to benefit by the removal of the tax on nightsoil removal charges!

(4) Most of us will no doubt applaud the Hon. Minister for raising the relief for aged dependants from $750 to $1,000 per aged dependant.

Mr Yeo Choo Kok (Delta): It is not enough!

Mr Tan Soo Khoon: I just overheard my good Friend, the hon. Member for Delta, saying that it is not enough. But I think it could not have come at a better time, especially when we are trying to preserve our traditional Asian values. But let us hope that Singaporeans bear in mind that tax relief or no tax relief, it is still our moral duty to look after our old parents and grandparents. It would be a sad reflection of our time and of our people if we need to take tax measures and to introduce laws to make us carry out our moral obligations.

As I am now touching on the matter of taxes, I would like to raise another fundamental question. Our income tax policy has always been to spread the income tax net to cover as many individuals as possible. Allow me once again, Sir, to quote rom Hansard, Vol. 40, No. 6, col. 348, the words of the previous Hon. Minister for Trade and Industry when he presented the Budget this time last year. He said:

'The more citizens we have paying income tax, the greater will be the appreciation amongst Singaporeans of the basic fact of life - how to finance various programmes, like health, housing and social welfare. Our people will have a keener understanding that more expenditure on welfare programmes and subsidies must mean an increase in their income tax.

Those who have to pay income tax to meet the costs of welfare programmes will at once ask themselves why they must work to subsidize the laggards and the indolent who are able-bodied but reluctant to work.'

He then went on to point out that the majority of our taxpayers are wage-earners who cannot evade tax but there were still those, largely the self-employed, who continued to evade the tax net.

It was stated last year that steps would be taken, including the possibility of presumptive taxation of individuals who claim they do not keep accounts, to bring more people into the income tax net. I would like to know what steps are being formalized in this direction. The sooner we do something about this, the faster we reduce the inequity in our income tax system where the taxes are borne largely by wage-earners. The more people there are paying taxes, the less tax each and every one of us hopefully has to pay.

The financial community has expressed some disappointment with the lack of further tax concessions to them. During the past decade or so, many measures have been introduced to promote a range of financial activities to make Singapore the financial centre in this region. Additional incentives should have been introduced to allow us to compete more effectively with other financial centres such as Hong Kong. As an example, only 50% of the management fee paid by an investment holding company or a unit trust is tax deductible, whereas in Hong Kong this is fully deductible. A concession here would no doubt have given greater impetus to the funds management industry.

Another area where something ought to be done is in the exemption of withholding tax on interest paid on balances derived from gold trading of non-residents. There is again no such tax on interest relating to such transactions in Hong Kong and in London, and such an exemption would have encouraged the development of Singapore as an international gold market.

In conclusion, I would like to state once again that I do not quarrel with the basic philosophy underlining the Budget Statement, and that is, we are in for some rough weather and we should therefore fasten our seat belts. Let us hope the warning signs are as wrong as those who predicted the end of the world last week, but if the trying times do come it will be the test of all of us as a nation and as a people.

It would not be simple for Singaporeans, acclimatized to conditions of plenty and affluence, to imagine themselves to be in the same position as those who are in wartorn places like Cambodia, or in drought-stricken countries like Uganda, or in parts of India where we read last week of villagers resorting to picking grain from cow excrement. Let us hope that such misfortune does not befall us. In such places, starvation is the order of the day and therefore let us as a Government and as responsible leaders continue to exhort our people to practise the virtues of thrift and frugality. These are values our young people are unfortunately in danger of losing, helped along no doubt by the distortion of life painted for them by an emerging breed of gift-bearing prophets promising a new heaven on earth.

Singaporeans could well learn from Greek mythology which tells of some Trojans who should have known better. The euphoria that greeted the wooden horse - a gift of the gods they said made them lose sight of the values that saw them through 10 years of siege by an enemy and through correspondingly difficult times, and brought them in the end to imminent grief and calamity. This is the tragedy that befell a city-state and it is a tragedy that could just as well befall us if we lose sight of our values and of our objectives. 3.26 p.m.

Dr Wan Soon Bee (West Coast): Mr Speaker, Sir, last year, in his Budget Statement the Hon. Minister for Trade and Industry warned Singaporeans about the difficult times ahead in spite of the fact that our economy grew by 10.2%. In 1981, our economy has grown by 9.9%, just 0.3% short of 1980's performance. In his Budget Statement for this year the Hon. Minister for Trade and Industry has repeated the warning for Singaporeans of the difficult times ahead.

At a time when most countries are confronted with low growth or recession, the high economic growth achieved by our country would certainly be envied by many developed and the developing countries. With such a sterling performance in our economic growth during the last few years, it would appear to many Singaporeans that our Government is always crying "wolf". Unfortunately, it is not so.

Through the press reports and other media, the hon. Members in this House must be well-informed of the economic troubles the world has been going through since the first oil crisis in 1973. The common features in most countries have been slow growth, recession, high unemployment and high inflation. Just before the world was able to adjust to the high cost of energy, in 1979 the second oil shock came. This has certainly plunged the world economy into deeper troubles.

Indeed, 1981 has been a very difficult year for the world economy. And the prospects for 1982 do not appear to be any better. Most of the Western industrialized countries are suffering from low or negative growth. The unemployment situation in the OECD countries has almost reached the crisis level. At present, in all the OECD countries, more than 25 million people are unemployed. This is equivalent to about 7 1/4% of their total workforce. In the U.K. alone the number of people unemployed has exceeded the three million mark. This is a huge figure. It is much more than the total population of our country.

As the Hon. Minister said in his Budget Statement, we are fortunate to be located in an area rich in natural resources. There is political stability. And it is also one of the growth areas in the world today. All these factors are favourable conditions for growth and they have certainly contributed to our success.

However, I believe that a more important factor has been the sound economic policy which our Government has adopted over the years. In the seventies, we built up a diversified economic base and in 1979 we embarked on our economic restructuring. We have made the right move. Our efforts have produced encouraging results. We are more competitive now and our high technology and high value-added products are less prone to protectionism.

Both the Government and the NTUC are fully aware that to succeed in our economic restructuring programme, it is imperative to upgrade the skills of our workers and to increase productivity. A lot of effort has been put in to achieve these objectives. The Skills Development Fund is one of the schemes created to assist companies to upgrade the skills of their workers. But to-date only managerial staffs, professionals, skilled workers and, at best, semi-skilled workers have benefited from the grants. The workers at the lowest rungs have been neglected. More should be done for this group of workers.

There are many workers who do not even possess the minimum requirement stipulated by the Vocational and Industrial Training Board (VITB) for training in any skill. I hope the VITB and the Institute of Continuing Occupational Development will look into the matter. The NTUC realizes the need to help its members who have missed the opportunity to obtain a basic education. It has now come out with a comprehensive education programme known as NTUC BEST (NTUC Basic Education for Skills Training). But we are limited in our financial and manpower resources. I hope the Skills Development Council will give us maximum support to carry our project through.

We have a hard-working population and a workforce which is able and willing to accept and adapt to changes. To ensure success in any economic development programme, good industrial relations is essential. We are fortunate to have an intelligent and responsible trade union movement. The quality of our union leaders was clearly demonstrated in August 1968 when two major pieces of legislation were introduced in Parliament, the Employment Act and the Industrial Relations (Amendment) Act. The Employment Act replaced three former Ordinances relating to employment and working con- ditions. It abolished certain discriminatory practices, rationalized pay structure by doing away with certain abuses of overtime, and also protected young industries from being compelled to provide excessive retrenchment benefits which would have stunted their development. The Industrial Relations (Amendment) Act removed some ambiguities regarding the jurisdiction of management and trade unions which had long been a source of friction. The Act placed certain subjects clearly within the prerogative of management, such as the promotion of employees, their transfer, recruitment, retrenchment and assignment of tasks. These subjects were held to be outside the range of labour-management negotiations.

In the 1960s the greatest problem faced by the Government was mass unemployment. The unemployment position in 1965-1968 was as follows:- Persons Unemployed as Year Unemployed % of Labour Force 1965 48,000 8.7 1966 51,000 8.9 1967 49,000 8.7 1968 46,000 7.3 The problem of unemployment was further aggravated in 1968 by the decision of the United Kingdom to withdraw the British Armed Forces by the end of 1971. The withdrawal had the immediate effect of putting 21,000 citizens, directly employed by the British, out of job. In addition, thousands of citizens who were earning a livelihood by providing services to the British bases, such as domestic servants, taxi drivers, shopkeepers, restaurant workers, were also badly affected. From the Household Sample Survey of 1966, there were altogether 52,000 persons unemployed. Added to these were an estimated 25,000 school leavers who entered the labour market annually. The withdrawal of the British Armed Forces was seen to have a potentially adverse recessionary effect on the economy, as they spent US$188 million annually, constituting 14% of the Gross Domestic Product.

At that time the Government realized that Singapore's future survival depended not on her traditional entrepot trade but on rapid industrialization. It also recognized that labour stability was the prerequisite to a successful industrialization programme. Faced with these economic realities, the Government had to devise a means of striking a balance between labour and management. It was against such a backdrop that the two pieces of legislation were introduced to create a favourable investment climate for industrialization.

Of course, the 1968 industrial legislation was seen by some as a rather bitter pill for Singapore workers to swallow. Nevertheless, the workers themselves, led by NTUC, took the stand that in giving up past advantages gained through collective bargaining, they would obtain better future employment prospects for themselves and their dependants. The workers and their trade union leaders understood and accepted the need to amend the industrial legislation as was done in 1968. More importantly, they had full trust in the assurance of the Government that the legislation would result in long-term benefits.

The trust of the workers has been borne out by the success of Singapore since 1968. The effect on industrial peace was gratifying. Less than 7000 man-days were lost, on an average in each year from 1968 to 1974. There were only seven strikes in the three years following the enactment. In 1961, there were 116 strikes leading to a loss of 410,889 man-days. Even after the communist grip on labour unions was broken in 1963, Singapore lost some 35,000 to 45,000 man-days each year through strikes.

Perhaps it is difficult for younger Singaporeans to imagine the situation that confronted Singapore workers in 1968 when Singapore's future appeared totally bleak. To understand why the Government enacted legislation to attract foreign investment, it is necessary to see the 1968 situation in its proper perspective. Data on Government revenue and expenditure highlight the differences between 1968 and the present period. In 1968 Government revenue totalled $857 million and Government expenditure $787.6 million. In 1981 Government revenue totalled $7,888.0 million and Government expenditure $7,582.0 million. In the intervening period of 13 years Government revenue and Government expenditure have increased more than nine-fold.

If it is objected that the figures for Government revenue and Government expenditure are, at the most, only indirect indications of the economic situation at any given time, then references can also be made to the data on the GNP and the Industrial Production for Singapore during that period, In 1968 the GNP for Singapore amounted to $4,402.2 million while in 1981 the GNP increased to $26,389 million. Similarly, the Industrial Production increased from $2,806.2 million in 1968 to $36,937 million in 1981.

After adjusting these figures for inflation, the increases are substantial and most impressive. They clearly show that the economic development of Singapore took a giant stride forward during the 13 years between 1968 and 1981. The economic boom enjoyed by Singapore naturally benefits the workers as well. It is unnecessary to refer to increases in wage levels since it is obvious to everyone in Singapore that there have been huge wage increases during the past several years.

What is more important from the point of view of workers and their dependants is the availability of jobs for them. In 1968 the employment rate was 7.3% as compared to the unemployment rate of 2.9% for 1981. What is even more significant and not revealed by such unemployment statistics is that there are more jobs available in Singapore right now than can be filled up by Singaporeans. The good fortune enjoyed by Singapore workers can be reflected again in the level of social amenities enjoyed by the workers, particularly housing. In 1968 only 29% of the population were housed in HDB flats but in 1981 the percentage increased to 70%.

It is no coincidence that the good fortune enjoyed by workers during the past 13 years is also reflected in trade union membership increases during that period. In 1968 only 125,618 workers were registered as union members, many of them book members, but in 1981 the figure was over 240,000 paying members. It goes to show that trade unions also benefit when workers are better off. The unions have now emerged much stronger.

Our country would not have prospered and the standard of living of our workers would not have reached the present high level if the trade union movement and the workers had been suppressed. Some people would like to appear to be champions for the workers. They talk about the rights of the workers but they conveniently forget the obligations of the workers. Only when there is a balance between rights and obligations will the system work. Besides slogan-shouting, these people have done nothing else to help the workers. Unfortunately, slogan-shouting alone would not help the workers to raise their standard of living. By misleading the workers about their rights, these people are actually jeopardizing their future.

Singapore workers have every reason to be proud of their contribution to the success of Singapore which includes, not least of all, their whole-hearted response to the call of the Government to scrap certain features in the then industrial legislation which were likely to frighten off foreign investors. It is accepted by workers that the present good fortune that they and their dependants are now enjoying is due to the Government's response to the needs of workers.

Over the years the trade union movement has become even more matured and responsible. Today, the trade union has gone to the extent of initiating and promoting good labour-management relations. Circumstances have changed. As a result, some of the legislations have outlived their usefulness while others are ridiculous in the present context. It is certainly necessary to amend industrial legislation to reflect changes in the character and circumstance of employer-employee relations.

I would urge the Government to review the industrial legislation and make the necessary amendments, Amendments should be made in such a way as to promote better industrial relations, based on mutual trust and respect. The interest and the basic rights of the workers must be safeguarded. As no legislation is perfect and as it is also subject to abuse, the Government should review it constantly and also administer the legislation firmly and fairly.

The NTUC will always monitor closely the implementation of the legislation to ensure that the employers do not abuse their prerogatives. It will not hesitate to take any employer to task if necessary. This has always been done. NTUC and the workers realize that the interests of both the workers and the employers lie in cooperation and not confrontation. Managements' interest and workers' interests are intertwined. The trade union movement can be strong only when enterprises are doing well and the nation is prosperous, and that enterprises can do well only when the workers' interests are adequately taken care of.

The NTUC and the workers are reasonable and responsible. They are not short-sighted. They are not fighting for narrow sectional interests or for short-term interest. They fully realize that in a country like ours, we either prosper together or we go down the drain together. The NTUC and the workers also want industrial peace, but it must be industrial peace with justice. So legislation must be such that the interests of the workers are protected. And what is even more important is that the legislation must be seen to be protecting their interests.

At times, workers could be concerned and upset because they may not have properly understood the spirit of the legislation. They may also be misled by cynics and mischievous elements. Thus, it is of utmost importance that any new legislation or amendment which concerns the interests of the workers is written in an easy-to-understand language and explained clearly by the Government. And I am confident that the NTUC and the workers will respond positively to amendments to the legislation. They will cooperate with the Government and employers to ensure the continued prosperity of our country.

On that note, Mr Speaker, Sir, I give my full support to the motion moved by the Hon. Minister for Trade and Industry. 3.47 p.m.

Encik Othman bin Haron Eusofe (Geylang Serai): Mr Speaker, Sir, I join my colleagues in support of the motion standing in the name of the Minister for Trade and Industry.

Singapore pushed ahead in 1981 with an economic growth rate of 9.9% even though the world economic environment was gloomy and depressing. Domestic factors accounted more significantly for our healthy growth rate. Our success was due to a large extent to the grit and determination of our workers. They worked harder. They worked more intelligently. They improved on their present skills and acquired new ones. They worked as a team with their managers and supervisors at the various workplaces.

There was good rapport between the Unions, Employers and the Government built over many years. This led to a productivity growth of 5.4% compared to the 5% registered in 1980. Productivity increase would have been greater had the productivity in the construction sector not declined. Productivity in the construction sector declined mainly because the industry failed to modernize. For the manufacturing sector, productivity growth was almost twice that of 1980.

The confidence in the ability of our workers to work hard and in their capacity to absorb new skills was one of the main factors which helped to make Singapore an attractive place for foreign investments. It is a good sign that a new record was set for net new investment commitments which, excluding petrochemicals, reached $1.9 billion in 1981,

In his Budget Statement, the Minister for Trade and Industry has acknowledged the contributions made by the workers. The hard and good work put in by the workers should be given more widespread recognition by the employers and management in the private as well as the public sector. Workers given due recognition by management will experience satisfaction at work and will be motivated to give of their best. At this point, 1982 looks to be a more difficult year, and for us to continue to grow, we must ensure that our workers are correctly motivated and are given due recognition and reward for their hard work and good effort.

Let me now turn to two measures which we have to bring out the best in our workers. First, the National Wages Council's second-tier wage increase, namely, the recommendation for outstanding workers to be better rewarded. There is no quarrel with the principle that outstanding workers should be better rewarded. We cannot give equal rewards for unequal contributions. We must establish the link between performance and reward.

However, what has brought about concern and has given rise to a great deal of dissatisfaction and unhappiness among the workers is the way the scheme was implemented at the various workplaces. There was also unhappiness about the way the second-tier awards were disbursed, especially when some gained the wrong impression that it was meant to motivate only top performers. Admittedly, this is only the second year of the Second Tier Scheme, and therefore there can be improvements as we develop. Yet the lack of ability on the part of managers and supervisors to adequately assess their subordinates' performance is a matter of great concern. If they are unable to assess their subordinates properly, they would not be able to guide or help them to overcome their weaknesses or to develop their strength. They would not be in a position to motivate them and bring out the best in them. We should not allow the seeds of discontent to be sown in the relationship among the workers, and between workers and their managers and supervisors, simply because the latter are unable or are not competent to assess their workers' performance or they have not exercised sufficient care when assessing their workers or have chosen to blatantly ignore the general unhappiness that they have generated because of their failure to assess their workers correctly. Worse still, if their careless assessment leads to a deterioration in teamwork at the workplaces.

We must develop in our employers, managers and supervisors, the skill to assess their workers effectively. It is a skill they must learn conscientiously. It would also be useful for managements to consult the unions on the appraisal schemes proposed for their companies. Besides monetary rewards, we should also work out other ways to recognize good work. One way workers find that their good work has attracted recognition is when they are consulted on the work which they are doing.

Skills Development

If workers are adequately trained, they will be able to use their skills to the fullest. Therefore, to facilitate the restructuring of the economy, we need to expand our pool of skilled manpower. We must give every opportunity for our workers to either improve on their present skills or to acquire new ones. The Skills Development Fund was established with the objective of training and upgrading the skills of our workers and to retrain the retrenched workers. The Fund is financed by a 2% levy paid by employers for each employee earning not more than $750 per month.

While it is noted that the Skills Development Fund has plans to make a greater impact on the training of workers, its present performance is somewhat disappointing. The Fund has collected $191 million, but its commitment so far is only $68.4 million, or about 36%. Since 1979 only 32,100 workers have benefited from grants from the Skills Development Fund. This is only slightly more than 10% of the labour force in the manufacturing industry. I am also in agreement with the Member for West Coast that the Skills Development Fund grants have benefited more of the higher grade employees than the workers who earn below $750 p.m. It is time now for the Skills Development Fund to seriously consider using the funds it has amassed to benefit the line workers. Rather than wait for employers to make submissions to get training grants, the Fund could perhaps work closely with training institutions, like the VITB, as well as employers and unions to organize courses which are useful for our workers.

Inflation

I share the views expressed by the Member for Alexandra on our inflation rate. Inflation did not abate much in 1981. With oil prices stabilizing, domestic factors are likely to continue to exert greater influence on consumer prices in 1982. Besides, world prices of essential commodities, such as rice and sugar, are also expected to decline. Care should, therefore, be taken to ensure that the domestic measures taken either on environmental or other grounds do not cause price increases, especially fo6d prices. Stern action should be taken to curb profiteering. Inflation would hit the workers, especially the lower wage earners, hardest.

Housing for our Workers

I am happy to see that one of the objectives of the Budget is to accelerate the public housing construction programme to meet the rising demand for housing units. It is important to restate that we should build HDB flats which our workers can afford to purchase. Proposal to introduce new technology in the construction industry could lead to higher construction cost. Increased productivity in the construction sector would help to keep the cost of the flats within the means of our workers.

In this connection, contributions to the Central Provident Fund should give better returns. In the Ministry of Labour's Addendum to the Presidential Address at the opening of the Fifth Parliament, it was stated that the CPF Board intended to review its investment policies and the returns given to members' contributions. I would like to know what progress has been made so far. This review should be expedited.

Sir, I support the motion. 3.59 p.m.

Mr S. Chandra Das (Chong Boon): Mr Speaker, Sir, this is a very sober budget, a budget with a thin spread of goodies right cross the board. Nobody is unhappy because no one has been asked to pay more. Neither is there cause for rejoice since, as usual, expectations will never be met. On balance, however, I must congratulate the Hon. Minister for Trade and Industry for giving the citizens of Singapore a breather, so to speak.

Mr Speaker, Sir, our economy has performed well because we were prepared for the worst: a major recession in the industrialized West is just beginning to hit us because of time-lag. The former Minister for Trade and Industry had brought this point home over the last two Budgets. We should, therefore, not be tempted into thinking that the Singapore economy will be insulated from this imminent recession. The writing is already on the wall. Unemployment in the EEC and the US has reached record levels.

So this is the time for us to consolidate and make the necessary changes to be able to survive the possible onslaught of the recession. I say that we must stay trim and be ready to seize the opportunities when the developed economies recover.

Mr Speaker, Sir, now I would like to touch on a number of areas the Minister has touched upon in the Budget Statement, starting with taxation.

(1) Taxation

Our taxation policy hinges on two cardinal principles:

(a) that the tax base should be as wide as possible;

(b) tax rates should not be punitive so as to become a tax on initiative, thrift and risk-taking.

This sound policy has enabled us to engage in some form of social fine-tuning over the last two decades. Real income levels have risen, so have standards of living. We now appear to be caught in a dilemma arising from the very success of a sound taxation philosophy. Further legitimate claims for income tax reliefs cannot be granted without reducing the taxpaying base. At the same time, additional reliefs for the support of aged parents cannot be raised further than $1,000 lest they get higher reliefs than the spouses of taxpayers. To raise these reliefs for both categories might then erode the tax base.

I am fully aware of the complexities involved in different tax measures and tax policies and which would have different policy results. One policy may be superior with respect to social objectives such as income distribution but inferior with respect to its efficiency, economic growth and other employment effects. However, I am afraid trade-offs must be made.

Basically, I am suggesting that the tax structure should be an incentive package for taxpayers to produce more, work harder and save more. I am suggesting that we should erase the notion that taxation is a burden to be avoided. Perhaps the time has now come for a rethink of our income tax structure. A modest reform based on effective tax rates could be one option the Hon. Minister for Trade and Industry might wish to consider. This then would eliminate his problem about reliefs.

(2) Energy

Mr Speaker, Sir, may I now touch on the statement the Hon. Minister made on Energy Development? The Hon. Minister correctly pointed out that "we must not be lulled by the atmosphere of glut and distressed prices." The recent fall in oil price should not lull us into a relapse of naive optimism. The current drop in prices arises partly because of the current recession in the major industrialized economies as well as a temporary contradiction among members of the OPEC cartel.

Our policy of ensuring that consumers pay for their energy consumption at the prevailing world market rate is sound. We should not subsidize consumption, least of all wastage.

However, I would like to bring up some points which bear directly on our energy generation and conservation policies.

The Hon. Minister told this House that he would "attribute the improvement in energy efficiency to the effects of higher energy prices." The Public Utilities Board, I agree, has performed creditably well with mounting surpluses each year. However, it is tempting to equate monetary surpluses with efficiency. But again, efficiency is a relative term. The PUB might wish to draw up some indicators, such as the type, age and efficiency of the machinery, the unit cost of energy generated, efficiency coefficient, and so on. I am aware that it is not going to be easy to construct comparable indicators. Nonetheless, we need some objective yardsticks. For example, is the PUB satisfied that its investment and purchases have resulted in lowering of production costs? It has been argued that there is no other public utilities body with which we could compare PUB's performance. This argument is partially valid, but one could perhaps take a look at Hong Kong's private company called the China Power and Light Company.

This House was told on 16th March, 1980, by the then Minister for the Environment that the "question of using coal as a source of fuel for power stations is under study." In his Statement, the Hon. Minister for Trade and Industry spoke on our "strategy of diversifying away from oil" and that the "PUB's external consultants have completed a study on coal-fired power stations." I sincerely hope that a decision could be made fairly soon.

Our policy on alternative energy should be clearly articulated and understood by everybody ranging from the policy makers to the consumers. Such a move, I believe, is vital since energy is an issue that is going to be with us for a long time to come. You may wish to note that among the ASEAN countries, both Malaysia and Thailand have successfully diversified into coal power generation since the 1973 oil crisis. Our failure to do so is still a riddle to many. It is perhaps an over-reaction to the potential problems of pollution arising from coal-fired power stations. However, I believe the technology of such power stations has improved significantly over the years. It is definitely worth taking a second look. Perhaps there should be greater public debate on such policy alternatives.

Mr Speaker, Sir, I am inclined to think that the economics and strategic considerations of coal-fired power stations warrant an early and favourable consideration. According to Japan's MITI, the economics of power generation using oil, coal and nuclear are as follows:-

(i) Power generation for oil, coal and nuclear is 15 cents, 11 cents and 7 cents per kwh respectively.

(ii) The construction cost per kwh is cheapest for oil-fired power stations at $1,000 followed by $1,500 for coal and $1,700 for nuclear power stations.

It is interesting to note that both coal and nuclear power stations are widely used in Japan.

The Hon. Minister for Trade and Industry has also referred to natural gas which has been found in substantial quantities in the region, It would be useful to know whether studies have been made to determine the economics, applicability and social costs of this fuel alternative.

Sir, I would now like to move on to our energy conservation policies. Thus far, our policies appear to hinge on Disincentive to Waste rather than Incentive to Save. This is evident from the PUB's imposition of a 10% surcharge on utilities bills above $80 per month. This appears sound since we do not want to encourage wastage. However, there must also be corresponding positive measures to act as incentives to save. The Hon. Minister is only too well aware that banks and financial institutions provide competitive interest rates to induce people to save! Similarly, I hope the PUB could come up with something more innovative.

The Hon. Minister in his Statement which gave the guidelines on accelerated depreciation to cover approved energy-saving expenditure incurred by non-industrial users is a good example of an incentive to save.

I am told, Sir, that in Canada and Japan, the authorities have come up with one interesting innovation. The Energy Diagnosis Bus. This bus is equipped with computerized instruments and manned by energy specialists. Basically, it visits small industries to assist them in energy conservation. Among other things, the team provides assistance to save energy in terms of an energy audit and comes up with specific recommendations. In short, this energy diagnosis bus provides energy-saving -consultancy services. Perhaps the PUB might wish to consider introducing something similar. I would sincerely urge the PUB to take a more aggressive role to facilitate energy-saving improvements.

(3) Local Initiative

Mr Speaker, Sir, I would now like to go on to the initiative by local industries. The Hon. Minister for Trade and Industry in his Budget Statement told the House that in 1981, local firms have committed about $610 million for expansion and upgrading of plants in the printing, publishing and ship-repairing industries. This is an encouraging sign. It is definitely indicative of the dynamism of local enterprise. -

I am confident that our local entrepreneurs as well as the more established industries will respond positively to the challenges and opportunities in the years ahead. The immediate future is not good. Recession and unemployment is now increasingly seen.

Paradoxically, it is during times like this which offers the best opportunity for us to restructure and upgrade. What is needed, I venture to add, is a more positive response from the Government to the needs of our local industries, especially the small and medium-sized firms. On record, the Economic Development Board appears to have done and are still trying to intensify their efforts to assist local industries. The Local Industries Unit in the EDB was specifically set up to look into the problems of our local entrepreneurs. In fact, the Hon. Minister in his Budget Statement said that 70% of the $11 million awarded under the Interest Grant for Mechanization Scheme went to 91 local companies. Yet, one continually hears of the alleged indifference or MNC-bias of the EDB.

I do not know the reasons for this adverse image. It could arise from a communication gap, lack of publicity or rapport between the Board and our industrialists. One feedback I received was that the Board appears to be rather passive. It waits for our firms to approach them with a problem. The EDB provides only financial assistance. While this is vital, some form of consultancy services is also useful.

One rather peculiar feedback on the Skills Development Fund (SDF) refers to coffee shop operations, For example, our coffee shop operators contribute to the SDF but they could hardly upgrade their operations under existing circumstances. Perhaps, the SDF, the EDB together with the Chinese Chamber of Commerce and Industry and the relevant trade association could sit down to work out a long-term plan for this uniquely Singaporean feature. True, our manpower resources and increasing affluence will not permit coffee shops to continue as they are. Changes will have to be made. Maybe one should study some of the fast-food chains in the US or Taiwan. These firms deserve our support and attention.

The Government, through the Skills Development Fund, has sought to induce companies to upgrade. It would be interesting to know the progress of the SDF since its inception. Specifically, who are the main beneficiaries, in terms of ownership (i.e. local or multi-national companies) and by sector (i.e. manufacturing or services). It is disturbing to note that the SDF appears to favour training courses which are manufacturing or production-orientated. In other words, attendance at financial, marketing and management seminars do not qualify for SDF financing. Of late, I understand that steps are being taken to correct this anomaly. I would urge the management of our local industries to take full advantage of this facility. Modern management methods cannot guarantee success but can minimize the probability of failure.

(4) Manpower

Mr Speaker, Sir, may I now touch on the Hon. Minister's reference to Manpower Development. The recent salary revision for senior civil servants reflects the Government's increasing concern to stem the brain drain out of the public sector. The widening wage disparity between top civil servants and their counterparts in the private sector has been cited as the primary motive behind the exodus. We are all in favour of retaining top brains in the Civil Service. And we also want to pay them well. However, one has to recognize and accept that there is no way one could close the remuneration gap in monetary terms between the two sectors. At best, one could narrow the differential.

I would also like to join other hon. Members to make a plea to the Minister for Trade and Industry to consider as early as possible a similar review of the salaries of the daily-rated, Divisions III and IV workers. I am afraid these are the unsung heroes of the bureaucracy and who are the hardest hit by rising costs.

(5) Research and Development

Mr Speaker, Sir, the Minister for Trade and Industry in his reference to R & D said, and I quote:

'I am confident that we have the talent to achieve our ultimate aim of building up R & D capability in selected areas of technology. With the progress being made in industrial R & D, real opportunities now exist in Singapore for highly qualified R & D scientists and engineers.'

I hasten to add that I share the Minister's guarded optimism. A lot still needs to be done.

R & D lifted Japan from a nation of imitators to a nation of pace-setters. Of course, we should be realistic about our own capabilities. I strongly feel that our policy and expenditure of $50 million on R & D is inadequate and conservative. Japan, for example, spends 1.7% of her GNP on R & D while the US spends 2.3%, West Germany 2.1% and France 1.8%. Among the developing countries, South Korea devotes about 0.4% of her GNP on R & D, and Taiwan 1.6%. In fact, I would even urge that we should incorporate, among other things, an element of venture-capital into our R & D policy.

(6) Computerization

Mr Speaker, Sir, the Government's drive to encourage greater use of computers should improve productivity and relieve manpower shortages especially in the Civil Service and the other service sectors in the economy. It is commendable that the Government should take the lead, partly as a demonstration effect as well as to stimulate the infant computer industry.

Initially, however, it appears that there is a shortage of computer personnel itself. The Minister in his Budget Statement has referred to steps being taken to "overcome the shortage of computer personnel". However, some critics have suggested that we might be in danger of "doing too much too fast". It is argued that we should stop to check the speed of our computerization programme, lest we over heat the industry. Perhaps the Minister might want to allay the fears of such well-meaning critics by giving this House a progress report on the situation.

(7) Trade Development

The growth rate in our exports registered 7% compared with 14% for the manufacturing sector in 1981. In his Budget Statement, the Minister said that we will have to increase our share of existing export markets as well as open up new ones to provide the impetus for growth. Moreover, the Minister added, and here I quote:

'in the longer term, as we restructure our economy and move into the production of more higher valueadded products, we will be less vulnerable to protectionism.'

I fully agree with this thinking. It is now time for a bold initiative to embark on a new export drive. The rules of the game have changed. The liberal export markets which contributed in no small measure to our export-led growth in the 1960s and 1970s have now narrowed. Today, we have moved and will continue to move up-market into the less vulnerable sectors of the global export markets, However, moving up-market or producing more higher value-added products does not automatically shield us from protectionism. Take, for example, Japan's success in the current export drive in the industrialized markets. Already there are so-called "voluntary marketing arrangements", self-restraint and all sorts of euphemism for protectionism. The most recent is a call by President Reagan for what he termed as "balanced reciprocity".

Mr Speaker, Sir, it is my contention that the export business or international marketing is warfare. Let us not delude ourselves and go ill-prepared. There is no concession for the weak. Governments can, however, provide some basic logistics such as product and market intelligence as well as the necessary contacts, Thus Japan has its JETRO and the Republic of Korea has KOTRA. Similarly, Taiwan and even Australia have similar outfits.

I have gone through the Hansard over the last few years and records show that this House has debated the issue of an Export Promotion Agency or a Trade Development Authority or Board since February 1978, Finally, in March 1980, the then Minister for Trade and Industry gave reasons against the setting up of a statutory trade development board. I am afraid events have since changed significantly. I would therefore strongly urge the authorities to reassess the urgent need for a high-powered trade promotion agency such as a Trade Development Board. Such a statutory body or agency would enjoy the operational and policy flexibilities of a commercial outfit so essential in the field of foreign trade. Specifically, the agency could provide a computerized trade information service to our exporters and monitor protectionist tendencies.

Mr Speaker, Sir, the Minister also referred to the opening up of new markets. This, I must add, is something which this Board could seriously undertake in view of the high initial cost of market exploration and so on.

While we try to break into new markets, may I suggest that we do not forget the 200 million ASEAN market. Our ASEAN partners could be both our sources of supply as well as our markets. I would therefore urge that we should not overlook this possibility. Sad to say, at this moment, Intra-Asean trade is still at a very low level. This could be due to the various stages of our economic development, historical trade practices and different colonial experiences. Nonetheless, it is worth mentioning that steps should be taken at every opportunity to help foster greater Intra-Asean trade.

Conclusion

Mr Speaker, Sir, in conclusion, I hope I have not made any unsobering remarks on a basically sober budget. As I have indicated in my opening remarks, a sober budget is not a stand-still budget. To stay trim and fighting fit, we have to shed off excess fat and tone-up flabby muscles. Tax-concessions, shorter queues for HDB flats, better bus services and the other things in life are all contingent on a soberminded electorate. A painless budget is not a prelude to a free lunch. Rather, it is an option to a better but paying lunch.

Mr Speaker, Sir, on this note, I support the Budget Statement of the Minister for Trade and Industry. 4.24 p.m.

Dr Ow Chin Hock (Leng Kee): ( In Mandarin): Mr Speaker, Sir, the world economy is facing three major problems. First, stagnation of economic growth. The average rate of economic growth of the OECD member countries last year was 11%, the lowest in the past five years, (Amongst the member countries, the growth rate of the United States was only 11%, Japan 32%, while UK and West Germany had negative growth rates of -2% and -1% respectively.) Secondly, the waves of unemployment faced by the industrialized countries reached a rate as high as 71% last year. In the United States alone, the figure of unemployment reached 9.5 million persons; in the United Kingdom, there were 2.8 million people unemployed which is more than the population of our Republic. Thirdly, inflation still poses a serious problem. Although, in 1981, the rate of increase of the consumer price index in the OECD countries had fallen slightly as compared with that for 1980, it still remained at double digits (11%).

The prospects of a world economic recovery in the next two years are not very optimistic. The main reason is that economic recovery in the largest industrial country - the United States, will be both slow and difficult. Therefore, she will not be in the same position as in the past to provide the locomotive effect to world economic recovery. According to a forecast, the economic growth rate of the US in 1982 will be -0.5% and will recover to 3% only by 1983. In the US, the number of unem- ployed is expected to reach the highest point of 9.75 million in 1982, before lowering to 9.25 million in 1983. However, the inflation situation will improve, falling to 7.5% from last year's 8.25%. This forecast also estimates the economic growth rate of OECD member countries in 1982 to be about the same as in 1981, staying at around 1.25%. Only in 1983 will it be possible to increase to 3%.

Besides, there are two types of crises latent in the present world economy: First, industrial countries invariably hasten to set up trade barriers in view of their economic difficulties and their rising unemployment. This trend of protectionism will lead to many undesirable consequences. In countries where protectionism is practised, those low-efficiency and high-cost industries may thereby prolong their dying lives ( ) thus leading to misallocation of resources. Their people will have also to pay a price higher than that for imported goods, in order to buy products by such industries. Furthermore, various countries one after another will set up tariff barriers to retaliate against one another. This will lead to a vicious circle. If this situation continues, it will get worse and eventually turn into a trade war, when all will suffer. In the 1930s, during the time of world economic depression, the same situation existed and it caused world trade to come almost to a stop or to be paralysed.

Secondly, the crisis that takes place in international finance. At present, non-oil producing developing countries, because of increasing prices of oil in the past few years coupled with failing prices for their commodities, have suffered huge deficits in their balance of payments as well as incurring heavy external debts. Some of these countries cannot even repay the interest regularly. According to the OECD 1981 Review, these countries have to pay a gross interest payment of US$32.8 billion in 1981, compared with $4.0 billion in 1973. This shows an increase of more than eight times. Should there be a few cases of default in payment, there would be a chain reaction with unthinkable consequences. The stability of international currencies and the whole financial system would then be undermined.

We have reiterated the problems and the crises that the world economy is facing, not to create false alarm, even less to cry "wolf". If we are not careful for a moment, the wolf would come at us. Therefore, in the present difficult conditions of the world economy, while we can congratulate ourselves and our ASEAN partners for having been able to maintain high rates of economic growth, we should on the other hand increase our vigilance, to be always on guard, in order to meet the challenges brought about by world economic depression hereafter.

Our country has all along been practising the policy of market economy, which rely on the market forces of supply and demand and profit incentive to determine prices and the distribution of resources.

Apart from providing political stability, creating a suitable investment climate, and enforcing industrial and commercial laws and contracts, the main responsibilities of the Government in economy also include, first, the construction of infrastructures such as sea-port, airport, public roads, communication systems, industrial estates etc., and secondly, the cultivation of talents and development of our only resource - human resource through education and technical training.

The main targets in this year's Budget reiterate the importance the Government attaches to these two fields of responsibility. Another target is to accelerate our building programme in order to satisfy the needs of the people. The PAP Government's economic policy is enlightened and effective. This can be evidenced by the economic achievements over the past 16 to 20 years. During this period of time, from 1965 onwards, we have not only overcome the economic problems brought about by the withdrawal of the British Armed Forces in 1968 and the oil crises in 1974-75, we have even gone one step further by bringing about a prosperous economic growth and the standard of living of our people has been continuously enhanced.

We all know that during this period of time, from 1966 onwards, we had no Opposition party in Parliament. In other words, the Opposition parties made no contribution towards the construction of our country's economy and the making of our economic policies. The close cooperation between the people and the Government over the past 16 to 20 years has resulted in the coffers being much richer. Now, the Opposition party hopes to reap the harvest and win popular support by making all sorts of suggestions for providing free services for this and subsidies for others. It is always easy to make suggestion on how others should spend their money or how to spend other people's money.

However, they ought to know that these are assets earned and accumulated by our people through their diligence and effort under the able leadership of the PAP Government over the past 16 to 20 years. Furthermore, we cannot take for granted that our economy will continue to enjoy a prosperous growth just because of our economic achievements over the past 16 to 20 years. During the past six years, the economic growth of West Germany declined from 5.6% to -1%. This is a lesson for us to learn. When the economy is stagnated and the coffers empty, we cannot talk about nation building, as even our national security will be jeopardized.

In the Annex to the 1981 Budget Statement, the then Minister for Trade and Industry stated our economic targets for the '80's (Hansard, Vol. 40, col. 361) as: (a) Real GDP growth of 8-10% per annum, and (b) Productivity increase of 6-8% per annum. Some people are skeptical as to whether we have set our target too high. At the same time, they are of the view that in order to attain this target, one would have to pay a very dear price: (1) we have to face the consequences of the heavy influx of foreign workers; (2) the consequential worsening of inflation; and (3) the adverse effects on the efficiency of the distribution of resources.

With the success of our family planning programme, our population growth rate has decreased from year to year. In the 80's, the supply of new labour force will decline. In 1980, the number of new work- ers came into the market was 32,000. In the period 1981-85, the supply will be reduced to 24,000 per year, and in 1985-90, it will be further reduced to 16,000 a year. In order to meet the demand for labour, henceforth we may have to continue to rely on foreign workers, or to increase the Labour Force Participation Rate (LFPR), or to increase productivity, or a combination of all three. If we are not to rely on foreign workers after this decade, then we will have to attach more importance to the increase in our Labour Force Participation Rate. The female Labour Force Participation Rate in 1980 was only 44.3%, which is low as compared with those in Japan, Hong Kong, South Korea and Taiwan. Of course, we have to give due consideration to the fact that married women have the duty to raise children. We have to strike a balance between economic growth and family education. We may even have to consider the possibility of day-shift, time-shift or piece-rate and job payment systems, and the use of computers and other technology to enable the women-folk to carry out their work at home. Bringing the light and clean industries near to their homes in housing estates is another good method. At the same time, the retirement age of employees should be raised to 60 years, or even 65 years for most trades. This may help to alleviate our labour shortage.

However, the most important aspect of our economic policy is increased productivity. In 1981, our productivity growth rate was 5.4%, which is higher than the 2.9% in 1979 and 5% in 1980. However, it is still short of our targetted productivity growth rate of 6-8%. For this reason, increased productivity is one target which we should not spare any effort to achieve over the next few years. We can employ various methods to achieve increased productivity - raising capital-labour ratio, improving labour-management relationship, introducing company welfarism, provide technical training, instil in the workers a better sense of productivity, and implement computerization, automation and mechanization. Based on the past experience of economic development in other countries, some people believe that no country is capable of sustaining a high productivity growth rate over a protracted period. In other words, what we are trying to achieve is unprecedented ( ). However, the Independence of Singapore, the events of our survival under unfavourable conditions, the achievement of political stability and economic prosperity within a short period, and thus opening up a new chapter in this corner of Asia, are also unprecedented. Where there is a will, there is a way. Productivity relates also to the state of mind and will-power of the people. As such, I believe that so long as our people are united and determined, we will certainly attain our productivity target. Moreover, the standard of technology in many of our industries is still far below that of the advanced countries, such as the use of computers, robots, automation systems, etc. There is plenty of room for improvement to bring about an increase in productivity. Even when mass-produced, robots will not give us any housing problem, neither will they go around looking for companions and creating social problems.

As regards the problem of inflation, the rise in the consumer price index is mainly due to the increase in food prices. For instance, 58% of the 8.2% increase in the 1981 consumer price index was due to the increase in food prices. During the past few years, the main cause of inflation was the increase in oil prices and foodstuffs.

As for the allocation of resources, the Government should pay more attention to the coordination and synchronization between public works and investments (particularly in housing development) with private investments. We should avoid the bunching of several major projects which may cause an overheating of some industries. On the other hand, if public works and investments can be carried out in accordance with the economic conditions of our Republic and the fluctuations of private investments, then we will be able to generate a stabilization effect on our economy.

In short, we cannot give up eating for fear of choking ( ) . We must not lower our target of economic growth for fear of a possible rise in the inflationary rate by a few percentage points, and possible problems in the allocation of resources in some quarters, or that there is no other country for us to emulate. We are not denying that such problems do exist. What we have to do is to try our best to solve these problems or to minimize the effects that these problems may cause.

While our economy is still capable of rapid growth, we must seize all opportunities as they come, in order to move ahead, to further improve the material and spiritual lives of our people, to carry out effective economic, cultural and social constructions and, at the same time, to enrich our coffers to provide against a rainy day in case the world economy worsens and hits our economy. There is a Chinese proverb which says, "A boat sailing against the current must forge ahead or else it will be driven back."( ) If we are complacent and conservative and lose our spirit of "working with perseverance "( ), then we will gradually lose the lead over the other developing countries in marketing, in foreign investments and in technology, fields which because of an early start we now enjoy a competitive edge. In today's highly competitive world, once we lose an opportunity to a competitor, no one will ever give us a second chance.

The Minister for Trade and Industry personally feels that tax changes, though exciting, are not necessarily the most important part of any Budget Statement. But to a vast majority of our citizens, tax changes are the most important as they directly affect their pocket and the cost of living. This year, there are no new taxes and the existing taxes remain unchanged, much to the relief of our people. Yet there are some people with ulterior motives or officious people who said that the PAP Government "dares not" increase taxes because there is an Opposition member in Parliament.

Mr Jeyaretnam: Hear, hear.

Dr Ow Chin Hock: Such thinking is childish and ridiculous. It also overstates the value of this Opposition member ( ). He is not important enough to constitute a factor of consideration in the preparation of the Budget. Sir, as we all know, Singaporeans have, in fact, been enjoying painless budgets in the last few years.

Another view on this year's Budget is that the few concessions it offers benefit only those in the middle and upper income groups, and not the ordinary citizens in the lower income group. The reasons given are: (1) Most of the ordinary citizens are contributing less than $5,000 per year towards CPF. The tax relief on the full amount of CPF contributions will benefit only those who are earning above $1,800 per month. (2) The raise in the exemption limit in estate duty to the full value of any one residential property has no bearing at all to owners of public housing or those who have no property. (3) Exemption from estate duty on CPF savings will benefit those who have accumulated more than $100,000 in their CPF accounts. CPF members from the lower income groups do not benefit much. (4) Waiving the 10% tax on the fixed charges in PUB bills (in respect of fees for sanitary appliances, refuse disposal, rental of appliances and nightsoil disposal) will only benefit those whose PUB bills exceed $80 per month. Even then, the amount of tax waived is negligible.

On the surface, such a view appears to be a correct one. But if one takes a step further, one will discover that this view is lopsided because there is clearly a lack of understanding of the Principles of Taxation. First, when we examine a budget, we cannot consider the revenue and expenditure for only a single year. We have to take into consideration the trends of revenue and expenditure for a number of years and the economic strategies for that period.

As regards the former, the Government has started cutting down the income tax rates since 1978. The effective income tax rate of our people is now lower than that five years ago, and those in the lower income group enjoy more benefits than those in the higher income group. Furthermore, with the high-wage policy over the last three years, the rate of increases of earnings among the blue-collar workers is higher than that of the professionals and executives. The weekly earnings of the production, transport and manual workers in 1979-80 increased by 14.3%; in 1980-81, it increased by 16.9%. During 1979-80, the rate of increase in weekly earnings of professional, administrative, and managerial workers was 10.5%, during 1980-81 it was 8.7%; while the rate of increase in the weekly earnings of clerical, sales, and service workers was 12.2% during 1979-80 and 10.1% during 1980-81. In other words, during this three-year period the rate of increase in income was highest among the blue-collar workers. The important thing is: the rate of increase in income was higher than the rate of increase of consumer price index (CPI). In other words, the real income of our people in all walks of life, particularly the blue-collar workers, is higher today than a few years ago. Increasing real income with a decreasing effective tax rate is something which people in many countries, including industrial countries, can dream about but cannot get. Yet we Singaporeans in all walks of life can all enjoy the fruits of economic growth at a time of difficult and depressing world economy. I hope we will continue to work hard in order to sustain this condition.

Finally, let us talk about the principles of Government's taxation, revenue and expenditure. The first point, as the Minister for Trade and Industry has said, "our income tax will never be so high as to deter Singaporeans from wanting to work hard and earn more." The second and more important point, the Government should use tax revenue on education and technical training, to enhance the ability of the people to earn more, but not to subsidize consumption. The third point is related to the question of the distribution of wealth and income. While we have to rely on market forces to make more efficient use of the resources to create more wealth for our nation and people, on the other hand, the Government has to resort to legislative and administrative measures to look after the livelihood and well-being of people with lower incomes and in poorer walks of life. Progressive income tax is a case in point. People of upper and middle income groups bear much higher burden both in tax rate and in quantum than people in the lower income group. The lowest rate of income tax is 4% and the highest is 45%. 91% of the total income tax revenue comes from 19% of all taxpayers. These 19% taxpayers are in the middle and upper income groups whose chargeable income per year is above $75,000. Last year, all taxpayers got a 10% tax rebate, the higher the tax the bigger the rebate, the lower the tax, the smaller the rebate. This is obvious. But there are some people who want to cook up something from this in order to mislead people.

As for the personal reliefs in income tax, I believe other hon. Members will comment on it and the Minister may respond. It suffices me to point out that the lower income group, like other income groups, have both the right and the obligation to contribute to the national coffers. Even if their tax rate is only 1% or 1/2%, it will still be educational as it will instil a sense of pride and a sense of participation in nation building.

Besides giving tax concessions, the Government also gives special care to people in the lower income group in matters of housing, medicine, education, etc. At present, 70% of our population live in HDB flats, 240,000 of whom are owner-occupiers. In the next eight years, the HDB will build 290,000 units more to satisfy the demand for housing by people in the middle and lower income groups. We are world-renowned for our achievements in the field of housing, particularly low-cost housing for our people in the middle and lower income groups. In the field of medicine, a patient pays less than 12% of the actual cost of a C class ward in a Government hospital. The Government is also paying meticulous attention to the health and medical care of our school children. As regards education, no student because of his poverty will be prevented from attaining the highest level of education if he has the capacity to learn. Taking into account all the various services provided, we find that the real income of our lower income group is much higher than their money income.

Let us look around at some of the socalled socialist countries. There, the people are living in dire misery and are suffering excruciatingly. The misery and the traumatic sufferings of the peoples of Cambodia and Vietnam are too well known for me to reiterate here. In Poland, the people have to stand in long queues in order to buy rations of bread and other daily necessities. Meanwhile, workers work with the barrel of the gun pointed at them. From this, we can see that mere shouting of "socialism" slogan will not provide the people with their daily necessities or with a livelihood. To solve these problems and to raise the standard of living of the people, hard work and positive action is required. A former editor of one Da Gong Bao ( ) newspaper told me that previously the socialism practised in China "If everybody else lives in a straw hut while you live in a tiled house, then you should pull down the tiled house in order to be equal with the others." The socialism in China today is: "Through modernization, more and more people who originally lived in straw huts should be able to live in tiled houses." This quotation is worth pondering over seriously.

To sum up, this year's Budget is a careful and cautious one. In respect of expenditure, it meets the requirements of the economic restructuring in the 1980s. Attention is also being paid to the housing needs of our people. As regards taxation, there is no new tax or any increase in tax rate. On the contrary, there are several tax concessions even though some of these are insignificant. The present Budget shows the concern of the Government for the world economic situation. It also reflects the careful manner of a former banker on the part of the Minister for Trade and Industry. In view of the stormy world economic situation, it is always worthwhile to be a little cautious. It is hoped that when the storm has calmed down, the future Budget will be able to bring more and better news to the man in the street, our ordinary citizens. ( )

Mr Speaker, Sir, I support the Motion by the Minister for Trade and Industry.

Mr Speaker: I propose to take the Suspension now. I suspend the Sitting and will take the Chair again at 5.25 p.m.

Sitting accordingly suspended at 4.55 p.m. until 5.25 p.m. Sitting resumed at 5.25 p.m.