ANNUAL BUDGET STATEMENT

Debate resumed. 5.37 p.m.

Mr Lau Ping Sum (Yio Chu Kang): Mr Speaker, Sir, I rise to support the motion moved by the Hon. Minister for Trade and Industry on 4th March, 1983.

World Economy

1982 saw a deepening world recession. GNP declined by 0.5% in OECD countries and by 1.8% in the United States. One of the major causes of the decline was the successful anti-inflationary policy of these countries which brought the inflation rate down from 10.6% in 1981 to 7.2% in 1982. The success in curbing inflation was not achieved without a high price. Tight credit brought down inflation but at the same time, the unemployment rate in the US reached 10.8% and in the OECD countries, 32 million people were jobless, the highest level in 50 years.

Many industrial countries reached the troughs of their business cycles at about the same time. A strong US dollar and continued high interest rates in the US forced other industrial countries to adopt cautious monetary policies to protect the external value of their own currencies. Investment spending was at a low ebb. World demand shrank, followed by a sharp fall in the prices of basic commodities.

Protectionism spread as governments tried to protect their own industries, a trend which GATT 82 failed to reverse. Developing countries were boxed in between low commodity prices and high interest rates. Debt servicing and bridge financing for debtor countries have become major problems. Ironically, only a few years ago, economists were debating on how to recycle petro dollars. Now they are concerned about the huge, debts of certain countries and the viability of the international financial system.

Against this gloomy background, the last quarter of 1982 and the beginning of 1983 saw a few welcome signs of change. Interest rates have been declining. Real spending on new homes and consumer goods, such as cars, increased in the US. Although it is not at all certain that these are typical signs for a late recession/early recovery stage of a business cycle, a sustained revival in demand in that country will set the stage for recovery, hopefully, in Europe and Japan and other countries after a time lag.

Developing countries, however, are expected to continue experiencing depressed export revenues this year. In order to restrain imports, they are likely to adopt restrictive economic policies. Their prospects, therefore, remain bleak. Singapore Economy

In a year characterized by disappointments in the world economy, Singapore did well to achieve 6.3% growth in 1982 compared with 9.9% in 1981. Largely the result of a sustained boom in construction, it was still a remarkable performance. Financial and business services grew by 14%, transport and communications by 11%. But manufacturing suffered a hard knock and fell by 6%.

The Singapore dollar appreciated in value against major currencies: 14% against Sterling Pound, 12% against the Yen, 16% against Deutschmark and held steady against the US dollar.

A strong Singapore dollar keeps the cost of imported items down but makes it more difficult for exporters to compete in world markets. It is a measure of the confidence that international investors and fund managers have in Singapore that the Singapore currency should enjoy such favourable exchange rates.

For the next few years, major construction projects, such as the MRT and others, will be able to counter declining activities in manufacturing. But it is worth noting that only investments in plant and machinery can enhance the productive capacity of the economy. In the absence of a strong revival of external demand to encourage such investments, the productivity of our economy, notwithstanding the productivity movement, will fall. If this happens, the prospects for growth would be limited.

The Minister has rightly stressed the importance of knowledge-intensive industries. We have to maximize our efforts in this direction. But it is unlikely that Singapore will be able to export software in any significant quantity for some years to come. Experienced professionals, such as project managers, system designers, data base specialists, computer auditors are in short supply.

As we expand our own computerization plans, the demand for these professionals will increase. On-the-job experience and an in-depth knowledge of users' requirements take time to acquire, much longer than that required for learning how to write a computer programme. At the same time, there is a wide range of new software products and new versions of existing software emerging each year. With our limited manpower, there is no possibility of covering the whole range. The development path of our software industry must, therefore, be selected judiciously with due regard to our own strength and weaknesses. Perhaps, it is noteworthy that for every software product that is a commercial success in the world market today, hundreds of others have failed, representing many man-years of wasted effort.

The 100% depreciation allowed for the purchase of computers and office automation equipment is a commendable move. But the common problem that many small businesses face is the selection of an appropriate system which will help them raise efficiency. In Singapore today, there are numerous companies selling micro-computers, word processors, and small business computers. Perhaps the Minister can enlighten the House on the ways in which greater assistance can be given to the small users so that they can instal their systems successfully.

The use of the Skills Development Fund for upgrading skills is important for our economy as a whole. However, an undesirable side-effect has been the escalating fees of training courses run by some foreign consultants. Is it likely that the fee increases have been brought about in part by the easy availability of rebates from the Skills Development Fund, in spite of what the Members for Chong Boon and Leng Kee have said earlier? Perhaps the SDF could carry out a 'value for money' audit on some of these courses.

Financial Centre

The measures taken to develop Singapore further as a financial centre are praiseworthy. The tax exemption on income from syndicated loans and the abolition of stamp duty on cheques are welcome news for the financial sector. But more could be done to strengthen Singapore's position in this region. Take, for example, the question of tax liability of the net gains realized by Investment Holding Companies. If these gains are taxed at 40% because they are considered trading or dealing profits, the total tax payable would affect the performance of these companies in terms of their asset values. The Income Tax Act does not define what is trading profit or capital gain. The circumstances surrounding the sale of investments by these companies and their operations as a whole are considered by the Inland Revenue Department to determine tax liability. Apparently, the guidelines used are the original intention of the Investment Holding Company at the time of purchase of securities, the main object of the Company, the holding period, the frequency of transactions, and so on. The local investment managers, under these circumstances, not knowing the tax liability beforehand, are placed at a disadvantage and, therefore, less efficient than their counterparts overseas.

If the present situation continues, foreign fund managers would be discouraged from operating in Singapore and local fund managers may decide to set up offshore units.

For Singapore to grow from strength to strength as a financial centre, there is a need to review all relevant tax regulations. Any uncertainties should be identified and, if possible, eliminated. Clearly defined criteria used in determining the tax liability of approved Investment Holding Companies would further encourage the development of Singapore as a funds man- agement centre vis-a-vis other centres such as Hong Kong.

Sir, the Minister seems to be a firm believer in giving good things in small parcels. There are other possible incentives. For example, about 50% of the management fees for fund managers are allowed as deductible expenses in computing the 40% tax on investment incomes like dividends and interest. Full deductibility of the fees could perhaps be considered. Another example is the exemption of withholding tax on interest paid to non-residents' deposits for gold trading in Singapore.

Sir, I agree entirely with what the Member for Pasir Panjang said earlier on the very small and modest increase on import duty on cigarettes.

As it is our policy to discourage smoking, the increases in import and excise duties on cigarettes seem to be rather modest. For example, the $5 per kilogram increase in import duty on cigarettes, etc is hardly effective in reducing the pernicious habit which, statistical evidence has proved beyond any shadow of doubt, is linked with lung and other diseases. A higher increase would have been more effective as a disincentive.

On the whole, the Minister has presented a cogent and convincing case for the financial policy in the context of grave uncertainties in the world economy. It has demonstrated the foresight, steadfastness and clarity of vision that have become the hallmark of our Government. 5.50 p.m.

Dr Augustine H.H. Tan (Whampoa): Mr Speaker Sir, in his Budget Statement, the Hon. Minister for Trade and Industry painted a very sombre picture of the world economy. He also sounded very pessimistic about its prospects for improvement. There are two key problem areas in the global economy that threaten our economic well-being.

The first is protectionism. In terms of unemployment, the industrialized countries have experienced a relentless increase for nearly a decade. There are a number of explanatory factors. One is the type and pace of technological changes. In the main, these have been labour saving and have been in the direction of miniaturization, making the parts so small that there has to be tremendous alterations in terms of plant and equipment. Another factor has to do with the characteristics of post-industrial societies which are saturated with goods like cars, household appliances and so forth and which demand newer types of services. A third factor is the change in population structure, from one that has many youthful dependants to one that has aged dependants. Stringent birth control programmes accompanied by horrifying abortion rates have shifted demand from diapers and prams to old-age homes and wheelchairs. And the problem is a mounting one that even Singapore will not escape. Of course, there were other exacerbating factors. The very extensive welfare programmes have resulted in an erosion of work ethics and have also created tremendous disincentives to save and to invest. The energy price increases have, of course, helped to worsen the unemployment quite a good deal. In the first place, such increases in energy prices have shifted the pattern of comparative advantage in many industries and countries. Secondly, they have resulted in a lot of diversion of capital investments into conservation measures which, of course, use up this capital which could otherwise have been productively employed. Thirdly, high energy prices especially for oil have led to very extensive capital investments in alternative energy sources.

A decade of low growth rates plus prolonged and deep recessions has produced unemployment rates in excess of 10% in most industrial countries. This fact, together with normal yearly additions to their labour force, will guarantee that unemployment will remain a severe problem into the 1990s, even if there should be robust economic recovery. Somewhat less robust recovery will exacerbate the unemployment problem in the industrial countries.

Hence, I believe the Minister is right in stating that protectionism is a mounting problem. What will prove to be especially damaging would be the large scale adoption of non-tariff barriers. At least tariff barriers can be overcome if our exporters are efficient enough. But quotas, administrative obstacles, health and other domestic regulations can be used to hinder trade and consequently cause severe disruptions. A consignment of fresh orchids or fruits quarantined in the hot sun for a week is effectively destroyed. Yet, Sir, I believe there is a ray of hope. Bilateral, if not multilateral negotiations, can be worked out to keep markets open and minimize trade and production disruptions. If the Americans can work out a bilateral agreement with the Japanese and each in turn with the European Economic Community to avoid protectionist excesses, and if their growth rates are reasonably buoyant, there would be some leeway for countries like Singapore. Moreover, surely the stern lessons of the Great Depression of the 30's have not been lost on the present generation, namely, that protectionism increases mutual misery.

The other major global problem mentioned by the Hon. Minister is the possible breakdown of the international monetary system. A default by a major creditor nation like Brazil or Mexico that is not averted by concerted action can produce a domino-like effect on the international banking system. I am, however, somewhat less pessimistic than the Hon. Minister for a number of reasons. First, the credit-worthiness of many of the developing- debtor countries has been much eroded by the global recession which has cut back their exports both in volume and in price - especially for primary commodities. This is why some of their debt-service ratios look horrendous at the moment. However, as the global economy recovers, as I believe it is in the process of doing, the debt problems of the developing countries will ease. Falling oil prices will have much more beneficial than negative effects on the world economy. Furthermore, the United States appears to have switched its monetary policy from concern with curbing inflation to one of encouraging economic growth. But perhaps what makes me really hopeful is that everybody is talking about the possibility of a breakdown of the world financial system. When there is such awareness, the event is least likely to occur as emergency measures would have been prepared. I was more fearful in 1974-75 precisely because so few were concerned about the problem! If an international monetary breakdown does occur, I expect it would catch people unawares. At present, I am more fearful that global inflation would be re-ignited by over-zealous reflationary policies in the OECD countries. I expect the next round of inflation to be much worse than the last. After that, perhaps we shall see the crunch - but not for a few years yet!

It would be wise, however, to plan for the eventuality of another Great Depression. Singapore survived the 1930's Depression through emigration of sub- stantial numbers of Chinese and Indians back to China and India. The next time, this option will not be available. We will then have to depend upon our foreign exchange reserves. The first task is, therefore, to invest those reserves in relatively depression-proof investments, bearing in mind that bank deposits would be the first to be wiped out. The second task is to work out a survival plan to meet the minimum needs of Singaporeans for at least 10 years. The third task is to identify industries that are relatively depression-proof, if there are any, so that at least some Singaporeans can keep on working and earning.

On the energy front, the world economy is enjoying a temporary respite. I hope Singaporeans will not be lulled into complacency because of the current oil glut and reductions in prices. There are a number of reasons for the present situation. One is that OPEC overestimated the capacity of the market in 1979-80 to absorb the price increase it set. Secondly, the depth of the current recession has substantially trimmed demand for oil. Thirdly, energy conservation measures have successfully reduced the growth in energy demand. Fourthly, OPEC's share of oil production has been eroded from 60% in 1973 to only 39% today. Fifthly, a decade of high oil prices has stimulated supplies of alternative forms of energy like gas, coal and nuclear power. But these sources, let us not forget, are marginal in nature. They are costly and they too will run out before too long.

The question is: how long will the oil glut and price erosion last? My guess is: only for a short while. As the global economy recovers, so will the demand for energy. There is also a lot of pent-up demand for energy because many OECD countries have obsolete industrial machinery which have not been replaced because of inflation and recession. Singaporeans should therefore pursue energy conservation relentlessly. The figures on energy consumption quoted in the Economic Survey are not encouraging at all. There appears, to me, to be very substantial room for energy conservation in all sectors of the economy. The analysis presented in the Survey on energy is too skimpy and aggregative. We should, for instance, be gearing our manufacturing towards production of energy-saving goods and machinery. Our efforts are presently directed towards saving labour via mechanization and use of robots. However, more use of capital equipment usually means more intensive use of energy. We need a two-pronged policy - to economize on labour and energy and to produce energy-saving goods and services.

The oil glut and corresponding oil price erosion has, however, an adverse effect on Singapore. Hon. Members would have read of a major refinery reducing its output and capacity. The trend for oil producing countries to refine their own oil will exacerbate the problem. Furthermore countries are turning more towards barter trade arrangements, which will further erode our role as a major oil refining centre. Members would have read of the case of Pertamina, Indonesia, having such an arrangement and the threat it poses to our refining industry. We must recognize the shift in comparative advantage. Moving to downstream petroleum products as we have done is also hazardous and costly as other countries have cheaper raw inputs like gas. Perhaps the Hon. Minister can explain to this House, in view of the bleak prospects that I have outlined, (a) why Government has been encouraging and investing in new refineries, and (b) why a further substantial injection is being made to the petrochemical project?

Mr Speaker, Sir, I would now like to direct the House's attention to the Budget Estimates, not for the year 1983-84 but rather for the year 1982-83. The Memorandum on the Budget of 1983 provides a brief review of our expenditure and revenue performance last year. Budgetted recurrent expenditure was $7.6 billion but the actual turned out to be $9.3 billion, or 22.1% excess. The biggest offending item was the Public Debt. Although this House provided for only $1.4 billion, an actual amount of $3 billion was spent, representing an increase of 120%! The second biggest offender was the Ministry of Law which increased its expenditure from $37.2 million to $57.2 million, an increase of nearly 54%. The third major offender was Pension, which spent an excess of 23% or $16.8 million over the Budget.

For Development Estimates, however, Government underspent by $1 billion or 14.8% below the Budget. And this, in a year of slower growth! It is hard for me to understand. The biggest culprit was the Ministry of Law, with minus 48.8% followed by no less than the Prime Minister's office of minus 46.9%, Ministry of Finance, minus 31.7%, Ministry of Social Affairs, minus 30.3%, Ministry of Culture, minus 28.9% and Ministry of Trade and Industry, minus 27.4%, among others.

The revenue estimates for 1982 fared little better. Actual revenue turned out to be 18.6% higher. Two of the three biggest under estimators turned out to be our key financial pillars, namely, the Monetary Authority of Singapore: estimated revenue from dividends as presented to this House was $100 million while actual dividends paid was $300 million. The Currency Board on the other hand had an estimated surplus of $36 million, while the actual surplus was only $1.2 million. Mr Speaker, Sir, I am sure there must have been extenuating circumstances that account for these serious budgetary lapses, but if these are allowed to continue it would make a mockery of the Parliamentary budgetting process. Our Ministers and civil servants should show respect to this House by keeping within reasonable limits of the Budget.

Allow me next to comment on the Public Debt. As at the end of 1982, Government owed a total of $20.7 billion, of which $19.9 billion was lent by Singaporeans, primarily through the CPF. For the next financial year, we shall need $1.8 billion (if there are no major miscalculations again) to service this debt. This amount comprises slightly over a quarter of Government's recurrent expenditure. Sir, these figures look horrendous, but I believe Government finances are in a healthy state. Each year, as hon. Members can see from the Budget, Government revenue exceeds its recurrent expenditure. For the next financial year, for example, there is an anticipated surplus of $1.9 billion which is transferred to the Development Budget. However Government intends to spend $7.8 billion on development projects. It, therefore, needs to borrow $3.7 billion. This money will come mainly from our CPF savings. In turn, CPF will hold Government bonds. The point, Sir, is that these CPF-held Government bonds will only be worth something, depending on the viability of Government's and the statutory boards' development projects and commercial/ industrial investments. It is my understanding that, in the past, such investments and projects were carefully appraised and monitored and, by and large, yielded good economic and social dividends. Is there any guarantee, Sir, that this will always be the case? Will we get a Government someday that will fritter away our hard-earned CPF funds? When the younger hon. Members retire, can we be assured that inflation would not have eroded our CPF balances? There has, of late, been some signs that public standards in the use of funds have been lowered. I am a little concerned, Sir, about the rather grand public buildings we are putting up, rivalling our commercial buildings in opulence. And there was the instance of a major statutory board which for many days published full-page advertisements, proclaiming the one word "MERGER" in funeral black. I thought at first that Tan Chin Tuan and Wee Cho Yaw were going to merge their banks! I did not know whether to be amused or excited when it was later shown to be a merger between the humble Post Office and the Telecoms. I certainly did not need to be further informed, at my own expense, through a telephone bill which could be lower.

Mr Speaker, Sir, the proliferation of statutory boards has other implications. Last year the seven major statutory boards, viz, HDB, JTC, PUB, PSA, Telecoms, URA and Sentosa Development Corporation, spent over $8 billion, nearly almost as much as Government itself. Yet this expenditure is not directly accountable to Parliament. The Hon. Minister for Finance or his delegate would make only minor references to statutory boards when money is loaned to them but this House is given no indication of their total intended expenditure. In other words, Sir, the Budget as presented each year gives us only half the picture, at best. This House and the public would have to wait until next year to read of expenditure by statutory boards, as reported in the Economic Survey. I earnestly hope the Hon. Minister would take this point seriously as, I am sure, industrial and commercial observers would need the same valuable information to plan their activities.

Another important implication that arises from the activities of statutory boards is that the role of the Government has been greatly expanded. I was surprised to learn, as I was preparing this speech, that last year's total expenditure by Government and the seven major statutory boards amounted to $16.7 billion or nearly 58% of our GDP. This is an extremely high percentage, by any standards. Indeed, even the tax receipts of Government alone have shown a dramatic increase from 15% of our national income in 1970 to 21% last year. There are at least two important consequences of this development. Firstly, it means that productivity performance in the total public sector is absolutely critical for the health of our economy. Last year's Government wage bill, and I am sure that for the statutory boards too, rose by 27% but has there been corresponding productivity increase or has there been only an increase in grumbling and discontent because others got a higher increase?

A second important consequence of the dominant role of the public sector is the effect on the private sector. I have not mentioned the industrial and commercial activities of the public sector. I hope Government is paying attention to this, as we may be crowding out the private sector. Typically, publicly owned enterprises use administrative connections and even legislation to out-price and crowd out private competitors, and later the public ends up paying even higher prices. I hope the Government will review the public sector's role in the economy and allow more leeway for the private sector. Reductions in corporate taxes and further reductions of income tax can be achieved if the Public Sector trims its activities in non-essential areas that can be better handled by the private sector.

Mr Speaker, Sir, I would now like to discuss the matter of economic planning. As I see it, Sir, there is a vital missing ingredient in our economic planning, and that is, the economic repercussions of physical planning are not taken adequately into account. The Hon. Minister mentioned that the Construction sector doubled its rate of increase to 36% last year. But surely there must have been big strains on the sector - where did we get all the skilled workers? Premiums on Land Sales last year went up by 145% to $1.2 billion. What is Government's policy on land alienation? Is it to raise maximum revenue? Is Government aware of the repercussions on property prices, home ownership, and escalation of rentals on shop space, offices and factories? Are we pricing ourselves out of the tourist market because of higher mark-ups? What is the rationale for more than doubling our hotel rooms in five years, from 15,724 to an additional 18,965? Are the investors or potential investors informed of Government's plans? If we were to judge by a recent experience, the answer would appear to be no. One hotel group shelved its extension plans when information was made public in this House.

Sir, I am seriously concerned about the economic implications of physical planning because we have unwittingly under-cut our efforts to promote manufacturing and tourism. Hon. Members may have heard of a disease called the Dutch-disease. There is nothing peculiarly Dutch about it, except that the symptoms were first noticed in Holland. In the 1960's the Dutch discovered natural gas. This led to such a boom that the Dutch guilder appreciated significantly in value, squeezing out her export industries, particularly manufacturing. In a similar way, our uncontrolled property boom has undermined our manufacturers as well as the tourist industry. It has undoubtedly also distorted the pattern of investments. Why invest in a 15% per annum manufacturing plant when you can double your money in property ventures overnight? Who are the richest people in Singapore? Are they the manufacturers or the property developers? The question is: can Government do something about it? I believe it can. Government must not look upon land sales as a purely revenue earning device. It has a more responsible role in evening out demand-supply balances in land, and hence booms and recessions in the property market. And I believe there are also political repercussions to be considered. 6.16 p.m.

[Mr Deputy Speaker in the Chair]

Dr Augustine H.H. Tan (Whampoa): Turning now to consider the tax changes in the Budget, I am sure Singaporeans are relieved for they were expecting tax increases. Indeed, we got some welcome relief and the only tax increases fall on the shoulders of sinners who smoke and drink.

The Hon. Minister is right in saying that we face tough times ahead. I believe we need to be more enterprising if we are to secure our little niche in the world economy. We must, first of all, realize that our role is largely that of the middlemen, whether we are talking in terms of entrepot trade, providing tourists with services or adding some value in manufacturing plants. We are essentially processing other people's resources in one way or another. If we can enlarge our vision, we can become international contractors and garner the expertise to build turn-key projects for other countries. As the world economy recovers, and as the patterns of comparative advantage change, there will be opportunities for us if we are ready. It is certainly the right thing to do to build upon skills and infrastructure but we need to extend our horizons beyond our shores. If we can help the private sector build up international trading firms and international contractors, we need not be limited by our labour or land resources, or even capital as we assume a truly international middleman's role.

Sir, with these few qualifications, i would like to extend my support to the Hon. Minister in his Budget. It has not been an easy budget to prepare, and I offer him my humble congratulations for a job well done.

6.18 p.m.

Dr Lau Teik Soon (Serangoon Gardens): Mr Deputy Speaker, Sir, we have just heard from my colleague, the hon. Member for Whampoa, who has just delivered what some of us on this side of the House have called the second budget statement.

Sir, I would like to begin by reminding ourselves that as a global city Singapore cannot escape the difficulties and the traumas of the world economic system, and I would like to reiterate a point which the Minister for Trade and Industry made in his Budget Statement. He mentioned an aspect of the adverse economic conditions in the world, namely, the growing unemployment and protectionism in the Western industrialized countries and Japan. I think it is worth quoting the figures which he gave in his Budget Statement. In 1982, the unemployment figures in the United States and the EEC were 12 million (or 10.8% of the workforce) and 12.3 million (or 11.1% of the workforce) respectively. In order to reduce growing unemployment, as he stated, these countries have resorted to enforcing certain protectionist measures and additionally to introduce new ones. He gave the example of the United States, the EEC, Japan and Canada, which have tightened the rules of the Generalised System of Preferences (GSP) selectively and thereby restricting the exports of the more competitive countries, including Singapore.

As he stated in his Budget Statement, the trend towards growing protectionism is likely to continue. Efforts have been made to stem the tide of protectionism. In November 1982, as the Minister stated in his Budget Statement, the meeting of the General Agreement on Tariffs and Trade (GATT) did not make any impact at all on the state of protectionism in the world. In fact, I quote him:

'The meeting however ended in disarray spelling more trouble ahead for free trade.'

In such a situation of pessimism, we have to look for avenues to expand our trade, and here I would like to refer Members of the House to the efforts that the regional grouping, ASEAN. is attempting to do in order to improve intra-regional trade. It is heartening to note that under the Preferential Trading Arrangements, the number of items coming under PTA has increased. With effect from 1983 there would be about 10,000 items eligible for tariff concessions. Certainly this would improve intra-regional trade, and I would be interested to know from the Minister the impact the PTA has had in terms of intra-regional trade. Further, what are the prospects he sees for future expansion of intra-regional trade in ASEAN.

Mr Deputy Speaker, Sir, in 1976, following the communist takeover in Indo-China, the ASEAN Heads of Government met in Bali and one of their priorities then was to foster greater economic cooperation among the ASEAN countries. Preferential Trading Arrangement was only one proposal to promote regional cooperation. There were many others, but I would like to ask the Minister what is the state of progress with regard to two areas of cooperation, namely, joint industrial projects and the dialogues with the Western industrialized countries and Japan. At the time these projects were announced there was great expectation that the ASEAN five would get closer together economically, but up to now the proposals for joint industrial projects have made little progress. I would like to ask the Minister whether we have come out with better proposals which can be considered and hopefully accepted by our ASEAN neighbours.

The Minister in his Budget Statement mentioned the growing protectionism on the part of the Western industrialized countries and Japan. In the dialogues with these countries, particularly the United States, the EEC, Japan and Canada, I would like to ask the Minister whether in these dialogues the question of access to their markets, the markets of the Western industrialized countries and Japan, was taken up with these countries and, if so, what progress has been made in that respect. Otherwise, I see the futility of continuing with the ASEAN dialogues with the Western industrialized countries and Japan.

Mr Deputy Speaker, Sir, in his Budget Statement, the Minister mentioned the need for better quality manpower to meet the industrial development needs of the country in the future, particularly when the country would be receiving better quality investments in such areas as computers and related equipment, electronic, computer software and engineering services. The need to upgrade the education and skills of our labour is urgent and the extension of the BEST classes throughout Singapore must be the responsibility of all Members of this House. Here, I would like to suggest that another target group be looked at - in terms of creating awareness of the need of Singaporeans to be better educated in science and technology and to attain better skills. I would suggest that the Ministry consider and encourage the establishment of science and technology clubs in the various community centres.

In line with the advance in technology, we need to promote a science and technology programme for the young, especially those in the youth groups, for they need to keep abreast of the knowledge in the field of science and technology. I hope that the Minister will assist the community centres, especially those who wish to set up the science and technology clubs.

With regard to the tax changes, the Minister has given very generous concessions to the senior citizens, those aged 55 years and above, who are still in the workforce. I wonder whether the Minister would consider certain concessions for the senior citizens, aged 55 years and above, who have given of their best to the country and who are no longer in employment. I refer specifically to the pensioners who have served the Government.

I have certain suggestions to make. First, in the area of medical care, whether the Minister would consider reduced rates for senior citizens who receive medical attention, for example, at the outpatient clinics or at the emergency departments. Another suggestion that I would like to make is whether the Hon. Minister would consider giving tax exemption on savings of senior citizens who were in the Civil Service before and whose bulk of the savings is derived from their CPF. Another sugges- tion that I would like to make with regard to concessions for senior citizens is whether the Hon. Minister would consider exemption from tax on sales of tickets by entertainment establishments like the theatres, the cinemas and cultural centres, i.e. whether the entertainment tax on the sales of tickets to senior citizens could be exempted.

Mr Deputy Speaker, Sir, the hon. Member for Ayer Rajah referred to the enhanced child relief given to specially qualified working women. I would like to support what he said with regard to that point. It is not just the cost of getting domestic help that is the problem. It is also the difficulty of getting domestic help nowadays. So I would like to support the comment that he made that the category of specially qualified working women should be extended to all working women in the country.

Finally, I would like to refer to the public assistance allowance which is being given to either the handicapped or the destitute persons, that is, those who have no dependants and who have no means of support. As hon. Members are aware, the rates of payment today range from $80 per month for a single member to $170 per month to a household of four members. Clearly hon. Members will agree with me that such payments are really very meagre and cannot meet even the minimum requirements of those receiving public assistance. I would urge the Hon. Minister to review the rates of payment under the public assistance scheme. 6.35 p.m.

The Parliamentary Secretary to the Minister for Trade and Industry and Minister for Social Affairs (Encik Sidek bin Saniff): Mr Deputy Speaker, Sir, like my other colleagues in this august Chamber,. I wish to congratulate the Minister for Trade and Industry for his pragmatic and cautious Budget Statement. It reflects the experience, maturity, and strength of our wisdom, having been the Government for the past 24 years. It merits our praise, especially if we were to ponder upon our history. It was a short history, but Singaporens have gone a long way since then - the turbulence of the 5O's.

I would like to confine myself to what I consider the three important matters that warrant our close observation and, at a certain period of time, our careful and systematic action. First, the world recession and its impact on unemployment throughout the world, and Singapore is no exception. Second, the age of computers and the Human Factor. Thirdly, the Nuclear Line and its implication to national and international politics with the West German national elections as a case in point.

Sir, permit me to elaborate. The synchronous world recession that had originated from the second oil crisis worsened in 1982. It is in its fourth year and the longest recession after the Second World War. The three major industrial economies were estimated to have grown more slowly, if not, actually contracted: Real GNP/GDP Growth 1982 OECD -0.5 USA -1.8 Federal German Republic -1.25 UK 0.50 France 1.50 Japan 2.50

While ASEAN countries managed to have a real GDP growth of between 2.6% and 6.3%, in selected North-east Asian countries like Hong Kong, ROK and ROC, they had a GDP growth of between 4% and 6%. The deepening of this recession was reflected in shrinking demand leading to failing industrial output, increasing number of closures and mounting unemployment. World trade also dipped by 1.5% and suffered further protectionist measures among the trading nations. Protectionism by definition alone simply means help few people a lot while free trade means help everybody a little. The latter should be the answer to a practical long-term solution rather than the former which boils down to short-term euphoria because protectionism or resistance causes stagnation. Stagnation brings about unemployment, The unemployment problem constitutes an increasingly serious problem worldwide. Politically it can be explosive. Let us peep at the figures. In 1982, overall unemployment rate in OECD countries rose to 8.5% from 7.1% the year before. The OECD estimated that by mid-1984, 35 million people or 9.5% of the workforce in its 24 member-countries will be unemployed.

The situation was worse in the US where unemployment reached the double digit figure of 10.8% (12 million people in December 1982). According to the ILO report, 555 million people under 40 years of age are jobless. In developing countries, one out of four are jobless. The ILO Director General, Francis Blanchard, was rather pessimistic. He commented that a return to full employment, as it is conventionally understood in the industrialized world, may not be possible even with the growth and economic recovery. This is because new technology will reduce the need for labour leading to further job losses, unless measures are taken to upgrade skills. Mr Blanchard estimated that one billion jobs must be created by the year 2000, and 88% of them in developing countries for everyone to have work.

Already we hear the cry of "We want jobs. We want jobs," in Europe. There were cases where employees were willing to work less days and accept a lower take-home pay. The incident where a firm had 200 vacancies was stormed by about 20,000 applicants is another extreme example of the seriousness of the situation. Japan, the country which achieved an economic miracle, suffered the highest percentage of unemployment last year, 2.4%. This figure is amongst the lowest in the world. Nevertheless, the Japanese are very concerned because this figure reflects a jump of more than 100% compared to the previous year. Recently in Japan I was told that employers were still willing to give an increase of between 3% and 5% during their so-called "Spring Offensive" while the union was asking for 7%. At the same time, and it must be quite an irony, the government froze the wages of civil servants till the end of the year.

In Singapore our unemployment dropped from 6% in 1970 to 3% in 1980. Real unemployment was 2.6% as of June 1982. In recent years we have further intensified our industrialization program me by pursuing a high wage policy to encourage the restructuring of our economy. We had to move into higher technology and higher skilled products to maintain our competitive edge. Labour costs were increased so that industries would upgrade its operation by switching to use more machinery instead of labour. As we restructure our economy and develop more sophisticated, higher technology and more capital-intensive industries and services, the use of computers is essential. The introduction of computers and computer-based equipment is crucial to our future development and growth. We also understand that computerization and automation will reduce the need for both unskilled and skilled workers. However, I strongly believe that in the context of Singapore and because of our small size and our ability to attract more manufacturing and service investments, there should be not so much of a problem absorbing any displaced workers. We can absorb the affected workers into other growth areas. But these workers need training and retraining. The primary means of improving oneself is by the upgrading of skills through training. I am quite sure the aim of the Government manpower requirement is to make available every opportunity and facility to enable our people to realize their highest potential. It is happening in our Vocational and Industrial Training Institutes, Polytechnic and University enrolment. Besides expanding the enrolment, these tertiary and training institutes are also constantly updating their courses to keep up with the advance in technology and the changing skills requirement of our industries.

Meanwhile the NTUC has started .its Basic Education for Skills Training (BEST) Programme. This will certainly provide remedial courses on English and Mathematics for workers who missed such opportunities in their earlier years. The involvement of the VITB, Ministry of Education, and companies deserves our commendation. At this juncture it is of the utmost importance for workers to remember that after improving themselves and hence their productivity through training, their achievements will go to waste if their work attitude is poor. Inculcating good work attitudes and team spirit among our workers goes hand-in-hand with upgrading their skills and training. Good work attitudes will be fostered if workers identify themselves with the job in the company they work in. The National Productivity Council was formed last two years to promote the nexus between employers and employees. With the Government, business group and trade union representatives in the Council, I hope they will also examine how employers can provide more company-based benefits to the employees.

The campaign to improve work attitudes is a long and arduous one. We must persevere with it. Besides encouraging our workers to cultivate good work attitudes, I would also urge that employers on their part should also make an effort to observe and enlighten personnel practices. I am glad to note that we are beginning to hear of firms which have made an effort to improve their working environment for their workers' well-being. The unions too have a role to play in helping workers to look to the unions for guidance. The unions must act in a respectful manner. The unions can explain to the workers that by working hard at their jobs the company will prosper and ultimately the workers will benefit by having better bonuses and pay increases. The tripartite system should continue, and we must also be on guard against any element of discrimination or lack of recognition from any party.

And starting this year the normal collective bargaining will resume. It is crucial for both parties to look upon the human factor as important, if not more important, than the other factors in building up the economy. For instance, it would be wise for employers to discuss with their workers, especially the union in that particular plant, should the introduction of computerization, automation or mechanization affect the workers. Tell them the truth, find ways to retrain them, how many could be absorbed and how many workers would be retrenched. I consider truthfulness important in order to create industrial peace. I am quite sure even the retrenched workers will appreciate it if management gives them the truth.

Since employer-employee relationship is a very important factor and part and parcel of human dignity, let me illustrate this by taking the example of a daily-rated cleansing worker. While the others were talking about wages, the second tier, etc., she raised two very simple human problems which needed the human touch to solve them. She asked for a pair of gloves so that she could carry out her job. This was a simple request, but an important basic need. She had simple ways but she was certainly no simpleton. She also pointed out that if supervisors had any problems, personal or otherwise, they should not allow these problems to interfere with their work and their relationship with their subordinates. She said she is quite sure supervisors know how to control their tempers when dealing with their superiors; so likewise they should know how to control their tempers and not vent their anger unnecessarily on a lay worker like herself. They should develop good rapport with their workers and maybe, she said, she could produce better work and be more productive. She may not know about the latest technological advancement or about the computer because the computer is something new. She is not. But she knows about truth, for truth is not new either. It is as old and immutable as nature itself. Looking at her made me come to the conclusion that anyone would be proud to have her as a mother; the trade union movement would be proud to have her as a member or one of its leaders; and a country, a citizen.

Ideally, there should not be any occurrence of this kind in future. At least one could hope that it will be less and less because I strongly believe that with the introduction of moral education in our schools things will change, hopefully, drastically in the next 10 years or so. Because while law has its own special unctions, in certain things it needs morality to solve it. Morality can control the external force of man and it can also enjoin heir spirit. Violation of law is punished by authority, of morality by social intolerance. The conscience is largely the expression of custom, social training and religious influence. But as a principal conduct, it is the "self-legislation" of a responsible person to know right from wrong. If, after the introduction of moral education, there are some who consistently transgress the accepted norm, let us remind them that there is the omnipresence of the wrath of God. For the others, perhaps they deserve the wrath of Goh, maybe Soon, since Dr Goh and Dr Tay Eng Soon are honourable men in-charge of the Ministry of Education.

To know right from wrong and the inculcation of values are part and parcel of nation building. In fact, this is what politics is all about, because basically politics is about the two B's - the bread and butter issues. Certain countries have been bestowed with bread and butter - some with very little of both. There are examples of countries with political maturity plus education and dedication of the people who not only managed to get bread and butter but many a time that also included jam. At the same time, there are countries which have only jam on their laps, only this time it is political jam followed by social jam and finally by economic jam. Surprisingly, the guns never jammed. They got more bullets than bread. Chaos, riots, killing and murder are the order of the day.

The irony of living is that history keeps repeating. The world has experienced the First and Second World Wars. From the ashes of World War II, there were rifts between countries which resulted in conflicts and loss of lives. Let us examine this development by looking back at history. When France was militarily supreme in Europe in the first years after the war, a number of small powers grouped themselves under her aegis. When Germany's military strength eclipsed that of France, most of those powers made declarations of neutrality or veered to the side of Germany. This was the First World War.

At the time when the UN Charter was framed in 1945, it was hoped that cooperation between the Soviet Union and the US which formed such striking expression during the war would be continued; but that was not to be. Instead, soon after the war, differences began to develop about Korea, Germany, the control of atomic energy and, indeed on every political issue of importance, two blocks gradually emerged and every crucial question came to be considered from the point of view of its relation to the blocks, and many a time until now, not from the point of the United Nations as a whole. I honestly hope I am wrong.

The recent West German national elections is the testimony of an explicit interpretation and its implication on national and international politics. It is the latest phenomenon of history. Without belittling the importance of the economic issues such as inflation, interest rates, monetary policy, strength of the currency, debts and the double digit unemployment, it was the first time in modern history that a candidate won or lost an election on the arms issue. The line is very clear. It is nuclear - the nuclear line.

When one talks about armament or nuclear weapon, one automatically cannot rule out the power behind this monstrous weapon. It must be the super-powers. The people of Germany have to choose in their national elections by leaning toward America which supposedly represents the free world by accepting the deployment of American missiles in West Germany or Russia, the communists. The decision was made but the crux of the issue remains.

The recent defence posture taken by Prime Minister Nakasone of Japan is another case in point where, I am quite sure, the super-powers will be involved and the nuclear line will be more visible.

Democracy has its own problem. The greatest problem of modern democracy is how to overcome ignorance, injustice and political selfishness. Or how sincere is the acceptance of the principle of co-existence and the desire to remove suspicions between countries. In other words, what should be done in order to promote freer intercourse between them. There is no law on earth that could solve this particular problem. The only sensible and available approach is through understanding, sin- cerity and human dignity. Perhaps by having more serious dialogues and not forgetting that dialogue is the expression of love, not hate.

I am indeed glad that our country, Singapore, ASEAN and other peace-loving countries have taken every opportunity to air positive views as a true statesman at the International Forum like the Non-Aligned Movement and the United Nations, in particular. Our effort could save the international body from the cynics and the churlish from the wholesale condemnation implied to the then League of Nations as the "Geneva Council of Fools" and the "League of Notions".

This is where the question of good, responsible leadership comes in. We must ensure that political myopia and hypocrisy should not be allowed to reach its zenith. those believers of war but preaching peace must be exposed. And let us remind ourselves that while it is true, as I had earlier mentioned, that basically politics is about the two B's it does not confine itself in the realm of the two B's alone. It actually goes far beyond that realm, in fact, to the realm of humanity. This factor to me is crucial. It is the pillar of human civilization. Because in the final analysis, politics should be morally pegged to the development of mankind and humanity, not just the glorification of power or, even worse, the venal crowning of power. Our leaders have done this for the past 20 years. And these contributions must continue. I have not an iota of doubt that we can play our role positively in future.

Mr Deputy Speaker: It is almost 7 o'clock.