ANNUAL BUDGET STATEMENT

[Mr Speaker in the Chair]

Debate resumed.

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

Despite the prolonged world-wide recession beginning to affect Singapore's eco- nomy in 1982, we were fortunate to be able to register a respectable growth of 6.3%. We managed to maintain full employment. Yet it will be foolhardy for us not to make preparations for the more difficult times ahead. The world economic outlook continues to be depressing, with prospects of recovery in 1983 uncertain. To formulate a Budget in these troubled times is, indeed, a difficult task. I would like to congratulate the Minister for Trade and Industry for formulating a Budget which will enable us to take advantage of the recessionary times to build and develop our human and physical infrastructure. We must be ready to seize the opportunities when the upturn comes. I am greatly relieved that because of our prudent management in the past, we had accumulated sufficient resources to enable us to avoid having to cut back on our development programme.

Mr Speaker, Sir, I would like now to touch on the following areas.

Manpower Development

The 1983 Budget continues to have, as one of its principal objectives a programme to increase the supply of skilled, technical and professional manpower. We must prepare ourselves to attract the future industries which will be highly automated and computerized. The challenge is to upgrade the numeracy and literacy skills of our workforce. This is a difficult task as we have almost 600,000 workers with less than primary six education. This massive undertaking has been launched with the trade unions under the leadership of the National Trades Union Congress, taking the lead by first organizing the Basic Education for Skills Training (BEST) Programme. Now, others have followed the lead. This is indeed a fine example of the deep sense of responsibility which our trade unions have. It shows the strength and capability of our trade unions. The best way to safeguard the workers' welfare is to make sure that they have the ability and skills which are relevant to the needs of the time. Only in this way can they always continue to be employable. As our workers upgrade their skills or acquire new skills to satisfy the demands and requirements of the future industries, they can look forward confidently to earning better salaries and will then be able to provide their families with a better quality of life. We must provide the necessary encouragement to the employers to invest in the re-training of their employees during the current slack period. Here, it is important for the Skills Development Fund to play a more active role in the training of our workers. As at 31st December, 1982, a total of about $313.8 million was collected for the Fund. According to the Economic Survey, as at the end of 1982, only about $110 million or a third of the funds available had been committed for the training of 86,059 workers. This is only a small portion of the workforce. We need to step up the use of the Skills Development Fund to train more workers. It is necessary for the Skills Development Fund to take the initiative to work together with the training institutions to organize programmes for training of the workers in the skills which have been identified as necessary to meet the manpower requirements of the type of industries we want to attract to Singapore. The Fund should not only wait for applications from the employers but must be able to act on its own. One of the objectives of the Fund is the re-training of retrenched workers. In view of the poor economic outlook, the Fund should begin to gear itself to this crucial task and not wait until it is too late to do so.

On the subject of skills training for our workers, we have, amongst our workers, those who have picked up their skills "on the job". They learned their skills from their supervisors through years of hard and painstaking work. Hence, we have a pool of such skilled workers in the industries, the shipyards and also in some statutory boards, like the Public Utilities Board, where we have electricians, fitters and artisans who started off as unskilled daily-rated employees and who have slowly moved up the skills ladder. Since they lack formal educational qualifications, they find it difficult to be channelled into the training institutions like the VITB because of the present system of admission. We should look at ways to tap their talents and help them to upgrade their skills. Perhaps one way is for the training institutions like the VITB to consider a system by which they can undergo some form of trade testing which will test practical skills rather than theoretical skill. If they are given the recognition they richly deserve, they can be encouraged and motivated to pick up the literacy and numeracy skills to enable their skills to be further upgraded.

Trade Development

We could not have found a better time to set up the Trade Development Board. In 1982, our domestic exports fell by 1%, the first decline since 1975. The prolonged recession has caused many countries to turn to protectionistic measures to safeguard employment. The TDB will have to urgently formulate a trade development strategy which will help our manufacturers, especially the local manufacturers, to win overseas markets in these difficult times. Without the opportunity to sell our goods and services in the international markets, particularly now that our exports are unfairly hindered by protectionistic and restrictive trade policies of the developed countries, our industries cannot survive and, if they fail, our workers will suffer.

In this connection, Singapore participated in various overseas trade missions, fairs and in-store promotion% in 1982. In 1983, more such trade missions and fairs will be organized. The question I would like to ask is: how much can we rely on these fairs and missions to help our manufacturers, especially the local manufacturers, to win overseas markets? How effective have they been?

The Trade Development Board must closely monitor the trade policies of our trading partners and quickly alert our traders so that they would not be caught unprepared by the new trading practices imposed by them, some of which may be "clever" forms of protectionism. The Board must also act quickly to remove any disadvantages which our exporters will face which will only dampen their competitive edge. Here, the Minister has taken note of the need to ensure that our traders and exporters are not handicapped by an over-valued Singapore dollar.

The TDB must work towards developing Singapore's reputation as an honest and reliable supplier of high quality goods and services. Our workers, be they production workers, supervisors, managers, traders, etc, must understand that they have the prime responsibility to help us develop and maintain this reputation in the world market. This is indeed crucial for our survival.

Wages and Inflation

The message that we will have to tighten our belts and lower our expectations for wage increases in 1983 will not comfort the lower income workers. As it is, they have enjoyed only a small increase in real income in 1982. Although the inflation rate has dampened, most of them are already hard-pressed by their expenditures on basic items like housing, bus fares and public utilities, which seems always to go up but never down. If things get really bad, with companies having to close down their operations or to introduce shorter work weeks and so on, leading to loss of income, individual as well as family incomes, we should consider ways to help the lower income group. Perhaps one way is to consider giving them an income tax rebate in the same way as was done previously but this time to be applicable only to the lower income groups, say, those earning chargeable incomes of, say, $7,500 per annum and below. The tax rebate could be in the region of 20% or thereabouts. I hope the Minister for Trade and Industry will consider this and also other ways to help the lower income workers if the economic conditions become really bad.

To sum up, this year's Budget continues to be a careful and cautious one. It will help us to stay trim and fighting fit to meet any difficulties ahead. It will also help us to seize the opportunities when the developed economies recover.

Mr Speaker, Sir, on this note I support the Budget Statement. 5.48 p.m.

Dr Chau Sik Ting (Thomson): Mr Speaker, Sir, I join my colleagues in sup- port of the motion standing in the name of the Minister for Trade and Industry.

I must congratulate the Hon. Minister for Trade and Industry for giving the citizens of Singapore yet another breather, so to speak. It is a serious but painless budget. Even the habitual smokers and drinkers will not feel the pain. If they do, it is goo.d for them.

In the current world-wide recession, certain sectors of the economy have performed below expectation. The Budget should provide greater encouragement and inducements to sectors of the economy which are in the doldrums, specifically the manufacturing sector. Among the pillars of growth in the Eighties, the manufacturing sector is supposed to be the dynamic prime mover for high and sustained rates of economic growth with its expected share of contribution to the GDP lifted to 31% by the end of this decade. Growth in the manufacturing sector, unfortunately, has stagnated in the last two years and for 1982, it registered a negative growth. Our Government should be prepared to provide in greater depth the incentives that are now available to the manufacturing sector. Today, we have a sizable industrial base in Singapore with capacity for further growth. Singapore has built up a good name in a number of industries, including ship-building and ship-repairing, oil rigs and ancillary equipment, electronic components, petroleum-based products, iron and steel, food and plastic products. We should, therefore, capitalize on the strength of our existing industries which have room for further growth and expansion when the economic situation improves.

There appears to be a need to review the role and scope of the incentive schemes for industries. Presently, the various incentive schemes seem to be geared primarily for new industries, thus somewhat neglecting the existing industries which have the potential for further expansion, growth and diversification. Our industrial base has expanded substantially over the years and today, the existing industries provide the bulk of our new industrial investments in Singapore. If more assistance, in terms of incentives, can be given to these industries to encourage them to expand, diversify and, equally important, to develop markets, these industries are likely to invest more and should provide us with the additional growth so necessary to meet our long-term objectives.

Industries today complain about our strong Singapore dollar and high overheads. A strong and stable currency, as we all know, has both advantages and disadvantages. But certainly a strong and stable currency is much preferred over a weak and unstable currency. Our Government, however, will continue to ensure that our traders and export-oriented manufacturing firms are not handicapped by an overvalued Singapore dollar. As for overhead costs, such as land, factory premises, utilities, wages, skill development fund, and property taxes, etc., I am glad that our Government is now doing its best to moderate such increases. In fact, with the present economic downturn such increases, if any, should be minimal. Here, I am in agreement with the Member for Anson that statutory boards need to assist our manufacturers. The Jurong Town Corporation, for example, needs to rethink about its intended upward revision of up to 50% of industrial land rentals applicable this year. Likewise, the tariffs on utility charges should be reduced proportionately in view of the reduced fuel price. As for Skills Development Fund, I agree with the hon. Member for Chong Boon that it is a heavy cost burden for our manufacturers. Since only 8.8% (or $27.5 million) of the total contribution of $313.8 million had been disbursed as at 31st December, 1982, it would appear that at the present rate of disbursement and contribution, the interest accrued will be adequate to meet the current disbursements. It is perhaps timely, under the present economic environment, to review the necessity to maintain the current rate of contribution.

As we are noted for our pragmatism, we should be realistic enough to make suitable adjustments when necessary. Any reduction of the SDF levy can always be readjusted when our economy improves.

I disagree with the hon. Member for Kebun Baru when he stated that since corporate profits showed an increase last year, our industries therefore did not appear to be affected by SDF levy. In fact, total manufacturing output for 1982 has dropped by 6% and its contribution to our GDP has correspondingly dropped.

The success of our industries in Singapore will depend on its competitiveness and its ability to secure contracts overseas. The competitiveness of selling prices of our products for both domestic and overseas markets is the deciding factor. Unless we provide greater assistance to make our industries more competitive, our hope to see the 31% contribution to GDP by the manufacturing sector by the end of this decade will not materialize.

On ASEAN, the Hon. Minister has reported that our regional trade under the ASEAN Preferential Trading Arrangements has continued to grow. From press reports, it is noted that our Government is investing in Australia, and USA particularly in real estate. As mentioned in this House yesterday by the Member for Whampoa, the returns on such investment had been grossly under-estimated for FY 82. There is no doubt that we have made sound investments and that our reserves are well maintained.

It may, however, be useful for our Government to further look out for similar investment opportunities in the ASEAN region, which is expected to be one of the fastest growing regions in the world in the years to come. At the same time, this will enhance our existing close cooperation with the ASEAN countries.

Finally, Sir, I wish to comment on another point regarding enhanced child relief for specially qualified married women. According to the Minister in his Budget Statement, from the next financial year, apart from the normal tax relief, they will enjoy an additional relief of 5% of their annual earned income for each of their children, subject to a maximum of three.

I understand that at present the term "specially qualified married women" refers only to women who are University graduates and the idea is to encourage such married women who have gone through some years of tertiary university education to continue to work even after they have children. If this is the rationale behind the move to allow enhanced child relief for such women, there are other categories of married women who have some form of tertiary training and education but it is not at the university level. These categories of women also ought to be included for such a concession of enhanced child relief. Among others, I am referring to the fairly large numbers of such women in two occupations, namely, the trained nurses and the non-graduate teachers. My information is that at present there are 5,124 trained nurses registered in Singapore. One can make an educated guess that there might be more than 600 of them who, because of their children, are not able to get to work. While I do not think that by including them for the tax concession would induce all of them to return to work as nurses, it would certainly make those contemplating to resign to think twice before doing so. From the figures of the National Health Plan, it is quite obvious that with the proposed increase in the development of hospitals, both in the private and public sectors in the next 10 years, the need for active working nurses is very great. This would then be an added reason why such married nurses who are presently not working should be encouraged to do so by being included in the categories for enhanced child relief.

The same line of argument could be applied to those teachers who have undergone certain tertiary training at the Institute of Education or the former Teachers Training College not amounting to University level degree.

There may be even more non-working married women among female teachers from the figures I have obtained. For example, there are now over 21,000 trained teachers of both sexes of whom only 4,293 are university graduates. Over the last 10 years over 3,000 teachers of both sexes have resigned. It is possible that some might have changed their occupation. Nevertheless among this group of trained female teachers, there are over 2,000 who are not working because of their marital status. I believe the Ministry of Education requires at least an additional 1,000 teachers at present. These non-work- ing trained teachers should also be encouraged to work by including them in this enhanced child relief concession.

Sir, I fully support the motion. 6.00 p.m

Mr Goh Chee Wee (Boon Lay): ( In Mandarin): Mr Speaker, Sir, in the past few days several Members of Parliament had given their refined opinions on the financial policy of the Government. Allow me to touch on certain policies of the Government particularly those which concern our workers. Sir, compared with the past few years, 1982 is a year when our economic growth was the lowest. Almost every sector of our economy had been affected by world economic recession, in particular the manufacturing sector. Total industrial production has in fact been reduced by 6%. Last year 7,500 workers were retrenched, among whom 90% were employed in the manufacturing sector. What should be noted is that the number of retrenchments does not entirely reflect the effect of economic recession on the income of our people. Because of a reduction of overtime and shorter work-week, many workers have, in fact, had their income reduced to a great extent.

Some critics say that Singapore workers are not loyal to their jobs and are wont to job-hop. I feel this is an unfair criticism on the majority of our workers. In fact, older workers who have family burden to bear all hope to have a stable job and are willing to accept overtime work to augment family income. To such workers, economic recession and retrenchment are a great blow to them. Even though there are vacancies available, companies are generally more willing to employ,younger employees because they are lower paid. For a young worker who gets $300-odd per month, it is not difficult for him to get new employment with the same pay after retrenchment. But the same cannot be said of those older workers who have families to support and who are earning $800-$1,000 per month. After their retrenchment it would be very difficult for them to get another job with similar pay, as employers would be hesitant to employ such workers with higher salary.

6.05 p.m.

[Mr Deputy Speaker in the Chair]

Mr Goh Chee Wee (Boon Lay): Moreover, their past experience and skill may not be of any use in their new jobs and will go to waste. The Budget Statement has stressed the importance of skills training in order to ensure the success of our economic restructuring. I feel that we should make sure that retrenched workers are given the opportunity to be trained in order to facilitate them to get new jobs. The question is whether those who have a family burden can afford to attend full time training without getting any salary. Although the Skills Development Fund provides grants to assist companies in the training of workers, this mainly applies to workers who are already in employment and is of no use to workers who are out of job. Thus they have no chance to be re-trained. I hope the Government will pay close attention to this point. The Government should map out the overall manpower plan and identify the types of skills that will be required in Singapore in the coming years. It should encourage those unemployed workers to enrol for skill training in such approved courses and at the same time give them financial assistance to enable them to receive re-training.

When our country is advancing towards higher technology industries, we must continually try to raise the educational level of our people. Last year the NTUC introduced the BEST programme for the training of workers in English and Mathematics. With the assistance of the Government, this programme has now become part of a nation-wide system of continuing education. I am glad that the Government has paid serious attention to this scheme and I hope that many more companies will set up such classes in their establishments to train their workers, and I also hope that more workers will avail themselves of the opportunity to attend such courses conducted by NTUC and their factories.

With regard to employees' salaries, from 1979 to 1981, the National Wages Council has for the three-year duration recommended high wage increases in line with the policy of economic restructuring. In 1982, the NWC recommendations were more realistic in reflecting the growth and prospect of our economy and productivity. Some people doubt that after being used to receiving high wage increase over the last three years, whether our workers will be able to adapt to the new situation where there will be lower wage increase. Facts have proved that trade unions and workers of Singapore are realistic and responsible. We are able to face the challenges and, with concerted effort, to ensure the competitiveness of our products in local and foreign markets. But we must point out that while our workers are exhorted to tighten their belts, exercise self-restraint and increase productivity, our management personnel and professionals as well as executives should also exercise the same kind of restraint. Their salaries have increased by leaps and bounds in recent years. In an attempt to attract and retain talents, the Government has continually increased the salary of senior officers. As a result, the private sector also followed suit. If this competition goes on indefinitely, pushing salaries up to unrealistic levels, it will create an unfavourable effect on our effort to attract foreign capital and on our commercial and industrial development. I am not begrudging the high pay drawn by the professionals and the administrators. In Singapore, our professionals are in short supply and therefore command high wages. What I am worried about is that if we want to attract industries of high technology to come to Singapore, we must have quality technicians, engineers and graduates who are prepared to draw reasonable wages. If these people want wages higher than that of their counterparts in the advanced countries, how can we successfully attract these industries to invest here? How can we successfully attract foreign companies to bring their research work to Singapore? Compared with Taiwan and South Korea, are we not losing our competitiveness in this respect? I hope the Minister for Trade and Industry will carefully consider these problems.

Another matter which I would like to bring up to the attention of the Minister is that besides wages, the Government must also exercise restraint over such things as rentals of industrial land and utility charges.

Sir, I want to make some comments on the tax policy this year. The new tax policy gives specially qualified married women a special tax concession on their children. This is to encourage these qualified women to remain in the work-force by increasing their child's relief. I agree to the suggestions made by some Members that when we are faced with labour shortage, we should not only encourage these qualified professional women to come out and work, but must also encourage all the other women who can contribute to our nation's economy to come out to work. This will not only increase the income of the family but will also alleviate our dependence on imported labour. This tax relief should be applied to all working women and not limited to some professional women.

Another item of tax concession offered by the Government is permitting 100% depreciation allowance on computers and automation equipment in the first year. This measure of encouragement for computerization is most welcome. In order to improve our work efficiency arid productivity we must actively promote automation and computerization. Our employers must understand that the implementation of automation will not only save labour but also, more importantly, raise work efficiency and the quality of products. Even in England, although the problem of unemployment is extremely serious as thousands of workers cannot find jobs, the British government is strongly encouraging automation in order to improve productivity. For instance, the government is prepared to subsidize as much as onethird of the total cost of the purchase of industrial robots. Evidently if the manufacturers want to increase productivity and maintain its competitiveness, they must incessantly improve on their production processes.

At present, Singapore still depends a lot on foreign labour. We must make good use of this period of labour shortage to expedite our modernization and mechanization programme and train our workers to handle the new machines and to learn new techniques. This will not only raise the income and the standard of living of our people, but can also alleviate our dependence on foreign workers, thus achieving our objective of building up a quality and highly efficient Singaporean workforce.

Mr Speaker, Sir, I support the motion on the financial policy of the Government. 6.14 p.m.

Mr Tang See Chim (Chua Chu Kang): I rise in support of the Minister for Trade and Industry on his balanced and painless budget presented to Parliament on the 4th March. This is especially commendable in view of the world-wide depressed economic conditions. I think credit should also go to the Government for having taken some tough measures in the past which make it possible today to have a painless budget.

There are just two matters to which I would invite the Minister's attention. The first is the question of Estate Duty, and the second is enhanced relief for the third child. Estate duty is not compatible with Government's philosophy of encouraging people to work hard and to save. The people toil and save, and build up their assets. But what happens at the end of the day when they die? The Government takes away a big chunk of what they have worked so hard to save. Is it not better to spend it during your lifetime than letting the Government take it away on your death? Are we not encouraging consumption?

Estate duty discourages saving. It is also an anomaly. Your liability to pay estate duty depends upon what assets you own on your death. If you own a house worth, say, $10 million, it is estate duty-free. On the other hand, if you own shares worth $10 million, estate duty takes away 60%. Should you die when the prices of shares are high and if you have to pay duty later at a time when the prices of shares are low, all the proceeds from the sale of shares may not be enough to pay estate duty.

An hon. Member: You have a house.

Mr Tang See Chim: You may have to sell your house indeed! If you own assets outside Singapore, there is no estate duty payable. It therefore encourages outflow of funds from Singapore. While Singapore aspires to be a financial centre and trying its best to attract funds into Singapore, estate duty is doing just the opposite - encouraging funds to flow out of Singapore.

Furthermore, estate duty is inequitable in that the really wealthy can always escape estate duty by proper planning. It is only the middle-class who are not too poor nor too rich and who work all their.life to build up a little nest-egg who will find that when they die the Government takes a big chunk away.

The amount of estate duty collected compared to the total collection of the Inland Revenue Department, that is to say, excluding import duty and excise duty, is insignificant. According to the Report of the Inland Revenue Department, in 1981, for example, estate duty collected was $47,585,000 compared to a total collection of $3,920,109,000, that is to say, estate duty forms only 1.2% of the total revenue collected by the Inland Revenue Department. Again, for the first half of 1982, January to June 1982, the amount of estate duty collected was $21,539,000 whereas the total revenue collected was $2,227,774,000, that is to say, 0.96%. The figures for 1980 and 1979 are: 1980, 0.82% ; 1979, 1.7%. This percentage of the estate duty, compared to total revenue collected, will further reduce because of the exemption of one dwelling house from estate duty. It is not that the Government needs the money. Then why create all this ill-will for such an insignificant sum? I would therefore urge the Government to abolish estate duty.

The administration of estate duty also creates certain anomalies. On a person's death all his assets are frozen and until an executor or an administrator is appointed by the court to administer the estate, his assets cannot be touched. Yet under the Estate Duty Act, duty is payable from the date of death and interest on the amount of duty payable is charged at 3% from the date of death to the date of payment, although on the date of death nobody knows how much duty is payable, not even the Estate Duty Commissioner, and yet interest is chargeable on the duty that is subsequently assessed to be payable. Is this not absurd? So I would urge the Minister to do away with the provision to charge interest on estate duty payable from the date of death, even if he were not prepared to do away with estate duty altogether. If interest is payable at all, it should be from the date of the grant of probate or letter of administration.

I now want to say a few words about child relief for specially qualified married women. I agree with my colleagues who say that if enhanced child relief is payable at all it should be payable to all working women. Why specially qualified women? I wonder whether the Minister has figures to show how effective the earlier enhanced child relief is and how many more specially qualified women, with the new provision, would be encouraged to come out to work? I personally believe that the effect is marginal. Married women work because they either need the money or because they want to work, and if they are specially qualified they will work whether or not you give them any enhanced child relief over and above the other married women. I am not begrudging my specially qualified married working sisters. Good luck to them for the bonus which the Government is now handing out. But is it not inconsistent with Government policy to give enhanced relief for the third child when the Government encourages people to stop at two?

Mr Deputy Speaker, Sir, apart from these two points, I support the Budget. 6.22 p.m.

Dr Wan Soon Bee (West Coast): Mr Deputy Speaker, Sir, the year 1982 was indeed a grim year not only for the industrialized West and other developing countries but also for Singapore. Though we still managed to achieve a GDP growth of 6.3% which is more than respectable by any standard, the fact that our GDP growth has declined from 9.9% in 1981 to 6.3% in 1982 augurs badly for the future. This rapid decline in our growth rate has indicated to us just how vulnerable our eco- nomy is. We are not immune to the state of health of the world economy. For quite some time, the economic experts around the world do not seem to be able to forecast correctly the arrival of the elusive economic recovery. While we must hope for the best, we must be prepared for the worst.

Mr Deputy Speaker, Sir, under the circumstances, I must say that the Budget Statement placed before the House by the Hon. Minister for Trade and Industry is fair, positive and realistic. The proposed Budget does not shirk or avoid facing up to the grim economic situation that is being experienced by Singapore and the rest of the world. That Singapore seems to weather the present unfavourable economic situation better than many a highly industrialized country is in itself an eloquent testimony to the far-sighted and rational policies of the Government in fiscal and economic matters up to now. The proposed Budget is, likewise, laying the foundation for Singapore to take advantage of any economic recovery in the world economic situation.

Mr Deputy Speaker, Sir, I think we are also fortunate that over the years our workers and especially our unions have been very enlightened. They have been reasonable and realistic. They have always responded positively to the calls to tighten their belts as and when necessary. This was clearly manifested in last year's NWC negotiations, They have demonstrated that they realized and understood the seriousness of the worsening world economic situation and its impact on our own economy. With the sterling performance of 9.9% GDP growth in 1981, most workers and unionists in other countries would have been tempted to ask for a high wage increase. But instead they have responded positively to the call for wage restraint. They knew that it was in the long-term interest of our workers and our nation. Unfortunately, this year is still very uncertain and unpromising. And I am convinced that once again our unions, workers as well as the managers will continue to act responsibly. While there should not be unnecessarily high expectations this year, the efforts of the workers to help increase productivity must be rewarded.

Sir, I do not think any reasonable Member in this House will object to the granting of tax incentives which should ultimately strengthen the economy of Singapore. I personally find it gratifying that the proposed Budget does not contain any tax increases except where it is consistent with the policies of the Government to increase taxes in areas where the consumption is either luxurious or undesirable. For example, the increase in taxes on tobacco and alcohol products is consistent with the Government's policy to discourage the consumption of these two products. And I fully agree with several other hon. Members who have spoken that the increases have been too mild to have any effect on the habitual consumers of these two products.

While I am generally happy with the Budget, I wish the Budget proposals would have devoted some attention or reference to the plight of those Singaporeans who are not able to cope with life as well as others, even in a normal economic situation. In an economic down-turn it is conceivable that the plight of these unfortunate Singaporeans would worsen. Moreover, it is not peculiar to Singapore alone that some of its citizens are in such unenviable position. Even in highly developed countries there are segments of the population needing more public help and assistance than others. As it is, there are some Singaporeans who are not able to avail themselves of Singapore's comprehensive and enlightened programme of public housing without some form of public assistance,

Mr Deputy Speaker, Sir, my concern today, however, is directed particularly to that small but significant group of workers who are in the greatest danger of being left out, high and dry, by our programme for the restructuring of the economy. As Members of the House know, the restructuring of our economy necessarily entails the adaptation of our workforce to more advanced and sophisticated industries incorporating the latest technology. What this means in plain words is that the workers have to learn new skills or upgrade their existing skills in order to be able to continue working in the restructured economy of Singapore.

It is for this reason that NTUC initiated the "Basic Education for Skills Training" or commonly known as BEST, which is now administered by the VITB on a nation-wide basis because they have the material and manpower resources to manage such a huge project. Similarly, the Government established the Skills Development Fund to promote and finance the development of the skills of our workers. The VITB and the Skills Development Fund Board are doing a good job in helping workers to gain new skills or upgrade existing skills. But do all categories of workers benefit from the various schemes of education and skills training? Who do the employers choose to send for skill upgrading? Are all workers qualified to attend or capable of following even the BEST programme?

Mr Deputy Speaker, Sir, what I am not happy about is that the plight of a small but significant group of workers has been apparently overlooked and completely ignored. The workers I refer to are those who are either less endowed by nature, or who have never been to school for one reason or another or who might be too old to start education all over again. There are others who are good with their hands but who might find formal schooling inappropriate. All VITB skill training courses require certain minimum academic qualifications. To expect this group of workers to go through BEST programme and then the skill training courses would take them years. With a family to take care of and after eight hours of hard work, this is hardly practical. Whatever the explanation, they represent a forgotten group of workers who are not able to participate in, and benefit from, the BEST programme or other skill training programme financed by the Skills Development Fund. We have limited manpower resources and everyone counts. More importantly, let us not forget that these workers have contributed a lot in the past and they can continue to make their contributions in the restructured economy. Everyone has a role to play. And everyone must play his role if Singapore is to continue to thrive. If we do nothing for them, we are being very unjust. In addition our small country cannot afford to carry passengers.

As it is, employers who have established training programmes for the upgrading of the skills of their workers usually select the good workers in their service. Similarly, some workers who do not have any training programme in their place of work and who are keen to better themselves can enrol themselves in the BEST programme or other programmes presently conducted by the VITB. In short, workers who are able or are eager to benefit from any programme to upgrade their skills are adequately catered for by the various programmes conducted or sponsored by the VITB or the Skills Development Fund in association with the employers, PAP educational centres and trade unions. But the group of workers, who either have cause for thinking or have convinced themselves into believing that they are unable to take part in any programme or upgrading of skills, would find themselves in a worsening situation as time goes on. Without new skills or upgraded skills, these workers would find themselves among the first to be retrenched in any establishment and among the last to obtain new employment after retrenchment. If these workers are unable to obtain gainful employment to support themselves and their families, they may have to require public assistance in one form or other. It is not a healthy or desirable state of affairs for the workers, their dependants and Singapore. We must not spare any effort to persuade them and to design special courses to enable them to upgrade their skills or gain new skills.

At present, to attend any training programme of VITB, a worker must possess minimum educational qualifications. The BEST programme thus enables workers to obtain the requisite qualifications. I would urge VITB to also conduct short practical courses in skill training for workers who do not possess the prescribed minimum educational qualifications. There are workers who do not have an aptitude for any form of formal schooling but who are able to benefit from practical experience. A very good example are the car mechanics and some other technical workers who may not have gone through a formal education at all and know nothing about the theories. Yet they are excellent in their jobs.

What I have in mind is that the VITB and other training bodies should conduct training courses not only at different levels but also in different modes. In place of or in addition to training courses which consist of lectures or lecture-cum-practical demonstrations, the VITB should design training programmes that wholly consist of repetitive sessions of practical demonstrations to enable workers with very low educational levels to acquire new skills or improve their existing skills. The practiceoriented courses should be of short duration, that is, one to three months at the most, and should be precise and to the point, that is, without needless theorizing. The Skills Development Fund Board should give its fullest support to such projects.

At the same time we should also ensure that all the resources, energy and time we spend on the training of our workers are not wasted. Proper guidance and advice should be given to the workers as to the requirements of future skills. Mr Deputy Speaker, Sir, another concern is the productivity movement which we are embarking on. Trade unions and workers have responded wholeheartedly and enthusiastically to the call by the Government to increase productivity. Trade unions and workers similarly co-operate with employers to raise productivity in their places of work. But do all employers appreciate the efforts of their workers in raising productivity? I am afraid not. Some employers think it is good business practice to use the productivity gains from the efforts of their workers to retrench workers, since less workers are needed to do the same amount of work. Some other employers even think it is good business practice to take advantage of the productivity campaign for reorganization and get rid of the older workers at the top of their wage-scales.

I wonder whether these employers are good businessmen, if you consider that such business practice would save one cent today and lose one dollar tomorrow. If workers see that whatever contributions they make towards raising their productivity will be used to terminate their employment, it is unlikely that they will cooperate with their employers in any future productivity campaign.

Yet, the same employers can do a lot to make their workers productivity fans. If productivity gains result in less workers being needed to do a given piece of work, the excess workers can be re-deployed to do other work, work which the management always wanted to do but were unable to do so because of manpower shortages. The employers can also arrange for the workers who can be spared to go for skill-upgrading courses so as to be able to increase their productivity further. What is required of employers in this kind of situation is that they use their management skills and ingenuity to derive the maximum benefit from productivity gains instead of jeopardising their own productivity campaign by their own short-sighted action of cooking the goose as well as the egg.

It is accepted that trained manpower is our only significant natural resource. On that count alone, we should explore and exploit every avenue to enable every worker, even those who are less endowed by nature, to participate in and benefit from the restructuring of our economy. We should particularly ensure that those workers who work well and hard to raise their productivity benefit and not suffer from their contributions to productivity gains. Workers must be made to see that the gains of their companies are also their own gains. If we do not do so, future calls for greater efforts in productivity improvement will be futile and consequently the workers, their dependants, the enterprises as well as Singapore will suffer.

Mr Deputy Speaker, Sir, I support the motion by the Minister for Trade and Industry. 6.40 p.m.

Dr Lee Chiaw Meng (Tanah Merah): Mr Deputy Speaker, Sir, speaking towards the end of a debate has its disadvantage. There is hardly any ground that is left uncovered. On the other hand, the advantage is that I need not go through the rationale in detail as the backdrop has been fully painted by others. I would, therefore, be very specific without making reference to all the statistics and figures.

Sir, a welcome development over the last few years is that there have been fewer surprise taxation measures introduced in between Budgets. I hope this tradition will prevail. Although I appreciate that there is no particular reason, other than being logical, why tax changes must be introduced together with the financial policy of the Government during the Budget, we should not introduce too many surprise elements in the financial management of the State. This is especially so if such changes have been conceived as part of the financial package of the Budget.

Prior to the recent Budget Statement, there was a fear of a hefty increase in the Additional Registration Fee (ARF) on motor vehicles. Thankfully, this was not the case. However, I find it difficult to reconcile the increases in the estimated revenue to be derived from the ARF with that from road tax. Under Tax on Production and Expenditure, the road tax on motor vehicles is estimated at $297 million, a reasonable 13% increase over the 1982 figure. On the other hand, there is a 60% jump in the revenue from ARF for 1982 of $245 million as against the estimated figure of $390 million for 1983. It implies that either the Government has a plan to increase the ARF sometime during the year or that other measures will be introduced which will increase the revenue from ARF while holding down the road tax at a reasonable level. I would like to have the assurance from the Minister that a hefty increase in ARF has not already been planned. Perhaps he would care to explain the discrepancy in revenue from these two items. I fear that I may be looking at the show which the Member for Rochore was watching with scrutinizing eyes.

Over the years our Government has been trying to develop Singapore as a service and training centre. The taxation policy, however, does not appear to be moving in the same direction. In 1978 the Finance Minister announced a 20% concessionary tax rate on income derived from providing consultancy and technical services overseas. The legislation was enacted in 1979. Unfortunately, it is primarily meant for the construction and building industry and, moreover, it is only applicable to consultancy service performed on approved overseas projects and provided the company has a minimum gross annual revenue of $1 million from such a source. I believe very few, if any at all, local firms can take advantage of the incentives. They only benefit the large multinational concerns using Singapore as an offshore base which will not necessarily result in a transfer of technology. Many find the requirement of obtaining prior approval and a minimum $1 million revenue unrealistic and impracticable. They find it more convenient and less taxing, perhaps I should say no tax, by not repatriating such offshore income back to Singapore. The net result is the loss of revenue and the loss of foreign exchange earnings.

The service sector, Sir, is less vulnerable to protectionism than the manufacturing industry. Over the years we have accumulated considerable expertise in many aspects of the service sector. But we have yet to exploit the advantage fully. I would like to urge the Minister, therefore, to give the necessary encouragement and support to the development of the service sector. There is no reason why, for example, similar tax incentives and support available only to the manufacturing sector cannot be applied to the service sector. Similarly, there is also no reason why they should only be confined to one particular industry, We are equally strong in other disciplines, such as accountancy and the legal services.

Sir, we have been talking of developing Singapore as a service centre for years. In the face of recession perhaps we need the impetus from the Government to make it a reality.

In his Budget speech, the Minister mentioned that the Government intends to focus on three major areas for further development of Singapore as a financial centre. Unfortunately, the Minister only elaborated on measures to encourage the development of the gold market and the international loan syndication. He has not made known the position nor the intention of the Government with regard to the development of offshore fund mana- gement. Of obvious interest is whether he would now consider granting net earnings from such activities concessionary tax rates as in gold and ACU dealings. Other financial centres such as Hong Kong have a more attractive package than us. We must make it attractive for the financial institutions to use Singapore as an operational base.

Sir, the manufacturing sector has borne the major brunt of the world recession. At the same time, our local industries are facing the strangling pincer of high production cost and the effect of a very strong Singapore dollar. We are grateful to the Minister for highlighting the adverse effects of a strong Singapore dollar to our trades. Unfortunately, we could not possibly expect the Minister to announce any redeeming measures on the foreign exchange rates.

On the other hand, on such issues such as production cost, particularly overhead cost, he can. First, there is rental for land and factory premises. Singapore manufacturers have to pay a higher rental than our competitors in Hong Kong, Taiwan and South Korea. To fuel the situation further, the Jurong Town Corporation has recently decided to increase most industrial land rentals by the maximum 50% under the five-year revision scheme. The argument is that it is below the market value. I believe the argument is rather ridiculous. The entire Jurong Town is practically owned by the JTC. There is no such thing as market value nor any other base line to work on. Such increase, though legitimate as contained in the lease agreement, is I think unjustifiable at this point of time, especially as JTC has just shown a very hefty increase in revenue.

Secondly, we have one of the highest statutory contributions in the world. Total contribution to CPF, SDF and payroll tax amounts to more than 50% of the payroll. With the introduction of the Medisave scheme, it is possible that it will go up even higher.

Sir, I do not wish to repeat the arguments so eloquently put forward by my colleagues except to remind the Minister of a statement made by the Finance Minister in 1979. While explaining the rationale for the skills development levy, he said that the levy, together with the increase in employer's CPF contribution, 4% for that year, provided a buffer which "in the event of a deep recession could be removed or lowered to moderate wage cost increases of the employers."

I think it is an opportune time for the Minister to examine the whole issue of statutory contributions rather than its individual components. Similarly, I hope the Minister will also examine seriously the question of containing high overhead costs and reviewing the total package of tax incentives for investment and trade development so as to make it more flexible for the manufacturers and exporters to compete in the world market effectively. In the face of a shrinking world market and in order not to lose out, we must adopt a more innovative strategy for the coming year. I am sure the Minister is more than capable of doing that.

In the face of world-wide recession, we could not have expected a better budget from the Minister. Although we are not here to shower him with compliments, I would like to join all my colleagues in congratulating him for his masterpiece. 6.50 p.m.

The Minister for Trade and Industry (Dr Tony Tan Keng Yam): Mr Deputy Speaker, Sir, I would like, first of all, to thank all the hon. Members for their constructive suggestions and the keen interest which they have taken in the Budget debate. While not glossing over the difficult economic times which we are now going through, Members in their speeches have in my view reflected a sense of determination, a sense of readiness to come to grips with economic realities that must augur well for Singapore as we tackle the somewhat rocky road that lies ahead of us.

Some of the matters brought up by the hon. Members in the debate, for example, the increased rates of public assistance allowances mentioned by the Member for Serangoon Gardens, more financial assistance for Government-aided primary and secondary schools raised by the Member for Buona Vista, are I think more within the ambit of particular Ministries. I do not think it is appropriate for me to discuss such matters in detail in my reply, but I do hope that the Members concerned will raise the questions again at the appropriate time in the Committee of Supply. I am quite sure that my colleagues in the Cabinet will be very glad to answer their questions in detail.

In my reply, I shall first discuss the economic and financial policy of the Government and then go on to discuss particular taxation issues raised by various Members. Mr Deputy Speaker, Sir, the economic circumstances in which this Budget has been framed have been amply spelt out in the Budget Statement and further commented on eloquently by the Member for Chong Boon, the Member for Whampoa and other Members in their speeches. I do not intend to go over familiar ground. Members already know that we do not expect an easy road ahead. But Members may have read in the press recently about the upturn in the leading economic indicators in the United States for January. Some may wonder whether this signifies, as has been claimed by a number of U.S. administration officials, that the recession has ended and the recovery has begun. Unfortunately, January 1983 is not the only month in which the index of leading economic indicators has shown an upturn. In fact, if we were to study the index carefully, we will find that the index has been predicting a recovery in nine out of 10 months since April last year. And yet the U.S. economy continues to be in recession.

In the third quarter of 1982, the U.S. economy only showed marginal growth, 0.7%. In the fourth quarter of last year, the U.S. economy actually declined by more than 2%. I am therefore inclined to view the rise in the January index with some caution. And indeed after the initial euphoria, senior economic advisers in the United States Government have also started to warn the public and to express their reservations that the January rise may not indeed mark the beginning of the long awaited recovery. And I think that their caution is understandable. Although the rise in the January index was indeed substantial, the highest in 33 years, it was due mainly to the sharp increase in the money supply which resulted from a sure in the public investing in the new money market deposit instruments which banks and savings institutions in the U.S. can now offer.

Last year in April 1982, when the index of leading indicators also showed a significant upturn, the financial components were also a principal factor for the rise in the index. In January, although almost all the components of the index rose, one important component fell. Industry orders for equipment declined and this shows that businessmen are still very hesitant about investing in new equipment. Such a lack of confidence does not augur well for a sustained economic recovery. And it is only with a sustained recovery that our industries and our economy can benefit. While I, like all of us, would like to see an early recovery in the U.S. economy, I think that it is only prudent for us to guard against being taken in by a false spring.

The decline in oil prices announced last night will undoubtedly be good for the world in the long run, and therefore it will be good for Singapore. But in the short-term, it may be disadvantageous for us. The drop in oil prices will, for example, affect the export revenues of those of our neighbours who are producing oil and this, in turn, must affect our trade with them. Furthermore, a decline in oil prices must hit those economic activities which service the oil exploration programme in the seas around us. And as we have all read in the press, production at our refineries has also been affected.

In so far as the refinery programme is concerned, the Member for Whampoa has asked whether in the light of the present downturn in oil prices whether Government should continue to encourage oil refining activities. The Government has actually not given any tax incentives for any increase in basic crude distilling capacity in recent years. But due to the changing petroleum product patterns resulting from energy conservation, the oil refineries have been forced to modify their refining plants through upgrading projects such as visbreakers, hydrocrackers and platformers. These units essentially take one or perhaps more product streams from a refinery and upgrade them to higher value products.

Our investment in the Petrochemical Corporation of Singapore, which has also been a subject of some comments from Members, was committed in 1977. At that time, of course, there was no oil glut. There have been no new investments committed in the complex apart from what was originally envisaged as forming part of this complex. The latest downstream project to produce ethylene glycol was committed in January this year. But it still remains an integral part of the complex as it was originally planned. It is not possible to operate the complex economically without this particular downstream unit.

Undoubtedly, this complex will find the going very tough for the next few years. I do not think that we should try to hide this fact. But we have invested heavily in the complex together with our Japanese partners and we must regard this project as an investment for the long term.

The Member for Rochore has queried about the impact on Government revenues as a consequence of the decline in oil prices. He mentioned particularly the excise duty on petroleum, It is too early for us to try and work out what will be the decline, although there will undoubtedly be a drop in Government revenue from this source. It will depend upon what are the final prices quoted at the petrol pumps. In connection with this matter, the Member for Thomson has raised the matter of PUB electricity tariffs and suggested that they should also go down when the oil price goes down. I fully agree with him. He will remember that since August 1982 the PUB has adopted a system of three-monthly automatic adjustment of the electricity tariffs. I think this system is more equitable as the consumers will be charged the prevailing fuel oil price paid by the PUB. When the price goes down, then of course the tariff must go down. Indeed in November last year, following a decline in the fuel oil price, the PUB reduced the electricity tariff by 1/2 cent per kilowatt hour. This resulted in a reduction of between 2 1/2 % and 3% in the average electricity rate to our industries and consumers. Since November last year the posted prices of fuel oil have actually not changed, although the spot price of oil has changed. This is why for the three-month period commencing 1st February 1983, there has been no change in our electricity tariffs. The next adjustment will be on 1st May, 1983, and it is likely that we can look forward to good news.

Protectionism is another subject which has been mentioned by several Members in their speeches. I think many Members have also highlighted the increasing tendency of countries to resort to non-tariff barriers which are particularly detrimental to our exports. Singapore, as we all know, is an open economy. We rely significantly on our export of goods and services to sustain our economic growth. However, this does not mean that we are helpless or cannot take any action against the adverse influences of protectionism. I think we can mitigate these effects, first, by searching for new markets not only in the non-traditional countries, like the newly developed countries, but also in new product areas which are less susceptible to protectionism, for example, in the high value-added items such as computer peripherals and sophisticated machinery. Members will also know that we have formed the Trade Development Board to assist our manufacturers and traders to promote their products abroad. I am pleased to inform the Member for Geylang Serai that the TDB has an active programme of export promotion, including beefing up our overseas trade offices, increasing the frequency of our trade missions abroad as well as concentrating on improving the core of marketing expertise within Singapore. The Government is also keeping a close watch on developments in protectionist legislation abroad and our offices are always on the alert against such moves and we intend to protest vigorously against any unfair measures to restrict trade. But above all, we must continue to improve our products and services with a view to enhancing quality and reducing cost. We must move towards the production of high quality, sophisticated high value-added products and services because where there are trade restrictions in the form of tariff duties, so long as our products and services can be competitive we can still overcome such tariff and we can also capitalize on economies of scale in order to lower our production cost. By working as a group with our ASEAN neighbours we can also improve trading relationships with other countries. I would like in this respect to mention that the impact of ASEAN as an economic grouping has gained recognition throughout the world. In the last round of our multi-fibre negotiations with the EEC, for example, it was because ASEAN negotiated as a group that each of us, each of the five ASEAN countries, was able to get better benefits than if each of us had negotiated individually.

The Member for Whampoa has mentioned that he is more hopeful that this time the international monetary system will not suffer a breakdown because more people are now aware of the problem and are talking about the massive overhang of debts which, as we all know, is giving international bankers recurrent nightmares. We must all hope that he is right and that my fears will prove to be unfounded.

Various proposals have been floated in the international financial press about solutions to the debt problem. In particular a person named Felix Rohatyn, a New York merchant banker, suggested an expanded version of the Municipal Assistance Corporation (MAC), which was the instrument he devised to save New York from bankruptcy. In the present case this would mean that it would have to be an international institution guaranteed by governments which would take over the bank debts owed by the developing countries and convert these debts into long-term debts at lower interest rates. The banks who had lent the money would then have greater security of getting their money back but they would suffer a loss in recurrent earnings. Such a scheme would, however, require legislative approval from the major developed countries, particularly the United States. I think we all know that Congress is already known to be unhappy about being asked to use taxpayers' money to bail out banks which have got into trouble through their imprudent lending. The situation may change when there is a crisis because adversity concentrates the mind wonder- fully. The question is whether such international cooperative effort can be activated without a major economic crisis to stir Congressmen and Parliaments into action. We have to wait and see. But governments today have more contacts with each other and hopefully we have learnt some lessons from the Great Depression in the 1930s when grievous policy errors were made. I am hopeful that even if we should have another economic disaster, this will not be as prolonged as in the 1930s when the Great Depression lasted for ten years. Under today's circumstances, with the political pressure which the unemployed can exert on legislators, I think that governments will be forced to act in concert and hopefully the Second Great Depression, if it comes, will be over not in ten years but in three to four years. But in those three to four years, we must make sure that our economic structure is not permanently damaged and that hardship to our citizens is minimized where possible. I think the key must be to keep unemployment as low as possible and to keep as many people in the workforce as possible so that their skills will not go stale with disuse, their time is not wasted, and when the depression ends we shall have a head start over other countries.

I now come to the subject of local companies, which was raised by the Member for Chong Boon and also by the Member for Kebun Baru. In 1982, local investments amounted to $540 million, which constituted 31% of our total investment commit- ments. These commitments came from both new investment projects as well as projects to upgrade existing manufacturing operations through automation. Investments were in sectors which covered the Petroleum, Shipbuilding and Ship-repairing, Iron and Steel Fabrication, Metal Products, Food and Plastic industries. It is encouraging to note that increasingly new local investment commitments are being made in high growth, high technology sectors, such as computers and computer peripheral equipment, photo voltaic cells and industrial robots. Local companies have also invested in sophisticated equipment to provide the critical components which are needed for the fast growing computer peripheral industry in Singapore. Realizing the importance for local companies to upgrade and automate their operations and diversify into new high technology industries, EDB has instructed its international network of promotion offices to help any local company who wishes to establish contact with appropriate foreign firms. EDB will continue to grant generous tax and financial incentives for such joint venture projects which involve the manufacture and development of high technology products.

With regard to the help given by Government, some statistics on applications to the Interest Grant for Mechanization Scheme would be relevant. In this case, for example, last year out of 398 applications received from local companies for the Interest Grant for Mechanization Scheme, two-thirds or 260 had been approved. Another problem which local companies also face is lack of finance. In this case the Government established the Small Industries Finance scheme in 1976. Under this scheme, long-term fixed interest rate finance is provided by Government to participating banks for onward lending to small viable local manufacturing or technical service companies in order to assist their technical modernization and expansion. This scheme has been very successful. The scheme with a little bit of modification is now also extended to cover medium-sized local companies with fixed assets of between $2 million and $5 million. As at the 31st of January this year, a total of $235 million in loans have been granted to 626 local small companies under the SIF scheme. The EDB has also a comprehensive package of tax incentives to assist our local companies to invest in, develop high technology and capital-intensive products. Many local industries have taken advantage of these tax incentives. Again as at 31st January this year, wholly local companies and joint venture companies (that is, a joint venture between a local company and a foreign company) have been granted 43% of the total number of Pioneer Certificates and 68% of the total number of total investment allowance certificates granted by the EDB. Overall, in fact, the local and the joint venture companies have been granted 44% of the total amount of tax incentives granted to industries. This reflects that the Government is alive to the problems which are faced by our local companies and also we realize that there is a need for local companies to acquire technical assistance for them to upgrade into high technology areas. In this case, we have come out with what we call the Small Industries Technical Assistance Scheme (SITAS) which is to encourage small companies to obtain the use of technical consultants to help them in their upgrading effort. Under this scheme, 90% of the approved costs of engaging such consultants can be reimbursed by the Government.

I come now to the point on the Science Park which was brought up by the Member for Chong Boon. There are, in fact, quite a number of companies which have negotiated to be residents of the Science Park. Their identities will be made public at the appropriate time. EDB is fully aware of the need for proper incentives to be given to attract good tenants to the Science Park. Among the tax incentives, for example, the Capital Assistance Scheme and the Research and Development Grants are available to potential tenants. Also the rentals which were originally $22.75 per square metre for standard factory buildings in the Science Park have now been lowered to $19 per square metre which is comparable to the JTC ground floor rent. For selected Park tenants, EDB is also prepared to negotiate a further reduction in rentals on a case-by-case basis. With regard to the lease rate for land, this is $11.60 per square metre per year. I think we all agree that this is quite reasonable and there is no further need to reduce this rate.

The Member for Thomson has brought up the point that Government needs to give some assistance to manufacturing in these difficult times. In fact, of all the sectors in our economy, manufacturing has benefited more than any other sector from Government incentives. In fact, in some ways, they have benefited a little too much. The incentives which are available are investment allowances, investment grants for mechanization, grants for raining costs, research and development grants, the Product Development Assistance Scheme whereby grants are given to local companies and double deduction of expenses of R&D operating costs.

The subject of JTC rentals was brought up by the Member for Tanah Merah and also the Member for Thomson. We all know that land is a scarce resource in Singapore. It is a primary requirement for all economic activities and in the manufacturing sector in particular. Like all factors of production, we need to ensure that our land resources are used to the maximum efficiency that is possible. JTC's primary objective is to provide industrial land at low cost to industries and to ensure that this land is used efficiently. Members know that JTC does not sell land. JTC leases industrial land on 30 years' tenure to manufacturing firms who are required to pay an annual rental instead of a lump sum payment. This prevents firms from speculating on the rise in the price of land but rather forces them to concentrate on maximizing the efficiency and productivity of the manufacturing operations. It also prevents the hoarding of land by manufacturing firms beyond what they actually need.

JTC land rentals are revised every five years subject to a maximum increase of 50%. The last five-year revision of JTC land rentals was made in 1978. Since then land rentals have generally increased by at least two to three-fold. Revision of JTC land rentals is scheduled for this year. For this revision in 1983, JTC has taken several factors into consideration. This includes the current recession, the Government's economic policy to maintain our competitive edge as compared to other countries, the rentals paid by the existing lessees as compared to new lessees and the need again to ensure the maximum usage of land. After careful deliberation, JTC implemented a three-tier increase in land rentals in January this year.

First of all, there is no increase in rentals for existing lessees who are paying the current market rental. For those who are paying a very low rental, the increase is 50% and for those paying slightly higher rentals, which are still below the market rates, the increase is 40%. Out of the 1,791 existing lessees, 57% are affected by the 50% increase and 26% by the 40% increase. Even after the revision of 40% or 50%, existing lessees still pay very low rentals as compared to new lessees. For example, the lessees who are occupying inland sites in Jurong pay 78 cents to $2.70 per square metre per annum and, after a 50% rental adjustment, this will rise to $1.17 to $4.05 per square metre per annum. This is approximately 14% to 48% of the current market rental of $8.40 per square metre per annum. Also to assist firms from having to bear a large rental revision every five years, JTC has given the firms the option to opt for a new yearly rental revision scheme whereby land rentals will be revised every year subject to a maximum increase of 7.6% each year. The rental revision by JTC is necessary to ensure that those companies which lease land from JTC at very cheap rentals many years ago will pay rentals somewhat closer to the economic value of the land today. The new industries which have gone into JTC recently have not been affected by the land rental revision.

The Member for Chong Boon has brought up the matter of PUB installing thimbles and suggested that this be encouraged. This was started by the PUB in 1979 to instal thimbles in private high-rise apartments and also in HDB flats. By the end of 1982, the PUB had completed its programme of installing thimbles in approximately 150,000 existing high-rise apartments and HDB flats. New high-rise apartments and HDB flats will have the thimbles installed at the same time when their water meters are installed. Following the Save Water campaign in October 1981, owners of recreational complexes comprising public swimming pools, clubs, cinemas and places of interest were requested to instal water saving devices such as self-closing, delayed action taps or showers and constant flow regulators in their public washrooms. I am pleased to say that the response from the owners has been encouraging.

With regard to the commercial, construction and industrial sectors, the use of thimbles is not so effective because of the different nature of their usage of water. These sectors account for about 30% of the total water consumed in the Republic. I believe that it is in these sectors that we can do more to reduce wastage. The manufacturing industries can, for example, look into reducing consumption of potable water by re-cycling their water. They could use sea-water or industrial water in their manufacturing processes. The JTC is undertaking a programme to see how water can be saved in these sectors.

The Member for Serangoon Gardens suggested that we encourage the formation of science and technology clubs in community centres. Judging from the runaway success of the computer clubs, this shows some promise in promoting the further understanding and appreciation of new developments in science and technology. I shall ask the Science Council to follow up this suggestion of the Member.

The Member for West Coast brought up a very important point, i.e. the effect of automation and mechanization on jobs. The rapid pace of mechanization and automation in Singapore has brought about significant structural changes in our economy. So far we have been able to harness the new wave of automation and mechanization to help solve our labour shortage problems and reduce our dependence on foreign workers. On the whole, automation and mechanization have been beneficial. It has not only helped to increase output per worker but it has also reduced the absolute number of workers required in existing economic activities and enable employers to deploy these workers in other activities. The workers who have been displaced by automation and mechanization should be trained for new jobs within their existing firms.

In this respect, I would like to mention and to bring to the notice of Members the recent agreement by the Japanese company Nissan who has signed an agreement with the trade unions whereby the trade unions have undertaken to help the company to introduce robots to mechanize the operations, but on the understanding that no workers will be displaced or lose their jobs as a consequence of the introduction of these robots. This is a far-sighted move and should be emulated by our employers in Singapore. Workers must never fear that their jobs are put at risk by the robots, by the new equipment, which have been introduced by employers and companies, and it is foolish of companies and employers to use mechanization and robots as a means of reducing their workers and creating unemployment. This is the surest way to ensure that such a programme will fail,

Several Members have spoken about the BEST programme. Here, I would like to acknowledge the assistance of our trade union movement, the NTUC, in getting this programme off the ground. In all fairness, we must recognize that it was the trade union movement who first recognized the need to upgrade the skill not only of those young people who are going to join the workforce but of those people who are already in the workforce so that the workers will be able to work in the new type of industries which we are attracting to Singapore.

With regard to the Basic Education for Skills Training (BEST) Programme, a suggestion was made by the Member for Boon Lay, whether workers who had been retrenched and could not find employment could be enrolled in Government-approved training courses and receive Government assistance while undergoing training. On the whole, I would agree with the Member that, as far as possible, we should help retrenched workers to enrol in our training centres and to acquire new and relevant skills which will improve their chances of re-employment. I am not sure whether giving them a subsidy by way of direct financial assistance is a good measure in the long run. The experience of several Western countries has shown that the existence of such benefits is often a disincentive to people to look for work.

So far, getting a job has not been too difficult in Singapore because we still have a labour shortage. But the Government will do its part to encourage companies to keep their workers and to retrain them. In this respect the Skills Development Fund is prepared to give generous financial support.

The Member for West Coast has also raised the point about those workers who have not been to school at all or who are too old to have the potential to study English and Mathematics which are the aims of the BEST programme. In this respect we must realize that the BEST programme is still at a very early stage. Once the Continuing Education and Training Department of VITB, which is responsible for the BEST programme, has acquired enough experience in running the BEST programme, it should turn its attention to the categories of workers which have been referred to by the Member for West Coast. Perhaps one possible way is to teach them simple practical skills which do not require a knowledge of English or Mathematics. For example, these can be simple mechanical skills. However, there is a limit to what we can do to train employees for these simple mechanical skills. If workers want to upgrade themselves, then at some stage they must at least learn the rudiments of Mathematics or English so that they can handle the more complex machinery which our companies will introduce. In this respect the trade unions can help the Government significantly to reduce any difficulty which the older workers may have in this area.

A variety of views have been expressed by Members regarding the Skills Development Fund. The Members for Leng Kee, Chong Boon and Thomson feel that the scheme should be reviewed. The Member for Kebun Baru is a strong champion of the SDF. We should not just look at the disbursement figure of $27 1/2 million which has been mentioned several times. A further sum of $102 million is due to be paid out when companies complete their approved training programmes. I do not think that small companies are at a disadvantage as there are many avenues through which they can avail themselves of the SDF funds, for example, by using the Interest Grant for Mechanization scheme. Moreover, several trade or industry associations, like the textile trade and the hotel trade, have joined together to set up industrial training programmes which are funded by the SDF. It is in this way that our small local companies can make use of the SDF funds which they have contributed. In fact, almost two-thirds of the total SDF grants have gone to our local companies. Since most of our local companies are small, this shows that our small companies have also made use of the SDF funds. Furthermore, the annual commitments of SDF grants have been increasing. In 1980 it was about 18% of the annual collections, in 1981, 49%, and in 1982, 60%. Perhaps in 1983 it will reach 100%. The number of applications received in 1982 has more than doubled compared to that received in 1981.

I am glad to see that the momentum in training is quickly building up, although I would like to remind Members that we are still a far cry from the state when training is required as an integral part of a company's operations. My fear is that with the present recession some companies may be tempted to cut back on their training programmes in order to reduce costs. This is most undesirable. Not only will it be a setback for us but I believe it will also impair the ability of companies to take advantage of the recovery which must come one of these days.

The Member for Yio Chu Kang has speculated that fees for training courses have gone up because it is so easy to get money from the SDF. This may be true, but the SDF has built into its criteria an evaluation of the cost effectiveness of the training programmes which it subsidizes. Companies have also been advised that they should weigh the likely benefits of the training programmes to which they send their workers. If the prog ramme is not cost effective, the SDF will reduce the level of support which it gives or, indeed, reject the applications from the companies. If companies wish to pay a high price for some programmes, that is their privilege, but the SDF will make sure that this is not at the cost of the SDF funds.

The Member for Yio Chu Kang has also brought up a number of points on the development of Singapore as a financial centre, particularly with regard to the management fees incurred for managing funds. Members will know that these management fees are incurred by companies which deal in stocks and shares and are fully deductible if they are part and parcel of the expenses in buying and selling the stocks and shares and the profits from these sales are subject to tax. But, on the other hand, companies which are engaged in investment holding and do not deal in stocks and shares are subject to tax only on the investment income, not on the profits realized from the sale of such stocks and shares. Companies will have to make up their minds whether they wish to be dealing companies or to be investment holding companies. They cannot have the best of both worlds. Nevertheless, the Ministry of Finance has been most generous in giving a concession by allowing a deduction of 50% of the management fees incurred by the investment holding company. Furthermore, there is the problem of defining what is capital gain and what is dealing gain. There is, in fact, an abundance of case laws which can give guidance in deciding whether in any particular case the gain is income gain or a capital gain. In fact, to my knowledge, no country in the world has given an explicit explanation of what is an income gain as against a capital gain. If the Member for Yio Chu Kang has any information which we do not know, I would be very pleased to hear from him.

As regards land, this is a topic which has been raised by several Members, including the Members for Clementi, Whampoa and Rochore. We must use land carefully in Singapore because it is a finite resource. We must also ensure that there is always sufficient land set aside to generate economic growth while, at the same time, to satisfy the housing, recreational and social needs of our population. We all know that developers of land for economic use are motivated by profit consideration, as are all businessmen. I am not sure whether it is wise for the Government to direct businessmen to build hotels, offices or condominiums. I think it is best to leave such decisions to the businessmen. But it is right that the Government should make sure that as much informati6n as possible is available to the businessmen so that they can make a careful and considered judgement.

The Government is monitoring the situation to ensure that our Master Plan continues to be relevant and appropriate in the light of new economic and social circumstances. I think that with the high pace of construction and high usage of land likely in the next few years, I am inclined to agree with the Member for Whampoa that perhaps it is time now for the Government to make an overall study of the economic use of land in Singapore in order to ensure that this finite resource can be put to the most efficient use. This is a matter which we will take up with the Ministry of National Development.

Mr Deputy Speaker, Sir, do I have to stop at 8.00 o'clock.?

Mr Deputy Speaker: Yes.

Dr Tony Tan Keng Yam: I shall move a little faster now. The Member for Serangoon Gardens also talked about ASEAN, particularly the ASEAN industrial projects which have not moved as much as we would like. Basically, the reason is that the conditions under which all the five countries have to participate in the projects are becoming a little difficult for the projects to get off the ground. My own feeling is that the new agreement on the ASEAN industrial joint ventures is a much more promising approach.

I would now like to say a few words on the expenditure budget, since the Member for Rochore has commented that he has scrutinized acutely our strip-tease Budget. This has also been commented on by the Member for Whampoa. He has expressed concern over what he called the serious budgetary lapses that have occurred each year when the expenditure and revenue estimates presented by the Government differ markedly from what is actually spent and earned. For example, in FY 1982-83, Government revenues were under-estimated by 22% while development expenditure was over-estimated by 15%. This under-estimation of revenue and over-estimation of expenditure, in my view, reflects the conservative and prudent approach taken by the Government in the management of public finance.

Dr Augustine Tan: On a point of explanation, Sir. It was an under-estimate of recurrent expenditure, an over-estimate of development expenditure and an underestimate of revenue.

Dr Tony Tan Keng Yam: I am grateful to the Member for Whampoa. But he has brought up a very serious point, and that is that the Budget presented annually to Government does not include the expenditure of our major statutory boards and also of the Government companies which the Member for Rochore mentioned, I would like to point out here that the annual budget does state the amounts that are being provided by Government to statutory boards by way of operating or capital grants and loans. Of course, the budget does not reflect the revenues and expenditures of those statutory boards which are self-financing. However, this does not mean that Parliament is not kept informed of the spending plans of the various statutory boards. Each statutory board is required to present its budget as well as its audited statement of accounts annually to Parliament. Further, the parent Ministry of each statutory board regularly monitors the board's activities and its financial performance. Finally, as a further measure, the Ministry of Finance will be introducing a computerized system to monitor the long-term recurrent and capital expenditure commitments of all the statutory boards, including those which are self-financing. This should ensure that the expenditure of statutory boards is under adequate Government control.

One last point brought up by the Member for Whampoa which deserves to be discussed is the increase in Government spending in the last few years. This is necessary because of the fact that we are in an economic recession. During such times, it is necessary for the Government to take an active part in spending while the private sector is hesitant to expand its operations. The Government will reduce its role when the economy recovers in order to ensure that there is no crowding out of resources.

I think Members also know that a large part of Government spending is in development projects which will improve the social and economic infrastructure of Singapore. This is an area where the private sector does not venture into - public housing, power supply, industrial land, port development, telecommunications, which will bring lasting benefit to us.

As time is short, I will skip over some of the specific taxation issues brought up by various Members. I hope they will bring them up again in the form of Oral Questions so that we will have time to give them a reply. This includes taxation on foreign source income brought up by the Member for Chong Boon. I would like, however, to say a few words about estate duty. There seems to be a concerted campaign during this debate to question the need for estate duty. I would just like to mention here that we are reviewing whether estate duty is necessary in Singapore and, if so, what can be done. Perhaps by next year I will be able to let Members have more information.

As regards the enhanced child relief given to specially qualified women, several Members have suggested that this be extended to all working women. I am not sure whether there is a valid case for it. But I am sympathetic to the suggestion by the Member for Thomson that qualified teachers in schools and nurses should perhaps be considered. I will recommend this to the Ministry of Finance.

Again, Members have brought up points like taxation on venture capital and the Member for Tanah Merah brought up the point on international consultancy companies which I do not have time to reply today. I hope he will ask the question again in due course. I think I have covered all the material points which have been brought up by Members in the Budget debate.

I will turn now to the comments of the Member for Anson. He has spoken, according to my watch, for 60 minutes but has said nothing that is new or relevant but a lot that is confusing. Indeed his speech seems to be a hotch potch of unrelated ideas, and I really think that he should confine himself to speaking on subjects with which he is familiar.

He has asked why we have not spelt out the measures to see how we can see our Singapore economy through the present recession. I would have thought that the whole budget speech is devoted to that particular theme.

Secondly, he has raised some new concepts which I am not familiar with, for example, tying bonuses to current cost profits. I believe that the term is current cost accounting. He has criticized the fact that Government may be using unduly tight interest rate and exchange rate policies which hamper our exporters and manufacturers. You cannot have tight interest rates and tight exchange rates at the same time. If interest rates are low, then your dollar will go down. So I think you have got to choose one or the other.

The Member has a fairly predictable frame of mind. So I have taken the precaution of preparing a number of schedules relating to the points which he has raised in this debate. He has said that one defect in this budget is that workers have not been given a fair share in the prosperity of the company. I suppose this means that most of the profits have been siphoned off to the companies and that workers are only left with the crumbs. The Clerk of Parliament will distribute this schedule (Cols. 915 - 916) which shows average annual remuneration per worker in manufacturing over the last 23 years since 1960. Manufacturing is indicative of the other economic sectors and the figures have been adjusted for inflation so that they are comparable. [Copies distributed to Members.] schedule (Cols. 915 - 916)

Members will see straightaway that the average annual remuneration per worker in manufacturing has, in fact, more than doubled from $5,705 in 1960 to $11,521 in 1982 and these are real wages to reflect the increase in purchasing power which the average worker in manufacturing has been able to enjoy in the last 23 years.

Another very striking figure in the schedule is the average CPF balances of workers. In 1960, the average balance was $1,089. In 1982, the average balance was $9,074, an increase of over eight times. Again these figures have been adjusted for inflation and they are all stated in 1982 dollars. Half of the increase of eight times represents the increased contribution from the workers, half represents the increased contribution from their employers. So we can see that not only have the workers been able to spend more on the necessities and luxuries of life but they have also been able to save more. What is more remarkable to me is that the higher CPF balances have come about even after deducting the commitments on HDB mortgages which is the means by which we have enabled the vast majority of our population to have the hope that one of these days they can own their own homes. I think this is a promise that no other government has been able to give to its people.

Some hon. Members: Hear, hear!

Dr Tony Tan Keng Yam: The Member for Anson has also suggested that the Government should provide workers with homes within their work places. This is a new concept of worker benefit which I am not familiar with.

Mr Jeyaretnam: I said "near to their work places."

Dr Tony Tan Keng Yam: Did you not say, "within"? Perhaps we should go back to the old cottage industries where the home is the work place!

Again, on a more serious subject, the Member has criticized the Government's taxation policy with regard to reliefs and implied that the Government is managing our economy and our financial policy only to the benefit of those who are rich while neglecting those who are poor. In other words, we are squeezing the poor in order to benefit the rich.

Mr Jeyaretnam: That is what the average man thinks.

Dr Tony Tan Keng Yam: Let me just pass this schedule (Cols. 917 - 918) around which shows the distribution of personal income tax based on assessments completed in 1982 [Copies distributed to Members.] schedule - DISTRIBUTION OF PERSONAL INCOME TAX BASED ON ASSESSMENTS COMPLETED IN 1982 (Cols. 917 - 918)

I do not have to say more. It shows that the bulk of our personal income tax is in fact collected from the higher income groups. 75% of our taxpayers numbering some 369,000 people with chargeable incomes of less than $10,000 pay only 8.7% of the total tax that is assessed.

On the other end of the scale, are those taxpayers with chargeable income above $100,000. This comprises some 5,091 taxpayers assessed last year. They were only 1% of the total number of taxpayers. They paid $265 million or more than one-third of the total tax assessed.

The Member has also complained that our personal reliefs are too low and has compared us unfavourably with reliefs given by a neighbouring country. I think he should not only take tax reliefs into consideration but also the tax rates. In Singapore, our tax rate for the first chargeable group of $5,000 is only at 4% whereas in that neighbouring country the lowest rate is 6%. So I do not think that he can compare one thing with another unless he takes the whole thing in perspective.

I am running out of time, Mr Deputy Speaker, Sir, but I think that this has been a very interesting Budget debate and I thank all hon. Members for their constructive suggestions and their comments. As I have said in my concluding remarks in the Budget speech, many Members have noted in their speeches that we live in perilous times. While I am apprehensive I am not discouraged. We have seen the dangers ahead and we have taken the necessary precautions. We have a population that is well tested, that has been exposed to equally perilous dangers in the past and each time we have overcome what appeared to be insurmountable obstacles. Our children will inherit a Singapore that will be a far cry from the riot stricken, impoverished city which was the lot of some of us in this House in our younger days. Our children will have the benefit of being better prepared to face the world in the 1980s and the 1990s. From time to time, no doubt some of us may have occasional doubts as to whether the younger generation will have the moral fibre, the resoluteness that is characteristic of Singaporeans and symbolized by the hard-headed, realistic, honest policies pursued by our Government over the last 24 years. The ways of the young may appear to be somewhat strange to us but I believe that lessons learnt by the old have not been wasted. These lessons can be transmitted to those who are now in schools, doing their national service, in the universities and those who are embarking on their first jobs. All of us are human. One of these days all of us will pass away from the scene. In due course of time, our children will inherit the Singapore which our ancestors and we have built and I believe that they will do us proud.

Much obliged, Mr Deputy Speaker, Sir. [Applause]. 8.00 p.m.

Question put, "That Parliament approves the financial policy of the Government for the financial year 1st April, 1983 to 31st March, 1984."

Mr Jeyaretnam: Division, Sir.

Mr Deputy Speaker: Take a division.

The House divided: Ayes, 51; No, 1; Abstention, 1. Ayes No Abbas Abu Amin Jeyaretnam, J.B Ahmad Mattar Ang Kok Peng Chai Chong Yii Abstention Chandra Das, S. Hwang Soo Jin Chau Sik Ting Bernard Chen Chin Harn Tong Ch'ng Jit Koon Dhanabalan, S. Goh Chee Wee Goh Chok Tong Ho Kah Leong Ho See Beng Hon Sui Sen Jabbar, M.K.A. Ayes (contd.) Jayakumar, S. Koh Lip Lin Lai Tha Chai Lau Ping Sum Lau Teik Soon Lee Chiaw Meng Lee Yiok Seng Lee Yock Suan Liew Kok Pun Lim Boon Heng Lim Chee Onn Mansor Haii Sukaimi Ng Kah Ting Ong Teng Cheong Othman bin Haron Eusofe Ow Chin Hock Phua Bah Lee Rohan bin Kamis Saidi Haji Shariff Seah Mui Kok Sia Khoon Seong Sidek bin Sa niff Tan Cheng Bock Tan, Augustine H.H. Tan Keng Yam, Tony Tan Soo Khoon Tay Eng Soon Teh Cheang Wan Teo Chong Tee Wan Hussin Zoohri Wan Soon Bee Wong Kwei Cheong Yap Giau Cheng, Eugene Yeo Ning Hong Yeo Toon Chia

Resolved,

That Parliament approves the financial policy of the Government for the financial year 1st April, 1983 to 31st March, 1984.