MAIN AND DEVELOPMENT ESTIMATES OF SINGAPORE FOR THE FINANCIAL YEAR 1ST APRIL 1985 TO 31ST MARCH 1986

Debate in Committee of Supply resumed.

[Mr Speaker in the Chair]

Head R (cont.) -

Dr Arthur Beng Kian Lam (Fengshan): Mr Speaker, Sir, I rise on a point of clarifi- cation. Sir, I seek clarification from the Member for Potong Pasir regarding what he said earlier on the release of CPF Funds causing inflation and its relationship to, I quote, M1. I am very concerned, Sir, regarding CPF-induced inflation. If this is true, may I beg his indulgence and your indulgence, Sir, for, as a medical practitioner, I am confused with this relationship to M1. What is M1? Could he please clarify and, I hope, allay my fear.

The Chairman: Mr Chiam, you have a chance to speak a little bit more.

Mr Chiam See Tong: I am obliged, Mr Speaker, Sir. May I first clarify the figure I gave in respect of the overall wage bill of $1,000? Now, this should be based on a salary of $800 and a 50% CPF contribution from either side, employer and employee. The take-home pay would be $600 and $200 each for the employer and employee to contribute. Now, as I said, in a tight labour market situation, the wage for a certain skill and profession at an equilibrium -

Dr Arthur Beng Kian Lam: Mr Speaker, Sir, on a point of order. I asked for clarification on a specific topic.

Mr Chiam See Tong: I am clarifying my own earlier statement.

The Chairman: Your earlier statement has been finished. It has been dealt with. You were given 12 minutes to do so. Now you are being asked to clarify a certain point which the Member has raised.

Mr Chiam See Tong: Mr Speaker, Sir, M1 is an economic term for the supply of money. Now, I have here a report in the Business Times, December 1983: "Singapore's M1 money supply rose by $52 million to $8.13 billion in August after a $164 million fall in July." This is the money supply that is circulating in Singapore. We have this much money. Now, by my party's calculation, in about 15 years' time, the withdrawal of CPF in the year about 2003 would be around $9.5 billion. This is the problem that the Prime Minister was talking in his report given on 21 December. This is the time when those who are 40 years old or so would have problems getting their money back. And this money added into the circulation would certainly create immense problems as regards inflation. So this is the problem I am referring to. I hope the Member for Fengshan is quite clear on this point now. I am much obliged, Mr Speaker, Sir.

Dr Hu Tsu Tau: Mr Speaker, Sir, since we are talking about money matters, perhaps I should clarify on behalf of the MAS.

I think the Member for Potong Pasir is unnecessarily worried about effects of net CPF releases causing inflation in the Singapore economy. His concern is understandable but it is totally misplaced. Let me cite. M1 is defined as a narrow money supply indicator and represents only cash in circulation plus coins in circulation and current account deposits. When you talk about total money supply in Singapore, you really should be talking about M3 which includes fixed deposits, certificates of deposits, savings accounts and deposits in non-financial institutions such as finance companies. When we talk about this, the total amount currently in Singapore is $36 billion. In addition there are also considerable other financial assets available for investment by Singaporeans because the total stock market capitalization, as at the end of 1984, was $68 billion, of which $28 billion was accounted for by Singapore registered companies and about $40 billion by Malaysian companies. So there is even now no shortage of financial instruments for the prudent Singaporean to invest in, if he could lay his hands on the money. So that is one point.

Secondly, I think he has calculated that in about 15 years' time, net CPF withdrawals would be around $9 billion. I do not know how this is calculated. Our own calculations show that a net reversal or net outflow would take place probably by the year 2013, or roughly 18 to 20 years in the future. Now, by that time, one must realize that the Singapore economy, even assuming a conservative growth rate of 6% per annum, would have quadrupled in size. So again, the pool of funds in the economy for investment purposes or assets for investment would be very much larger, even discounting inflation.

Thirdly, even if the facts as stated by the Member for Potong Pasir were correct, that a $9 billion flows into the system in 15-20 years' time, I think the Member is doing every Singaporean a disservice because every single Singaporean has proved to be a very prudent individual and is, in fact, an inveterate saver. In addition to the gross contributions of CPF in 1984, around $5 billion, he has also salted it away in the POSB about $7 billion. In addition, private account saving deposits in banks total another $4.5 billion. You can see, therefore, even if the entire amount of money were released to them, I think it is highly probable that a good proportion would be re-saved or invested in financial instruments by the year 2005, 2010 or 2015, at which time we would hope that the range of financial instruments available for investment would be vastly larger. So there is really no need to be worried or be concerned that the Government would be unwilling to release money when this falls due because the opportunities for investments are vast. In fact, in my day-to-day meetings with visiting foreigners, when we discuss about the CPF, they have invariably expressed the opinion that it is the greatest invention since the wheel, and they wished that their governments had the gumption or political ability to introduce similar schemes.

Dr Arthur Beng Kian Lam: On a point of clarification from the Minister. Is it true then that there will be no CPF-induced inflation in the future, no such thing?

Dr Hu Tsu Tau: I think it is highly unlikely. Firstly, the other point which I forgot to mention is that Singapore operates a very open economy. I did mention yesterday, or the day before, that about 70% of our goods consumed in Singapore, are imported. Therefore, even if you pour $9 billion into the system, assuming there are no net savings, there will be some pressure on services possibly, but the great bulk of these consumption items would be available from a vast world market where, therefore, even $9 billion is a drop in the bucket and will create no problems whatsoever.

Dr Arthur Beng Kian Lam: Thank you.

Mr Chiam See Tong: Mr Speaker, Sir, I have got two points of clarification for the Minister for Trade and Industry. It would appear by the way the Minister says that there appears to be no problem in regard to the payment out of CPF. Now, if that is his view, then what is the Prime Minister talking about the problem of those who are in the 40-age group. Now, that is one area.

The other problem about CPF is, why are there so many schemes now being hatched, for example, the postponement of the repayment of CPF at age 55 to 60, to 65, and the other schemes to soak up or lock up CPF money? Perhaps the Minister could explain these two points.

Dr Hu Tsu Tau: Mr Speaker, Sir, on the point about the Prime Minister's concern, I think, understandably, the Prime Minister generally tries to see as far into the future as possible, and he is concerned that there may be a basic change in the habits of the Singaporean. I myself think it is probably unlikely, but he cannot discount this.

Mr Chiam See Tong: You do not agree with him then.

Dr Hu Tsu Tau: No, no. I think he is, what you call, testing the parameters. And when you are a far-seeing political leader, you have to consider the possibility of something happening. So you prepare in anticipation. I think, by and large, there is a proportion of the younger population who may consume and spend all they saved. But by and large, when the time comes, firstly, even if he does spend, there will be adequate outlets for his expenditure if it takes place. So inflation will not take place. So I see, from the inflation point of view, no real need to be concerned. On the second point, perhaps the Minister for Labour should clarify.

Mr Lee Yock Suan: Mr Speaker, Sir, first, I would like to thank the Minister for Trade and Industry, who is the real expert here on financial matters, for explaining so clearly what the Member for Potong Pasir is completely ignorant about. I am sorry to have to say so.

Mr Chiam See Tong: Please just explain.

Mr Lee Yock Suan: I will, don't worry. I am coming to it. But it is obvious from the fact that he was not able even to explain what M1 is. He has not a clue of what he is talking about. And yet, despite this ignorance, or despite wrong advice by people who have been advising him, he has been publishing all these in the Demokrat. I have a copy here, Sir, of the Demokrat dated October/November 1984 which was the issue before the Elections. I think those who have read this, and who do not understand the full facts, would be confused and would be alarmed unnecessarily. I consider this to be a higher irresponsible action on the part of one who claims to be constructive opposition. 2.45 pm

Again, this morning he has misquoted what the Prime Minister said during the press conference. I do not know whether he is genuinely not able to understand what the Prime Minister said or his whole frame of mind is such that he is not able to understand the issues. Acting on wrong advice or on ignorance, he has come up with this notion that because the sums to be withdrawn from the CPF many years from now will be very big, that, he has been told, is going to cause inflation. Therefore, he has been going around telling everybody that the Government is trying to delay payment of CPF in order to postpone this day of reckoning. This is the basic premise of his statements today and also of this article in The Demokrat. He has come out with all kinds of preposterous ideas. One point he made here, or the writer made, is the claim that HDB prices have been increased in order to soak up the CPF savings. How preposterous can he be? We all know that from 1979 to 1981, the construction industry was overheated and as a result -

Mr Chiam See Tong: Point of clarification, Sir. Is it not true that almost all property prices dropped last year by 25-30% and yet HDB prices increased against the trend of the market? Can the Minister explain why, if it were not to soak up the CPF savings?

Mr Lee Yock Suan: This is one of the claims made by him. I would like to remind him that he still has to decide on the offer by the Minister for National Development to build the four blocks of flats.

The real increase in HDB prices came after the severe problems faced by the industry in the years 1979-81 when the construction cost shot up because there was overheating of the industry. And this affected not only HDB flats but also all kinds of properties. I just mentioned this by way of illustration. I do not want to digress into HDB which is not my problem. I just wanted to quote one example to show the kind of ideas he has been led into.

His second point is his original claim - today he has shifted his position - but his original claim as reflected in the article is that the Government will not be able to pay the CPF withdrawals because the sums will be very big. I am glad to note that today he has finally accepted our explanation and agreed that the money will be there, and there will be no problem of repayment. But because he thought the Government was afraid it might not be able to pay, he has suggested that the Government was, in fact, raising the CPF rate year by year in order to get more money to pay back the depositors and thereby postponing the issue. There again, it shows how he has not understood the problem.

The third point which has already been well answered by my colleague concerns inflation. He claims that because there is going to be inflation, therefore, the Government is trying to delay payment of the CPF and that is why the Government has been discussing this postponement of the withdrawal age. I am afraid, Sir, the Member has misunderstood or misquoted the Prime Minister who was commenting on the problem that will come in the future as our population gets older. In the Howe Yoon Chong Report, it has been projected that (if we consider the different age groups, those who are economically active, ie, people between the ages of 15-64 as one group, and then we have those who are the aged, aged 65 and above, who are the ones most likely to have left employment) as of the year 1980, there were 15 economically active persons to one person aged 65 and above. As our birth rate declines and the population grows older, this ratio is going to change from 15:1 to 10:1 in the year 2000 and to 3:1 in the year 2030. This is the problem that the Prime Minister was alluding to. He was concerned that with so many aged people in our midst, there will be a problem of financial security in old age. This is the basic concern. It is not because the Government is trying to postpone the withdrawal age, not because the Government is concerned about CPF withdrawals causing inflation, but because being a farsighted and responsible politician and Prime Minister, he has forewarned the people of this problem. What it means is that, as the population ages, there will be fewer and fewer working Singaporeans to support every member who is aged.

Furthermore, people are living a longer life. The life expectancy will probably go up to about 70-75 years, maybe longer. And this prolonging of life may come about through medical advances, through modern medical techniques, such that people are kept alive at high medical costs. This is the problem, a very serious and genuine problem, which we will have to face up to in the years to come. This is what the Prime Minister was referring to.

Since so much confusion has been created over this issue, I would now like to take a few minutes just to explain the various aspects of this CPF withdrawal age problem. Much of what I am going to say is not new. It has been reported. It has been discussed in this Parliament. But I want to take this opportunity to spend a few minutes on explaining what the issue is all about. As I have said, the whole thing started with the problem of the aged which is coming within the next 20-30 years. All these are contained in the Howe Yoon Chong Report. This Report was meant only for discussion, both inside this House and outside, to get public response.

One of the proposals in the Report was to defer the withdrawal age from 55 to 60. As people work longer and so on, the idea is to postpone this withdrawal age. But because of the very strong negative reactions from both the public and from Members of the House, the former Minister for Labour has given some ideas about what could be a possible solution. These are ideas at this stage. The idea that he indicated was that perhaps a minimum sum could be held back, say, $25,000. This figure has not been fixed, Anything above that amount can be withdrawn completely.

During the elections, the Prime Minister further clarified that this minimum sum includes the value of the property that you buy. So if you own an HDB flat and has already paid up to the sum of $25,000, then there is no need to hold back any more CPF savings. The whole sum in excess of this $25,000 or the value of the HDB flat can be withdrawn at age 55. In the heat of the elections, many people have missed this point because it is a very significant point.

As you know, Sir, the Government is aiming for 100% home ownership. If, in fact, we do achieve that, then where is the sum held back? Because everybody would have invested some CPF savings in their properties to the extent of this amount. But recently the Prime Minister has said that he is not optimistic that we will be able to achieve 100% home ownership. There may be a small minority, maybe 10-15%, who may not be able to achieve this objective. This is a small group of people whom we have to take care of to help them manage their savings, to make sure that they will have enough savings after retirement for their financial security.

Whilst we want to do this, Sir, the intention is not to penalize the majority. We know that the majority are fully capable of looking after their money. As my colleague has mentioned, Singaporeans are avid savers. So when they withdraw their CPF money, they will probably put it into a bank. But there will be a group, maybe a small group, who may not be able to manage their own savings. So this small group may require assistance, without penalizing the rest. If there is not enough provision made for this group, they may end up as a burden on their relatives and maybe eventually on the State.

Sir, let me just give you some numbers to view this sum of $25,000 because, if we just look at the figure "$25,000", it looks like a big number. Let us consider a young man who starts work today. For example, he is 25 years old today. By the time he is 55, he would have worked for 30 years. If we assume that today his salary is $500 per month, which is a very normal pay, his CPF per month would be $250, 50% of $500. For one year, therefore, he would have $3,000 CPF savings. If we multiply this figure of $3,000 by 30 years, the time that he would be working till 55, we would get a figure of $90,000, a very big figure.

Let me explain. This is looking at it in a very simplistic view. If we assume that the CPF rate just equals inflation - in fact, it is greater than inflation, but for simplicity, we assume that the CPF rate is equal to inflation - and if there is no wage increase, which is most unlikely, then this figure of $90,000 will be his real savings in CPF at age 55. 1 am not saying this will be the actual figure. The actual figure will probably be bigger because the CPF rate is higher than inflation and there will also be actual wage increases. I am just using this figure, Sir, for easy comprehension. If a Member can follow my calculations mentally, he will be more convinced of what I am trying to tell him. Looking at these figures alone, in real terms, this young man earning $500 per month today would have by the age 55 a sum of the order of $90,000. So this young man will be well provided for. He will be able to own a 3-room flat costing about $40,000. He will be able to put aside $10,000 for Medisave. He will still have savings of $40,000 to live on. So this CPF scheme is a wonderful scheme. He has saved over the years. He has got this much money. 3.00 pm

The question then is, looking at this figure of $40,000 that he has got left, does he realize that, at age 55, he may still live for another 20 years? Some may not. Some may live even longer. But on the average, maybe up to age 75. If that is the case, in order to live for 20 years, even at $200 per month to live on, a very modest sum, you need $2,400 per year. You multiply that by 20 years, you will need, in fact, $48,000 to last him from age 55 to age 75.

So the point I am making is that the Singaporean worker starting out today will be well provided for, but not so well that he can afford to squander away his money. He must still manage his savings carefully in order that this sum can last him through his twilight years. I know what Members are thinking. Most of us can look after our own savings. I agree. But I think many of us have come across instances of retired persons who have withdrawn their meagre CPF savings and spent it straightaway on television, on videos, on trips to China, maybe speculated on the stock market, and then eventually ended up dependent on their relatives and families. Many of us have heard of or experienced such instances.

Mr Jeyaretnam: Do you have records of this?

Mr Lee Yock Suan: There is no record of this because the Government does not collect these records. But the fact is, it does happen. There are some people who need to be assisted, a minority group, maybe a very small group, to look after their savings. They may have the illusion that this CPF saving which they will get is a very big sum, but in actual fact that sum has to last them for the rest of their lives. I am not saying that the Government should try and protect him completely, to make sure that he is provided completely for the rest of his life; maybe only partially. But we should at least try and look into the problem to see how we can provide for this group of people, without penalizing the majority who are prudent and who know how to manage their own funds.

The Prime Minister has also mentioned in this press conference, which was alluded to earlier, that there will be many people who are. reaching their retirement age. These are people who are aged 50 and above, aged 45 and above. These are people who were earning relatively low salaries in the earlier years when pay levels were low. In those years the CPF rate was also low. So their CPF savings as of now are, in fact, quite small. For this group of people we will have to give special consideration because the sum of $25,000 is just too big to be retained. And this group of people, in total numbers, is small in comparison with the whole population. This is what the Prime Minister meant. He said that if this idea of a minimum sum retained was accepted, then it should be implemented in stages. Maybe those above 50 should not have any sum held back, those who are younger maybe smaller sums, and so on, in gradual stages. This is really what he meant. So please do not misunderstand him and misquote him.

Sir, I would like to emphasize that all these points that have been discussed so far are just ideas at this stage. My Ministry is still studying the problem. It is a very complex problem and we will try and come up with a proposal by next year. The proposal will be thoroughly discussed before a decision is reached.

Some Members in this House, when this matter was being debated, also brought up this idea of old money and new money. In other words, should you distinguish between CPF money put in at a certain date from that put in at a later date? That is something we will have to look into.

There is also the question that there are many people who are not yet in the labour market, who have no CPF savings yet. These are the younger workers. The Government will also have to look at them. In other words, the Government has to see all the factors, not just those I enumerated, before we come up with a proposal.

I would like to mention also, Sir, that my Ministry is considering introducing a dependant's protection insurance scheme. Some Members mentioned this morning that they would be in favour of some insurance scheme to protect the CPF members. My Ministry is examining the merits and details of such a scheme. The idea is to provide a minimum level of life insurance for members to protect their dependants against the risk of the member's premature death. The premiums payable will come out of the Special Account of the members. We are still looking at the details. So I hope this answers the pleas made by some Members that we should improve on the CPF scheme and make use of CPF for various purposes. This is one such scheme we are studying, Sir.

Another point I want to make is that, contrary to the unfounded allegation that the Government is trying to hold back the money, in actual fact the Government is thinking of how to liberalize on the use and management of these funds, As the First Deputy Prime Minister has mentioned, we are thinking of allowing the use of CPF to purchase more than one residential property, perhaps even commercial property, perhaps shares, and other assets. But even, as of now, with the various schemes that we have, the CPF money is, in fact, not locked up. Vast sums have been withdrawn by members to buy HDB flats. Do not forget this point. This is the reason why many members are able to furnish their flats lavishly; they are able to buy cars; they are able to go on travel. Because they have been using the CPF money to finance the homes that they own. So they have money to spare, which they are using for various other purpose& So the money is actually not locked up.

If I may now turn, Sir, to one other point which the Member for Potong Pasir made this morning. It was his idea that we should reduce the CPF rate from 50% to 40%. He himself has confirmed that this reduction of 10% will come from the employer's portion as well as the employee's portion. This means that he is advocating a reduction in the wage packet of the ordinary worker. I do not think our Singaporean worker will thank him for it. As the Member for Toa Payoh has explained this morning, our Singaporean workers need this CPF money in order to pay for their HDB flats, and even at 50% rate they can barely make it to own a 3-room flat at Woodlands. If it were a 3-room flat in a more central location, already there will be a problem. And here, this Member for Potong Pasir is advocating that we should cut down the CPF rate.

First and foremost, Sir, I think he should get his sums straight about CPF. He was so confused with the numbers that I do not know whether Members could understand him - about gross salary $1,000 and deduct $250, and therefore the take-home pay is $500. Perhaps he should go back and do the sums first. But the basic point is that CPF is workers' pay. If you cut it, if you reduce the CPF rate, you are going to reduce the workers' pay. It is as simple as that. It is no use talking about equilibrium, this, that and the other. If you give the employers half a chance, I think they will try and reduce costs.

Sir, I would like now to turn to some of the other issues raised by hon. Members. Members seem to have sensed that the Government no,w has a more liberal mood towards CPF and are trying to introduce or suggest all kinds of new uses for CPF funds. Before we proceed further, maybe I should remind Members that they should really take a look at the breakdown of CPF savings of different members at this point of time. What is the real situation as far as the quantum of savings in members' accounts is concerned? As at 31st December, 1984, out of about 900,000 active members on the CPF list, 33% had less than $10,000 in their accounts. This includes the amounts withdrawn for HDB, for SBS, and so forth. 55% had less than $20,000; 69% had less than $30,000, 78% had less than $40,000. If you compare this to what I have mentioned just now, about the sum you need for old age financial security, you will see that we are still quite far away from that financial assurance upon retirement for existing members. If you exclude amounts withdrawn for HDB, the proportion is even more striking -88% had less than $40,000 in their accounts. So before Members start jumping up and suggesting all kinds of new ways to use the money, just look at the quantum of the savings. The Member for Toa Payoh has already mentioned that the CPF savings are needed to pay for HDB flats. So we should have our priorities right. First and foremost, the objective of the CPF scheme is for old age financial security. This is the most important basis of the CPF scheme and we should not forget that. Secondly, we want him to own a home; priority No. 2. So we must make sure these two are assured first before we even consider other possibilities.

Various Members have spoken eloquently on why we should release CPF money for education, that it is a form of investment, it is good for filial piety, and so on. Members have also given the reasons which were explained before in this House. So I will not repeat them. But before we look at that possibility, we should take up the proposal of the Minister for Finance the other day - that one way is for the Government to offer interest-free loans to students going for tertiary education in our Universities. I think that is an excellent idea and something we should look into. Because it means the students, the young men and young ladies, will be able to finance their own tertiary education without taxing their poor parents who need the CPF savings for their old age. As of now, already there are many scholar-ship schemes and bursaries which have not been fully used. Perhaps the PSC should be more liberal. It could be that there are not many takers. But if it is because the PSC has been too strict, then I would suggest that they should really liberalize and provide more bursaries, more scholarships, more loans (interest-free loans), before we touch the CPF money. 3.15 pm

There was also a suggestion that we use CPF for renovation. The problem here, apart from this basic factor of preserving the quantum of the savings for old age security, is that it will be very difficult for CPF to administer the scheme because, what constitutes renovation? Is it furnishing? Is it changing of a window? What is it? But that is not the basic objection. The basic objection is that we should first look towards providing financial security in old age and home ownership before we think of other possibilities.

How much time do I have, Sir?

The Chairman: I will give you another 10 minutes.

Mr Lee Yock Suan: The Member for Kebun Baru was concerned that if the Government were to allow CPF for purchase of more than one property, then we might cause overheating of the property market. In actual fact, the amount of money that could be released from CPF into the property market is limited by the amount of savings that people have. As of now, they can invest all their money in one property, one big house or whatever; or they could invest the same sum of money in several properties. Instead of buying a big house, this member may decide to buy a small terrace house because he has a small family. He does not need a luxurious house. He might then buy another house to rent out. In fact, it is an improvement of the scheme and does not necessarily lead to further heating of the property market. Of course, members will have to use their judgment as to when is the best time to buy -whether it is now or later. But, as in any investment, there must be some risks although in the Singapore context, with our land shortage, we expect that investment in properties will be a good hedge against inflation and will be a good investment in the long run.

Sir, the Member for Jalan Kayu and the Member for Boon Lay touched on the problem that we have been experiencing with some employers who have been late in their payment of CPF on behalf of their members. If Members recall, the CPF Board has issued a very comprehensive statement on this problem. Let me just explain the mechanism.

Sir, the CPF already has a very comprehensive enforcement system. All the accounts are computerized. As soon as any company is late in payment, the CPF computer will detect this late payment and a letter of demand will be sent to the company to pay up. If the company does not pay up, the CPF Board will then have to take legal action to get a court order to enforce payment. If, despite this court ruling, the company still does not pay, then the CPF Board may have no choice but to seize the employer's assets for sale to recover the arrears of CPF payment. If need be, the CPF Board can even go after the company's debtors -what are known as garnishee proceedings, in legal jargon; in other words, to go after the debtors of the company to get them to pay to the CPF. Unfortunately, all this process takes time. The courts are busy and they take time to hear the cases and so forth.

What the CPF Board has done is to inform members within a reasonable period that their employers have not been paying their CPF. Once that is done, the CPF member should be alerted that his employer has been underpaying him. So it is up to him to decide what course of action he wants to take. It is as if the employer has not been paying him wages or underpaying his wages. He might go and bang at the door of the personnel manager, or whatever other action. In the extreme case, he might even decide to leave the company because the employee is in a sense offering his services to the company. If the company is a good employer, has good welfare benefits -

Mr Jeyaretnam: On a point of clarification. Will the Hon. Minister say what the employee can do in those circumstances? He suggests banging at the door. The next minute the man will be dismissed. What is he really suggesting?

Mr Lee Yock Suan: I am just putting it simply to Members that the CPF money is the members' pay. If a worker were suddenly to find that his employer is not paying him, what does he do?

Mr Jeyaretnam: The employer can be prosecuted under the Criminal Law. Do you know that?

Mr Lee Yock Suan: Whatever it is, the employee himself is alerted. He can make his own choice, and it is a very immediate reaction from the employee. The CPF is doing its best within the legal process, which takes time. If it were a good employer, the employee affected might decide, in that instance, to allow the employer to pay later. That is part of this concept we are promoting - company welfarism, loyalty and so on. But if the employee feels that he cannot accept this underpayment of salary, then it is up to him to decide what action he wants to take.

Mr Jeyaretnam: You suggest something. What can he do?

Mr Lee Yock Suan: Sir, the Member will have every chance to make his point afterwards. Could I request that I be allowed to continue in peace without interruption?

In view of the problems and the concern, the CPF Board is trying to see how it could improve on the collection. For example, the Board is arranging with the Attorney-General for his approval of the request for prosecution, which will be forthcoming within a week. Previously, it took longer than that, except for urgent cases. Now we are trying to expedite the legal process. The CPF Board is also asking the Subordinate Courts to arrange for earlier hearings.

One of the problems we must realize is that the CPF Board must weigh the pros and cons of taking action. If you take premature action, you will be just pushing the employer over the brink. If it goes bankrupt, then everybody loses. One further problem is that many of these employers have taken loans from banks and other financial sources which are secured against their machinery, factories and so forth. These creditors have first charge on those assets. This is normal banking practice. I believe this is the situation all over the world but I have to verify this - that when a banker lends money against security of an asset, he is effectively the owner of that asset. He has first claim. We cannot have a situation where his claim is subordinate to some other claim, be it wages or CPF or whatever. This is the problem.

So if you push that company over the brink and there is not enough money to pay all the creditors, then the CPF holder gets nothing. But within the legal framework and within the present system, under the Companies Act, in the category of unsecured creditors, the first priority goes to winding-up expenses. The second category is salaries and wages. The third category is workmen's compensation for injuries and so on. The fourth category is pay for leave that has not been taken. The fifth category is CPF contributions. The Attorney-General has advised that where an employer has deducted CPF from his employee's pay and failed to pay into CPF, that money still ranks as wages. So it is really No. 2 on that priority list. On the other hand, the employer's CPF ranks No. 5. The question is whether we want to move this No. 5 up to No. 2. Personally, I feel there is no strong reason because all the other categories, except the first one, are really dues to employees, whether it is wages or workmen's compensation and so on. There is really no advantage in moving this up.

The Member for Jalan Kayu mentioned this possibility of applying the maritime law. I am not familiar with that law but I do not think it is quite applicable to a landed situation, because with a ship you have special considerations.

Mr Heng Chiang Meng: Point of order, Sir.

The Chairman: You want to clarify something, Mr Heng?

Mr Heng Chiang Meng: I just want to point out to him that the use of maritime law is a very specific case. Whether it can be applicable to land law or not depends really on how the law is enacted here.

Mr Lee Yock Suan: Sir, I have a write-up here on maritime law which I could show the Member afterwards if he wishes. But the way I read it, it is not applicable because with ships there are a number of other considerations. The owner is not on board the ship. The cargo might not be paid and so on. Under maritime law, I understand, wages rank first for very special reasons. But that might not apply to, say, a situation in Singapore, a landed situation.

The Chairman: Mr Lee, I will stop you here and allow Members to speak.

Mr Jeyaretnam: Sir, I am moving away from the CPF to a subject which is very near my heart. I have spoken on this time and time again, and that is, the pass to which our workers have been reduced by this Government which came to power on the backs of the workers. It promised the workers that it was their Government which was going to bring justice to them in this land.

Perhaps I will illustrate the pass to which our workers have been reduced, by a case example. An employee in an engineering company brought to my notice the circumstances surrounding the termination of his employment. It happened in this way, Sir. He was at work which required two people to do the work at the same time. He had a colleague working with him at this job that was assigned to them. After two or three hours of work, the colleague decided that he had to take a little break to have a smoke. They stopped working for a few minutes and the colleague went off to have his little smoke. This man does not smoke and so he took out the Reader's Digest which he had in his pocket and was browsing through it, The Works Manager then suddenly saw him browsing through the Reader's Digest and, hey presto, within the next hour or so he got a letter warning him that he was found reading the Reader's Digest during his hour of work.

This poor man protested that there was nothing for him to do because his colleague had gone off to have a smoke and he could not do the job himself and so he was just browsing through this magazine. That would not do for the Works Manager and, he was told, he was warned. This man appealed to his union and I see there was a letter from a Member of Parliament replying to this, and the answer was, "Oh, no. We do not agree we can do anything about your case because, after all, you were reading the Reader's Digest, weren't you?" That was one incident. 3.30 pm

A month later, he got another warning letter, and this came about for this reason, Mr Speaker, Sir. There was an accident at the workplace and after the man had been conveyed to the hospital, some of the workers gathered round to see what had gone wrong, and he seeing them just went to inquire what was wrong and, hey presto, the next minute he had another letter saying, "You have been warned not to form groups of people."

And a month later, he had a letter: it has been decided that your services should be terminated; here is a month's salary, take it and go. This man has had some years of employment with the company, and the company obviously was building up towards terminating his services. So they had to find excuses or causes for his termination. No doubt they gave him a month's salary which is the sum allowed under the Employment Act.

This poor man has appealed to the Minister for Labour to ask him whether he would do something about this which he considered a most unfair dismissal of him. Mr Speaker, Sir, it is a dismissal, notwithstanding the man was offered a month's wages. I have not been able to speak to him today, but I do not think he has had any reply from the Minister for Labour yet, and that was two months ago when he appealed.

So this is the situation which our workers find themselves. They have no protection against the employer. The unions are not there to protect them. Is it any wonder, Mr Speaker, that the unions are losing their members? I see concern Voiced in the Press over dwindling membership of unions. Union leadership today, Mr Speaker, Sir, is management-orientated. Somebody was complaining to me the other day about elections to union leadership. Persons who want to serve the union and the workers and wish to stand for office in the union leadership suddenly find themselves transferred by the company to another place, depriving them of any opportunity to gain office in the union leadership. And I am told the same members find themselves back in office year after year. All management-orientated.

So what is the Government going to do about this state of affairs? Is it not time our workers have a break? I have spoken about the amendments that have been made to the Industrial Relations Act, to the Employment Act, which took away all the rights of the workers and have reduced them to the position of serfs. These amendments were made at a time when there was fear felt about Singapore's economic progress and the workers accepted the amendments. But now that we have come out of the uncertainty, the Government says we have made economic progress can anything be done now to restore the workers to their rights which they did possess at one time, and even before this Government came tO power in 1959? Today, our workers are but the playthings of employers and the union leadership. I have complained times without number about the complete helplessness of our workers. I would ask whether the Government now intends to repay a little bit of the debt that we Singaporeans owe our workers. They have contributed not a little to the prosperity of Singapore and I think they deserve a little more than what they have got from this Government.

I have referred to Section 14 of the Employment Act not once, not twice, but several times. I think the Ministry should take a closer look at Section 14 of the Employment Act. It was intended to afford some protection to our workers, but it does not. It is an empty section. I would ask that the Ministry give very serious consideration to strengthening the position of our workers by amending Section 14. 1 would ask the Ministry to consider introducing an Unfair Dismissal Act, which is now the law in a number of countries, where if a worker feels that he has been unfairly terminated, even by the grant of a month's wages, he can go to a tribunal and complain about the unfair dismissal. And then the tribunal will order his reinstatement. It is no good saying again the Minister can do this because I have said, time and time again, the appeal to the Minister in many cases is just an exercise in futility.

May I finally finish by saying, Mr Speaker, about this man, why the company got rid of him? Because he was, in the eyes of the company, a trouble-maker. He was somebody who was concerned about his fellow workers' benefits, their welfare and their rights. And so, between the union leadership and the company, this man has lost his job. Is this how we are going to treat our workers?

Dr Ow Chin Hock: Mr Speaker, Sir, on a point of clarification. The Member stated that he wants to move away from the CPF issue. May I ask him a question whether he shares the same views as the Member for Potong Pasir on CPF, in particular with regard to the following points: (1) CPF Board will be unable to pay back in the near future; and (2) whether CPF withdrawals will be put in M1 and hence cause inflation?

The Chairman: I think it is completely out of order.

Dr Ow Chin Hock: But he said he wanted to move away. I just want to ask him whether he shares the same views as the Member for Potong Pasir.

The Chairman: He has moved away.

Mr Lim Boon Heng: Mr Speaker, Sir, before I speak, may I ask a point of clarification from the Member for Anson, whether the worker that he was referring to was a gentleman called Mr Chua Chwee Kay?

Mr Jeyaretnam: You've guessed that right.

Mr Lim Boon Heng: Sir, the Member for Anson is predictable. We have heard his usual diatribe in this House about the -

Mr Jeyaretnam: Is he replying on behalf of the Minister, or is he making a speech?

The Chairman: He has got an amendment here.

Mr Lim Boon Heng: Sir, I am making a speech because I have two more amendments and I thought I will take up the time to clarify a few matters, because I am familiar with this case.

Sir, the unfortunate worker was issued a warning letter by the management because he was found not to be working but doing something else other than work when he should be working.

Mr Jeyaretnam: What did he do?

Mr Lim Boon Heng: In this particular instance, the management quoted the fact that he was reading the Reader's Digest instead of working.

Mr Jeyaretnam: What were the circumstances?

Mr Lim Boon Heng: Mr Speaker, Sir, the union took the matter up with the management and, after a series of discussions with the management, decided not to pursue the matter because, apart from this incident, the management pointed out to the union that there were many instances of his not performing his duties.

Mr Jeyaretnam: And you agreed.

Mr Lim Boon Heng: And therefore it was decided that, instead of giving him verbal warning, the management felt it was important to let him know, in writing, that his continued behaviour in this manner would not be conducive to the working environment of the company. We had discussions also with various officials and we decided that we would not continue to pursue the matter.

Mr Speaker, Sir, may I ask again a point of clarification from the Member for Anson, what were the circumstances under which a letter of termination was issued to Mr Chua Chwee Kay?

Mr Jeyaretnam: Well, I should have thought the Member would know that. He works with the management.

An hon. Member: He was a shirker.

Mr Jeyaretnam: All I was shown was a letter from the company saying, "It has been decided to terminate your services by offering you a month's salary." The management did not have to spell out its reasons because, under our Employment Act, you can just throw a worker out by giving him four weeks' wages, and tell him, "You cannot ask any question. Get out."

Mr Lim Boon Heng: Mr Speaker, Sir, the circumstances under which the letter of termination was issued by the company were different. The company was engaged in activities of a serious nature, and there were certain areas within this company that were restricted, and only authorized personnel could be allowed to enter those premises. Unfortunately, Mr Chua Chwee Kay was caught in these areas, without authority.

Mr Jeyaretnam: Why don't you charge him?

Mr Lim Boon Heng: The management issued a letter of termination. The union discussed this with the management on his behalf to see whether the management could retain his services in view of the contributions that he might have made to the company in the past number of years. The union made several attempts to find a solution with the management, failing which the union wrote to the Minister for Labour on behalf of this member, and the matter is with the Ministry of Labour.

Encik Yatiman Yusof (Kampong Kembangan): Mr Speaker, Sir, on a point of clarification from the Member for Anson. The Member for Anson cited one case which he says that the worker has not been given a right and he goes round saying that that represents the condition under which workers in Singapore are placed under the PAP Government. Is he saying that one case represents hundreds of thousands of workers in Singapore?

Mr Jeyaretnam: Yes. I know of several cases where the company has just thrown workers out by offering them this four weeks' wages.

Encik Yatiman Yusof: On a point of clarification, Sir. Does "several" represent all the workforce in Singapore, Sir?

Mr Jeyaretnam: You figure that out yourself.

Mr Lee Yock Suan: Mr Speaker, Sir, I think Members by now are very familiar with the story and the line that come out from the Member for Anson. Sir, there are always bad apples in any basket. I do not know why the Member is always associating himself with the bad apples and thereby generalizing that, "Oh, our laws are terrible, we are not looking after the workers' interest" and so forth, and making a big song and dance out of it.

An hon. Member: He is a bad apple.

Mr Lee Yock Suan: Our labour laws are fair. They provide the minimum conditions for employers and employees to enter into a contract of employment. I do not think, Sir, we want to over-provide in our laws. We must leave room for employers and employees to come to agreement themselves, to leave room for employers to show concern and care for the welfare of their employees. Now, this Section 14 has been mentioned which provides for appeals to be made in cases where employees feel they have been dismissed without proper reason or excuse. The appeal is made to the Ministry of Labour. My officers will look into it thoroughly. We will request the employer to explain their background, their reasons, justification, whether they have conducted due inquiry and so forth. 3.45 pm

[Mr Deputy Speaker in the Chair]

Mr Lee Yock Suan: This particular case that he mentioned, Sir, is something which my Ministry is looking into carefully. It takes time. He mentioned two months. It shows how carefully we are studying the case.

If there is a just cause for the employee's appeal, the Government will then order the employer to compensate the employee or to reinstate him. But we will have to look into the facts fully. The Member's usual line is that we must refer this matter to a tribunal. There must always be contention, and so on. But in these cases, my officers do their jobs to the best of their ability. It is a question of administrative policy. It is not a question of legal matters, commissions, and so on. It is a question of whether the employer has treated the employee fairly. So whether it is dismissals which are provided in the law, or whether it is terminations, if there is reason to believe that the employee has not been properly treated by the employer, such that the employer has used some excuse to terminate him, the employee can write in to the Ministry, and I can assure everyone that my Ministry will look into the case thoroughly and make sure that the interests of workers are well protected.

Sir, we are a small country. Our laws must be such that the framework for investment remains attractive. We can write the most iron-clad provisions into our labour laws to protect the workers. But if, in the end, we scare away the investors, then these laws are just empty pieces of paper. So we must get our priorities right.

Sir, as time is running short, l would just like to respond to two other points. One concerns the National Wages Council. This was raised by the Member for Boon Lay during the Budget debate and no reply has been given. I share the view of the Member that the NWC continues to have a useful role to play. The Council was set up 13 years ago to facilitate the transition from a labour-surplus to a labour-scarce economy. It has performed its function well and has contributed to industrial harmony and orderly wage increases over the years.

The NWC has been discussing a proposal from the employer groups to expedite the move towards direct wage bargaining at the enterprise level. This arose because employers believe that there are certain shortcomings with the NWC system. They are apprehensive that the NWC system may have contributed to higher wage costs.

While we understand the concern of the employers, I would like to urge all parties involved to examine carefully any proposal to phase out the NWC. We should work within the NWC system and try to improve on it, to make it more responsive to market forces rather than phase out NWC at this stage. We should not discount the contributions made by the NWC to the peaceful industrial relations climate and the orderly wage increases which we enjoy. It should be possible to make the NWC system work to the mutual benefit of both employers and employees. The NWC recommendations are only guidelines which are wide enough to cover a broad spectrum of companies. Moreover, actual wage agreements can depart from these guidelines. Employers and unions only need to convince one another that such departure is necessary because of the peculiar circumstances affecting the firms or the industry in which they operate.

The other announcement, Sir, I want to make concerns the problem of the levy on foreign workers. As you know, Sir, on the 1st October 1984, a flat levy of $200 per month was imposed on foreign workers other than domestic servants on the levy scheme in place of the then 30% ad valorem levy. The flat levy was scheduled to increase by $50 per month every six months as follows:

$250 per month from 1st April 1985;

$300 per month from 1st October 1985;

$350 per month from 1st April 1986.

In view of the current economic outlook and representation from employers, the Government has decided to defer by six months the increases in the levy sheduled to begin from 1st April 1985. The scheduled increase will be reviewed in six months' time.

The purpose of the levy is to ensure that the cost of employing such foreign workers will not be less than that of employing Singaporeans and permanent residents. It is to discourage employers from resorting to indiscriminate recruitment of such foreign workers. This will undermine efforts to upgrade our economy and increase productivity through mechanization and automation.

In the construction sector, it will hamper efforts to build up a permanent core of skilled local construction workers. To keep up the pressure on upgrading and to reduce dependence on unskilled and cheap foreign workers, it is therefore necessary for the increase to proceed as soon as appropriate.

Sir, there are one or two points on the CPF which I have not fully answered. The Member for Boon Lay raised this question of the interest on late CPF payments. I think this issue was raised in the House previously and an answer was given. The reason why the CPF Board has not been crediting part of this interest into member's account is that it is in the nature of a fine on the employers. It is meant to defray the expenses of the CPF Board in recovering the late payments on behalf of the members.

Nevertheless, considering the appeals by the hon. Member and by the public, I have asked the CPF Board to credit interest at 61/2% per annum to the members' accounts when the late payments and penalty interest are received. This will be with effect from 1st January 1985.

Sir, I hope I have answered all the questions. If I have missed out any item, will Members please bring them up now?

Mr Jeyaretnam: May I ask the Minister a question on the appeals to the Minister? He has told us that the Ministry receives representation from the employers once an appeal is received from an employee. Does the Ministry communicate to the employee the representations made to the Ministry by the employer, so that the employee may be able to answer them? My understanding is that nothing of this sort is done. That is why I say an appeal to the Minister is an exercise in futility. The poor worker does not know what representations are made by the employer to the Minister. And on what grounds the Minister has refused to intervene?

Mr Lee Yock Suan: Sir, may I say that the Member for Anson is completely wrong in his statement. The actual practice is - and I know of several cases which have come to my attention so far in my three months in the Ministry - that the employer's written submission is given to the employee, if need be. In fact, my conciliation officers, have called up both parties so that they can talk together with the conciliation officer, with a view to reaching a settlement. What better way than through direct discussion. So there is no question of our hiding information about why we decide one way or the other. The whole thing is done fairly and openly.

Dr Augustine Tan: Sir, at the end of the day, after a long debate, the surest protection for our workers is an economy with full employment and without inflation. Because as long as there is a plentiful supply of jobs, if any employee feels aggrieved or discriminated against, he can move to another job and he can better his prospects in the process.

Sir, Members have voiced a lot of concern about inflation in this House today. But if the truth should be made known, the real causes of inflation reside in these factors. Firstly, low savings rate. Countries with very low savings rate are very prone to high rates of inflation. Secondly, high government deficits spent wastefully on subsidies of various kinds. And, thirdly, in an effort to finance the heavy government deficits, large sums of money are printed. The M1, M2, M3 figures go up. Those are the real causes of inflation. And we can be thankful, Sir, that in Singapore we have avoided both unemployment and inflation.

Sir, if one were to simply take the 1984 figures for the CPF, $5.4 billion was credited to the accounts of members. $3.5 billion was withdrawn, of which $2.7 billion was for housing. In other words, $3.5 billion was withdrawn last year out of a GNP of $38 billion. Let us put it roughly at 10%, without inflation. By the year 2000, if the Member for Potong Pasir's figures are correct, $9.5 billion withdrawal out of a GNP of probably $95 billion by the year 2000, again a figure of around 10%. So there is no reason why CPF withdrawal per se should cause any inflation.

In fact, Sir, if hon. Members are willing, they could come up to the University and study the first course in economics and then they will realize some fundamentals of economics: that in any year you create a basket of goods and services which has a monetary value, and if you save some of that and later take some of that money and spend it, it is not going to cause inflation. It is only when you get the Government to subsidize PUB, bus fares, housing, ad nauseam, then you are going to cause inflation. As I said, Sir, we have much to be thankful for. In fact, if there is any worry about inflation, it ought to be this. If we were to elect a government that is irresponsible, wasteful, corrupt, then by the year 2000, even if you were to withdraw the $9.5 billion from your CPF, you will find $9.5 billion of worthless bits of paper. So that is the real lesson for us.

With that, Sir, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn. 4.00 pm

The sum of $34,811,460 for Head R ordered to stand part of the Main Estimates.

The sum of $44,391,900 for Head R ordered to stand part of the Development Estimates.

The Chairman: I shall now deal with the remaining heads of expenditure in respect of which no amendment stands on the Order Paper Supplement. In respect of the Main Estimates, they are Heads B, C, D, E, G and H.

I propose to take those heads of expenditure en bloc.

Question, "That the sums stated for those heads of expenditure which appear in the last column of the Schedule of Estimated Expenditure under the Main Estimates on page 17 of Paper Cmd. 4 of 1985 stand pan of the Main Estimates for the financial year 1st April, 1985 to 31st March, 1986," put, and agreed to.

The Chairman: In respect of the Development Estimates, the remaining Head is Head E.

The sum of $1,416,500 for Head E ordered to stand part of the Development Estimates.

Question, "That the sum of $8,348,120,020 shall be supplied to the Government under the heads of expenditure for the public services shown in the Main Estimates for the financial year 1st April, 1985 to 31st March, 1986, contained in Paper Cmd. 4 of 1985," put, and agreed to.

Question, "That the sum of $10,472,455,300 shall be supplied to the Government under the heads of expenditure for the public services shown in the Development Estimates for the financial year 1st April, 1985 to 31st March, 1986, contained in Paper Cmd. 4 of 1985, put, and agreed to.

Resolutions to be reported.

Thereupon Mr Deputy Speaker left the Chair of the Committee and took the Chair of the House.

The Minister for Finance, Minister for Education and Minister for Health (Dr Tony Tan Keng Yam): Mr Deputy Speaker, Sir, I beg to report that the Committee of Supply have come to certain resolutions.

First Resolution reported -

"That the sum of $8,348,120,020 shall be supplied to the Government under the heads of expenditure for the public services shown in the Main Estimates for the financial year 1st April, 1985 to 31st March, 1986, contained in Paper Cmd. 4 of 1985."

Second Resolution reported -

"That the sum of $10,472,455,300 shall be supplied to the Government under the heads of expenditure for the public services shown in the Development Estimates for the financial year 1st April, 1985 to 31st March, 1986, contained in Paper Cmd. 4 of 1985."

Dr Tony Tan Keng Yam: Sir, I beg to move, "That Parliament doth agree with the Committee on the said resolutions."

Question put, and agreed to.

Resolutions accordingly agreed to.