DEVELOPMENT LOAN (AMENDMENT) BILL

Order for Second Reading read. 3.45 pm

The Minister for Finance and Minister for Health (Dr Hu Tsu Tau): Mr Deputy Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

The various Development Loan Ordinances and Acts authorize Government to raise domestic loans to finance development schemes. The total value of such loans is now $18.2 billion and the bulk of this has been borrowed from the CPF. The provisions in the Development Loan Ordinances and Acts provide firm guarantees that not only will interest on borrowings be paid regularly but also that each loan will be redeemed in full when it matures. In particular, the legislation stipulates that a sinking fund be set up for each loan and annual contributions made from the Consolidated Fund to the sinking fund. The contributions to the sinking fund together with interest earned on these would in normal circumstances be sufficient to redeem the loan when it is due for repayment.

Since 1968, in addition to the mandatory annual contributions, Government has made accelerated or enhanced contributions to the various sinking funds. Owing to the enhanced contributions, the total amount in the sinking funds is now $11.5 billion, more than sufficient to meet current domestic loan obligations.

The practice of making enhanced contributions is a prudent measure to ensure that there are always sufficient reserves to redeem domestic loans, the bulk of which have been raised from the CPF, when these fall due. In particular, enhanced contributions should be made in those years when revenue performance is good so that contributions could be reduced during lean years while ensuring that there are sufficient funds to redeem the loans on maturity. Also, it was considered that such contributions were not prohibited by law as the various Development Loan Ordi- nances and Acts only specified minimum contributions that had to be made.

Sir, the Public Accounts Committee (PAC) of the previous Parliament, in a Report released last year, agreed that it was prudent to make enhanced contributions to the sinking funds. The PAC, however, requested the Auditor-General to seek the advice of the Attorney-General on the law in relation to such enhanced contributions. The Attorney-General subsequently advised that any doubt about the interpretation of the law could be removed by amending legislation to make specific provision in the various Development Loan Ordinances and Acts for enhanced contributions to sinking funds.

The Development Loan (Amendment) Bill, 1985, therefore, seeks to provide specific sanction in statute for this long-standing and prudent practice which has resulted in the sinking funds now being more than sufficient to redeem all current domestic loan obligations when these fall due.

Clause 2 of the Bill seeks to introduce a new subsection within the existing section on sinking funds in each of the Development Loan Ordinances and Acts listed in the first column of the Schedule to the Bill. The new subsection will enable the Minister to authorize enhanced contributions to be made to any sinking fund subject to the total amount in the sinking fund at any time not exceeding the outstanding principal sum of the domestic loan.

Clause 3 of the Bill seeks to regularize enhanced contributions that have been made in the past or that might be made between now and the coming into operation of the amending legislation.

Sir, I beg to move.

Question put, and agreed to,

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Dr Hu Tsu Tau].

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