PRESIDENT'S ADDRESS Debate on the Address (Fifth Allotted Day)

Order read for Resumption of Debate on Question [24th February, 1986],

'That the following Address in reply to the Speech of the President be agreed to:-

"We, the Parliament of the Republic of Singapore, express our thanks to the President for the Speech which he delivered on behalf of the Government at the Opening of the Second Session of this Parliament.".' - [Dr Aline K. Wong].

Question again proposed.

Encik Wan Hussin bin Haji Zoohri (Kampong Ubi): ( In Malay): Mr Speaker, Sir, over the past four days we have heard plenty of arguments and comments, almost all of which revolve around the economic aspects. Therefore, today I would like to shift the debate onto the non-economic aspects, which I consider not less important, within the framework of our efforts to restore our economy. Let me begin by examining once again the President's Address itself.

I would like to draw attention to the significance of the President's Address in the context of our constitutional government. To my mind, the President's Address is the embodiment of the people's expectations and aspirations which they have entrusted to the Government democratically to continue to build a peaceful, just and prosperous society. The Address is the turning point and culmination of the people's aspirations to be translated into action by the Government towards the attainment of a peaceful, just and prosperous society. Hence the need to view the Address in its totality, and not from fragmented segments. It must be viewed in the light of its substance as a whole. It must be examined from its wide-ranging directions and inhibitions and it must be practised in its substance and spirit. Therein lies the quality of the President's Address.

However, the President's Address must be viewed in conjunction with the 1DPM's speech and also that of the Report of the Economic Committee itself, for the three are very closely intertwined. And if we scrutinize these three important documents, I find that all of them contain three important characteristics. Firstly, they are very pragmatic in nature for we notice that we acknowledge our economic ills which we are currently experiencing; together we endeavour to find solutions to surmount our economic difficulties and in the process nearly 1,000 people have toiled and troubled in order to find solutions, and we are courageous enough to take concrete and drastic measures. The second characteristic contained in the three documents is that the whole structure is systematically arranged. We observe that the causes and the solutions thereof are classified, orderly and objectively. We are well informed concerning the causes and effects and we are provided with the short term and long term solutions. The third characteristic I notice which is contained in the three documents is that all of them are optimistic in nature. The documents urge us not to groan and moan; neither to be gloomy nor helpless in our present situation. On the contrary, the documents inspire us to organize ourselves; to be cohesive and act in concert and only with this optimistic attitude can success be assured.

Mr Speaker, Sir, if we study closely our present economic recession, I think it is identical to the condition of a sick person. A sick person will naturally consult a doctor who will examine him, ask questions of him and then diagnose his sickness. This will be followed by advice, and medicines prescribed and, if necessary, the doctor will give injections and, if necessary again, the sick person will be advised to undergo an operation. We know that whether it is medicines, or injection or operation, none of them is palatable. There will, of course, be aches and pain, and also agony. However, after the treatment, the doctor will invariably advise the patient not to be overly worried about his illness and to be cheerful and this will help to cure his ailment much quicker. This analogy is identical with our present economic recession. Our economic doctors have already examined and identified the causes of our economic downturn. Subsequently, the Government has recognized these causes, thereafter proposed several measures in the form of medicines and injections which are somewhat bitter and painful but which are capable of reviving our economy. Finally the Government has urged the people not to feel resentful nor depressed as this will exert our energy and thereby render us feeble to recover normalcy. There are people who say that our present economic condition is not yet severely affected. It may be likened to it suffering from flu or influenza but not yet pneumonia. However, let us endure a little suffering and make some sacrifices now in order that we may enjoy the comforts later. Let us incur a little loss through CPF cuts as long as we do not lose our jobs and all, as a Malay saying goes: "Biar tersenget jangan tertiarap; biar titik jangan tumpah" translated means, "Never mind a drop or two but do not spill much."

Mr Speaker, Sir, I said earlier that there were several non-economic factors which I consider important for us to focus our attention to because, based solely on economic factors, without the support of the spirit, character and attitude of the people, most of which depend on the non-economic factors, then I feel that our success will be limited. What are some of these non-economic factors? Firstly, I think the most important is how the value system and the attitude which are inherited by a society can determine whether the standard of that society can progress or retrogress or go upwards or downwards. Here I wish to draw the attention of the House to several characteristics propounded by an economic expert named Gunnar Myrdal, in his book entitled Asian Drama: An Inquiry into the Poverty of Nations. In this book several characteristics are mentioned within the framework of modernization. This author defines all of these characteristics as the modernization ideals. I feel that this bears repetition because in the string of characteristics we find that in our society are found most, if not all, of the characteristics and which our society has inherited and practised.

In order to save time, allow me, Mr Speaker, Sir, to read out these characteristics in English for easy and correct understanding. Thirteen characteristics have been mentioned as important in order to ensure whether a society can progress, upgrade or otherwise. First is efficiency characteristic. Second is diligence; third, orderliness, fourth punctuality; fifth, frugality, sixth, scrupulous honesty; seventh, rationality in decisions on action; eighth, preparedness for change; ninth, alertness to opportunities as they arise in a changing world; tenth, energetic enterprise; eleventh, integrity and self-reliance; twelfth, cooperativeness; and lastly (13th) willingness to take a long view. Notice that most of these characteristics are inherited and practised by our society. And the second factor, which is non-economic and which is not less important, is defined by Gunnar Myrdal in his book, The Challenge of World Poverty, which says that we are not a soft state. What really is the definition of a soft state? The author says that a soft state finds itself difficult and slow to develop. Once again, allow me to quote in English: (In English)

'The term "soft state" is understood to comprise all the various types of social indiscipline which manifest themselves by: deficiencies in legislation and in particular law observance and enforcement, a widespread disobedience by public officials on various levels to rules and directives handed down to them, and often their collusion with powerful persons and groups of persons, .... and corruption.'

Mr Speaker, Sir, the problem of corruption is very rampant in many countries. But with respect to Singapore, we score high marks and this is stated by the author himself in his book mentioned above. He says:

'Singapore is one of the few spots in the underdeveloped world (with) a clean government ...'

This was stated in 1970. It was true and valid 15 years ago and it is still true and valid now.

(In Malay): After having said all this, I fail to see how we can accept the allegation that we have mismanaged the State. Let us look at our situation now. How can we misgovern this country when the per capita income of Singapore stands at No. 22 in the world for 1983? How can we mismanage the State when the life expectancy of our society is 72.3 years and this is on par with other developed countries? How can we mismanage the country if 80% of our population live in modern HDB apartments? How can we mismanage the country when one out of 11 persons owns a motor car?

And how can we misrule the country when we know for a fact that many of us own TV sets and telephones? These are obvious facts. But the Opposition Members deliberately refuse to see these facts. The Opposition is unwilling to acknowledge these excellent facts. We have been able to rule for such a long period until today with the support of the people for 25 years. Our excellence is like a star in the sky. This reminds me of a saying by Confucius who says:

'The rule of virtue can be compared to the pole star which commands the homage of the multitude of stars without leaving its place.'

This shows the strength of our Government over the last 25 years. And I feel we will continue to grow from strength to strength in the years ahead. Recognizing our successes, I am puzzled as to what is the yardstick adopted by the Opposition to allege that we have mismanaged and misruled the State. I can only draw one conclusion as to how they reached their erroneous decision, and that is, they practise a set of political philosophies diametrically opposed to ours. They practise an unsavoury political philosophy. They practise a deviationist political philosophy. I call their political philosophy by the name 3D. It is not three-dimension politics. Firstly, they practise what I call politics of dissent, ie, they practise politics of rejection. They will reject whatever that is good. Secondly, they practise politics of destruction, ie, they will try to destroy whatever we have built over the last 25 years. And, thirdly, they practise politics of doom, ie, they will do everything in their power to disrupt --

Mr Chiam See Tong (Potong Pasir): Point of clarification, Sir. I am sure the Member is not afraid to give way.

Encik Wan Hussin Zoohri resumed his seat.

Mr Chiam See Tong: Sir, he said that the Opposition has practised 3D politics. What evidence has he got that the Opposition is destroying --

Mr Speaker: What clarification do you want, Mr Chiam?

Mr Chiam See Tong: The evidence. He is making all kinds of wild allegations which are not true. If he wants to know what we are dissatisfied about, there are 600,000-odd workers who have less than PSLE education. You say that we have plenty of facilities for education.

Mr Speaker: I did not say it. You keep on saying, "you". I did not say it.

Mr Chiam See Tong: All right. Let us have the evidence that we practise 3D politics.

Encik Wan Hussin Zoohri: ( In Malay): Mr Speaker, Sir, this then is the nature and brand of the Opposition. They have a penchant for looking at one weak aspect and then blow it out of all proportion. Let me continue. The three political philosophies, ie, politics of dissent, politics of destruction and politics of doom, are diametrically opposed to what we practise. Our politics is simple but our politics is of the qualitative type. What I wish to drive home is that our politics which I define as the politics of ABC is, firstly, we practise politics of assent, meaning we endeavour to get the concurrence of the public at large. We strive for the people's recognition of our manifesto. This is the hallmark of our politics. Secondly, we practise the politics of boom and not doom because we have guaranteed the prosperity of our people for the last 25 years. We have provided many comforts for our people. And, lastly, we continue to practise the politics of construction and not politics of destruction.

Mr Speaker, Sir, the people of Singapore are more intelligent than the Opposition. The people of Singapore have made their choice of their political affiliation in order to safeguard their future. As the Malay saying goes: "Jauhari juga yang mengenal manikam", which means, "Only the jeweller knows best about gems."

That is all, Mr Speaker, Sir. 11.23 am

The Minister of State for Health and Foreign Affairs (Mr Yeo Cheow Tong): Mr Speaker, Sir, I rise to thank the President for his Address.

Over the past few months, one topic or worry has been foremost on all our people's minds, ie, the recession in Singapore. Hardly a week went by without an article on this subject appearing either in the local press or in the foreign press. During this period, members of the Economic Committee and its sub-committees spent long hours gathering and, sifting through masses of data, collecting feedback and viewpoints, carefully and systematically analyzing the information and, finally, identifying the causes of the recession and formulating the recommendations needed for correcting the situation.

Two days ago, the First Deputy Prime Minister in this House announced the measures this Government is implementing to lift us out of our problems. My fellow PAP MPs have over the past four days very thoroughly, constructively and critically debated the Report of the Economic Committee as well as the measures designed to nurse our economy back to health.

All the important points have already been well covered. There is no need for me to repeat all their arguments. I therefore urge all Singaporeans to focus their minds and energy on the key objective which must be to regain our competitiveness, to preserve the existing jobs and to create new ones. Let us not indulge in further debating and arguing over the desirability of certain marginal changes to the bold measures that have been announced. We must waste no time in ensuring that the $2.8 billion that will be injected directly into the economy this year will not be frittered away. Lost time in business equals lost opportunities and such opportunities may never return. It means all of us must view our situation with positive frames of mind. Moaning and bickering or waiting for even more help from the Government will not bring us a single step closer to salvation.

Over the past few months, I have had the chance to meet various people, many of them reasonably optimistic, others were resigned to their fate or pessimistic. At one function recently, I was approached by several businessmen who wanted to unload their complaints to me. One of them was describing how bad his business was. Turnover was down, profits were down, everything was depressing. The only good thing that had gone down, in his mind, was his golf handicap. To take his mind off his problems, he was playing more golf. He was, in fact, travelling less on business trips in order to cut down on expenses. "Anyway," he said, "why travel? Business is equally bad elsewhere." Sir, I fear that in such a rapidly changing and competitive environment, the only continuing improvement he will achieve will be in his golf game. He will see his business further eroded by aggressive marketing by his competitors.

Sir, let me bring up another example of the opposite frame of mind. I met a young man in his 30s recently. When I asked him how was his business, he started off by saying that he had rotten luck. Up to early last year, he was the happy general manager of a relatively successful small local company. Feeling the urge to be his own boss, he resigned and started up his own company doing a bit of printing and selling various items to the local and regional markets. Finding the local market pretty tough, he looked around and, anticipating that India under Prime Minister Rajiv Gandhi might present a huge attractive market, decided to visit India late last year to market his products. Upon his arrival, to his great horror, he found that the Indians had already started producing similar items with comparable quality but at a much cheaper price. The Indian Government had apparently, in the middle of last year, removed restrictions on certain high quality raw materials that were needed for this product. He was really in a fix. There he was in India trying to sell his samples and not finding anyone who was prepared to look at them. His mind boggled at the thought of these same products being exported to Singapore. In his mind, he could see himself as a bankrupt, just a year after embarking on his own business. He thought such are the vagaries of business.

However, not one to be beaten, he located one of the Indian manufacturers and after a few days of hard bargaining, convinced this Indian gentleman to let him be his Asia-Pacific distributor, of course, subject to certain performance commitments. Today, he has made plans to visit Australia to market his Singapore and Indian products and has started trial shipments to some Malaysian and Indonesian dealers. There is no guarantee that he will succeed. But one thing for sure, he will never be held down. But if he succeeds, he will create more jobs for other Singaporeans. Sir, I have brought up this second example to urge Singaporeans to emulate his positive thinking and his fighting spirit. The markets outside may be competitive and tough, and tough they are. But someone is still selling the goods. We can ensure a fair share of those goods will be ours, but only if we are competitive, both in price and quality. Then not only will jobs be preserved but more jobs created.

Mr Speaker, Sir, please allow me now to comment on the development of Singapore as a centre of medical excellence, as mentioned in the President's Address. The hon. Member for Ulu Pandan has also made some very interesting suggestions on this topic. The Ministry will carefully study them. The Ministry is presently working on the next stages of the process to attain medical excellence. The present standard of medical expertise and services in Singapore is generally high in the context of our immediate region, but has not reached the standard of the internationally renowned medical centres. Although our doctor to population ratio is adequate, there is still a relative shortage of specialists in certain specialities. This is especially so in the public sector. Modern medical services are delivered not by doctors alone but by a whole health team. So we will need to train not only more specialists but also other members of the health team, such as specialist nurses, laboratory technicians and technologists, bio-medical engineers and many others. Our hospitals will be restructured gradually to allow autonomy and flexibility in operations. Better services can therefore be provided for the general public as well as to provide greater motivation to the staff.

The private sector must also play its part actively and constructively in making Singapore a centre of medical excellence. In 1984, foreign patients made up 45% of admissions into private hospitals. They generated export revenues of $82 million. In addition, $62 million was spent by patients and their family members on non-medical services and goods. The Member for Ulu Pandan had pointed out the other day that unfortunately the foreign clientele had declined over the past few years, mainly because of the following reasons: (1) The economic situation and exit levies imposed by neighbouring countries. (2) The high charges imposed by Singapore doctors, private hospitals and other supporting facilities. Well, we cannot do anything about the external constraints. On the other hand, the recent drastic drop in hotel charges will help somewhat. I agree with the Member for Ulu Pandan that the key factor must be some self-discipline or self-regulation on charges by the profession and by the private hospitals. Let us not kill the goose that lays the golden eggs. A reputation once damaged will be very difficult to rebuild. The Ministry has also recognized that some medical research and development must be carried out if we are to progress further. We will look into how this can be achieved, especially in view of budgetary constraints. We will also encourage the organization and sponsorship of local and regional medical conventions, seminars and workshops so as to act as a catalyst for further clinical research.

On the National University Hospital, I would like to allay the concerns of the Member for Ulu Pandan about its priori- ties. As a University Hospital, its objectives must necessarily be teaching, research and service, in that order. Unfortunately one cannot divorce service for patients from undergraduate training. In addition to formal lectures, medical undergraduates learn by following the doctors and teaching staff in the hospital wards. They assist in patient care, supervised by the senior doctors. The bulk of the patients will be locals, but the hospital will not turn away foreign patients who are prepared to pay the full price.

Sir, all these developments together will help make Singapore a centre of medical excellence.

Sir, I support the motion. 11.35 am

The Minister for Finance (Dr Hu Tsu Tau): Mr Speaker, Sir, may I have your permission to say a few words concerning the Singapore dollar exchange rate. This is because a number of questions have been raised in the House on the subject, particularly the misconceptions which seem to have arisen about MAS's policy which it is believed would tend to contradict the recommendations of the Economic Committee.

I can assure the House, Sir, that this is totally untrue. To quote the recommendations of the Economic Committee. It says:

'The Committee is of the view that the Singapore Dollar exchange rate should be set by market forces. The Dollars should, as far as possible, be allowed to find its own appropriate level and one which reflects fundamental economic trends.'

This is precisely the policy of the MAS. And I have said this in public several times in the past. However, I think Members of the House may still remain skeptical, so I will explain.

The strength of a country's currency is determined by a number of fundamental factors, and these include its basic balance of payments position which is a reflection of the demand for a country's currency by its trading partners, investment flows into the country and short-term capital movements for financing of trade. In this area, Singapore's fundamentals have always been very strong. Another important factor determining exchange rate differentials is the relative inflation rates between countries which determines the comparative purchasing power of currencies. Again, in this respect, Singapore has always enjoyed very low inflation rates relative to its major trading partners. Another important factor determining rates would be the position of the Government's finances or fiscal position, budget surpluses, whether a country runs a surplus or a deficit, whether it needs to borrow externally or has either nothing or large external reserves. In all these aspects, Singapore's fundamentals have always been and still remain very strong. Finally there is the more general situation in which foreigners' confidence in the country is determined by political stability in the country and its investment climate. Again, I think Singapore excels in this area.

For a combination of these reasons, up to at least the middle of 1985 probably, the Singapore dollar has been steadily appreciating against most currencies of its trading partners. During this period, the MAS policy has been, in fact primarily, to intervene in the market in order to keep down the rise of the Singapore dollar. It did this by purchasing US dollars in the market place, and thus adding to our external reserves. So there was no question of propping up the Singapore dollar. In fact, we were trying to keep it down. Since then, of course, with the weakening of the economy of Singapore, the Singapore exchange rate has, in fact, adjusted itself to market realities. I will give you some examples.

Taking the exchange rate for the period 1st January 1984 to the rate prevailing yesterday, a period of roughly two years. In early of 1984, Singapore's economy and its fundamentals were very strong. It has weakened since then. Against the US dollar, it has weakened marginally by 0.7%. However, against the Deutsche Mark it has declined by -21.8%. Against the Sterling Pound it has declined by -6%. Against the Yen by -24.5%. Against the French Franc it has declined by -21.3%. Against the Swiss Franc it has declined by -17.2%. Against the Malaysian Ringgit it has risen by 5.1%. Against the Rupiah it has risen by 13.4%. It has weakened against the Hong Kong dollar by -0.7% because the Hong Kong dollar is linked to the US dollar. Finally it has weakened against the Taiwan Yuan by -6.5%.

This shows quite clearly that the Monetary Authority does not artificially prop up the Singapore dollar against the currencies of its major trading partners. In fact, the policy of the Monetary Authority is to ensure that there is a stable market condition for the Singapore dollar exchange rate and it intervenes where necessary in order to ensure that there will be no disorderly movements either upwards or downwards which will disrupt the market and to stop unnecessary speculation. In order to do this, it monitors the movement of the Singapore dollar against a basket of currencies of its major trading partners. Unfortunately the market tends to focus on one currency alone, and that is the US dollar. In this connection, as I have said, the Singapore dollar has only weakened by 0.7% against the US dollar, simply because the US dollar over this period has itself weakened considerably against most other major currencies. Surely the market does not expect the Singapore dollar to fall even further. I hope this will be sufficient to dispel any rumours or beliefs that the MAS pursues a policy independent of the Government to satisfy its own whims.

Finally, there is a misconception that the MAS is determined to uphold the value of the Singapore dollar in order to protect the status of Singapore as a financial centre. Again this is not true. Why is it so? Take Hong Kong, for example. The Hong Kong dollar until it was pegged to the US dollar depreciated very, very severely because of its uncertain political situation. That has not in any way affected Hong Kong's status as a financial centre. Similarly for London, which the Sterling Pound has depreciated substantially; no one has suggested that London has declined as a financial centre. Again, for the United States, the US dollar has depreciated substantially. Is anyone suggesting that New York is no longer a financial centre? Again, you see, these are misconceptions which are unfortunate and are based on a lack of understanding of the real situation.

Dr Augustine H.H. Tan (Whampoa): Just two points of clarification on the Ministerial statement, Sir. The first question is whether in the period between 1980 and mid-1985 the MAS intervened sufficiently? Nobody questioned that the MAS intervened to keep the Singapore dollar down or to keep the Singapore dollar from being too strong. The question is whether it intervened sufficiently. The evidence seems to show, from the presentation of the Minister, that we are very much tied to the fortunes of the US dollar because in a period when the US dollar was very strong our currency was also very strong, against virtually most of the other currencies. Now that the US dollar has been going down since last September, we also have been going down vis-a-vis a whole host of other currencies.

Sir, the other question that must be posed is whether the basket of currencies and the weights assigned to the different currencies are appropriate enough for Singapore? If not, can we do something about it? Do we not have a little degree of freedom to decide the degree of monetary expansion in Singapore? Do we want more liquidity or less liquidity domestically?

Dr Hu Tsu Tau: May I respond to the Member. Indeed, the composition of the basket, of course, is a matter of judgment, and perhaps we can discuss this outside the House. However, the strong linkage to the US dollar, I think, is almost inevitable because not only is the US our major trading partner but it is also the currency of denomination of a lot of our imports. So it has a strong influence in the basket weighting, obviously. But whether there should be more weighting or less weighting, and whether we should depart more or less from the US dollar, is a matter of judgment, and I do not think I want to enter into a public debate on this. Whether we should have intervened more, again, it is a matter of judgment. I think one has to balance the strength of the currency and its weakness on the overall impact on the economy. In a country like Singapore which does not have a large agricultural base or a large domestic resource base, a weak currency has more negative effects than positive effects. Weakening your currency such as a major devaluation will not generally benefit you other than very, very marginally. Its undesirable effects are much more, in that it will invite inflation and almost inevitably cause a rise in domestic interest rate which is something we do not wish to do. 11.47 am

The Parliamentary Secretary to the Minister for Community Development (Mr Teo Chong Tee): Mr Speaker, Sir, on Wednesday, the First Deputy Prime Minister announced several measures to beat the present recession. I have had the opportunity of talking to some people who are directly or indirectly affected by the current recession. Although their response to the announcement was favourable, they commented that the wage restraint should not be applicable to every company. They were in favour of wage restraint initially for one year, subject to extension for one more year only if it is absolutely necessary for firms which are hit by this recession. Companies which continue to perform well and enjoy vigorous growth, despite the recession, should not take advantage by implementing wage restraint, especially the drop in oil price has appropriately come about for them to benefit additional profits. I am in full agreement with their comments and I hope the Government will bear this in mind.

Sir, on the 25% income tax rebate, they were overjoyed because they had not expected the Government to be so generous in giving them the concession. They expected a concession but not as much as 25%. Nevertheless, the rebate must have made many taxpayers happy.

On the whole, the remedial measures announced by the First Deputy Prime Minister are very practical and encouraging, although some of them may have painful effects on our workers, particularly those who are in the lower income group. In my opinion, these measures are the correct medicine which could be best prescribed for our economnic ills. They are appropriate and necessary at present so that existing jobs are not lost.

Mr Speaker, Sir, the younger Singaporeans have not had any experience of hardship which the older generation or our senior citizens had in the early years. Therefore, the economic downturn must have come as a surprise and a rude shock to most of them. Following the two decades of continuous economic progress, it is not unnatural for Singaporeans' expectations to go up and for Singaporeans to take the prosperity of the nation for granted. It is also not unnatural for Singaporeans to assume that they will forever enjoy the high standard of living unrivalled anywhere else in the third world. Home-ownership, good education, excellent medical services, recreational facilities (you name them, you have them) are many of the marvellous achievements brought about by the PAP Government for the benefits of all peace-loving Singaporeans during the last two decades. However, Sir, the present recession may turn out to be a blessing in disguise. It may jolt the people out of their complacency.

Sir, this is not the first time our nation is facing adversity. Many older Singaporeans will recall that when the PAP first came to power in 1959, many businesses shut down in Singapore and re-started elsewhere, causing massive unemployment among Singaporeans. After we left Malaysia, we were confronted with the British military withdrawal. Thousands of businessmen and shopkeepers, who had dealings with the British servicemen and their families, faced a bleak future. Many prophets of doom expected the Singapore economy to collapse. Far from it, it was the PAP Government which took realistic, decisive and bold measures to counter the adverse economic effects of the military withdrawal. With the full cooperation of the people of Singapore at that time, we were not only out of the woods within a comparatively short span of time but were also able to forge ahead to prosper beyond our wildest dream. We were also confronted with the oil crisis. Again, it was the PAP Government which took Singaporeans through the difficult times and Singapore had continuous growth in our economy.

Each time the Government was able to overcome the difficulties that affected our population. The Government's ability to overcome all the difficulties was not by chance or due to some miraculous cure but largely due to the far- sighted leadership of the PAP Government working in tandem with the hardworking and intelligent population and the trade unions. Nowhere else could such tripartite system work so successfully, though it was no easy task for the PAP leadership. However, the PAP Government was able to cushion off the hardship faced by Singaporeans then. I am confident that the same PAP Government, working closely with the people, could also do it now to alleviate whatever hardship caused to all Singaporeans in our current recession.

Therefore, this is not the time for Singaporeans to sulk and cry over spilt milk or to try and find someone to point an accusing finger at, just as what the two Opposition Members have been doing, for the plight we are in. On the contrary, it is time we galvanize ourselves and put our shoulders to the wheel to overcome our present predicament.

To see fruitful results, Singaporeans must work together with the Government in its urgent implementation of the recommendations contained in the Report of the Economic Committee and the key measures announced by the First Deputy Prime Minister. The people, particularly the younger workers, must face the harsh reality with grit and prove to themselves and the rest of the world, that they are made of sterner stuff and are prepared to make temporary discomforts and sacrifices for a quicker revival of our economy and for the long term prosperity of the nation.

I urge Singaporeans not to go for soft options and must never, for a moment, forget that nobody owes us a living. Our position is vulnerable. We must always remind ourselves that being disadvantaged due to the constraints of land size and natural resources, we must be better educated and trained, better be able to adapt to changing circumstances around us than others or else we will be left in the lurch. To be inflexible and to cling on to old ways of life will mean weaknesses and finally destruction for all of us.

Mr Speaker, Sir, although the present recession seems to be more complex in nature, I have the fullest confidence that with the same kind of unwavering determination and concerted efforts we used to show before, we should be able to ride the present storm and evolve more competitive, resilient, tougher and more cohesive as a people. May I therefore call upon all Singaporeans to rally solidly around the PAP leaderhip, tighten our belts a little and be prepared to live with some temporary discomforts and inconveniences so as to overcome the present bad times and sow the seeds for a better tomorrow.

Singaporeans are pragmatic and understanding people. I am sure they will heed the President's call to all Singaporeans to work together with the Government. It is time we set aside petty issues and differences and fully support the Government to regain our prosperity as soon as possible. There is no other way out of the present recession. Either we stand together and beat the recession successfully or we face economic collapse and more hardship. The choice is obvious.

Sir, I support the motion moved by the hon. Member for Changkat. 11.52 pm

The Acting Minister for Trade and Industry (BG Lee Hsien Loong): Mr Speaker, Sir, after a wide-ranging debate on an issue of momentous importance in this House, let us now re-focus on the basics of what is involved. Let us see our problem in its proper context.

What is our aim in this exercise? Why have we gone through this immense labour, extensive consultation, discussion, analyses, evaluation and now implementation? What are we trying to do? Our aim is to secure the standard of living of Singaporeans, the livelihood of Singaporeans, to make sure they have jobs, to make sure they have secure incomes, to make sure they have homes to live in, and to make sure there is a future for their children. That is what we are about. How do we do that? By restoring the economy to health and rekindling growth as quickly as possible. So the objective is growth. How do we get growth? Not by redistribu- tion, not by taxation, not by genuflexion and wishing for the best. We get it by creating opportunities to do business in Singapore. We get it by making it profitable to do business in Singapore. If the opportunities are there, if the potentials for profit are there, then there will be business, then there will be growth and wealth, and then there will be income to be shared fairly with the population. If there is no increase in GNP, there is very little to quarrel about. Therefore, when we are discussing action to be taken and policies to be implemented, we should focus on one criterion to judge whether these are good policies or bad policies. The criterion is: Does this promote growth and restore the economy to health as quickly as possible, or is it an aspirin which will help you get over a hangover but will not remove the underlying cause of your headache?

If the policies will restore growth, then we must implement them even if they are uncomfortable, even if they involve sacrifices, even if they are unpopular, because the consequences of not implementing them will be less growth, vastly greater unpopularity for the Government and enormously increased misery for the population. So we want growth. Where do we get it? We get it by being competitive.

At the press conference announcing the Report of the Economic Committee a few weeks ago, one reporter asked me, "We have done all this. Now, what will happen if our competitors do the same? Then what do we do in Singapore?" My answer was: Our competitors have been doing the same, all along! We have failed to watch them. We have failed to keep up with them, and that is why we are in this position. They also have difficulties. Taiwan formed an Economic Reconstruction Committee last year, at the same time as we in Singapore established an Economic Committee. They were faster off the mark. They completed their report faster. In November, I received a complimentary copy of their report. I read it carefully to see if there were any lessons to be learned from it for Singapore. In February, when we published our Report, I reciprocated the courtesy. They will study our conclu- sions to find out if there is anything to be learned for them. And they will attempt to change, to react and to put their house in order as quickly as we can, if not faster. So this is a competitive game. To win, we have to be quicker off the mark. And having been quicker off the mark, we have to stay ahead in the race; and there are no consolation prizes.

How do we become competitive? I think all the issues which have been discussed in the last few days are related. Let me take them in turn. Firstly, costs; secondly, productivity; thirdly, taxation, and fourthly, our performance as a people, as a whole.

First of all, costs. Costs are not just high CPF rates. Costs of doing business refer to all the aspects, all the things you must pay for. Even taking wages alone, CPF is not the only problem. CPF has been a problem for the lower paid where it has raised the cost of employing workers. It has been much less of a problem for management staff, where the effective CPF rate is less than 50% because there is a ceiling. Yet our management costs have gotten out of line. Why? Because we have developed fast, we have grown quickly, we have developed shortages of managers, we have not produced enough university graduates, polytechnic graduates, skilled people, to run our enterprises. And so our management costs have gone up, and people say that in Singapore it is no longer profitable to do business. So let us not get mesmerized by the CPF problem.

But it is not just wages and CPF. These we have identified and we will now attempt to keep in line. Crucial. It is also our rental costs, our interest rates, our statutory boards' charges. All the other components of doing business in Singapore have to be competitive. And if we keep them low, not by subsidizing them but by doing things efficiently and providing services economically, then we will have kept our costs down - the first element of being competitive.

The second element of being competitive is to raise our productivity. Why is it that a Japanese worker can be paid three or four times as much per hour as a Singapore worker, and yet they do not have a cost problem, they do not have a recession? Because they are more productive than us. And if we want to be paid as much as they are, we have to be as productive as they are.

There has been a widespread misunderstanding that productivity is a worker's problem. The unionists, Members for Boon Lay and also for Kebun Baru, have eloquently pointed out that this is not just the workers' problem although workers are critical to it. You must have a good work attitude, you must be conscious that your contribution counts, you must work efficiently, you must be well-trained, you must be able to contribute more for every hour which you put in. That means work harder, work more flexibly and work smarter. If you do not do that, if you have workers who say, "Well, new machine, less work. You compensate me for the new machine which threatens to replace my job" as has happened in other countries like Britain, then there will be no new machines, there will be no productivity increases. So the workers are the first half of the productivity problem. But they cannot solve it by themselves. To solve it, you need management. Managements have to be better. How productive a manager of a firm is does not depend on how many hours he sits at his desk. It depends on how wisely he thinks, how far-sightedly he plans, and how intelligently he manages his firm and leads his people so that, as a group, they produce results.

That is why the Economic Committee has focused on business efficiency, on total productivity. We are not in the business of singing jingles. We are in the business of improving performance, and to improve your performance you need to have the leaders. Is it fair to a worker if his manager lets him down, manages a firm poorly, so that the firm goes bust and the worker suffers? No. It is not fair. But what is the alternative? Can you therefore say, "This worker is entitled to his wage, and if his manager goes bankrupt we will continue paying him in the firm?" There is no alternative. It is not fair, but it is a fact of life. If we want to prosper, management have to make their companies prosper, and then the workers will follow.

If you look at some of the Tables in the Economic Committee Report, you will see the extent to which managements can make a difference. There are two charts in Chapter 14, Charts 14-2 and 14-3, which compare the performances of companies in the different sectors. They also compare the performances of different sized companies in the same sector, the performances of companies of the same size, local versus foreign, in each sector, they show the extent to which the management, the firm's organization, can make a difference. If you work in a small manufacturing firm with 50 workers or less, your pay will be 50% less than if you work in a manufacturing firm with 100 workers or more. Why? The firms are less productive. What is the solution? One is to tell people, "Well, if you want, you work where you like. These are the data. You choose." In which case, everybody will go into the big firms. Unfortunately, these will be the multi-nationals.

We cannot stop people from going. So the solution we have chosen is, the small firms better upgrade themselves, otherwise they are going to go out of business! And they employ 30% of our population! So if we could get these 30% properly organized, our productivity would immediately go up significantly, and our GNP and our national income would go up. So we owe it to our population to make sure that the managers upgrade themselves and are able to provide decent employment for their workers. That is the second component.

The third component is taxation. The Report has said, and the Government has endorsed this view that we have to keep our tax rates low in Singapore - corporate taxes and personal income taxes. You have to do it because otherwise you are not competitive. On the other hand, the Government needs money. So you cannot simply cut taxes indiscriminately, indefinitely, across the board. Money has to come from somewhere. And particularly in Singapore, where there is a defence burden to be shouldered, where there is education and health to be looked after, the Government's revenue requirements are larger than in other countries like Hong Kong, where these are much smaller components of the GDP.

We have a certain amount of reserves which we can tap up to a point. There is a certain slack which we can take up. We can say, "Well, let us reduce taxes from 40% to 35%. No need to compensate." Is that going to be enough? If not, how do you go further? And we must go further because most other countries in the world who matter to us are taking this route. The US tax rate used to be 46%. It is going to 39%, maybe 33%. The British who are above 50% are bringing their corporate tax rates down to 35%. The Taiwanese, following their Economic Reconstruction Committee report, have reduced their tax rates from 30% to 25%; hesitantly in two steps - 30% to 28%, 28% to 25%. Under those circumstances, what are our possibilities of keeping the tax rate at 40% and hoping that companies will still say, "Singapore is such a fantastic place. I will come here and willingly pay tax."? It is not feasible. Therefore, we need consumption taxes. The Economic Committee would not have put this down without strong reasons. It is not that we do not know that this is an unpopular move. Nobody likes to pay taxes, least of all indirect taxes. It is not that we do not know that this will cause a rumpus. We could easily have taken the easy way out - recommend tax cuts across the board, and let the Government carry the baby. We did not do that because it would have been popular but irresponsible. Some services have to be paid for.

Some Members have suggested touching the statutory boards (I think the Member for Alexandra mentioned that yesterday). Well, the statutory boards have some reserves. But another recommendation of the Economic Committee is that the statutory boards should not be in business to maximize profits. They are in business to provide a service, break-even, and earn a fair return. There are no vast profits to be looked forward to from the statutory boards in time to come. So you cannot have it both ways - statutory board charges as low as possible, at the same time statutory board profits as high as possible, therefore taxes low. Mr Speaker, Sir, very seldom in life can you have your cake and eat it. So the statutory board surpluses are not the solution.

The Member for Queenstown made an eloquent, entertaining argument yesterday, quoting historical precedents as to why we should never go in for indirect taxation. But this is not a joke. 1986 is not 1965. The world has changed; economics has changed; and Singapore has changed. To quote a Chinese phrase, such as often accompanies such entertaining interjections: Shi guo jing qian, cang hai sang tian " " - The time has passed, the whole scenery has changed. What used to be limitless oceans are now mulberry fields. The solutions of yesterday will solve the problems of yesterday. The solutions of today have to be found anew. They do not come from interjections. They come from thought.

One objective has not changed, and that is, the objective of raising the standard of living of our people, of safeguarding the interests of our people. The question is: how do you do that? 1965 was the time of the socialist movements in the Western democracies, Dennis Healey, Harold Wilson, in Britain, and similar socialist movements in the Scandinavian countries.

Mr Chiam See Tong: PAP in Singapore.

BG Lee Hsien Loong: And the PAP in Singapore sharing some of these views. The economic wisdom of the day was that you tax the rich and redistribute to the poor. And the phrase was, "Squeeze them till the pips squeak." Some start off as pips and cannot be squeezed.

Why have they given up this line? Because it has been shown to lead to ruin, because it has been demonstrated that if you do this, you choke off enterprise, you stifle businesses, you drive your most capable and talented people elsewhere, and you lead to stagnation and decay. That is why they have gone to indirect taxes of which much play has been made. That is why, although they too have elected governments, subject to the ballot just as we are, they have found it necessary to introduce VAT, sales tax, and brave the wrath of the population. And that is why, having done this and having reduced their corporate and income taxes, they have been able to show better performance than they used to do. For us to ignore this lesson, to ignore the new cirumstances and to pretend as if we are undergraduates or fresh 25-year-olds in 1965 and apply similar solutions, is to ask for disaster.

Even Hong Kong is introducing indirect taxation. There was an article yesterday in the Asian Wall Street Journal which reported that the Financial Secretary was proposing:

'... several indirect taxes, which together would add HK$295 million to government coffers. Sir John argued that such measures must be implemented because the government no longer can raise large amounts of money through land sales.' Does that sound familiar? If Hong Kong cannot live with low taxes all round, can Singapore afford to do that?

Three years ago the Economist, in a series of articles starting from the 17th September 1983, argued a case for moving away from the existing systems of taxation on income tax to expenditure tax for individuals. This was what the Member for Jalan Kayu was mentioning yesterday. It argues for a tax on corporate cash flow rather than corporate profits. It makes a strong case, and a valid one, that it is fairer and more sensible to tax the consumptions rather than the creation of wealth. You want to encourage savings. You want to encourage wealth creation. You do not want to encourage consumption. You do not want to encourage tax dodging. You do not want to discourage investments. I suggest Members who are interested in economics read this series of articles.

The British, alas, did not go all the way of the recommendations although they have gone some of the way. For us, therefore, not to follow is to squeeze out business and to shut ourselves out of the future. It sounds good when you make a speech, "I will be willing to pay 35%, 50%, so that the other person can pay less." I do not doubt the sincerity of such professions but I doubt the universality of such sentiments. If everybody believed this, we would not need a Commissioner of Inland Revenue. We would just need another Community Chest of Singapore. Life would be simple. But it is not.

So we do not really have an alternative. The alternatives are, keep income taxes high, stifle growth, drive away business. Secondly, reduce government's expendi- ture, cut down existing subsidies on health and on education. I think we may need to go the second route part of the way. But I do not see any way of going the first route. There is no way of dodging this issue in the long run.

The Report is a solution not for these two years, or even for this term of the Government. It is a solution for the next decade and more, and therefore it has to take a long view. It has to look at the position down the road. This year there is no purpose served in collecting a large amount of money. But there is a purpose served in putting the machinery in place so that when we need it, it is there. If it is not done now, it cannot be done later on.

The fourth component of competitiveness is to make Singapore a better place to do business. The Member for Potong Pasir pointed out that Singapore is not Sri Lanka. He was absolutely right which is probably why the Member for Anson appeared to grimace when this was said.

Mr Chiam See Tong: Why?

BG Lee Hsien Loong: Why is Singapore not like Sri Lanka and why must Singapore not become like Sri Lanka? Because we have a better business and political environment. When a company goes to a country, sets up a firm and hires workers, it does not just look at the cost of workers. If it was only the cost of workers which mattered, we would be out of business long ago, because the Chinese would undercut us by a factor of at least five in all their special economic zones. They look at the overall environment of the country. It is like going into a restaurant and ordering food. You are not just paying for the food. You are paying for the ambience, the music, the waiter saying, "Did you enjoy your dinner, Ma'am?", the rose which is put on the table for your lady friend.

The same goes for hiring workers in a country. You must judge the country as a whole. Does it have good government? Does it have political stability? Are there good labour management relations? Is it an honest environment where enterprise can flourish and crooks captured? If it is, then the value of each person who works there goes up. He commands a premium. That is why we do not have to be as cheap as Hong Kong. We are more valuable, not individually, but taken as a whole, Singapore is worth it. That is why we must never become like Sri Lanka.

But I should add a caution. That is not why we can raise our wages as high as we like without consideration for Hong Kong, Taiwan or Korea. We have an edge. But it is a finite edge. It is not indefinitely large. We must watch it, we must preserve it. If we do not preserve that edge, we will become as cheap as Hong Kong or Sri Lanka or the Philippines. And the way to preserve that edge is to make sure that we continue to have good government, make sure we continue to hold together as a people, make sure that labour management relations are never soured up, either by irresponsible employers or hot-headed union leaders on both sides. And then we will be valuable.

That is the way to become competitive. If we are competitive, then pleasant consequences will follow, important consequences. We will be able to export more to the rest of the world. All the talk about domestic demand neglects one very important fact. Two-thirds of our demand is external. There is no domestic demand for shipyards. There is no domestic demand for oil refineries. There is a limit to the number of nights a Singaporean will sleep in a hotel in Singapore every year. Stimulating domestic demand will help all these industries and businesses not a whit. What we must do is to stimulate external demand. If our prices are competitive, our hotel rates are coming down, then conventions will come to Singapore and the rooms will begin to fill up. If our rentals are low, then headquarters of multinational companies will come to Singapore to occupy office space, and our commercial building occupancy rates will go up. If our goods are competitive, and the margins can be improved, orders from other countries will go up and more business will be generated in Singapore.

We can make the adjustments here, but their purpose is overseas. Then existing companies will get more business. After a time, new investments will also come to Singapore and then new jobs and better jobs will be created, not necessarily the same ones, not necessarily doing exactly the same thing as we used to do, but new jobs and jobs which will earn a decent living.

That is the way for us to get prosperity and recovery. That is the purpose of the policy changes proposed by the Economic Committee and substantially endorsed by this Government. But we must look beyond this recession. Indeed, the recession looms large. If you judge by the debate in this House, you would never have guessed that the policy measures recommended are only three chapters out of 24 chapters in the book. There is a reason why there are another 21 chapters after Chapter 3, and that is, we must get our fundamentals and long-term direction correct. The way we hope to get out of this recession is for companies which are already here to invest more, and for new companies to come here and put in fresh investments. They do not do that because this year CPF is down. They do that if they think that for the next five years, the next 10 years, this is a good place to do business and that this is a good year to start. So to get out of this recession, we have to demonstrate that we are able to make a sustained effort, keep it up for years, then only will people come in. Then only will the economy grow.

When I was in London last month, I made a pitch to British investors, bankers, people who have an interest in Singapore, people who want to know whether we are a good place for them to put their money. I told them the way for us in the future is to be more competitive, more flexible, work longer hours, work third shifts, go for hardship tours overseas, even in god forsaken places. They listened to me carefully. After the speech, one lady came to speak to me. She said, "You've put it positively. You said this is the way forward. But let me ask you honestly, do you really believe your people will do this?" And I had to tell her, "I do not know. There is no certainty but neither is there another way out. We will have to make it so."

So investors, watching Singapore, do their calculations. They do not come here out of charity. They come here if they think this is a place for them for the long run. And that is what we must preserve, the stamina, the endurance, the determination, to make the long run.

The report provides the key policies, taxation, wage reform, manpower development, education, local businesses, entrepreneurship. These are all important pieces which must be put in place by the Government, by the private sector, by the population. Unless we get them right, we cannot get the short-term right. We have to move.

Yesterday the Member for Whampoa said he disliked the term "niche", because that is where you put ashes. If we do not get out of our present niche, our ashes will be put there, because others are closing in on us. The alternative to doing what is recommended is not just to bumble along in our comfortable old ways, preserving our old livelihood and our old standard of living. It is to hazard everything which you have gained so far and risk going back all the way, 20 years back. The world does not stay still.

Today we can make a living by getting Hewlett Packard, or Seagates British Petroleum, to set up a factory here. Do you think there are no other countries in the world eyeing these investments? Do you think that the other newly industrializing countries are not strenuously upgrading their education, building their infrastructure, raising their technical competence level, developing into substantial economic entities in their own right? Do you think that other countries, equally desperate for such investments, are not going all out to get them to come, offering all kinds of inducements?

The Chairman of EDB informed me that he went on a promotion tour a couple of weeks ago. He found out that Bavaria was advertising for investments. Bavaria, that is South Germany. And they were offering 60% capital grant on investments in Bavaria. That means, if you bring $100 million to set up a firm there, they will match you with $60 million straightaway so that you can buy more machinery, hire more workers. That is the competition which we are up against. And we want to tax them heavily and say they are willing to pay? Are we honestly better than German workers?

If we do not move, if we do not get out of our present niche, then we are finished. The future strategy is to go into total business, to go into services, to go into offshore business. Do not just look in Singapore, but look beyond Singapore. Do not just look at Manufacturing. This is not just a production base. This is not just the place for other people to bring their plans, their assembly lines, their blueprints all complete, for Singaporeans just to put it together. This must be the place where people come and do all kinds of business - design work, management of subsidiaries, fund management, personnel management, services repairing equipment, services advising clients. Then we will have something which will take the others some time to catch up on. Even that will not be a final solution. But I think the solution to the next stage of catching up will be the next Economic Committee Report. That is where we must move.

Even then, this is not our last recession. This is not our last property slump. To think that it is the Government's fault, and the Government should go down on bended knees and beg forgiveness and crave pardons is ludicrous. Let me take an example - Hong Kong. No excessive government intervention in the economy. Total laissez-faire. No high CPF, in fact, no CPF at all. No high taxes, 18.5% constantly held up as a model for Singapore to follow. Currently no property slump. No PAP Government. And yet in 1985 they had a severe recession. Much more severe now than they realized earlier. Their growth was 0.8% compared to 9.3% in 1984.

Mr Chiam See Tong: That has nothing to do with economics.

BG Lee Hsien Loong: So the conclusion is, policy changes do not eliminate the problem. They help us to regain a competitive edge. If we do not have CPF, if we do not have reserves, if we do not have taxes which can now be reduced, then we would be in a sad position. A recession would still have come, and in future a recession can still come. We will have fewer parameters to play with, less to talk about, much more to be sad over. So do not believe that after we have trimmed the CPF and the corporate taxes, there will be no more recessions and property slumps. There will be. If we are not careful, what is reduced on the CPF side can easily be eroded way. Wages can easily take up the 15% slack which the CPF has created, costs can easily go up if managements do not know what they are doing. Then we will be sitting here morosely wondering what to do next.

Mr Speaker, Sir, we are therefore discussing solutions to the problem, we are not discussing the causes of the problem. In the end, we must connect this analysis with our day to day life. The Americans have a slightly crude saying: When you are up to your waist in alligators, it is very hard to remember that you are supposed to be draining the swamp! We are not quite up to our waist in alligators, but there are many bush fires to be fought. Manage wages, hold down increments, adjust CPF, look for new areas of business, cope with retrenchments, unemployment, adjustments, but never forget what our aim is. And our aim is to drain the swamp, to get out of the swamp. If people understand this, and accept the changes and work towards this objective, then we can make it. Then we can get where we want to go. If they do not understand it, if they are confused and bewildered, then they will become angry, demoralized, and we will fail.

So far, the spirit which has been shown has been good. The union's response has demonstrated that there is substantial understanding. The sacrifices which have already been made are significant. These are not peanuts. These are drastic measures, not tokens. If we can hold this position, then we will succeed. The Government will do its part. The policy recommendations are here. A systematic implementation plan has to be worked out. All Ministries, departments, statutory boards will be involved. It is easy to say, "EDB will promote services, TDB will sell Singapore." To get that organized, to hire the right people, to go out and get the first firm here, be it a lawyer's firm, hospital, or accountant's firm. That is a massive amount of work which will be done. The private sector has to work. Moaning and groaning, maybe cathartic, but it will get us nowhere. The opportunities have been identified. The process of cooperating with us in the Economic Committee has been highlighted them to the private sector. Many opportunities which they were previously not actively aware about have been identified, and I hope they will now follow up.

The Cabinet itself will play its part in promoting Singapore because when you want investments to come in, when you want people to commit and back you and to be certain that you are the right horse, they must judge not just your country and your report, but your person. What are you like? Is this a leader whom I can have faith in? Or is this a wild-eyed rabid fanatic who may do something rash and demolish all my investments overnight? Or is it perhaps a feeble, incapable government who will be pushed by the whims and fancies of the mob?

The Cabinet will do its part. First Deputy Prime Minister will be travelling in September to Europe to promote Singapore. I will be going to Japan in May, to the United States in June. My Minister of State, Dr Lee, will also go. We will look for new markets, new places where we can attract business in and find business to go out. We will do everything which can be done, but in the end nothing is certain. Can we guarantee that recovery will come next year or at the end of next year, or 1988? We cannot guarantee that. Nobody knows what the world will bring. Nobody knows whether the US economy will continue its recovery, actually limping along on its recovery longer than any previous recovery, or whether it will go into a slump. Nobody knows what will happen to commodity prices, although nobody is optimistic about them either. Nobody knows what other events may take place in this region, as dramatic as the events of the last two weeks in the Philippines. So we cannot be sure, but what we are doing will make sure that if there is a ghost of a chance, then all of us will succeed. [Applause].

12.41 pm

Dr Tan Cheng Bock (Ayer Rajah): Mr Speaker, Sir, after listening to the appeal of the Acting Minister for Trade and Industry to the people of Singapore to work hard and build a new Singapore, let me assure him that the people of Singapore, workers and businessmen alike, will certainly take heed of his message, the First Deputy Prime Minister's message and, of course, the President's message.

But at the same time I sincerely hope that the Government will also take heed of the message. The Government too has a part to play in working together with the people. Let me explain what I mean. While the people have no doubts about the integrity and the noble objectives of the Government, there is still some worry about whether the Government will really feel comfortable to let the private sector take more initiative. For example, for years, the private sector has pleaded with the Government not to put up its own companies to compete with them in the local markets. Among other things, the private sector has argued that if we let them make profits Singapore will ultimately benefit as they are taxed 40% on the profits. However, during these years some private sector people have come to the conclusion that the Government's attitude is, "Why take only 40% of the profits when we can take 100%?" Therefore, the private sector is very sceptical of the Government's intention to privatize the many Government-owned companies. They think that only non-profitable ones will be sold. It is not surprising therefore when one of my community leaders doubted the call by the First Deputy Prime Minister that the Government welcomes all types of industries, high-technology or otherwise. "Will EDB allow this?" was his simple and straightforward reply. This concern and doubts are in the minds of many Singaporeans. They fear that all these new policies will ultimately be bogged down by red tape and regulations. The Government must therefore dispel these doubts quickly. It must demonstrate in no uncertain terms that, in asking the people to work with the Government, the Government will reciprocate by working closely with the people and by providing clear and consistent signals to guide them.

The private sector is not asking the Government to guarantee them anything. However, they are going to look upon the Report by the Economic Committee as a guide to the likely scenarios for at least the next few years. To them the Report is an important one. The private sector will take the adoption of the recommendations in good faith. They will plan their investment and make their adjustments accordingly. It takes time before they can see results - time to react and time to earn a return. Therefore, once the Government has decided on a course of action, it should maintain consistency and avoid making sudden changes which will be unsettling for them unless, of course, the measures are not working, in which case, the people must be given clear information well in advance of the changes that are to take place. Consistency is important.

Let me give you a down-to-earth example. A company took up the Government's call to set up a pre-fabrication plant in a special designated area. This was to be the future regulation for all future pre-fab work. He spent money, time and bought expensive equipment. Before long, he was surprised to find that pre-fab work was being done at work-sites outside the special area and with the approval of the authorities. Imagine the frustration and anger. It is this inconsistency that people are worried about and it seems to affect those who comply. In implementing the Economic Committee's recommendations, the administrators should not try to apply just one set of rules for everyone. There must be sufficient options given so that they can get more benefits from the new policies. Let me give you another example. Many of my colleagues have called for a reduction in the employee's CPF contribution by 5%. While this will be good for some, I do not think the reduction will appeal to all CPF account holders. Those who are heavily committed on mortgage repayments will find that a large portion of the 5% cannot be spent but instead will be used to pay for the housing loans. On top of that, the 5% that is released is taxable, as pointed out by the First Deputy Prime Minister. These people will be worse off.

I therefore propose that instead of imposing a single rule to allow or disallow the reduction in employee's contribution, each account holder should be given a choice either to retain the current contribution rate or to reduce it by 5%. If at the end of the day, Mr Speaker, Sir, the worker decides to have a reduction in his CPF, then he has made his choice and must know full well the consequences of his choice. For those who have no housing loan to service, it would mean they have to pay tax on it and if they are wise, if they have no other commitments, it will be prudent to leave it in the CPF. The idea behind this proposal is not to pump more money into the economy but to allow flexibility in the use of the CPF. Lest I be accused of sugar-coating this issue, let me remind the House that the sweetener was given by the First Deputy Prime Minister when he allowed an across-the-board 25% rebate on personal income tax to the tune of $250 million. I am sure many in this House and outside will thank him very much for this unexpected but most welcome gesture.

While on the subject of flexibility, I learn from my hon. colleague, the Member for Kebun Baru, that there are as many as 8,000 unemployed households. If this is so, then we must request CPF to look into the matter of helping these people. We just cannot lock up their savings in the CPF when they have no money to buy the basic essentials or pay for utilities. Our present CPF ruling will not allow this but under such conditions we must be bold enough to make a change.

Such flexibility in making and applying rules to suit people in different circumstances is needed not just from the economic-related ministries but from the whole Government. To set up a company and do business in Singapore, one has to contend with a whole lot of rules and regulations imposed by the ministries and departments. Each one has its peculiar requirements and sometimes they are not well coordinated. If this carries on, our private sector may be frustrated into giving up, not because of poor market or high cost but because of a rigid bureaucracy.

I shall read to you a case which was brought to my attention at the Feedback Unit to illustrate the rigidity of our system.

'A local businessman has a piece of freehold land which he wants to develop into a housing estate. After submitting his plans to the various departments, he was asked to acquire an adjoining piece of Government land because of MOE drainage requirements. The problem is that the Government land is a 99-year leasehold while his is in perpetuity. Another point of discontent is that the Government is selling land for $80 per sq ft while the prevailing market rate for that area is in the region of $40 to $50 per sq ft. In actual fact, the problem of drainage can be solved effectively by modifications of the terrain requiring minimal costs to the developer but because of an implacable bureaucracy, the developer finally gave up his original plan and decided to shelve the project.'

To be able to exercise flexibility and to be confident that the flexibility is correctly exercised, the civil servants must be well versed with what is happening in the various sectors of the economy. Unfortunately, most of our civil servants enter the Government service straight after leaving school or university. Many never had a chance to work in the private sector environment. The appreciation of the nitty-gritty of industry can therefore be somewhat limited. But this limitation can be overcome with more consultation and open dialogue. There is a wealth of information and knowledge in the private sector on how we can improve our country waiting to be tapped by the civil servants. But I know that some civil servants are worried that the private sector people have a vested interest and hidden agenda, that they want to take the Government for a ride whenever they can. Of course, some of our businessmen are no angels but, by and large, our people are sincere and helpful. We know this from the feedback sessions at our constituencies and the Feedback Unit. The civil servants must realize that it is not a sin to have personal interest, to want to make profits. If we kill this desire, where will we find the people to take risks and seize opportunities?

The Economic Committee comprises members from the Government, business and trade unions. Their ability to work smoothly together to chart new directions for our economy clearly shows that the Government and the people can work together. This cooperation was demonstrated at the highest level. It is now up to the civil servants of all levels to follow up on the initiative and develop a greater understanding of the private sector.

The recurring theme at most of the feedback sessions is the inflexible attitude of our civil servants. A plea for more understanding of the private sector is a usual request after each session. To enhance the understanding of the private sector, I am making a suggestion. Perhaps the Government should consider recruiting civil servants at all levels from the private sector and not just for the basic levels. If we can make a Finance Minister out of a private individual, from the private sector, what is there to prevent the civil service from making similar appointments of Permanent Secretaries or Deputy Secretaries. Of course, this is a radical change. But if new directions are being charted for the economy, new styles of recruitment should not be looked upon as being too radical.

What I have just said should apply equally to our dealings with the man-in-the-street. There must be greater understanding of the people's problems and needs and greater flexibility in discharging duties. Sir, rules are made to make life better, not more frustrating.

Mr Speaker, Sir, the President's call for the people to cooperate and work together will be heeded by the people. I hope that the Government will make it easy for them to do it. 12.57 pm

Dr Aline K. Wong (Changkat): Mr Speaker, Sir, it now remains for me to sum up this debate but, without the skills of our previous speakers, I do not think I can manage in the remaining three minutes. Having heard more than 40 Members in this House who participated in the debate, my job of summing up is not an easy one. The Government has also made its policy announcements and only just now the architect of the Economic Committee's Report has also made his defence. What remains for me to do now is to beg your patience by asking you to come back after lunch, so that I could conceptualize the whole debate in a way in which I think we can leave this sitting with something to ponder about.

I cannot really go over the points made by the Members individually, one by one, and if I fail to mention them by name and to thank them for their individual contribution, I beg their forgiveness. If I may just tantalize you with this point about conceptualization. I have something rather intriguing again to talk about.

The debate can be roughly analysed in terms of three different sections. The first one, of course, is about the causes of the recession. The Opposition tried to place the blame squarely on the Government but their arguments were fully demolished and this is seen by all as to be, that is, to point an accusing finger at anyone, a futile exercise. It is clear that both external and internal factors are responsible for our present economic difficulties and we would be blind not to take heed of global and regional trends in demand. What we can do internally is that we must strengthen ourselves, correct our weaknesses and, in fact, steer a new course towards a new path. This we must do now quickly and decisively. But here the Government should take heed of the Member for Alexandra's call for it to take note of some early warning signs, especially from the PAP Backbenchers. We were urged to assess the current recession in the right perspective, including the past history of greater difficulties, whether economic or political. With historical hindsight in future the current recession may prove yet to be just another rough patch on our path. So if we quickly prepare ourselves for changes in future trends, I think this may turn out to be just a little bump on the road.

Mr Speaker: It is 1.00 pm, Dr Wong. We shall now have a recess and digest the few words, ie, the hors-d'oeuvre you have dished out. We come back for your main course at 2.30 pm. Order.

Sitting accordingly suspended at 1.00 pm until 2.30 pm. Sitting resumed at 2.30 pm

[Mr Speaker in the Chair]

Debate resumed.

Dr Aline K. Wong: Mr Speaker, Sir, this morning before the suspension, I was trying to sum up the debate in this House. I said that, instead of going over the points raised by hon. Members, one by one, I would rather attempt a short conceptual summary of the issues raised.

The first type of issue discussed concerns the causes of the recession. In this connection we noted that the Opposition tried to put the blame squarely on the Government. But they were taken apart entirely and, in fact, this type of approach was proven to be totally futile.

It is clear that both external and internal factors are involved in causing the recession, and that we would be blind not to take heed of global and regional trends in demand. What we can do internally, we must do quickly and decisively. Here, the Government should take heed of the Member for Alexandra's call to take quick note of early warning signals, especially those sounded by the PAP Backbenchers. We were also urged to assess the current recession in the right historical, economic and political perspectives. Members, including the Members for Leng Kee, Clementi, Queenstown, Serangoon Gardens and Changi, all spoke on the right historical, economic and political perspectives in which we should be viewing this recession.

Sir, we have faced far greater problems in the past and we have overcome them with great ability. The current recession, with historical hindsight in future, may prove just to be a rough patch in our path, if we quickly prepare ourselves now for the changes in the future economic trends.

The second type of issues discussed are the remedies. The Economic Committee's recommendations for a quick recovery were debated at length, and the Government has made announcements about the measures that it would take immediately to relieve the recession. The common man in the street should now see clearly that the Government is truly concerned with his interest. The home owners, whether of HDB flats or private homes, should now have their fears allayed. They should find little difficulty in meeting the mortgage payments. The businessmen have also received a substantial dosage of help in terms of cutting costs. And the message to the nation is loud and clear - steel up and face the problem squarely like a man. There is no painless solution, Sir. So let us pull ourselves together and get on with it.

What remains to be seen now is whether the announced measures will be adequate to restore business confidence. The measures will definitely help the ailing firms to survive. Will those with ability, not just to survive but also expand, will they plan on ahead now, reinvest, raise overall business efficiency and strive for export markets? As the Acting Minister for Trade and Industry told us this morning, his answer to that lady's question about guarantee is that there is no possibility of guarantee. But if businesses do not act now, during this brief respite, we may face even bigger problems after these two years, as the Member for Whampoa has so dramatically pointed out to us yesterday.

The third type of issues discussed pertains to the long term future. Much of our discussion in the past 4(r) days has centred on the current recession. But the fact is we should put a greater emphasis on the future directions. Sir, the thrust of the President's Address is on the future. The Economic Committee's recommendations also focus on our future path. In fact, the very reason why we are debating the measures and the changes in strategies is with a view to restructuring the economy for future growth. While the Acting Minister for Trade and Industry pointed out and drew our attention to the four major strategies for sustaining and increasing economic growth in the future, my question is: is this future simply planned for economic growth? The thrust of the future development should not just be in the rising standard of living but if I may quote from the President's Address:

'Our society [in future] should be a lively, challenging, and fulfilling place to work and live in.'

I was trying to talk a little bit about the issue of creativity. I lost count, in fact, of the number of times the word "creativity" was mentioned in the Economic Committee's Report. But unfortunately it seems that no one in this House has picked up this issue. Obviously, everyone was preoccupied with the economic recession, and rightly so.

Now, we have to examine the rules and regulations very carefully in order to provide a conducive business environment. The civil servants will have to work very hard from now on. They must be geared up for the impending changes. The Civil Service, including the statutory boards, has received a fair amount of criticism from Members of this House. Bureaucracy, it seems, has a way of multiplying itself. In their eagerness to implement Government policies, civil servants come up with rules and regulations which proliferate to such an extent until the original purpose is completely lost.

Sir, now that the civil servants are charged with the responsibility of taking down the edifices which they have built in the past and from which they derive a considerable measure of pride, we must extend to them our moral support. Their task is not going to be easy. In fact, it is going to be painful because they have to go step by step and to carefully balance the interests of the public with the possibility of people by-passing the rules in the future. We must not forget that they have also sacrificed for the recession. So let us lend them our fullest moral support.

Let me conclude, Sir, by offering another intriguing topic which I promise to be divulging to the House. I seem to be reading in between the lines a lot of times. We are talking about moral obligations and moral lessons. Do I perceive a perception gap somewhere? Sir, the man-in-the-street insists that we talk about moral obligations, obligations of the Government, to take care of the daily needs, obligations of employers towards employees, and the obligations of the Government to nurture local businesses. The Government's response is yes, we are taking care of your interests and needs but, at the same time, you should learn a moral lesson. We have become soft and expect too much and too unrealistically. The hard fact of life is that no one owes us a living. So we must all stand up on our own feet. This perception gap must not be allowed to widen. We have a tremendous selling job indeed to do, as the Member for Chong Boon so aptly described it. And the Member for Ayer Rajah called on the Government to work closely with the people and always extend to them a listening ear.

In my humble opinion, Sir, the challenge to the young generation of leadership now, which is also a very urgent one, is to steer our nation towards the common goals and galvanize our total efforts towards our future recovery and development.

It remains for me, Sir, to thank you and the rest of the Members of this House for this great opportunity to have started off this debate, and I thank you all for your very valuable contributions. [Applause].

Question put, and agreed to.

Resolved,

That the following Address in reply to the Speech of the President be agreed to:-

"We, the Parliament of the Republic of Singapore, express our thanks to the President for the Speech which he delivered on behalf of the Government at the Opening of the Second Session of this Parliament."

Mr Jeyaretnam: Mr Speaker, Sir, may it be recorded that I have abstained on this voting?

Mr Speaker: Yes, it can be done.

Mr Jeyaretnam: It is not that I do not wish to thank the President but I cannot see anything in it to thank him.