ANNUAL BUDGET STATEMENT

12.15 pm

Order read for Resumption of Debate on Question [7th March, 1986].

That Parliament approves the financial policy of the Government for the financial year 1st April, 1986 to 31st March, 1987.". - [Minister for Finance].

Question again proposed.

Mr Lim Boon Heng (Kebun Baru): Mr Speaker, Sir, I rise to support the motion standing in the name of the Minister for Finance.

Sir, events in the past year have together driven home one important message: nothing can be taken for granted. We have to be prepared to face the unexpected at any time. How we fare depends on how wisely we respond to events. The severity of the economic downturn was not quite expected. Last year the Minister who was then holding the Ministry of Trade and Industry portfolio assured this House during the Budget debate that things were not as bad as it was made out to be. We are all perhaps a little wiser now considering the plunge that the economy took.

The Budget this year is a budget to counter the recession. As such, it is commonly referred to as the pro-business budget. Quite rightly so. If businesses are in trouble, it is necessary to provide assistance. It is only when businesses are able to continue that jobs are preserved. And it is only when new businesses are set up that new jobs are created. So while the budget may be pro-business, it is also pro-worker in job preservation and job creation. The problem is that it is not an instant cure. As such, there is no guarantee that there will be no further retrenchments or that there will be no rise in unemployment. There may be more pain before us before a recovery takes place. The Minister for Finance has literally given billions away to businessmen, with some for the taxpayer. It is an unusual situation. In most situations when Governments are faced with recession, Governments would have to make up for falling revenues by new taxes. We have been fortunate that there are enough accumulated surpluses for Government to give away so much without having to impose immediately new or higher taxes. As such, the budget is a welcome painless budget.

Sir, as there are many of my colleagues who wish to speak, I shall now confine myself to only two aspects of the Budget statement that may cause some pain in the future to a large number of workers. These two aspects have caused worry and concern. They are the proposal to trim staffing levels in the public sector by 10% over the next five years and the intention to impose the consumption tax.

First, the proposal to cut staffing levels in the public sector. Sir, I have requested the Clerk of Parliament to circulate two tables to which I shall refer to in this discussion on the permanent establishment of the public sector. [Copies distributed to Members] In his Budget statement the Minister for Finance has highlighted the public sector employment to population ratio as relatively high. Our public sector employment population ratio was 5.3% as compared to 3% in Japan, 1.6% in South Korea and 3.4% in Hong Kong. He declared that Government has decided that the permanent staff complement of Ministries and statutory boards should be reduced by 10% over the next five years. Last Friday, in a press interview, the Permanent Secretary in the Ministry of Finance pointed out that while the number of public employees grew by 10.3% in the last five years the total expenditure on manpower almost doubled, rising from $1.62 billion in 1980 to $3.07 billion in 1984. These figures certainly indicate that steps must be taken to trim public sector employment and to reduce manpower cost. The Permanent Secretary has announced the appointment of a working group who are set to come up with their findings in July.

Sir, while both the Minister for Finance and his Permanent Secretary have been careful to assure employees that the proposed 10% reduction will be achieved through natural attrition and retrenchment is to be avoided, this trimming exercise is causing restlessness, if not nervousness, among public employees. Public employees are wondering which one of them out of 10 will be affected, especially if there are none in their section who is due for retirement. In order not to demoralize the entire civil service, the exercise will have to be carried out with tact and consideration. While there should not be precipitate haste, yet the sooner the issue is setled the quicker stability will return. So while it is essential that public expenditure be scrutinized, we must be careful when we compare ratios, particularly on broad indicators with those of other countries. We must be sure that we are comparing like with like. Here in Singapore the public sector provides a number of services that in other countries are provided by the private sector. Telecoms and HDB are two examples, and between them they account for over 20% of public employees. We can trim the public sector employment to population ratio drastically if the two statutory boards are privatized. However, such a move would be merely transferring a big chunk of public employees to the private sector and may not necessarily result in more efficient utilization of manpower. So clearly, objective criteria will have to be established to determine whether each Ministry is efficient in its utilization of manpower.

Among the Government Ministries, three of the larger employers are Education, Health and Home Affairs. I do not intend to go into each of these key areas. It is sufficient to look at Education to show what limitations there are in trimming manpower. In 1984 there were 23,697 persons employed in our educational institutions. Figures released by the Finance Ministry show that we have the highest ratio of public employees per 100 population when compared to Hong Kong and South Korea. Ours, like Japan, is 0.9. It is 0.1 for Hong Kong, and 0.6 for South Korea. While the public employee population ratio is a useful indicator, it is insufficient. I cannot see us trimming down the ratio for Education. We are committed to higher expenditure on Education to raise the educational level of our workforce and until we have caught up with the developed countries we will have to spend a proportionately higher amount on Education, and in the process we will be employing more on teachers. We must also not forget that demographic characteristics differ from country to country. So while we may have the same public employee/population ratio as Japan, we have a younger population. As such, the more accurate indicator will be public employee/population ratio for those in the student age group. If this is used, I think the figure would show that even now we will be deploying proportionately fewer people in education than Japan. From figures contained in the Year Book of Statistics, in June 1984, we have one teacher for every 22.8 students. How does this compare with other countries. That is what the working group on public manpower would have to look at. Figures can be broken down to different levels, from primary schools to universities. The higher the level, the lower is the student/teacher ratio. This is shown on Table 1. It would appear that we have a very liberal student/staff ratio at the Institute of Education - 4.8:1, and the universities 8.8:1. The Technical and Vocational Institutes also have a very comfortable ratio of 10.2:1. Clearly, if there is to be any trimming of manpower, these are the areas to be looked at. However, it may well be that there are other compelling factors that may not allow further trimming. Quality of education is one. I trust this cursory examination of education is sufficient to illustrate the complexity of the exercise. We can expect an increase in employment in education rather than a decrease. The move towards full-day schools or one-session schools and the extension of pre-primary classes to all schools will add to rather than subtract from manpower requirements.

Let me return to manpower costs incurred by the public sector. The sharp increase since 1980 is due to three factors: high wage increases aggravated by the method by which the public sector implemented NWC guidelines, increase in 10,000 posts as stated by the Minister and an increase in the number of higher posts. Let me elaborate on this third factor. Table 2 shows that the various Ministries have, in fact, been fairly successful in trimming staff levels in Divisions 3 and 4. For Division 3, there has been a fall of 2,641 posts between 1980 and 1984. There has also been a fall of 943 posts for Division 4 between 1980 and 1984. However, for Division 1 there has been an increase of 1,751 posts between 1980 and 1984. And there is a marginal increase of 50 for Division 2. So clearly, while there has been a trimming of staff at the lower levels, there has been an increase of employment for officers at the higher level. Quite obviously, if there is a higher proportion of senior officers, there will be a correspondingly higher wage bill. I know that Table 2 may not reflect accurately the employment situation in the public sector because certain staff have been transferred to newly created statutory boards. However, the fact remains that there has been a proportionately higher increase in senior positions in the public sector.

Finally, I would urge the Government to examine rules, regulations and practices that may actually result in inefficient systems and inefficient use of manpower. An example is the system of refuse collection and disposal that we have. It is highly labour-intensive because of a number of factors, including rules and regulations that restrict mechanization. We should be concerned that there are policies that are making it necessary for certain Ministries to employ large numbers of employees. We should question whether these rules, regulations and practices are really necessary. So perhaps they could be included in the terms of reference of the Committee that is looking into manpower requirements in the civil service.

Sir, next I turn to consumption tax. There is considerable apprehension over the proposed consumption tax. Workers are afraid with the free use of the term "broad based".

If it is to be broad based, then it may be that the lower income who make up the broad base will be the hardest hit. Unfortunately the statements so far made are brief and offer little explanation. The subject was dealt with in two paragraphs in the Economic Committee's Report. It was also briefly stated in the First Deputy Prime Minister's Speech to this House. The Minister for Finance was equally brief when he spoke the other day. What we need is an assurance from the Minister to allay the public's apprehension. I take solace in some key phrases that have been used. The Economic Com- mittee's Report said that it will take several years to set up the infrastructure to collect indirect taxes whose introduction must be carefully timed. The First Deputy Prime Minister used the term "selective" and he said it would not be implemented soon and that it will be low. The Finance Minister himself has said that every effort to ensure that the less desirable side effects are mitigated. What I am seeking from the Minister for Finance is a clear assurance along the lines that have in fact been taken by different Ministers. The last thing we need as we face the recession is for the people to be unsettled by a new tax. Yet it is not a new tax as it may have been made out to be. We have had consumption taxes in the following areas: on tobacco and liquor, on petroleum products, on cars, on PUB bills, on restaurant bills, on entertainment, such as cinemas. These taxes are paid only if the item or service is consumed. Thus, Government has, in fact, selectively imposed consumption taxes in the past.

What is cause for concern is: on what items will consumption taxes be further levied? On retail sales, as suggested by the Economic Committee? Which essential items will be excluded and will, having an exemption list, be unwieldy? Finally, will the setting up of the machinery for consumption tax collection lead to an increase in staffing requirements in the public sector? Or will it cause private companies to have to spend more on manpower to cater for this new method of tax assessment?

Sir, apart from these reservations, I support the motion. 12.33 pm

The Senior Parliamentary Secretary to the Minister for Defence (Mr Phua Bah Lee): Mr Speaker, Sir, I would like to speak on five areas, the first of which is the Defence budget.

Despite the economic recession, the Finance Minister has recommended to Parliament for approval, a budget reasonably adequate for the Defence Ministry for the next fiscal year. I would like to thank the Finance Minister for this.

Defence is a crucial matter. Defence spending should not be compromised with the economic conditions of the country, particularly in the Asia-Pacific Basin where interest is growing. Essentially, we have to determine the fundamental principle and objective of national defence. If we can fully appreciate the importance of the defence of our country and the implications from the lack of it, then an appropriate and adequate defence budget must be fully supported. Experience has shown that prolonged recessions in a country, coupled with weak internal security and national defence, provide a fertile breeding ground for insurgencies and strife. Therefore, during these difficult times of economic recession we should be particularly careful that we have an adequate defence budget to ensure our internal security and national defence.

Our Army, Air Force and Navy have been doing a good job in ensuring the security of our nation. They have made personal sacrifices and have trained hard to defend our country when the need arises. They deserve our full appreciation and support.

Our SAF reservists too deserve special mention. Despite busy work schedules, various family and personal commitments, they have responded positively to annual in-camp training and physical fitness tests. Some even spend time attending military courses to upgrade themselves so that they can undertake higher command responsibilities. They have also responded well to periodic recalls and mobilization exercises, testifying to their good attitude towards national defence. Our reservists, therefore, always stand ready to defend our nation.

Modern wars can no longer be fought with men alone. Sophisticated weapons and advanced technology determine to a large extent the victory or defeat in the event of war. For the SAF to remain an ever viable force; for the SAF to continue maintaining a high standard of operational readiness, there can be no compromise on the state of its men, weapons and machines, and the level of its technology. Today's knowledge and skill is rendered obsolete tomorrow unless every effort is made to update them. Time changes things fast. Therefore, to continually upgrade the SAF and so maintain readiness at all times, an appropriate level of defence spending is necessary.

The SAF has built up its might and power over the last two decades. It must continue to do so in the coming years. But with the economic squeeze, we have to make absolute adjustments to our defence capabilities. Basic is maintenance and consolidation of a force which has an adequate capacity to deal with current and foreseeable tasks. This is particularly important, bearing in mind the dangers lurking in our region - the fall of Vietnam, the invasion of Kampuchea and the incursions into the Thai border by the Vietnamese forces - they all tell a story. Unless we are serious in our cause of defence, unless we are ready for any eventuality, we could also become another nation of boat people.

Mr Speaker, Sir, during this period Mindef will consolidate its resources so that when the economy recovers we will be able to proceed with the strengthening of our Defence Force. The Defence budget, therefore, is one that should be treated with utmost sensitivity and sensibility.

But I must caution that any future cut in Defence spending may be detrimental to our maintenance of a credible defence force.

Mr Speaker, Sir, I will now speak on rapport. Over the past weeks the Government has announced several measures, some particularly radical, to pull the economy out of the present recession. These measures have been well publicised by the newspapers, the television and radio. I, therefore, do not propose to cover the same ground.

However, I would like to repeat the call on the people to rally behind the Government at this critical stage of our economy. Whatever the remedial measures, unless they are strongly supported by the people, will fail. It is as simple and direct as this. "People power" in the Philippines has brought about a new democratic government.

Mr Jeyaretnam: Hear, hear!

Mr Phua Bah Lee: "People's will" in Singapore can help us overcome this recession.

The new team of leaders is chiefly responsible for turning the economy around. It is now the will of the people translated into concrete action and support for the Government that will make the difference between success and failure.

In the past, the people stood firmly behind the Government in many crises, such as Singapore's separation from Malaysia, the British withdrawal from Singapore, the oil crisis, etc. Each time, we passed the test with flying colours. We became a better people - hardier, wiser and more resilient. We had a different team of leaders then.

Today, whether we can survive this economic recession and overcome the problems ahead will again depend to a large extent on the people working in concert with the Government. Unless there is the same level of support for, faith in, and cooperation with the new team of leaders, the measures introduced to beat the recession cannot go far.

This new team of leaders from the 1984 group are young. Except for the Minister for Finance, their average age is 39 years. They are a fine team - highly qualified, full of ideas, stamina and verve. They possess a keen mind, an ability to zoom in on problems, analyse them and come out with solutions. The team has been specially hand-picked after rigorous tests and scrutiny by the old guard. The second generation leaders will not fail the people, just as the first generation leadership had not. They will chalk up a fine track record given the time and the support of the people.

While I sound this call for support by the people for the new generation of leaders and their measures to beat the recession, may I also urge the new leaders to make a special effort to understand the people and reach out to them.

The people are now experiencing a rather different kind of economic environment. They were accustomed to two decades of growth, affluence, high salaries and the many related comforts. The younger Singaporeans, moreover, might not have even experienced the difficult times of the past. They have been enjoying a life of plenty.

The changed scenario from one of economic abundance to one of economic recession certainly has an impact on the people. Lately, our people have sacrificed much. They have to put up with disruptions to their lives. There have been a loss of jobs for some, a cut in salary for others. New graduates find it harder to get jobs. They could in these difficult times misinterpret what they read in the newspapers or be misled by questions raised by the Opposition in Parliament, such as why should not the Ministers take a pay cut, are Ministers paying income tax, etc. All these promote anxiety and confusion in them.

Mr Chiam See Tong (Potong Pasir): Is that so?

Some hon. Members: Yes.

Mr Phua Bah Lee: Viewed against the backdrop of wealth and affluence in previous years, it is inevitable that some people have become cynical and critical of the Government. While the Government talks about measures to recover from the recession, these people talk about a worsening economy that might never recover. So when the Government stresses on them the importance of work values and correct attitudes at this time, the people feel that they are being lectured upon. The people must therefore be made to understand very clearly the situation at the present moment. They must be left without a doubt that the Government's measures are necessary to ride over the recession. To succeed, they must have faith in the dedication of the new younger leadership to steer the country out of the present problems. Good rapport with the people is therefore absolutely necessary, and their support will come if they are made confidently safe to speak the truth, explain their feelings and thoughts sincerely, and are given a sympathetic ear.

It is important therefore for the Government leaders to meet the people more often and listen to them. Not just talk to them. Occasions should be found where casual, frank and true dialogue can take place; where the people can get to know their leaders as people who care, and not as their political masters. Then the rapport created would prove beneficial to the nation not only during this time of recession but also in the years to come.

Mr Speaker, Sir, next comes work attitudes. The Government has called upon the people to be less choosy in taking up jobs, to work the third shift, to be prepared to work in far-away lands, and also to improve their educational levels.

Sir, while we may suggest, advise and persuade the people to seriously consider all these, but do they really listen? Will they respond in the manner that would improve the overall national interest in the longer term and thereby furthering their own interest? Or do they regard short-term self-interest and personal convenience the more important factors for consideration? These would have a profound effect on the economic as well as other aspects of Singapore.

In the first place, why are the people choosy? The answer could well lie in our culture and the comfortable environment in which our younger Singaporeans grew up over the last two decades. The South Koreans and the Taiwanese have different work ethics, motivations and cultures originating from historical developments of their countries. The constant threat to their survival is real and very much in their minds. This has given them a greater impetus to work hard even with less pay and in a less comfortable working environment.

Singapore is fortunate to have a hardworking and disciplined people. Our workforce is, in percentage terms, relatively lower educated than the workers in Hong Kong, Taiwan and South Korea, but our people have achieved a high standard of living, almost as high as that in some developed countries. This is something we have always been proud of. But to take pride in ourselves because of what we have achieved in the past will not get us anywhere, anymore. We need to acquire some of the better attributes and attitudes that the people in the other NICs possess. Two things could bring this about. One is a real disaster to jolt everyone out of his complacency. The other is education. No one opts for disaster, but if we are not careful, it could happen. Therefore, we are left with the second option. But this will take time.

To hasten the process of improving the outlook, education and discipline of the Singapore workforce, the Government should perhaps consider whether there is a need to set up a special committee to delve deeper into the matter. This special committee could perhaps inquire why the people have become so choosy in taking up jobs; why some are even prepared to stay jobless rather than accept jobs that alter their basic life-style; why some are not prepared to take up jobs with less pay; why some report for work for half a day and then disappear without reason.

Before this 'choosiness' becomes a way of life for the average Singaporean; before this becomes a serious social problem that may have an adverse impact on the national economy, the Government should set up a committee to look into the matter and come out with the necessary recommendations to combat it.

Mr Speaker, Sir, let me now speak on the problems my Tampines residents are facing.

Not long ago, I was told of a conversation between two housewives. One housewife, on being allotted a flat at Tampines New Town, rejected it. When asked why, she said that travelling was inconvenient because public transport was inadequate and the family did not own a car. They then speculated that the bus company was probably waiting for more people to move into Tampines before scheduling more buses to ply the routes. They also said that people might also not move in until the public transport has improved.

Mr Speaker, Sir, this conversation raised the age-old question of which comes first: the chicken or the egg? In this instance, should public transport be fully developed first so that the people could move into the new town, or should the people move in first so as to make it viable for public transport to start their business?

I am concerned because, if these considerations are true, they may affect the progress of the public transport services within and around Tampines New Town. Ultimately it is the present 92,000 residents who are penalized through no fault of their own.

As I understand it, three parties are involved before public transport services could be provided. The HDB plans the location and the size of the bus interchange and terminus based on projections provided by SBS. SBS plans the route network, the number of buses and their frequency based on the projection of passengers which, obviously, also depends on the town population. ROV would have to approve all these routes.

Each party has to plan properly and accurately to ensure viability, and at the same time to complement one another's effort. For example, HDB cannot construct unless it knows how big the interchange should be; SBS cannot commit unless it is assured of a satisfactory passenger volume; and, of course, ROV can only approve the routes when it knows how many and where they are.

For these reasons, it is understandable why the development must come in stages, and that takes time.

However, the fundamental problem still remains. Residents in Tampines are not getting an adequate public transport service. The temporary bus terminus is no help because commuters swelter in the hot sun and get soaked in a downpour. Should they be subjected to these because we cannot provide fast enough?

There is no denying that HDB, SBS and ROV have good track records. HDB has done a splendid job in housing the populace. As for Tampines New Town, the HDB is developing it into a modern self-contained town with good roads, schools, parks, sports and recreational amenities and others.

Tampines is a sprawling town. It now has 329 blocks comprising 32,000 units. When completed, it will have 56,000 units. Residents need to commute with the least inconvenience. That is why public transport services play an important role in their lives. Not many people can afford private transport. It is responsiveness that the residents seek. They want us to be sensitive to their basic transport needs.

The residents are not asking much; only that the process be speeded up to alleviate their daily problems. They want a reasonable service to enable them to get to work on time, go to market, visit friends and relatives, shop or go to the cinema.

I, therefore, urge that the relevant department pay less interest in procedures and profit motives and place priority in servicing the community's needs.

I believe that once the public transport service is speeded up, Tampines New Town will be more vibrant. Viability for the bus company will naturally fall into place. And perhaps people like that housewife will not have to reject the flat.

Mr Speaker, Sir, I think time is running short. You may wish to suspend the Sitting --

Mr Speaker: You still have got 45 seconds.

Mr Phua Bah Lee: -- for lunch and I will continue at 2.30 pm.

Mr Speaker: You can still carry on to one o'clock.

Mr Phua Bah Lee: Sir, you are a very law-abiding Speaker.

Finally, a word for the civil servants. Our civil servants have come under some public criticism lately. This is especially directed --

Mr Speaker: Mr Phua, it is 1.00 pm now. The Sitting is suspended until 2.30 pm. Order.

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