ANNUAL BUDGET STATEMENT

[Mr Speaker in the Chair]

Debate resumed.

Mr Phua Bah Lee: Mr Speaker, Sir, our civil servants have come under some public criticisms lately. This is especially directed at the administrative officers who jointly formulate public policies with our Government Ministers. I have also heard of blame put on them. I recall reading an article in the newspaper that the "Work-to-rule attitude of civil servants, who do not raise counter-proposals, should be seriously tackled and eliminated." While I share, to some extent, the sentiment expressed by the writer, I do feel that our civil servants are sometimes being put down too harshly.

It is appropriate and necessary to remind our civil servants to be constructive, to monitor the effects of public policies with a view to improving them, or to recommend their deletion if such policies no longer serve the purpose. This was most skilfully put across by the Education Minister in December last year at a function of the Alpha Society. But when opportunists jumped on the bandwagon and openly chastised the civil servants, I feel compelled to say a few words.

The word "servant", though not demeaning, usually conjures a servant-master relationship. In most cases, it means, "you, the servant, are there to serve me; to do my every bidding, and to be there when I need you."

During the colonial days, that mentality prevailed. Though much have changed, the term "civil servant" somehow remained.

Because of the stigma associated with this word, it is always easy to scold a "servant" when things do not go the way we want them, rightly or wrongly.

In this instance, the "master" is the public and the "servant" is none other than our civil servant, who also happens to be a member of the public, as it were.

The point, therefore, is that we must first change our attitude towards our public service workers. We must see them as professionals, persons who need our support to do a better job. After all, what they do would be for the general good.

While we want them to feel deeply and be willing to act compassionately, yet we do not feel the same for them. We want them to be impartial when implementing policies. At the same time, we want them to exercise flexibility.

Put plainly, the civil servant's job is not a bed of roses. In helping the Government to formulate public policies, they are walking a tight rope, balancing delicately to meet the needs of our people on one hand and the national goals, on the other. This, I assure you, is no easy task.

They have to consider the objectives and the need for public policies to be introduced. They must bear in mind what most people want out of life, where and under what conditions their desires can best be fulfilled. They have to suggest the right time to introduce the policies. On top of that, they have to pre-empt the mood and reaction of the people towards the policies.

Once implemented, the whole machinery is put in motion to support the policies. They have to be monitored, re-evaluated and implemented again. Sometimes, just as a policy is being implemented, events have overtaken it, rendering the policy irrelevant.

The tasks the civil servants undertake are complex and sometimes unenviable. Despite the complexity, we all know that our civil servants are efficient, corrupt-free, dedicated and loyal. They protect the Establishment by being impartial and prudent. We must also realize that they are equally affected by these policies. In such instances, their objectivity prevails because they are amongst the best people we have. It is acknowledged that we do not want yes-men as civil servants. But it must be pointed out that policies are always debated thoroughly amongst the civil servants. During such sessions, we get all kinds of opinions and feedback. We get people who speak up forcefully, convincingly and even apprehensively. However, for the system to function, the civil servants must be team players. Once decisions are made, we would want them to carry out the policies, not undermine them.

Those of us who have had a chance to travel overseas should realize how lucky we are to have such an effective and efficient civil service. We know there are some countries overwhelmed by inefficiency and corruption. I am very proud of our civil service.

Naturally, there is always room for improvement for the civil service. It should move with time, adapt quickly to the changing scenario, resolve problems well, reduce red- tape and so on. This, they are doing quickly and surely.

Mr Speaker, Sir, let us not be quick to criticize. Organizations err because human beings err. But how fast we can admit our mistakes and how quickly we can put them right makes the difference. It is this that makes or breaks a set-up. It is this that shows the character of an organization.

Let us pick on what our civil servants have done for us and not what they have not done.

Mr Speaker, Sir, I support the financial policy of the Government. 2.40 pm

Dr Toh Chin Chye: Mr Speaker, Sir, this year's Budget statement has been more responsive, conciliatory and less aggressive than those presented in previous years. The Minister for Finance is new. He is not contentious. He is not like the Parliamentary Secretary to the Minister for Defence who sounds like Caspar Weinberger. He has my sympathy, although he is not here, for having to reap the wild oats that others have sown.

Eleven studies with recommendations have been submitted by various sectors of business and industry to the Government. Each sector has spelt out its problems loud and clear. So there is not much more that we in this House can add and I do not wish to go over old ground that has been covered in the debate on the President's Address.

Commodity prices have been falling since 1983. But it has taken the Government a long time to understand the implications for Singapore. Property prices have also fallen. The value of shares in the stock market has fallen. The value of collateral on loans held by banks and finance companies has fallen with the result that mortgages and other loans have become non-performing. The result is distress sales not only of property but also liquidation of industrial and construction equipment.

Liquidity is tight as shown in the declining annual growth rate in the money supply since 1981. For this, we have to thank the high CPF rates and successive Government budget surpluses that soaked money out of the system.

Against this background of deflation, a strong Singapore dollar hides what is really a weak economy that has seen a record number of winding up of companies and businesses and loss of jobs. The problem that we face today is that 100,000 jobs have been lost. Foreign firms have either pulled out or cut down the scale of their operations and sent their expatriate staff home.

Economics does not concern itself with citizenship. What it means is that there is less private spending in the retail sector and a drop in the demand for rented accommodation. The problem of businesses today is how to survive this year, and the fear of workers is whether they will keep their jobs or have their pay cut in the next six months. If they cannot survive through 1986, no glorious vision of 1999 will inspire them.

My constituents are not great economic thinkers but they see the ebb and flow of the economy through retail shops, restaurants, bars, coffee shops and hawker stalls. They understand turnover. Without private spending, there is no turnover, and without turnover, business is dead.

When the Stock Exchange index was reaching a new high each month, it was the brokers and the speculators who passed the boom to the retail trade. Today, the stock market is limping along.

Those who are sanctimonious about speculation and gambling may not understand that in Hong Kong, horse racing is held three times a week. The bookies, the punters and the hangers-on are patrons of night clubs, bars and restaurants. It is they, not the directors of Singapore Pools (Pte) Ltd, who spend. In Singapore, even as unlicensed bookies are zealously pursued by police, bars, coffee shops and restaurants see a further downturn in business.

The Government can dismiss the contribution of this grey fringe of the economy to Singapore's GDP, just as the Minister for Finance, in justifying the recent closure of the Stock Exchange for three days, belittles the role of the Exchange in Singapore's economy with his statistics. The danger of total trust and absolute reliance on statistical data for policy making is to ignore the human factor which can make economic predictions less reliable than forecasting the weather, which at least is in the hands of God.

So it is not surprising that the idea of the consumption tax is being raised solely in terms of covering up Government revenue that will be lost through income tax rebates. Equally, it is not surprising that quick reaction has been evoked among the public and backbenchers. A consumption tax is not new, as the Member for Kebun Baru said this morning. But to be successful it has to be broad based, like the Government levy on Telecoms bills, PUB bills, 3% cess on food and beverage consumed in restaurants. If excise duty is another way of calling a consumption tax, then there are consumption taxes on tobacco, liquor and petrol. But when the Minister for Finance tells us that a machinery will be set up this year to collect a consumption tax, that tax sounds like a new tax. And we have to accept that the Government has made up its mind, regardless of public opinion. Take heed: if the consumption tax, whatever from it takes, is to control private spending, imposing it this year or the next can only lead Singapore to a downward spiralling depression.

May I ask, is more taxation necessary? Singapore's infrastructure in the port, in roads, sewerage, communications, factories, warehouses and housing, has almost completely been developed. Outside the MRT and the second terminal for the Airport, there will be little scope for public expenditure in capital works in the next few years. There is already under-utilization of existing capacity in every part of the property sector. So further Government spending to stimulate the economy can turn out to be an exercise in waste. It will not justify further taxation to replenish Government coffers.

Four thousand years ago, all the resources in Egypt were concentrated in the hands of the Pharoahs. They built pyramids, stimulated the construction industry and created work for artisans and peasants. If the Pharoahs had established national accounts at that time, Egypt would have recorded double digit growth in GDP. But the immense resources in material and manpower needed to build these monuments to the Pharoahs impoverished the country.

There are no pyramids in Singapore, but take a drive down the East Coast Parkway onto Benjamin Sheares bridge towards Keppel. One can have a grand view of Singapore's landscape outlined by the CPF building, the Treasury building and the MAS building standing side by side, half empty monuments to the ego of the bureaucracy. Construction costs were $474 million, and if land costs were imputed at 50%, total costs would be close to $711 million.

The Finance Minister's estimate of a $3,217 million deficit for financial year 1986 is accounted for by spending on development. Under the Development Estimates the Ministry of National Development will be spending $10,073 million, but of this amount $8,814 million will be lent to the HDB. If it is a loan, it will be recovered with interest payment at some future date and will have to be accounted for as receipt in future revenue estimates. What it really means is that taxpayers are asked to pay for a Government loan to the HDB which will be repaid eventually through sales and rental of flats, shops, factories and warehouses.

The HDB is the largest property developer in Singapore. It should have gone public on the Stock Exchange. There is no reason why the loan it requires for development should not be taken out as public bond issues and not through taxes. If this were done, the deficit will disappear and instead there will be a surplus of $5,460 million in the Budget.

Over and above the problems that have been related in this House and in the Economic Committee's Report is the property overhang. In a recession a government normally falls on the building and construction industry to pull the economy out, but this recourse is not possible given the excess capacity of residential units, offices, shops, warehouses, factories and hotels. This under-utilization of property will remain for the next four years and may even continue beyond 1990 if occupancy rates remain low.

When a 5-star hotel in Singapore sells at 3-star rates, when an international hotel management that used to sell rooms at $200 a day now sells rooms in a new 5-star hotel at $70 a day, it goes to show the parlous state we are in. There has been an increase of hotel rooms by 85% in five years during which tourist arrivals increased by only 18%. Supply does not create demand.

Statistics put up by the Property Consultative Committee are startling when they are compared to those of Hong Kong. Singapore has more office space, more factory space, more warehouse space, more hotel rooms per sq. km land area than Hong Kong. The ratio of Singapore built-up space to Hong Kong is that Singapore has 1.14 times more office space, 1.2 times more factory space; 2.07 times more warehouse space; and 1.8 times more hotel rooms. Where are the people to fill our offices, factories and hotels? There are more sq. metres per person in Singapore than in Hong Kong.

Built-up space per person: for office space it is 1.4 times bigger than for Hong Kong; 1.56 times bigger for factory space; 2.2 times more for hotel rooms. In other words, Singapore needs that many times more workers to utilize the same area of office and factory space as efficiently as Hong Kong.

To stimulate more building under present circumstances is an economic waste, a wrongful use of money on non-performing assets that will lead to non-performing loans.

The HDB will have to spell out the purpose of the $8,814 million loan it is asking. And in this budget we have not been presented even a note on the nature of the spending. How will the money be spent, when already 84% of the population are living in HDB flats? There will be no market left for the private sector.

Indeed, housing is Singapore's biggest achievement. But there has always been a price to it and I would prefer to let the people know how cheap housing has been paid for. Housing in many developed countries does not necessarily mean home ownership. It can be cheaper to rent than to buy, particularly for those who are mobile. We had a mix of rented HDB flats and purchased flats. That mix has been changed for political reasons. The loan to the HDB for financial year 1986 is almost twice that for financial year 1985. Just imagine, a private developer going to his bankers for a loan of that size. The bankers will fall off their seats!

I would advise the Minister for National Development, if he were here, not to do everything in his life-time. Leave some work for future generations of architects, engineers and contractors. Let the future generation earn the money. We have already on our hands the most expensive social security system in the world, paid for through high CPF rates. That has landed us in the jam that we are in today.

The CPF is a cheap source of borrowing for the Government. Even when the prime rate at its high was 13.6%, the CPF was lending to the Government at 6�%. Now that the prime rate has fallen to 7.2%, CPF contributors have been forewarned that interest on their balances will be at market rates which currently are 5�% for POSB accounts and 4 % to 5% for savings accounts in commercial banks. It still means that borrowings from the CPF will be below the prime rate.

So we had the Blue Paper in 1984 which sought to extend the withdrawal age for CPF contributions, from 55 years to 60 years. Likewise, Medisave guarantees that there will be money in the CPF kitty as a contributor cannot withdraw this account even after retirement. In fact, he may not even be able to withdraw all of it after he is dead. CPF funds are still available for Government borrowing.

The proposed consumer tax will be the new milch cow. It will be a free gift to the Government who will lend it to the HDB who will repay the Government at some future time, 20 years for loans for constructing flats for sale and 60 years for loans for properties for rent.

It is not only the HDB that borrows from the Government. Other statutory bodies and Government companies are also supplicants for loans. That ought to make us worry. The vacancy rate for HDB factories is 40% and 27% for JTC factories. The vacancy rate for HDB warehouses is 23%, 43% for JTC and 42% for PSA warehouses.

The Government cannot on the one hand pronounce that there has been a misallocation of resources, too much money locked in property and on the other acquiesce to the HDB's escalating building loans. We are, of course, interested in the question whether the fiscal measures that have been pronounced inside and outside Parliament will turn the economy around. The Government is now seen as the pacesetter. Through the statutory boards and the companies it operates, the Government is so dominant in the economy that Singapore has become so much smaller for the entrepreneur and private enterprises. This position is magnified by Singapore's small economy.

Equity in Raffles City Hotel is controlled by the DBS, Temasek Holdings, SIA, PSA and the Singapore Tourist Promotion Board, all of which are statutory bodies or Government companies. The managers of this conglomerate have a degree of freedom that a private hotel management does not, mainly because of its backing by Government.

The 3% cess on food and beverages consumed in restaurants and the 3% cess on hotel rooms is paid to finance the STPB to promote tourism in general. It is not intended that this cess should become capital for STPB to invest in a hotel. Surely, there must be a conflict between the STPB's interest in a Government hotel and its efforts to promote competing hotels.

Last year, during the Budget debate, I strongly advocated greater accountability of statutory boards and Government companies as it is in the interest of the Singapore body politic to understand how taxpayers' money or public money is spent to oil the Government economic machine. No action seems to have been taken. Neither has the Public Accounts Committee been offered documentation of Government enterprises. Memories are short. We have forgotten about the purchase of Granite House by the Singapore Government. So I feel compelled again to ask the Minister for Finance for a written answer on the profits and losses of Government companies. The temptation of Government companies to collaborate with each other or with bodies close to the Government is to be expected. This is being done to the prejudice of private sector enterprises.

I understand that Singapore Pools (Pte) Limited will be working with the NTUC to sell 4-D and Toto tickets that previously have been farmed out to private individuals. The NTUC and Singapore Pools are, of course, operating under cover of Government legislation. Does the NTUC really need the commission? Given that civil servants sit on the board of Government companies, they have the pull and the clout that private companies do not have.

Private businesses that are outside the pale of Government patronage and protection will not be able to compete. It does create cynicism indeed when the Economic Committee advocates greater dependence on the private sector to pull the economy out of this trough, but the contrary is seen as economic power remains centralized.

Will the fiscal measures bring a turnaround of the recession? The measures are seen in the market as a stop- loss operation. Those companies that have been chased out of Singapore by past Government policies are in no hurry to come back. New investors are unable to make any feasibility studies for their operation or new investment in Singapore when there is uncertainty at the end of two years. Two years is the magic number. Two years for the reduction in employer's contribution to the CPF. Two years for the reduction to the Skills Development Fund. The 15% cut in employer's contribution is correct but it becomes counter- productive to qualify that this will only last for that short span of time. I do not know. It may be a political gambit to placate the NTUC. But it was foolish to create the impression all along that the employer's contribution is part of their pay. It is not. It is unearned income, not for work done and it has never been negotiable. It is a tax on labour in Singapore as in other countries which have social security systems. It is a tax for the social security that we have and the amount is dictated by the Government.

Businesses go wherever they perceive a cost advantage or price advantage. In Hong Kong, there is no social security tax equivalent to the CPF. Nor is there one in South Korea. As for Taiwan, there is labour insurance in which the employer contributes 5.6% and the employee 1.4% of gross monthly wages.

A repetitive note that has been made in the Presidential Address and in the Budget speech is the need for Singapore to be internationally competitive and competing in the world market means price. And price is related to the cost of doing business in Singapore as well as the foreign exchange rate of the Singapore dollar. It may be useful to note how the currencies of the four newly industrialized countries have fluctuated against the United States dollar last year when the G-5 talked the dollar down. The percentage changes against the United States dollar from the first quarter of 1985 to December 1985 has resulted in the South Korean Won having depreciated 5.75%, the Taiwan NT dollar depreciated 1.28%, Hong Kong dollar has not changed because it is pegged to the US dollar, the Singapore dollar on the contrary appreciated 5.71%. In other words, the Singapore dollar was more expensive than the Korean Won by 11.5%, the Taiwan NT by 7% and the Hong Kong dollar by 5.7%. That helps Korea, Taiwan and Hong Kong to be more price-competitive than Singapore in exports and the tourist industry.

An over-valued currency is deflationary as the Japanese have found with an over-valued Yen. The exporter will be getting less Singapore dollars for his US dollars. The alternative is for him to raise his US dollar price. By doing so, he may become uncompetitive and loses his share of the market.

We cannot expect the Minister for Finance to talk the dollar down. It should be left to market forces, so says the Economic Committee's Report. It can be taken to mean that the MAS is also in the market, a point that the Member for Alexandra drew attention to recently. So when the Minister for Finance denied that MAS had intervened again, following the opening of Parliament, I am afraid the market has not been receptive to his answer. Traders have to hedge forward to protect their export or import earnings but they will be at the losing end each time when fundamentals move the market but the MAS perceives speculators as the moving force and intervenes causing interest rates to rise.

May I come to Research and Development and the Skills Development Fund. I support the Minister for Finance's tax exemption on R&D. That is fine, particularly in the light that we are spending more money on planting trees and chopping them down than on research. Buying a weighing machine, a microscope and a dozen test tubes and employing a white coated technician is not research when it really is quality control. Hong Kong has no R&D or Skills Development Fund incentives but it went on from exporting wigs to plastic flowers, toys to fashion dresses, watches to electrical and electronic goods. Hong Kong industry has never been preconceived in a master plan. It is the flexibility of the Hong Kong worker and the imagination and ingenuity of the entrepreneur that has made Hong Kong. So unless the Inland Revenue Department understands what is research and what is development, R&D incentive can offer a tax loophole.

The allocation of money from the Skills Development Fund is left to the judgment of the bureaucracy who is biased by policy decisions or directions. Companies that have been enjoying pioneer status collect an additional windfall when they apply to the Skills Development Fund. In reality, many small businesses that have been paying to the Skills Development Fund since its inception have no chance of smelling at the Fund at all. They are being taxed to support companies that have the resources to train their own staff. A surplus of $102 million in the Skills Development Fund no longer justifies continued imposition of the 1% tax. It should be abolished. Any claim for tax exemption on expenditure used for training skills should be made to the Inland Revenue Department just as claims for tax exemption on R & D expenses have to be justified before the Inland Revenue Department.

May I end with a note on the proposition to revise income tax and the wage freeze. Mr Speaker, I have requested the Clerk to circulate a Table to Members of the House so that they will be able to follow the argument which I am putting forward. [Copies of table distributed to hon. Members].

Each time there is an income tax revision, the ideological basis for the change is to favour the professionals. It will encourage them to work harder, says successive Ministers for Finance. It is equivalent to saying that the working class does not need to work harder and they ought to carry a greater share of the tax burden. The professionals, doctors, architects, lawyers, brokers and bankers do not need to be urged to work harder. They are already the highest income earners, as has been pointed out in this House and they have amassed fortunes. For the working class families to survive these days they need at least two members to work. The professionals need not do so.

The revision of income tax for Year of Assessment 1987 is regressive. It brings out inequities. The weight of the tax burden is shifted to the lower and middle income groups. I shall not go through the entire list of groups who are subject to income tax, except to pick out two groups - those whose chargeable incomes vary from $5,000 to $25,000and the other group whose chargeable incomes vary from $100,000 to $400,000. For the group whose chargeable income is $5,000 to $25,000, the savings in tax vary from $32 to $494, ie, 0.64% to 1.98% of chargeable income. For the professionals who are already very highly paid and whose chargeable incomes are from $100,000 to $400,000, their tax savings are $4,144 to $21,644 ie, 4.14% to 5.41% of chargeable income.

The reduction in income tax will not offset a wage freeze for two years, as recommended by the Government. The wage freeze is really being paid for by the Government through a loss in income tax collection but that will be recouped through a future broader based consumption tax. A saving of $32 to $494 in income tax is equivalent to a tax- free wage rise of $2.67 to $41.17 per month. For the higher income bracket, it is equivalent to $345 to $1,803 per month. So where is the wage freeze? As it can be seen it is the lower income group that is bearing the wage freeze, not the professionals.

I would, at this stage, urge a 5% reduction in the employee's contribution to the CPF. This will mean a 6% increase in take home pay without any additional increase in the wage bill and without the Government suffering any losses in tax collection. You do not need 6% of the CPF locked in Medisave in these difficult times. The alternative for the lower income group is to go to the pawnshops. And all the statistical data we have shown that pawnshops are running out of capital because they are too prosperous.

Households have lost income through retrenchment or pay cuts of some members of the family. Take home pay becomes important as bills have to be paid, marketing has still to be done, and bus or taxi fares have to be paid in cash.

Hopefully, the continuing fall in the price of oil will also mean that there will be no great increase in the cost of living and the Consumer Price Index will not exceed 1% to 2%. Even if this is so, it will not be easy for low income families that have growing children or families that have additions to cope with a wage freeze and a consumption tax.

The Budget is seen as no more than a holding position for this year and the next, until the Government can thoroughly digest the input it has received through the different Economic Sub-committees.

May I end with a note of thanks to the Minister for Finance that this year's Economic Survey has been more readable than in past years, and that by incorporating two reports into one, the Budget has been more easily understood than previous year. Thank you. 3.20 pm

Encik Abbas Abu Amin (Pasir Panjang): Mr Speaker, Sir, I rise in support of the motion under the name of the Minister for Finance.

Sir, it is the desire of every government to provide economic prosperity and to raise the standard of living for all its citizens. Singapore has been able to do this for more than two decades. However, for the past two years, the economic climate of Singapore has been affected by both internal and external factors which have resulted in the present economic recession. This recession has affected all of us, be it the workers, industrialists, civil servants or the entrepreneurs.

The basic thrust of the Government's response to the internal and external difficulties which Singapore is facing has been elaborated by the First Deputy Prime Minister. The fundamental objective of this year's Budget is to lower labour costs and strengthen the competitiveness of our products in the international market in order to turn our economy around and, in the long run, create more job opportunity for our citizens.

The announcement of bold measures to be implemented by the Government has been well received and has been acclaimed as a move in the right direction. Trade unions have demonstrated clearly their resolve to work together with the employers and Government to overcome the current recession.

May I say, Sir, given the above outline, the Budget is not only pragmatic but it encompasses all facets that have to be considered.

Sir, I would like to comment on three topics: (a) manpower training or manpower development; (b) trimming of manpower in the public sector; and (c) consumption tax.

(a) Manpower training. The Government has taken concrete measures to put the economy back on its feet. Notwithstanding this, we must look beyond these measures and prepare our workers, especially those in the lower income group, to meet the expected revival of the economy. The trade unions support the emphasis on the training of our workers. Emphasis must also be given to the re-training of retrenched workers so that they can be employed in the productive sectors of the economy. This is by far a more practical way of helping the retrenched workers than by giving them hand-outs. As the saying goes, "Give a man a fish, he lives for a day. Teach him how to fish, he lives for a life time."

On the part of the unions, Sir, we have initiated the Basic Education for Skills Training (BEST) programme to train workers who do not possess primary school qualification. There are 7,120 BEST students studying at 74 Centres for the January 1986 intake. Arrangements have also been made with VITB for retrenched unionized workers to attend Modular Skills Training (MOST) Scheme.

I would like to appeal to employers to do likewise and to adopt a positive attitude towards training of their workers. Mr Speaker, Sir, from the surveys conducted by the National Productivity Board, companies reported having training expenditure below 0.2% of their total sales. Likewise, a survey done by the Ministry of Labour found that training cost forms only 0.8% of the total labour cost. It is important that more companies develop in-house training programmes to raise the specific skills of their employees.

It is equally important that firms avoid the temptation of reducing training expenditure as a cost-saving measure during the current recession. To a large extent, the current economic downturn is a good opportunity for firms to raise the skills level of their employees through training so as to prepare their workers for the economic upturn.

Now I touch on the trimming of manpower in the public sector. Mr Speaker, Sir, while I am on the subject of manpower training, I would like to briefly touch on the decision of the Finance Ministry to reduce the present establishment of the public sector by 10% and which has been amply publicized in the media. I share the view expressed earlier by the hon. Member for Kebun Baru on this matter.

It is generally agreed that the recession and fall in the revenue makes it more pressing for the Government to contain increases in the Establishment levels and manpower costs. As such, the Government has decided that the present staff complement of Ministries and statutory boards should be reduced by 10% from the current level over the next five years and that a comprehensive programme of manpower scrutinies will also be instituted in the public sector.

However, Mr Speaker, Sir, the Minister for Finance has assured us that the 10% staff reduction can be achieved through normal attrition and more selective recruitment without the need for retrenchment. We have also been assured that every attempt will be made to retrain and redeploy redundant staff to other areas.

Nevertheless, Mr Speaker, Sir, may I appeal to the Ministries concerned that in implementing this scheme, care and attention should be given and that the process will be carried out in the proper perspective and proper approach should be taken for effective implementation without causing anxiety and disparity.

Next, the consumption tax. In the Budget Statement, the Minister for Finance indicated that consumption tax is being considered by the Government. I concede that the need for the consumption tax must be seen in the longer context of Singapore's economy in particular, as direct taxes are lowered to meet the competition, thus consumption tax is anticipated by the Government to be brought in to provide compensating source of revenue. Mr Speaker, Sir, the consumption tax, though it may be necessary in the long term as a source of revenue for the Government, due care and attention should be exercised in its implementation so as not to create adverse results. Timing is essential. Effort should be made to explain to the people so that they understand and appreciate the Government's long-term intention to implement such a new scheme.

However, in the light of the present recession, the workers have undertaken measures for wage restraint; reduction in CPF's saving and related benefit, notably the half month incentive payment, by the public servants.

Given the present economic conditions, the Government must not impose additional strains to our workforce, especially the lower income group who are already finding difficulties adjusting their financial needs. The Government in implementing the consumption tax should take these factors into consideration.

Mr Speaker, Sir, I urge the Ministry to give careful consideration to this matter and its selection for consumption tax to be applied. Let us not forget the sacrifices which our workforce has made in this present economic situation. Let us not burden them any further.

A case in point is that, of late, the public servants have been notified on the reduction in the renovation loan; the contraction on the years for repayment, and the increase in the interest of loan. This step has brought sharp reaction from the public servants, especially those in the lower income group as they are the ones who need to use such facilities, due to their economic status. I would urge the hon. Minister for Finance to review the implication on the implementation of the renovation loan and, if possible, assist the affected civil servants.

In conclusion, Sir, I would like to thank the Minister for Finance for presenting a pragmatic Budget for the benefit of all, the people and the nation. The Government has laid out its plan and strategy to fight the recession and restore the economic growth. Now it is up to all Singaporeans to take the challenge.

I beg to support the motion.

3.30 pm

Dr Koh Lam Son (Telok Blangah): Mr Speaker, Sir, I find the Budget Statement made by the Minister for Finance very encouraging. It shows that the Government is taking steps in the right direction. It is not a panacea for all our problems. But I certainly hope that it will infuse enough confidence to revitalize our sagging economy. If it does, we hope to recover from the recession within the next 2-3 years. If it does not, then we must be prepared for more hardship. Sir, it would be wise that we advise our people to square up to the facts of life and to be neither euphoric nor pessimistic with the outcome of the budget.

The business people are satisfied, as I understand, with what they can get for now, but I will not say that they are laughing their way to the bank. The road ahead for them is uphill. Hopefully, most will be able to overcome the cash flow and debt problems and stay competitive, and even then their success or failure will depend on the future growth in demand for their goods and services, especially from overseas.

Sir, some business people have commented to me in a rather pessimistic manner that the economic measures, although sufficient, have come too late and they predict that many more companies will go bankrupt. They said that these measures should have come about and implemented at least a year ago. If the Government had known a year ago that we were going to face a recession in 1986, I am sure it would have come up with these measures and implemented them a year ago, if not earlier. But the truth is that neither the Government nor any economic expert could know for sure what was going to happen. And supposing they did, would it have been possible for the Government to convince the people at that time that belt-tightening measures were necessary? If you recall, Sir, in 1984, we had such an uproar from the public when the Committee on the Problems of the Aged proposed a delay of CPF withdrawal beyond the age of 55 years. It is impossible to think that they would accept a 15% reduction in CPF contribution in 1984 when the economy was growing at 8.5%.

Sir, the recession can be likened to a young man taken ill with acute appendicitis. He is a fit young man and does not expect to get appendicitis. But when it comes, there is little warning. The treatment for acute appendicitis is simple - perform surgery, cut the appendix out. The effect is more pain for a while before final recovery. In retrospect, one could say that if that young man had his normal appendix removed earlier, he would have been spared the attack of appendicitis. But then would any normal and sane human being want to go through a painful surgery to have his appendix removed? I do not think so. Likewise, Sir, nobody wants the Government to take painful measures unless it is really necessary.

Sir, big companies with a large workforce are likely to benefit more from the Budget policies. A good number of companies are making profits, even during this recession. The Budget policies will enable them to increase their profit margins. It is hoped that these companies will use this increased profit to expand, diversify and create more jobs.

The smaller companies with a smaller workforce are unlikely to benefit much from the Budget. They will be going through a traumatic time. Their problem of high costs is compounded by bad debts and poor business. Owing to poor turnover, they do not have sufficient funds to cushion off their bad debts, and they are reluctant to close new deals. The 15% reduction in CPF contribution will help them somewhat, and so will cheaper petrol. But they need more help. High road taxes, high HDB rentals and utility charges will only add to their costs. Can the Government consider a further reduction in these charges to help these small businesses?

Sir, when we talk of small businesses, we are referring to companies with a workforce of 20 to 30 workers. We do not include the HDB shops which normally have three to four workers per shop. The HDB shops are a different category. They are there to serve the HDB residents in particular, and their market is well defined and very limited, and it will remain so.

The typical HDB shop is a small family business concern, set up to provide a modest family income. By and large, these shopkeepers are not entrepreneurs and they do not see the need for automation, modern management systems and productivity. Given the fact that they are HDB shops and they will always be HDB shops serving a restricted market, how can they upgrade themselves during the recession? For example, Sir, let us take the HDB provision shops. Can the provision shops group together to form a supermarket? Even if the HDB allows them to do so, is it possible to get the families together to run one business? Sir, I think the real problems faced by the HDB shopkeepers is not a lack of modern management or high labour costs but high rentals, high utility charges, and the fact that they have to compete with other shops of the same trade for a small and limited market.

In Telok Blangah, there is a row of 11 HDB shops. Out of these, there are three provision shops. From the proliferation of goods outside the shops, it is obvious that there is fierce competition. I think the HDB should not encourage this. There should be a better balance of the different trades in each row of shops and in each neighbourhood.

Sir, the Budget is without doubt a painful one for the wage earners. They had not expected the 15% reduction in CPF contributions, coupled with wage restraint. The majority have no choice but to be prepared to adjust to a lower standard of living, and some will face financial difficulties. Many are living, in fear of the threat of retrenchment. The problem of those who are retrenched is another matter.

The reduction in income tax offers little comfort. For example, a married worker with one child, earning $700 a month, will save $48 a month in income tax reduction but loses $105 from the CPF cut. This group of workers forms more than half the workforce. Sir, we tell these workers that all these harsh measures are necessary as ultimately it is in their interest. But we must not forget that it is this group of people who bear the brunt of the burden. And it behoves the Government not to add any further unnecessary burden on them.

Sir, since we expect the workers to show wage restraint, it is not unjustified if they expect Government departments and statutory boards to show some restraint by keeping the fees down. In fact, Sir, I would suggest that if there is a saving made in any of the Government department or statutory board, they should pass it down to the consumers. For example, the Public Utilities Board is likely to make a saving from the new fiscal policies and from the lower cost of oil. So I hope it will seriously consider lowering the utility charges so that both the workers and businesses can benefit.

I would like to give a timely advice to the PUB - they must not give the excuse that the reduction in oil prices is only temporary. Because I can tell the PUB that the people will not accept this. If the reduction is temporary, why should the oil companies reduce their prices in the first place?

Sir, other fees, such as HDB conservancy, car park, traffic summons, hawker's licence, telephone, radio and television and others, should not go up as they will affect the recurrent expenses of the ordinary workers. It is a well known fact that our road tax is one of the highest in the world, and yet the motorcar in Singapore is considered less and less a luxury item. The motorcar is necessary for people to be efficiently involved in economic activities. For this reason primarily, we all spend our hard-earned money on motorcars. In my view, our road system is quite efficient and traffic jams are not serious. With the present slow-down in the car population growth, there is no reason to increase the road tax unless as a revenue-generating measure, which I strongly discourage the Government to do so. In fact, there is a case for the fees to be reduced as I believe that the slow-down in the car population will last two to three years.

Sir, in the last parliamentary sitting, the First Deputy Prime Minister gave the assurance that every Singaporean will be given assistance to solve the mortgage repayment problems resulting from the 15% reduction in CPF contribution, and he announced several schemes to help such people. In spite of this, I believe there is a small group of people who may still find themselves in trouble. For example, the group of older people who have purchased residential property with the intention of repaying their mortgage loan right up to their retirement age. The loan is taken, say, at the age of 45 years with a 10-year repayment plan and using mainly his 50% CPF contributions. Now with the 15% cut, he will have to pay the balance after his retirement age when he is no longer working and has no further CPF contributions.

The bridging loan scheme will help especially the group of people who have purchased a second private property. But some people may not have enough in their CPF to pay the bridging loan and they will have to dig into their own pocket. And what about the person who is retrenched? If he owns a private property, he will be in a serious predicament. If he runs out of CPF to service his loan, he may be forced to give up his house. And at the present depressed property market, he may not be able to get a price that is enough to redeem his mortgage, especially when he has to return the loan to the CPF Board. If he has no savings of his own, he may become a bankrupt. Worse still, if he is out of job and he cannot afford private rentals, he and his family may end up without a roof over their heads. So will the Government please give further consideration to this group of Singaporeans and judge them according to the merits that they deserve? Will the HDB also consider giving this group of people some priority in accommodation?

Sir, the good intention of the Government to allow CPF contributors to use CPF to buy a second property has landed some of them in hot soup. On what reliability will a person now go into private housing, knowing that the policies are subject to changes? He will not be certain of his servicing ability. To resolve the uncertainty, there must be a clear indication of a minimum and a maximum CPF ceiling. Here I fully agree with the First Deputy Prime Minister's suggestion that the CPF contribution rate should be based on a reducing scale, starting at 50% and gra- dually reducing it over the years to a low level. I hope the Government will seriously consider this and come up with such a scale. This will give the CPF contributors reliability in planning their future spending, particularly in housing, thus avoiding disruption to their life as a result of policy changes. If such a scale is agreed, it must not, of course, apply to the present CPF contributors but to the new contributors.

Sir, I have taken 15 minutes to highlight some of the problems and areas of concern of the ordinary people.That is because I feel that if the Government leaders want the people to listen to them, to support and cooperate with them, then they, as their leaders, must also listen to the people and understand the problems that the people are facing during the recession. The Government must not take the cooperation of the people for granted; they must show the result of their actions.

In conclusion, Sir, I believe the Government is confident and the people are confident that there is this close cooperation and support and that together we will pull the nation out of the recession. 3.47 pm

Mr Lai Tha Chai (Henderson): Mr Speaker, Sir, I think the Finance Minister is very generous this year. He is particularly generous towards the taxpayers. In his Budget statement he has announced a 25% rebate on personal income tax for this year, and a bigger rebate for the same next year.

Sir, in my view, his kindness and generosity serve to reflect the integrity and high morality of our leaders. They have built up a reserve of over $25 billion for the country and are now using part of the reserves to help the people in their present difficulty. Sir, had our national coffers been empty, or worse still, had our country been debt-ridden, such help would have been impossible. For even the cleverest woman cannot cook meal without rice, as the Chinese saying goes. ( ) (chiau fu nan wei wu mi zhi chui). It would have been a case of "the spirit is willing but the flesh is weak". ( ) (sin yiu yi er li bu tzu ). The people would have to suffer in the end.

However, what I would like to point out, Sir, is that it appears that the income tax rebate is more a reward for individual talent than a reward for kindred feelings. I am all for giving recognition to individual talent. But at the same time rebate should also be given for the support of parents. It will be a good way to foster our oriental tradition.

Sir, as we all know, the HDB gives priority to applicants of extended families. If the Finance Minister also gives the tax rebate for the support of parents, it will be a good way to show recognition of filial piety as well as brain power.

Sir, I believe you will agree with me that a good brain and a kind heart are equally important. Neither of it should be overlooked. Take our Finance Minister, for example. Before entering Parliament one year ago, in December 1984, he was earning a salary of more than $50,000 a month but now he earns about $20,000 a month. He is earning less. Now he gets very little compared to what he was earning years ago. However, Sir, this does not mean that he is now less brainy than before he became a Minister. On the contrary, it serves to show that he has a kind heart besides a good brain.

Sir, I am not saying that money is not the only measure for kinship. I sincerely hope that the Government would take practical measures, of course, including economic measures, to encourage the people to look after their parents as well as their children if we want them to remain orientals and not become "pseudo-Westerners". On that note, Sir, I support the motion. 3.51 pm

Dr Koh Lip Lin (Nee Soon): ( In Mandarin): Mr Speaker, Sir, the main topics of the debate on Finance. Minister's Budget Statement this year are the Government's economic development policy and the measures to overcome the economic recession. The most notable ones are the reduction of CPF contribution, income tax, the restraint in wages, and the rebate in property tax and others. What the public is most concerned with is the proposed imposition of consumption tax. Undoubtedly many people are opposed to the consumption tax. The reduction in the various taxes will lead to unbalanced accounts. So there is the need to seek alternative revenue by some other channels. Of course, we should not be like many other countries where, when they are short of money, they will borrow from abroad or print a lot of currency notes which will cause inflation. So the only method is to impose new taxes. Of course, the people will then be alarmed. Everybody is afraid that new taxes will increase his burden. However, in fact, new taxes are inevitable because as the fleece comes out from the sheep, so does Government revenue come out from the taxpayers. But the people should understand that when the Government is a clean government, the revenue through tax will all be spent on the people. The more important thing is that the government in the imposition of taxes, should be fair in the scope and method of its implementation, so as not to give some people having some advantage while some others have to bear an undue burden.

The shortage in revenue resulting from the reduction in income tax is to be made up by the imposition of consumption tax. This may cause some dissatisfaction to some people. This looks like the reverse of Robin Hood's method: taking from the poor to help the rich. From another angle, this is not so, because the principle of income tax is to tax on income while the consumption tax is just the reverse, to tax on expenditure. Reduction of income tax and increase of consumption tax are measures to encourage people to earn more and spent less. So the tax on consumption is to encourage more production and less spending and wastage. This has been a virtue of the Oriental people.

Talking about wastage, let us examine whether our people has the habit of wasteful spending. In the past, due to economic prosperity, the standard of loving of the people of Singapore has improved a lot. In respect of clothing, food, dwelling and transport ( ), there has been a marked improvement. Now, we have a better standard of living than many other countries, particularly developing countries. Our people's standard of living is even comparable with that of some advanced developed countries. This is a result of sharing the fruits of economic prosperity, and is something to be proud of.

But let us look at it from the point of foreigners. I have noted that some foreigners praise our achievement, some express admiration, yet some ridicule us as upstarts ( ). I think we do not like foreigners to look at us as upstarts. But let us take note of the behaviour of some Singaporeans. They do behave like upstarts. Some people spend a lot on the four necessities of life. It is quite common for salaried people to spend a few hundred dollars on a good brand of clothing or a famous brand of watch. And when they go to a restaurant, they must have expensive dishes like shark's fin, abalone, suckling pig and XO brandy in order to 'save' their face. In dwelling, they must renovate their dwelling flats at great expense. This is also very common. Even in transportation, other than having a car, they must now and then go abroad. This is again a popular practice. Their behaviour and mannerism abroad usually give foreigners a kind of impression that they are upstarts.

At this juncture of economic recession, some foreigners also criticize Singaporeans saying that in the past Singaporeans, were upstarts but now they have become destitutes ( ). Of course, when they say we are upstarts it may be due to a case of sour grapes. When they ridicule us as destitutes, I think they are rejoicing at our misfortune. But we must also examine our own image. Maybe there is some truth in what they say. We should not appear like upstarts nor do we want to be destitutes.

The Minister also announced the intention to reduce the number of permanent staff in the Government departments and statutory boards by 10% within the next 5 years, with the aim of reducing expenditure and increasing productivity. I hope this will not lower their standard of service. I am also worried that this may adversely affect the employment opportunity of new school leavers and tertiary graduates in the next few years. This will mean that more tertiary graduates and young school leavers will have to look to the private sector for their employment. All along, Government and statutory boards have been the main employers of such people. The new measure now will reduce their intake. I do not know whether the Public Service Commission has any statistics to show the possible effect of this new policy. But I believe there will be more of such people looking for employment in the Government and statutory boards. Before our economy recovers, particularly in the next year or the year after, the private sector will not be able to absorb them. So this is the period when school leavers and tertiary graduates will find it difficult to get jobs. I hope the Government will pay attention to this problem and relax the policy of achieving 10% reduction in five years or extend the period longer when necessary.

Sir, in Chinese culture and philosophy it has been widely have accepted that the success of one's enterprise depends on the three factors of opportune season, geographical advantage and human relationship ( ). In the past decade, Singapore's success was mainly dependent on these three favourable factors. But opportune season is something out of our control though it had been favourable to us in the past. It also relates to international and regional political, economic and social climate or conditions. In the past 10 years or more we have had this advantage. As regards geographical advantage, we are at the strategic crossroad of the eastern and western hemispheres. This is a factor to our advantage. The factor of human relationship refers to the cooperation among the people and the trust of our people in the Government and the confidence and friendship that other countries have shown to us.

In 1984 and 1985, because of the international economic depression, the weather or the season was bad. So, our own economic situation was also going down. What could we do? A season is subject to constant changes over which we have no control. Geographical advantage is something that is fixed, and is not changeable. What is best is to depend on human relationship, that is on ourselves, for a remedy. The ancient Chinese philosoper Mencius said: "Opportune season is inferior to geographical advantage, and geographical advantage is inferior to human relationship" ( ). For over 2000 years, this saying has been repeatedly quoted. There must be some truth in it. So I believe the future of Singapore depends on human relationship. I hope with the cooperation of the people under the Government's leadership, and with concerted effort, we shall be able to attain higher achievements, to achieve greater success and scale a higher peak, based on a harmonious human relationship.

Sir, I support the motion by the Finance Minister. 4.02 pm

The Senior Parliamentary Secretary to the Minister for Home Affairs (Mr Chin Harn Tong): Mr Speaker, Sir, I wish to comment on a point that was indirectly touched upon by the Minister for Finance in his Budget Statement but that, I think, is directly relevant to Singapore's economic recovery.

Though the Budget Statement came as an anti-climax after all the publicity and discussion on the Economic Committee's Report, the Minister for Finance must be congratulated on his clear and concise presentation of the Government's proposals to deal with our present situation. I do not think any right-thinking Singaporean will want to quibble over the nature or extent of the proposals to stimulate our economy, whether by cutting costs or offering incentives.

What I would like to comment on is more in the line of amplifying the Minister for Finance's reference to the need for all Singaporeans to join together in launching the next phase of our economic development. The impression that seems to have been created by the Economic Committee's Report and the Budget Statement is that active and positive roles will be played by the Government and the employers in any economic development, and that a passive and negative role will only be expected of workers and other Singaporeans.

Sir, I may be wrong and no such impression has ever been intended by any one. Nonetheless, I think it is important to give credit where credit is due. As the Minister for Finance has said, we are dependent mainly on our human resources for our economic success. If praise is due to the people of Singapore, let us do it openly, and not by implication or as an afterthought.

Despite the present economic downturn, Singapore continues to have the social stability which Singapore enjoyed for nearly three decades of PAP government. It shows a general acceptance of the PAP by the people of Singapore. There is acceptance because of several factors. One is the free election of the Government by the people themselves; two is the consistent record of good leadership and honest administration by the Government; and lastly, but not the least, is the people's capacity to understand and willingness to support the Government's policies even when not favourable to them.

I do not think sufficient publicity, however, has been given to this positive aspect of the Singapore people's acceptance of the PAP Government over the years. It is an acceptance that is built on mutual respect and trust. It is an acceptance that has withstood the test of time. But the further point I wish to make is that workers, particularly the organized workers, have constructively contributed towards this acceptance.

Mr Speaker, Sir, when I say this, I am not trying to belittle what our Government has achieved by its own efforts and on its own merits. Our Government has undoubtedly gained the respect and trust of the people on its own performance, not the least of all by its record of enlightened, sound and honest administration. As events in the past few months have shown, our Government does not shirk from recasting its policies when the circumstances require it, no matter how unpopular the changes may be initially.

At the same time, I think we should not forget how well the people of Singapore have responded to the changes in Government policies. Singaporeans show, once again, that they are not only able but also willing to cope with whatever adverse consequences these changes may have on their lifestyle and living standard. Singapore workers who are affected as drastically as, if not more than others by the changes, have, under the leadership of the National Trades Union Congress, reacted in a positive manner to the changes.

I do not think anyone in this House doubt that workers are personally unhappy over the CPF cut and the policy of wage restraint for the time being. Nonetheless, the workers have been able to rise above their personal problems, pressing as they be, and view their personal problems in the perspective of Singapore's economic circumstances. The workers may not like what they see in the scenario that is unfolded before them, but they take it in their stride.

It is not a mere passive acceptance of difficult times ahead. More than that, the workers have, under the leadership of the NTUC, shown themselves able and willing to play an active role in cooperating with the Government and the employers in the national efforts to stimulate our economy. Time and again, the workers have responded without fail to the calls of our Government for greater national efforts. The publicly proclaimed tripartite partnership between the Government, the employers and the workers is an indisputable example of the spirit of national cooperation to which workers wholeheartedly subscribe.

Sir, a cynic may term such cooperation as a matter of enlightened self-interest since if workers do not cooperate, they do not have jobs and would not be able to live. I do not think any Member in this House shares this cynical view. It is a kind of view that can be held only by persons who regard workers as workhorses for which the carrot and the stick are appropriate. Well, it is not every horse that can be made to drink the water before it. Nor is it every stubborn mule that can be made to move by the liberal use of the stick.

Workers in some other countries seem unwilling or unable to stop themselves acting in a perverse manner even when they know they are hurting themselves and their countries. I do not have to refer the Members of this House to the chaotic industrial relations in those countries to make my point that Singapore workers cooperate with the Government and the employers not simply out of enlightened self-interest. Workers cooperate because, first of all, they are well led by the NTUC, which prides itself on its symbiotic relationship with the PAP, and, secondly, they themselves believe whatever efforts and sacrifices they make help to contribute towards our national development.

Without putting too fine a point upon it, the role of workers is every bit as active and positive as that of the Government and the employers in combatting the present economic downturn.

What is really significant about this role of workers is not so much they have rendered their services well or uncomplainingly at the instruction of others. What is really significant is the positive attitude they have shown of their own accord towards cooperation with the Government and the employers. It is a commendable attitude which owes much to the leadership of the NTUC. 4.11 pm

Dr Ang Kok Peng (Buona Vista): Mr Speaker, Sir, for over two decades Singapore has enjoyed high economic growth notwithstanding two oil crises, stagnation of world economy and growing protectionism in world trade. Averaging a growth rate of 10% per annum, our GDP fell by 1.8% for the first time in 1985. Alas, recession has hit us squarely on the face. Tough is the time now, but undaunted we would strive to overcome this travail. The measures proposed in the Budget together with those adopted at the recent debate on the Presidential Address will go a long way to create the environment for checking the slide in our economy and hopefully bringing it back onto a course of growth in two years' time. It is now up to the people to adjust to the prevailing situation, act cohesively and work hard to overcome the recession.

Year after year, for over a decade, Parliament has been presented with a surplus budget so much so that we have come to regard it as a norm. Because of the current recession, Parliament is now being presented with a deficit budget. Does this signal a change of a trend into deficit budgetting and a warning to us to be more vigilant on our housekeeping? The Budget shows a deficit of $3,217,803,440 which is to be met by borrowing and drawdown of the Development Fund. Of this sum, how much is to be from borrowing and how much from a drawdown on the Development Fund? Perhaps the Minister may wish to enlighten the House on this.

I note also that there is an estimated amount of $2,506,083,090 for public debt servicing. I am interested to know how much of it would involve an outflow of money from Singapore in foreign currencies. This is related to my next query which is: should deficit budgetting be necessary for the next few years, how deeply would servicing and repaying public debt eat into our foreign reserves?

The revised FY 85 estimate shows a decrease of 12.1% from its original value. I hope that the FY 86 budget is more accurate in its prediction. It is important to have accurate estimate so that the private sector can forecast and plan more fruitfully knowing the provisions the Government has made for development and recurrent expenditure.

In the Budget Analysis and Review it is stated that:

'The under-expenditure in the Ministries and Organs of State is mainly because the contingency provision for NWC wage increases is not required in view of the wage restraint policy.' In this connection, may I seek clarification on the following points:

a) What is the quantum of the contingency provision for NWC wage increase which is not required; and

b) Is the under-expenditure on Ministries and Organs of State a recurring feature? If so, are the original estimates overstated because of inadequate controls in the budgetting system?

There will be a reduction in the total authorized staff complement of the Minis- tries and Organs of State by 870 posts in FY 86 and according to the Budget Statement, the reduction of authorized staff will continue for another few years with the objective of reducing the permanent staff complement by 10% during 1986-90 period. This prompts me to ask whether such reduction would exacerbate the unemployment situation in Singapore significantly in the next few years. And in view of the worsening unemployment situation, what measures will the Government take to ensure that school leavers and other new entrants into the employment market will be gainfully employed? What are the standard and equitable procedures available to ensure that local workers, in both the public and private sectors, are the first to be employed and foreign workers the first to be retrenched? These procedures will make our citizens feel that their interests are fully protected and the social problems arising from unemployment can be mitigated and the social cost minimized.

In the budget allocation for the Ministry of Health there is a provision of $58.67 million for development expenditure, which is a decrease of 24.5% from the revised FY 85 provision. I am surprised at this, as I think there is a case for a larger provision. I say this because the physical facilities of our older hospitals are grossly inadequate. Just to name an example, take the Toa Payoh Hospital. The place is cramped and the physical facilities need upgrading. There are not enough Class B1 and B2 wards to cater for public demand. So is the case for the unsubsidized Class A ward, which lacks quality. The same situation exists in other hospitals. While we are striving to become a centre of excellence in medical services, I am perturbed that such a state of affairs still persists in our hospitals.

Perhaps the Minister for Finance, being at the same time the Minister for Health, has been over-cautious in his allocation to the Ministry of Health lest he be seen to be liberally taking money with his right hand and giving it to his left. But I can assure him that he will have the support of the House for a more generous allocation to improve the physical facilities of our hospitals for the benefit of our people.

Another point I wish to touch on is Estate Duty. In the last Budget Statement, the Minister for Finance announced a reduction of estate duty and a simplication of its method of assessment. The reduction was generous and the computation has been made easy and straightforward.

My purpose of referring to this item of revenue is to ask the Minister to seriously consider abolishing it altogether. The estimated revenue from this item for FY 86 is $12 million, a paltry sum representing about 0.08% of the estimated total revenue for 1986. In fact, the estate duty collection has been decreasing steadily in recent years and, if the trend persists, the estimated amount for FY 87 will be even less.

To collect the estimated amount of $12 million for FY 86, we have to maintain a machinery for its collection with the estimated manpower expenditure alone of almost $1 million, which does not appear to be as cost effective as the other revenue collection units in the Ministry. For most people, the estate duty payable is small and bearable. But what is undesirable is that the legal process involved in settling the estate duty is time-consuming, not to mention the inconvenience and frustration it causes the beneficiary or beneficiaries.

I would therefore suggest to the Minister that, in keeping with our national policy of encouraging people to work hard and save, this item of taxation be abolished.

Having made these comments, I must add that the proposed Budget before the House is as good as any that we can expect at a trying time like this. I therefore support the Budget Statement. 4.10 pm

Mr Chng Hee Kok (Radin Mas): Mr Speaker, Sir, I rise in support of the motion standing in the name of the Minister for Finance.

Although the Minister mentioned only two differences in this year's Budget from previous years in his opening remarks, I consider that the most significant difference is actually the shift in government philosophy. I hope that this signifies a real shift in thinking instead of just implementing measures which are pragmatic and practical. The danger of doing what is pragmatic is that these measures may be overturned when the situation improves. I think this will be wrong and this has been shown to be the case.

Although the last Budget recognized that the private sector will be the main engine of our future economic growth, there were insufficient steps or policies implemented to back up this philosophy. In this respect, this year's Budget Statement is quite different. I think it is very difficult to fault the Minister on this account. In fact, the familiar charges of the Government giving out with the right hand and taking away with the left hand is absent, except of course for the consumption tax. I have spoken out against this tax in the last debate on the President's Address, but I am now inclined to urge Singaporeans to adopt a wait-and-see attitude. And I am reassured by the Minister's remarks when he mentioned the consumption tax. I think, basically, it is hard to argue against the philosophy that you want to reduce direct taxes and giving the wage earner the right or the choice of how he wishes to be taxed and how he wishes to spend his money.

The reduction in personal income taxes, both in the form of a 25% rebate this year and the changes in the future tax rates, are welcomed. I am a great admirer of the Member for Rochore. In fact, I read the speech he made last year during the debate on the Budget, and of course there were many truths in what he said. However, today I must take exception to what he said about the tax rebate. The impression given is that, of course, the high income group will benefit more than the lower income group. Although it is not politically wise to say this, I would like to say that, if a person is earning a high income, obviously he should be given a high rebate. And why not? I think that all taxpayers have benefited from what the Minister has proposed, and I have also taken note of his comments on those in the lower income group. We must always keep this group in mind.

But, however, the principle that the tax base be as wide as possible must apply, even if the tax on an individual is only a few dollars. To broaden the base, the Government must widen the net to include those who are self-employed. This has been mentioned before. The inequality or inequity is not between a man who pays $50 or $100 in tax and one who pays $1,000 or $10,000. I think the inequality or inequity is between someone who pays his due share of tax and a person who does not pay tax, and yet at the same time benefit from the services provided by the Government - services such as education for his children, medical health and, of course, other services provided by the Government. I think the inequity really lies between tax-payers and non-taxpayers. I would urge the Government to make larger efforts to try and bring more people into the tax base rather than having officials pay more attention to those who are paying their taxes, which in some cases tantamounts to harassment. I remember a case in my Meet-the-People session sometime ago. A man who was a hawker, had retired, and finally was assessed for tax. It was only a small sum of over $50 and, I believe, he paid. But subsequently he received another letter demanding that he declare his income for the last, maybe, seven or eight years (if I remember correctly). I think this is quite unnecessary. He has paid his tax. There is no need to go back to the hawker and ask him to declare seven or eight years' income for tax purposes. We should try to get more of those people, who are presently not paying tax, into the tax base.

If the property tax rebate of 50% is to be effective and meaningful, the annual value of the property must also be re-assessed accordingly. The complaint is that the Property Tax Department is quick to adjust the annual value upwards whenever rentals go up. But, of course, when rentals are coming down, the Department is very slow and does not do the necessary adjustments. One landlord I know of, complained that he had to justify and explained in great detail to the Income Tax Department why he had to reduce substantially the rental charged on a showroom. He had an existing tenant, and if he wanted to keep him, he had to reduce his rental substantially. The Property Tax Department was not happy about it. In any case, after all that trouble, despite the reduced rental, the tenant finally folded up because the rental was still too high. I am apprehensive that such complaints may be well-founded, and I quote a little item on page 61 of the Economic Survey. It is about Prices and Inflation. It says:

'On the other hand, housing costs rose by 2.5% because of higher imputed rentals due to the revaluation of owner-occupied properties.'

I just cannot understand why rentals went up last year. Everybody says that rentals went down. Everyone I met said rentals went down. Yet we have the Economic Survey saying that housing costs went up 2.5% because of higher rental costs.

Sir, let me now touch on the trimming of the civil service and the statutory boards. The reduction of 10% over five years is about 2.1% a year and this is actually about the same level that was achieved in 1985. Of course, as the Member for Kebun Baru has mentioned, this reduction will not necessarily mean a 10% reduction in payroll unless, of course, the reduction is across the board.

I would like to take up two points on this. Although the Minister has said that the reduction in numbers will be achieved through normal attrition and selective recruitment, I do not see why the Minister should give an indirect assurance on job security. If there are redundancies, it should be dealt with accordingly, just as they do in the private sector. It is uncharacteristic of this Government. Perhaps in the process, we may get an even more efficient service.

The other point I wish to bring up is the composition of the Working Group which is charged with the review of public manpower levels. This Working Group is staffed by senior personnel in the public service. I have my doubts about the effectiveness of self-policing or self-regulating roles unless someone outside the civil service is involved.

Mr S. Chandra Das (Chong Boon): The Stock Exchange.

Mr Chng Hee Kok: Like the Stock Exchange, yes. The success of Lord Rayner in helping to trim the British civil service when they started the exercise in 1979 must provide us an important clue. I think anyone who has watched the television series or read Antony Jay's Book, "Yes Minister" must have some doubts that the civil service will be able to regulate and cut down their own staff. From 1980, efforts by the Government to reduce staffing levels actually led to an increase of 10,000 permanent posts. And what was the gain? The gain was about 1,100 reductions.

Sir, let me now come to Government expenditure. I would like to touch only on one item. The move to spend more than 60% of total expenditure on development is logical and welcomed. Besides stimulating business activity, it also demonstrates the Government's resolve to do all it can to get us out of the recession - by spending money wisely. Instead of spending money on consumption, development expenditure will go towards improving our infrastructure - the physical infrastructure as well as social.

However, I am disturbed by one particular item, not because the expenditure is too high but rather because it is projected to decrease. I am referring to the expenditure on Defence which has been mentioned by the Member for Tampines. This is expected to decrease by some 7%. Mr Speaker, Sir, we live in an uncertain world. Although we have to live within our means, we have little choice but to continue to build up our defence capability. With fast technological changes in offensive and defensive equipment, one must expect that the level of Defence expenditure - I call it investment - must be maintained just to upgrade our present systems. I hope that the decline in Defence expenditure is not a result of the recession. I think it is in time of need, when we are not doing well, that we really need Defence most. By tying our Defence expenditure to the health of our economy, we may send the wrong signals to outsiders as well as to our people.

Generally, taken as a whole, since the policy changes were implemented last year, it is clear that there is this strong recognition by the Government that a strong dose of medicine is necessary to address our illness. In moving the Budget last year, the then Minister for Finance cautioned that "the outlook for 1985 is not as rosy as that for last year", ie, 1984. In retrospect, this must be the under-statement of the year. Perhaps the Minister for Finance this year did not wish to hazard a guess on the outlook for this very reason. Personally, I would like to be more bullish than most businessmen. I do not think this optimism is misplaced. The present reduced cost of doing business, impending and potential cuts in statutory boards' charges, reduced rentals, the new incentive scheme on venture capital which is extended to individuals, and the setting up of the unlisted securities market are moves which will hopefully spawn a new generation of entrepreneurs. When we read of success stories of entrepreneurs who made it good, we tend to believe that this took place in ideal conditions or in ideal environments. This is not so. So instead of asking for more, those who wish to become their own boss should start their own business. I think the conditions have improved a great deal in the last year. To those who are inclined to be more pessimistic, I believe that the measures have at the moment stemmed the tide. On 10th March 1986, the Business Times reported under the headline "Stronger yen and lower costs provide good incentives - Japanese manufacturers give Republic a second look". I think some of them have already reacted and are looking at Singapore again. I have also personally heard of firms, which have plans to relocate, have now decided to do otherwise. In other words, with some luck, we should be able to hold on to our position and put the brake on further decline. New investments, from both local and foreign, are what we really have to look forward to.

Finally, let me quote the then Minister for Finance when he summed up last year's budget. He said:

'Rumours about the impending demise of our economy are greatly exaggerated.' I think the more we talk about how badly we are doing the more we will go down the spiral, as the Member for Rochore has mentioned.

4.32 pm

Mr S. Chandra Das (Chong Boon): Mr Speaker, Sir, I rise to support the Motion standing in the name of the Finance Minister.

Sir, the Budget statement brought no new surprises, as much of the goodies were handed down by the First Deputy Prime Ministerduring the debate on the Presidential Address. However, the Minister for Finance addressed the problems of overcoming the recession and at the same time set the correct direction for the long-term growth of Singapore.

Sir, it is with this in mind that I would like to speak on a number of topics. Firstly, Manpower. I would like to refer Members to Chapter 11 of the Report of the Economic Committee. The Economic Committee in its Report states that the upgrading of the educational level of our population will take time but nevertheless we must support the effort relentlessly:

'Our strategy should be to:

(a) Educate each individual to his maximum potential;

(b) Encourage the development of more creative and flexible skills through broad-based education;

(c) Stress the need for continuous training and re-training;

(d) Provide skilled manpower at internationally competitive cost; and

(e) Match skills with demand.'

Sir, it goes on to add that manpower development plan should include an increase of annual intake by 3% per annum for our Universities and Polytechnics, while the VITB should expand by 5% per annum. Further, it states that we need to consolidate on our success in expanding and improving underrgraduate education and that we can now expand on post-graduate education.

The Report also specifically states that the National University of Singapore and the Nanyang Technological Institute should expand their post-graduate programmes, particularly in areas of Engineering, Information Technnology and Business Administration. It also suggests that professionals should leave their jobs and undergo full-time post-graduate programmes and also employers should be encouraged to give employees scholarships to undergo post-graduate training. These are the guidelines and objectives both for the short-term and the long-term. Therefore, I believe it is vital that the Government sets the right example for the manpower development programme to succeed.

In this connection, Sir, whilst I agree with the Minister for Finance that the expenditure on manpower in the public sector has increased considerably from $1.1 billion in 1981 to close to $2 billion in 1985, I am not sure whether the proposed reduction of 10% from current levels over the next five years is a wise move at this juncture. Our current increases in manpower are easily justifiable. Sure our public sector employment to population ratio is still high compared with Japan, South Korea and Hong Kong. It is 5.3% for Singapore, 3% for Japan, 1.6% for South Korea and 3.4% for Hong Kong.

Sir, in times of recession and falling revenues, it is tempting to cut establishment levels and manpower cost. I would agree with the Minister that such cuts are necessary in normal times. But now we are facing a recessionary period which is expected to last at least 24 months. Any cut or curtailment now will only add on to the unemployment scene, and I strongly believe that there will be no expansion of jobs in the private sector for the next 18 to 24 months. Sir, the Government must be careful not to add on to the unemployment scene by becoming the pacesetter.

If the long-term objectives as indicated in the Economic Report are to be fulfilled, I strongly suggest that the Government will have to do the reverse, ie, in fact, employ more. The Government will have to look at innovative ways of employing our trained personnel. We repeatedly say that our only resource is manpower and yet we are prepared to discard them in times of recession and only call for their services in boom times. In fact, in boom times, we crack our heads to think of schemes like PIPS to attract foreign talent. I would like to strongly urge the Government to look into ways and means of absorbing particularly professionals and better qualified personnel, at least for the next 24 months. Here, I would like to congratulate the Ministry of Education for absorbing a fair number of graduates into the teaching service.

I believe the Government can employ quite a few technical and professional people, not necessarily at the starting salary of $2,200 as currently done by the Public Services Commission, but maybe recruit these engineers and technical people on a pupillage basis and at a reduced salary. This was done in the early times. An engineer used to start work as a pupil engineer, not necessarily a Division I engineer, and could start off at a much lower salary. Some of them could be seconded to the Small Enterprise Bureau and help provide assistance to companies who need the services of professional and technical people and yet who are unable to employ them.

Funding for such innovative exercises can come from the Skills Development Fund or from past collections of payroll tax. I believe this is a course that the Government must seriously look into. If not, we will encourage our professionals, especially our brighter students who are currently studying abroad, to move away from Singapore to other countries. If the government can carry some excess manpower for the next 18 to 24 months, then I believe when the economy picks up, we will have sufficient manpower in place to take advantage of the new opportunities. I would caution the government about staff reduction at this point of time. I would urge that the committee headed by Mr Hochstadt take note of this aspect of Government policy.

Mr Speaker, Sir, I would like to touch on Financial services which the Minister raised in his Budget statement. The Minister identified, rightly so, the financial sector as having growth potential, especially in fee-based activities such as fund management and financial futures. He stated that, in addition to financial contracts, SIMEX would be introducing stock index futures and futures trading. A fixed rate securities market would be developed and that the stockbroking firms would be better organized with the introduction of the new Securities Industry Act. In this connection, I would like to congratulate both the Minister for Finance and the Monetary Authority of Singapore for the speedy way in which they brought about sense into the stock market in Singapore. While some stockbroking firms are forced to go into liquidation, the MAS very quickly brought confidence into the stock market by asking the Big Four banks to set up their own stockbroking firms. This has really brought about some sense of investor-confidence in the stock market.

But, Sir, apart from confidence, I do not think any new or additional business will be injected as a result of the Big Four moving into the stock market. What has happened is really a transfer of business. I submit that in order to deepen and widen the stock market, the Finance Minister should urge the MAS to consider offering two or three seats to internationally top broking firms. I believe that these international firms, apart from adding international status to the market, will also offer competition to our Big Four banks. The other benefit would be to raise the level of professionalism in the local market, particularly in the areas of investment research and analysis.

Sir, the stockbrokers in Singapore have been protected far too long. I think Hong Kong, London, Tokyo and Sydney have already begun opening up their memberships in the stock market. Further, others like Korea and Taiwan will also open up their stock markets to foreigners. At this moment, these markets do not pose a threat to Singapore but in the longer-term, foreign investors are likely to focus more and more on these markets at the expense of Singapore. The limited opening up of our stock market for international stockbroking firms would be, I believe, in keeping with our "open-door policy". I do not think the Stock Exchange of Singapore should be an exception.

Sir, next I turn to venture capital incentive and the unlisted securities market. Currently, we have an incentive allowing companies to write off 50% of equity invested in any approved technological company, if the latter incurs cumulative losses at the end of the first three years of operation. The Minister in his statement announced that this scheme will now be replaced by the Venture Capital Incentive which will allow an investor to deduct his income from other sources up to 100% of the equity invested in an approved venture capital project.

The experience of countries like United States and the United Kingdom suggests that venture capital can be properly harnessed and become a new source for economic opportunities and growth. However, investments in venture capital can be restrictive in the sense that these investments cannot be easily liquidated. In other words, there is no mechanism available for early recovery of funds when this is needed. In this context, I am pleased to note that the Minister mentioned about the unlisted securities market in his Budget statement. Maybe the Minister would like to enlighten this House on the status of this proposal on the unlisted securities market.

Sir, the Minister also spoke about operational headquarters incentives. The introduction of operational headquarters incentives, I believe, will propel Singapore as a genuinely Total Business Centre. Multinational companies, for a start, would be induced to set up complete business units in Singapore which will include manufacturing, marketing, research and development, financial and fund management functions. In other words, operational headquarters would not be mere investment holding companies in Singapore but companies with substantial business interests in Singapore. I am glad to note that the Minister has assured us that his officers are looking at the operational headquarters incentives very closely.

The Economic Committee has recommended that all foreign income of approved operational headquarters should be exempted from tax. My feedback from the business community is that this incentive is potentially a very effective instrument in our effort to promote Singapore as a Total Business Centre. As I can see, there will be no tax losses.Right now, such operational headquarters would already have been located in other tax friendly countries, like Hong Kong and Switzerland. So the authorities need not worry over perceived or notional tax losses. I hope the Ministry will be able to come out with a scheme very quickly.

Sir, experience has shown that some of the best ideas can be crippled by unrealistic guidelines drawn up purely to deal with problems, imaginary or otherwise. Whilst I agree that not all businessmen are angels, it may be worth mentioning that neither is the business world infested only with crooks.

Sir, next I turn to the question of consumption tax. I agree with the Finance Minister when he says:

'Much will, of course, depend on the economic situation and the actual Budget position in the years ahead. But there may come a time when we need to look for new ways to raise revenue.' Then he goes on to describe the First Deputy Prime Minister's announcement of some form of consumption tax.

'It is intended that we begin to put into place this year, the machinery needed for the collection of consumption taxes.' Sir, I think the key question to ask is, "Is it timely now to introduce consumption tax, or are we just giving the population an indication?" Rightly so, Sir, this proposal to introduce consumption tax has sparked off keen interest and unhappiness from Members of this House and members of the public. Sir, this is not purely on the grounds, as the Finance Minister said, that any tax is unpopular. I would strongly urge the Minister not to consider any form of consumption tax within the next two to three years. Other measures should be explored before consumption tax is levied on the population. The timing is most inappropriate, and I submit there is no justification to introduce consumption tax in this recessionary period. We can have a closer look at it when it becomes necessary for us to do so.

Sir, in conclusion, I would like to say that our goal is to make Singapore a developed country in the 1990s. When we become a developed country, we shall have a standard of living equivalent to the Swiss today. I think this is a goal we have all agreed on and it is worthwhile pursuing. Sir, however, the only snag is that the Government has already imposed Swiss standards in Singapore, in terms of environmental health, safety regulations, etc. We are, in fact, being excessively over-cautious, over-designed and over-regulated. This makes our environment not too conducive for business growth.

If I may recount what a business friend told me recently. Singapore is a good place to live in because it is clean; there is law and order, but as for business he prefers to do it outside. Sir, this comment is worthwhile noting. The businessmen are not asking for a total free-for-all-situation. A happy medium has to be struck. I believe much more has to be done in this area. We need to improve our business environment quickly and, more importantly, inject more confidence. Right now, it is very critical for confidence to return to the market place quickly.

Mr Speaker, Sir, we have a difficult task ahead of us, and I would urge all Singaporeans to work together with the Government to get the economy going again. 4.48 pm

Dr Wong Kwei Cheong (Cairnhill): Mr Speaker, Sir, I rise in support of the motion standing in the name of the Minister for Finance.

Mr Speaker, Sir, the sate of our economy has been adequately discussed during the recent debate on the Presidential Address in Parliament. Most of the recommendations made by the Economic Committee have been adopted by the Government, as confirmed by the Minister for Finance in his Budget Speech. It is indeed a generous Budget, full of goodies like the 25% tax rebate to all taxpayers, property tax reductions, and other incentives to industry and commerce.

Will these measures help Singapore overcome the current recession? I am confident they will. But let us not forget, Sir, that Singapore is but a small boat struggling to keep afloat in a very turbulent ocean of world economic uncertain- ties. Fortunately, certain world events today are taking place that will help us to be more competitive. Let me elaborate.

First, the oil price drop. Oil prices have dropped by more than 50% in three months to a current value of about US$13 a barrel. What is the significance of this price reduction? The OECD countries in 1984 imported some US$175 billion of oil. A one-third drop in oil prices means a saving of some US$60 billion. This amounts to a major tax cut and will help to reduce inflation and stimulate growth for oil-importing countries. Disinflation will be the momentum behind the economic recovery for most OECD countries. We can expect an increase in the purchasing power of their consumers and therefore a corresponding increase in demand for our goods and services.

Singapore's economy will also directly benefit from this oil price reduction. Already premium grade petrol is reduced to 90.9 cents a litre from a high of $1.51 cents a litre about a year ago. This will not only benefit our car owners but also our industries, as their PUB bills will be further lowered. Hopefully, SBS fares and taxi fares will also be lowered so that more people can be encouraged to visit our empty shopping centres. The travel industry will benefit. For example, SIA, our national airline, is expected to save some S$100 million in fuel costs this year.

On the negative side, the economies of our neighbouring countries will suffer from a drop in oil revenues, as they are oil producers. Our invisible trade will suffer. Tourism, for example, will be affected by an expected drop of visitors from our neighbours.

Together with falling oil prices, world interest rates have dropped and the exchange rate of the US dollar vis-a-vis other major currencies have declined.

How does Singapore benefit from these changes? Firstly, lower interest rates will mean a quicker economic recovery for the OECD countries, and therefore a better market for our products. Secondly, the USA is our major trading partner, and the movement of the Singapore dollar tends to follow that of the US dollar. Of course, the value of the Singapore dollar also depends on other factors like the state of our economy, as recently explained by the Minister for Finance. Today, the Singapore dollar is far more competitive than what it was before, especially when compared to the European and Japanese currencies, as shown by figures recently quoted by the Minister for Finance.

Mr Speaker, Sir, I am confident that the chance of Singapore's recovery from the current recession looks brighter than ever. External factors have directly or indirectly contributed to an increasing demand for our goods and services, and to a reduction in our energy costs and in interest rates. We have a competitive Singapore dollar. Through the implementation of the recommendations of the Economic Committee, the business environment will be further improved through a series of cost reduction measures. We will regain our competitiveness. There is every good chance that we will recover from this recession provided that we work hard to reduce our operating costs and increase our productivity and, provided, of course, that the world's economy will continue to recover with the drop in oil prices.

The Economic Committee has already studied most economic issues in great detail. I would like to speak further on two issues. Firstly, tourism. Tourism is a major export industry, contributing about 16% to Singapore's foreign exchange earnings. In the 1970's tourist arrivals were increasing at an average of 15% per year. Hotels were enjoying occupancy rates of more than 90%. This has encouraged many developers to embark on hotel development projects. Today, we are faced with a glut of hotel rooms. This number will increase to some 30,000 by the end of 1990. We will need some 5 million tourist arrivals to enable hotels to achieve an average occupancy rate of 65%. However, based on current projects, we may only achieve visitor arrivals of 4 million by 1990, giving hotels an average occupancy of 50% or less.

Hotel investors have poured billions of dollars into the hotel industry. For example, assuming a cost of S$200,000 for each hotel room, the total investment by 1990 will be some S$6 billion. Sadly, today, many hoteliers are planning for massive losses over the next few years. Several will go bankrupt. The Minister for Finance in his recent Budget Speech has outlined a few measures to help the hotel industry. Hoteliers appreciated such measures and wished more could be done. They have submitted detailed proposals to the Government through the Singapore Hotel Association. Hoteliers have discussed their many proposals with me last year when I was Chairman of the Singapore Tourist Promotion Board. Today, I intend to take up their main proposal, and that is, the mothballing of hotel rooms. The hoteliers have emphasized to me the need for Government to provide sufficient financial incentives for hoteliers to mothball up to 30% of the rooms available. Unfortunately, the current budget does not contain such incentives. The glut of hotel rooms will result in fierce price competition between the hotels. As mentioned by the Member for Rochore just now, some of the deluxe hotels are offering their rooms at around S$70 per night. At these rates, such hotels will not even earn enough for the financing costs. Mr Speaker, Sir, such price competition is harmful to our tourist industry. Our hotels lose money. Overseas tour operators are reluctant to package tours to Singapore, as hotel rates are dropping continuously. Our tourist arrivals may even be reduced. I therefore give my full support to the Singapore Hotel Association's proposal to stabilize prices by mothballing the rooms, and hope the Minister for Finance will review their submissions and provide hoteliers with sufficient financial incentives for them to do so.

Mr Speaker, Sir, the tourist industry in Singapore is facing acute problems. There is a glut of hotel rooms and shopping complexes. We do not have sufficient attractions for the average tourist to retain him or her for more than 3.5 days. On top of that, the recent disaster of the Hotel New World collapse will mean unfavourable publicity for Singapore's tourism industry. Tourists, doubting the safety of Singapore hotels, may cancel their trips here. Mr Speaker, Sir, may I appeal to the Government to step up their efforts to promote Singapore as a clean, green and safe tourist attraction. May I appeal to the Government to build new tourist attractions, like theme parks and marinas, and to start immediately the preservation programmes in Chinatown, Little India, and around the Singapore River.

The next issue that I would like to bring up is that of training. The Economic Committee Report highlighted the fact that 60% of our workforce have primary or no education. Singapore's future depends on the productivity of our workforce. Training is the basis for higher productivity. We cannot leave the responsibility for their training to the employers. The Government must play a more active role in upgrading the quality of our workforce.

The Member for Alexandra, in the debate on the President's Address, bemoaned the fact that the Skills Development Fund has only paid out $42 million out of a total accumulated fund of over half a billion dollars. I do not support the argument put forth by the Member for Alexandra that SDF payments by employers should, therefore, be suspended. Training is essential and SDF payments force employers to take training seriously. What I would suggest, Mr Speaker, Sir, is that the SDF should be administered by the National Productivity Board and not the Economic Development Board. After all, the job of the Economic Development Board is to promote investments whereas the job of the National Productivity Board is to promote productivity and training. With SDF, NPB will have the financial muscles to seriously upgrade the quality of our workforce with appropriate training programmes.

Mr Speaker, Sir, may I conclude by sharing with Members of this House a recent discussion I had with one of my MBA students. He is now a full-time student. He told me that he was formerly a part-time MBA student. Recently, however, he was retrenched from his company. He, therefore, decided to study full-time, even though he has to support a wife and three children with his savings. With better education, he hopes to find a job after getting his MBA degree.

Mr Speaker, Sir, I dare say that this is the typical spirit of a Singaporean in the recession. With lower operating costs, and a better business environment and with Singaporeans who are prepared to work hard and save for the future, I am confident that we will soon recover from the recession.

Sir, I support the financial policy of the Government. 5.03 pm

Dr Dixie Tan (Ulu Pandan): Mr Speaker, Sir, in recent weeks many Ministers have spoken on the development of every individual to their maximum potential. In this context, I wish to draw attention to some areas of education that are in urgent need of development. I have in mind the $3 billion that has been mentioned as going to be made available for human resource development. Let us look at the primary schools first.

Primary school education should be as broad as possible. There are good reasons for this. It allows a child to develop his whole self, to develop all areas of his brain -the dominant side as well as the non-dominant side. It also allows any special aptitude in a child to be picked up for further nurturing and development. The present unnatural method of examining only four subjects in primary schools, namely, English, Second Language, Mathematics and Science, causes undue focus and attention to be placed on these four subjects, to the detriment of the other subjects. If we must have examinations, and I suppose we must, then we should assess children in primary schools equally in all areas of study and development. This would include studies such as art, music, dance, and developments such as in physical education. This is especially important because we are streaming children at such a young age in Primary 3 and Primary 6. I wonder how many potential artists, musicians and perhaps even athletes have been lost to us because they failed their Mathematics at Primary Three, or perhaps because they were concentrating so hard on the four examination subjects that other areas failed to be developed and their potential failed to be picked up.

Then what about educationally sub-normal children who comprise 2% of the primary school population? Do they not also have a right to develop to their maximum potential? There is a great need for the Ministry of Education, and undoubtedly it is the responsibility of the Ministry of Education, to establish special classes for these children so that they too can have an education and training to equip them for jobs and to live independently like everyone else. Right now they are receiving an education in primary schools, but their education is not relevant and is not doing them very much good. Allowing them to grow up without a relevant education is both unproductive and very wasteful. So the National Productivity Board ought to jump on this wagon.

Special education for ESN children is available right now. It is provided by welfare associations, but this is not the line to take. I believe very firmly that most of the ESN children right now are in primary schools where they are wasting their time. Therefore, I would plead with the Ministry of Education to develop this area of education. However, there is a problem with the number of trained teachers we have in various areas that I have mentioned. Well-trained teachers are necessary in subjects like music and special education and physical education, just as they are important in other subjects in schools. The College of Physical Education will in due course provide teachers in physical education but we have as yet no proper scheme for the training of the other two types of teachers, and I would again urge the Ministry of Education to develop the training of teachers in these two very important areas, ie, music and special education.

Let us look briefly at secondary schools. I believe that every secondary school should provide the teaching of music and dance and physical education. Physical education is well under way. There are quite a number of such teachers, I believe, and the College of Physical Education is doing its job. But in art and music, at the moment there are only very few schools that provide art elective programmes and music elective programmes. Unfor- tunately, it does not seem feasible to introduce this very quickly because there is a bad shortage of teachers in these two areas. This brings me to tertiary education.

I propose that funds from our development estimates be spent on a National College of the Arts to raise these areas of art to Diploma level. This college should also include an art gallery and also a theatre where students can exhibit their works of art and perform and get practise. If we start up such a college quickly, in a few years we will have product designers and graphic artists for our industry, we will have performers for our arts festival and, of course, we will have teacher material for our students both in primary and secondary schools.

In conclusion, I wish to make a plea that we value our artistic people as much as we value our technical people because they complement each other to make a nation. We have to nurture the slow learners as well as the high flyers, and we have to nurture the high flyers who are both artistic high flyers as well as scientific high flyers. All citizens should be given a chance to achieve their maximum potential so that they can contribute to the nation in the best possible way.

Sir, I support the motion.

Dr Lau Teik Soon (Serangoon Garden): Mr Speaker, Sir, let me first congratulate the Minister on the decisive and vigorous manner in which the Government has taken measures to tackle the problems associated with the economic recession. He has mentioned numerous measures, including tax and fiscal concessions, all of which are mainly aimed at reducing the burden of the business community.

Sir, while these concessions are to be welcomed and should go a long way to alleviate the burden of the business community, yet I have heard of a number of doubts being expressed by representatives of the business community. We have had dialogue sessions with community leaders, including some of those who are in business. Some of them say that these measures have come too late. But a more serious doubt, Mr Speaker, Sir, concerns the credibility of the Government. The question being raised is whether or not the Government, after having introduced these various measures, will continue with these measures in the years ahead, not only continue but even improve on some of these concessions. Or will the Government all or some of these measures in the next year or so when times are better? Sir, we have known of Ministers who have introduced certain policies but soon after reversed some of them.

In the effort to recover from the severe recession, the Government has called on all Singaporeans to accept sacrifices, to work hard and to increase productivity. We are all aware of the favourable responses of most Singaporeans, especially the workers, to accept these sacrifices. The lower and middle income groups are seriously affected by the number of wage restraint measures. The reduction of the employer's CPF contribution, the suspension of the half-month incentive payment and the removal of the NWC allowances have all seriously reduced the take-home pay of wage earners. For many of them, they have to make serious adjustments so that they can meet their monthly financial commitments, like payments for house loans, car loans and so on. For many, they may even have to consider reducing their standard of living.

Mr Speaker, Sir, many wage earners have accepted that these sacrifices are necessary. But they are anxious - anxious because they wonder whether more measures relating to wage restraint will be forthcoming in the months ahead. They ask: Will the normal annual increment be frozen? Will the 13th month salary be taken away? If the Government is contemplating such measures, I hope they will defer taking such action, because if they do, it will be a further financial setback for the people. It will only deepen their suffering.

Sir, there is another matter which the people are worried about. This concerns the intention of the Government to introduce consumption tax. Many of my colleagues have spoken on the subject. What the people say is that, on the one hand, the Government has given relief by way of tax rebate. But, on the other hand, the Government cannot wait to take it away by introducing consumption tax. Sir, in my view, the tax rebate is the compensatory measure that to provide financial assistance to the lower income group for the loss of income arising from the reduced CPF contribution, the loss of incentive allowance and the NWC payment. I ask: why should the Government adopt this method to compensate for the loss arising from the concessions given to the business community? Are there no alternatives? Here, Sir, I would like to support the suggestion of the Member for Chong Boon that any proposal to introduce consumption tax should be a measure of last resort and should be deferred as long as possible.

Mr Speaker, Sir, if and when the Government decides to introduce consumption tax, I hope the Ministry will go down to the people and explain clearly to them what it is all about. This is very necessary. They should go to the people, persuade them that consumption tax even when introduced is a fair and just measure to take. If they do this, and when the measure is implemented, the pain inflicted will be less painful for them.

Sir, whatever measures we take to overcome the economic recession, it must not be done at the expense of losing the support of the people, the confidence of the people in the Government. In the ultimate analysis, the policy must be for the benefit of the general good. Hence, all the measures aimed at economic recovery must be for the benefit of the people of Singapore. They should not benefit just as a particular sector or a privileged group of people.

Finally, Sir, the Economic Committee Report recommended that a form of consultative committee be established to provide advice to the Government, especially on future tax measures. The Minister in his statement has not mentioned this recommendation. If he does decide to implement this recommendation and if such a Committee is set up, I hope that the members of that committee would not only come from the business and financial community but also from the representative institution of the workers, namely, the NTUC.

With that, Sir, I support the motion standing in the name of the Minister. 5.20 pm

Mr Chew Heng Ching (Kaki Bukit): Sir, the Budget as presented by the Minister for Finance is a realistic one. It addresses the problems of overcoming the current recession as well as sets the direction for long term growth of the economy.

It is reassuring that the Government will continue to take measures to overcome the recession. Besides a reduction in Government revenue arising from the various tax concessions and the recession itself, the Minister has decided to increase development expenditure by some 50% in the next financial year. This is indeed a bold move in the face of the current recession. This will speed up infrastructural development and help to stimulate our economy. Sir, to ensure that the objective of boosting the economy is achieved, the Government should consider awarding contracts for these development projects to local companies or to joint venture companies with long term vested interest in Singapore. This is necessary to ensure that moneys spent on these projects are channelled back into the domestic economy to stimulate other economic activities, via what the economists call the "multiplier" effect.

A budget deficit of $3.22 billion is forecasted for the next FY, more than double the anticipated deficit for the current FY. Sir, while a budget deficit in the second year runnung may be necessary to fight the current recession, may I caution the Government against getting into a permanent budget deficit. Unlike most other countries, ours is an open economy with no natural resources. We have no oil. We have no gold. We are vulnerable. We cannot afford to experience the massive problems faced by other countries which suffer from huge and chronic budget deficits. Prudent financial management is therefore very essential to protect the State's overall financial position and reserves.

Sir, whilst the Government reduces direct taxes to stimulate economic activities, it has no choice but to increase other forms of tax and to look for other sources of revenue in order to finance public sector activities. The Minister has announced steps to prepare the machinery for consumption tax. May I suggest that the Minister consider making this machinery as simple as possible, or else we may end up raising consumption tax just to finance this machinery, which defeats its purpose. To minimize consumption taxes when they are implemented, the Government shouldd also consider channelling surpluses of statutory boards into our consolidated revenue account. In any case, the Government should defer implementing this consumption tax on a large scale for as long as we are in a recession.

Sir, the Government has announced plans to trim the public sector manpower by some 10% over the next five years. This move cannot be more timely. This will release talented manpower into the private sector, which is now the engine of growth. To achieve the objective of a 10% reduction in workforce, I urge the Government to consider, besides the various measures already announced like privatisation of some of its activities, cutting down red tape to reduce unnecessary workload and perhaps even reviewing existing public sector perrsonnel policies to enable more public sector employees to resign and seek jobs in the private sector without incurring financial loss. The recent move to convert the pensions scheme to the CPF scheme for new civil servants is a good one. May I suggest that the scheme be also extended to as many of our existing civil servants as possible.

Sir, whilst on the subject of manpower, it is high time that the Government considered taking in experienced personnel from the private sector into selected senior positions in the civil service. The flow of manpower should be two ways, not just from public to the private sector. This is healthy as it generates new ideas and injects greateer professionalism into the civil service, which is a necessary move if the service is to perform its role well to support the private sector in generating wealth in years to come.

Sir, we talk about restoring confidence to the economy. One way to see this happen is through the property market. The property sector is indeed an important sector of our economy. Its collapse has been a major cause of our recession in recent months. We must therefore stimulate demand for property. Business confidence will pick up if property values begin to rise again. The Budget does not appear to address this problem of a lack of demand for property. The 50% rebate on property tax and the three additional measures announced by the Minister on the property tax system do not help stimulate the demand for property. I therefore urge the Government to study the numerous recommendations put up by the Property Market Consultative Committee seriously and waste no time in implementing the necessary measures to stimulate our property market.

Finally, Sir, I believe the various tax concessions will lighten the burden of all Singaporeans, employers or employees, in this period of recession. The Government has done its part. I think it is now up to the private sector, the hawkers, the public transport operators, etc, who have benefited from falling prices of commodities and oil and the various tax concessions, to do their part. They should answer the call by their fellow Singaporeans to lower their prices and bus fares.

Sir, I support the motion standing in the name of the Minister for Finance.

Mr Leong Horn Kee (Thomson): Mr Speaker, Sir, with the few minutes left before the moment of interruption, I would like to join the debate on consumption tax.

Sir, I believe the principle of the imposition of consumption tax is valid because it is on the basis that if a person spends or consumes an item, he has to pay a price for it. And the more you spend, the more you have to pay. If a person buys 5,000 pairs of shoes or 350 of something else, I believe it is only fair that that person should pay consumption tax on their expenses. Similarly, if he is going to spend over $2 million on clothing and jewellery, I also believe that such a wealthy person should pay consumption tax.

On the other hand, there are some familiar items which are necessary for everyday use and they could be cheaper, for example, a watch.

All of us, Sir, need to wear a watch. Some people wear a very simple and cheap watch; but some others want to buy an expensive Rolex watch. And so we tax them on the basis of a percentage. The person who feels that he should not be penalized for spending would buy a cheap watch, eg, a Casio which costs only a few dollars. But if he feels he likes an expensive watch, a Rolex for example, he pays a price for it. And someone else might even feel that he needs a dress watch for the night, a day watch while working, a jogging watch when he goes jogging, and maybe a watch to wear when he goes out with his girl friend.

Sir, I believe in principle that consumption tax should be imposed. But the question, Sir, is when and how we should do it. On the question of when, many Members in this House have said that perhaps now is not the time, because now we are facing a severe economic recession and so we do not want to dampen our domestic demand and cause a further downturn in the economy. In addition, we also feel that perhaps the machinery or the mechanism as to how we should impose consumption tax should be carefully considered. As the Member for Kaki Bukit has just mentioned, the cost of the imposition of consumption tax could be higher.

Mr Speaker: Order. It is 5.30 pm. Debate to be resumed what day?

Dr Hu Tsu Tau: Tomorrow, Sir.

Mr Speaker: So be it.