ANNUAL BUDGET STATEMENT

[Mr Deputy Speaker in the Chair]

Debate resumed.

Mr Goh Chee Wee: Mr Deputy Speaker, Sir, before the lunch break I was talking about the size of the statutory boards in Singapore. The statutory boards employ a total of 60,000 people, including a disproportionately large number of high-powered senior officers. And I mentioned that there are more than 1,000 Superscale officers in the statutory boards and institutions of higher learning, more than double the number in the whole Civil Service. In terms of income and expenditure, the statutory boards' budget is sizable too. The total revenue of the seven major statutory boards in Singapore, including HDB, TAS, PUB, PSA and JTC, amounted to more than $6 billion in 1986. The total expenditure in the same year was near to $8 billion.

Sir, most of the statutory boards are set up to provide services to the members of the public. They charge fees for their services. Examples are PUB, TAS and others. They are what we know as mono- polies. The public have to pay whatever fees or rates charged by the boards. And in the absence of competition, there is no way we can compare and evaluate their performance and efficiency. Of even greater concern is that these statutory boards have the authority and autonomy to commit huge amounts of public funds and to borrow money without first notifying Parliament, let alone seeking Parliament's approval. Last Friday, we heard the Member for Punggol telling us that PUB had to borrow large sums of money to finance its development plan. In other words, the statutory boards can borrow huge sums of money, make us heavily indebted as a nation, without even Parliament knowing about it. The present state of affairs is, in my view, unsatisfactory.

I am suggesting, Mr Deputy Speaker, Sir, that the budget of all the statutory boards, including those of the self-financing statutory boards, be subject to Parliament's scrutiny. The point has been raised by the Member for Kaki Bukit last Friday. The fact that a statutory board does not require Government funding should not absolve the board from the obligation to account to Parliament. It must be stressed again that the statutory boards are indeed managing and committing public funds.

No doubt, the statutory boards are set up by the relevant Acts of Parliament which granted the boards certain authority, including management of funds. But Parliament should have the right to require the statutory boards to present their budgets to the Parliament for scrutiny, if not for approval. A practical proposition is to include the budgets of the statutory boards as a supplementary information under the respective Ministries in the Annual Budget document. Although the budgets of the statutory boards would not form part of the total Government expenditure to be approved by Parliament, such information would nevertheless enable Parliament to examine the financial commitments of the statutory boards and to enable members to raise queries. Inclusion of such information would also give Parliament an idea of the overall magnitude of the public sector revenue and expenditure. Currently, the annual reports of the statutory boards are presented to Parliament. But the annual report is a report of what had already taken place. What we really want to know at the beginning of each financial year is how much the statutory boards are going to spend, how are they going to raise revenues to finance their operations and how much are they going to borrow, etc.

Mr Deputy Speaker, Sir, the Parliamentary Estimates Committee has deliberated on this matter and has made specific comments and recommendations. The recommendations are contained in the Estimates Committee Report presented to the Parliament on 2nd January this year. I hope the Minister for Finance will give these proposals serious consideration. For a start, I will support the Government's move to require the statutory boards to turn in 33% of their operating surpluses to the Government. This will, hopefully, help the Government to balance the budget and to put the money into productive use. The next step, I hope, is to require the statutory boards to present their budgets to Parliament for scrutiny.

Next, I would like to turn to the question of the impact of the Government expenditure on the local economy.

In 1985 and again in 1986, the Estimates Committee was given to understand that the Ministry of Finance would support increases in development expenditure and would ask the various Ministries to accelerate the implementation of the public sector infrastructural development projects. The purpose was to stimulate the economy. But as it turned out, the allocations for expenditures by the Government Ministries, including the development expenditure, were underspent last year. This together with the increased revenue resulted in the Government having a sizeable surplus again in 1986. One would expect that such a situation should never arise or should never be allowed to develop in the year when the economy needs extra stimulus. So what has happened to all the pump-priming measures and the development projects? Are we still accelerating, decelerating or have simply shelved all those plans? I think the Minister for Finance should give some satisfactory explanation.

Sir, I have more to say about the Government development estimates.

All the pump-priming measures are effective only if they have a positive impact on our economy. The increased Government expenditure should hopefully lead to more business to the local contractors and manufacturers which would, in turn, create more jobs for our citizens. If increased Government expenditure merely means more business to the foreign firms or to foreign suppliers, then I would question the efficacy of all these so-called pump-priming measures.

Sir, I believe that when the Ministry of Finance supports major capital expenditure proposed by the respective Ministry, insufficient attention has been paid to the question of whether the project will be implemented in such a way that it will benefit local industry and create employment.

Whether it is infrastructural development projects or acquisitions of expensive equipment, many of our capital expenditures go towards paying the foreign firms. We did not seize the opportunity to help or to create local industry and develop local expertise. Or put it in another way, we have not done enough. This is most undesirable.

I do not have to mention the experience of the other NICs, like Taiwan and South Korea, where many of their local industries or joint venture firms are created because of the assured government contracts. Even in the more developed countries, there is a deliberate attempt by the government to ensure that the local industries do benefit from the nation's capital outlay, either by the government or by the private firms. For instance, the Australian government (and it is indeed the same with the governments of many other developed countries) insists that when the government or the government-owned companies purchase expensive equipment from overseas or award contracts to foreign firms, a certain percentage of the components or design and production work must be done locally.

In Singapore, I believe there is very few of such arrangement. When the Ministry gets the approval to spend on certain project, they will just go round and see how they can implement the project in the fastest way. It is indeed very tedious to promote local industry. You run a greater risk too by relying on local firms. Furthermore, it may be cheaper to get what you want by outright purchase from overseas suppliers or by awarding the contract to foreign firms. So why bother to give special preference to local firms, let alone creating a new one.

Mr Deputy Speaker, Sir, by adopting such a policy, we are trading off long term gains for short term expediency. We are missing the opportunity to build up expertise and capabilities of our own.

I suggest that the Ministry of Finance focus its attention on this matter. The Ministry must have a say on how the approved projects are to be implemented, especially if it involves huge capital expenditure. With all the money under his control, the Minister for Finance should, in consultation with the Minister for Trade and Industry, exploit all opportunities to help local industries to create employment and to encourage joint venture or licensing arrangement.

Sir, if we read through the Budget statements of the Minister for Finance all these years, a message which has been repeated again and again, year in year out, is that the Government is doing something to help the local industries. This is understandable. The Government must be seen to help local industries. Many assistance schemes were introduced by the Government. But in the final analysis, if there is no opportunity, no contracts, no business, no markets, what is the use of all these incentives? And I certainly hate to see a day when countries like South Korea and Taiwan take off and join the league of developed countries with their own indigenous technology and industries, we are still sitting here talking about schemes to help local industries.

The same principle of maximizing the benefits to our local industries should also apply when we export our services and secure overseas contracts. The promotion of offshore activities has been identified as one of our key growth strategies. In order to encourage such offshore activities, the Minister for Finance has announced in his Budget statement that export incentives, presently applicable to manufacturing activities, will be extended to cover export of selected services. This will include, amongst others, consultancy, management, construction, technical and engineering services. Under the scheme, 90% of the qualifying export income would be exempt from tax.

When undertaking projects overseas, our companies must be encouraged to source the materials and expertise from Singapore. They must be encouraged to use our architects, our engineers, our accountants, and even our workers, if they have the skill and cost advantage. Source the materials and supplies from Singapore too. In this way, we can maximize the returns to Singapore. In administering the export incentive scheme, the Minister may want to consider giving further encouragement and granting added incentives to those companies which utilize the manpower and material resources from Singapore. For instance, we can treat the Singapore component of the expenditure differently in arriving at the profit figure or in setting the export base beyond which the incentive would apply.

Here, I think we can learn a thing or two from the Japanese. When a Japanese company secures an overseas contract, they will bring in the Japanese engineers, Japanese technicians, Japanese consultants, Japanese secretaries and Japanese equipment. Everything Japanese. I say they are smart. When the Japanese tourists come to Singapore, they fly to Singapore by Japan Airlines, shop in Japanese department stores, buy Japanese products, eat in Japanese restaurants and then fly back to Japan again by Japan Airlines.

Sir, we may not want to imitate the Japanese style in all respects, but we can certainly try to learn from them the technique of maximizing returns when doing business.

2.45 pm

The Acting Minister for Health (Mr Yeo Cheow Tong): Mr Deputy Speaker, Sir, many hon. Members have spoken on the new population policy and measures and I would like to reply to some of the broader points raised. I am happy to note that most of the Members understand the need to increasee our birth rate to replacement level. Their concern is whether the new measures will be adequate to reverse the declining birth rate.

Sir, whilst most people realize the need to look forward and plan for the future, some prefer to concentrate on the past. Some people, both inside and outside Parliament, have asked whether our family planning programme and, more specifically, our Stop at Two policy was a mistake. The Member for Potong Pasir is one such person. He prefers a laissez-faire approach. His line is that the Government should have done nothing in the mid-1960s and 1970s to restrain the population growth. "We should have let nature take its course and everything would be all right." The question is: would the laissez-faire approach have turned out right? And if it did not, what kind of problems and difficulties would Singaporeans be facing today?

Let us cast our minds back to the mid-1960s. Our population was then growing at the rate of about 2(r)%. At that rate, we would have 3.3 million Singaporeans today, almost 700,000 more people than what we have now. After we implemented our family planning programme, the population growth rate slowed down to about 1.9 to 2% by the late 1960s. At that rate, and without the Stop at Two policy in 1972, we would still have an extra 300,000 Singaporeans today. Can you imagine the pressures on our schools, our hospitals, our housing programmes? And could we have generated enough jobs for all the additional people? Sir, was the population policy a mistake, as Mr Chiam claims?

Singapore experienced a bad recession during the last two years. Many jobs were lost. If we had not implemented our family planning programme, many more Singa- poreans would have lost their jobs. Fortunately, many of the retrenched were foreign workers who just packed up and went home. Otherwise, our unemployment rate in 1986 would not be just 6.5% but a much higher figure. If that had happened, would the additional unemployed Singaporeans be able to knock on Mr Chiam's door and be assured of a job?

Sir, the Stop at Two policy by itself was not a mistake. If all Singaporeans married and had two children per family, then we would just be replacing ourselves. But that does not mean that the Government did not make any mistakes. Our mistake was in not recognizing earlier two important population trends. The first is the singles problem. The second is the tendency for married women with at least a secondary school education to have less than two children.

Sir, the singles problem is a complex one. It involves many factors such as attitudes, equal educational opportunities for males and females, greater career opportunities, social norms and others. As such, we do not expect to resolve the singles problem quickly. The question is: should we even try to help those singles who wish to settle down but for various reasons do not have the opportunity to socialize with members of the opposite sex? If we follow the suggestion of the Member for Potong Pasir, the answer must be "No, let nature take its course." But would we be helping by doing nothing?

Members may be interested to know that the Social Development Section of the People's Association and the Social Development Unit have in their short existence managed to attract a total of over 55,000 participants to their activities. It shows that most singles do find such assistance from the SDU and SDS useful. Perhaps the SDS and the SDU should, in fact, intensify their activities.

Sir, since we do not expect to resolve the singles problem quickly, the only way to reverse our declining birth rate in the immediate future is to encourage those married women with few children to have more. We are realistic in our expectations. Not every married couple would want to have a third child. However, there are those who would like to but for our previous Stop at Two policy. We hope that they would proceed to have their third child, now that all disincentives have been removed.

Sir, let me move on now to the special tax incentives for the third child. The Member for Potong Pasir felt that the incentives only benefitted the rich and was inequitable. He is again wrong. The special tax rebate is very fair as it gives back to the couple their own money and no one else's.

Sir, the Member for Potong Pasir has described the $10,000 sterilization grant scheme as being aimed at "keeping the population down." He concluded therefore that the cash grant scheme contradicts the new population policy. He does not seem to have understood the aims of the cash grant scheme. The objective of the cash grant scheme is to help low-income families with low skills and education to break out of their poverty trap. By keeping their families small, they would be able to maximize their limited resources. Their children will then benefit greatly. The cash grant will also help these families to purchase their own homes. Hopefully, the better home environment will allow their children to have a better start in life. They can then help their parents to break out of the poverty trap, in turn. Therefore, this cash grant scheme in no way contradicts our new population policy.

Sir, the Member for Rochore has sympathized with the large number of women who have undergone ligation, as they will be missing out on the new incentives. The numbers, however, should be seen in the right perspective. Over the past 20 years, over 100,000 women have undergone ligation. However, the vast majority, over 75% of them, were ligated only after the birth of their third or higher order child. Our records show that today there are only about 7,000 ligated women below the age of 35 who have two or less children. I have instructed my officers to see how we can help these ligated women who wish to reverse their ligation.

Sir, the Member for Punggol has asked for assurance that the new population policy will not be changed. I agree with him that the people must be given the confidence that they will in no way be penalized should policies change in the future. But no one can assure him that policies will never change over time. It will take us at least 5-10 years to monitor and analyze the effectiveness of the new population policy. It is therefore premature for me to talk about the possibility of policy changes when we are just implementing the new policy. What I can assure him and all Singaporeans is that those who have responded to the new policy need not fear that they would be either penalized or lose the benefits that have been made available to them.

Sir, much effort will be needed to reverse our population trend. The success of the new population policy will depend on the attitudes of Singaporeans towards marriage and family formation. If marriage and having children could be seen as a desirable fulfilment beyond career and material possessions, then we will succeed.

At the same time, responsible parenthood is very important. The children's interests must be carefully considered by those wishing to have more than three children. Will the children be disadvantaged compared to their friends? Can the parents provide the educational, recreational and home support for their many children? Changes in attitudes will take time. But the process can be made easier if all Singaporeans chip in with their full support. They will be helping themselves as well as the nation. Equally important, they will be helping their own children, helping to ensure that their future is less heavy and burdensome.

Sir, as this is a debate on the Budget statement, I have only addressed in my reply the broader issues raised. However, I would like to assure all Members that all their points have been noted and that my officers will look into them.

2.56 pm

Dr Tan Cheng Bock (Ayer Rajah): Mr Deputy Speaker, Sir, the first budget speech I heard in this House was presented by the First Deputy Prime Minister when he was then the Minister for Trade and Industry. That was in March 1981. The main thrust of his speech was the Economic Development Plan for the 80s. The emphasis was on industrial development, research and development, trade development, services development, energy and manpower development. A total of $4,579.9 million was required in FY 81 to meet the recurrent expenditure of Government programmes like the modernization of the Armed Forces, restructuring of the educational system, expansion of the National University and other training institutions to cope with the demand for skill, technical and professional manpower as well as higher maintenance costs.

Mr Deputy Speaker, Sir, there is a significant shift when you compare the two budgets, from what I described as physical development budget of 1981 to people-related budget of 1987. This year, the budget calls for wage restraint, to restore international competitiveness, wage reform and CPF contribution rate that the economy can afford to maintain our international competitiveness.

The tax and revenue changes for 1987 confirm my observation. There are tax incentives to encourage procreation, tax relief for children who use cash to top up the Minimum Sum account of their parents, selective goods and services tax and foreign workers' levy scheme. Sir, physical development no longer excites Singaporeans. Building another Raffles City or Treasury Building will not make many heads turn. But people-related issues are different, different because such issues deal with feelings, emotions, individual privacy, needs, expectations and money. For example, wage restraint, CPF and sales tax deal with the individual's money. Procreation, marriage, the population issue and human organ transplant issue involve emotions, feelings and individual privacy. Schools, especially independent schools, deal with expectations and needs. Therefore, Mr Deputy Speaker, Sir, we have come to a stage of our nation building where approaches to achieving new goals to solving problems should be conscious in our minds. Those formulating policies and those implementing policies should take note. As Government policies increasingly have something to do with emotive issues, we must look beyond just voting dollars and cents to implement the policies.

Mr Deputy Speaker, Sir, at my many dialogue sessions and tea sessions with ordinary Singaporeans, educated and not so educated, professional or grassroots leaders, a number of clear messages have emerged. I will use these few minutes to highlight four main messages. I hope the front bench Ministers and those who help them to implement their policies are all ears. In fact, this is one speech that the Minister for Finance need not take down notes but just sit back and listen. It is meant not only for him but also for the other Ministers.

I will start with this tax incentive for procreation. It is not only one of the means of achieving our population target. We have this goal of having more babies. But do not expect that if you dangle a carrot of $20,000 special tax rebate, we are going to have more babies. You may succeed to a certain extent but fundamental to this is that the reasons for having more children must be made clear to our population. Some people are not convinced we have a problem. They do not share the Government's vision as they do not have enough information to appreciate the seriousness of the problem facing us. Other participants questioned the whole basis of the optimal population size, while others believe that Singapore is already one of the most densely populated countries and questioned the wisdom of having more babies. They want assurance that increasing the population base will not bring on more problems of overcrowding, competition for jobs, more demand for education and social services that Singapore cannot bear. I think this has been touched upon by the Acting Minister for Health a few moments ago. Unless Singaporeans are aware of the serious consequences of our declining population, monetary rewards will be a marginal incentive.

Mr Deputy Speaker, Sir, if a child is told that he should not litter our streets because of a $500 fine, then we have been giving him the wrong reason for not littering our streets. But if you tell a child that he must not litter or spit because the streets will be dirtied and diseases can spread, then the right reason has been imparted to him and he will not litter or spit when no one is around. That is why when I see the sign "No littering, fine $500", I think the wrong message has been conveyed. Similarly, in our drive to encourage more babies, let us tell them the seriousness of a fall in population and lop-sidedness in the procreation pattern. I know our First Deputy Prime Minister has gone on television to explain, but it is still not enough. It is a more arduous task. But we must remember that to achieve our goal we must not forget the importance of the process to reach it. Does the end justify the means? We have been too much goal-orientated and not enough process-orientated. And because of this philosophy we are too anxious to get things done and would thus set out to achieve our target with little or less consideration for the way it should be done. This is a message constantly expressed at dialogue sessions. Will those in charge of policy-making and implementation please take note.

Our goal of achieving high births in the coming years appears to have been carried out in a manner feared by concerned Singaporeans. We are going to give priority of schooling to three-child families. We are going to give priority of housing to those who want to upgrade their flats upon the birth of the third child. And we have set out seven other incentives and measures to support the new population policy. I wonder whether those who set out these measures realize the implications of some of these measures and incentives.

Those who ligated at two are wondering about their children's priority of schooling. And notwithstanding what the Acting Minister for Health has said, once upon a time those who ligated after two births had top priority. Then with new changes in policies they had priority but less priority. So now they are waiting to see what happens at the next school admission exercise. We must remember that a child takes six years to grow up before entering school. What you promise, you must honour. Those who have complied with your old policy have yet to enjoy the benefits. In view of what the Acting Minister for Health has said, I hope in six years' time those who comply now before the cut-off date for this new policy need not have to bite their nails in fear of new policy directions. Then again, there are those who have been waiting some time for their HDB flats. They fear that with the new priority for the third-child family they may have to wait yet longer.

There are Ministries with a large women workforce, like the Ministry of Education. How will the schools cope if many women teachers decide to take advantage of this answer given by the policy of granting four years no pay leave? Judging from the Minister of State last Friday, it is quite obvious the Ministry will be facing a serious problem. Just imagine, two extra teachers going on leave from our 401 secondary schools, we will have 800 teachers short. You must remember, Mr Deputy Speaker, Sir, that we have 13,000 women teachers out of a total workforce of 35,000 women in the Civil Service. This is going to affect our school programme. The message is therefore quite clear. Pay as much attention to the consequences of the process as well as your goal. Consider all factors for a start.

I shall now move over to the foreign workers policy and the $140 levy. We all understand that we must not rely entirely on foreign workers to man our industries. We do not really want our children to be brought up by foreign maids if we can help it. But what choice have we? It is a fact that some jobs are simply not attractive to Singaporeans. This has been mentioned umpteen times and ad nauseam. In such cases, the local businessmen, the working family, have no choice but to look for workers from overseas. We must view the situation sympathetically and help them whenever possible.

We have the rationale for a strict foreign workers policy and the levy scheme. However, in implementation, the objective must be to help our businessmen get foreign labour cheaply and easily in order that industries and services can flourish. This is all too often forgotten as the Civil Service is overly concerned with control and tightening against abuses, mostly to the detriment of business enterprise which is, fast changing. Introducing the $140 levy on foreign workmen now is frowned upon by some business quarters as negating the cost-cutting measures of reducing CPF introduced earlier this year. This will make our products less competitive. Are we paranoid about the whole issue of foreign workers? The industrialists want to know. On the one hand we talk about a revolving pool of foreign workers. Then at the next breath we want to tighten control by introducing a $140 levy. Our industrialists want to know why? They perceive it as a departmental concern overriding national interests. Mr Deputy Speaker, Sir, this is the other message that I want to bring to the attention of the Ministers. People at the receiving end fail to see the logic of some of the things you do. They view each Ministry guarding jealously its own policy without trying to balance it with the overall national interest.

In the Budget speech, the Minister clearly stated, and I quote him:

'Local businesses occupy an important role in our economy. We must build a solid base of thriving and resilient local businesses.'

Mr Deputy Speaker, Sir, in this troubled period of slow growth, many of our local businesses face a cash flow problem. Therefore, they may be late in their payment of CPF or rentals of their premises. Some of these businesses do owe substantial sums to HDB and to the CPF. But HDB and CPF were kind enough to let them pay by instalments in most cases. But sometimes even such arrangements pose difficulties for the company. While acknowledging that there are some companies which are dshonourable, there are also many who are indeed having a cash flow problem. It is within HDB's right to write to the lessee's bankers informing them of the rental arrears and the Board's intention to terminate the lessee if the arrears were not settled. This indeed happened and has led the bankers to start squeezing the credit facilities of their clients. I am not saying that HDB was wrong. It was a perfectly legitimate exercise as the bank was the lessee's guarantor. Whilst serving the Mortgagee Notice on the bank is legally right, the point I am trying to make is that Government ought to extend a helping hand by withholding action rather than precipitate their bankruptcy. Hard-headed economics in these times should be tempered by heart-felt sympathy.

One request that local entrepreneurs would like to make is for policy-makers and implementers to think Singaporean. It is a shame to go to China and be told that our local contractors do not have the expertise to build airports, stadiums, ports, as they have no past records to show. We must give more jobs to our locals than to foreigners. Although there is a trend now to give Singaporeans priority, more can be done. Perhaps we should consider giving priority to Singaporeans for the controversial Central Expressway project. We should invite locals to tender and, if necessary, they can buy the expertise elsewhere.

Mr Deputy Speaker, Sir, it will be unheard of in Japan but this happened in Singapore. If you tune in to your radio you may have heard of a Harvard Medical Heart Specialist giving advice to Singaporeans on what to eat and what not to eat to stay healthy and thus prevent heart diseases. You are aware, Mr Deputy Speaker, Sir, that we are doing open-heart surgery and by-pass heart surgery and we have a number of very prominent heart specialists. Do we need a Harvard Medical Professor to advise Singaporeans how chao guo tia will affect his lipid and cholesterol levels, whether soup kambing is good for his heart or whether nasi-lemak will push the fat contents in his blood up? Does SBC have such a low opinion of our local doctors and nutritionists? The message I am trying to bring to the attention of this House is "Let us start thinking Singaporean".

Another example as to how people-related issues must be handled carefully is best illustrated by the question of compen- sation. In 1985, the Government raised the compensation given to those who were resettled. Whoever was still occupying the properties on or after the cut-off date were given the enhanced compensation. While my colleagues in the supervisory panel of the Feedback Unit were satisfied that there were good reasons why such a method was chosen, those affected by the exercise saw an anamoly. They told us that those who were stubborn and refused to move out of the properties were, in fact, rewarded by being given the extra 30%. Those who cooperated with the Government and left early got less. In their mind, the Government seems to be telling them that they made an unwise decision when they chose to cooperate with the Government. It is a perception, Mr Deputy Speaker, but this is what they think. We must be very careful not to let too many of such misconceptions take place. We must be conscious of those at the receiving end of our policy is the other message I want this House to know.

In summary, Mr Deputy Speaker, the four messages that I would like to pass to the Government are:

1. The Government has been too much goal-orientated and not enough process-orientated.

2. Departmental concerns must be subject to national interest, not override it.

3. Be conscious of those at the receiving end of your policy.

And lastly, Mr Deputy Speaker, Sir, think Singaporean.

Dr Arthur Beng Kian Lam (Fengshan): Mr Deputy Speaker, Sir, I rise in support of the motion.

Sir, it is heartening to note that the economy is on the path to recovery following the depth of recession in 1985. However, as has been emphasized, the recovery is not across the board. The sectors that have performed well are manufacturing and transport and communications which make up half the economy.

In the last year, the Government has helped to reduce operating costs and improve company profitability by lowering employer's CPF contribution rate , reduction of statutory charges and the 50% cut in property taxes. The more important effect of all these measures is that confidence has been restored in the economy. Investment commitments in 1986 showed a 27% growth over 1985 reaching $1.4 billion.

Sir, I would now like to focus on three areas in which I would like to seek clarification from the Minister for Finance. The first area is what I would call the areas of uncertainty regarding the future directions of the Government. More specifically, I refer to the temporary adjustments that have been made. For example, the reduction of CPF, reduction of property taxes and statutory charges. Businessmen in Singapore and the foreign investors, I am sure, would like to know the medium term, if not the long-term Government policy with regard to these interim measures which have been implemented to cut operating costs. As stated in the Budget statement, even with these measures implemented, "Our competitive position against the other NICs weakened by as much as 50%." Thus, it would seem that the cost of operating a business in Singapore is still high. Should we thus not make longer term decisions regarding some of these cost factors? We are of course now dealing with wage reform. This is a step in the right direction as it will provide for clear directions and stability in the realm of wages.

Sir, I would now like to seek clarification from the Minister for Finance as to what he means when he stated in the Budget presentation, and I quote:

'We must ensure that Government programmes should be self-financing as far as possible, with minimal subsidies.'

The level of subsidies for tertiary education has been reviewed and the rationale explained. This I find acceptable. However, I am disappointed at the recently announced increases in health fees, especially the charges in the Accident and Emergency Department. In 1985, the Government expenditure in the A&E programme was $14.4 million. The estimated expenditure for 1987 is $14.1 million, a lower figure. My guess is that the lower figure of $14.1 million would be based on the new charges.

Sir, the Accident and Emergency Department is providing an essential service. People turn to the Department only in a time of special need. They want this medical care urgently. Many would be cases of traumatic injury. Others are medical emergencies, as understood by the layman. To slap on separate fees for minor surgical procedures and investigations for A&E cases is totally unwarranted. As many are cases involving trauma, this would imply a need for minor surgical procedures, eg, the stitching of a wound or what is medically termed "toilet and suture". While the patient was paying $10 previously, he will be charged $20 now for the additional surgical procedure, double the previous charge.

The last time A&E charges were reviewed, I remember that the reason given was the misuse of the Department, ie, it was added on as a deterrent. The Ministry has had a very successful four-month campaign last year to educate the public. Twelve months after the campaign, the absolute number of attendances fell by 8,000 or 21.6% from 37,000 per month to 29,000 per month. More significantly, the number of non-emergency cases presenting themselves at the A&E Departments fell from 60% to 20%. In the Straits Times report on Friday, 13th March, the closing paragraph reads thus:

'In thanking the public for its cooperation the Ministry also said, "We would like to urge the public to continue to seek medical attention for all non-emergencies from GPs and OPD clinics and to reserve the use of A&E Department for emergency cases.'

In thanking the public for its cooperation, the Ministry has instead raised A&E charges. How paradoxical! What I seek from the Minister for Finance in citing this example is clarification as to what is meant by "minimal subsidies". What will be the guidelines for implementation of this philosophy? If this is not carefully monitored, we may see escalating charges for even essential basic services.

The next area that I would like to focus on is a sector of our economy which is still facing immense problems - the tourism industry. In 1986, the average room occupancy was 64.7%. This, however, does not tell the whole story as the room rates for even our five-star hotels have dropped about 40%. A single-room now would cost $70-$80 per night. Tourist arrivals in January 1987 increased by 8% over January 1986. This is a good sign but not quite enough when one takes into account the fact that there are 15% more rooms in February 1987 compared to February 1986. Another 2,000 rooms are expected to come into the market over the next 24 months. Today, room rates in Singapore are 40% lower than that in Hong Kong and 30% lower than that in Indonesia. They are equivalent to that of Malaysia. The Singapore Hotel Association estimates that a new five-star hotel of about 500-room size can expect to lose $1 1/2 million per month under present circumstances.

The ultimate answer to the woes of the hotel industry is, of course, to increase the inflow of tourists and to encourage them to stay longer. The Singapore Tourist Promotion Board is sparing no effort to attract major sporting and other events of international standing to Singapore. 1986 saw the first in-shore power boat race ever organized in Asian waters held in Marina Bay in November. 1987 will see Singapore hosting the Miss Universe pageant and in 1988 the International Garden Festival. Hotels, however, should also be encouraged to conduct more promotions overseas. To this end, I would like the Minister for Finance to reconsider a previous request by the hotels that they be given double taxation relief to market overseas, as is being enjoyed by the manufacturing sector. This could be in the form of official overseas marketing missions organized under the STPB banner. Another aim of this mission could be to encourage more chartered flights of tourists to Singapore.

As the Singapore Tourist Promotion Board endeavours to attract more international sporting and other events to Singapore, another problem has arisen. This is the taxation of prize money by the Inland Revenue Department. Perhaps the Minister would like to consider exempting the prize money from taxation or granting special status to these events so that it may be more attractive to bring these events to Singapore.

Sir, I would now like to turn to the Defence budget. Our national defence capability should never be compromised. It takes years to equip, train and organize a unit into an effective combat force. Thus, it is reassuring to note that despite the economic slowdown, the provision for the Ministry of Defence has not been scuttled. There is a 4.5% increase in recurrent expenditure and 12.5% increase in development expenditure over FY 86. There must be no letdown in the build-up of our defence capability. Our national security must not be taken for granted, as recent events have shown. Our water supply has been repeatedly threatened by many groups, including some eminent statesmen in Malaysia. However, we are gratified that there has been reassurance by the Government of Malaysia that this is not the official stand. I am not advocating an arms race in our region but we must be ever-vigilant.

In closing, Mr Deputy Speaker, Sir, I would like to turn to the procreation policy. However attractive though the incentives are, as some of my colleagues have mentioned, many have missed the boat. I join my colleagues in urging the Minister to make the tax incentive for the third child applicable retrospectively. The Acting Minister for Health has asked his officers to study the problem of reversal of ligation. I congratulate the Minister on this. He has decided to meet this problem face on, and this is good. Many had ligations done because of the disincentives in the population policy at that time. They were victims of circumstances and to help them now is right and noble. I hope that a serious study will be done and that it may mean the setting up of a special unit in Kandang Kerbau Hospital for the reversal of ligation. We must be prepared for this. I also hope that the Minister will reconsider the quantum of relief for the first and second child. This is very important for the young couple because before one can have the stamina to reach No. 3, one first has to survive Nos. 1 and 2, Mr Minister, Sir. If the experience of the first two is less painful, perhaps one can then reach No. 3 and enjoy the incentives. 3.28 pm

Mr Jek Yeun Thong (Queenstown): Mr Deputy Speaker, Sir, I have a lot of things to say about this Budget but in view of the time constraint, I had better say all the good things first and leave the others to whatever time there may be, lest I would be misunderstood.

The Minister for Finance should be congratulated for producing such a mild and harmless budget under so much economic constraints and traumas such as we have experienced over the past year. After last year's economic shocks, I thought we were in for a harsher and more painful budget this time. Yet I was surprised that we were again presented with a painless one. I mean, painless as far as I am concerned. I do not drink. I do not gamble and I do not smoke. So all the increases in tax on liquor, betting and tobacco which the Minister has implemented do not affect me at all. And for those who not only do not drink, gamble or smoke but can also produce babies, there is a bonanza of $20,000 to be had. No wonder the Acting Minister for Health is always beaming broadly whenever I see him because, as he has told someone, he is working hard at it. Well, that applies to the young ones in the front row as well. But I am afraid I cannot compete with them in this field. One has to admit one's limitations. So I have to forfeit the $20,000, tempting though it may be. But I am not complaining. Even if I could have what they call the second spring or gone through a rejuvenation programme or, as the rumours have it, the Women's Charter could be changed, I would still want to keep the same wife and have the same two children. Nothing more (I mean, wife) and nothing less. And that was decided between my wife and I long before the policy of Stop at Two. Although I am not a rabbit, neither am I a guinea pig. I would not want to subject myself to the Government's great demographic experimentation, of which I would have more to say later.

What is also noteworthy about the Budget is that the Minister is generous enough to allow the 20% tax on telephone services to remain suspended for the time being and to postpone the 10% tax on electricity and gas consumption until next March. That will help a little. Of course, more will be better. But dare we ask for more? To have more would mean a bigger deficit, and a bigger deficit would lead to what the Minister calls a "permanent budget deficit" and this will give him the excuse to bring in the consumption tax which, like the Sword of Damocles, has been hanging over our heads ever since last year's great economic debate. So we have to tread very carefully and not give the Minister any excuse at all to do just that.

Whatever the Minister may say or the Member for Radin Mas may say about the consumption tax, it is still my belief that it is inflationary and regressive. The Minister may try to soothe us by saying that he would go on a selective basis rather than a comprehensive one. The trouble is that once the tax is introduced, and when the Finance Minister is under siege at some future date, he can easily change it from a selective one into a comprehensive one. It is easy to say that one can avoid paying consumption tax by not consuming. But do you know what a comprehensive consumption tax means? In UK, if you want to have your house renovated, you have to pay 15% VAT on top of the contractor's price. If you have your water pipe burst or a blackout, you have to pay 15% VAT on top of what you pay to the plumber or the electrician. And if you are hungry, you go to a restaurant to eat, you pay 15% VAT; and when you die, there is also a 15% VAT on top of the undertakers' service, although you yourself may not have to worry about the payment. You may say that you can avoid paying the tax by not having your house renovated. But can you avoid not having your water pipe or your electrical fittings repaired? Can you avoid eating? And finally, can you avoid death?

The Minister should be well informed enough to be aware that just a few days ago the Nakasone government in Japan lost a by-election in one of its safest seats over the issue of the sales tax. And the ruling LDP was split right in the middle. And they were only talking about 5% sales tax and later on negotiated down to 3%. And there was already this big hue and cry. How many per cent are we going to have if the Minister does get his way? As I have said it last time, if it is too high, politically we cannot afford it; and if it is too low, administratively we cannot afford it. The Japanese people are often very articulate and even violent over matters such as this. I am not suggesting that their sort of scenario will be transplanted to Singapore because we the people here are not like them. But why does the Minister not see it as a lesson and then think, think, and think again before doing it - (suo wei san si er hou xing). In view of the resistance and resentment which a tax of this nature will inevitably generate from the people, should the Minister not be more thoughtful about it and not, using his own words, "throw caution to the winds"?

Somebody said in a forum in the Straits Times last week that the fact that the Minister did not slap the tax straightaway might reflect that the Minister was having a change of heart. If that is so, can the Minister say so and not leave us guessing? However, we are at least thankful and grateful to the Minister for not imposing it straightaway. He said he was going to set up a Division to look into the matter. If there is any red tape at all in the Ministry of Finance, long may this Division be bogged down by such red tape so that it will never see the light of day.

I also sincerely hope that the $3.75 billion deficit is truly a deficit and not some sort of accountancy conjecture made up to justify the introduction of the tax. In fact, some people are very sceptical about the deficit figures and this was also mentioned in the Straits Times forum where it was pointed out that in the last fiscal year we were supposed to have $3 billion deficit but at the end of it, we turned out to have quite a substantial surplus. The same sentiment has been confirmed by no less an authority than the Member for Whampoa. Mr Deputy Speaker, Sir, I am not a magician or a juggler in figures. So I have no way to prove or disprove what was being said by both camps. I can only take the Minister's word on its face value and I see no reason why he should not tell the truth.

When I earlier talked about a painless budget, it was actually a customary way of expressing an obligatory compliment. For those who know this Government well enough will understand that whatever pain there is in any budget, it is usually administered either before or after the budget but never during it. The whole process of the budget presentation is like preparing a patient who is about to go for a surgical operation. He isusually first given a jab of sedatives which will bring about a sense of euphoria and well-being over his whole body and very soon his anxieties and fears of pain will disappear.

It is the same with this budget. Witness the increase in University students' tuition fees and the hospital prescription fees. But I must make it clear that I am not objecting to these increases. In the case of tuition fees, firstly, I think it is a good socialist principle - although we might have already forgotten about the meaning of that word now - that a privileged few should not be heavily subsidized at the expense of a large number of less privileged people, no matter how talented that group of people are. Secondly, the problem uppermost in the minds of most parents regarding their children's tertiary education is how to get a place in the University and tuition fee is always the secondary consideration. I am happy to see that the Government is considerate enough to allocate $100 million as study loans to the needy students. My only regret is that the Government should be so hard-headed and business-like in pegging the interest rate at prime rate. I think the right thing to do is to peg it at whatever rate the Government borrows from the CPF. I do not know at what rate the CPF is lending its money to the Government, but I presume it is much less than the banks. My argument for this is that prime rate can fluctuate according to the demand for capital. If everyone is crazy again to speculate in shares, gold, properties, or what-have-you, the rate can go rocket-high. We are only lucky that it has reached an all-time low of 5(r)% this year. But a prime rate of 11% or 12% is not unheard of, for instance, in 1984 and 1985.

A large loan coupled with continous high prime rate for several years may cause the future graduate to end up with having greater liabilities than his assets, in which case he may not be eligible to sign the declaration of non-indebtedness as required by the Government Manual when he joins the Government service. But I presume the bureaucrats in the Ministry of Finance are farsighted enough to foresee this eventuality and amend the Manual long before it becomes necessary.

Since the Government is in this generous and magnanimous mood, may I venture to suggest that this $100 million loan facility be also extended to students who study in approved and recognized universities overseas. This makes good economic sense as, firstly, students studying overseas can benefit from other people's subsidies. Secondly, the fact that they are studying overseas releases more valuable places in our University for other deserving students. And thirdly, with more students studying overseas, we will have wider cross-fertilization of knowledge and greater challenges among our student population.

As regards the increase in prescription fees, the important thing is that the drug prescribed should be good enough to cure us. If, for instance, I had cancer and if there is a drug that can cure it, I would be happy to pawn my last shirt to get it. Now that we are promised that better and proprietary drugs would be used, I think the small increase is well worth it. However, I am afraid that the trend of modern medicine is such that it will probably cause more to find out what is wrong with us than what to do with us. I suppose they call it the "science of diagnosis". I suppose that is what you call progress. I remember when I was in London and once when I had a little fever and had to go to see a doctor, I was sent round to the various laboratories all over Harley Street to have blood tests, X-rays, etc, the bills of which went up to almost 100. After a few days of rushing around in Harley Street, I went back to see the doctor again and I was given a pre- scription chit and told to take two tablets prescribed therein, twice a day, and to go back to see him a week later. Meanwhile, I was charged another 25 for the doctor's consultation fee. Later, I found out that the tablet was actually a kind of analgesic though of a different brand name but was similar to Panadol, which I could have bought for 50 pence at the ordinary chemist's shop. But that was not the end of the story. Unlike doctors in Singapore, those in London do not give you medicine after they have seen you. They only give you a prescription chit and you have to run round to the nearest chemist or pharmacy to buy your medicine. In my case, since the medicine was sold on a prescription basis, the pharmacist charged me 2 for counting out the number of tablets prescribed. I suppose that is called "professional service rendered" and another 50 pence for the tablets. That is what happens in an advanced and developed country. I hope such things do not happen in Singapore. But who knows?

Mr Deputy Speaker, Sir, since the Minister was rather vague about the prospect of the economy and has not told us in his speech what is in store for us in the coming year, whether it is going to be a good one or a bad one, the ordinary people will have to resort to their usual horoscopic skill to tell their fortunes and the prospects for their business. Usually it is to find out what animal is in reign during that year. You must not laugh and you must not under-estimate them. More than 3,000 years of experience and knowledge have been distilled and compressed into a great proverb book called Tung Su, the Chinese Almanac. Sometimes their predictions are more accurate than PhD economists and social scientists. Remember 1985? We were then imbued with a sense of euphoria and the planners were telling us that the fun society had finally arrived and we were in for some golden harvest. The then Finance Minister was painting a rosy picture of what good things were about to come. Then some tiresome people warned that we had better watch out because the Tiger year was approaching. And sure enough, bang. In 1986, we met with the year of reckoning and we went down the slippery slope from which we have still not recovered.

For this year, the Rabbit year, the optimists of the Tung Su are saying that it is going to be a good one because according to them, the rabbit is an active animal and it breeds prolifically, something which may cheer the First Deputy Prime Minister. It foretells a year of active business and increasing profits. However, on the other side of the coin, are the pessimists. Like the professional economist, these amateur soothsayers also have two schools, one optimistic and the other pessimistic. The pessimists refer us to the Chinese story about a clever rabbit having three hideouts. So does it mean that this is a year of reckoning for dishonest contractors and crooked businessmen and forewarn that they had better quickly prepare three hideouts, one in Bangkok, one in Macau and another one in Taiwan where our laws cannot get at them? Whether it is so, I do not know and I could not care less because I am not a rabbit, I am not clever, and I do not need a hideout.

But I am more interested in that part of the story about the rabbit being a fast breeder and hope that this will lend some help to the First Deputy Prime Minister's efforts to get the nation moving again in the matter of producing babies. I really do not know what has happened to our people. After so many years of glorious achievements, we are finally caught out to be low in productivity, not only in factories but also in bedrooms. I fully understand the new population policy and I support it. But unfortunately for me, the support can only be a verbal rather than a biological one.

However, I am not happy with the way it is being promoted. Again, we are falling into the trap of too much regulating. We must remember that we are living in a society of human beings and we must treat it as such. In a matter like this, we can only give advice and not dish out regulations. It revolts against human nature to be told how many babies he or she can or cannot have. Anyone who has any self-respect would be unhappy to be told that he or she has a quota of not two, not four, but three babies to be filled. In the field of trade, we have been vehemently against the quota system, against GSP graduation and so on. And yet when it comes to producing babies we have a quota system. In the matter of the size of the family, I am in favour of letting people have their own initiative and decide on how many babies they should have.

I am not a great admirer of Confucius. But at least in this matter about promoting a cause among the people, I agree with what he said in one of his quotations. He said, Min ke shi you zhi bu ke shi zhi zhi . There are a lot of controversies and interpretations about this quotation. And my own interpretation is this. If the people are intelligent and they understand your policy, you should let them have a free hand and take their own initiative. If they are not, you should educate them and make them understand. They will then respond more positively to what we want them to do.

The First Deputy Prime Minister himself has said that once a departing diplomat had told him that Singaporeans lacked initiatives. They have to be told by the Government what to do about everything. That must be one of the shortcomings of our people as seen through other's eyes. I believe it also to be true and we must try to rectify it. And yet in this very personal matter about babies, the First Deputy Prime Minister is not letting the people have any initiative at all. He has to tell them how to produce and how many to produce. If we spoonfeed them at every step, how can we expect them to grow up and become an intelligent people? I am sure if we explain to them fully the dilemma we are in and the problems we are going to face, they will support the Government wholeheartedly and come out with more ingenious ideas and solutions of their own.

I myself was very depressed when I saw the graphic about the man holding a tongkat getting bigger and bigger, meaning people above 60 getting more and more until the year 2020 when the figure becomes largest. There is little consolation to me that I am not in that group of tongkat holders yet.

But the aging of the population is already felt in my own constituency. In the past when we held baby shows or dance parties in the community centre, there was great response. Now I do not remember having any baby shows there for the last 10 years. And the activities that attract the greatest response were those meant for senior citizens. What are we going to do with so many old people? They are unproductive, fragile, grumpy and needing so many young people to support them. I understand that in the Turf Club, when a horse becomes lame or when its useful life is over, it is shot and then its carcass is fed to the animals in the Mandai Zoo. They call it humane destruction. But it would be inconceivable and we cannot do this in a human society. Or can we? I am not so sure. I cannot see what is going to come in the next 10 years, let alone in the year 2020. What was considered inconceivable in 1970 has become conceivable today, and that is only a lapse of 15 or 16 years. So what is considered inconceivable today could well be conceivable in, say, 20 or 30 years later, is it not? Fortunately or unfortunately, I would not be there to see it.

I do not know how the magic figure of three has been produced. We were told that it was a result of statistics, charts, projections and so on. But as I have said earlier in 1985 about charts and projections, they can lead us up the rosy path but they can also plunge us into great abyss. I am not a great believer in statistics and charts. But if we must have figures to make our speeches sound more authoritative and irrefutable, then I shall do so by quoting from the latest issue of the Monthly Digest of Statistics in order to soothe the nerves of our panic-stricken Ministers. The First Deputy Prime Minister has conveniently chosen the 1986 figure to show that there is a shortfall of 14,000 to 15,000 babies. Of course, it is true that in 1986 we had 39,400 babies as against 42,484 babies in 1985. And there is a net loss of 3,084 babies, if my arithmetic is right. But does he know or has his analyst taken into consideration the fact that 1986 was a Tiger year and what implications this must have in a population which is predominantly Chinese? If we look at the figures of live births year by year, we will see that from 1982 we have been having an average of 41,000 babies every year. In fact, from 1976 onwards, the figures have been increasing every year. Why is it that in all those years nobody sounded any alarm? Why has nobody tried to find out how we came to be short of 3,000 in 1986? To me, the explanation is simple and the figures are all there in that book for everyone to see. The shortfall, in fact, came from the Chinese section of the population. While the other races maintained more or less the same number of babies in 1985 and 1986, the Chinese had 29,355 babies in 1985 as against 26,108 babies in 1986, a net loss of 3,247 to be exact. Why did the Chinese produce less in 1986? You must ask the politicians and not the statisticians because the Chinese believe that although Tiger boys are good material for soldiers Tiger girls are definitely out. They believe that Tiger girls are difficult to handle and to live with. In fact, I have friends who are Tiger girls and are married to husbands of the Bull years, and they actually refrain from eating beef because they believe that Tiger girls who eat beef may bring harm to their Bull husbands. So is there anything worse than a Tiger girl who may eventually become a graduate? It has already been drummed into their ears day in and day out that a graduate girl is so difficult to get rid of, I mean in the matrimony way. So they are not taking any chances at all.

If you look down the column of births for the Chinese and compare the monthly breakdown figures, it will become more interesting and revealing. In January 1986 the figure was an all-time high of 2,808 babies. But in the next month, February 1986, the beginning of the Tiger year, the figure plunged to an all-time low of 1,808, exactly 1,000 babies less. Do you call it coincidence or good planning? If you look at the number of marriages registered by the Chinese for the years 1985 and 1986, you will also see the same pattern. Less Chinese were prepared to get married in 1986. The figures are 16,747 in 1985 and 13,824 in 1986, about 3,000 less couples. So what does all this prove? It proves that no doubt 1986 was a bad year but it was also an exceptional one. But all is not lost. When it comes to the more auspicious years, such as the Dragon year or like this year, the Rabbit year, we may even have a baby boom and all our worries will be over.

In the last few days I have been thinking very hard over ways and means to help the First Deputy Prime Minister out of the population dilemma. My thoughts first directed me to the baby boom years of 1954-1958. I wanted to find out why we had a baby boom then, and not now. I thought naively that if we could re-enact some of the conditions prevailing in those days, then we might be able to induce at least a mini-boom, if not a real one, and that might help. However, after some reflection I decided that it was a non-starter. Because not only can we not push the clock back, but do we want the conditions prevailing in those depressed and tragic years to come back to us?

First of all, we must compare what we did have or did not have in the 1950s to what we do have or do not have now. For a start, we did not have television in the 1950s, which is a plus point as far as producing babies is concerned. This condition cannot be re-enacted now because the whole population is already addicted to television, and what is more, we also have the videotape machine which can be played right after midnight, which makes things worse. Then in the 1950s there were riots, strikes and general instability. And in those circumstances people tended to stay at home at night. There is no prize for guessing what people would do when they stay at home at night without television to watch. But do we want those conditions to come back to us? Then there was massive unemployment. Thousands of young men and women were wandering about the streets aimlessly and when boys and girls without anything better to do met, you again can easily guess what would happen. We did not need any SDU then. The matchmaker then has almost become an extinct species.

And what is it that we have now that we did not have in the 1950s? We now have electronic factories and garment factories in which large numbers of young girls are engaged and enclosed for at least eight hours a day without any chance of meeting the boys. What is more, there is also the problem of the third shift. When they get home, they are usually too tired to go out to meet the boys. Also we now have army camps which we did not have in the 1950s, and they cordon off large numbers of young boys without giving them any opportunity of meeting the girls. They can go home in the weekends but marriage can hardly be struck within that short period. Cupids do not work so fast. Girls can work third shifts but cupids don't. They cannot aim their arrows so fast. So what are we going to do about it? Dismantle the factories and the army camps? We might as well dismantle ourselves.

This led me to think of the other alternative. According to the First Deputy Prime Minister there are nearly 20,000 marriageable and biologically productive women who are not married. If we can make them produce just one baby each, then all our talk about shortfalls and crises will be over. But the problem is: why are they not married? The finger is always pointed at us, the male chauvinist pig. But I think there are always two sides to a coin. It is true that some men may be reluctant to marry some women whose academic qualification is higher than theirs. But the women themselves too are choosy and they have some sort of complex. While an ordinary man may have no hesitation in marrying a woman whose academic qualification is lower than his, a woman often refuses to marry a man whose qualification is lower than hers. I once asked a Secondary 4 girl whether she would take a boy who has not completed his Secondary 4 education to be her husband, and she said, "Very definitely no." I also asked an A-level girl whether she would take a Secondary 4 boy to be her husband, and she said, "Not really." But when I came to an older and unmarried graduate girl, I dared not pose the question because I was afraid that she might misunderstand me and think that I was trying to propose to her. But whether or not I posed the question, I suppose the answer would still be the same as the other girls. That is why I think the SDU is doing the wrong thing. They thought that if they brought the graduate boys and the graduate girls together, they will somehow hit it and that they will be married happily ever after. But judging on the fact that more girls are getting into the University than boys every year, they are really fighting a losing bat- tle. It is like trying to fill a tub with water when it has a hole at the bottom. While we must try to remove the fear of the boys marrying upwards, we must also try to remove the girls' inhibitions about marrying downwards. If a graduate boy marrying a Secondary 4 girl can produce a brilliant baby, there is no reason why a graduate girl marrying a Secondary 4 boy cannot have the same result.

I have a suggestion as to how to get these 20,000 unmarried but marriageable women on the baby-producing track. The suggestion may sound unorthodox but it is not unthinkable and neither is it unmentionable. In fact, it has been mentioned by no less a personality than the Prime Minister himself. It is called single-parenthood. What is single-parenthood? I am afraid many of our people cannot grasp the idea because it is a completely new life-style and new phenomenon from the West. A sweet young girl of a reporter from the Lianhe Zaobao, when reporting the Prime Minister's speech, explained to her readers in this way: Single-parenthood means that if an unmarried woman wishes to remain single she can do so, and in order to avoid the loneliness of old age she can adopt other people's child. I was laughing my head off with such naive and innocent interpretation. But I do not blame her. The trouble with the Chinese language is that it has no neuter noun as "parent". It has to join the characters "fu" meaning father and the character "mu" meaning mother to form the word "fu-mu" and use it to equate the English word "parent". Therefore, they have trouble in translating the word parenthood with only one sex, and it becomes rather difficult for them to conceive and understand parenthood with only a father or a mother. However, single-parenthood in the Western context means divorced men or women keeping and bringing up their children separately. It also means unmarried mothers, who cannot decide who their babies' fathers are, bringing up their babies instead of aborting them. It also means unmarried women conceived babies from men who are other women's husbands and, instead of aborting their babies, they bring them up under their maiden name. But these are not the kind of single-parenthood I have in mind. To promote them would mean encouraging promiscuity and extra-marital affairs among the people and I am against it. I hope the TV will show it tonight because my wife will be watching it. However, extra-marital affairs are nothing new in oriental societies and even Confucius himself, someone whose behaviour we are emulating and whose teachings we are spreading, had been found to be involved in one. At some appropriate occasion I will produce documentary evidence and quotations found in ancient Chinese books to prove it. But right now, let us return to our procreation budget.

My idea of single-parenthood is different. There now exists techniques which can cause the woman to conceive without so much as a touch from a man. Do you know what is it called? It is called artificial insemination. It is very safe, very convenient and can be easily administered. Furthermore, it can solve problems for women who have complexes. For instance, there are women who are born man-haters and there are also those who harbour great contempt for men, and this technique will enable them to have babies without getting near a man. To this end, I suggest that a sperm bank be set up by the Ministry of Health and unmarried women of the category mentioned above should be encouraged to apply for the service, free of charge, of course, and officials should not ask too many questions. To make the scheme a success, the Ministry of Finance should consider giving another incentive, say, $10,000, to those women who are bold enough to take that first step. And to ensure that we should have good quality and brilliant babies, we should insist that only males who are PhDs or First-Class Honours graduates may be invited to be donors.

Our immediate problem with this scheme is that the Vatican may view us with disgust and despair but we are in unusual times and so unusual measures have to be adopted. Anyway, we have been doing a lot of things. For instance, abortion, which they view with contempt. So one more misdeed will not take us any further away from heaven. However, our long-term problem will be how to legitimize these babies. First of all, the SDU should be expanded to cater for counselling of parents in this category. Then we should help by changing or amending some of the laws. For instance, the Registrar of Births and Deaths should allow the baby to be registered in the mother's family name and not insist that the column giving the father's particulars be filled. Then the Women's Charter may have to be reviewed. But since we do not have so much time, may I be allowed to stop here.

Dr Aline K. Wong (Changkat): Mr Deputy Speaker, Sir, may I be allowed to join in the debate on the procreation incentives in the Budget statement. I would not have time, I think, to cover the other aspects of the Budget statement.

The population debate has been going on for more than three years now. It is very difficult for me to understand why, after so much data have been released, statistics analysed, talks and discussions held, some Members of this House still do not grasp the essence of the matter. Population problem is a very serious matter. We appreciate the jokes. We appreciate the humour. But I believe that we really should come down to substantive arguments and criticisms, if any, of the measures proposed by the Government before we end this debate on the Budget statement.

As a social scientist, I am satisfied that the Government has taken very serious consideration of the whole question and has utilized the best manpower we have - demographers and social scientists - in analysing the causes and proposing the right measures. May I congratulate the Government for having come up with a series of incentives which indeed address the balance that we have to maintain between the requirements for population quantity and quality. In the past, the issue of quantity versus quality understandably has upset some people because the undertones of such requirements touch on issues of equality and basic rights of individuals to decide on matters as personal as child-bearing.

However, we should note that governments around the world have used policy intervention in population matters. Witness their selective immigration policies, the family planning policies as well as their policies on abortion. For us, to have such a small population that we have now and will have, considerations for quality are equally important as considerations for quantity. We do not live in an ideal world and if we are convinced that the new population policy is good for the long-term future of the country, I believe a trade-off has to be made. Something has to be sacrificed. So it is not a matter of whether or not we should have the new population measures but a matter of how best to devise a set of measures that are effective while minimizing some of the undesirable consequences such as an accentuation of social inequality or, more importantly, the degree of perceived inequality. It is here that I feel that the present set of incentives has come short on the question of equity.

The new set of tax incentives, Sir, gives a big advantage to the higher income groups. The $20,000 special tax rebate together with a special rebate of 15% on the wife's earned income, on top of the enhanced child relief which can by itself run up to $10,000 already in terms of offsetting, all these will result in some families paying no income tax for five years at all. Does this sound right? The highest income groups, perhaps those earning $6,000 household income per month, will pay some tax but these families will be able to absorb the entire tax rebate within five years. In other words, they stand to gain the most. Even if we accept that the higher income groups are better able to provide a conducive home environment and such like to bring up children and therefore they should be encouraged to have more, I feel such kind of disparity in treatment is going to create social resentment. How could the general population accept this? How could this measure go down well with them?

With effect from 1st January 1988, delivery and hospital expenses for the fourth child can be offset against the parent's earned income for tax purposes up to a maximum of $3,000. What we are doing is not only to allow some people to pay no income tax at all for five years but also to have the babies in Class A wards, in luxury. Surely, the Finance Minister could have thought about this and could have limited the amount of offsetting only up to what the average Singaporean would be paying for hospital and delivery charges, ie, in the Class B1 and Class B2 wards only. I think this would go down much better with the population.

In talking about the overall effectiveness of these measures, even if the higher income families are now prompted to have a third child, the number of additional births would not be large enough to make a difference to the population size. Whereas if you compare the small size of this high income group with the large number of families where women have three 'O' levels and above, you would find this latter group would make more difference to the population size. For this large group, economic considerations in the past were important considerations for not having more children. Thus, the tax incentives are more likely to help them to decide on having a third child. So the number of additional births resulting from such decisions is likely to be much larger because of the larger base to be begin with.

Sir, we must be concerned with the question of numbers. It is not only because last year happened to be the year of the Tiger that the number of births among certain population groups has gone down. Since 1982 we have been short of the number of live births required to place the population back to replacement level by 14,000 to 15,000. The trend has been well established and has been identified. Numbers matter. As for quality, I am of the opinion that parents with a relatively good level of education, such as those who have already got three 'O' levels and above, also place great importance on the children's education. This, on both counts of quantity and quality, the effectiveness of the tax incentives is more likely to be felt among this group and not among those in the higher income groups.

If I could provoke the Finance Minister a little, I'd like to ask him how many years is he prepared to wait for the special tax rebate to take effect, and if after that number of years the tax rebate is not seen to be effective in raising the number of additional births among the higher income groups, will he consider withdrawing it so that there will be a better balance in terms of fairness?

There is another point. Why is it that 1st January 1987 is set as the beginning date, whereas for every other financial measure, it is always on the day that the Budget is announced that things take effect. Could the Finance Minister please explain the rationale for backdating the incentives to take effect from 1st January of this year?

The effectiveness of the population measures must be viewed within the entire package of incentives and not just the fiscal measures. If the Finance Minister will bear with me and since I see the Acting Minister for Health is also here, I would like to go over the other incentives. Let me first state that in the past, the primary school priority registration scheme was the most important deterrent to higher order births because of the value our population places on the education of children. By removing the disincentive against the third child in the priority registration of primary school children, we are doing the right thing. In other words, it will be effective on parents who place so much emphasis on the education of their children.

By comparison, giving housing priority to families with three children who are now living in 3-room flats and who may require additional space, this incentive may not be as effective as we would expect it to be. Here, we should also sound a word of caution. The families, even given this incentive, should not rush into making a move. They should carefully consider the possibility of a drop in family income due to retrenchment. The recession should have taught us a lesson. By giving them housing priority, the Government cannot guarantee their continuing affordability. And still, there is the questionable assumption that living space is an important consideration for family size decisions. If it is, then how does one explain the fact that that those who live in 5-room flats already do not have a bigger family size than the rest? And if this incentive is actually meant to also work as a disincentive to discourage those who live in the 1- and 2-room flats from having many children, then why did not space constraint work on these families to limit family size in the past? So it is a questionable assumption to what extent is living space an effective influence on family size?

Let me come quickly to the major thrust of the non-fiscal measures - the provisions to enable working women to have more children. For many years, women have been asking for more subsidized child-care centres, part-time and flexi-time work, extended no-pay leave for child care and full-pay unrecorded leave for taking care of sick children. They have repeatedly called for these provisions because, without them, it is well-nigh impossible to hold a job, do well in it and at the same time pay enough attention to one or two children, let alone have more. Thus, the full-scale response of the Government to their demands and requests is most welcome news to women indeed. We note, however, that quite a lot depends on the cooperation of the employers in matters such as providing part-time work, flexi-time arrangements, granting of extended no-pay leave, etc.

While it is only fair that the employers should indeed have the right to decide based on exigencies of service, the question is how can women be sure that employers would indeed take a sympathetic view in spite of the assurances given by the Acting Minister for Health and various other Ministers. Also, will the private sector really follow the example set by the Civil Service? Already some women are becoming apprehensive that there may be a backlash effect in terms of a reduction in the demand for female employees, particularly in the private sector. So I believe, Sir, that the Government must demonstrate its will to implement these schemes with success, to demonstrate its sincerity in helping women to combine work and having a family and, by example, encourage the private sector to follow because if it does not, then the private sector would stand to lose in terms of not finding enough women to work in the companies and firms.

Finally, even though compulsory counselling is introduced for abortees, the question of abortion is not yet resolved. But each year we know there are many thousands of babies lost through abortion. I think, Sir, this question of abortion must be faced, the sooner the better.

A final final word on matchmaking. All of us must remember that as much as half of the population problem arises out of the high proportion of unmarried persons in the population. Ever since the matchmaking activities have been extended to those with "0" level qualifications, much social stigma attached to those activities has already been removed. But matchmaking is only part of the solution. The larger solution really lies in changing people's attitudes towards marital choice and the marriage relationship itself. It is most heartening to hear from the Acting Minister for Health himself that the right emphasis must be put back on people's motivations for having children. People must value children for themselves. Children should be seen as bringing warmth and happiness to the family rather than as a product of the parents' calculation of financial or economic considerations.

If I may react very quickly to his announcement that he would urge his Ministry officials to find every way, every means to help women who wish to reverse the process of ligation. I would like to express my personal opinion on this matter but as a very quick and unprepared response. We must not forget that women who ligated in the past did so out of their own free will. They had taken into consideration their personal situations, the Government's encouragement, and made a decision. There are those among them who would have already benefited from priority registration for primary school children. Some others had already benefited from the waiver of accouchement fees. So in helping them to have a reverse ligation, I should hope the Minister would only stop at providing hospital facilities such as hospital beds for them to have this kind of operation. I would not like to see more financial incentives because you would be encouraging people to take double advantage of old and new policies.

The Minister for Labour (Mr Lee Yock Suan): Mr Deputy Speaker, Sir, I would like to take this opportunity to clarify the proposed extension of the levy scheme to all foreign work permit holders progressively from 1st April this year.

Several Members have spoken on this issue. The rationale for the levy scheme is to narrow the cost differential between local and foreign workers. Foreign workers come from countries where wage levels are lower than ours. They are generally prepared to work for lower wages than Singaporeans. If foreign workers are freely admitted, the tendency would be for employers to rely increasingly on foreign workers who are prepared to accept lower pay. To reduce dependence on foreign workers, the Government has to impose a levy. This has already been done for NTS (or non-traditional source workers) and block-work-permit construction workers from Malaysia. The Government has decided to extend the levy scheme progressively to all work permit holders. Therefore, this is not a new scheme but an extension of an existing scheme. Eventually, there will be two schemes of employment in Singapore. There will be the CPF scheme for Singaporeans and permanent residents and, secondly, there will be the levy scheme for all work permit holders.

Most workers prefer a higher take-home pay. The CPF scheme is a compulsory savings scheme to ensure that Singaporeans have sufficient savings to purchase homes, pay for hospitalization needs and still have sufficient savings for old age. The CPF scheme is therefore not relevant to foreign workers who are here only for a few years and would not be making their home here. They would prefer higher take-home pay from which they can save up for their own needs.

Under the levy scheme, employers will have to gauge how much take-home pay they need to offer to new foreign workers to attract them to work in Singapore. The workers, on their part, will be fully aware that the CPF scheme no longer applies to them. Thus the new level of take-home pay will be determined by market forces.

Some employers have compared the $140 levy to the employer's CPF and concluded that the levy is too high. This assumes that a new foreign worker will only work in Singapore if he gets the same salary as a Singaporean worker without having to contribute 25% of his salary to CPF. If so, his take-home pay will be much higher than that of a Singaporean worker. We should avoid this tendency to link the levy with CPF. The levy scheme and the CPF scheme are entirely separate pay regimes. Under the levy scheme, market forces will determine the new level of take-home pay for new foreign workers.

The fixed levy of $140 per month favours the employment of semi-skilled and skilled foreign workers. Thus, if a foreign worker requires a take-home pay of, say, $400 per month in order to work in Singapore, the cost to the employer under the levy scheme would be $400 plus $140, making $540 per month. On the other hand, if we continue with the CPF scheme, the cost would have been $400 plus $185 CPF, both employee's and employer's, making a total of $585 per month. So the key question is: what is the take-home pay that is necessary to attract this particular worker to work in Singapore? For those who are semi-skilled or skilled, the levy scheme, in fact, reduces the wage cost for employers.

To facilitate the transition to the levy scheme and to minimize the impact on employers and existing foreign workers, the levy scheme will only apply to new Malaysian workers recruited after 1st April this year. Existing Malaysian workers will remain on CPF so long as they stay with their present employers. Some employers are apprehensive that their Malaysian workers will job-hop to enjoy higher take-home pay with their new employers. I am prepared to consider various measures to discourage such job-hopping. For example, one possibility is to allow them the option to convert to the levy scheme even whilst they remain with their present employers.

The levy is basically a pricing mechanism to moderate the inflow of foreign workers. It is like an import duty to discourage over-reliance on unskilled foreign workers. The Government will monitor the labour situation and adjust the levy if necessary. Foreign workers can only supplement our own pool of Singaporean workers who constitute the bulk of our workforce. Wage levels should therefore be determined primarily by our own internal situation and not by the marginal cost of employing foreign workers. The Government will continue to allow employers ready access to foreigh workers provided they do not become overly dependent on them. We must continue with our wage restraint policy in order to regain our international competitiveness.

This new policy will not result in a switch to foreign workers from non-traditional sources. I think the Member for Whampoa is concerned about this point. NTS workers are only allowed in the construction and shipyard industries and as domestic servants. Outside these three approved sectors, there are hardly any NTS workers left in the economy.

Our economic growth must depend on the upgrading and restructuring of our economy and not on an ever-increasing inflow of foreign workers. Our total workforce is roughly 1 million workers. If we depend entirely on more foreign workers to achieve economic growth, each 1% increase in GDP will require 10,000 more foreign workers. This clearly cannot be sustained indefinitely if we are to avoid the social, economic and other problems which a large foreign workforce will entail.

Mr Deputy Speaker, Sir, in view of the time constraint, I will deal with issues concerning CPF in the Committee of Supply. 4.42 pm

The Minister for Finance (Dr Richard Hu Tsu Tau): Mr Deputy Speaker, Sir, over the two days allotted for the Budget debate, Members of the House have raised so many questions that I hope I can do justice to all of them in the time allotted.

Sir, I propose to sum up the issues raised along the following areas: issues on the Budget and the public sector, issues on the corporate income tax matters, consumption tax matters, economic issues, other economic issues, issues concerned with the statutory boards, and finally, privatization. I will not touch on procreation incentives as this has already been dealt with at length by the Acting Minister for Health, and the Minister for Labour has just touched on the levy issue. But before doing so, I would like to make some general observations about the Budget.

The Budget is the centrepiece of Government's fiscal policy and is designed to support growth in the economy. Since 1985 and 1986 Government has injected some $2.2 billion into the economy through tax cuts and reductions in Government charges. And the amount will be further augmented when fiscal year 1987 corporate tax cuts come into effect. Therefore, there is no no question whatsoever that both the 1986 and 1987 budgets are stimulatory.

The Members for Whampoa and Jalan Kayu have expressed concern that the 1986 Budget may have, in fact, been contractionary because the public sector accounts registered an overall surplus of $1.4 billion in 1986 and that a surplus of this magnitude in a recessionary year would exacerbate the recession and slowdown the recovery process. The Member for Whampoa was also concerned that such a surplus would lead to a strengthening of the Singapore dollar, thus adversely affecting the competitiveness of our exports. I would like to reassure the hon. Members that their concerns are totally unfounded. A close study of the Budget document will show that the overall surplus of $1.4 billion arose solely from a substantial rise in income and capital gains realized from overseas investments. Foreign equity and bond markets were exceptionally buoyant in 1986 and we were able to realize substantial capital gains from certain investments made in the past. Such profits from overseas investments amounted to some $2.2 billion in 1986. Without this extraordinary income, the public sector would have, in fact, registered a deficit of $800 million in 1986. Looked at in another way, if investment income and capital receipts had not increased substantially in 1986, the operating account of Government would have shown a deficit of $2 billion, a deterioration of $1.4 billion over the $600 million deficit in 1985.

I should also point out that the profit stream from overseas is entirely in foreign currencies and has therefore no effect on the Singapore dollar exchange rate. In fact, as pointed out in the Economic Survey, the Singapore dollar eased against major OECD currencies in 1986 as a direct result of our weakened economy, and this has helped to improve our export competitiveness. I would also like to stress that capital gains from investments are generally unpredictable and cannot be relied on as a permanent source of Government finance. It will not be prudent to reduce tax rates on account of these one-off increases in revenue. Tax revenues have sharply declined in recent years and with the lowering of the corporate tax rate with effect from FY 87, the tax revenues will further deteriorate.

The Member for Whampoa has also raised the issue of excessive savings. As I see it, there is no such thing as excessive savings. When savings are in surplus of what our own economy can receive in investments, either because we have been saturated by foreign investments or because our people have not yet got the know-how to bring in technology which is profitable and can use the investments, then the investments should go abroad. Like the Swiss, we must build up as much investments yielding dividends abroad as we can to augment our GDP and increase our GNP. This is exactly what the Swiss are doing, the Americans and the British have done in the past, and the Japanese are also doing right at this moment.

The Member for Thomson expressed concern over the projected deficit of $3.75 billion for FY 87. He pointed out that this represented a sizable percentage of our total reserves. The large deficit of $3.75 billion arises because it takes into account net lending of $2.67 billion to statutory boards and public enterprises. These loans will be repaid with interest in due course and will not therefore affect Government's long-term reserve position. Excluding net lending, the overall budget deficit is a less alarming figure of $1.08 billion which will be financed from local borrowings.

The Member for Jalan Kayu also commented on the poor fiscal marksmanship of the Finance Ministry. A projected deficit of $3.2 billion for FY 86 might now turn out to be a small surplus of $500 million or so. I am afraid that these two figures cannot, in fact, be directly compared as they were prepared on different bases altogether. The original estimate of $3.2 billion deficit was based on traditional Government budget classification conventions and excluded certain revenue items. In response to requests by Members for a clearer and more comprehensive presentation of the budget, my Ministry has adopted the budget classification conventions recommended by the International Monetary Fund in preparing the FY 87 budget. If due allowance is given to the differences in classification conventions and the deferment to 1987 of the interest burden resulting from the conversion of CPF advance deposits to domestic loans, then it will be seen that the original budget estimates are fairly close to the mark.

The size of the public sector has also excited interest. Its size and impact on Government's operations have been commented on by several Members. I have distributed to Members earlier a Table giving comparative data on public sector expenditure to GDP ratios for Singapore, OECD, other ASEAN countries and the NICs. The data, however, have to be interpreted with caution. The range of functions and services provided by the public sector varies from country to country. For example, very few countries have a public housing programme of the same magnitude as in Singapore. The data show the trends up to 1984 and unfortunately more recent comparative data are not available. But I do not think the pattern has changed significantly since 1984. You will see that our total public sector expenditure as a proportion of GDP was about 45% in 1984 and was comparable to the average for OECD countries but much higher than that in the NICs. However, if HDB's expenditures are excluded, the ratio for Singapore would only be 25%, or lower than the 27% in the case of Taiwan.

The recurrent expenditure to GDP ratios are even more revealing. Excluding HDB's recurrent outlays, the recurrent expenditure to GDP ratio for Singapore in 1984 was only about 15% as compared to 18% for Taiwan. These figures suggest that our public sector is not overly large, given the functions and services that it has to provide.

By the end of this decade, the bulk of our infrastructural development would have been completed. Public sector development outlays will then be much lower. Measures to economize on public sector manpower usage, including privatization and contracting out of activities, would have been implemented. These would help reduce the size of the public sector. The private sector by then would be the dominant source of economic growth.

I will now touch on corporate income tax issues. The Member for Whampoa has asked why we grew by only 1.9% last year whereas the other NICs grew at a faster pace. The implication I assume is that perhaps our corporate taxes are still too high in comparison with the other NICs. I would like to assure the hon. Member that our corporate tax rate is competitive for the following reasons. Singapore employs a full imputation tax system where corporate profits are taxed only once, either at the company level on distribution or at shareholders' hands. A credit is given if the company tax withheld exceeds the shareholder's rate. In comparison, countries like Taiwan and South Korea have a two-tier system where corporate profits are taxed twice, first, at the company level and subsequently upon distribution by the individual shareholder with no offsetting credits. In a two-tier or separate entity tax system, the tax load on the economy is always substantially higher than in the imputation system.

Secondly, we in Singapore allow generous depreciation allowances of between one and three years which help to reduce the companies' taxable profits. Additionally, investment allowances may also be granted on a selective basis. In comparison, most other countries including Taiwan and South Korea depreciate their capital equipment over much longer periods.

We have also various incentive schemes which make certain sectors very competitive tax-wise. For example, the 10-year pioneer exemption for manufacturing and service industries, tax exemption for shipping profits and the 10% ACU tax for banks and financial institutions. In these areas, Singapore offers tax advantages that rival or better than our competitors including Hong Kong. Singapore also has a wide network of 25 double taxation conventions which confer certain in-built tax advantages to promote trade, investment and technology flows. Taiwan, for example, has far fewer treaties. Hong Kong has none.

I believe that our present income tax structure is therefore sufficiently competitive. But I would like to assure Members that the situation will be continually monitored. I should point out that a low tax rate in itself should not be the overriding concern. It is equally if not more important to ensure that other elements of business costs are kept at competitive levels. And this we will do.

The Member for Jalan Kayu has asked for statistics with respect to tax on interest earnings which are accrued from deposits with banks in Singapore. Based on statistics for the years of assessment 1984 to 1986, between $30 million and $40 million worth of tax were collected annually on interest income of Singapore resident individuals. The Member has also suggested exempting from income tax all interest earnings on bank deposits as this would encourage the repatriation of funds currently held abroad. However, I would consider that it would not be equitable to exempt interest income without at the same time exempting other forms of income such as wages, rentals, dividends and royalties from tax. Furthermore, the tax collection on interest income is significant. If interest income were to be exempted from tax, a shortfall in revenue would have to be made up through higher taxes on other forms of income or on consumption.

Members have also raised some questions on the use of CPF funds and the tax planning which this provides. I will not touch on this today but I suggest it should be taken together with other questions on CPF during the Committee of Supply.

Consumption tax issues. Concern has been expressed by Members of the House on the need to introduce a consumption based tax. Amongst other things, the negative impact of such a tax system on domestic consumption and the tourist industry has been highlighted. As I have mentioned earlier in my budget statement, a broad-based consumption tax will only be introduced if the revenue shortfall is substantial and a permanent deficit is inevitable. As a start, the Government has decided to adopt an item-by-item approach to meet any temporary shortfalls in revenue which could not be funded by other more traditional methods. Every alternative revenue source will be considered. The Member for Whampoa has suggested utilizing the surpluses of statutory boards to fund any shortfall. This has been done and will continue to do so. But we must be careful not to overdo it. I am well aware that consumption taxes are unpopular. They are seen to be unwieldy, regressive and bad for tourism. If, however, the need should ever rise to introduce a broad based consumption tax, then every effort will be made to ensure that its less desirable side-effects are mitigated.

The Member for Queenstown has made an eloquent condemnation of consumption tax. But he misunderstands the issues. I have said that consumption tax will only have to be introduced at a time when we are compelled by international competition to reduce direct taxes to the point where compensatory consumption taxes will have to be introduced. If we were forced to the position where indirect taxes had to be introduced, perhaps the Member for Queenstown could suggest what other sources of tax might be available if he dislikes consumption tax so much. In the Singapore context where we do not have natural resource of any form, we cannot turn on the tap to produce oil or gas. Every cent or dollar of tax has to come from you or your neighbour's pocket. We have no alternative.

I now touch on other economic issues. Members have provided valuable suggestions on ways to help the small and medium industries. I would think that the small and medium industries in Singapore require assistance from Government mainly in the area of access to capital. The Small Industries Finance Scheme (SIFS) was first introduced in 1976 and has helped to provide low-cost financing to small local enterprises. There are now 20 financial institutions participating in the SIFS. In addition, the Small Enterprise Bureau also administers the interest grant for mechanisation scheme which provides grants to help defray interest cost incurred in the purchase of new equipment, machinery and the liberalized investment allowance scheme which grants 30% investment allowances for the purchase of productive equipment.

Members of the House will no doubt note that the formation of Sesdaq will also help facilitate access to equity capital for small companies.

I would also agree with the Member for Chong Boon's proposal that there should be a liaison agency to help local businessmen, especially the small and medium-sized local companies. The Small Enterprise Bureau (SEB) has, in fact, been established as a one-stop agency to assist local small and medium-sized enterprises (SME). The SEB is conscious of the need to avoid duplication of incentives. The various incentives available for local SMEs are targetted at meeting the specific needs of local SMEs. I would therefore want to assure the Member for Chong Boon that all the separate schemes administered by the various agencies are part of an integrated framework coordinated by the SEB to assist the SMEs.

The Member for Chong Boon has also asked for the present status of the Economic Committee's recommendations pertaining to the 10% tax concession for third country trade and the employee share option scheme. Discussions were held between my Ministry, the Ministry of Trade and Industry and the relevant agencies to consider the Economic Committee's recommendations on the 10% tax concession for third country trade. A number of problems or objections were raised and there was a consensus of opinion that the incentive in its original form may not be particularly effective nor economically desirable. The two Ministries have therefore decided that instead of the proposed 10% tax concession the Trade Development Board through the Ministry of Trade and Industry will consider the possibility of granting pioneer status to companies whose activities relate to international trade. Further details will be elaborated once the finer points have been worked out. The National Productivity Board has recently completed its study of companies stock option plans in Singapore. A copy of its report was extended to my Ministry for further study. A decision on the feasibility of providing tax concessions for such a scheme would be made shortly.

Finally, I note that the Member for Jalan Kayu has blamed the lack of success of many local businesses on excessive Government rules and regulations. Whilst a reduction in Government rules and regulations is undoubtedly desirable and we will continue to reduce them, I find that the Member has found a novel and new approach to explain away business failures, in which he blames it entirely on Government rather than on the lack of enterprise or poor business judgment of the businessmen. I do not think this is either realistic or fair.

Mr Deputy Speaker, Sir, I will now touch on issues concerning statutory boards. Some Members have commented on the surpluses of statutory boards and the Government's decision to transfer part of these surpluses to the Consolidated Fund. While welcoming the decision Members have also expressed concern that it might result in statutory boards not having sufficient funds for their development programmes and needing to raise charges to finance such development. I would like to reassure Members that statutory boards will be allowed to retain part of their accumulated surpluses to fund development programmes. Only surpluses in excess of long term development requirements will be channelled back to Government. Statutory boards will not therefore need to raise charges to compensate for the transfer of surplus funds to Government. In fact, statutory boards will make every attempt to lower their charges. I am pleased to note that the Member for Punggol has commended statutory boards providing a high level of service to the public for being very efficiently run. I share his sentiments. The fact that the major statutory boards have been able to meet their objectives without Government subsidies is clear evidence that their Boards have managed their finances prudently. It should, however, be stressed that not all statutory boards run up surpluses. The HDB as well as the educational institutions and other statutory boards have received and will continue to receive financial assistance from the Government.

Mr Deputy Speaker, Sir, the Government's budgetting and accounting system has also come under considerable scrutiny from Members. The Members for Boon Lay and Kaki Bukit have remarked on the extent of parliamentary scrutiny of statutory board's budgets. In particular, they have expressed the view that Parliament would be in a better position to oversee the management of public sector finances if Government's budget documents included information on the revenues and expenditures of major statutory boards. In fact, the current Budget document does provide these details in respect of Government-funded statutory boards. Data on self-funded statutory boards are, however, not included. The Estimates Committee has recently recommended that the Budget document presented to Parliament should contain budgetary data of all statutory boards. My Ministry is presently studying this recommendation. Some of the problems which have surfaced are that the statutory boards keep their accounts on a calendar year basis like many companies while Government accounts are on a financial year basis. Moreover, the majority of statutory boards prepare their budgets and maintain their accounts on an accrual basis while Government's budget is on a cash basis. These differences make it difficult to consolidate Government accounts with those of the statutory boards. Notwithstanding this, the Budget document will be continually improved upon. As I have mentioned earlier, the basis for computation of the Government budget balance has been modified in the 1987 Budget document. The revised basis is in line with International Monetary Fund classification conventions which provide a clearer picture of the bottom line impact of Government expenditure and revenue transactions. A number of questions have also been raised regarding particular budget allocations and particular policies of Ministries. These, I think, would be more appropriately dealt with in the forthcoming debate in the Committee of Supply.

This afternoon the Member for Boon Lay has suggested that there is presently little control over the spending and the borrowing powers of statutory boards. I would like to assure him that this is not true - that the boards are now under the supervision of their respective Ministers and of their Boards and they are ultimately responsible to the Cabinet.

Privatization of Government companies. Members have raised issues concerned with Government's privatization policies. Before responding to the specific questions raised, I would like to make a general statement on Government's response to the Report of the Public Sector Divestment Committee which Members would have received.

The PSDC was commissioned in January 1986 to undertake a comprehensive review of Government-linked companies in Singapore and to make recommendations for the systematic and orderly reduction of Government in non-strategic businesses. The PSDC operated within very broad terms of reference and its recommendations therefore reflect the private views of the members of the Committee and are not necessarily those of Government. However, the PSDC Report is accepted in principle by Government as its thrust is in line with Government's stated intention of reducing its role in business. The detailed recommendations are being studied and specific decisions on the next steps in the divestment process would be announced as soon as possible.

The timing, pace and order of divestment will be determined by the specific circumstances of each company. The preferred route will be the widest possible participation to listing in the Stock Exchange. Needless to say, public participation will only be invited from companies which are financially sound.

Turning now to the specific questions raised. The Member for Chong Boon has expressed unhappiness over the manner in which Government shareholdings in UIC and in the National Iron (NISM) were sold. I would like to point out that it is unlikely that whatever method is chosen to dispose of shares will satisfy everyone. As custodian of the peoples' assets, Government's primary consideration must be to secure the best possible price for the sale of the shareholdings and also to ensure that the shares are sold to companies which can provide strong management. In this connection, I do not agree with the contention of the Members for Rochore and Chong Boon that the sale of Government shareholdings to the Development Bank of Singapore is not privatization at all. Privatization can take place in stages and the sale of assets by the 100% Government-owned Temasek Holdings to DBS Bank which is more than 50% owned by the public represents a substantial privatization step.

The Member for Rochore has also criticized the Government for excessive interference in the stock market. First, by suspending the Stock Exchange of Singapore for three days in December 1985 which, by implication, then led to the collapse of the stock market and thereafter, in attempting to revive the stock market, by allowing the use of CPF funds for share purchases. Both allegations are not only factually incorrect but are extremely naive in their assumptions.

The facts are, first, the SES was suspended for three days between 2nd and 4th December 1985 by the SES Committee and not by the MAS. Although the MAS is the supervisory authority for financial institutions, including the SES, it does not run the SES and did not order the suspen- sion. This important fact is continuously and, I believe, deliberately misunderstood by critics of the MAS. The SES Committee decided to suspend the Exchange and sought MAS's concurrence primarily because many of its broking members were in financial difficulties when the forward contract bubble burst after the collapse of Pan-Electric in November 1985. The three-day suspension was needed to agree financing terms with their bankers. In retrospect, the SES decision was a correct one as orderly refinancing was achieved and the SES managed to turn around in less than one year.

Secondly, the release of CPF funds for share purchases on 2nd May 1986 had very little, if any, effect on the recovery of the stock market. In the 10 months, between May 1986 when the liberalization of CPF funds was allowed and February 1987, a total of just under $230 million of CPF funds were used for share purchases. This is a miniscule amount compared to the sums which are flooded into the stock market since the ST industrial index bottomed at 563 on 28th April 1986. The index stands today at around 1,040-odd and this represents a $38 billion increase in market capitalization from the bottom which took place on 28th April 1986. Government takes no credit for this increase.

I agree with the Member for Rochore, however, that the stock market has reached dizzy heights and investors should therefore exercise caution. But the strong recovery can probably be attributed to a return of investors confidence coupled with low interest rates, high liquidity and a shortage of investment alternatives and a strong dose of euphoria thrown in.

Mr Deputy Speaker, Sir, I cannot let pass the extraordinary attack that the Member for Potong Pasir has made on two Government policies. I shall not touch on the population issue as this has been dealt with by the Acting Minister for Health. But I feel obliged to express amazement at his attack on the wage increase policy instituted by Government in 1979. For someone who professes to champion the workers, I find his criticism uncomprehensible. In 1979, the high wage policy was introduced with two objectives in mind. Firstly, it was felt that after nearly 20 years of double-digit growth during much of which wage increases had been kept low in order to promote growth and jobs, the economy was sufficiently strong in 1979 to absorb significant wage increases which would allow workers to enjoy some of the accumulated fruits of their labour. The high wage policy was to be phased over three years from 1979, 1980 and 1981 through mandated NWC recommendations.

Secondly, it was seen that Singapore with a small population base could not possibly compete with its neighbours and emerging countries, such as China, for industries which required low-cost labour. Singapore had to upgrade its industries or perish. It was hoped that rising wages coupled with fiscal incentives would accelerate the process of industrial upgrading. I have no doubt that the upgrading process was necessary and had borne fruit. But what could not be foreseen was a strong export demand in the early eighties which led to labour demand and wage increases well beyond NWC recommendations and ultimately brought about our loss of export competitiveness.

Let us also not forget that the severity of the 1985 recession was also a result of the slump in the shipyard, oil-rig, shipping, oil-refining business, and a major decline in our trade with Malaysia and Indonesia due to decline in regional commodity prices and finally due to the collapse of the construction market.

To sum up, I believe that the Government would not have had the moral authority to ask our workers to accept wage restraint last year and again this year and our workers and the union leaders would not have responded as they did if Government had not had the courage to encourage substantial wage rises at the time when the economy was growing strongly as it did in 1979.

Finally, Mr Deputy Speaker, Sir, I would say that few would dispute that we are in the throes of a recovery. However, we must not be complacent. Our recovery is still patchy and lopsided and much depends on the world economic outlook. In this Budget I have maintained the same broad policy principles and guidelines which have been adopted in previous budgets. Cost-competitiveness, a trim government and the private sector as an engine of growth are the Government's basic philosophy. In addition, we have taken steps to solve the long-term problem and that of a declining birth rate. I am confident that if we all work together, we should be able to ride the tide of recession and emerge a stronger and trimmer nation.

As a parting note, I would say that the Government has done its part. It now leaves me to ask the private sector to avail itself of the opportunities which have been created to do their part. [Applause].

Question put, and agreed to.

Resolved,

That Parliament approves the financial policy of the Government for the financial year 1st April, 1987 to 31st March, 1988.