ANNUAL BUDGET STATEMENT

[Mr Speaker in the Chair]

Debate resumed.

Mr Goh Chee Wee (Boon Lay): ( In Mandarin): Mr Speaker, Sir, one of the themes of this year's budget statement is implementation of the social policy through taxation policy, to encourage people to procreate and to look after the aged parents and the handicapped dependants.

Under the new taxation policy, Government has decided to raise the tax relief for wives and children and rebates for aged parents and the handicapped dependants have also increased somewhat. All these new measures are a reflection that the Government has attached importance to the family unit as well as to reducing the burden of the people. I welcome the Government's move.

Another measure that is worth mentioning is the incentive policy to encourage procreation. In 1987 the Government announced that a mother who gave birth to the third child will be entitled to a $20,000 special tax rebate. And in order to further encourage procreation the Government has extended this incentive to the fourth child. In principle the Government hopes that such a fiscal policy will be able to encourage people to have more babies. However, I feel that the tax incentive for the third and the fourth child would not be sufficient and effectively encourage people to have more children. As a matter of fact, very few people would like to have children just for the sake of money, especially to have the third and the fourth child. To have children and the trouble of bringing up children cannot be measured by money alone. In order to encourage people to have babies, we have to start from education and publicity, and instill among the young people the correct concept of marriage and having babies so that they will understand the benefits of starting a family early. The problem Singapore society faces is not whether the mother should have the third or fourth children. The crux of the problem is that there are many single men and women who are not setting up family units. They do not get married. Another trend which is a cause of concern is late marriage, that is to say, more and more people get married late, especially those highly educated men and women, particularly the women, more stay single, and they get married late. We need only to look at the statistics to understand the problem. In 1977 the average marriage age for man was 27 1/2 years. In 1987 it had risen to 29 years. For women, the average age was 24 in 1977 and it reached 26 years old in 1987. For women who have their first baby the average age was also rising with years. Now women get their baby between 25 and 29 years old. Of course, the various races vary in this matter. For example, most Chinese women have their first baby between 25 and 29 years old. Whereas the Malay women have their first baby between 20 and 24 years old. However, the general trend is late marriage and late births. I feel that if we want to make use of taxation to encourage people to have babies, then the Government should formulate a comprehensive across-the-board policy and and not go in a piecemeal approach. The Government should first encourage people to get married early, then to have babies early, followed by more babies. We should go about this step by step and not putting the cart before the horse. Just ask the question, without getting married, how are they to have the third and fourth child? Therefore, I would like to make a recommendation to the Minister for Finance and the Minister for Health that a complete review should be made on the present incentive scheme and formulate a comprehensive and drastic policy to encourage people to get married early and have babies early through tax incentives and other methods. For example, they can get tax rebates if they get married within a certain age range.

Just now, I have said that merely using the monetary incentives is not the most effective way to encourage more births. Under the present circumstances, the Government hopes to use all kinds of methods to encourage people to have babies. However, if they want to use the taxation policy then the policy should be thorough in order to be effective.

Mr Speaker, Sir, another issue I would like to raise is the suggestion of major salary revision for civil servants. The Minister for Finance announced that the Government has accepted the recommendations made by the Civil Service Careers and Scholarships Committee and that it is prepared to launch a major revision of civil servants' salaries in order to attract talents to the civil service. Without doubt, if the Government wants to carry out its national policies effectively, then it should have a core of talented and dedicated civil servants. On the principle of market supply and demand, to adjust salary accordingly is only right. If the Government wants to attract talents into the civil service, so does the private sector. Unless the Government also works on the principle of supply and demand and revise the salaries accordingly it will not be able to attract talents and capable people into public service and those who are serving at present may also leave their posts in time.

However, what I would like to emphasize is that the timely revision of salaries should not be confined to the people in the upper echelon only. With economic growth, our demand for various types of workers has been increasing and private sector is also attracting people with their high salaries. Government should also adjust salaries on supply and demand principle of those lower civil servants. In implementing our policy, we should adopt a consistent stand. What I am concerned about is not only the revision of salaries for these low grade civil servants. What I am concerned is the salary revision for the lower income workers as a whole.

In the private sector, in order to attract managers and senior staff, they are prepared to pay high wages to attract talents. If the wages and salaries offered are not attractive enough then they are prepared to increase these salaries in order to attract those who are qualified. And among themselves, companies often compete through pay offers to attract talents. However, when dealing with the general low grade workers, some employers have adopted a different attitude. The salary scale for certain work is terribly low and therefore they are not able to recruit Singaporean workers. But these employers do not abide by the market forces in adjusting and increasing the pay to attract workers. Instead they go to the Ministry of Labour to make a complaint that they cannot get local Singaporean workers. They ask for permission to recruit cheap foreign workers. I hope, whether in the private sector or in the public sector, in formulating salaries, whether it is senior staff or junior staff, they should adopt a fair, reasonable and practical attitude.

Mr Speaker, Sir, in this year's budget, there is no increase on road tax as was rumoured in the market. However, in the last few months, there was a rumour that the Government intended to raise the road tax and therefore sparked off a wave of panic buying, especially on the 3rd March when the Minister announced his budget and the few days before that, such scrambling for new cars has reached a panic situation, as car buyers tried to beat the announcement of car price rise by registering their cars before that. Because of the increase in sales, many car companies have sold out their cars. There is no stock and certain people insisted on booking the cars and paying the money first before taking delivery in order to register these cars at the ROV. I feel that such phenomenon was caused by rumours but in the final analysis it was caused by the Government's policy. Up to now, the Government has been using taxation to curb car increase and thereby increasing car prices all the way so much so that buying a car has now become a form of investment to the motorist. In the whole world, only Singapore people treat car buying as an investment. After a certain number of years, the car will increase in price. This is unique in the world and is ridiculous. And it is felt that increase in road tax is no solution to curb increase in car population. Such policies are also likely to bring about adverse effects. I believe that the Government is also considering other measures, for example, by imposing levy on the usage of inner city roads but up to now we do not know what measures the Government will take.

In his budget, the Minister did not mention the increase in road tax. However, whether such taxes will be increased or not in future, we still do not know. We do not know whether the Minister for Communications has any trick up his sleeves. He is not here. I hope the Minister will announce his stand in these two days of debate and declare what measures Government will take in order to allay the fears among motorists. Otherwise, such mad rush for cars will continue.

Lastly, I would like to talk on the impending consumption tax. The Minister announced that the Government will gradually and by stages implement such taxation. Of course, I hope that since the Government's financial position is sound, there is no need to levy such taxes to increase revenue at present. However, if the Minister for Finance intends to levy such taxes as a matter of principle, I would suggest to the Minister that he should be cautious in order not to cause hardship to the lower income group. We know that in our present income tax system those who earn more pay more taxes. Those who earn less pay less. However, with consumption tax, it is different. No matter how much you earn, you pay the same amount of tax if you buy items which carry such taxes. Therefore, the implementation of consumption tax will have a greater effect on the lower income group. I would urge the Government to exempt such taxes on common daily necessities in order to avoid increasing the burden for the general public leading also to inflation. When implementing such tax, I would urge the Government to be prudent and to take into consideration the plight of the lower income group.

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

Sir, I lend my full support to the three budget policy objectives set out by the Minister for Finance, namely, the need to maintain an overall balanced budget for the long term; second, to continue investing for the future; and third, to foster growth of the private sector. In this respect, I support the Government's policy of supporting staff increases in the critical areas such as schools, junior colleges and the courts while the majority of other ministries will be maintaining zero growth in their staffing.

However, Sir, I would like to seek the Minister's clarification regarding his intention to reduce by more than 2,700 posts or 2.4% of the authorized manning level in ministries and Government funded statutory boards. How many of these posts are due to the deletion of long-standing vacancies? How many will actually be retrenched and what level of staff are they? What is the profile of these workers? Can they be retrained or given alternative jobs? How many will end up being unemployed as a result of this exercise? I am of course not expecting any exact figures but just a good guesstimate.

Sir, I would like now to turn to the problem of manpower shortage which I believe is prevalent both in the private and public sectors, as a result of, firstly, the mismatch of the type of workers needed, and secondly, there is a real or absolute shortage of available manpower. The mismatch has arisen because the demand is for young female production operators in the factories, while we have a pool, albeit a small pool of middle-aged and more elderly males and females who are available for employment.

Sir, the Minister has highlighted a record $2 billion manufacturing investment commitment in 1988. This is something that all Singaporeans can be proud of and the Ministry of Finance and the Ministry of Trade and Industry should be commended for this. However, as the Minister has stated, the majority of the jobs in manufacturing (65,900 jobs) went to foreign workers. Whatever local labour that was available was soaked up and supplemented by foreign workers.

However, with each new factory being set up, there is also an increased demand not only in the production line (consisting largely of foreign workers) but there is also an increase in demand of the staff at all levels, eg, receptionists, stenographers, and other office staff, accountants and other infrastructural staff. What is the result? The result is that many small and medium-sized industries are facing an acute shortage of staff. Furthermore, these are the very industries that are not allowed to employ staff on work permits or employment passes. Furthermore, as a result of the increased number of foreign workers, the foreign worker levy is being raised, thus aggravating the shortage of manpower.

I would like the Minister to comment on this problem. Are we tackling the problem at the right end? Did we allow the opening of too many factories in 1988? Was there too rapid a growth? Should we also not review the work permit policy so that both the foreign investor and the local entrepreneur can benefit? I agree fully that having a large number of foreign workers carries a high social and political cost. However, what is the solution now? There are some jobs that just cannot be automated and manpower is required. There is a mismatch of available labour. Perhaps the Minister can enlighten us on this.

Sir, I would next like to turn to the question of property tax. On 26th February 1986, the First Deputy Prime Minister referred to the question of property tax rebates. He said, and I quote:

'A rebate of 30% on the present property tax rate of 23% has been given for both owner-occupied and let-out industrial and commercial properties, vacant lands, including lands under development and let-out URA, HDB, and JTC properties. This 30% rebate will be deepened, with effect from 1st July 1986, to 50%, and extended to 31st December 1988. The additional rebate of 20%, however, will be given only if it is fully passed on to the tenants.'

Sir, the Finance Minister has generously extended this rebate scheme for another year till 30th June 1990. However, we are all aware that there are many instances where rentals of commercial properties have increased by as much as 100%. It would seem that the initial spirit of the rebate, that it be passed on to the end-user, that is the tenant, is breached. Will the Minister comment on this and look into this problem? Can a mechanism be set up whereby tenants can bring this to the attention of his Ministry?

Finally, Sir, consumption tax. Sir, this subject has been debated extensively previously. It is reassuring to hear from the Ministers that in the implementation of the tax, "its effects on all income groups, and on our exports and tourist trade will be considered. However, Sir, I would like to bring up another point for the Minister's consideration. If the cost of essential and luxury items is raised above that of our neighbouring countries, will it not result in Singaporeans doing their marketing and shopping elsewhere? Would this then not be counter-productive?

Thank you, Mr Speaker, Sir.

Dr Ong Chit Chung (Bukit Batok): Sir, I rise to support the motion and wish to congratulate the Government for having delivered, with the support of the people, one more good year for our country. And if I may add, may the PAP Government continue to deliver more good years for Singapore.

Sir, 1988 is indeed a good year; a vintage year as the wine merchants would put it. The economy grew by 11%, the highest growth rate in this decade. Many received unprecedented or substantial bonuses. The hotels are almost full. Orchard Road is crowded with shoppers. Talks of wage increases are in the air, and Hon. Ministers and senior civil servants are expecting or can expect a pay rise.

My purpose, Sir, is not to dampen this happy mood, but just wish to add a note of caution. In the midst of this prosperity, we must not be lulled into a sense of complacency nor forget so quickly the lessons of the 1985/86 recession.

Sir, we are a small, open and indeed vulnerable economy, very much dependent on external trade and demand. The Minister for Finance has himself told us that the strong external demand was the main impetus of growth in 1988, contributing 90% of the growth in total demand.

We are very much dependent on the world economy, particularly the economic health of the OECD countries. If the United States of America have a chill, we might catch a pneumonia. We must therefore, Sir, monitor the economies of the OECD countries, watch out for protectionism, follow closely the multi-lateral negotiations, for example GATT, and the economic summits of the G7 nations. Things can go wrong. Protectionism could raise its ugly head or there could be a banking crisis or wild fluctuations in the stock exchanges of the world.

Sir, some factors are beyond our control but we should prepare for the worst by further diversifying our economy and be less dependent on particular industries, for example, the electronics industry.

We must also watch out for developments in neighbouring countries, as these developments would have, I believe, an impact on our economy. The health of Dr Mahathir is of immense interest to observers of the Malaysian scene, and there is endless speculation on the power equation and the issue of succession. And who should succeed President Suharto in Indonesia? Or what about the baffling behaviour of the Thais over the Cambo- dian issue? The Thais seem to bend like the bamboo, sometimes even before the wind is blowing. In short, we should ever be mindful that the economic cream could go sour any time.

Sir, for a small nation, in effect a city-state, we have no choice but be tied up into the global economy. Indeed, with our high saving rate, local surpluses and the internal labour constraints, we should think even more of exporting our capital and services to the world. SIA and the "Singapore Girl" are our best success story in this field. But more tax and other incentives could be employed to encourage Singaporeans and Singapore-based companies to venture overseas. The tax system should also make it worthwhile for them to bring their profits or income back to Singapore.

We have talked about the Swiss standard of living. But we should emulate the Swiss who work overseas and export their services in sectors like hotel management. Sir, have we identified the areas for export of services? What steps, I wonder, are being taken to encourage highly-skilled Singaporeans to work and live abroad? Many, I suspect, are not prepared to work overseas, and some are deterred by the disruption to their families and their children's education. But as the economy develops, this is an avenue for further development. And I believe the Government should examine problems in this area.

In terms of budget surplus, we must commend the Government for its financial prudence and wise stewardship in running up surpluses far exceeding its own conservative estimates. We definitely cannot complain about this. And we know that the money is being put aside for rainy day.

Nevertheless, I believe that a reasonable portion of this surplus could be used creatively for the betterment of all Singaporeans, particularly for investment in education. I know that much is allocated to education, but much more could be done, for example, upgrading facilities in existing schools, building more junior colleges and accelerated implementation of single-sessions in all schools, especially primary schools. We should also think of how we can share some of our prosperity with our citizens who earn much less, for example, more flexible home- ownership schemes, and more generous bursaries for all levels of education.

Finally, Sir, a word about the consumption tax. The world-wide trend is towards consumption tax, and so it is inevitable that it will reach our shores. But many are thankful that it is not implemented extensively this year. My plea is that as the Government deliberates on further measures, spare a thought, Sir, for the lower income groups and consider the impact of consumption tax on their everyday life. To them, Singapore may become less and less affordable.

Sir, I support the financial policy of the Government.

Mr Lau Ping Sum (Yio Chu Kang): ( In Mandarin): Mr Speaker, Sir, the Minister for Finance delivered his Budget Statement on 3rd March. This Budget Statement has three basic objectives:

(1) To maintain a balanced budget for the long term;

(2) To continue investing for the future; and

(3) To foster growth of the private sector. When we review 1988, we find that the performance of world eocnomy has been very good. In the OECD countries, there was 4% growth; America, 3.8%; and Japan 5.8%. By the end of 1988, the forecast for had not materialised. In face, the growth in Singapore had reached 11%. For the last few years, Japan's rapid economic growth was fast catching up with the United States. In June last year, the G-7 countries met in Toronto (Canada) and the Japanese Prime Minister put up a very creditable performance. He announced that his foreign aid planned for the next five years amounted to US$5 billion. On the other hand, the US twin deficits, in the balance of trade and the budget, increased tremendously, gradually losing her image as the greatest economy of the world.

Now the US government has adopted policies to promote her exports and reduce imports. There are many eminent economists in the United States. Many of them have won Nobel Prizes, and they have got MBA courses in Business Administration in the universities. And they have trained a large number of graduates who can analyze problems. However, their productivity and economic efficiency has declined.

The views of the economists have been divergent. I remember mid-December last year Prof. Friedman published an article in the Wall Street Journal saying that the twin ddificit was not a grave problem. He said that after World War II, for a number of years the budgetary deficit in percentage terms had been greater than the present one. The question was to allow the private sector to invest according to the demand of the market to stimulate the economy. Secondly, according to him, the trade deficit meant that there was s surplus in capital account. A lot of Japanese capital flowed into the US market buying up properties and bonds in the US market. This reflected the confidence of foreign investors in the US economy. Therefore the trade deficit is not a serious problem to US although it is so to many Third World countires.

In Japan, the rising Japanese yen has made the Japanese to focus attention on cost reduction and productivity gains whilst they adapted themselves to the new situation. They chose to maintain market share and have not raised the prices of their goods following a rise in the exchang rate. For example, from 1985 to 1987, there was an increase in the exchange rate between Japanese yen and US dollar to the tune of 65%. Yet the export price of Japanese cars to the US had increased by only 26%. The appreciation of yen has led many Japanese to venture out of the country to invest in other countries, especially in South-east Asia, making use of the lower cost of the region to enhance their competitiveness. Therefore, to many Asian countries Japan has replaced US as the major economic power in the world.

Let us look at the Budget Statement. One of the objectives is to maintain a balanced budget. This move is correct, because in many Third World countries, even in many developed countries, there have been huge deficits in their budgets. The revenue generated was not enough to cope with the ever increasing expenditure because social welfare and medical costs have been enormous. In time their reserve's dwindled and their treasury is depleted. Foreign debts multiply. However, Singapore does not need a credit balance each year. If the expnditure is incurred on infrasturcture, such as an inproved telecommunication network transportation, airport facilities and environmental hygiene, then it is beneficial to Singapore in our development plans as a regional business and financial centre. A short-term deficit in the budget will not be a problem. The second reason is that the statutory boards in Singapore have maintained their surpluses year after year. This can be made use of to make up for a short-term deficit. In considering the public sector's financial position as a whole, the statutory boards should be included.

There is a close relationship between manpower training and our future. I am happy to see that the budget for the Ministry of Education has increased from 3.5% to 3.8%. This is laudable. The BEST programme is very important. More than 116, 300 people have enrolled for these courses since the beginning. I would like to know how many of them are non-citizens, and if they return their countries eventually, then the training effort would have been wasted.

Last year's Skills Development Fund outlay was about $61 million and training opportunities were created for 200,000 people. I am glad to note that more than half of the outlay was for training of workers whose monthly wages were less than $750, whereas in the past, the training had been concentrated on the middle level supervisors or managers. However, I would like to know, out of the $61 million, how much of it was spent on people whose income was less than $750 per month.

Another feature of this year's budget is the promotion of certain social policies through taxation. Last year, I requested the Minister for Finance to give greater tax relief to taxpayers with handicapped dependants. The minister turnd down my request. One of the reasons he gave was that it was difficult to define "handicapped dependants". However, he was not very emphatic when he turned down my request. I felt there was still hope. I am pleased to note that this group of people who have handicapped dependants, brothers, sisters or children will have their income tax relief increased from $750 to $2,500. However, on further analysis, we find that the relief for ordinary children has been increased to $1,500. Therefore, the difference between the relief for normal children and for handicapped children is only $1,000, and the actual rebate may only be a litle over $100, assuming that taxpayers pay about 12% to 15% income tax. We know that families with handicapped children spend very much more than this amount on medical expenses, especial care, transport and education. Moreover, it is a very heavy mental burden to look after children who are handicapped, and if the families are not particularly well-off the quality of care would not be adequate. Therefore, I would like to suggest that the tax relief should be given according to the individual need. For example, if the medical expenses are very high, the quantum of tax relief should be applied with some flexibility.

The last point I would like to touch on is the tax rate on owner-occupied properties which will be reduced from 23% to 4%. However, we know that in some cases the effective tax on old properties has been less than 4%. Therefore, the tax rate has increased, not decreased, I wonder if the Minister agrees with this viewpoint.

Dr Aline K. Wong (Tampines GRC): Thank you, Mr Speaker, Sir, for giving me this chance to participate in the debate on the budget statement.

A lot has been said already about two peculiar features of this budget. One is that it is painless and, second, that it is a family budget. Incomparison with the 1987 budget which could be described or nicknamed as a procreation budget, this year's budget could be called a family budget, because it highlights the responsibility of the family towards the young and the old, the well and the disabled, and it also addresses some of the problems faced by working mothers.

In joining my colleagues in this House, I too welcome the tax incentives for the building modifications for the disabled. These incentives are long overdue and perhaps still not quite enough in some environments where a lot needs to be injected in order to make those environments barrier-free for the disabled. One obvious example that comes to my mind is the Kent Ridge Campus of the National University of Singapore. I think the amount of tax incentives will not really be adequate at all to help change that environment to be barrier-free for the diabled. Nevertheless, the fact that we begin to recognize the need, is timely and, as I said, to some probably a bit overdue.

I also welcome the raising of the income tax relief for the handicapped dependants who are the siblings or the children of the taxpayer, and also for the aged parents. Like the Member for Siglap, may I urge the Minister for Finance to consider a little more flexibility in varying the condition that the aged parents and the disabled sibling must be living together in the same household as the taxpayer. The reason is that there are circumstances under which it may not be quite possible for the taxpayer to live together especially with a disabled sibling. Such a case actually came to me recently at a Meet-the-People session. A young lady has been the sole earner of the family supporting of her aged parents who take care of a mentally disabled son, ie, her younger brother. She recently got married. She moved out and she found that she could no longer be entitled to this tax relief for supporting her disabled sibling. Cases like this deserve flexibility of consideration giving income tax relief.

As far as the procreation incentives are concerned, the raising of the normal child relief for the first, second and third child and extension of this to the fourth child reflects more realistically the cost of rearing children and will certainly help towards encouraging bigger family size. The enhanced child relief for the second, third and fourth child continues to be given to working mothers only. While this may be a positive factor in encouraging working women to have more children as well as ensuring working mothers would remain in the workforce, I think the emphasis on working women is to the disadvantage of women who drop out of the labour force in order to take care of the young children. Theoretically, this woman can still benefit from the special tax rebate for the third or the fourth child. But the families which are most likely to benefit from the full rebate are those in the higher income groups, ie, women who do not work but whose husbands earn high incomes are likely to benefit most, to the fullest, from this special tax rebate. Therefore, by comparison, women who belong to the lower income groups and who drop out of the labour force to take care of the young children would be at a disadvantage. The finacial problems faced by women from the lower income groups are real and these are the people who need the additional income most. With the wife relief being raised from $1,000 to $1,500, there is a bit of recognition for the work of women at home which is unpaid. In view of the fact that the lower income groups actually need this wife relief much more and to a more substantial amount, perhaps the Minister for Finance could consider raising this wife relief for women who stay at home in order to give their unpaid work at home, especially in taking care of young children, a bit of recognition.

Of course, in the final analysis, we all realize that financial incentives are only partially effective in encouraging procreation. This House has debated at length other measures including child care centres, part-time work, flexi-time work. All kinds of measures can be taken to encourage women to have more children as well as to stay in the workforce. I would not dwell on this now as I am sure other Members of the House would talk about these measures under the individual Ministries.

Let me just say that apart from financial incentives as well as supportive measures, the Government should consider placing more emphasis on public education in order to change the attitudes of our population towards family life, parenthood and marriage.

The 1989 budget is distinct perhaps, thirdly, by a radical departure from the past in terms of the block vote allocation system. Certainly, such a decentralization would increase the operational efficiency of the individual Ministries or units. At the same time, the new system clearly places more responsibility on the already powerful top civil servants in the individual Ministries. I hope that the individual Ministries and the officials, in their sometimes over-zealous pursuit of maximum efficiency in a narrow financial sense, would not incur political and social costs which are external to the particular Ministries. It is arguable that one such example is the recent increase in tuition fees at the NUS and NTI. I realize this issue is not particularly within the purview of the Ministry of Finance and probably the Minister for Finance will refer me to the Minister for Education later on. But let me take it as an example of where the considerations of one Ministry may have spill-overs onto the entire country in terms of having not only economic but also social and political costs. And therefore I wish to urge the Minister for Finance, being in the position of watching the budget in an overall sense, to be careful about allowing individual Ministries to tread on grounds which might have this kind of external costs.

The raising of tuition fees for NUS and NTI came as a great surprise to many people. I think to use the word "bombshell" is probably not an over-statement. The fees at NTI and NUS were raised only in 1987, ie, two years ago. And to appreciate the magnitude of the present increase, one should not just compare the proposed tuition fees for this year beginning July 1989 with that which were raised in 1987 as shown by the tables presented in the Straits Times of 8th March. One should actually make a comparison between what is going to be effective in July this year, 1989, with what was immediately obtaining before the 1987 increase. For Accountancy, Commerce, Arts, Social Sciences and Law students, the fee charged in 1986 and 1987, before the 1987 increase, was only $1,200. But the proposed fee now is $2,600. So the increase is, in fact, not 30%. If you only take the two years, 1987-88 compared to 1989-90, the increase will be 30%. But if you go back to the fee structure just before the 1987 increase, the three years will give you 117%. Of course, one may argue that you should average out the increase over a number of years and you should not, say, take three years back or four years back and make it out to be such a big increase. Let me finish this comparison by going over the other two faculties. For Architecture and Building and Engineering Science, the increase will be 158% over the last three years. For Medicine and Dentistry the increase will be 454% over the last three years instead of 85% only. The point I want to make is that there are students who enrolled in 1986/87, who are still going through these courses and have not finished. In other words, they would have been struck by the fee increase twice, and to them the increase was actually 117%, 158% and 454% and not 30%, not 29%, not 85%. For this cohort of students who enrolled earlier on, and would have made budget calculations when they entered the University, they suffer a tremendous hardship.

No one disputes the fact that tertiary education is heavily subsidized. No one disputes the fact that students who graduate from the University or from the NTI are a very privileged minority in the population and therefore they should bear not only part of their educational cost but should also be paying back what they get from society and the taxpayer's money after they graduate. That is why in the case of Dentistry and Medicine there is this bond that they must serve for five years after graduation.

Mr Speaker, Sir, I suppose I should let the House know that I have two children who are attending NUS but I do not speak as a parent who can afford this fee raise. I am speaking on behalf of those who cannot afford the fee increase. So for families who made their calculations before their children entered the University, they are hit by this fee increase twice within the last three years and this really comes as a big surprise.

It is said that they can apply to the Revolving Loan Fund from the Ministry of Education from which they can draw and cover up to half of the tuition fees. The second half they can apply from other loans at the University or at the NTI. But the upper limit to these other loans is only $2,000. And the actual amount a student would obtain is not necessarily the maximum. That depends on the financial circumstances of others including how many applications there are for these loan funds. So other means must be found to help the students who are caught in the financial bind and I think there is need for the University to raise the amount, the upper limit of this $2,000 loan, to help the students caught by this increase.

The justification given for the sharp increase in tuition fees is the rise in the operational expenditure at. If we read the figures given in the Straits Times on the 8th March, it is noted that between 1987 and 1988 and 1989 and 1990, the total operating expenditure of NUS and NTI increased from $231 million to $351 million, that is a rise of 52%. Whereas the recovery from tuition fees would rise from $28 million to $62 million, that is a rise of 121%. So what has happened is that there is a higher cost recovery from the students themselves. If this trend continues, I am afraid university education will become more and more the privileged of the privilege few who can afford it. This trend must somehow be alleviated and means must be found to help students along in meeting this part of their expenses.

As for foreign students, nobody would disagree with the argument that foreign students should pay more than local students. This is fair and this is just. And at the University level, there has always been a quota, a limit on the number of foreign students so that we can benefit, from their presence, students can mix with students from other kinds of background, other nationalities, and they can benefit from this multiplicity of cultural and national backgrounds. The quota, on the other hand, limits the number of places taken up by the foreign students. But the hefty rise in tuition fees for foreign students, doubling what they were paying two years back, will cause a loss of goodwill among foreign students who come from our neighbouring countries. We must not forget a lot of the close relationship we have enjoyed with our neighbours can be attributed to the fact that Singaporeans and Malaysians and other people from Asean have shared common educational backgrounds, common educational ties. If the foreign students from now on find it impossible or very difficult to meet our tuition fees, they would not come. Or those who can afford them may find it relatively more attractive now to go to universities in other countries where there would be a greater range of courses, where they may stand a chance of settling down after their graduation. To that extent, we will be losing the very valuable past educational ties that we have been sharing with people from our neighbouring countries. Sir, I think this is a consideration which the Government probably has thought about deep and hard. It has come to this conclusion after weighing the pros and cons. But I am afraid opinion on this matter is going to be divided.

So with that, may I urge the Minister for Finance. In having implemented this new system of budget allocation, not to give up his role as an overall watchdog of how individual Ministries spend and raise money, but to make sure there would not be foreseeable external economic, political or social costs to the nation. 3.56 pm

[Mr Deputy Speaker (Mr Abdullah Tarmugi) in the Chair]

Dr S. Vasoo (Tiong Bahru GRC): Mr Speaker, Sir, I rise to support the motion. May I also join my parliamentary colleagues in commending the Minister for Finance for a very well-balanced budget which has provided relief to families in their care for the aged, the disabled and dependant children.

Sir, it is indeed a budget which is set to further strengthen the family support system and I hope that the budget will in future consider this direction if we think the family is a basic unit that needs to be strengthened. In doing so I forsee that it will lay further foundations to strengthen the family's capacity to support members who

are dependent.

Sir, whilst the budget can be said to be a good one, there are a number of areas which require further review and careful implementation. We need therefore to look at what is our future direction in terms of policy for revenue generation. Is our policy going to de-emphasize direct taxation and move towards indirect taxation? And if the latter is the case, then I assess that it will have implications not only on consumer behaviour but also implications for the working class.

Firstly, Sir, a key concern which requires close attention is the implementation of consumption tax on goods and services. In the context of Singapore, we do not have a large consumer base to generate sufficient revenue from consumption tax. We have only a population of 2.6 million and I project that we will have to tax almost all essential goods and services in order to generate sufficient resources for our budget. Therefore, if consumption tax is to be imposed on a wide number of goods and services, it will increase the tax burden of the working class. It will also stifle our tourist trade and make our goods and services less attractive in comparison to those in our region. Revenues will be indirectly lost as it will dampen both domestic and foreign demands for our goods and services. Singaporeans may go across the Causeway to buy their essentials. Today we see during weekends thousands of Singaporeans going across the Causeway to buy their essential goods. Therefore, if the direction is towards taxing more essential goods, the exodus will be greater and it will be less tenable for us. Sir, such a consequence is not unlikely. So, I hope that the Minister will be more selective in imposing future consumption tax and exclude levy on basic essential goods. This will, in fact, allay the concern of the average working class families. Sir, we must not forget that at least about 60% of the population are earning salaries of less than $1,000 a month, and it is this large consumer base that we have to address the question.

Sir, secondly, in our effort to encourage families to have more children, we have not fully directed our attention to finding solutions to child-care problems facing working mothers. I note that incentives alone do not lessen the burden of our working mothers. We must look beyond this question of incentives. Incentives may be good. It does help to relieve the working mothers of their financial burden. But we should look at the question of creating a good infrastructure for child care and support.

Sir, we have to focus on mothers with less than three children. The current tax incentives do not have any impact on the middle and lower income working mothers with less than three children. They form the main bulk of our working mothers. In order to alleviate the financial burden of child care of these families, it would be attractive to increase the enhanced child relief for the second and third child below 12 years old to 20% and 25% respectively; at the same time a special rebate of $10,000 should be considered for a newborn second child. I stress that if we are really serious in wanting to increase the number of childbirths, we should give a good booster to enable higher procreation which would solve the problem of a declining population growth.

Sir, to encourage procreation, there is a need to set up more child care facilities to cope with the growing demands of working mothers in the future. It would be useful to consider at least a $25,000 tax relief deduction from income for a period of four years for private child care operators or employers who wish to set up new child care centres. This will provide an incentive for those who intend to promote private child care centres. I urge that further incentives for supporting the employers and private child care operators be looked into quite seriously.

Thirdly, Sir, the disabled workers, unlike normal workers, are generally at a disadvantage with regard to wages. They are in a lesser position to bargain for wages comparable to normal workers. Besides this, they have to spend more in getting to work than for a normal person. Sir, in recognition of such a situation, they merit a personal tax relief of $2,500 which will perhaps in some way help to relieve their burden in terms of expenses on transportation. The child relief that is provided, ie, the $2,500 which is provided for the disabled child, does not in any way help the disabled worker.

Fourthly, Sir, families who look after the elderly sick or disabled parents deserve more financial relief. This is because caring for the elderly sick incurs additional financial burden. An additional $2,500 should be accorded to the family caring for the aged sick parent who normally needs more medical attention and nursing care. Sir, with a population which is aging, more parents are likely to become aged sick and, in order to encourage more families to look after their elderly sick parents, I see that there is a crucial need to review how families caring for the elderly sick could be supported.

Sir, in conclusion, I hope the Minister will look into further ways in strengthening the family support system and implement the consumption tax only on non-essential goods.

Mr Loh Meng See (Kampong Glam): Mr Deputy Speaker, Sir, I wish to support the financial policy moved by the Finance Minister.

Sir, I would like to offer some observations and comments with regard to the Budget Statement given by the Finance Minister. It is a question of jargon whether the Minister termed some charges to be tax revenue or non-tax revenue. In the eyes of the taxpayer, what matters is what he is charged. Whether it is foreign maid levy or taxes on motor cars, this tax is what matters to them because what is given up in taxes or levies he has a reduced disposable income.

As much as the nation and the private sector need information for prudent financial management, I think we owe it to the individual taxpayer to give as comprehensive and complete an information as possible. There are gaps in the Budget Statement on some items - the question of motor cars and certain proposals with regard to property tax on HDB flats. I thought it would have been better if the individual taxpayers have all this information at one go rather than to let them have on a piecemeal basis and to let them guessing and speculating because they also need and want to budget their own personal expenses.

Sir, I would like to talk on the subject of pensions because I have not heard any Member speaking on this. I think pensions could be a very large expenditure in the longer term because, as we have heard from the Finance Minister, the expenditure on pensions is expected to rise by $22 million to $264 million. He did not tell us how large the number of retirees is. The problem of pensions is the unpredictable nature of pensions expenditure. Pensions are based on last drawn salaries and it is not quite possible for us to plan the long-term liability if we continue to expend on pensions as is currently done, ie, from revenue and expenditure. In fact, there ought to be a reserve provided for long-term liability and there ought to be the advanced provision taking into account such things as the age structure, the number of people under the pension scheme and what is the last drawn salary likely to be because the amount can increase fairly dramatically.

It is opportune for us to consider this, Sir, because the Government has indicated that they wish to review the salaries of key civil servants who most probably are people under the pension scheme. I would suggest that instead of providing for a large supplementary benefit in the form of pensions when civil servants and Government officials retire, it might be better to provide them while they are in active service. This will also address the issue that there are disparities in the retirement benefits or pension received which differ from the year in which one retires.

Sir, a related matter is the Minister's indication that there will be a limit on tax deductions. I am aware that statutory boards provide for special pension funds for statutory board employees and the contribution to the pension fund could be very high, much higher than the limit imposed by the new policy. What is likely to happen is that without any increase in salary, because of the statutory provisions, senior pension officials in statutory boards are likely to pay higher income taxes because the contribution to the approved pension fund exceeds the statutory limit.

The next item on the tax deduction for CPF contribution is of course in relation to the Government's desire to encourage flexi-wage policies. The limit of 4.8 months is a bit too low considering that we certainly want to encourage companies to have lower operating costs and to reward their employees on the basis of bonus payments and that they are rewarded by linking their rewards to that of company performance.

The next item, Sir, is that on consumption tax. Previously, there was the tax of 10% on water charges in excess of $20 per month. Now it is 5% on combined PUB charges in excess of $40. Arithmetically, it is correct because both pay $2 if the minimum is reached. But arising from this conversion, the Government receives an additional tax of $7 million. It appears to me, Sir, that $40 appears low as the minimum limit because I think the bulk of the people who are affected are the low-income earners and it is my plea that in this conversion exercise as much consideration be given to the lower income category. Of course, by the introduction of the consumption tax, we have made our tax system to be more regressive and less progressive and in a more regressive income tax system obviously it hits the lower income category more.

Finally, Sir, on the matter of property tax. Though it appears that there would be a reduction on the property tax rate from 23% to 16% across-the-board, I am rather uncomfortable with the announcement that there will be a new system of assessing HDB residential properties. We are aware that the majority of Singaporeans, 86% of Singaporeans, live in HDB apartments. Is it that more of us who live in HDB flats are likely to pay more in the process? It would appear that the well-off who live in private properties, and maybe the foreigners, are benefiting from this reduction in property tax.

Notwithstanding the above that I have stated, Sir, I support the motion.

Mr Yeo Toon Chia (Ang Mo Kio): ( In Mandarin): Mr Speaker, Sir, the long awaited tax reliefs and rebate for the family and children have now been announced in the Budget. The wife's relief which has not been revised for a long time will be raised from $750 to $1,500. For the subsequent third and fourth births, a family will now enjoy a rebate of up to $20,000. These measures will certainly help to reduce the living expenditure of a family. There are people who encourage marriage and procreation. This is correct. For our continued economic development and prosperity, our birth rate must be above replacement level so that with an increased population, we will have enough human resources to carry on with our economic development and nation building. In this respect, I hope that more responsible young men and women will marry and set up their families early. For those who can afford, they should have more babies in order to contribute their share and help the future development of our country.

Mr Speaker, Sir, may I add that if we had implemented these increased tax reliefs and rebate concessions in the 1970s when our economy was bouyant, we need not now have to worry about our low birth rate, late marriages, procreation rate not reaching replacement level, aging population and future manpower resources. However, now that the government is giving more concessions to encourage more babies, the question is, will it lead to more blessings? I doubt so. For those who are well to do, there will be no problem. But, for those in the lower income group, the tax concessions may not help them very much. Every parent looks forward to a good education and a successful career for their children. At the same time, they are also worried about their children's study, whether they will be able to overcome the pressures of a highly competitive education system and do well enough to successfully complete their education. With the rising cost of living, more women also have to go out to work to supplement the family's income. Added to these problems, if there are insufficient creches and no maternity leave for the third and fourth child, and with the high cost of employing a maid, I doubt the government's call for women to have more babies would be successful.

Government should therefore set an example and take the lead by building more and better creches in all the new towns to enable working mothers to have their children taken care of in nearby well-organized creches while they are at work. Maternity leave should also be granted to working mothers for the third and fourth child. The government should legislate to enable female employees in the private enterprises to enjoy such benefits. Futhermore, we should also allow such companies tax deductions on expenses spent on the creches. This will not only encourage the private sector to set up creches but will also enable working mothers to work with peace of mind therby encouraging them to have more babies and, at the same time, increase productivity and contribute to our human resources and economic progress.

Mr Speaker, Sir, the company tax has been reduced to 32% from 33%, a reduction of 1% which is an insignificant figure. Perhaps the Minister for Finance feels that since we had an economic growth of 8.8% in 1987 and a growth of 11% last year, our economy has fully recovered and that a small reduction in our corporate tax is sufficimot as we are still quite competitive. But, our present high corporate tax is uncompetitive compared with other countries in the region and may deter foreign companies from using Singapore as their regional centre for their businesses. From a long term point of view, if Singapore wants to develop a conducive environment for commercial and industrial enterprises, then our company tax must necessarily be further reduced. If we can reduce our corporate tax to say, around 25%, we should be able to attract more foreign companies to Singapore and to promote our country as a regional, commercial and financial centre. Multi-national corporations from countries in the Asia-Pacific region where the political situation is not so stable and where there is a strong currency appreciation resulting in high cost of operating their businesses will relocate their business operations and come to invest in Singapore.

To grant one year's tax concession for machinery depreciation on automation is a correct measure. While in fact we are having labour shortage, for our long term interest, we cannot rely too heavily on foreign labour. Therefore, by encouraging the commercial and industrial enterprises to automate and mechanize is the best policy. Industrial automation and mechanization will help increase production and make our goods more competitive in terms of quality and price on the inter-national markets. Just like Singapore, Japan does not have any natural resources, yet she is able to high-tech products such as cars, electronic audio-visual goods, cameras, computers soft and hardware and others. These products are all competitive in quality as well as in price and which have already made inroads into the international markets. Because of their modern production methods such as automation, computerisation in design and manufacturing and high-tech operation techniques, they are able to increase production and yet reduce the cost of the products even in the face of the appreciation of the Japanese Yen. Now they are turning towards even more advanced high-tech and high value-added products such as high grade semi-conductors, electronic calculators, televiews, fax machines, office and electronic equipment and communication systems and so on. These products though very expensive yet are competitive enough on international markets and had earned for Japan some US$91.8 billion in foreign exchange last year.

Mr Speaker, Sir, in order to succeed in our industrialization other than having people with knowledge in high-tech and modern commercial and industrial management, we must also have other highly trained creative industrial personnel capable of innovative thinking and production. It is not difficult to train up mechanical and production engineers and also other professional people. But that is not enough. More importantly, we should have talented, creative and innovative personnel who are able to improve on our products and invent new products so that we will be able to achieve new and better technology in order to help our country into an advanced and industrialized nation.

Mr Speaker, Sir, the government has allotted $100 million for various government departments and statutory boards as funds for research and development. This is a timely measure and a step in the right direction. We must continue with our efforts to encourage and develop more people with talent who can invent and innovate to come forward. In this respect, government should encourage students in the higher institutes of learning such as the Singapore and Ngee Ann Polytechnics by awarding those students who are creative and have invented some outstanding projects or giving the institutes research funds for such students to venture and complete their inventions. We should perhaps give some invention awards or prizes to those inventors who have made contribtions of inventions in the fields of science and technology, industrial machinery or production techniques in order to encourage such talents.

Mr Speaker, Sir, since independence, our economy has progressed rapidly, and our reserves have also accumulated up to $33.3 billion now. Growth in our financial circle, banks and enterprises has also increased much. From the total assets of our four local banks and the development investment by local enterprises for the past five years, the figure for 1984 was $494 million, 1985, it was $232 million, 1986, it was $253 million, 1987 it was $295 million and 1988 it was $348 million on record. There are also many big enterprises worth more than $100 million. We can see from these figures that we have enough local investments and funds to promote the growth of our industries. With the addition of some few hundred sizeable companies under the government, we should have the financial strength and be confident enough to emulate Korea and Japan in forming multi national corporations. The government should encourage and assist local enterprises with poten- tials, good management skills and with strong capitals and the necessary technology to develop into multi-national companies and to even go overseas to progress further into the international markets. This will strengthen our commercial and industrial development and help our local companies make inroads into the international markets.

Mr Speaker, Sir, although we do not have any natural resources, we should make use of our well ecucated people and develop our country into a human resource centre. With our experience in economic development and nation building for the past few decades, we have asquired the necessary expertise to support our services. We have developed our country not only into a manufacturing centre and a trading entrepot, but also a centre of scientific innovation and advancement. Thus, we should be able to carry out all these expertise services and advanced programmes and consultation in various fields such as public housing construction and management, port establishment and urban redevelopment, transportation management and telecommunications and in other fields like banking, medical services, etc. We should be able to provide such services to help our neighbours in their economic development and further promote regional economic prosperity and political stability.

Mr Speaker, Sir, in the past, we have been developing and building successfully with significant achievements in various fields such as politics, economy, education, defence, urban redevelopment, public transport, industrialization, tourism, port facilities, etc. We have great achievements in various fields and we have been praised by many countries. But we nust not be complacent and take our success for granted. We must continue to work together with concerted effort and vision. We should steel ourselves and be resolute to proceed ahead, and obstacles to develop further and to achieve our goal in our nation building so that our country can continue to progress and our people will be able to enjoy a better livelihood year after year.