SINGAPORE TECHNOLOGY COMPANIES

[Mr Speaker in the Chair]

Mr Philip Tan Tee Yong asked the First Deputy Prime Minister and Minister for Defence, to maximise the productivity of our limited pool of manpower, whether he will consider directing companies belonging to the Ministry of Defence to concentrate on security-related or very high-tech businesses instead of manufacturing and selling personal computers.

Mr Speaker: Question No. 1, Mr Philip Tan.

Mr Philip Tan Tee Yong (Paya Lebar): Mr Speaker, Sir, before asking the Question, I would like to declare that I am in the computer software business though I am not in the business of manufacturing personal computers for sale. Secondly, I also want to declare that I am a council member of the Enterprise Development Council. This Council was formed by the Economic Development Board to promote and develop local enterprises to play a bigger role in Singapore's economic growth in the 1990s.

The Second Minister for Defence (Services) (BG Lee Hsien Loong) (for the First Deputy Prime Minister and Minister for Defence): Mr Speaker, Sir, I am answering on behalf of my Minister.

The principal purpose of setting up the Singapore Technology (ST) companies is to provide technical and industrial support to the Singapore Armed Forces (SAF), to enhance its operational effectiveness and strengthen our economic defence.

However, ST cannot do this solely by undertaking work for the SAF. No defence group in the world does this unless self-sufficiency is to be achieved at all costs. Strengths and capabilities which the SAF will need only in a contingency will almost by definition be surplus to requirements in peacetime. The same technology used by the SAF can often also be employed for civilian purposes. For example, both military data terminals and civilian personal computers require similar integrated circuits and printed circuit boards. To develop a capability for one and not to use it for the other would be wasteful.

MINDEF's policy is therefore that ST companies should, besides SAF work, also undertake industrial and commercial activities which have synergies with, support or extend the core defence-related activities. This may mean "crowding out" the private sector from the business. But from the point of view of the nation as a whole, it is better for the defence industries to do this and channel the private sector into other areas of business, rather than for the defence industries to keep their surplus capacity idle in order to give the business to the private sector.

ST companies are required to maintain a clear business focus. They only undertake those non-military activities which make sense for the core mission of their companies, where there is synergy with the defence business. They are not allowed to practise predatory pricing, or take advantage of their Government-owned status to hide costs and win contracts. They must compete for business on equal terms with private sector companies.

Electronics and computer systems are pervasive and important components of modern weapon systems. While we cannot become totally self-sufficient in these areas, the ST companies can develop a comprehensive capability in these systems, to give the SAF the extra technological edge. This is why ST companies manufacture and sell personal computers.

Mr Philip Tan Tee Yong: Sir, is the Minister aware that ST companies are also agents for personal computers?

BG Lee Hsien Loong: Mr Speaker, Sir, yes, indeed. The SAF Enterprises (SAFE) retails many brands of PCs as well as other consumer goods as part of its business. In addition, SCS, which is an information technology systems house, provides PCs and other work stations as part of its total system solutions. That means, when it sells a consumer a package, it is selling a solution - hardware, software, integration, training support. Therefore, SCS has a standing business relationship with PC vendors, which reduces the cost of such total systems offered to the clients. It is better for the clients. It gives them a more attractive package. Once SCS is a value-added supplier of PCs, there is no reason for SCS to turn down, customers who walk in and want to buy PCs off the shelf.

Mr Philip Tan Tee Yong: Sir, is the Minister aware that the advertisements by the ST companies were on selling PCs as stand-alone hardware only?

BG Lee Hsien Loong: Mr Speaker, Sir, I do not know what advertisement the Member is referring to. I presume it was the advertisement for the Lynk computer which was designed, manufactured and sold by Chartered Electronics Industries (CEI).

Mr Philip Tan Tee Yong: I am referring to the ST company which is the agent for the AST personal computers.

BG Lee Hsien Loong: Mr Speaker, Sir, rather than argue what advertisements have been published or not, I take the position that even if they were published entirely as the Member has maintained, I see nothing wrong with it. Why should a commercial company, making a commercial decision, seeing a business opportunity, not go in to offer a service which their customers value and find useful?

Mr Philip Tan Tee Yong: Mr Speaker, Sir, the point is actually we want to maximise the limited manpower pool that we have. The PC area is not a very high-tech area.

Mr Speaker: Mr Tan, ask your question, please.

Mr Philip Tan Tee Yong: Sir, I would like the Minister to consider whether this is in line with maximising the productivity of our limited manpower.

BG Lee Hsien Loong: Mr Speaker, Sir, the line between what the Government should do, what the Government-owned companies should do, and what privately-owned companies should do, is a matter of degree, judgment and choice. From MTI's point of view, it makes absolutely no difference when a company sells a computer, whether the shareholder happens to be the Minister for Finance on behalf of the Government, or happens to be a private entrepreneur on his own behalf; provided he is operating on a level playing field, provided that there is no hidden subsidy from the Government, provided that the Government is not favouring its own company and, therefore, enabling it to compete unfairly with the private sector. If the Government company can give the private sector a run for its money, so be it.

Mr Philip Tan Tee Yong: Sir, I am wondering whether the Minister will comment on the statistics provided in the directory of the Singapore Federation of Computer Industry that there were five Government-owned companies employing 1,135 computer professionals as against 50 private companies with 4,802 employees. This works out to an average of 227 computer professionals per Government-owned company and 96 computer professionals per privately-owned company. Is it not true that the manpower has been drained away into the Government-owned companies?

BG Lee Hsien Loong: Mr Speaker, Sir, if tomorrow the Government decides to sell off one of its companies with 220 people to a private sector entrepreneur for $10 million or what ever it is worth, the averages are even out overnight. Does it make one jot of difference to the economy? Which is better for us? That whoever owns the company and whoever has the enterprise gets the individuals and puts them to productive use, or that the Government and its companies, when these have talent and ideas, stand by idle and do nothing in order that others who are less competitive can come in and monopolise the market at the expense of consumers? Surely it is better for resources to be used optimally and consumers to be better served. They are not forced to go to Government companies. They can, if they wish.

Telecom - the next question - is not compelled to buy computers from the Government. In fact, we encourage them to tender or to explore R&D contracts with whoever is available. If the Government company is the best one, so be it. If the Government company were not there, are we so confident that there would automatically be a private company in its mould and image in its place magically? I doubt it.

Mr Philip Tan Tee Yong: Sir, I beg to differ. Is the Minister assuming that the productivity of the Government-owned companies in the area of personal computers is higher than the privately-owned companies?

BG Lee Hsien Loong: I make no assumption, Mr Speaker, Sir. But these are Government-owned companies competing on fair basis, receiving no subsidies, hiring workers and yielding returns, and they are not losing money. So why should they not continue?

Mr Philip Tan Tee Yong: Sir, but how can we say that they are on a fair footing? The Minister should consider that there are certain factors that the Government-owned companies will have to take into account, for instance, land cost, rentals and even the attractiveness of employing people from the industry.

BG Lee Hsien Loong: Mr Speaker, Sir, Government companies pay for their land cost, they pay for their office rentals and, if there is any preference, I can tell you that people prefer to work in private companies rather than Government ones.

Mr Philip Tan Tee Yong: I rest my case.