ANNUAL BUDGET STATEMENT

Order read for Resumption of Debate on Question [1st March, 1991],

"That Parliament approves the financial policy of the Government for the financial year 1st April, 1991 to 31st March, 1992.". -[Minister for Finance].

Question again proposed. 12.43 pm

Dr Lee Siew-Choh (Non-Constituency Member): Mr Speaker, Sir, the 1991 budget, described as a "Shenton Way Budget" in the Straits Times front-page headlines, has been warmly welcomed of course by the financial sector. Big business, big shipping, investment companies will all benefit from it. And the big four local banks, already reaping thumping profits year after year, get yet another windfall. All this fits in very well, Sir, with what the Minister says, namely, that "Government will continue to provide a conducive environment for business to thrive and prosper."

But the Minister obviously does not have our small and medium business enterprises (SMEs) on his mind. And not unexpectedly they are all disappointed, as are the vast majority of the people in Singapore. Badly hit by the US recession, many local SMEs and retail trades have already been troubled by a rising cost of doing business, with rents rising everywhere, including those controlled by the URA. Their woes become compounded by the Gulf War for a good period. And now many are concerned with further rising business costs with the increase in the employers' CPF contribution rate by 1% point. Workers of course, Sir, benefit from the increase of CPF contributions by employers. But many will still have hardly any increase in their take-home pay. Apart from the CPF increases, there are also small tax deductions for which the people have not much to enthuse about. Thus, for example, parents will be able to contribute annually a sum of $100 rising to $500 eventually to the Edusave account of the fourth child for some tax deductions. But with most families already opting to have two or at most three children in present day Singapore (for whatever reason), there are not very many parents who will be able to really benefit from this tax deduction for contributions to the Edusave account. Moreover, many parents have low incomes, and they are in no position to contribute anything. If the Government's intention is to encourage parents to have more than three children, it would be much more helpful to waive all hospital charges for the fourth child. I hope the Minister will accede to that.

Tax relief of $3,000 for the handicapped dependant is now extended to the handicapped spouse. The Minister says that revenue loss from this is estimated to be about $1 million. From this, it can easily be seen that those people who may benefit from this scheme will not exceed 300, less than a handful.

Similarly, the number of those who may benefit from the deductions for CPF contributions by self-employed persons must also be very small.

The reduction of entertainments tax from 10% to 5% will benefit entertainment enterprise-operators or proprietors more than those seeking admission to such places of entertainment.

The refund of property tax on vacant residential buildings undergoing building works is a consolation in that at last Government has recognised that it should not have imposed such property tax on vacant residential buildings in the first place.

And tourism cess rate reduction by 1% affects only a limited number of people. Thus, only small groups of people benefit from all these tax deductions.

The only tax cut that may be said to benefit wider sections of the people is the across-the-board once-off rebate of 5% on personal income tax for the Year of Assessment 1991, with estimated revenue loss of $65 million. But as in all across-the-board tax rebates, those who benefit most are those who earn high incomes. A worker who pays income tax of $100 will get a tax rebate of only $5 (hardly enough for a plate of mee), whereas a person who pays income tax of $10,000 will get a rebate of $500 (at least he can spend that money on something).

Government has frequently stated that it will help the low-income group. It should therefore give higher rebates to them instead of to those with higher incomes. Of course, when Government gives away something with one hand, it also makes sure it takes back something with the other hand. Thus, duties on cigarettes and tobacco are imposed. Of course, these duties may be justified from the public health point of view. But a small increase in the prices of cigarettes will not really deter people from cigarette smoking. It would only add to the burden of those who cannot kick the habit, and they are mostly from the low-income group.

If Government's intention is to really stop our youths from cigarette-smoking, that is, if Government's intentions are genuine, then much more will have to be done. If persuasion and public health education should not be able to stop our youths from smoking, then as a first step, selling cigarettes to youths should be made illegal and a punishable offence.

Then there is the water conservation tax in addition to the existing 5% tax on PUB bills, with a promise of further increases in water rates within the next few years. There is already the water-borne fee. Now there is this new conservation tax in addition to the existing 5% tax on PUB bills. What other taxes will the PAP think of next? Will the Minister inform this House - I hope to hear the answer - whether this new tax is a new condition imposed by the World Bank or whether it is another gem from a PAP brain-wave?

The PAP Government has often stated that in the coming years it intends to help those who have remained poor although they have worked and saved for many years. But now the PAP wants to impose more taxes on them, on their use of water which is a necessity of life. This is a typical example of the PAP saying one thing and doing another thing; in fact, the direct opposite in many cases. At the same time, instead of giving people more tax allowances and reliefs, the PAP Government continues to cast its tax net as widely as possible. It is true, Sir, that the low and middle income groups do not pay very high taxes. But it has to be remembered that, for them, a large part of their income goes to pay for the necessities of life, like food, health care, transport, housing, clothing, education for the children, and so on. They have very little left over for other things. Yet Government does not lift a finger to extend a helping hand to them by way of personal allowances and reliefs. How then can the PAP claim to help the poor?

From 1961 to 1990, 30 years, the personal allowance for a married couple has remained the same at $3,000. Only in 1990, was it increased to $3,500. Today the people are paying more and more taxes almost on everything in the form of fees, charges, licences, permits, levies, duties, rates, fines, what-have-you, just name them, and the PAP will impose a tax on them. With an ever increasing cost of living, $3,000 in take-home pay after CPF contributions will not go very far. As very tersely and forcefully pointed out in the Straits Times editorial of 1st March 1991, and I quote:

"That might have bought a lot in 1961. But not today." If the Straits Times (often called a PAP newspaper) could argue the case so strongly for personal allowances, what excuse has Government not to increase them?

As I had pointed out in last year's Budget debate, for many years Malaysia's personal allowance for a married couple has been $7,000 a year. Yet with a higher cost of living in Singapore, our Government's miserly personal allowance for a married couple has only recently been increased to $3,500. We have billions and billions in reserves, and we have billions in surpluses year after year since 1986.

Corporate taxes have been reduced again and again, from 45% not so very long ago to the present 31%. And the Minister has told us that a 1% reduction in corporate tax works out to $70 million. Just calculate the billions and billions that have been given to big business in tax concessions all these years, not to mention the billions that have been given to big business during the 1985-1986 recession in Singapore. The rich and high income earners too have had their personal tax rates reduced from 40% to the present 33%. Yet the PAP would rather help big business to make more and more profits, and the rich to become richer, than give some measure of necessary relief to our low income workers.

Clearly the PAP has all its priorities upside down. When it should be helping the low income people, it would rather help big business and the rich instead. When it should tax those best able to pay, it would rather tax those who have low incomes, and who live from hand-to-mouth. If the PAP aimed to be a caring society, as it has said on many occasions, then the first step should be to lighten the burdens of the lower income group in Singapore.

In this connection, I would also like to call the attention of the Minister to the hardships caused by the imposition of heavy levies on foreign maids. Tax rebates are presently given to working married women. There are, however, also non-married women who need the services of foreign maids to look after aged parents and younger children. Although tax reliefs are given for normal children and aged parents and handicapped children, the Minister should know that these tax reliefs are totally inadequate. No one wishes to incur extra household expenditure to engage a foreign maid unless absolutely necessary. Tax rebates should therefore be seriously considered also for households which need the services of domestic help for whatever reasons. The Government should not try to put a tax on everything.

Let me conclude, Sir. The Government has spoken much of its Vision 1999 and now of the Next Lap. But all this will remain an empty dream if we do not keep our priorities right. In the past, the PAP used to say that we had to enlarge the cake before we could share it. Over the years, we have enlarged the cake many times. But the cake is still being hogged by the PAP, and it is not being shared more evenly. A few at the top are enjoying all the best on the table. The vast majority receive only crumbs and left-overs.

Presently, a large part of our budget is spent on defence, 27.9%. Only 4.5% is spent on health, and a meagre 1.4% on community development. A world of difference. If only a portion of these funds spent on defence should be channelled to improving education, health-care and welfare of the people, all Singapore would benefit. But almost all fiscal measures, year after year, have been designed not to promote welfare and ease the burdens of the people, but to promote growth and increase the profits for big business. Meanwhile, many continue to suffer hardships.

Already there are promises of increases in PUB rates and other fees and charges. Even burial fees have gone up. And consumption taxes may soon be imposed. The people may also expect the imposition of more and more inter-budgetary taxes without any debate at all on the matter. If Government is serious about improving the lot of our people, all this must change. And the sooner the better.

Assoc. Prof. Maurice Choo (Nominated Member): Mr Speaker, Sir, when I asked my 10-year old last night what he would like most if he were sick, he said: "I want to get better so that I can study and play." It struck me that all the key elements of good medical care were encapsulated in that wish. These have been expressed by more sophisticated minds as access, affordability and quality.

Some weeks ago, I was speaking with a group of journalists, some of whom are in the Gallery here, about the critical issues confronting Singaporeans today. There was unanimity that the rising cost of medical care is one. Today, I should like to keep one eye on this year's health budget but, more important, the other eye at the longer term prospects for containing health costs, yet ensuring access to quality care.

"Health care systems of all types are in crisis." This was the opening salvo in a report of a joint conference between the Royal College of Physicians of London and the American College of Physicians held in January last year. Americans spend US$600 billion or 12% of their GNP on health care. Despite this, the American health care industry is tottering under a host of problems identified by Don Berwick from Harvard as "technology out of control, rising costs, variations in care, rising malpractice suits, angry payers, hospitals going broke and patients afraid."

This is not the scenario in Singapore today, but may well be. The US problems may become our problems, and their solutions today may offer means for our escape tomorrow. For this reason, we should examine them closely, so that we can choose the right programmes and maximise our health dollars.

One of the solutions offered at the conference was "outcomes management" a term proposed by Dr Paul Elwood of Interstudy and Quality Quest, USA, a pioneer of health maintenance organizations. Outcomes management measures the effectiveness of medical practice through assessment of patient outcomes. Put simply, it seeks to find out, in medical care, what works, why it works, and how it works. This movement is gathering so much momentum that the editor-in-chief of the prestigious New England Journal of Medicine, Dr Arnold Relman, called it a revolution.

In 1988, research into outcomes manage-ment in the USA was limited to US$1.9 million. Just two years later, in 1990, the US National Center for Health Services Research allotted more than US$30 million for such research. It is hoped that this research will obtain "better information for doctors and patients, improved guidelines for medical practice, and wiser decisions by purchasers of health care."

Outcomes management will not solve all, nor even most, of the problems that plague health care today, but it is an important measure. In Singapore, we have hardly begun to study widely and systematically our own medical processes and outcomes. Looking at the health budget, I could not detect any specific allocation of resources for this activity. To be sure, outcomes management may be done here and there on an ad hoc basis, but it requires a clear commitment of resources if it is to yield benefits. I would therefore urge the Minister to consider such allocations.

It is now recognized that large computerized medical databases offer investigators of outcomes a rich source of information to dig into. Although such retrospective analysis is non-randomized for study purposes, it offers a valuable insight into actual medical practices and results. Unfortunately, most medical databases focus on financial and administrative transactions. The clinical and scientific content is often paltry, and reveals little about the actual process of delivering health care. Although electronic medical databases are at a developmental stage, I would suggest that hospital databases incorporate some useful clinical parameters for future outcomes analysis, and the Ministry's full implementation of Medinet should attempt to accommodate this.

Unlike cures for diseases which are more easily seen and measured, outcomes of primary prevention programmes are less obvious. For this reason, doctors and lay persons alike have not placed much emphasis on preventive measures. Yet personal responsibility for health maintenance is increasingly recognized as an important strategy to reduce health care expenditure.

Commenting on a 10-year plan laid out in the document "Healthy People 2000: National Health Promotion and Disease Prevention Objectives" published last year by the US Department of Healthy and Human Services, Dr Louis Sullivan, a staff member, claimed that "better control of fewer than 10 risk factors - such as poor diet, lack of prenatal care, infrequent exercise, the use of tobacco, alcohol and drug abuse, and simple failure to use seat belts - could prevent between 40% and 70% of all premature deaths, a third of all cases of acute disability, and two thirds of all cases of chronic disability."

I was, therefore, amazed to see that our Training and Health Education Unit spent an estimated sum of only $2.60 per capita in financial year 1990, projected to increase to $2.73 per capita in financial year 1991. Yet, it has been noticeably more effective and dynamic in recent years. It may be deduced that the Unit is highly productive, or has alternate sources of funds. Of course the limited number of risk factors, legislation on seat belt usage, and increases in tobacco tax make its task easier, but I wonder if the Unit's impact would be greater if it had more than $2.73 per capita.

In the same table, one notices under the item "Health Services for the Elderly" that the number of home visits for the elderly has fallen from 39,155 in 1986 to 28,466 in 1990. I am perplexed that our ageing population with more elderly sick appears to require less home visitation services. Could it be that our family units are really getting stronger? Or could it be that the cost per visit has increased from $16.10 in 1986 to $25.30 in 1990?

Mr Speaker, in my last address to this House, I spoke on the urgent need to grapple with the challenge of an ageing population. In their occasional paper published this year entitled "Health Care Economics, Policies and Issues in Singapore," Dr Toh Mun Heng and Dr Linda Low, two economists from the NUS, wrote that the "social security system in Singapore, based on the CPF scheme, has carefully considered the problems of the aged both in magnitude and composition." This statement was based on the 1984 Ministry of Health's Report of the Committee on the Problems of the Aged. Given the exponential increases in health costs to come, and knowledge of patterns of Medisave usage so far, I would suggest that the Ministry carefully reconsider the problem.

Looking ahead, it has been suggested that many health economies will be most devastated by two explosions - the explosion in the ageing population, and the explosion in medical technology. What is more, technology may increase longevity, and longevity will increase the use of technology.

Technology out of control in medical care is no longer hyperbole; it is real and it is frightening. Technology is multiplying and growing so fast that it may be impossible to know for certain what is useful, what is superfluous, what is redundant, what is extravagant, and, worse, what is harmful. Growth in technology appears to be limitless.

Many papers on the "New Technology Assessment" have appeared in recent literature. Dr Victor Fuchs and Dr Alan Garber from Stanford University assert that in "an era when government insurance companies, and employers insist on cost containment, the new technology assessment can be the most powerful tool physicians have to protect the interest of their patients."

This assertion has two weaknesses. Firstly, an inherent problem is that while each year brings a plethora of new innovative technology, each technology may take several years to assess. Secondly, physicians practising in an entrepreneurial environment, in which the application of new, even untested, technology widens the scope for reaping financial rewards, cannot be relied upon to protect the interests of their patients. In fact, many would suggest that in such circumstances the patient has to be protected from the physician.

In this complex situation involving the patient, the doctor, the purveyors of technology, third party payers such as employers and insurance companies, and the government, who is to decide? The patient cannot, the doctor may not, and the purveyors must not. Quite interestingly, Lee Iacocca, who could turn debt-ridden Chrysler Corporation round, confessed: "Business has lost the war on hospital costs." He suggested turning the job over to government. If our Government is to take the lead in technology assessment, it will, just as in outcomes management, need to allocate substantial resources for research.

Excessive application of medical technology is not new. Alexander the Great, who came to an early end, said: "I am dying from the treatment of too many physicians." Today, we still need to avoid over-investigation, over-diagnosis, and over-treatment. To do this well, it is now conceded that the effort can only be orchestrated from the centre. Left on their own, all the concerned parties will merely "nibble around the edges" of the problem, doing what former US Secretary of Labour, John Dunlop, called "disjointed incrementalism."

To coordinate our response to the whole problem, the Ministry must reach out to affect not just Government and restructured medical services, but also academic and private medical centres. For this, it must commit not just funds but constant attention.

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

Encik Abbas Abu Amin (Pasir Panjang GRC): ( In Malay): Mr Speaker, I support the motion moved by the Hon. Minister for Finance.

We must be grateful that, for the past several years, we have always enjoyed budget surpluses. It is no easy task to plan and implement the national budget in such a way that an economy vulnerable to shifts in the world situation can keep thriving. The budget this year has been a cautious one, and this is explained by the uncertainties in the international business scene. Thus, a number of tax incentives have been given to businessmen. Still we find various parties who are unhappy with these facilities.

Mr Speaker, the Government policy of making sure that every citizen enjoys the fruits of prosperity is evident in a number of incentives that have been provided, such as relief for the handicapped spouse and for contributions to Edusave. The 5% tax rebate would certainly ease the burden of the people.

I would like to comment on a number of points raised in the debate yesterday and today. Firstly, on the restoration of 1% of employers' contribution to CPF. I am disappointed to hear a number of hon. Members complaining about the rising wage cost. Business costs should be viewed in a wider perspective. Wage cost is only a part of its totality. Rentals and utilities, telecommunication and transportation costs as well as statutory fees are also part of the cost of doing business. All these have gone up. For example, Dr Arthur Beng said that rentals have risen by 200-300%. I have not heard any company giving its workers that much a raise. The question workers ask is, with all these costs rising, why not their wages too? They know how well their companies are doing. This, they feel, is unfair.

Workers have been expecting the restoration of employers' contribution to CPF during the good years before the recession. So far, we have restored 6.5 of the 15 percentage point cut. If employers and their spokesmen continue to begrudge the 1 percentage point, they are going to be viewed with low regard by their workers. Workers would press their leaders not to trust the employers and to take a militant approach. Is this what our employers and their spokesmen want? Fortunately, Mr Speaker, we can be proud that we have as leaders of our unions responsible men who have the national interests at heart.

Mr Speaker, secondly, I would like to touch on training facilities provided for our workers. I support the Government policy of providing funds for upgrading the skills, knowledge and competitiveness of our workers. If the Edusave scheme is meant specifically for our children who are still in school, equal attention should be given to efforts to retrain workers who do not possess high qualifications and who are 35 years and above. Although Government bodies like the NPB, VITB and the unions do conduct classes for workers, more meaningful efforts can be made to encourage workers to attend these courses. And I would like to urge all employers to invest in such training programmes. In this regard, the Skills Development Fund (SDF) should be fully taken advantage of to further this noble aim. I would also like to suggest that companies organise inhouse skills training programmes, providing training of specific relevance to their own workers.

With the end of the Gulf war, there are signs that our economy will continue to grow again. More stress should be laid and incentives provided to build and maintain a productive and highly skilled labour force.

Finally, Mr Speaker, I would like to touch on the Consumer Price Index and on the cost of living. I read with interest the introduction of the water conservation tax. From 1st April, a rate of 5% will be imposed on domestic water usage exceeding 20 cubic metres a month. Although I fully support the Government's move to penalise those who waste water and other utilities, I hope the Government would also conduct programmes to educate the people on the need to conserve and be cautious in our spending. Of greater concern to me is the rising cost of living that is affecting the people of Singapore, especially the lower income group. Currently, the Consumer Price Index is at about 4%. Any real wage increase must exceed the rate of inflation, which is the concern of all, workers and employers alike.

Mr Speaker, I support the motion.

Mr Charles Chong (Sembawang GRC): Mr Speaker, Sir, I rise in support of the motion moved by the Minister for Finance.

Sir, I am glad to note that the economy turned in yet another good year, registering a growth of 8.3%. This is also the fourth year in a row that we have achieved significant economic growth. I think there can be little doubt that we have indeed come a long way from the shadows of the 1985-1986 recession when many in the labour force had to accept sacrifices such as a wage freeze, forgoing of NWC increments and, most significantly, a 15% reduction in the employers' CPF contribution from 25% to 10%. I distinctly recall during the recession that workers were told that these cut-backs were necessary in order to get the economy and their companies back on their feet. Many of them also believed they received assurances that these cuts would be restored once the economy recovered. Workers also accepted the fact that the restoration of the CPF reduction would be gradual, in line with our economic performance and that it may never go back to the pre-recession rate of 25%.

Like the Member for Pasir Panjang GRC, Major Abbas, who spoke before me, I am disappointed, not so much on the mere 1% restoration of the employers' CPF contribution, but more on the negative reaction of some business leaders and employers who obviously feel that even this 1% increase is 1% too much. The Member for Eunos GRC, Mr Chew Heng Ching, feels that this may be only 1/2% too much; whereas the Member for Cairnhill feels that this is more than 1% too much and has urged the Minister to reduce the employers' CPF rate in his next announcement.

I would like to remind employers that this so-called increase in CPF contribution is in reality only a partial restoration of the 15% cut employees accepted when the economy was in recession, on the explicit understanding that it will be restored once the economy recovered. Mr Speaker, Sir, if we cannot fully restore the cut in CPF rate after four consecutive years of strong economic growth, exactly when can we expect to do so?

It has been argued that we must be cautious and take measures to avoid possible future downturns as advocated by a number of Members yesterday. Sir, there can be little said to dispute such a prudent point. However, restoration of the CPF rate should never be used to further such an argument. We must never think only in the short term. If there is a possibility of future economic downturns, as invariably there would be, then it is more imperative that we maintain credibility with our workers. I would like to think that when we face another downturn in the future, our union leaders would still be able, without any loss in credibility, to go before their membership and convince workers to accept sacrifices once again, on the understanding that the cuts would be restored once the economy recovers.

Sir, I congratulate the Government for announcing the impending increase in employers' CPF contribution despite lobbying to the contrary by some employers. This is a measure that clearly demonstrates the Government's will to keep faith with the workers. I would like to urge the Government and employers to support the restoration of the remaining 2 1/2% employers' CPF contribution that is still outstanding without further delay while the going is still good. If this is done, I am positive that if we are hit with another downturn, we can rest assured that workers once again will do their part in turning the economy around. In this respect, I would like to request the Minister to allow companies that can afford it to proceed with restoration of the remaining 2 1/2% of employers' CPF contribution ahead of Government legislation.

Notwithstanding the restoration of the CPF rate, should we be concerned that real wages rose by 6.4% compared with only 3.4% growth in productivity? The Member for Cairnhill feels that we should be gravely concerned because nominal wages rose by 9.4% which was way ahead of the 3.4% productivity growth. The Member for Kebun Baru, on the other hand, feels that there should be less concern because real built-in wages rose by only 3.3%, which was less than productivity growth.

Sir, I spent some time last night going through all the figures again. I can assure the House that both of them were indeed telling the truth. I am just amazed that such different stories can be produced using the same set of facts. Similarly, the NCMP's assertion that the Government helps only the businessmen seems to be at odds with what the businessmen themselves say. Whatever the case, I am concerned that some of us appear to be attracted to easy and short term solutions in addressing our problems. If there is a perceived gap between productivity and wage increases, I would have thought that the most preferred and long term solution would be to raise productivity. Instead, emphasis has been concentrated mainly on the need to keep wages down. If we intend to keep wages of our workers comparable to that of workers in third world countries in order to be competitive, then we will always be a third world country, and we would have wasted much time in talking about the next lap.

I would therefore like to urge employers to place greater emphasis on the promotion of productivity and also share the benefits of productivity increases with their workers. If workers are able to see direct tangible benefits on productivity increases in terms of higher bonuses and improved working conditions, then the word "productivity" would no longer be regarded as an abstract term which some workers still perceive as a tool of management to squeeze more out of them.

I would also like to urge unions to play a greater supporting role in productivity promotion in their companies for the benefit of their members and their companies. The Government, too, can assist in providing more incentives and assistance to companies, especially the SMEs, to embark on productivity enhancement in addition to the current incentives it provides for worker training and skills upgrading.

Finally, Sir, another subject in the Budget Statement that I would like to briefly comment on is the goods and services tax, which a number of speakers before me had already addressed. The Minister has been talking about this broad-based consumption tax for quite a number of years already, and I am confident that all possible regressive implications of such a tax would have been taken into consideration. However, I would like to express apprehension on the possible impact such a tax would have on inflation which has already risen to 3.4% last year. I also note that we have had to introduce unpopular regulations such as the half-tank rule and, more recently, the three-quarter tank rule in order to reduce loss in revenue. If we do introduce the consumption tax, I hope we never have to expand this regulation to include perhaps a one-shirt rule, or a one-pair of shoes rule. Sir, it may be a little premature to comment on the proposed tax at this stage, as the White Paper has yet to be published. However, I feel compelled, purely as a pre-emptive measure, to remind the Minister that he has constantly provided reassurances in this House that the negative impact on the lower income groups would be addressed in the formulation of any consumption tax. The Minister has also reiterated on several occasions that such a tax will be introduced only if Government revenue shortfall is substantial and a permanent deficit is inevitable. I am therefore extremely glad to note that this year's budget is expected to generate a surplus of $1.4 billion. May it always be in surplus this year and every year without the consumption tax.

Encik Othman bin Haron Eusofe (Marine Parade GRC): Sir, I would like to deal with the increase of the employers' CPF contribution by one percentage point to 17 1/2%. Some Members of this House, identified as the "pro-business" MPs, have spoken on this issue, and they have asked for this increase to be re-considered, reduced or even deferred.

Sir, like my colleagues, the MP for Pasir Panjang GRC and the MP for Sembawang GRC, Mr Charles Chong, I am disappointed. I cannot agree with them. I would like to appeal for their understanding on this.

The proposal to raise employers' CPF rate by one percentage point is fair. Let me also remind Members that in 1986 our workers made a big sacrifice by taking a deep 15 percentage point cut in employers' contribution. Sir, this is a big wage cut. This has helped to make their com panies competitive. Sir, it also helps to save jobs, but, more importantly, it has helped their companies to turn around quickly. After several years of good economic performance, only half of this cut has been restored. Sir, we would like to have the cut in employers' CPF to be restored quickly. But we understand that we have to be cautious. From 1987 onwards when the economy improved, the rate of restoration has been a cautious one. The workers have also agreed to a long term rate of 20% contribution each from both employers and employees. This is below the 25% before the recession.

Sir, it is only fair that workers enjoy a fair share of the economic success of Singapore for their hard work and contribution. My colleague, the Chairman of the GPC on Labour, Mr Lim Boon Heng, has explained yesterday that last year's wage increases were achieved because of two reasons. Firstly, the good performance of the companies and the economy; the other reason being the tight labour market. Because of the tight labour market, many companies have made wage adjustments in order that they can retain their workers. While this was the position last year, union leaders and workers have taken a responsible attitude and stand, and have not exploited the situation.

Some Members have spoken about the increase in wages above the productivity growth. But here the point has been made that real built-in wage increase was in fact below the productivity growth. The real built-in wage increase was only 3.3% compared to the productivity growth of 3.4%.

Sir, I understand the concern of our businessmen, especially the local businessmen, over the rising cost of doing business. However, wages of workers are only part of their problem. There are other cost elements. These have been mentioned such as the increase in rental rates. There is a need to consider reducing the corporate tax rate. If we compare the corporate tax rate in Singapore with some of our competitors, there is a case for considering a reduction. Government levies is another reason for the increase in the cost of doing business. Not the least, I think, are the salaries of management staff. I am told that the salaries of our management staff, ie, especially the CEOs in Singapore, are much higher compared to those of other countries in Asia. These are some of the areas which we can look into to understand why the cost of doing business has gone up. But I do not think Members in this House should have taken issue about the increase in the one percentage point in the CPF.

The Member for Sembawang GRC, Mr Charles Chong, has spoken about the need to increase productivity. I think productivity increase is the one way whereby we can continue to be competitive. So management factor in productivity increase is something which we must pay attention to. Management should improve productivity, cut cost and wastage, motivate their staff to do better and go for more training of their staff. In this way, we can increase productivity and we can have wages which are competitive, and which will not be the concern of our businessmen. The wages, even when they are high, will still be affordable, and at the same time their competitive position is not eroded.

So I hope our employers and management should not make a big song and dance about this increase in the 1% of the employers' CPF rate. The exercise is actually to look at ways to improve productivity, how to train and motivate our workers to do their best so that they will continue to be Number One, be effective and help ensure that our economy will grow.

Sir, on this note, I support the motion.

Mr Heng Chiang Meng (Cheng San GRC): Thank you, Sir, for allowing me to join in this debate.

Sir, once again, I would like to take this opportunity to clear up a contradiction in the argument put up by the Non-Constituency Member of Parliament. In one breath, he derides the across-the-board tax rebate as being more beneficial to the rich than to the poor. In terms of absolute dollars, he is not wrong. Yet, in the next breath, he argues for an increase of personal and wife reliefs, even using the Malaysian reliefs as an example. May I remind him, Sir, that increasing the reliefs will benefit the rich more than the poor. I believe I said that last year, and I am saying it again. A taxpayer at a 30% marginal tax rate will save $300 for every $1,000 increase in relief, whereas a taxpayer, at a 5% marginal tax rate, will only save $50. Is this what he wants?

Sir, of the inflation rate last year of 3.4%, only 0.4% was attributed to external sources, while 3% were due to domestic factors. One of the main domestic factors was the tight labour market, which in turn affected sectors with a relatively high content of labour, especially the service industries.

Sir, it is clear that for us to remain competitive, labour must continue to be productive, as already mentioned by a number of labour MPs. As we move towards greater emphasis on service industries, productivity gains become that much more difficult. Moreover, the Government's policy on foreign labour means that a large portion of our foreign labour force will remain transient which translates into low productivity.

The message is very clear - relocate to a country with cheaper labour cost if you need significant labour input in your products, especially those of low productivity labour; or else, close shop in Singapore, because we have no place for low productivity labour industries in Singapore.

Hence, the encouragement to our local businessmen to globalise, especially to invest in the economies of our immediate neighbours in ASEAN. Sir, it makes good economic and even political sense.

Sir, it is a first-class policy, but then what about its implementation? The Government has helped but in a very ad hoc manner. Globalisation is not just removing tax inequities to encourage local companies to sell or invest overseas. There is a whole host of related problems which should be resolved. Unfortunately, many of these problems are beyond the capabilities of individual companies to resolve. Perhaps an example will suffice. Here I would like to declare my interest as a director of various companies expanding overseas.

Sir, a company relocating part of its production overseas normally would already have an existing market for its products. In order to maintain the quality of its products and to protect its reputation, it is important to train the workers from the new location to the same standard as its Singapore workers as quickly as possible. What better way than to train them here in Singapore, especially if these workers are from ASEAN countries. But when they are brought into Singapore for training, they are not treated as trainees. Instead, they are treated as any other foreign worker. Sure, a small token concession on the total numbers is provided, but even this concession cannot exceed the normal foreign worker complement, which means that it is actually not a concession. After all, if a company with about 40% of its workforce of, say, 2,000 workers, wishes to relocate its labour intensive production overseas, it needs to train its workers for the new location very rapidly. And even if you want to transfer that part which consists of all foreign workers, it needs almost 800 workers as quickly as possible in this example that I have given.

Worse is that the company will also be required to pay the normal foreign workers levy - as if the trainees are going to be part of a long term workforce in Singapore. We all know that relocation is expensive, training is costly, and very often the stay for such trainees in Singapore is too short to be of any use to the Singapore operations. Why then the extra burden imposed by the Government? The usual answer: because of possible abuse; because the Government is worried that there might be companies who will take advantage of a more liberal system to abuse or to violate the foreign workers rule. But surely, Sir, there are more equitable ways of controlling abuse than lumping together the genuine investors overseas and the crooks into the same category. I understand that the EDB aids those companies which invest in Batam with some sort of financial assistance for such training schemes. So why can this not be extended to other parts of Indonesia and even to other ASEAN countries?

Sir, as I said earlier, there is a whole host of problems related to the question of globalisation. In the 60s, in order to attract foreign investment into Singapore, we established various committees and a central body to examine the issue in all its aspects. We created the first one-stop investment development agency - for capital inflow. Now is the question of capital outflow, as foreign direct investment into other countries. So why can't we do the same to encourage Singapore-based companies to expand overseas, especially those companies belonging to Singapore nationals?

Sir, investing overseas is not just a matter of a tax change on foreign dividends. Nor is it just the establishment of a Singapore school in Hong Kong, nor companies incurring extra costs in tax equalisation schemes for their staff posted overseas, nor losses incurred in overseas investments not allowable for tax deductions against profits in Singapore. A total look at all the issues and problems of globalisation is required, and I would like to recommend that the Government set up a Committee to review these problems. For obvious reasons, the committee should include representatives of the private sector, across-the-board, in different industries and in different operations in different countries. The time is right for such action and perhaps even for an agency such as Japan's MITI or JETRO.

Goods and Services Tax (GST)

Sir, for several years, I have argued against this tax because of its regressive nature and the problems it may bring to one of our growth industries - the tourist industry. However, since the Minister cannot be convinced otherwise, I hope that these two issues will be thoroughly covered in his White Paper.

But then, Sir, this regressive nature is not new to Singaporeans. The user-pay principle espoused in the health and education services in Singapore is already a forerunner of the GST. The independent school assistance scheme is an implicit acknowledgement that the poor is much more adversely affected than the rich when coming to pay independent school fees.

My hope is that the Minister will include in his White Paper, ways and means to resolve such issues connected with GST. For example, basic necessities, such as rice, sugar, baby milk powder, could perhaps fall outside the ambit of GST. Or maybe a form of "reverse" income tax or coupon system whereby the Government gives poorer citizens money for certain types of expenditure. This could also be another solution. The Edusave is already one such coupon system. The CPF could be an ideal place for a comprehensive coupon system.

Entertainments Duty

The reduction in entertainments duty is welcomed. However, I do not suppose that prices to patrons will drop as a result of this reduction. All it means is more profit for promoters of shows and owners of cinema halls.

Would this lead to a more vibrant cultural and entertainment scene in Singapore? Sir, it is debatable. If the Minister is really committed to creating such a scene in Singapore, he should not have simply reduced the entertainments duty by half, but rather channel the duty that he is willing to forgo to the proposed Arts Council for its use, something like an "arts cess", similar to the tourism cess. It is, however, not too late. There is still the other 5%, and the amount is only $7 million, a paltry sum in the overall context of the budget. May I be so bold as to suggest to the Minister that he considers the conversion of the remaining 5% into an "arts cess" for the Arts Council.

While on this topic, I would also like the Minister to consider 1/2% of the tourism cess to be diverted to the Arts Council. After all, the tourism cess is for the promotion of tourism and a really vibrant arts and cultural scene is one of the best promotional materials of any country. Unfortunately, promoting arts and culture needs money, tons and tons of money. Some of the money needed should rightly come from the Singapore Tourist Promotion Board. It is not as if the Board cannot afford this assistance. Based on its Annual Report as at 31st March 1990, the 1/2% would amount to about $8 million. Its surplus for the year was about $14 million. Moreover, it has sufficient fat to meet the lean years, if and when they come. Over the years, its Tourist Promotion Fund has increased steadily, from $46 million in 1980 to $104 million in 1990. If my suggestions were to be accepted, there would be about an annual revenue of about $15 million for the Arts Council, hopefully adequate for its mission to promote the development of a vibrant arts and cultural scene in Singapore.

Sir, these suggestions merit some consideration, and I hope the Minister will not reject them out of hand. Because besides disappointing me and lots of other Singaporeans, he would also be disappointing his Senior Minister of State.

General Provisions for Banks and Merchant Banks

Sir, this is one tax change which should have been made several years ago. That it was not and banks still made the general provisions without the benefit of tax deductibility said a lot for the persuasive power of the Monetary Authority of Singapore. In any event, Sir, I am not complaining; better late than never.

The reasons given by the Minister for this change are also applicable to finance companies; hence, my surprise at their exclusion. (Sir, here I would also like to declare my interest as a director of a finance company.) In fact, I believe the reasons are more applicable to finance companies than to merchant banks, especially those relating to using depositors' savings for productive investment and the need to maintain depositor confidence. Sir, with your permission, I would like to ask the Clerk of Parliament to distribute some figures. [Copies of table circulated to hon. Members.]

Sir, if you look at these figures, from the year 1985 to November 1990, the total loans and advances made by finance companies were much more than the loans and advances made by merchant banks. I am comparing the finance companies to domestic unit operations of merchant banks. I use the domestic unit operations because merchant banks have large ACU operations. It would be unfair to compare them with the operation of finance companies which are in essence domestic. Moreover, the ACUs already have a 10% concession on many of their operations. If you look at the total deposits versus the borrowings of finance companies versus the borrowings from non-bank customers of merchant banks, again you will find that the figures for the finance companies are very much larger. Moreover, most of the depositors of finance companies are the men-in-the-street, whereas most of the depositors of merchant banks are large corporations. So here, therefore, if you want to look at the argument of the need to maintain depositor confidence, surely there is more need for the finance companies than the merchant banks. And if one uses the reason that depositors' interest should be used for productive investment, surely these figures show that finance companies have more need for the tax deduction than the merchant banks.

Sir, the exclusion of finance companies could perhaps be a simple oversight. If so, it is still not too late to include them. However, if it is not, could the Minister be giving us some subtle message? One could be that finance companies already have so much general provisions and the managements of the finance companies are so altruistic that they do not need tax incentives to assist them. If so, may I request the Minister to immediately remove the instructions prohibiting most public sector bodies from interacting with finance companies. For example, the public sector bodies are not allowed to place deposits with finance companies. They are also not allowed to accept guarantees issued by finance companies.

Sir, that was a good implication! A more sinister one could be a subtle message not to place money with them. I do not think that this was the message. Certainly I hope not. But surely the exclusion of finance companies raises a big question mark. Given the current restrictions on finance companies, they are already second class financial institutions. To deny them the tax deduction for general provisions will push them into third class. Is this the intention? Could the Minister please clarify?

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

Dr John Chen Seow Phun (Hong Kah GRC): Thank you, Mr Speaker, for allowing me to speak. Sir, I support the financial policy of the Government proposed by the Minister for Finance.

As emphasised in the Budget Statement, it is important that we adopt a two-pronged strategy for our economic development. Externally, we need to continue building linkages with other countries to ensure better economic stability and growth. Internally, we must have quick and nimble responses to changing circumstances and, wherever possible, allow market forces to work for us.

An example of a quick response by the Government is the proposed reduction of tourism cess rate from 4% to 3%. It goes to show that the Government now has the instruments to feel the pulse of the various sectors of the economy quickly and accurately, and is prepared to make policy changes to help the declining sector revive and stay competitive.

Sir, allow me now to make a suggestion on personal income tax. I would like to ask the Minister to consider giving a preferential tax rate of a mere 1 percentage point in favour of citizens. This I believe is necessary to underline the importance of citizenship, especially as we step up our efforts in attracting foreign talent into Singapore.

There have been some public discussions lately on whether we should link taxes with citizenship. Writing in the Sunday Times, Ms Tan Sai Siong argued that tax should be seen as a pure business transaction which buys the taxpayer "the privilege of earning a living in a particular place", and no more. She felt that "attachment and loyalty to a country is another thing altogether and should be priced above tax rates, rebates and reliefs."

Sir, such sanctimonious argument makes those of us who are in favour of a preferential tax rate look like sinners. While I agree that Singaporeans must be imbued with a sense of honour in carrying out their Total Defence obligations, we must not forget about the basics such as incentives, rewards and recognition which are just as important for a society to work. While we need to continue to attract foreign talent into Singapore, we must not ignore the feelings of citizens that they are disadvantaged, particularly those who have Total Defence obligations. If we only talk to them about honour of serving the country and nothing else, then we are bound to disintegrate just as communism has disintegrated and failed.

Nations throughout the world have always ensured that defence obligations and rewards go hand in hand. In the US, if you are a volunteer in the armed forces, you get certain benefits. In Switzerland, reservists who go for training pay less tax. Are the Swiss therefore less patriotic than us because they have linked taxes with national service? If the Swiss, with hundreds of years of experience and wisdom in nation building, have found it necessary to resort to the tax mechanism, I think it will be wise for us to look closely into the efficacy of linking taxes to defence obligations as a form of recognising the role of citizens.

Finally, Sir, I wish to make a comment on the Edusave Scheme. I hope that the Government will consider extending the scheme to all students instead of only funding the first three children of a family. The principle of Edusave is to give every child an equal start in life. It should not be linked to the other incentives or disincentives for having a larger family. Just imagine what psychological impact it will have on a child if he is constantly reminded for 10 years that all his friends receive and enjoy Edusave contributions from the Government except him.

Mrs Yu-Foo Yee Shoon (Yuhua): ( In Mandarin): Mr Speaker, Sir, I rise in support of the motion in the name of the Minister for Finance. But I would like to deal with some comments and views expressed by my colleagues in this House.

As a Member of the Feedback Committee, I have the opportunity to take part in the dialogue sessions and forums with representatives of the workers, businessmen and unions. Yesterday, some of my colleagues reflected the views of the employers and businessmen. I would like to reflect some views of the workers and union leaders.

On this question of 1 percentage point increase in the contribution of CPF by employers, the employers expressed dissatisfaction and disappointment. But I think this is a correct step taken by the Government. Probably it is because some employers and some of my colleagues in this House are troubled by the question of water conservation tax and the increase in rentals that they are expressing unhappiness. They cannot give good reasons to counter such problems, so instead they vent their dissatisfaction over the increase in the employers' CPF contribution. I do not think that we should use the word "increase". We should, instead, use the word "restore". This restoration of 1% is a very reasonable step, although some workers still feel that it should have been restored to 20%. A few months ago during the uncertainty of the Gulf War, the Government had, in spite of that, made a proposal to restore 1%. I think it is very reasonable.

Right now, business people may face a certain challenge, and we accept that. But they seem to forget the basic objective and the social role of the CPF and, that is, to help these workers own their homes and it is also extended to cover Medisave. CPF has taken a new role of adjusting wage cost. When we face a recession, the CPF is adjusted to take care of that. So when there is prosperity then it should be restored accordingly. We must not forget that the workers had already sacrificed 15% of their CPF during the recession. The employers should not be shortsighted. They must take up their social responsibility. More importantly, we have been able to weather through the recession and difficulties, one after another, and it is because our workers have the confidence and trust in the Government.

In 1987, the Government reminded the employers that in the next few years, it would restore the CPF to the 20% bracket. So the employers must not forget this. They must regard the restoration of CPF as part and parcel of their operational costs. Some people have touched on the question of wage cost and my colleagues have already pointed out that if we offset the inflation rate, then the actual wage cost increase is only 3% which is well within the productivity increase. So more importantly, we must think of the long term to ensure that we link the wage increase to productivity increase.

In 1983, according to the American statistics, in terms of the cost per hour (in US$) in the manufacturing industry, we might be a little higher than in Hong Kong and South Korea, but compared to other countries, we were lower. But in 1989, in Taiwan and South Korea, the cost per hour was $3.55, Taiwan was $3.43 and Singapore was only $3.09. So when we compare all these figures, we can see that we are still competitive in our wage cost. The question is: with whom are we competing, and with whom are we comparing? If we compare ourselves with the advanced countries, with the developed countries, then in the long term we want to reach a standard of living of Switzerland. So we must compare with the advanced countries. We should not compare with the under-developed countries. If we continue to compare ourselves with the under-developed countries, then we would not be able to increase and improve our standard of living. So more importantly, we must compare ourselves with the developed countries. How do we ensure that our workers will be engaged in high value-added activities? This is the reason why the Government has come up with the concept of the Growth Triangle. It would have a good effect on our economy in the long term and that is the reason for offering our infrastructure and our services to our neighbouring countries and extending our field of operations.

I hope that our employers and the Government will note that when we relocate our industrial activities to some other countries in the neighbourhood, we will have the problem of maladjustments or unemployment. We have about 300,000 to 400,000 workers who have low education. Although we are supposed to be the best workers in the world, in terms of skills we are ranked only 14th. So we must pay attention to the older workers to help them adjust to the new situation when our labour intensive industries are relocated elsewhere. How are we going to help them through the language that they are conversant with to go for training? You should not ask them to go for four years of primary school and another two years of secondary school to learn English and Mathematics before they can go for skill training. We must give them re-training in the language that they are conversant with.

The next point is, as I have already said, we must enhance the skill level of our workers, especially the older ones, so that they are able to be engaged in high value-added activity.

Mr Goh Chee Wee (Boon Lay): Mr Speaker, Sir, I feel compelled to say something in the midst of all these calls for restraining wage increases.

Yesterday, many MPs have expressed concern over the rising cost of doing business in Singapore. Many pointed their fingers at the rising wages. Some suggested the deferment of the increase in CPF contribution rate. Some suggested that we bring in more foreign workers to contain the wage increases.

Sir, I am very concerned and worried about the way things are going. Let me quote the statistics which show the income distribution of the wage-earners in Singapore. The latest published figures are contained in the Yearbook of Statistics 1989. The 1990 statistics should be available some time this year.

In 1989, out of a total workforce of 1.26 million, 156,000 or 12% earned less than $400 a month. 428,000 workers or 34%, which is one in three, earned less than $600 a month. And I checked the figures published in the latest CPF Annual Report and it also showed that about 10% of the CPF contributors earned less than $400 a month. The wage level in 1990 and the beginning of this year could be higher than in 1989. But we are still talking about almost one-third of our working population earning less than $600 a month, and one in 10 earning less than $400 a month. I am sure all will agree with me that with the rising cost of living in Singapore, $400 a month or $600 a month can hardly be considered as sufficient to support a family. So what do we do to help these low income earners? Bring in more foreign workers to further depress their wages? It does not make sense.

I must say that while the wage level of the Singaporean workers is now below those of many of the other NIEs, the wages of the senior executives and the managers have gone up tremendously. According to the survey conducted by the World Executives' Digest, the Singapore top executives are now the highest paid in Asia. This is not NTUC's statistics, but this is a survey conducted by World Executives' Digest. Singapore Chief Executive Officers (CEOs) grossed annual salaries of US$114,000. It goes down the line, Hong Kong US$96,000; Australia US$92,000; South Korea US$87,000 and so on.

Sir, I do not begrudge how much the managers earn. They can earn as much as they wish. But what I cannot accept is to point our fingers at the poor workers and say, "Hey, your salary is too high" when it is the managers' pay which is growing out of proportion. What I have found most objectionable is the suggestion to reduce the foreign workers levy or to bring in more foreign workers, which will bring down further the wages of those who are already earning miserable wages.

Sir, I must remind employers that they cannot expect to make money or continue to make good money in a country if the people are discontented and feel that they are unjustly treated. One of the main causes of discontentment and social unrest, as had happened elsewhere, is the wide disparity in income between the poor and the rich. I am not saying that this is going to happen in Singapore, but employers would do well to help narrow the income gap by raising the wage level of low income workers, not depressing it.

Mr Chng Hee Kok (Tiong Bahru GRC): Mr Speaker, Sir, thank you for letting me join in the debate.

I rise in support of the motion standing in the name of the Finance Minister. However, I am not sure whether congratulations for the Minister are in order, Sir. While it is true that the new budget contains no shocks or unpopular taxes, it also contains no surprises or creativity. Perhaps because our economy is cantering along at a steady pace, there is less need for a more creative budget. However, it is in a period of calm that we have the greatest latitude for creativity in planning for better times and dire contingencies. With the uncertainties of the post-Gulf war still present, I would have thought that the Minister should have shown more initiative in his budget.

Sir, the focus on cost of business at the moment is on the 1% increase in employers' CPF rate. Most speakers before me have mentioned this particular subject. I believe the focus is on the 1% mainly because it epitomises a string of other cost increases which are worrying the business sector and most industrialists in general. Although the Minister may argue that we are cost competitive to the other newly industrialising economies (NIEs), it is the trends which are reminiscent of the 1985 recession which businessmen are most worried.

What are some of the trends? First, unit labour cost. Compared to the other NIEs, the Minister has indicated that Singapore's unit labour cost is still competitive, but he did not mention that we are the only one which is showing an increase since 1986. The unit labour cost of Taiwan, South Korea and Hong Kong in fact declined last year.

Another worrying trend is the increasing statutory board surpluses. Similar to the years leading to 1985, our statutory board surpluses are again on the upward path. The surplus recorded in 1988 was about $1 billion. This has increased to $2.4 billion in 1989 and last year it was projected to have increased to $2.7 billion. As can be expected, the major share of the increase came from the business sector, and it appears that our memories of the 1985 recession amongst bureaucrats are shortlived. I think fundamentally the Government must raise its revenue from tax on healthy company profits and not raise revenue through other sources in the form of statutory board levies.

Another disturbing trend is declining company profits. Profits of public-listed companies, especially those in manufacturing and industrial based, are declining. Not unlike pre-1985, profits of property-based and hotel-based companies are now good. These companies have benefited from increased rental income and higher room tariffs for hotels. Although the total aggregate profits of public companies may still look comforting, it must be realised that certain sectors, especially the property-based companies, are doing well at the expense of the others.

Reminiscent of 1985 is also the strong Singapore dollar against the US currency. This has a significant impact on competitiveness of Singapore manufactured goods and products. Most exports from Singapore are sold or quoted in US dollars. As a result, exports have declined or in some cases Singapore products are no longer competitive because we just cannot compete on US dollar prices due to our high cost.

All the trends which I have just mentioned are indeed worrying. Unfortunately, unlike 1985, the world was then not in recession. Only Singapore was in recession. The recession in Singapore was confined to our shores as a result of our own internal cost structure which went up. At that time, by trimming our costs and a cut in the CPF rate, we could plug into the world economy, especially the US economy which was still growing. In this way, we turned the recession around rather quickly.

Today, the situation is less certain. At home, we have completed most of our major infrastructure development projects. The public housing building rate is declining. The MRT is almost completed. Our major road building programme is likely to be completed with the completion of the Central Expressway. The US economy is heading for a recession, and of course the continuing US problems of budget and trade deficits are much worse today than in 1985. The German economy is already affected by the reconstruction of former East Germany. The Japanese economy is badly affected by the decline in stock and property prices resulting in banks trimming their loans. All these countries are also adversely affected by the necessity to raise large sums of money, especially through taxation, to finance the just completed Gulf war. The result is tight liquidity. I think the much touted boom of post-Gulf war reconstruction may take a little more time to come about.

In the light of this, I am most surprised by the budget which seems to be oblivious to the problems which we have wrought on ourselves in 1985. By continuing to focus on comparison with the other NIEs on cost competitiveness, we may be going on a wrong track. The other NIEs have their own problems and not unlike Singapore's. South Korea also suffers from problems not unlike ours. They have substantial wage increases, high oil and land prices and they have continuing trade friction with the US. Taiwan suffers from a severe labour shortage, high production cost and very high land prices. And Hong Kong's largest problems are those related to the political uncertainties of 1997. This has discouraged investments and made worse by large-scale emigration from Hong Kong. Hence, by focusing on the NIEs which have similar problems to ours, I think we may not realise that all the NIEs including ourselves are heading towards a stage in which we are all no longer competitive.

Our competition must surely come from rising industrialising economies like Thailand, Malaysia and Indonesia. Reading published reports like the Economic Survey of Singapore and the budget statement of the Minister, one could not help but feel that scant attention is paid to competition from these three countries. Their high economic growth rates, their abundant land and labour resources and the tailoring of economic policies and incentives to attract foreign investments must pose a serious threat to us than warranted by the attention or lack of attention paid to these countries. In fact, the competition is made more acute by Johor and Batam which are directly plugged into our trade and communications infrastructure. Therefore, I suggest that we must begin to publish indicators of competitiveness of these countries, Malaysia, Thailand and Indonesia, as we have done for the other NIEs.

Hence, it is imperative that the Government do an immediate review of our cost competitiveness before we run smack into another 1985. This time around, we may coincide with a world recession which we may not be able to recover so swiftly. With this scenario, mere cost cutting measures will not help. The Government's attitude towards the complaints of business is not quite unlike that of the years leading to 1985, that businessmen just complain too much. On the contrary, the 1985 recession has taught us most vividly that the rising volume of complaints is only the lull before the storm. The level of complaints should be treated as a barometer of potential problems on the horizon.

The Government should have delayed the 1% hike in CPF until the aftermath or effect of the post-Gulf war economy is more certain. It is still not too late to reverse the process. Given the choice of smaller CPF increases or putting our CPF on hold as opposed to losing our jobs, I think the choice is very clear.

Mr Speaker: Order. I suspend this sitting and will take the Chair again at 3.15 pm.

Sitting accordingly suspended at 2.29 pm until 3.15 pm. Sitting resumed at 3.15 pm

[Mr Speaker in the Chair]

Debate resumed.