ANNUAL BUDGET STATEMENT

[Mr Speaker in the Chair]

Debate resumed.

Dr Arthur Beng Kian Lam (Bedok GRC): Mr Speaker, Sir, I join my colleagues in endorsing the fiscal principles as enunciated by the Minister for Finance. I would like to take this opportunity to discuss two areas of concern, namely, that of shopkeepers in HDB estates and the issue of health care costs.

HDB shophouses

Sir, first, on the issue of HDB shophouses. Mr Speaker, Sir, on 2nd March 1992, Mr Lim Boon Heng, Senior Minister of State for Trade and Industry announced the Retail Sector Development Plan. This together with the announcement by the Ministry of National Development on the sale of HDB shophouses brings new hope to the local small retailers. The Government's development assistance package for the retail sector, as well as the concept plans to upgrade existing HDB towns and neighbourhood centre, is timely. However, there is an urgency to this matter because, for many, it is indeed a matter of the "rice-bowl".

Sir, in the Retail Sector Development Plan, eight key recommendations have been made and I would like to comment on some of them.

(a) Promoting Economic Groups

The National Productivity Board (NPB) will set up a Franchise/Cooperative Centre to help small retailers organise themselves into economic groups and benefit from economies of scale. This will indeed be welcomed by our small retailers as many now resort to buying from the large stores when certain items are on special offers to resell in the neighbourhood shops.

(b) Providing front line business guidance and consultancy services

Here, the Economic Development Board (EDB) will form an Enterprise Promotion Centre (EPC) to provide direct assistance to the small retailer. Here for the first time, the small retailer will receive professional advice and I am sure that this is much appreciated.

(c) Selling of HDB shops to sitting tenants

Sir, this is welcome news, and tenants are anxiously awaiting the prices, schedules and methods of financing available. One question that is in the minds of the tenants is the period of the remaining lease for the shops as this will affect financing.

(d) Liberalising the foreign worker policy

It is stated in the report that the Ministry of Labour will be more flexible in administering the 20% dependency ceiling for small retailers. When will this take place, when will the levy be reduced, and will the levy be reduced to assist an already "sick" sector?

(e) Improving productivity and efficiency

The provision by the National Productivity Board of structural training programmes is most welcome. This will also help alleviate the employee problem in the HDB retail shop as on-the-job training will make it more worthwhile to work in a small enterprise.

(f) Promoting computerisation

I am sure that the NCB with all its expertise and experience will be of great assistance to the neighbourhood store. I am sure that the NCB will also be mindful of the special needs of an affordable and user-friendly system for this special group of clients.

(g) Concept plan for physical upgrading of HDB retail centre

Sir, Tampines and Toa Payoh have been chosen as models for the pilot project. Whilst awaiting for a full evaluation of this project, could something else not be done for other estates? As I have mentioned earlier, there is urgency in this matter.

(h) Other assistance

I am glad that the EDB will be making available its whole infrastructure to help the "small retailer" as for too long the EDB has been seen to only care for the MNCs, although we know that this is not the total truth.

In summary, Sir, I look forward to these benefits being made available soon to more shops, and especially to the shops in my own constituency, Bedok GRC, of which you, Sir, are also a Member of Parliament.

Health Care

Sir, much has been said on subsidies, health and doctors. I would like to focus on health care financing and managing health care costs. I will make reference to the Main Report of the Review Committee on National Health Policies.

As the practice of medicine has changed world-wide, we have not been spared. However, in Singapore, we can still hold our heads up high. Overseas, we hear of cuts in health care, closure of facilities, unemployed or under-employed doctors, wasteful practices and poor doctor-patient relationship as reflected by high litigation costs and the practice of expensive and wasteful defensive medicine. Yes, we have our problems but they are not of the magnitude of that in many other countries. We are still in the happy situation where we can rationally plan for new hospitals and services.

Health Care Financing

Sir, the Review Committee supports the principle of cost-sharing to curb excessive demand for health services. This is correct. However, what is affordable in terms of cost-sharing is another matter. That Government should ensure that basic health care is accessible to all is correct. However, what is basic? Basic is different to different persons and to different illnesses. There must be flexibility in the implementation of this policy.

Sir, first the issue of the Class C patients. It has been suggested that the cost recovery should remain at around 20%. However, as hospitals are restructured, 20% in real dollar terms will not remain static but will increase. Depending on the direction of restructuring, one must also keep a check on the real dollar cost to ensure that services remain affordable.

Sir, it has also been recommended that "service in Government and restructured hospitals should cater mainly to the lower and middle income groups. Facilities for private patients should not be expanded any further". I could not agree more with this statement. In this context, I would urge the Government to consider the reclassification of Government hospital wards, as mentioned in the report. There should be only two main types of wards: full paying wards and subsidised wards. As mentioned in the report, within each type, room rates can be varied accordingly to the level of privacy and comfort that the patient wants. In this manner, the services provided by a hospital can be subdivided into, firstly, pure medical care - the medical care that the patient came for in the first place - and secondly, the hotel-type or lodging facilities which the patient wants. The standard of medical care given should be appropriate to the illness regardless of the type of ward in which the patient is in. However, the patient is free to choose the type of accommodation that he desires. Some patients, even though they can afford it, may not want a single room. For example, when they are warded in the hospital many will prefer the companionship of someone, ie, to have a room mate.

In this scheme, it is also my hope that patients in the subsidised wards can choose a specialist of their choice. A properly advised patient would rather save on lodging and spend on medical care. This is what we should encourage. In this way, I believe health care costs can be significantly reduced.

Medisave

Mr Speaker, Sir, Medisave has been the cornerstone that has kept our health structure in good stead. It is indeed our life saver. It is obvious that the older person needs to spend more on health care. The younger person needs to spend more on housing and other needs, eg, children's education. Thus, a spread of the CPF contribution to different areas of needs at different eras of one's working career makes good sense. I, thus, agree that should the need arise to revise the Medisave rate, this principle should be followed.

Sir, as the trend in patient care is towards ambulatory care (ie, reduce hospitalisation to the shortest period possible), it is now the correct time to look into how Medisave can be extended to cover outpatient treatment for chronic illnesses. Medisave has kept up its time in that in many cases of day surgery, Medisave can be used. This is a correct way. You do not admit a person for surgery if he does not need to stay overnight. So likewise, there are many chronic illnesses for which a person need not be admitted but can be treated as an outpatient. Can we extend Medisave to cover this group? This will encourage patient compliance and reduce expensive hospitalisation. However, as this is the fear of the Ministry of Health, and a very rational fear, this should not be done until a system of checks and medical audit is set in place so as to prevent wastage and abuse.

In summary, Sir, the problems of health care will escalate, especially with an ageing population. No one wants to be ill, but get sick we all will. Prevention will help reduce illness, but there are many illnesses for which there is no preventive programme. There are many cancers for which we do not know the cause yet. But whatever we can do in the prevention of illness in encouraging healthy lifestyles we should. Government has and always will be a key player in the provision of health care - and thus the public and professionals will always look to the Government to provide the leadership. This is one area that "market forces" alone will not suffice to provide all the answers. Subsidy is a necessity and not a dirty word in health care. The quantum of subsidy required is, however, always open to debate.

I am sure that the Minister for Finance will always be sympathetic to the needs of the Ministry of Health.

Mr Chay Wai Chuen (Brickworks GRC): Thank you, Mr Speaker, Sir, for allowing me to speak in this budget debate. I wish to speak in support of the motion in the name of the Minister for Finance.

But before that, Sir, let me congratulate the Minister for Labour for his very clear and well-argued exposition on the maid levy issue just a moment ago. I think it is a good example for us that we should not let emotion get into the way of clear logic and rationale when talking about the maid issue. It also gives a very good perspective of the social implication of growth. So I urge Members to study in depth the Minister's response to this issue.

I also wish to cover only certain points, as my able Parliamentary colleagues have already covered many areas. Firstly, Sir, our economy grew by about 6.7% in 1991 compared with 8.3% in 1990, at 1985 market prices. Although many people may think that this is a letdown, I personally do not think so. It is, I believe, a realistic rate of growth for our economy at this stage of our development. Singaporeans should not expect the economy to turn in 8%, 9% or 10% of annual growth, although this was the norm in the 70s and the 80s. It is more important for our people to realise that productivity growth is a more crucial dimension of our real economic growth for us now. This is because by expanding capital inputs, we need labour to work with the capital. And as we are in full employment, such an increase in the labour input can only come from our own labour supply, or from outside Singapore. We already have about 300,000 foreign workers in Singapore. Alternatively, we need our workers to work with greater intensity of capital and to be able to do that they need skills and training.

Hence, increasing our labour productivity is crucial at this phase of our economic growth. It is not very useful to talk purely in terms of economic growth alone. Sir, I am concerned that labour productivity only grew by 1.6% last year, while real wages went up by 7.6%. As pointed out by the Minister, this is the third year where our real wage growth exceeded our productivity gains. I urge the Government to tackle this problem anew. Related to this is the unit labour cost which has been rising for the past three years. We run the danger of pricing ourselves out of the competition.

The second point, Sir, I wish to touch on concerns the wayward fortunes of the trade negotiations for the Uruguay Round. Through the leadership of our Prime Minister, Mr Goh Chok Tong, the creation of the ASEAN Free Trade Area (AFTA) is a significant achievement for Singapore and for the ASEAN countries. Singapore businessmen will benefit positively and significantly from this as it allows lower tariff for the movement of goods within ASEAN countries. More important, Singapore, through ASEAN, can benefit from the many favourable tariff preference arrangements. ASEAN and AFTA can be platforms on which Singapore and ASEAN countries can bargain for the optimal free trade arrangements for the simple reason that united we are strong, and divided we are weak.

Thirdly, Sir, I must compliment the Finance Minister for his expose on Adam Smith and the virtue of the free market. Few Finance Ministers can afford this luxury. The only other Finance Minister in the world that can expound so proudly on Adam Smith, I believe, Sir, is the Financial Secretary of Hong Kong. Nonetheless, the Minister has not forgotten to mention this and I quote:

'The market system, suitably tempered by Government intervention, has served Singapore well.'

Fourthly, Sir, I wish to compliment the Government for the policy on containing the public sector's share of manpower resources and on containing the size of public expenditure and the GDP. This is a very good yardstick to go by without sacrificing the quality of output and service. When the Government expenditure gets too big, there is always a danger of inefficiency.

Finally, Sir, I must thank the Finance Minister for granting the tax relief for National Service reservists. Although this decision was taken after the recommendation of the Committee for the Recognition of Contribution of Reservists to Total Defence (RECORD), many outspoken reservists have, over the years, spoken out for similar ideas, for well past a decade, as far as I can remember, speaking with experience as a Manpower Officer of a brigade for the same period. To all the reservists who have been banging this idea, and who have by now gone ROD from the reserve, there is still a $500 tax relief for their past service. They are not forgotten. It goes to show that this Government does listen to the good ideas of the people and that people with good ideas should not give up, even though sometimes the Government seems hard of hearing.

The Minister of State for Health (Dr Aline K. Wong): The question of subsidies and use of reserves to lower the cost of living has appeared many times in today's and also yesterday's debate. Sir, I would like to address this issue in the context of health care services and in my capacity as Chairman of the recent Review Committee on National Health Care Policies.

Sir, Singaporeans have by and large accepted that a welfare state is not good for us. But in certain areas, like health care, they are still hoping for bigger subsidies from the Government. However, we must not forget that subsidies have to come from the taxpayers' pocket. The burden ultimately falls back on the people. Therefore, the right approach is to control the rise in health care costs and to ensure that basic medical care will remain affordable to the nation. What is basic medical care? Dr Arthur Beng has just raised this question in the House. He also happened to be a member of the Health Review Committee. He probably would remember that we debated this issue at length and found it is very difficult to define. So we have to work with an evolving definition which we have to tackle from time to time.

As far as the question of health subsidies is concerned and the right approach to controlling the rise in health care costs, the Review Committee has drawn up a number of recommendations on, first, how to improve the health of Singaporeans, so that the need for medical treatment will be reduced; second, how to improve the efficiency and quality of our medical services, so that they are worth every dollar spent; and, third, how to manage the rise in health care costs.

Underlying our recommendations are several important principles. These have guided the development of our health care financing system and they have served us well. What are these principles? First and foremost, we believe that the individual has a personal responsibility to stay healthy and minimise the need for medical care. Hence our emphasis on health education, health promotion and disease prevention. Every person should make healthy living a way of life.

A second principle is that the Government should continue to ensure basic medical care is accessible to all citizens. In practice, this means that market forces cannot be allowed a free play. The Government must intervene in such an important area as health care. Hence, the Review Committee's recommendation that the Government should continue to be the major provider of health care and subsidies should still continue to be provided for the lower income groups.

Third, there must be a certain amount of cost-sharing at the point of consumption to discourage wasteful and excessive demand for medical services.

As for Dr Arthur Beng's question as to how much is affordable, that is of course open to debate and subject to review. We have made our recommendation in this area also.

Lastly, to enable Singaporeans to pay for their share of the costs, they must be encouraged to save, especially for their medical needs during their retirement years which, because of a lengthened lifespan now, stretch to about 20 years and more. So the Medisave contribution rate should be progressively raised, and the self-employed brought within the scheme.

These principles are important and we believe they are the right principles. The specific measures and programmes should be seen as implementation of these principles.

One of the recommendations that the Committee made with regard to the slowing down of the rise in health care costs has attracted much interest and this is our recommendation on the intake of medical students at NUS. Yesterday, Members of the House have engaged the Minister in a brief discussion on the relationship between the supply of doctors and health care costs. There were some articles recently in the Straits Times and also a letter to the Forum page. And even just now during the coffee break Members of the House were asking me to explain this relationship again.

If I may put the issue in rather simpler language, it is just that, under a situation of over-supply, doctors can maintain their incomes by driving up the volume of their services through over-investigation and over-treatment. Patients are often not in a position to dispute the doctor's treatment, not only because they do not have the expert knowledge, but also because when they are ill, they require immediate attention and they are also under great emotional stress. Therefore, at that time, they cannot make rational choices. And where the patient mistakenly equates costly treatment to be the best treatment, he would demand it. The doctor would be only too happy to give it, thereby feeding the demand. Health care costs go up as a result, and people's health is not necessarily better. In the case of terminal illness, costly treatment may prolong life somewhat, but the patient's quality of life is often poorer.

It may be true that doctors are not the only professionals who can play up an imperfect market. Others can, eg, lawyers and maybe others. But if I am not mistaken, America has the highest lawyer-to-population ratio in the world. But look at what has happened to legal costs there, and what a litigious society America has become.

Sir, the training of doctors is very expensive. At present, it costs $53,000 per year to train one medical student. It is as costly to train doctors locally as it is for medical students to be trained overseas, because our standards are comparable to that in advanced countries. Out of this $53,000, the student pays $10,000. Thus, the Government is subsidising each medical student $42,000-$43,000 per year. For each student's entire course of study, which takes five years, the Government provides a subsidy of over $210,000, and this is a huge sum. Needless to say, such heavy investments in our doctors must be carefully balanced against the country's need to train lawyers, engineers, accountants, and so on. Besides, we must not forget that, unlike lawyers and engineers, doctors once trained cannot easily change occupations should the demand drop. This would represent a huge loss in taxpayers' money spent on their training. Therefore there is no question that we must carefully plan the supply of doctors and the intake of medical students.

As with all projections, if the parameters change in future, such as, if Singaporeans are not returning from medical study overseas, or if foreign doctors are not coming to practise here, then of course we would have to make adjustments, and the NUS intake of doctors would have to be reviewed again.

I hope this will help to clarify the Review Committee's recommendation on the intake of medical students and lay the issue to rest, at least for the next few years, Sir.

Mr Bernard Chen (Brickworks GRC): Mr Speaker, Sir, I support the Minister for Finance's Budget Statement for the financial year 1992 and would just like to make some comments on two areas of concern.

In this year's statement, the Minister has taken considerable pains to give the background to some of the major policies the Government has implemented over the years. Underlying all these policies is the key decision to allocate our scarce resources by market forces. I subscribe fully to this very important factor in the formulation of our economic as well as social policies. With sustained economic growth over the past two decades, with the exception of a small hiccup in 1985, most of us in Singapore have come to take growth as virtually automatic. Many have indeed criticized the Government as too money minded and unduly obsessed with adherence to market forces. Success can often cloud our vision and lull us into believing that we have made it. Worse, we may come to believe that things can happen and economic growth will take place without any effort on our part. The reality, of course, is quite different. Given the scarce resource at our disposal and our virtually total dependence on the world market, we must make sure that we remain efficient always and to stay competitive. Competitiveness is dynamic. It changes not only with time but also with the way our competitors improve themselves. If we just stand still for a moment, they will overtake us. It will take us some time to catch up as they are better endowed with much more resources. Hence, in everything that we do, whether it is education, health, housing, in business and commerce, we must let market forces operate, in terms of encouraging maximum performance through a proper reward system. Subsidies will lead to inefficiencies as output is not commensurate with effort. The experience of the successful economies, especially those in the Pacific Rim, the NIEs and the Dragons, are living proof of the correctness of this approach.

More telling, however, are countries that have followed the other way of subsidising the people in all kinds of activities. The sad state of affairs of these countries is an indictment against the policies that they have adopted. Even more painful is that they will have to undergo much more hardship before they can turn the economies around.

Members may be aware that at present there is a delegation of Russian Members of Parliament in town. In the exchange of views, they were full of admiration of the policies that Singapore has adopted. I told them that it has taken us some 30 years doggedly following this market forces drive in order to arrive at what we have today. They were rather wistful and said that all they have got now is three months. And this is happening in a super power. We can only ignore these trends at our peril.

This is not to say, of course, that we must stick to market forces at all costs. We have recognised that for health, education, we have to continue to fund the bulk of the cost of these services. Just take a small example of education. Much has been said about independent school fees. I understand that for independent schools, even when the school fees are supposedly much more substantial than Government schools and aided schools, in terms of meeting the expenditure requirements of these schools, the Government subsidy in the form of capitation grants to these schools accounts for more than 80% of total expenditure requirements. And for schools which are not independent in the Government and aided areas, I am quite sure that the subsidy would be more than 90%. This is something that we have done for the last 20 over years and I am quite sure the Government will continue to do it.

We should also acknowledge that a certain segment of our population, for a variety of very valid reasons, would not be as well endowed as their fellow countrymen. We must therefore cater for these people and make sufficient room for them to make their contribution. For those who need to adjust to new circumstances or to overcome temporary setbacks, we must do our best to help them in whatever way we can. Indeed, a key element in the Government's economic and social policies implemented in the last two decades has been to pay special attention to this group of people. We have by and large succeeded, but as the Prime Minister has said in many of his speeches, more can and will be done. The objective must be to lift everyone to his maximum potential, rather than bringing everyone down to the lowest common denominator. The fundamentals of our policies are sound. They have been tested and proven correct. We should not ignore them.

Let me now turn to the other comment. The Minister has referred to the changing world economy in the established countries like the United States and countries in the European Community becoming less dominant and the emerging economies, especially in the Pacific Rim, are assuming more prominence. With the formation of new trading blocs, Singapore's access to these traditional markets will become increasingly difficult. The Minister has suggested that we should look closer to home, ie, Asia and ASEAN. We should take this suggestion very seriously. If we look back to the past decade, economic downturn in the industrialised countries in the West had always been tempered by growth in the regional economies, except in 1985 when even our neighbours did not do well. An added advantage is that we are immersed in the same Asian culture and in many ways share the same values. In business dealings, much emphasis is placed on trust and relationships built over years of working together. Singapore has a head start on this and we should redouble our efforts in this direction. Opportunities in ASEAN, Indochina and the People's Republic of China can be tapped to our advantage. Even the Commonwealth of Independent States can offer good business potentials when the political dust finally settles.

There is perhaps one obstacle, as Mr Chew Heng Ching has pointed out before the break. In our drive for more business and investment in these countries, our Singaporean managers are by and large quite reluctant to venture abroad and remain home-bound. Although quite a number of Singaporeans are now working in Hong Kong, the expansion of business will require many more. They are required in such countries as the PRC, Vietnam, Russia and the Republics, where living conditions are, unfortunately, quite far below those that we are used to in Singapore. There are valid reasons for them to avoid overseas postings, but we must find ways to encourage them to go abroad. I understand the Singapore School in Hong Kong is a very good move and very popular. The establishment of direct air links to these countries will also help.

The more important thing, however, is the change of attitude of our Singaporean managers. They must recognise that it is no longer enough to operate only in the Singapore market. Increasingly, we have and must look outwards for growth and opportunities. We should be well poised to do this. We can stay competitive and efficient, something which, without their realisation, the Government has been trying to prepare them all these years.