ANNUAL BUDGET STATEMENT

Order read for Resumption of Debate on Question [26th February, 1993],

"That Parliament approves the financial policy of the Government for the financial year 1st April, 1993 to 31st March, 1994." - [Minister for Finance].

Question again proposed.

Mr Robert Chua Teck Chew (Nominated Member): Mr Speaker, Sir, thank you for giving me the opportunity to participate in this debate on the 1993 Budget.

Singapore is running in a marathon of the world economies and we can imagine this marathon to have started just after the war. But if we look at the participants, they are in clusters, almost like the real marathon. Right up front, we have the developed economies of the world - United States, Japan and most of the west European countries. Just behind them are the NIEs (newly industrializing economies) such as Singapore, South Korea, Taiwan and Hong Kong. But just behind the second group, we have the developing NIEs, as they are sometimes called, such as Malaysia, Thailand, Indonesia and China. Further down the track, we have the less developed economies such as the African economy, Vietnam and so on.

We are about half way through this marathon and we should take stock of what is happening. Upfront, the developed economies have been running a very fast race but they are slowing down. But they are still far ahead. The second group, the NIEs, are still running at a fairly fast pace, trying to catch up with the first group. But the third group is running very fast. Somehow they took off a bit slowly but now they are catching up. Unfortunately, far behind, is a group of slower developing or less developed economies. We are in the second group. As we try to catch up with the first group, let us take stock of where we are, and how we can get there.

Our economy was growing fairly fast after the last recession. But in the last two years we have slowed down. I believe that, like in any race, we have to know how we stand and how we can forge ahead. We have to look at whether we are truly strong or we have too much fat that we should shed or trim. Do we have the right skills and techniques and the stamina to go on? In the long race, we usually have some reserve so that we can at least make the second half of the marathon. Do we make good use of that reserve?

I believe that the Budget that the Finance Minister has presented to us marks a very important major reform in our tax system which should help us to spur ahead and catch up with the developed economies. In fact, I would describe the 1993 Budget as a watershed budget. It is best described as a pro-growth budget aimed at rewarding entrepreneurship, work effort and companies which take commercial risks abroad. The introduction of a Goods and Services Tax (GST), though painful initially, is a move in the right direction as it would result in a more balanced fiscal system in terms of our reliance on direct and indirect taxes for Government revenue and its treatment of income and consumption. I hope that the tax reform will provide the necessary stimulus to propel Singapore forward in this race of the world economies so that Singapore can catch up with the leaders in the super league.

However, I move that not enough attention has been given to the problems facing the manufacturing sector. In 1992, the manufacturing sector grew by only 2.3% compared with 5.8% for the whole economy. Total employment in the sector declined by 13,100 jobs and the index for unit business cost of the manufacturing sector is at an all-time high of 119.2. This is higher than the level of 114.3 when Singapore entered into a recession in 1985. The same is true of the unit labour cost. Our relative unit labour cost has also been rising since 1989 and we are now close to the 1984 level when measured against the other newly industrializing economies.

Profit share as a percentage of nominal GDP has also fallen from 52.2% in 1988 to 46.2% in 1992. If the manufacturing sector continues to grow at a lacklustre pace compared to the overall economic growth, the sector's share of GDP will fall to about 22% by the year 2000. May I ask the Clerk of Parliament to distribute a table which I have prepared for your reference? [Copies of Table distributed to hon. Members]. I have painted three scenarios of the manufacturing sector growing at half the rate of the GDP assuming that the GDP grows by 4-6%. You will see that by the year 2000, the share of manufacturing of the GDP would have fallen to about 22%. If that continues, it would be less than 20% in the next century. In fact, I would like to draw the attention of Members to 1991 and 1992. In that period, the manufacturing share of GDP actually dropped from 27.4% to 26.5%.

The above indicators suggest that the manufacturing sector is at the verge of entering into the economic danger zone. We risk the danger of losing our competitiveness and slipping into a permanent era of slower growth unless the Government takes bold policy measures to reverse the decline of the manufacturing sector. The experience of the United Kingdom is instructive. Recently, the British Prime Minister, Mr John Major, admitted that Britain had made a mistake in allowing the manufacturing sector to decline. He felt that the present British government must take a different attitude towards manufacturing. We should learn from the British experience. However, I am confident that the Singapore Government will not make the same mistake. The manufacturing community was very much encouraged last year when the then Minister for Trade and Industry made the firm commitment that the manufacturing sector would remain as one of the key pillars or mainstays of the economy.

However, I believe that more should and can be done to help the manufacturing sector regain its competitiveness internationally and reverse the above unhealthy trends. One of the major concerns of manufacturers is rising labour cost. Unit labour cost has been rising because productivity increases continue to lag wage increases. We must find more innovative ways to increase productivity at both the company and industry level through quality and skills upgrading programmes. I would like to suggest that the Government give more tax incentives and grants for companies to set up in-house training facilities or group training centres at the industry level. This will ensure that the skills acquired by our workers are relevant to the job.

More funds from the general Government budget should also be allocated for such purposes as collection from the Skills Development Fund would not be sufficient to meet all our training needs. I am personally against raising the rate of the SDF contribution as it represents a tax on the business community and an added cost.

Another issue that must be addressed by the Government quickly is the falling share of profits to nominal GDP. Over the last few years, the profit share of nominal GDP has been falling from 52.2% in 1988 to 46.2% in 1992. The declining share of profit may be attributed to keener competition in the international market and the rising cost of doing business in Singapore. This is a cause for concern. Why? It means that manufacturing is becoming less profitable, earning lower rates of return on investment and becoming less attractive as an investment option. We are also concerned because lower profits mean less internally generated funds for new investment in machinery, technology, skills training and research and development and also for venturing abroad with new investments and for new markets.

The figures from the gross fixed capital formation showed that investment in machinery and equipment fell by 2.2% in 1992. While we appreciate the 3% reduction in corporate tax rate and the 25% property tax rebate, manufacturers would like to see more action taken to address the issue of falling profit share of GDP. In addition, bold measures are needed to address the problem of rising unit business cost. Thus, it is time for the Singapore Government to embark on a total review of business costs, such as rentals, utilities, health care, labour, transportation and various Government levies such as the foreign worker levy.

For a start, I would like the Government to re-examine our land pricing policies. One of the major concerns of Singapore manufacturers in 1992, as revealed by a recent SMA survey on the "Manufacturing Operations in Singapore" was rising rentals. Rentals rose by 11% in 1992, which is much higher than increases in labour cost. While the manufacturers welcome the property tax rebate of 25% announced in the 1993 Budget it must be noted that the rebate will only partially offset the higher property tax paid by many businesses due to the upward revaluation by the Property Tax Department of industrial properties over the last few years.

The rising industrial rentals appear to stem from the Government policy of applying market forces to the pricing of land. We all agree that market forces should determine prices. However, the price mechanism would not yield optimal results in situations where externalities exist. Such externalities cause a divergence between the social and private valuation of a product. Where positive externalities exist, market forces will result in under production at a higher price.

For industrial land, I believe that market forces cannot be used entirely to determine its price. Compared with residential land, industrial land creates positive externalities as it helps to generate jobs and income over a long period of time. It is a factor of production which contributes positively to the wealth creation process in Singapore. Therefore, industrial land generates social benefits for Singapore. Thus, leaving the pricing of industrial land to market forces will result in less than optimal provision. It is natural that industrial land will always be valued lower than the price of residential land. Although the industrial land fetches a lower price than residential land, we must encourage more allocation of our scarce land resources for industrial purposes as it generates jobs and income. It must also be priced at an internationally competitive rate so that foreign investors will continue to consider Singapore as an attractive investment location.

Let me now move to other aspects of the 1993 Budget. The need for Singapore to build an external economy is an important economic strategy for the 1990s. It is needed if we want to catch up with the leaders in the super league. The various tax incentives announced in the 1993 Budget to promote an external economy are very timely and most welcome. I am glad that the Minister for Finance heeded the requests of businesses to provide tax incentives to help them venture abroad.

Employers also welcome the cap on deductions for medical expenses. It is a wise move to force both employers and employees to become more cost conscious in consuming medical services. However, the implementation of the capping will require the cooperation of unions, employees and employers to look for innovative ways of managing their health care needs. At the same time, to ensure that such capping does not deprive employees of their existing medical benefits, there is also a need to find ways of keeping down the cost of providing medical benefits in Singapore. In other words, we must pay special attention to both the demand and supply sides in managing the health care costs in Singapore.

The reduction in corporate tax rate by 3% for Year of Assessment 1994 is a welcome move and will help to partially reverse the declining after-tax profit share of GDP. The reduction will also help to keep the corporate tax rate in Singapore internationally competitive. The business community is looking forward to further reduction in corporate tax to 25%. This should be done as quickly as possible as it is still far above the rate of 17% in Hong Kong.

Finally, I would like to touch on the GST. The business community welcomes the various measures and rebates introduced by the Minister for Finance to offset the unfavourable impact of the GST on the lower income groups. This will help to dampen the pressure for wage increases arising from the higher cost of living contributed by the GST. Given the already high cost of doing business in Singapore, businesses must be spared any additional cost burden.

On the issue of GST, special attention should be given to the problems of small enterprises in complying with the requirements of the GST. Although the Ministry of Finance exempts all small businesses with an annual turnover below $1 million from the GST, the proportion of small businesses opting for exemption will be lower since there will be pressure from registered customers to demand that these small enterprises also register for GST so that they can claim refund for the GST paid. This can be a serious problem as the experience of New Zealand and a number of other countries showed that the GST always encouraged large companies to deal with large companies, often at the expense of smaller businesses.

To help small businesses register and comply with the requirements of the GST, I would like to propose that the Government provide grants and other financial assistance to help SMEs computerise and upgrade their accounting systems to meet the requirements. The GST is also likely to confer unfavourable cash flow on export-oriented companies. For companies where the total value of direct exports exceed their value added, the input tax will always exceed the output tax. For such export-oriented companies, I would like to suggest that the Ministry of Finance grant exemption for GST on their imported raw materials if the company provides an undertaking that such raw materials are destined for export.

Finally, I would like to request that the Ministry of Finance consider the refund of any tax credit within 14 days of submission of the GST return. This will ensure that export-oriented industries will not be further penalised for complying with the GST.

Mr Heng Chiang Meng (Cheng San GRC): Mr Speaker, Sir, I support the motion standing in the name of the Minister for Finance.

His Budget is truly a sensible one for the transition to a consumption-based tax system, as well as one which will ensure the continuation of our low inflationary economic growth of recent years. The Minister has gone to great pains to compare our public expenditure with many countries, including Hong Kong, where he took greater pains to explain why our taxes are much higher than Hong Kong's. Unfortunately, Sir, it is a cruel cold world outside there. Out there, nobody cares a damn why our taxes are higher.

The captains of industry in the capital cities of the world look only at the bottom line. Is it worth while to be in Singapore or is it worth while to be in Hong Kong? We are being compared constantly. It is not strange because we are very much like Hong Kong, city states with a foreign hinterland, no natural resources except for a well educated population, hardworking and productive, first class infrastructural facilities, and so on and so forth. Their decision to invest in Hong Kong or Singapore will be based on the bottom line - how competitive we are to Hong Kong. They will consider factors such as corporate tax, personal income tax, labour cost, land cost, utilities cost, government bureaucracy, labour productivity and so forth, not why our taxes are higher than Hong Kong's. So how competitive are we compared to Hong Kong? That, Sir, is the key factor.

The Minister is fully aware of that. He knows that comparison will be made by those who matter, including those who decide whether to use Singapore or Hong Kong as the base to invest in other parts of Asia. Yes, there are many areas in which Hong Kong and Singapore are complementary. But in many others, we will always be in competition. To truly succeed, we must be, overall, more competitive than Hong Kong. It is not enough for the Minister to brush aside the competition posed by Hong Kong with a statement that it is impossible for Singapore to emulate Hong Kong's example. We must try!

Benchmarking is a strategy adopted by many successful companies to push ahead. We should also use benchmarks to progress. Just as there are other countries using us as a benchmark in some areas, we must be prepared to use Hong Kong as a benchmark in others, not least their low tax regime. It is difficult, Sir, but then nobody has ever said that being the Minister for Finance is an easy job.

Sir, on promotion of an external economy, do not get me wrong about Hong Kong. There are many areas in which we can learn from Hong Kong. Similarly, there are also many areas from which we should distance ourselves. And the suggestion to dismantle our so-called safety nets to create a Hong Kong-like environment in order to produce entrepreneurs is certainly one suggestion to ignore. It is a very seductive argument but I would like to urge the Government not to be lured into the thinking that the only way to succeed is to create the adverse conditions to separate the wheat from the chaff. The safety nets are our strengths, not our weaknesses. History has had many successful men advocating that, because they have succeeded despite the odds, perhaps even because of the odds, their way is the only way. Let the cream rise, they say.

It is also the ugly side of capitalism. We must never fall into the trap. While we advocate the principles of free market enterprise and the pursuit of individual excellence, we must never get carried away by our own rhetoric. This Government is not stupid. This Government has built up Singapore based on caring for the weak, compassion for the less fortunate and support for the poor with many opportunities for those who want to rise above their original stations in life.

To create more entrepreneurs, it is not necessary to give up our safety nets, because they are more than safety nets. They are the bedrock foundations of our society, the Singaporean society. In a short space of time of only slightly over 30 years, we have created a Singaporean nation out of a motley group of immigrants. This came about because of our bedrock foundations, because they give us a base to go forward, a base to plan our future and our children's future. They give us stability, certainty and a sense of permanence upon which we can plan. Remove these edifices, we remove the foundations of our nationhood.

We have taken a different route from Japan, Hong Kong, South Korea and Taiwan to where we are today. MNCs have helped to make us economically successful. If the result of this is that Singapore has insufficient entrepreneurs willing to take risks outside Singapore, I disagree.

Sir, if I may, I would like to ask the Clerk of Parliament to distribute some Tables to hon. Members. [Copies of Tables distributed to hon. Members.] In fact, if we look at Tables 1 and 2, in a recent study by the Department of Statistics, the Tables, show that:

`Factor income earned from abroad by Singapore residents and companies in Singapore increased from $125 million in 1960 to $12.9 billion in 1992. Compared to GDP, ie, the income generated in the domestic economy, income generated from overseas had grown at a faster rate. While GDP had grown at an average annual rate of 12% between 1960 and 1992, income earned overseas had grown by an annual rate of 16% during the same period.' Of course, the reason why our GNP is marginally larger than our GDP is not because income earned abroad is small. At 17% of GNP in 1992, it cannot be considered small. But that factor income paid to non-residents is also large as shown in Table 2. It is due to our policy of promoting foreign investments in Singapore leading to non-residents taking up an increasing proportion of the income generated in Singapore's domestic economy.

Sir, even so, as the Minister has said, it is not enough. We must encourage more overseas investments, especially when the pickings in our region are so bountiful. I agree, but it is too soon to elaborate much in this area. We should wait for Commodore Teo Chee Hean's report. Whilst doing so, I would like to offer my thoughts on three areas to the Minister of State:

(1) The Government, the public sector, must change its mindset. In today's world where economic progress is the name of the game, it must be fully prepared to play its role as a business partner of the private sector. The vestiges of the civil service as a mandarinate, inherited from the British and reinforced by Chinese traditional values, must be banished. Too often, the prevailing thinking in the service is "entrepreneurs equal businessmen equal crooks." Hence, if a businessman comes up with a suggestion, look for the hidden benefits for him. Reject the suggestion if you can find any. If you don't, reject it anyway, since any suggestion from him must be for his own good and therefore at the expense of the general public.

Sir, I am not asking for a lowering of standards, but rather a fair chance for business to be listened to and respected, not only at the political level but at every level where it has to interact with the public sector. Japan has shown the way that when business and the government cooperate in the form of Japan Inc., it can conquer the world. Singapore has done it another way - by the Government taking over the business.

Sir, my second point is businessmen do not need much incentive to venture overseas, not if there are profits to be made. If they do, they would more likely than not lose, not profit. More importantly for them is that they be allowed to enjoy the fruits of their ventures, especially enjoying them, ie, the fruits, in Singapore, their homeland. Making money in Singapore and giving the Singapore Government a 30% cut of their profits is, I suppose, considered acceptable. The Singapore Government has earned its share by its excellent governance of Singapore. But giving it 30% of the profits, or later on, 27% of the profits, remitted from overseas where the risks are much higher and the Singapore Government's contribution lesser, that is another question altogether. The Government is aware of this. But it is only prepared to give exemption to those who applied, on a case-by-case basis. This is not good enough, Sir. Nobody, Sir, if he can help it, wants to see the taxman with lots of information. So, in addition to whatever scheme already in place, why not simply reduce tax on remitted income to 10% across the board?

Also, the Minister should consider allowing the combining of all sources of businesses in a company regardless of whether or not a particular source has started producing income. Sir, let me give you an example on this. Assume that a company has two sources of business, say, A and B. If A is profitable and B is still new and not profitable, the losses accruing from B cannot be offsett against the profits from A. There are, of course, many variations in each and every case, but what I have just stated is the basic principle adopted by IRAS. If the Government wants to encourage entrepreneurs to venture into new areas, including overseas, obviously allowing this offset is one of them.

Sir, the third area is one of non-financial assistance. The Government should use its resources to establish an information and research centre on overseas economies, markets, opportunities, etc. The Japanese, through MITI, is reputed to have the best dossier on world markets. The Australians are now also in the game, having announced a package to penetrate into Asia, the centre piece of which is an Asia Economic Centre to provide analysis of Asian economies to Australian firms.

Sir, the assistance by the Government in this area should also involve all our foreign missions where each and every mission

becomes a Singaporean business centre overseas, helping to arrange meetings with Government officials and businessmen of the host countries, providing information and the like. Appropriate business-minded officers prepared to help even the smallest businessman from Singapore should also be made permanent members of every foreign mission.

GST.

In the past in this Chamber, I have argued against the imposition of a consumption tax. It is not that I am against a tax levied on consumption, but I am against the regressive nature of a simple consumption tax. Hence, I have urged for an expenditure tax which basically retains the progressive concept in the taxing of consumption.

I am aware that a consumption tax such as the GST will increase our tax base and permit the lowering of taxes on income, thereby making us more competitive. Unfortunately, while economic success, especially in the brave new world order, demands the law of the jungle, the survival of the fittest, how we will be judged by history as a civilised society will be on how we take care of our poor, our downtrodden, our less fortunate and our underprivileged.

In this respect, Sir, I must say that my fears of the unfair and regressive nature of the GST have been more than amply answered by the Minister for Finance in his current budget package. The Minister has gone overboard to ensure that nobody suffers during the next five years in the transition to a GST based system of taxation. If anybody is missed out, Sir, it is certainly not by intent.

Even the Opposition's cry that the budget discriminates against the middle-class is put to rest by the set of tax savings figures by Arthur Andersen. Sir, I refer to Table 3 in my set of tables sent out. Looking at the figures, a middle income earner with an annual income of $30,000 has a tax saving of $826 per annum. This translates at a GST of 3% into an annual expenditure of $27,533 or 92% of his annual income. It is unlikely that he would spend such a high percentage of his gross income. If he spends less, he is better-off under the new system.

For the $70,000 per annum earner, his tax savings of $1,066 translates into an annual expenditure of $35,533 or about $3,000 per month. Would he spend so much? If not, again, he is better-off under the new system.

Sir, I will not go into details as there will be ample time to air them when the GST Bill comes up for its Second Reading. At this juncture, I would just want to say that the fear of profiteering by the general public is real. Experience of what happened in the past when prices went up on the slightest pretext, with much Government inaction, has much to do with the present state of affairs. So I think the Government must do more than just giving assurances.

Encouraging Singaporeans to own shares.

It is said that once you teach a person how to be smart, you cannot, later on, teach him how to be stupid. In other words, Sir, while I subscribe to the idea of encouraging Singaporeans to invest in our soon to be privatised blue chip Government companies, the Government must be prepared to accept that sooner or later these same Singaporeans are also going to invest in other companies listed on the Stock Exchange. And when one invests in shares, he can also lose. There is no guarantee of profits.

The Government must, therefore, start educating the people on these basic truths. Otherwise, when people lose their hard earned money in the stock exchange, we may have a repeat of what happened several years ago in Kuwait and, more recently, in Taiwan. Then, when the stock markets collapsed, there was great clamour from the man-in-the-street investors to have their governments compensate them for their losses.

In the stock market crashes of 1973, 1985 and 1989 in Singapore, investors were then fewer and more sophisticated. They knew that such were the risks of stock investments. Should this happen again in future, with many more man-in-the-street investors, would investors then be so knowledgeable and understanding?

Profits from share investments, of course, include capital gains as well as dividends. Obviously, when more investors are attracted to a market, the likelihood of higher prices for the shares listed in that market also increases. This usually attracts more companies to be listed which, in turn, attracts more investors. This is a common phenomenon of a growing market place. Supply and demand feed on themselves. It is good for investors. My question is: Is the Stock Exchange of Singapore good for investors?

Sir, once we were the second largest market in Asia outside Japan; behind Hong Kong, and depending on which measures you use, we were even ahead of Hong Kong. Now, we are fourth after Hong Kong, Kuala Lumpur and Thailand. Sir, I refer to Table 4. Our place in the sun in this field appears to be getting shadier and shadier.

What has led to this decline? I am afraid it is not a single dimensional problem and there are many answers. But when institutional investors shun our market for others in Asia, when local investors buy foreign instead of local shares of our own companies, when companies go to overseas exchanges for its public listing after being told informally that they were not good enough for the Singapore main board, when good local companies do not wish to be listed because in the words of a successful local entrepreneur, "I do not mind being a fish in a gold fish bowl, but what I do mind is being told how to swim", then I say, Sir, that something is not quite right in the state of Denmark.

Cap on Deduction for medical expenses.

I agree that we should tackle the problem while it is still not pressing. Besides this fiscal measure, the Government has and will continue to put in place many programmes to encourage healthy living, emphasise primary health care and reduce health costs. However, I think as a fiscal measure, the proposed cap is inadequate. It puts the initiative on employers when very often medical expenditure is beyond their control. Very often, besides health care givers, the employees are the ones in charge. They are the ones to fall ill and the ones to decide when they would visit the doctor.

I would therefore urge the Government to consider the following:

(a) Allow companies to set up a trust fund called "Medical Benefits Fund". Contributions from companies up to 2% of total employees' remuneration should be tax deductible as proposed.

(b) Employees are not required to contribute to the Fund, but if the Fund runs short, employees and employers should contribute to the Fund. Tax deductibility will still be capped at 2% for employers' contributions, while employees' contributions should be made tax deductible.

(c) The Fund could be jointly managed by employers and employees. All income accruing to the Fund should be made tax free.

(d) The Fund would be used for medical expenses of employees, including the purchase of health insurance schemes for employees. In order to encourage all to take care of their health, a system of cash rebates could be given to those employees incurring little or no medical expenditure. Such cash rebates should be tax free.

Sir, I apologise for the complexity of my proposal. But we now live in a more affluent society with more varied needs. In order to cater to such a variety of needs, often a simplistic approach may not be adequate. My proposal has the advantage of putting the issue squarely on the shoulders of those in control of their health. It also does not reduce the level of medical benefits currently enjoyed by the workers. Separate Assesments for Married Women

Sir, on separate assessment for married women on all income, I am afraid that in the light of GST and going abroad, this is a much overlooked item. But I must say that I welcome this proposal as it finally treats a woman as an economic person in her own right. I am glad that the Finance Minister has taken this first step. I would like to ask when he would take the second step, ie, recognising women employees in the Civil Service as economic persons in their own rights - that they be not discriminated in medical benefits for their spouses and their children.

Sir, with that, I support the motion.

Dr Kanwaljit Soin (Nominated Member): Mr Speaker, Sir, thank you for giving me this opportunity to join in the debate.

I congratulate the Finance Minister on his budget proposals, which this year were wide-ranging and, in the case of the GST-related package, showed a lot of careful thought and care for the impact of the new tax system on the poor. The Minister is also to be commended for the innovative scheme of enlarging the assets of Singaporeans by topping up their CPF accounts to allow them to buy shares. Home makers, the majority of whom are women, welcome this news as their contribution to the GDP often goes unrecognised. Now they can also participate directly in the prosperity of the country.

In his budget speech, the Minister pointed out that for Singapore to maintain strong economic growth in the long term, new policy directions would be necessary. I want to seize this point and ask the Minister, indeed the Prime Minister and his entire Cabinet, to give new thought to a matter which has till now been treated in a fragmented, unsatisfactory way. And this is the question of how we are to bring into balance our economic and social needs. How we can pursue both economic growth rates and full and happy family lives? It is a matter that is crying out for new policy directions.

Mr Speaker, I surely do not need to explain why good family life must go hand in hand with good economic growth. Why do we work so hard but to provide more for our families? Why are we as a nation seeking strong economic growth but to ensure greater prosperity, an ever improving quality of life for our children and their children? Each of us in this House knows the value of a happy family. In our competitive and demanding world, a warm, strong family life provides security and stability for children; emotional support for wives and husbands, care and comfort for aged relatives in the twilight of their lives.

As a nation, we have declared the sanctity of the family as a matter of primary importance: one of our five core values states that the family is the basic unit of society. Just as the continued prosperity of our nation depends on the productivity of each of us, the strength of our social fabric lies in Singapore having happy, healthy families which give support and strength to the individual.

Why then do we continue to see family responsibilities as peripheral to our economic life? Why do so many women have to struggle with the double-burden of earning an income and keeping a family together? Why is it still the women who have to shoulder the bulk of the task of raising children and making a home? Why have we, as a society, been so slow in making those changes in attitudes, in behaviour, and in policies which will allow Singaporeans - and especially women - to find a better balance between the demands of the workplace and of the home?

Women of the earlier generations may have been happy to play home maker. They mostly had little education and were content to be wives and mothers. But women today are in a very different situation. Labour-scarce Singapore needs women in the workforce. And many Singapore women need to work because their husbands cannot earn enough for the family.

Government statistics show that 40% of working men earn less than $1,000 a month. In most cases, this is not enough for a household's needs. The 1987/88 Household Expenditure Survey showed that households with less than $1,000 in monthly income usually spent more than they earned.

So, many of the 630,000 women in our workforce are there out of sheer necessity - their families need the extra income. And for the vast majority of these women, a foreign maid to help look after the home and the children is totally unaffordable. We have some 700,000 households in Singapore, while there were - at last count made public by the Government - about 65,000 foreign maids. That means 90% of our households do not have the luxury of paid domestic help. Which means that, in many, if not all of these households, it is the women who must look after the home and the family. And, all too often, she must also go out to work in order to boost the household income. Our female labour force participation rate is 51%, and half of these women are married.

Let me try, Mr Speaker, Sir, to give the House an idea of what an average day in the lives of such women is like.

6.00 am: Wakes up. Let the others sleep on a bit while she prepares breakfast. Wakes husband, wakes children. Feeds baby, feeds children, feeds husband. Makes beds.

6.30 am: Takes children down to school bus. Goes back to her kitchen to prepare children's lunch when they return from school. Tidies house, washes dishes, hangs out clothes to dry, prepares bag of nappies and toys for baby.

It's getting late. Baby cries, changes nappy. Locks up the flat and, carrying baby, walks to bus stop with husband. Bus comes, husband settles in for a long ride to work. Wife gets off two stops away near baby-sitter's flat. Tells sitter about baby's medication. Goes back to bus stop and head for work.

11.00 am: Baby-sitter calls to check about medication. Wonders whether to scoot from work. But better not, because already taken two days emergency leave this month.

2.00 pm: Heavy rain starts. Wonders whether children are safely back from school. Did they take in the clothes before the rain came? Are they doing their homework?

Resists urge to call children. Calls baby-sitter instead. Baby is having a nap, thankfully.

Son calls. Settles fight between him and his sister. Turns back to her typing.

Husband calls. Reminds her to buy toothpaste. She reminds him to go to POSB.

5.00 pm: First bus is packed. Second bus has standing room. Long ride to the baby-sitter's flat. Sitter complains that she is late again in picking up baby.

Goes to provision shop. Buys toothpaste, cooking oil, and other items. Heavy shopping bag in one hand, heavy baby in another, walks to bus stop.

Luckily bus is early. Squeezes in, arms aching from her loads. Gets home. Husband is back already and is reading the papers. Children are fighting again. She shouts at them. Asks daughter to look after baby. Daughter grumbles.

Cooks dinner. Baby cries. Husband picks up baby. She tells daughter to set table. Calls husband and children to come and eat.

But no time to eat. Baby cries again. Takes baby to room and puts him to sleep. Husband washes dishes. She mops floor, checks children's homework and school bags. Tells them to stop watching TV and get to bed.

Children are asleep. Husband watches TV. She watches too while ironing clothes. Too tired to finish ironing. Joins husband in front of the TV.

They cuddle. Husband wants sex. Too tired. They fight. It is the same old argument.

He tells her to stop working. She says they need her income. And she does not want to have to ask him for every cent she needs.

They go to bed. She cannot sleep immediately. Worries about whether she is becoming a huang lian po ( ) (or yellow-faced hag).

Mr Speaker, perhaps some of the Members in this House agree with the husband. Perhaps they too feel it would be better for this woman to stop work because then she would be a better wife and mother.

And the truth is, Mr Speaker, many women do leave the workforce in order to concentrate on their work in the home. In 1991, 16,000 women quit their jobs because of the demands of child care and housework. Unlike in many of the developed countries, most of these women never return to the workforce.

Some of these women are happy to stay at home and raise families. Others quit work reluctantly. They fear they will lose touch with the world of work, they wonder whether they will one day regret the personal sacrifices they are making for the benefit of their families. At the back of their minds, in the depths of their hearts, they may feel they are being trapped into doing something they do not really want.

For the country, meanwhile, there is the loss on the investment in the education and training of these women. There are today more than 400,000 women whose full-time work is in the home. This figure does not include retirees, and those too old or too ill to work, and those who are full-time students.

Some 30%, or 130,000, of these 400,000 women have at least secondary education. They could be mobilised for full or part-time work in our labour-short economy. But they will need help in managing the dual-burden of the demands of a job and of a home and family. They will need help from their husbands, from their employers, from the Government, from our society as a whole. And it is time that we here in this highest policy-making body in Singapore paid attention to this need.

Mr Speaker, I would like to recall the words of our then Prime Minister, Mr Lee Kuan Yew, back in 1975 when he spoke at the occasion to mark International Woman's Year - this was organised by NTUC. Mr Lee said, and I quote:

`Societies which do not educate and use half their potential because they are women are those which will be worse off. Those that do and face up to the problems of new social and family relationships to help working wives to bring up the next generation are those most likely to provide better lives for their people.'

These words, Mr Speaker, were spoken almost 20 years ago. They are even more relevant today. Have we, since then, faced up to these problems? I submit, Sir, that we have not. We have merely tinkered with policies here, taken half-hearted steps towards change there. We have tackled the very real problems of new social and family relationships in an incomplete, fragmented, and unsatisfactory way.

Over the years, we have had a string of committees and task forces which have, in one way or another, put their minds to the matter of women in the workforce, and the attendant adjustments needed in policies, attitudes, and facilities. Some of their recommendations have been implemented, but too many have either been forgotten or have received mere lip service.

Let me refresh Members' memories.

In 1985, the National Productivity Board published the report of the Task Force on Female Participation in the Labour Force. The report emphasised the need to draw more women into the workforce and retain them there.

In 1986, we had the far-reaching Economic Committee, whose report laid out the steps Singapore would have to take to get out of the recession and which also looked at the longer-term policies needed for the nation's economic progress.

Among the many papers generated by the Committee was one on manpower, and this again emphasised the need to get more women to work. The report acknowledged that many women stopped working because of child care and household responsibilities. The Committee suggested this problem be tackled in two ways: (a) Modify the attitudes and behaviour of society; and (b) Reconcile home and work responsibilities.

The Committee also proposed several steps that could be taken, and I have summarised these along with the recommendations of the NPB Task Force. They are: (1) a public awareness programme; (2) changes in the education system to promote the virtues of sharing of housework as well as equality of the sexes; (3) professional associations, trade unions, and employers should work towards the elimination of sexual discrimination; (4) quality and affordable child care arrangements, including pre-school and before and after-school centres; (5) leave schemes and work schedules tailored to working mother's needs; (6) training and retraining of women.

Since then, other committees have made similar proposals. For instance, in 1989, the Advisory Council on Youth called for: (1) schools to teach children the importance of preparing for their future roles as spouses and responsible parents; (2) more child care centres to be located within high-density housing estates, and in large corporations, Government ministries and statutory boards; (3) an intensifying and upgrading of training and child care staff.

And then the Advisory Council on Family and Community Life, also in 1989, called for: (1) the special sick child care leave scheme to be extended to fathers; (2) employers to be more family-friendly; (3) a five-day work week to allow workers more time for their families.

Mr Speaker, what has happened to all these proposals? Is anyone following up on them? Or are the reports just gathering dust on Ministers' and civil servants' shelves?

Mr Speaker, it is time for us to stop making these half-hearted attempts to solve what is a national problem. We are now at a stage of our development when we need to bring our economic and social lives into closer harmony. We want Singaporeans to be efficient, productive workers; we also want them to be better-rounded, able to appreciate the arts, hobbies, sporting activities. And we want them to be good parents, to build secure and happy families.

The Government runs advertisements in the media encouraging young Singaporeans to marry early and start families. We have the Social Development Unit, the Social Development Section, the Social Promotion Section, all busily trying to get young Singaporeans married. This is all very well, but are we doing enough to ensure that the young women we are pushing into marriage will not be saddled with the double burden of work and home responsibilities? And are our attitudes and policies changing in such a way that our young men will enter marriage ready for their role as a considerate husband and caring father? For it is this, Mr Speaker, that young women today expect in a marriage.

Mr Speaker, I believe that the time has come for the Prime Minister himself to take ownership of the task of finding ways to bring Singaporeans' work and family lives into closer harmony and balance.

The integration of work and family responsibilities requires a national strategy, and the clout of someone at the very top to ensure that recommendations are implemented fully and sincerely at all levels to make up for a generation of lost time. And that someone should be the Prime Minister.

Mr Heng Chiang Meng: Sir, I beg your indulgence to say that one figure in the tables I gave out is slightly wrong. I would like to change that figure in Table 4 - Stock Market Statistics. In 1983, market capitalisation for Hongkong was not US$ 28.6 billion, it should be US$18.2 billion.

Mr Loh Meng See (Kampong Glam GRC): Thank you, Mr Speaker, for allowing me to join in the debate. This year's budget announced by the Finance Minister is a bonanza budget. It is comprehensive, well thought out and no one should feel neglected.

I agree wholeheartedly with the approach taken by the Government. Despite having done well in the past, we have not become complacent. We are forging ourselves ahead against the competing regional economies. What we are trying to do, and to do we must, is to continue with the momentum of growth.

The strategy for staying ahead is to distance ourselves further away from our competitors. Our competitors are ever so ready to want to catch up on us. They want to overtake us.

We should not allow our success to delude us into complacency. There are those who always want us to cast our eyes on the huge surpluses and reserves and to rest on our laurels. That would be the surest way to go downhill which we must avoid at all cost.

We enjoy full employment today, in fact, over-employment. I fear that Singaporean stake this happy state of affairs for granted. We seem to have a very short memory. Yes, we recovered all too quickly from the recession of 1985 and 1986 where there were retrenchment, unemployment and uncertainty. Let us be reminded that this can happen yet again, but the question is for how long.

We need both foreign and local investments to expand our economy. We want to continue to have more and better paid jobs for our people. Thousands of our young Singaporeans are graduating from the universities, polytechnics, technical institutes and schools each year. More are qualifying into polytechnics and universities. We need to provide new and better jobs for them. Our population is aging. We need to help retain the older workers in the workforce to earn a good living.

With jobs come income, and income comes the purchasing power. Creating and providing more and better paid jobs should be our focus and priority. The fiscal measures proposed do just that. It is right to reduce the corporate tax rate and the personal income tax rate to maintain the competitive edge and to be able to expand our economy further.

I fail to understand the suggestion by Mr Low Thia Khiang yesterday that the reduced corporate tax rate benefits the big companies and discriminates against the medium and small-sized enterprises. There are also large companies which do less well and will benefit less from the reduced corporate tax rate. Making little or no profit does not depend on the size of the company.

Mr Speaker, Sir, I believe that this is a good time to introduce the GST, a time when we have strong economic growth, the people are gainfully employed and inflation low. Basically, our people can afford to pay the taxes on goods and services consumed. The GST will encourage thrift and prudent financial management of household expenditure. We end up paying less taxes by being frugal in our expenditure. I do not think we should wait, as Mr Chiam has suggested, until Singaporeans are out of work and the country in a recession to introduce GST to prop up the economy. It will be too late for Singapore.

I would like now to speak on the 2% cap on tax deductions for medical benefits. I wish to support the 2% cap on medical expenditure for tax deduction by companies. The tax policy on medical expenditure is not really to deny and restrict the provision of medical benefits for staff. What this novel item does is to alert both the employers and the employees of the impending danger of medical costs rising out of control and causing wage bills to increase and leading business operations to become uncompetitive and unprofitable. Both the company and the staff will suffer as a result.

The unions have asked that the existing medical benefits enjoyed by the workers be left untouched, whilst the employers have requested that a cost- sharing approach be adopted for the excess medical expenditure beyond the 2% cap.

Sir, many companies have not yet reached the 2% level. The majority are, in fact, incurring about 1% of the payroll on medical bills. The big item of medical expenditure is really the hospitalisation cost. It would be productive if the employers and the unions can objectively review and reach a consensus as to what constitutes the appropriate ward eligibility for each category of staff. This, in itself, will contain medical expenditure on hospitalisation.

Many companies have implemented the flexible wage system for staff. The objective of the flexible wage system is to keep wage cost at a competitive level and when the company makes good profits, the profits are shared with the staff with commensurate increases in bonuses. I believe the flexible wage system provides a good avenue for the 2% capping on medical expenditure to be incorporated into the scheme.

Next, Sir, the CPF Top-up Scheme. Many Singaporeans somehow do not view favourably the holding of stocks and shares as good returns on their investments. Many prefer to take short-term profits because of the volatility of the stock market.

Sir, corporatisation and the listing of companies in the Stock Exchange of Singapore has a relatively short history. It is only in recent years that we see more and more Singaporeans being made directors of public-listed companies. This is part of the process of learning, growing and maturing. I believe we are reaching a stage where corporate boards are becoming more established and formidable in facing the fierce competition in the market place both locally and internationally.

Sir, the CPF Top-up Scheme is really part of the public education programme to get Singaporeans to buy and hold shares in reputable public-listed companies like the Singapore Telecom. Through their investments, Singaporeans can understand better the world of competition, productivity and profitability.

There are about 100,000 Singaporeans who work regularly but do not contribute to CPF. We must do everything possible to get these Singaporeans to contribute to CPF and to look after themselves and their families in housing, medical care and old age provisions. To me, the CPF Top-up Scheme serves this worthy objective of bringing as many working Singaporeans as possible to contribute to CPF.

Sir, I support the motion. 1.40 pm

Mr Goh Choon Kang (Braddell Heights): Sir, the Budget Statement this year is both very encouraging and generous. It is also very clear in purpose and that is, to promote an external economy and to provide cushion for the proposed GST.

Sir, I want to address only one point and that is the nagging fear of the man-in-the-street that prices will increase when the GST is implemented next year and by more than 3% as anticipated by the Government. I think the Government should do two things. First, do more to allay the fear, real or perceived, of the people, and second, ensure adequate checks and balances are in place against profiteering.

Sir, perhaps, it is useful to look at some empirical evidence on GST, or VAT. The February issue of the Bulletin, an Australian magazine, quoted a study by Alan Tait, Deputy Director of the Fiscal Affairs Department of International Monetary Fund. Mr Tait explored the inflationary consequences of value added tax in his 1988 book, "Value Added Tax: International Practice and Problems". Tait examined changes in consumer price indices, wages and credit over two years surrounding the introduction of VAT in 35 countries, as well as a further six examples where rates of VAT were changed. He found that in 22 of the 35 countries that had introduced the tax, there was "little or no effect of the introduction of VAT on the consumer price index". And in eight of the countries, there was a pronounced "one-off" shift in the CPI and an acceleration in inflation. So the impact of the introduction of VAT in most countries is either marginal, or one-off. And he concluded: "While some commentators have associated VAT rate changes with inflation, the weight of evidence seems to be against it."

What did the Bulletin itself say about GST. It said that "the GST has been labelled regressive because low income groups spend a higher proportion of their income than the rich and will therefore pay a higher proportion of their income in GST." At the end of the day, however, the Bulletin concludes:

'...there is a bogus element about the regression argument. The brute fact about the poor is that in all societies, at all times, they have got the dirty end of the economic stick. And in all societies, at all times, their best solution has not been to moan about their plight but to divert their energy to working their way into the higher income group. The problem of the poor is not the presence of taxation but the absence of income.'

My own conclusion is that the Australian economic woes arise not because of their lack of economic gurus, but rather a lack of political will and foresight. I think the 15% GST proposed is badly needed as a source of revenue.

Singaporeans, I think, are fortunate to have a Government with political will and foresight, and in the introduction of the GST at this stage at 3% and it is also revenue neutral. Still I think the fear of the man-in-the-street has to be addressed carefully. The Chinese say, min yi shi wei tian (

) It is only natural that the men-in-the-street are concerned about the possible adverse impact of the proposed GST on consumer prices. It is reassuring to know that the Government is fully aware of the people's worry and will take various measures to check profiteering and assist the lower-income groups.

One such possible measure is to flood the market with essential products through organisations which have an interest in keeping our consumer prices down, such as the NTUC Fairprice retail cooperative. However, Fairprice is not everywhere. Many new towns are without such outlets and new towns built in the 80s and later are also without wet markets and hawker centres. Fairprice has to bid for shop space. Since it is an important organisation which can help to hold consumer prices down, should the HDB not consider giving them some concessions in bidding? Because I know of some cases where NTUC Fairprice was outbid by other competitors. But I must say that I have no connection or vested interest at all with Fairprice.

On hawker centres and wet markets, the Government has decided not to build any more wet markets and cooked food centres. Therefore, many HDB new towns are without wet markets and hawker centres. What they have are dry markets and eating houses or coffeeshops which were bidden successfully many a time at unrealistically high prices. The high cost of operating these markets and shops or stalls inevitably will be passed on to the consumers. Nowadays, you can still get maybe $1.50 fishball guatio and $2 chicken rice at most hawker centres, but I do not think you can get them at this price in an eating house or coffeeshop.

Wet markets and hawker centres have not only become prominent features of many HDB estates, they are also important institutions which help to hold consumer prices down. They are very important to the working class, especially the middle and lower-income groups. So should the policy of not building wet markets and hawker centres be reviewed?

There is another aspect of this problem. The Government seems to have changed its mind a bit on wet markets. A few new generation markets have been planned. But from what I know, the thinking is to tender out these markets to one single operator, like in the case of coffeeshops. The Ministry of the Environment has actually started the practice of tendering out vacant hawker stalls in existing hawker centres. Ultimately, I think it is the consumers again, not the hawkers, who are going to pay for the high bidding prices.

Sir, I agree that we have to have faith in market forces. But the full play of the market forces requires competition. Therefore, while we should have faith in the market forces, we should also ensure that conditions that allow for the free play of market forces exist or are adequate. That is the most effective way to hold consumer prices down and that is also the most effective way to allay the fears of the man-in-the-street about GST.

Sir, I support the motion.

Dr Tan Cheng Bock (Ayer Rajah): Mr Speaker, Sir, I rise to support the motion standing in the name of the Minister for Finance.

A clear message in the Budget speech was the need to develop an "external dimension" for the Singapore economy. Therefore, to encourage local businessmen to venture abroad, he has unveiled a series of tax incentives to go regional. These are unilateral tax credit for dividend income remitted from countries without tax treaties with Singapore; extend double tax deduction scheme to cover exports and services; double tax deduction for approved expenses incurred in developing overseas investment opportunities; and tax exemption for venture capital and regional funds.

In addition to making Singapore a more attractive centre for various offshore activities, he has announced a 10% concessionary tax rate to approved art and antique dealers, tax exemption for non-resident beneficiaries of trusts where the trustee is an approved trustee company and extend tax holiday for SIMEX by a further five years. These incentives have been welcomed and appreciated by most businessmen. I personally think that these incentives are timely.

However, Mr Speaker, Sir, incentives to go abroad is but one dimension of our drive to go regional. The other is entrepreneurial spirit. Recently, there has been a lot of talk lamenting that Singapore lack entrepreneurs like those in Hong Kong. I think we can trace this to our very early independence days. It is historical. Since independence, we had approached our industrialisation programme differently from Hong Kong. We invited MNCs to help us to industrialise. The EDB enticed them and they came in large numbers, attracted by our political stability and, of course, the incentives offered them. EDB's role was therefore to encourage investments and it did not encourage our Singaporeans to go and invest abroad. Even when they helped develop Batam, the comment was, "it is again for the MNCs and the local element is again not remarkably significant."

But the message is now clearer. Figures on our economy, as revealed by our Senior Minister, showed the unhappy situation we will be in if we do not make the change to build an external economy for Singapore. While many would like to blame the Government for the lack of entrepreneurs, we should also be thankful that the MNCs brought prosperity and enabled Singapore to develop. In fact, it is never too late to encourage the entrepreneurial spirit. After 40 years of dead end Communism, China is brimming over with entrepreneurs.

Singapore entrepreneurs have always been around, but they lack recognition. They were at the fringe, at the periphery of the MNCs, ignored by EDB and Government departments. But today, after Senior Minister's speech, they are in the limelight. Creative Technology is cited by everyone as one of our made-in-Singapore entrepreneur. Yes, he deserves it. I heard him at a seminar explaining why he left Singapore, how Singaporeans did not pay much attention to his ideas and how from a small room in the United States he went around selling his ideas and products.

Mr Speaker, Sir, risk-taking is part and parcel of doing business. Many have had their fingers burnt, but they accept it as business risk. However, the press and Singaporeans at large are not so forgiving. They are too judgmental and ever ready, to label those who did not do well. The best recent examples are Yeo Hiap Seng's investment setback in the United States. Mr Speaker, Sir, I have no shares in this company. And the Government's investment in the Brierley group. Not only that, the press would drag up these names at every mention of investment setbacks. "There is no room for failure" has been bandied around for some time. I think it should be replaced by another saying "Failure is the key to success." We must be more understanding and forgiving.

Look at the way our press hound the offenders of littering. They seem to relish in the embarrassment. For one cigarette butt offence, you put them through this humiliation. It is out of proportion. Mr Speaker, Sir, I do not condone littering. Culprits should be punished. But to over-punish sometimes has negative effects on the individual and our society at large.

Now that the Senior Minister has encouraged Singaporeans to go regional, I hope the relevant Government bodies would not over-react. We should not allow the pendulum to swing to the other end which is quite possible because of the zealousness to overdo things in this country, especially when the idea comes from our Senior Minister.

While regional investment opportunities are likely to offer better return than those in North America, the EC countries and Australia, we should not give the wrong signal that these countries are no longer important. We depend on these countries for their technology and export markets. Therefore, while we must look regional, we must be prepared to entertain requests from Singaporean investors in Europe, America, Australia or anywhere in the world. Lastly, going to invest abroad should involve total cooperation between private and public sectors. It is necessary to pool our resources together to compete against many major international players. Presently, there is very little of such cooperation.

Private companies are often reluctant to exchange information or co-invest with the GLCs. They fear that business will be stolen from them. This will impede the development of our regional businesses. I hope Commodore Teo's committee will come up with some ideas to overcome this. We should start a new chapter of cooperation between the private sector, GLCs and the MNCs. Forget the past. EDB and the TDB could help out by providing the relevant information of the business risk and leave it to the entrepreneurs to make the final decision. Perhaps EDB may need to expand its role and encourage investments abroad instead of just encouraging investments into Singapore. I do not think we should establish a new body to spearhead this. We have EDB and TDB. Let them expand their scope of activity to emphasise the regional investment as another branch of their work. Too many bodies, too many rules. Our missions abroad must be on the look-out for such opportunities and work with EDB and TDB and report whatever opportunities they have back home.

Mr Speaker, Sir, I support the GST and appreciate the Government's concern to ensure that the poor will not be badly affected by the introduction of GST. Such a drastic taxation change is not without its share of problems. The question of the poor and how GST will affect them has been mentioned in many speeches. GST will definitely affect them. To offset this, the Government has come out with a series of rebates for households with incomes below $1,500 a month. These primarily are rental rebates for 1- and 2-room HDB flats and rebates on service and conservancy charges for 1-, 2- and 3-room HDB flats and also upping the public assistance allowance and Singapore Allowance. The rental rebates will benefit more than 83% of the 61,000 HDB tenants. The service and conservancy rebates will benefit 125,000 low income 1-, 2-, 3-room HDB flat dwellers. Dr Ow Chin Hock has even calculated the quantum amount these rebates will help them.

Mr Speaker, Sir, Opposition Members have been very critical lately that we do things to benefit the rich. I think we have been fair to all - rich and poor. The rich and better-educated have an advantage over the poor and less educated. They know how to maximise the many schemes and policies and opportunities provided by the Government. As for the poor and less educated, we must continually reach out to them on the many available schemes and opportunities open to them. The best answer is education. We have in place various special programmes, including Edusave, to help them. They cannot start on the same starting line as the others. We must bring them up to the starting level before they can compete.

First, there must be hope - hope for a better life and most of the poor bank their hopes on their children. Therefore, we must let them know through schools and at community level that any poor child who can study will be helped. That is why this Government has spread their bursary and scholarship awards to neighbourhood schools distinct from the scholarships that always go to the top schools.

We cannot assume that the poor know of the opportunities available. We must bring to their attention by way of the schools, RCs and CCCs that there are social and welfare services like family service centres, custodial care services, financial assistance services, textbook assistance schemes, tuition schemes, at community as well as national level.

We have been doing a lot for the less privileged Singaporeans. I hope the Opposition's cry that we look after the rich should be critically examined.

I have said that we have been fair to all and we will continue to be so. It would be foolish of us not to spread our wealth around because we know that politics of envy can be nasty. That is why from the very beginning we took steps to prevent this. For example, we acquired land, developed it and built subsidised public housing for all. If we had not done that, then the disparity between the haves and have-nots will be very wide.

As many of the poor are also saddled with medical problems, C-class beds have been retained in Government and restructured hospitals. I hope NUH will follow suit. Government institutional care for the aged sick must continue to be made available at reasonable cost.

It is not possible to make everyone own a flat. Rental flats must be retained because some cannot even afford the first downpayment. Eviction of poor flat owners because of rental arrears has been handled very carefully by Town Councils and HDB. In such cases, many a time such action was not carried out because of the assistance from the CC funds and easier payment terms have been employed.

Finally, we have to be realistic. We can never help all, but we can provide and create opportunities for them. If they fail to respond, then we can do nothing.

One should not be proud to be poor nor should be ashamed to be poor. Many of us in this House started out poor. We were not proud nor were we ashamed to be poor, but we shared one common objective - the determination to get out of the poor trap, the poverty trap our parents were in. We succeeded and we thank the Government for the bursaries and scholarships that gave us the chance to go to college and university. 2.07 pm

Dr John Chen Seow Phun (Hong Kah GRC): Mr Speaker, Sir, Singapore has prospered because of our sound economic and social policies plus the hard work of our people. The various fiscal measures announced and the proposed GST will strengthen our economic fundamentals and take us one big step forward in our economic development in this competitive world. These measures will also promote enterprise, thrift and hard work among Singaporeans.

At the same time, the Government has shown that in introducing these new measures, it has not forgotten the social implications and has offered generous rebates and offsets to help the lower income households. According to the Finance Minister, it is the intention of the Government that, as far as possible, no family would lose out because of GST.

Sir, while I am extremely pleased to see the various kinds of rebates, offsets and grants offered, I am concerned that a not insignificant number of HDB 4-roomers may not be sufficiently compensated. According to the Finance Minister, there are 195,000 households earning less than $1,500 per month. They pay little or no income tax and the proposed income tax reductions will not be sufficient to offset the GST they will pay. 90% of them live in HDB flats. 125,000 or 64% of them are in 1-, 2- and 3-room HDB flats. These households will be looked after mainly through S&C rebates and rebates on rentals or property tax.

However, there are still 41,000 households or 23% in this income category who live in 4-room HDB flats. They will not enjoy the S&C rebates. Their property tax rebates and the little income tax reductions that they will have are not likely to be enough to cover the GST. They may, therefore, lose out because of the GST. Will the Minister consider other ways whereby these households can be helped?

Sir, the Government is also generous in sharing the fruits of our economic success with the people. The Edusave grants to our children and the CPF share ownership top-up scheme are excellent examples of this kind of sharing. It is also done in a way which will encourage all Singaporeans, whether young or old, to work hard to ensure the continued prosperity of our nation.

It is clear that the CPF Top-up Scheme as announced encourages every Singaporean above the age of 21 to open a CPF account so that as many as possible can be share owners. The only requirement is a $500 co-payment. Many retirees and housewives are very pleased to hear about the scheme. However, the $500 requirement also means that those who cannot afford it will be deprived of the $200 the Government intends to give to every adult Singaporean. Therefore, whatever reasons the Minister may have for the co-payment, I feel that it should not end up preventing poor Singaporeans from receiving the $200.

May I therefore suggest that the $200 be given to every adult Singaporean who either has an existing CPF account or registers to open a new account. Co-payment by an account holder should only be required if his account does not have sufficient money but he wants to purchase his full entitlement of the Singapore Telecom shares. Alternatively, the Government may want to consider allowing the $500 co-payment to be paid by a transfer of money from a spouse's or child's CPF account. There is no reason why this should not be allowed. It is a good way to use their CPF money.

Sir, the Minister has proposed to cap the tax deductibility of medical expenses by employers. The rationale is good. It will cause employers and hence employees to be careful of how they spend on health care.

The United States has wanted to tax health benefits some years ago but did not because of political pressure. The proposal is now being reconsidered by the presidential Task Force on National Health Care Reform chaired by the First Lady Hillary Clinton. But the problem has grown to such an extent that the tax exemption on health benefits provided by employers is now estimated to be 10% of all health care spending in the US, which currently stands at 14% of the US GDP. Imagine what it will cost the employers if these health benefits are suddenly taxed. Imagine how workers and unions will react if employers then try to pass this tremendous tax burden to the workers. The political sensitivity of the problem has become so great that it is no surprise to read from International Herald Tribune recently that Hillary Clinton is already dropping the proposal.

Sir, we must therefore act early when the problem is still manageable. Most companies will not be affected by the proposed capping schedule when it is introduced. There is concern, however, that friction between labour and management may arise because of such a cap. This can be seen by how quickly the employers federation jumped at the proposal and immediately advocate cost sharing of medical benefits between the employers and their employees, and how equally quickly the labour movement reacts to it.

In this regard, it is therefore important to remind employers that there is nothing to prevent them from giving medical benefits beyond the 2% cap, and that the proposed capping should not deprive any workers of existing medical benefits. Of course, employers are free to propose their conditions as far as new and improved benefits are concerned. The two sides must acknowledge the problem of rising medical cost and work together, not only in collective agreement negotiations, but also in other health promotion measures to contain health care costs. There must be such an understanding between employers and the unions so that our harmonious labour-management relations will not be strained.

Sir, the ageing of our workers, the availability of better medical equipment, drugs and services, and the expensive manpower costs of providing health care are pushing health care costs up very rapidly. The increase in health care cost is therefore certainly going to be faster than the wage rise of workers. In the longer term, the legitimate medical expenses by workers are likely to exceed the 2% cap. May I ask the Minister whether the cap will be revised when such a situation arises?

Sir, I support the motion.

Mr Cheo Chai Chen (Nee Soon Central): ( In Mandarin): Mr Speaker, Sir, I am honoured to have the opportunity to take part in the debate on the Budget Statement.

The major premises in the statement consist of two main points. Firstly, to develop our external economy. Secondly, to pave the way for the implementation of the GST.

Let me deal with the first point. I support the Government's policy in encouraging local entrepreneurs to develop their business overseas. However, for local entrepreneurs to go overseas it is not an easy task. The most important thing is that they must have sufficient capital. In Singapore, those people who really have the ability to invest overseas and to compete with international consortia are very few. Apart from very large statutory boards and GLCs or MNCs, other small and medium-sized enterprises only feel that the "spirit is willing but the flesh is weak." Most of the SMEs do not have large profits in Singapore and they are only struggling to survive. I feel, therefore, Mr Speaker, that the tax policy in Singapore, apart from encouraging foreign investment into Singapore, should also support and assist the SMEs in Singapore. These are our genuine Singapore companies that need our assistance.

Mr Speaker, Sir, according to the nature of the policy of taxation, there are two categories involved. One is the tax on profit and the other is tax on costs. Tax on costs refers to the taxes that the Government levies on enterprises before profit, for example, the foreign workers' levy, stamp duty, etc. The other category refers to the tax on profit after the enterprises have become profitable, like the corporate tax.

Mr Speaker, Sir, I feel that the Government should allow the SMEs in Singapore to build up their strength. The Government should abolish all taxation on costs or reduce them according to circumstances. In this way, the Government will be able to lighten the cost of doing business by the SMEs and for them to accumulate more capital.

With regard to the tax on profit, of course if you can cut it, so much the better. But it may not be absolutely necessary. If a company makes money, then they will not mind paying the tax that is due, even though it might be still on the high side. This is their responsibility to the State and it is also their contribution in return to the society. If a company does not make money, even if corporate tax is cut down to 0.5%, it is of no help at all.

Therefore, Mr Speaker, Sir, the Government must pay attention to the question of cost increases of doing business here. At the present juncture, Sir, I feel that it is time for the Government or the statutory board to freeze all the rental increases in Singapore. In this way, they will be able to cut down the cost of doing business in Singapore.

When our SMEs are strengthened and have consolidated themselves, then they can pool their resources together to go overseas or to have joint ventures with our statutory boards or GLCs to go overseas and to cut down the risk involved. In encouraging local companies to develop overseas, the Minister for Finance has provided incentives to take care of the local companies, and I appreciate this move. However, I would like to remind the Minister for Finance that the Government should ensure that the profits made outside Singapore will be given preferential tax treatment when they are remitted back to Singapore. Because the most important objective in encouraging local companies to go overseas is to earn more foreign exchange. It is not just to enable the companies themselves to make profits for themselves. After that, if our entrepreneurs find that they can make more money and the world outside is better, then they will not come back. And then we will be suffering great losses.

Let me deal with the question of attracting foreign investments. All along, we have been giving them tax holiday and tax incentives. Like the local companies, these foreign investors are concerned with the cost of doing business. Therefore, we must create more favourable conditions and environment for them to come in. We have already set certain conditions which are favourable, like our infrastructure in telecommunications, harbour, airport etc. Secondly, we have a very good geographical position. Transportation is very convenient and developed, and there is political stability in Singapore. Our people are well educated and well trained to a very high level. These are favourable conditions. But we also have unfavourable conditions such as the high labour cost, the high land and rental cost. Our taxes are high and there are too many procedures and regulations, etc.

Therefore, Mr Speaker, Sir, in order to attract more foreign investments, we should review all these unfavourable conditions and continue to strengthen our advantages.

Let me now deal with the question of GST. Before that, we must understand that there is a relationship between budget and taxation. This is a very complex matter but the objective is very clear, and that is, to ensure that for all the expenditures of the various departments we have sufficient financing from tax revenue. A government, in taking any tax measure, whether it is direct or indirect taxation, the ultimate move is to get money. So in this regard, the Government, on the one hand, gives some incentives or subsidies or rebates and, on the other hand, it will try to create some sources of revenue. The objective is the same. But taxation, direct or indirect, will mean that different people will be affected differently. Those who pay direct taxes are those in the higher income group. Whereas those who pay indirect taxes, whether they are rich or poor, must all pay the same. So as far as the rich and those in the higher income group are concerned, whether it is a direct tax or an indirect tax, there is no problem in paying. But to the poor, or to the lower income group, or to those without any income at all, like pensioners or retirees, then the indirect taxation is a great burden to them. On the contrary, when there was only direct tax, they had no problem at all.

So if you say taxation must be fair, then GST can achieve the objective. If you say that GST will give Government a more stable revenue, then it is also true. But in order to have stability in a country, you must have a proper harmonisation between the rich and the poor. That means those who are well-to-do must pay more to help the poor and those less well-to-do. In that way, there will be warmth and care in society, and there will be long-standing stability.

The implementation of GST will increase the burden on the lower income group and the poor people who are already hard pressed. As a matter of fact, GST is a pseudonym for price increases. At the same time, it may also cause inflation and increase in prices.

Mr Speaker, Sir, although the Government says that it will only collect 3% on GST, no one can assure that, because of profiteering or administrative cost, there will be no undue price increases. GST will add to the cost of doing business, will cause prices to rise and this will also affect foreign investments as well as tourism.

When you consider all these factors, Sir, and the present economic growth which isgood and when we have a lot of budget surpluses, I feel that this is not the right time for us to implement GST in full. As a matter of fact, we already have some form of GST, for example, petrol duty and all kinds of duties on luxury goods. These can be considered as a form of goods and services tax. The present tax system is already sound and healthy. What we should do now is to think of getting other sources of revenue, to improve our productivity and to cut down expenditure, and to earn more foreign exchange. When the Government enjoys great surpluses, we should return these surpluses to the people and to the businessmen. A reduction in tax is a good measure.

In the Budget Statement of the Finance Minister, there are tax reductions for the individuals and the companies. Various categories of people stand to benefit by way of rebates, tax reduction and other measures. We welcome these measures. However, I feel that the various measures on rebates and tax reductions are not surprises because the Government wants to cut down the pressure on our people, because of the implementation of GST. It is a red herring that will try to divert the attention of the people from the disadvantages of GST, and that is why they are giving all these perks.

Mr Speaker, Sir, in this financial year, GST is not to be implemented. I would endorse and support the fiscal and financial policy of the Minister for this year. But I would not support the implementation of GST next year. I would urge the Minister for Finance to shelve the plans to implement GST from 1st April, next year. Otherwise, all the perks given now will be completely nullified or people may even stand to lose. Nobody can assure us that in future there will be no price increases and GST will not cause inflation. 2.30 pm

Mr Lau Ping Sum (Ang Mo Kio GRC): Mr Speaker, Sir, the Minister's Budget Statement this year gave Singaporeans both a clear and comprehensive overview of the underlying philosophy of this Government and details of the fiscal measures proposed for the next financial year. Investing in the future to secure the long-term success of the economy and sustain the quality of life in Singapore, this fundamental philosophy has been instrumental for our success. As is well known, the long run consists of a series of short runs. Hence the range of tax changes, for example, corporate and income tax reduction and the GST have been proposed in line with the objective of making Singapore more competitive and easing the direct tax burden of the economically active population.

An effective government must look ahead, anticipating probable problems and devising plans of action to counter them. But this is easier said than done. Often, social, economic, political and even technological changes overwhelm the best of plans. Sociologists, economists, political scientists and social anthropologists have their favourite theories on, for example, how Japan managed to transform a ruined economy after the Second World War into the most successful modern economy, the leader in many industries, within a generation. Equally, they are more than willing to speculate on the root causes of Japan's current recession and problems of corruption and malpractice in the financial markets. But there is no sign of agreement on the fundamental reason for the relative performance of different economies.

Against the backdrop of volatile changes, the need for adaptability and flexibility is crucial. Even in the business sector, the ability to respond speedily to structural and technological changes cannot be over-emphasised. In 1982, Tom Peters' book "In Search of Excellence" became a best-seller. All the business administration schools in the US, Europe and elsewhere adopted it as part of their compulsory reading list. Hundreds of seminars were organised to analyze the reasons for the excellent track records of certain companies. And we know that among the companies highly commended by Tom Peters was Wang Laboratories, which unfortunately filed for Chapter 11 Bankruptcy Protection. In fact, Tom Peters himself, in December 1992, admitted that he had badly underestimated the importance of adaptability because about 30% of the companies that he had highly commended went into difficulties of varying degrees within a few years after 1982.

Even IBM, for three decades, the most admired and even feared computer company, is going through a rough patch. Last year, it lost US$4.8 billion. With several Nobel Prize winners in its payroll and a capital expenditure and R&D budget amounting to US$10 billion a year, IBM could not reverse a steadily declining market share. It is currently less than 20% of the total computer revenue in the world, but used to be more than 30-35%. Its total stock value of US$106 billion in 1987 plunged to below US$30 billion in 1992. Microsoft, whose Chairman, Bill Gates, dropped out from Harvard University is now the richest man in US. With a much smaller staff of about 12,000, compared with a high employment of IBM's 400,000, Microsoft's stock value would, by now, have matched or even surpassed IBM in total value. No wonder an angry IBM shareholder, in December 1992, sent a message to Mr John Akers, the then Chairman of IBM, citing Oliver Cromwell, in 1652, when he tried to dissolve the long Parliament and I quote:

`Begone, you have sat long enough. Do you think to sit here till doomsday come?'

Despite its excellent track record and considerable strengths, IBM was not quick enough to adapt to the fundamental changes occurring in the computer industry. A weakened demand for mainframes, another term for it, downsizing, moving processing from large computer mainframes to smaller PCs and networks, the explosion of power of PCs, the user demand for more friendly interfaces and open architecture (which means that you could buy equipment and software from a number of vendors instead of just one proprietary vendor), all these require decisive changes which the multi-layered bureaucracy of IBM seemed unable to make in time.

Contrary to what my good friend, Dr Ow Chin Hock, said yesterday, size is no longer the most important consideration. Rather, speed in anticipating new trends and understanding their implications is a critical success factor. Intel, the semiconductor company, has become enormously successful by investing for the long term and adapting to changing markets with tremendous speed. Its Chairman, Andy Grove, a refugee from Hungary in 1956, who left the country with $20 in his pocket and, today, the Chairman of Intel, said:

'If we hadn't kept moving the technology rapidly from the 8088 chip in the original PC with 30,000 transistors to the 486 [which is the latest PC] with 1.2 million transistors, to the forthcoming Pentium with over 3 million - we wouldn't have an advantage ... and we are already beginning to invest hundreds of millions of dollars in the generations to follow. The pace of work these days isn't easy to live with, but welcome to the nineties.'

This is a fact of life. Rapid and even exhausting changes. The Minister for Finance rightly pointed out in a TV interview after the Budget Speech that we had to introduce these tax changes because the world was changing. There is tremendous competition for capital investments, and tax reforms are necessary. No doubt, they are necessary but not sufficient. We need to enhance the quality of our workforce, upgrade the infrastructure and improve our knowledge of the culture and business environment of the high-growth Asia-Pacific countries.

Sir, a common concern frequently voiced on the GST is the tendency of some merchants to use it as an excuse to raise prices. The Government together with CASE and the community leaders, the Shopkeepers' Associations, could work together and see how such acts could be discouraged. NTUC Fairprice and other companies will play a useful role in this regard.

Sir, on the Management Accounting Systems adopted in the Government, it is noteworthy that these computer-based systems have been installed in Government Ministries and completed ahead of schedule. By April, the systems will be in place in all Ministries and statutory boards are being encouraged to adopt them. The objective of using these systems to deliver high-quality public service at lower cost is, indeed, commendable. I would like to know if the concept of Activity-Based Costing (ABC) has been included in the current management accounting systems. ABC is a relatively new approach which, whilst keeping an eye on costs, focuses on the activities that add value to customer satisfaction in a direct way. Rather than concentrate on after-the-fact reports, the emphasis is on setting proactive improvement targets, planning optimum work procedures and preventing variances from occurring in the future. Would the Management Services Department be incorporating the ABC techniques to fine-tune the management accounting system?

Sir, I am happy to note that greater funding for the arts, sports, cultural and recreational activities will be available. The quality of life in Singapore should be enriched by a more vibrant cultural scene, hopefully, of the right kind. I was surprised to read in the newspapers recently, Sir, that we had some local drama performances where the actor or the performing artiste urinated in front of the audience and drank his own urine. I fail to see the artistic merit, the talent or the sensibility in this performance, and hope that Government funds were not involved in this production. I would urge the artistes themselves to exercise restraint and not to indulge in similar bizarre acts.

Traditional cultural values and activities should be promoted for nothing is more dehumanising than to be impoverished beneath the veneer of American pop culture. The American economist, George Gilder, said:

`The most dangerous threat to the US economy and society is the breakdown of our cultural institutions - the family, religion, education and the arts - that preserve and transmit civilisation to new generations. If the social fabric continues to fray, we will lose not only our technological prowess and economic competitiveness but also the quality of life itself.' Let us pause and reflect if this observation holds true in our context. The great unfinished task ahead of us is to achieve excellence in both economic competition and cultural pursuits.

Mr Speaker: Order. I suspend the Sitting and will take the Chair again at 3.10 pm.

Sitting accordingly suspended at 2.42 pm until 3.10 pm Sitting resumed at 3.10 pm