ANNUAL BUDGET STATEMENT

Order read for Resumption of Debate on Question [23rd February, 1994],

"That Parliament approves the financial policy of the Government for the financial year 1st April, 1994 to 31st March, 1995." - [Minister for Finance].

Question again proposed

Mr Chew Heng Ching (Eunos GRC): Sir, when Parliament adjourned yesterday, I mentioned that it was perhaps timely for the Government to gradually move away from giving fiscal incentives, no amount of which is ever enough. Discounts and rebates as incentives should slowly make way for some other more meaningful and less money-based incentives. If we desire a more caring and gracious society, want to inculcate stronger family values, we should not always emphasize fiscal rewards. How much should be fiscal and how much should be non-fiscal incentives, I do not have a ready answer. But I do know that in the long run, and with resolve, the Government should be able to find a balance between incentives and rewards.

With that, Sir, I support the motion moved by the Minister for Finance.

Encik Othman bin Haron Eusofe (Marine Parade GRC): Mr Speaker, Sir, I support the Government's financial policy.

This is a sound Budget to prepare Singaporeans for the future. However, Sir, there are two main areas of concern. First, with the implementation of GST, the continued good growth of the economy and the tight labour market, there are fears of overheating and inflation leading to increases in cost. We have to monitor these developments closely and be quick to take corrective measures to redress any problems. The next key area is whether we are allocating sufficient time and resources to tackle the issue of skill training and upgrading of workers, particularly older workers. Manpower is our only resource. Among our competitors in the NIEs, we have the lowest educated workforce. There is the urgent need to relook at the programmes for training of workers at the national as well as the company levels.

Our Government's prudent and farsighted economic management has enabled us to enjoy rapid economic growth over the last 20 years. This was achieved despite the fact that we have limited resources. Fortunately, under a strong and good political leadership, we have got the fundamentals right. Our workers have also cooperated in a positive way with the employers and Government and this has enabled difficult policies to be implemented which helped economic development and with it employment and good income for the people.

Our economic development strategy in the earlier years was to create employment opportunities for our people. We now want to achieve a qualitative improvement in our economy. Given our limited resources and the abundant resources and low-cost advantages which our competitors enjoy, we can only maintain our competitive edge if we enhance the quality of the work and services we produce. In this way, I am confident that we will be able to make the grade to enter into the First League. We must be ready to be pushed to the limit and accept that there may be frustrations and disappointments along the way. We have to take account of the realities of our limited resources. To succeed in the world market place, we have to be flexible and be able to make quick adjustments to meet the challenges in terms of development in other economies that compete with us as well as the development of new technology and ideas. We have to be innovative, creative and be able to quickly seize opportunities which become available because of the rapid development in the region and the world.

Sir, to move ahead into the First League, education and skill training and upgrading of our workers are therefore of crucial importance. More innovative programmes would have to be implemented to train workers, especially the mature workers. I am sure that with Government's intervention in this key area it will ensure that Singaporeans will have relevant skills for the industries and services which we want to promote. The salary ceiling for the SDF levy has been raised from $750 per month to $1,000 per month. Employers should look at this adjustment in a positive way rather than to complain that it adds to their cost of doing business. They can benefit from the fund if they train their workers. And if their workers have the relevant technical and operational skills they will be able to compete effectively in the world market.

Sir, while our larger companies have implemented effective programmes to train their workers, the small and medium sized companies are not doing so well. They may need Government assistance and incentives to help them organise training programmes for their workers. The SDF should work with these companies to identify the problems they may have whether in terms of expertise or resources and help them to train their workers.

How do we get the people to continue to work with the Government to prepare for the future? One way which must be done is to continue to win their trust and confidence. It is important that when we enjoy good surpluses we must be ready to share with them. We must help, particularly those who are older and the others who cannot adapt to the free market operations and as a result are left behind and earn lower incomes. We must do our best to help them adjust.

I am happy to note that the Government is giving income tax rebate, rebates on service and conservancy and rental charges for HDB residents, implementing a second Share Ownership Top-up Scheme and a higher rate of interest for CPF Retirement and Special Accounts. By giving this generous reward to the people during the period of good economic growth, it will help to motivate the workers to commit themselves to hard work and excellence so that we can even be more successful.

However, it must be clear that such incentives and rewards can only be possible in years of high growth and when we enjoy good surpluses. The people's role and responsibility is to continue to work hard, to upgrade and learn new skills and be more innovative and creative in their work. We must not assume that whatever we have done in the past, our strategies and formula will continue to work and be relevant for the future. We must be prepared to adjust for any unexpected turn in the future.

We can learn from the experience of the developed countries. However, no two circumstances are the same and there will be shortcomings and misjudgment as we move on. It is important that whenever they occur, we must pull together to overcome them rather than to blame each other. We cannot also afford to become soft and complacent and take our success for granted. To do so will result in the loss of our competitiveness and this will affect our very survival in the future.

Sir, before I end, I would like to turn to another issue, namely, the increase of the employers' CPF by 1.5 percentage points. The Minister has promised us in the last budget that if our economic growth continues to be good he will make the final 1.5% adjustment to the CPF contribution rates. Employers should not complain about the restoration. It is important that they understand that they cannot afford to lose the trust and confidence of their workers as it will be more difficult to persuade them to tighten their belts in the future.

Workers have made significant contribution to the economic growth and should be entitled to a fair share of the fruits of economic growth. Our union leaders have been responsible and they have helped to maintain a good and harmonious labour industrial relations climate. They understand that wage increases must lag behind productivity increases and they have been moderate in their wage demand despite a very tight labour market. As a result, we now see for the first time productivity growth exceeding real wage growth. This resulted in the Unit Labour Cost Index falling and it contributed to the continued decline in the Unit Business Cost Index. Workers' contribution has helped to attract investments to Singapore despite strong competition for foreign investment from other countries. We need foreign investments because of the technology which they bring to Singapore and the markets they offer.

Sir, on this note, I support the Government's financial policy.

Dr Tan Cheng Bock (Ayer Rajah): Mr Speaker, Sir, last year, businessmen hailed the Budget as a Santa Claus Budget. This year, they have expressed disappointment over the Budget.

There are three issues that caused this disappointment. One, their expectation of a cut in corporate tax. Two, the unexpected restoration of the 1.5% CPF contribution by employers. Three, the proposed income ceiling for SDF levy of $750 to $1,000. To the business community, it will affect business and especially coming at a time of the introduction of the GST was something they did not bargain for.

With the benefit of hindsight, this year's Budget should have been presented in 1993, that is, last year, and last year's Budget should be presented this year. This is because this is GST year and companies, including small and medium-sized businesses, do not expect more increased business cost. Last year, we announced a 3% cut of the corporate tax from 30% to 27% but there was no GST. Last year again, there was no restoration of the CPF in spite of the good economic growth and, again, there was no GST. But in 1994, GST looms over the head and expectations are high for some relief to ease their cost. There is thus a psychological impasse. Yet, in retrospect, if we examine the 1993 Budget, there were indeed many GST inspired changes for 1994 that were, unfortunately, forgotten.

To recap, some tax incentives and reliefs that will be given in 1994 from the 1993 Budget, include the cut in the personal income tax rate from 33% to 30%, an increase in personal relief of $1,000 from the present $2,000 to $3,000, reduced import duty for cars to offset the impact of the GST and similarly, reduced petrol and diesel taxes. There will also be a rebate of individual income tax granted in 1993 starting at $700 and dipping $50 per year until it reaches $500 the fifth year and it will stay at that level after that. All these were in addition to the rebates given to HDB dwellers. Even the landlords were given a one-off 25% tax rebate for business properties. In addition, the FY93 tax package includes seven tax breaks to encourage companies to invest abroad. I will not elaborate.

But above all, in 1993, there was a 3% cut (to take effect this year) in the corporate tax, representing a goal to a 25% corporate tax rate. Moreover, the employer's CPF contribution will be increased by half a percentage point from July last year and a 1.5% for 1994 was already announced by the Government to allow business to make adjustments in anticipation of the GST. I think this point was missed by many businessmen. That is why I said, in the earlier part of my speech, the unexpected restoration of the 1.5% CPF contribution by employers. I think this restoration is a fair one because the unions have, in the past, taken a pay cut during the bad economic time and now, eight years later, with the stronger economic growth, a restoration in 1994 is justified. Also restoring the CPF by 1.5% will help workers cope with the GST.

Thus, in summary, many goodies were already given in 1993 for 1994 and I said, with the benefit of hindsight, if we had presented all these this year, we could have overcome the psychological impact of the GST.

Mr Speaker, Sir, timing is important. It is not just giving, but giving at the correct time and this is a good lesson for us. What we have already given yesterday is yesterday's goodies. And no amount of explanation is going to change that. Human psychology is very complex. We should remember this in the years to come when we have bigger and more complex issues to tackle. Thus, in future, we should use more prudence and thought in our handling of issues.

The 1994 Budget has looked into areas that are very important for our future. Money is being pumped into developments and to upgrade the social infrastructure. Hence, the Government is putting $1 billion aside for the Cluster Development Fund to invest in selective strategic projects. And more funds are being pumped into education, civil works and, of course, health.

We must, therefore, look at the Budget in this light. If we take the two Budgets together, that is, 1993 and 1994, a more comprehensive assessment of the economic position of Singapore will be better appreciated.

Prudence, more thought and, again, timing are important when we introduce policies in 1994, especially when such policies affect the pockets of the individuals. The recent civil service pay revision and medical benefits is one issue I had in mind because it affects the pockets and expectations of the civil servants. In fact, this issue also brought together a point we must consider very carefully, ie, Government's relationship with unions.

The first generation leaders, I was told, were conscious of the union's needs. We must learn from them. The symbiotic relationship ensured industrial peace. This relationship is unique and must not be taken for granted. It must be strengthened further as new leaderships take over the respective unions and political organisations. We must not let this relationship be weakened. This is not because the leaders do not know the value of such relationship but because each has different agenda and needs. This is where careful understanding and awareness of each other's needs should be uppermost on their minds in future working relationships. There must be more interaction between the two groups.

The lack of consultation between the union and the Government on civil service benefits is a clear proof of a breakdown. A few unionists called me lamenting on the way the matter was handled. They felt taken for granted. They supported the call for pay cut during the recession. At least give them some face to face their members.

If you think the Prime Minister's speech has corrected their disappointment, let me tell this House that it helped a bit, but the hurt is still there.

Finally, getting people into politics to run this country was the focus of the last Parliament sitting. Pay was discussed at length. While a reasonable salary is needed, there are many other aspects to consider. We must, for example, emphasise and evolve good values of loyalty, commitment, dedication and a sense of duty to country. These must be internalised in us so that we can stand tall in a crisis.

The young are usually imbued with idealism. Idealism is important because it stirs up the passion in us to want to do well, and to want to make changes for the betterment of our society. This idealism gets tempered, as they gain experiences in life. However, this idealism will surface often to pull us from the draws of materialism that make us sit up and think beyond money matters.

I was not in this House during the last Parliament sitting when Senior Minister made his speech. I had to look after a Romanian Delegation visiting Parliament. I read his speech and I was particularly disturbed by his statement that if he were 32 years of age at this period, he too would hesitate to have gone into politics. This left an uneasy feeling within me. I wish he did not make that statement. His words are always so carefully chosen and carry so much weight and influence. I worry his statement would have dented the idealism of many young men and women who want to go into politics out of a sense of duty and commitment to the country. I believe S. Rajaratnam, who knows him better than many of us, that what was said was pure rhetoric.

I support the motion.

Encik Harun bin A. Ghani (Hong Kah GRC): ( In Malay): Mr Speaker, every time a Budget is presented in Parliament, we hear voices of approval in some sectors, and expressions of disappointment in some other sectors. Where the ordinary people are concerned, the Budget this time is seen to be generous. The various incentives at least give them a breather in coping with the various effects of the Goods and Services Tax to be implemented soon. But for the small businessmen, they see little hope of making much profit in the coming years, or at least for this year.

Indeed, no Budget can make everyone happy. Nevertheless, the man-in-the-street is grateful that the Government has been generous enough not to impose a heavy tax and, in fact, is distributing wealth especially to the poor and to the low-income group.

However, Mr Speaker, this situation might not be for long. Changes in the world political arena will affect our economic development. Political conflicts, protectionist tendencies and an environment of ill-will and allegations by influential world media are among problems that will affect our economic development and trade. Yeltsin's waning influence, the re-emergence of Super 301, Japan's reluctance to open its doors to American goods, the linking of human rights to Government aid, etc, are also developments that give us concern.

To cope with the problems that might arise, we need to be watchful and diversify our approach to economic expansion. In addition, we must continue to be prudent so as to prepare for the day when things might take a turn for the worse. For this purpose, we should reserve some of the rewards or goodies that we might want to distribute to our people, and give these to them in times of difficulty. The more we save up now, the easier it will be for them to bear the dire circumstances that might befall them in times of economic recession or economic downturn later on.

We also have to be cautious in distributing these so-called goodies. It has to be done in an equitable manner, everyone enjoying an equal measure, as in the case of the CPF Share Ownership Top-Up Scheme and the 5% across-the-board tax rebate.

This distribution should also not be seen as the Government moving towards welfarism, something we have strived to avoid. Special benefits should be meant only for the less well-off who really need them. Usually, handouts for those in difficulty will have a deeper impact and will be highly appreciated. But handouts for someone who is not in such dire straits will not be so appreciated and, in such a case, the goals behind the Government's well-intentioned measures will not be achieved.

Mr Speaker, the recent salary revision for civil servants has brought them relief. In addition, a better working environment, closer superior-subordinate relations, better promotion prospects, etc, have made the civil service career attractive. This has raised its competitiveness against the private sector and is good for our economic development.

The public service is the backbone of a Government. Our future national development will depend a lot on the efforts of the Ministry of Education in nurturing our future generation. The other Ministries and departments are of equal importance. Together, the civil service forms the supports of an effective government. As such, the Government has to continue to pay attention to departments having manpower problems and ensure that their requirements are met so that they can be more efficient and be able to provide the public with satisfactory service. At the same time, we must appreciate the work of those departments which have not been getting the attention they need but manage nonetheless to cope with a heavier workload. They have performed well under the circumstances.

I hope, Mr Speaker, that the Government will continue to ensure that public officers find a civil service career something to be proud of and not feel unesteemed and unappreciated.

I support the Budget presented by the Minister for Finance.

Mr Cheo Chai Chen (Nee Soon Central): ( In Mandarin): Mr Speaker, Sir, the focus of this year's Budget is on the implementation of GST. The Government has said that the implementation of GST is to change our tax structure so as to improve our competitiveness. This is only the perception of the Government. Whether it is a good measure or not, we cannot tell as yet. We must understand that there are many factors affecting competitiveness. GST is not necessarily the most effective measure, because many countries which are implementing GST do not seem to be competitive. I have spoken in this House that the implementation of GST would adversely affect the lower-income group, particularly those who are aged and not gainfully employed. Unless the Government can grant various rebates year after year to offset the effect of inflation brought about by the implementation of GST, these people will suffer very gravely.

The implementation of GST will lead to price increases. This is beyond dispute. Even before the GST has been implemented, we are already experiencing price increases everywhere. Before we could see the benefits the GST is supposed to bring about, we are already witnessing its adverse effects.

According to the estimates of the Government, its revenue from GST in the 1994 budget year will be $960 million. The Government has also stated that it would cost $1.2 billion for the rebates on conservancy and service charges, rentals, etc. Therefore, we can presume that if the Government fails to get revenue from other sources to cover its losses, it will increase other taxes, or increase the rate of GST or simply withdraw all the tax rebates given to the people.

The implementation of GST this year is already a foregone conclusion. I can only hope the Government will keep-on reviewing this measure and monitor its adverse effect on the low-income group.

Now, let me talk about the foreign workers' levy. Many people may not have realized that the introduction of foreign workers' levy has brought about the rise in prices of residential property. The Government holds the view that without the foreign workers' levy, there will be an influx of foreign workers coming to Singapore, resulting in the wages of the local workers being brought down. In fact, this is a specious argument. The reason is simple. In many industries which are in need of foreign workers, there are many jobs which our local workers are not willing to take up. In fact, the employment of foreign workers is subjected to a certain ratio. As such, their number is under control. Furthermore, the Government can also adopt some administrative measures to control the illegal employment of foreign workers. For example, we can ask employers every three months or half a year to submit a list of employees, stating who are locals and who are foreigners. In order to ensure that the local workers are not disadvantaged, the Government can, apart from fixing the ratio of foreign workers to local workers in each business establishment, also fix the minimum wages for our local workers.

On the other hand, the NTUC and the relevant unions can also play an important role in controlling the number of foreign workers. If our local workers feel that their wages have been dampened by the influx of foreign workers, they can complain to the unions. All these measures will allay the Government's fears and worries about foreign workers. In fact, if we look deeper into the matter, we can see that the foreign workers' levy has not only indirectly exploited the foreign workers of their hard-earned money, but also affected the wages of our local workers because the foreign workers' levy increases the employers' cost, and the employers, in turn, cut down on the wages for the workers. Therefore, I urge the Government to review its policy on foreign workers' levy.

It is a fact that we are facing a labour shortage. The foreign workers' levy is a burden to the employers. It triggers off a rise in property prices. So long as we have a budget surplus, and so long as we can effectively control the influx of foreign workers, I think it will be a wise move to abolish the foreign workers' levy.

Now, let me talk about the Government's policy to encourage our people to invest and work overseas. I feel that the Government should particularly encourage our people to develop their business in our neighbouring countries such as Malaysia and Indonesia. In order to make it more convenient for our people to go to Malaysia, I feel that the Government should abolish the "three-quarter tank" rule, and at the same time allow Singaporeans who are holding Malaysian work permits to drive Malaysia-registered vehicles in Singapore.

Singapore should try its best to avoid practising protectionism or to interfere with the consumption pattern of our people. We have been regarded as one of the four Little Dragons of Asia. We should have a mind which is as broad as a dragon, and not as narrow as a worm.

Mr Choo Wee Khiang (Jalan Besar GRC): ( In Mandarin): Mr Speaker, Sir, having heard Mr Cheo Chai Chen's speech, I cannot help wondering why Mr Cheo, as the Member for Nee Soon Central, can say that the foreign workers' levy is a form of exploitation on the hard-earned money of the foreigners. Is he a Member of the Singapore Parliament representing Nee Soon Central, or is he the Member of a foreign country? No doubt, he spoke with sincerity, but he should not use this kind of language, as it is not fair for him to use such language.

The foreign workers' levy has already been debated many times in this House and he is harping again on the same tune in this year's Budget debate. I do not think we should waste our time on it.

He said that various rebates should be given every year to offset the impact of GST. Likewise, this matter has already been debated thoroughly in this House. Everybody already knows what GST is all about and has endorsed it. I think we should let the GST be implemented for some time before we come back and discuss how much effect the GST has on the commodity prices in Singapore. As a matter of fact, I personally share the concern about rising prices. Of course some people who complain about the increase of 1.5% in the employer's CPF contribution may take this opportunity to raise their prices and blame it on the implementation of GST. This is not only my concern, but also the common concern of all my PAP colleagues in this House. In other words, the final cost will be passed on to the consumers. This is to be expected.

However, since everybody is beginning to expose all the profiteering activities of the unscrupulous businessmen who are using the excuse of GST or the 1.5% increase in the employer's CPF contribution rate to jack up their prices, we should take some action against them, such as boycotting them. The whole society, the whole Parliament, have been talking about this matter. So I feel that Mr Cheo should also look at our financial policy from a very long-term point of view.

I feel that the Minister for Finance should in his Annual Budget Statement share with the people of Singapore what we have done over the past 5-10 years in terms of budget policies so that the people will be able to see what the country has done for them over the past 5 to 10 years. They must look back into the past in order to review and look forward to the future. When we look at the Budget each year, we should not take it as just a reflection of the present situation of our society or the present state of economy, but rather we should look at it as a part in our long-term economic strategy. Just now, Mr Cheo talked about foreign workers' levy and the annual rebates to offset the impact of GST. I feel that he should cast his vision further when he comes to Parliament to debate on such issues.

Sir, I have spoken to the Chief Executive Officer of a German company in Singapore. I asked him why he chose Singapore as his regional headquarters. He told me that Singapore is a very good and very safe country where all the facilities and infrastructure are excellent. That was why he has decided to make Singapore his regional headquarters for Asia and the Southeast-Asian region. However, he also mentioned to me that he was afraid that Singaporeans would not be able to adjust to a not-so-well-off environment outside Singapore. So he was worried that he would not be able to get suitable people to be sent out to cover the Asia-Pacific region.

The point I wish to drive home is: Why is it that foreigners who invest in Singapore would find it difficult to get Singaporeans to work overseas for them? Is it because Singapore is too stable and our economy has been growing so well? It is a well known fact that our economy has been growing very well during the past 30 years. As a result, Singaporeans are over-indulged in the comfort and sense of security in Singapore and are therefore not prepared to go and fight it out outside Singapore. I hope that the Government can, to a certain extent, inject into the minds of the Singapore people the need to fight for improvement and survival overseas so as to encourage more Singaporeans to treat the ventures and work outside Singapore as one of the means of survival, and a form of livelihood.

Yesterday, when I heard Mr Chiam See Tong's speech, I could not help feeling a sense of regret. He seemed to be saying that our Budget each year is either unfavourable to this quarter or unfavourable to another sector of our people, such as the lower-income group. There has never been a year when he identified himself with the Budget presented by the Finance Minister. If we say Singapore in the 60s was like an under-nourished child, then after 30 years of nurturing and care by the People's Action Party Government, the Singapore of today is no longer under-nourished. It has grown into a rugged, fit and strong youngster. So I feel that when Mr Chiam makes his criticism he should look at the achievements of Singapore under the PAP Government over the past 30 years. He should not be finding fault with the Budget and say this is no good, and that is no good. What he is doing is in fact simply creating some unnecessary worries, and such unnecessary worries are bad for health. So I hope that the next time Mr Chiam looks at the Budget, he will look at the achievements of Singapore over the past 30 years and give it an overall assessment. It is easy to criticise but difficult to praise. However, I believe Mr Chiam is a sincere person. He should be able to make a fair and sincere assessment on the achievements of the PAP Government in Singapore over the past 30 years.

Yesterday, Mr Chiam See Tong said that this year's Budget favours the higher income group and that there is hardly any benefit for the lower-income group. He said that the 5% tax rebate is more to the advantage of the higher income group because it will not benefit the 76% of our people who are not required to pay any income tax. That is why I say he has not been fair in making this remark. Let me tell him, if we were to scatter all our surpluses from a helicopter in the air, he will also say this is not a fair distribution of our wealth. If Mr Chiam says that the way our Finance Minister redistributes the surpluses to our people is wrong, then he should tell us how we could redistribute our wealth to our people so that each and every Singapore citizen would be satisfied. If Mr Chiam cannot offer an alternative which is capable of satisfying each and every Singaporean, then I feel it is not necessary for him to come to this House every year to criticise the budget of the day.

Sir, every year, when it comes to Budget time, we talk on very healthy matters, such as how much income tax reliefs, how much rebates should be given, how many months' service and conservancy charges the Government is to pay on behalf of the people, etc. These are all very healthy matters, unlike in other countries where the only matters they discuss are unemployment problems, inflation problems, racial disturbance, social unrest, etc. So I feel that the Opposition MPs should make good use of the Budget time in this House to actively discuss the economic and social guiding principles of Singapore. They should not single out any particular issue for attack.

Mr Cheo Chai Chen: ( In Mandarin): Sir, with regard to Mr Choo's criticism on me, I feel that it is necessary for me to say a few words.

Sir, when I talked about the foreign workers' levy just now, my main concern was for the benefit of the Singaporeans, and not just for the consideration of the foreign workers' benefit. But Mr Choo must realise that foreign workers have also contributed greatly to Singapore. We should not ignore or neglect their interest. From what I know, because of this foreign workers' levy implemented by the Government, many foreign workers have to pay the foreign workers' levy out of their own pockets. As a result, their salaries were cut by a lot. Does Mr Choo feel that the employers should look after the interest of their foreign workers or should they exploit these foreign workers? If he feels that the employers should exploit their foreign workers, then he should give this House the reason why he thinks so.

Mr Choo Wee Khiang (in Mandarin): What Mr Cheo has just said is indeed very regrettable. Is he speaking for our Singapore workers or is he speaking for the foreign workers?

Mr Cheo Chai Chen: ( In Mandarin): I am speaking for the Singapore citizens. But I am also saying a few words of justice for the foreign workers, on moral ground. If he does not agree with me, then he is entitled to his own opinion.

Mr Choo Wee Khiang: ( In Mandarin): The Member said that he was standing on moral ground. He feels that foreign workers in Singapore are being exploited. Can he give us some concrete examples in this House to show us how Singapore has exploited the foreign workers?

Mr Cheo Chai Chen: ( In Mandarin): Has Mr Choo heard carefully what I said just now? I said "indirect exploitation". Perhaps, the word "exploitation" which I used was too strong a word. But I have already explained earlier on. Because the Government has imposed foreign workers' levy, many employers have asked the foreign workers to pay their own foreign workers' levy. So their salaries are affected. Their take-home pay becomes lesser and lesser.

Mr Choo Wee Khiang: ( In Mandarin): I would like to ask Mr Cheo this question. First, he said that the word "exploitation" which he used was perhaps too strong a term. But what I want from him are actual examples. Sir, he is unable to give us any single example on how Singapore is exploiting the foreign workers. Secondly, if he thinks that he is speaking for Singapore workers, then let me tell him this: If we allow foreign workers to work in Singapore without controlling their basic wages, then the wages of our Singaporean workers will be pulled down because of them. Singaporean workers will not be able to maintain their basic salary at a certain level. Does he think that by so doing it will be in the interest of the Singaporean workers? Please illustrate.

Mr Cheo Chai Chen: ( In Mandarin): Sir, I have already mentioned just now that Singaporean workers' interest and wages will not be affected, if the Government handles the matter properly. Moreover, I have made a few suggestions on how to control these foreign workers. Perhaps, Mr Choo did not hear me just now.

Dr John Chen Seow Phun (Hong Kah GRC): ( In Mandarin): Sir, let me ask Mr Cheo one question. If in a factory, you have some Singaporean workers and some foreign workers, and if we do not have the foreign workers' levy, then may I ask Mr Cheo who will the employer choose to employ? In other words, if a Singaporean worker applies for the job and asks for $800 a month, whereas a foreign applicant is only asking for $300 to $400, may I ask Mr Cheo who will the employer employ?

Mr Cheo Chai Chen: ( In Mandarin): Sir, I think even a secondary school student can answer this question. I have already said just now that in the industries which need to employ foreign workers, there are many jobs which our Singaporean workers do not want to take up. Furthermore, when we approve the import of foreign workers, we are already adopting a ratio system. There should not be any problem here.

Dr John Chen Seow Phun: ( In Mandarin): Sir, I want to ask Mr Cheo this question. Which industry is relying 100% on foreign workers?

Mr Low Thia Khiang (Hougang): Mr Speaker, can I add something to the debate?

Mr Speaker: Okay, but make it short.

Mr Low Thia Khiang: ( In Mandarin): Sir, the foreign workers' levy itself is already an exploitation, so is the payroll tax. Otherwise the money can go to the workers. The $450 levy can go to the construction workers, and for the domestic maids, it is $300. I am not speaking for the foreign workers. But if you ask whether it is exploitation or not, and if the Government does not take away this amount of money in the form of a levy, then the employers themselves can give a bit more wages to the workers. So this is exploitation by the Government! No doubt about it!

Mr Choo Wee Khiang (in Mandarin): Mr Speaker Sir, I absolutely disagree with him.

Dr John Chen Seow Phun (in Mandarin): Mr Speaker, Sir, they have not answered my question. With regard to Mr Low Thia Khiang's remark, I would like to ask him this: If the Government does not impose the foreign workers' levy, to whose pocket will this money go? Would it not go back to the pocket of the employers? How can this benefit the foreign workers? If it is in the form of the foreign workers' levy, then the Government collects the money, and Singaporeans will benefit from it. This is a very important point.

Mr Low Thia Khiang: ( In Mandarin): Mr Speaker, Sir, I do not deny the possibility of the money going back to the employers. But, if you are talking about exploitation, then from the workers' point of view, it is indeed an exploitation, because the money is taken away by the Government. Otherwise the employers can pay the workers more.

Mr Choo Wee Khiang rose ---

Mr Speaker: I will just allow one last remark from you, because I think we are getting nowhere. The proper place to raise this matter will be the Committee of Supply when we debate the Ministry of Labour's budget.

Mr Choo Wee Khiang: ( In Mandarin): Mr Speaker, Sir, with regard to what Mr Cheo and Mr Low have said, I have a few observations to make.

Just now, both of them mentioned about exploitation. I would like to ask them: Who is, in fact, exploiting who? Secondly, if the $450 foreign workers' levy is abolished, then can they say for sure that all the Singapore employers who employ foreign workers will give the $450 to the workers? Thirdly, without the foreign workers' levy, the interest of Singaporean workers will not be protected. The basic salary that they are asking for will not be protected. Therefore, the exploitation is not on Singaporean workers nor is it on foreign workers. We recognise and understand the contribution of the foreign workers in Singapore. We concur with them on that. However, maintaining a basic wage level of our Singaporean workers is our major premise. It is only when they can have a basic salary, can our Singaporean workers live a better life, a higher standard of living.

Dr John Chen Seow Phun rose ---

Mr Speaker: Dr Chen, we can have more of this in the Committee of Supply. Dr Toh.

Dr Toh Keng Kiat (Nominated Member): Mr Speaker, that verbal exchange has left me speechless.

The 1994 Budget is a good one. The problem with good budgets is that the next one is expected to be better. Good budgets are also addictive. You need to give more the next time round in order to gratify. Anything less will lead to a severe withdrawal. Hence, the business community's disappointment when a self-initiated prophecy of a further cut in the corporate tax additional to last year's 3% did not materialise. Like other recent budgets, this year's will also end up with a surplus. This appears to be the Government's policy which is to meet all expenditure, operating and developmental, with our operating revenue. Our revenue is mainly from taxes, fees and statutory charges. The billions of dollars from investment returns and other capital receipts have been left untouched to swell our ever growing reserves. Our surpluses and, therefore, our wealth come mainly from our citizens through taxation.

This is why some, including Opposition MPs, have questioned the necessity for continuing this accumulation of hefty reserves and have advocated that more be returned to the people. Let me remind them that, had it not been for the Government's foresight, we would have landed in debt during the recession and relied on loans to fuel our economic expansion. As it was, the Government could fire the economy again with our own funds by going into infrastructural development. Singapore also depends entirely on imports for our existence, from raw materials to food, to medicine and energy. Our reserves can only buy us six months of these. With a growing population, increasing consumption due to rising standards of living, imported inflation and an almost fully developed infrastructure, commonsense dictates that we should have more reserves and not less. The Government of the PAP has been doing just that. Sir, the acronym PAP has stood for different things to different people. To some, it is pay-and-pay; for me, it spells prudence-and-pragmatism.

Apart from having their aspirations unfulfilled, the businessmen have also felt that the 3% in corporate tax rebate granted last year was insufficient to offset the cost of implementing the GST. This was a common grouse at the Feedback Unit's dialogue with the business community. Rightly, some have complained that it only favoured those who are already making profits with more profits, while those with little could end up with losses after spending money on starting up the GST. One member complained that he had to spend thousands of dollars to upgrade the computers and the weighing scales in his chain of retail food outlets. As the GST was an on-going thing, additional staff had also to be employed to keep meticulous records of receipting and invoicing. All were unhappy that extra costs had to be incurred on a tax reform they never bargained for and in the end, acted as surrogate tax collectors for the Government. In view of this strong reaction, I would like to suggest that the Government consider a once-only tax rebate for businesses to offset the cost of GST implementation.

Fears of profiteering and inflation were also expressed. The recent price increases by some Government and statutory bodies had not helped matters. Coming on the eve of the GST, some felt that it could give wrong signals to retailers and hawkers, some of whom had already been queried for raising prices. They felt that this was a double standard. As the GST is anticipated to bring with it some teething problems, I would like to suggest that a national task force be set up to monitor prices and study the impact of the GST on consumption patterns. CASE has already started doing some of these. The other suggestion is that the Government and related bodies should withhold further price increases for at least one or two years.

One other area of discontent with the business community is the restoration of the 1.5% CPF by employers. Their reaction to this has been very strong as they felt that this would increase costs and reduce competitiveness. But the trade unions' reaction to this reaction has also been very strong. Many workers are still sore that their total CPF has been cut from 50% to 40% and that it has taken such a long time since the recession for the full restoration of this cut. Sir, I am pleased that the Government has gone ahead with this full restoration. We have just heard Dr Tan Cheng Bock speak about the close bond and trust between our first-generation leaders and the trade unions. This closeness is important to Singapore. To delay the restoration any further would be to break faith with our labour force and put the Government's and the labour MPs' credibility to question. But the employers' worries about rising costs are also genuine as workers have enjoyed larger salary increments in the interim years and the 1.5% will now be on a higher base. I hope that both parties will bear these in mind in the next round of wage negotiations.

The same arguments have also been raised over the reduction in property tax for commercial properties. Any savings would be eroded by the capital appreciation and upward valuation on properties. The cost of doing business would therefore not come down much due to this. But, Sir, the Government has also been pro-business in many areas, especially to the securities industry and those dealing in trading of some precious metals. Generous extensions of the tax relief periods and a shortening of time limit for issue of assessments have also been granted.

It is, however, Sir, in the additional reliefs to the lower income groups for which this Budget will be best remembered. Despite the Minister's reassurance that last year's package to offset the effects of GST is more than enough, further help has been given in the form of waivers of HDB rentals and service and conservancy charges. Like Mr Cheo Chai Chen, I am also concerned whether the poor will be able to meet this increased cost due to consumption tax when the five-year grace period of a fixed 3% GST runs out. Hopefully by then, their lot will improve and they will get out of this poverty trap. Otherwise subsidies will have to become institutionalised. Another way out is to give more grants to accelerate their upward social mobility through better and higher education.

Mr Speaker, Sir, education, or rather the lack of it, in our workers is worrying. The Minister has highlighted that our workers are less educated than their counterparts in the other NIEs, let alone the OECD countries. We should therefore not only upgrade the skills of our present labour force but enhance the general education of our next generation of workers by making schooling up to secondary level compulsory. Employers should also not begrudge the increase in contributions to the Skills Development Fund as it is an investment for the future.

On our development expenditure, the Government's policy has been to invest in infrastructure that will have long term benefits, particularly in education. I welcome this as a good education will ensure that all Singaporeans, under our meritocracy system, can start at the same starting point and succeed or fail on the basis of ability and hard work. But, Mr Speaker, Sir, there are some who cannot even make it to the starting point. These are the people who are handicapped by physically disabling genetic diseases they never chose to inherit or who are born with a lower than normal IQ that makes them less than able to perform even the perfunctory. The Edusave Endowment Fund already has $1 billion and many more millions to come to enhance the learning capacity of our normal children. The financial year 1994 estimates show that only a paltry $115,300 will be spent on development of the Special Education Schools Programme. This is nearly a 90% drop from financial year 1993 expenditure. Surely some money from the Edusave Endowment Fund can be used for this group of people or perhaps they could have a separate endowment fund of their own.

Sir, one other group has not been neglected in this, a people's budget - the pensioners. Pensioners must now feel reassured that their interests will be protected by the proposed pension fund, especially after the shock announcement that medical benefits to which they were entitled were at one time threatened with replacement by a system of co-payment for medical services. I would like to suggest that the widows and dependent children should continue to enjoy the same medical benefits as if their spouse and father were still alive until the children come of age.

Finally, Sir, I would like to deal with some general aspects of Singapore's economy. We had a robust growth last year and experienced actual growth in productivity of 6.4%. We are also told that investment capital grew by $3.9 billion. I wonder how much of this is due to infusion of capital. If largely so, then we will do well to heed MIT Business School Prof. Alwyn Young's warning on the dangers of productivity growth spawned by continuous capital infusion. Already our capital output ratio has been considered high compared to Hong Kong's and our total factor productivity low. Our annual expenditure is adequately covered by revenue through taxes. We have increased our surplus and our wealth through taxation. Can we continue to become richer by dipping deeper into our citizens' pockets through more taxes, levies and enforced savings? The answer is obvious.

Sir, I end by giving my support to the Finance Minister's 1994 Budget.

Mr Chng Hee Kok (Tampines GRC): Mr Speaker, Sir, I give my full support to the Budget Statement presented by the Minister for Finance.

In politics, Sir, the best intentioned and well meaning policy can sometimes go awry when implemented. If the public perception of a certain policy is such, it takes a great deal of persuasion to convince them otherwise. The implementation of Telecom's time-based charging is one such example. I hope our memory is not short-lived.

We can only hope that the implementation of GST will not go the same route as the Telecom's time-based charging. I give my full support to the implementation of GST. It is a necessary move for our long-term viability and competitiveness. This shift from direct to indirect taxation is the most far-reaching change in our tax structure since we first started collecting tax.

Although the Government is confident of the outcome, despite the ongoing campaign, I have this nagging anxiety that we may not have done enough. The people still see the implementation of GST as a revenue-generating exercise which is wholly unnecessary in view of the huge Budget surpluses which we have accumulated every year. Their main fear is that the price increases will overwhelm the financial offsets which they have been given and this will affect their lives and their standard of living.

Hence, their biggest fear on the implementation of GST is high inflation and profiteering and they begin to see this happening with their daily cup of coffee at the local coffeeshops and hawker centres.

They see the Government's threat on the use of the Price Control Act as paying lip-service. In fact, they see the Government telling them to eat or buy at some other place if they feel that a certain shopowner is profiteering. Moreover, the Price Control Act was only amended in 1973, 21 years ago, and traders and businesses are not convinced that the Government will activate the Price Control Act. Did the Government, after all, not bother to review the Act ahead of GST? The penalty in the Price Control Act, set some 20 years ago, is, in my mind, definitely outdated and not sufficiently intimidating. Therefore, the perception is that the Government is not serious in its threat on the use of the Price Control Act. It is not too late, however. The Act enables the Minister to appoint a Price Controller and other deputies whose authority and responsibility is to investigate cases of profiteering. I, therefore, urge the Government to act on the enabling provisions of the Price Control Act and do something about it now. If they do so, the Government will send a clear signal to businesses and consumers of its intention to use the Price Control Act in the event of profiteering as a result of the GST implementation.

To ensure a successful implementation of GST, the Government must also act against price fixing. Presently, business groups are permitted to form a cartel and set prices. Two well-known examples which come to mind are the Coffeeshop Owners' Association and the airlines. The recent 10 cents increase in a cup of coffee is an example which has caused a lot of concern to Singaporeans. The other example is the concerted effort by a number of major airlines operating in Singapore in setting fares, in the guise of what they call orderly marketing. This has been going on for a number of years.

But, Sir, if you were to recall, I brought up this matter in this Chamber on several occasions. I said then, and I say it again, that price fixing, or so-called orderly marketing, works against the interest of the consumer and this cannot be condoned or allowed. Our market is relatively small. When our coffeeshops implement an increase of 10 cents in the price of a cup of coffee, the consumer's choice is narrowed considerably.

How can the Government persuade the consumers to have a cup of coffee at some cheaper location when, in fact, there is no cheaper location. In a market which acts against price fixing, the consumers have a wider choice as the more profitable coffeeshops may not see the need to increase their prices as part of the marketing mix. In other words, with high volume and enough profitability, they keep their prices low. In fact, they can generate even more volume. The airline industry, and this is usually led by our national airline, Singapore Airlines, acts against or blacklist travel agents for giving discounts or prevents Singapore travellers from travelling when they purchase less expensive tickets from outside Singapore. This is wholly unsatisfactory. If this kind of action is not detrimental to the interest of travelling Singaporeans, what is detrimental to our consumers?

Sad to say, despite my protestations, the Government has seen fit to allow price-fixing activities to continue. As we promote free market principles, we must make a start and take action against price fixing practices. The Government will go another step forward in gaining acceptance of free market policies and, I believe, a smoother implementation of GST if consumers are more than convinced that their rights are protected.

In implementing GST, we should not leave too much to chance. It is too important an issue and the Government must not be just doing the right thing, the Government must be seen to be doing the right thing.

Although the financial offsets announced at last year's Budget and the additional rebates in rental and service and conservancy charges are generous, these could be easily negated by a one-off increase in inflation of 5% to 6%, which adds up to a total inflation rate approaching 9%. This is possible. Our current inflation rate is about less than 3%, add another 6%, you can reach 9%. Hence, it is better to err on the side of prudence and be even more generous where possible. Over-spending by government is worth every cent we give out, if we can gain widespread acceptance for GST. We should not bolt the stable door after the horse has bolted.

Although I welcome the 5% one-off rebate in tax, the Government has missed a golden opportunity of giving an even higher rebate to mitigate the GST and also to link this 5% one-off rebate to economic performance. Despite the fact that the economy grew by nearly 10% and generated a surplus of some $5.5 billion, the 5% rebate is unchanging and this has been going on for the last few years. As a result, there is a growing perception that this 5% is actually structural. In fact, everybody accepts 5%, no more and no less.

Mr Speaker, Sir, I turn now to the restoration of the 1.5% in the CPF. I have been quoted in the media that I would have been more comfortable if this increase is spread over another two years. Sir, no matter how strong our economic growth is, businesses always need time to adjust. In fact, with high growth in certain sectors, businesses in these sectors have naturally attracted higher wages, and wage increases in these businesses are actually more than 1.5%. But not all sectors of businesses perform similarly, and in a free market, wages will adjust to accommodate these and, in my mind, they will adjust more smoothly than if you impose structural changes.

As CPF contributions are structural, I am concerned about the point advanced by some of my colleagues for a further 5% increase in CPF. The main argument seems to be that, in the recession of 1985, workers sacrificed for the benefit of businesses. My colleagues may recall that in 1985, our unit production cost was out of line with that of the other NIEs. We were just too expensive. This, together with high statutory costs, was the main reason for the recession. But very fortunately for us then, the world was not in recession and we could recover within two years just by trimming our cost structure. I am all for high wages, but I would rather prefer to leave it to the market place to decide than to build these high wages as part of our structure as it is in the CPF.

By advancing the point continually that workers have sacrificed for the benefit of business organisations, such proponents forget the nexus between healthy businesses and employment. Without businesses, there will be no need for workers, much less high pay. We should not forget that businesses can relocate to a more viable and conducive environment, but not all unemployed Singaporeans can.

When I look at a newly emerging market, like Vietnam, with low wages and a relatively well-educated population, and a large domestic market to boot, each time I visit the country, I feel that we have a hard enough time trying to keep ahead. Hence, we should not increase the expectations of our workforce unnecessarily. We should remind ourselves that we compete in an international arena where the business world increasingly finds little or no boundaries.

Mr Low Thia Khiang (Hougang): ( In Mandarin): Mr Speaker, Sir, in last year's debate on the Budget, I criticised the Government for privatising social services and for blaming on the market forces the increase in prices. The Government has now admitted that the operation of market forces will hit harder the lower income group and the poor. The Government has also admitted that Government will provide the necessary social infrastructure services, education subsidies and health subsidies. All this open confession is gratifying. How the Government will be able to implement these promises and commitments, let us wait and see.

First of all, let me discuss this Budget from the national economic point of view. In 1992, the Government forecast that the growth of 1993 would be 6% to 7%. Now we have gone beyond the forecast and attained 9.9% growth last year. Because the Government is encouraging people to buy shares, the turnover in the stock market has grown many times and this is one of the main reasons why the growth has gone beyond expectation. Therefore, many Singaporeans who buy shares have also made contributions to the economy of Singapore. My question is this: is this kind of growth healthy? The Minister for Finance said that the growth is across the board. It has done well in various sectors. But the overall GDP growth in 1993 had increased by 12.5% and the main sectors that had promoted this growth are finance and commercial services, public utilities and manufacturing sectors which grew at 20.4%, 15.6% and 10.9%, respectively. The manufacturing sector, particularly the electronics industry, grew because of the opening up of the American market. However, because of intense competition outside, the prices have gone down and the profits have also gone down. So now, even with the unexpected growth that has been achieved, I do not know whether the medium and small-sized enterprises would benefit by this or not.

Now, with the implementation of GST, a lot of companies have to increase their cost on the software and manpower for administration of the GST. Although the Government says that the compliance cost is only 1.5% of cost of business, the estimate by the business people is that they need about $20,000 to $100,000 for the implementation of the GST. Even assuming that the Government's estimate is correct, that it is only 1.5%, coupled with the raising of the salary ceiling from $750 to $1,000 for SDF contribution and the restoration of another 1.5% of employer's CPF contribution, will that not affect adversely our competitiveness internationally? Will this not go against the very spirit of GST which is supposed to improve our competitiveness? If our local businessmen cannot compete internationally and if the economic forecasts are not as good as expected, then the wages of the workers will be affected, bonus will be affected, the price of goods would increase due to the increases in the cost of doing business. Then the wage earners will be doubly hit.

What is even more puzzling is that the Government says the objective of GST is to enable our businessmen to be more competitive and has promised to reduce the company tax to 25%. Now, unexpectedly, the cost of business has been increased without the company tax being reduced. Is it because the Government expects that the companies will make a handsome profit this year and expects to collect more tax? Or when companies have difficulty in competing in the international market, the Government will then increase the rate of GST correspondingly if company tax is needed to be reduced further? That is the usual tactic adopted by the Government to induce you into the trap and later on they will squeeze you.

Now, Mr Speaker, Sir, let me deal with some policies of the Government in this Budget. Singaporeans should remember that this is the first budget after the implementation of the GST. On the surface, the people seem to benefit with things like the increase of CPF contribution by 1.5%, more rebates, but those people with an income of $1,000 will only benefit by $15 a month. The Government will pay for the rentals and the service and conservancy charges for HDB flat dwellers so that they can save some money. All this, as the Government says, will enable the people and the workers to have more money in their pockets. It is because they have more money to spend, therefore they will pay more GST.

Singaporeans should remember that with GST, every day people are paying tax. The Government, after taxing the people a lot of money, and paying back only a little bit, expects the people to be grateful. On the other hand, the Government also said that they wanted the people to share the wealth of the country. The floating of the Telecom shares had gone beyond expectation. So the people put in $500 in their CPF, the Government paid them $200. This year, when they put in $750, they will get $300. For the next financial year, if the people put in $1,000, they should expect to get $500. In order to share the wealth of the Government, the people must have the money first. So this wealth sharing scheme of enabling people to buy the shares of the Government-owned companies, which the Government remains the majority shareholder, means that these companies will be able to absorb a lot of money from the people and all the money will indirectly go to the Government, being the biggest shareholder, and it will be controlled by the Government.

In this Budget, the Government is also spending a lot of money for upgrading of HDB flats. The maintenance and repairs of HDB flats were originally done by the HDB. But because the flats are getting older, they have become more expensive to maintain. So they have become a burden on the Government. Accordingly, the Government used the pretext of allowing the people to participate in the management of housing estates and pushed the heavy burden of maintenance to the town councils. At the beginning, some subsidies were given to the town councils to enable them to change the water tanks and to carry out all kinds of repairs and renovations. In the Budget, the Government has announced that from this year, subsidies for cyclical works will not be granted to the town councils. In this way, the Government will be able to save $100 million, and residents in HDB estates will have to bear the cost of all the cyclical repairs and renovations. If the town councils are not able to bear the cost, and are forced to increase the service and conservancy charges, who will be blamed? The Government or the town councils?

To make things worse, the Government publicised extensively that it is going to upgrade the flats, in an attempt to make the people grateful to the Government, thereby attaining the political purpose of the PAP. But actually, the people have been paying more and more S&C charges to meet the cost of repainting of the flats and the Government has saved a lot of money. So when the Government uses the amount saved to pay for the upgrading of flats, it is only fair for them to do so.

Mr Speaker, Sir, as it appears, the wage earners seem to be gaining a lot from this first budget after the implementation of GST, but in fact they are like the bamboo which has a thick outfit but actually hollow inside.

Originally, it was thought that once the GST is implemented, the Government would help the businessmen lighten their tax burden in order to further stimulate the economic growth, with the hope that the industrial and commercial sector would make better profits, thereby further increasing the workers' wages to enable the people of Singapore to cope with price increases.

Now the reaction from the business community is that the cost of doing business has been increased and there is no compensation from the Government. In order to meet the cost increase resulting from the payment of GST, they will have to increase the prices, but the workers' wage increase simply cannot catch up with the price increase. So will all these not add on to the burden of the cost of living of the people of Singapore?

Dr John Chen Seow Phun: Mr Speaker, Sir, we had a mini debate earlier on foreign workers' levy, but there is one very important point which was not touched on, ie, if we allow companies to have access to cheap labour, then there will be no incentive for companies to upgrade the skills of the workers to go for higher value-added activities. And at the end ---

Mr Low Thia Khiang: Mr Speaker, Sir, can I seek clarification? Will you allow me to clarify the point?

Mr Speaker: Let him finish with his point. Please continue, Dr Chen.

Dr John Chen Seow Phun: Earlier I was trying to add a last point but Mr Speaker stopped me. Therefore, I am bringing it up now.

Sir, as our neighbouring countries develop, sooner or later, we will find that the foreign workers will go back to their home countries. And sooner or later, the Singapore companies which employ these low-skilled labourers, including Singaporeans, will have to shut down. When that happens, Singaporeans will be adversely affected. This is a very important point which the Opposition Members have failed to see and which has a very significant impact on our workers if we continue to allow our companies to have access to cheap labour without imposing the foreign workers' levy.

Sir, Mr Cheo Chai Chen, Dr Toh Keng Kiat and also Mr Low Thia Khiang touched on the fear of GST. I would like to put their fear in the right perspective. I believe that the Singapore Government has introduced GST not because we need GST now. In fact, if possible, we would not like to have GST at all. That can only happen when our economy continues to grow and when we have surpluses year after year. And that is why the Government has fixed the GST rate at 3%, the lowest possible, and promised that for the next five years, it will not be increased. The most important question is: how do we get the surpluses? We can only promote economic growth by capital investment. And to encourage investment, we need to lower corporate tax and income tax. Countries all over the world are doing this. So if we do not, then we will be losing investments and jobs. And when there is no economic growth, we will not be able to fulfil our budget obligations.

Sir, Mr Cheo mentioned that GST is expected to collect $960 million and the Government is giving out $1.2 billion. So there is a deficit here. In the future, if it is not enough, the Government will have to increase the GST rate. But the point really is that if our lowering of corporate tax works, we will continue to have surpluses and his fear will be addressed. But we need to put GST in place because we will never know how low we should reduce our corporate tax, as it is subject to world competition. If we do not put the GST system in place now, when we have to reduce our corporate tax to stay competitive and we run into budget deficits, then we will have problems. By that time, if we try to implement the GST, we will find that it will be even more painful. It will not be easy because the system is a very complicated one.

Mr Low Thia Khiang says that the Government did not give enough to Singaporeans to compensate for GST. But if he were to scrutinise the figures, in last year's budget, the GST impact is fully offset. This year, in addition to those offsets, more will be given out.

Mr Speaker, Sir, in October 1991, I invited the Senior Minister to be the Guest-of-Honour at the 45th Anniversary Dinner of the Singapore Port Workers' Union. He agreed and asked me to list three issues which workers were concerned about for him to consider addressing them in his speech at the dinner. One of the issues I listed was that workers were increasingly perceiving the Government to be pro-business.

At the dinner, the Senior Minister started his speech by asking a number of rhetorical questions. He asked, and I quote:

'What for? What is the purpose of all this effort and activity, education, campaigns to improve our people, to improve our lives? Can it be to get more businesses of Americans, Japanese, Britishers, Germans, Frenchmen, Italians to make more money? Is it not to improve our lives?'

He went on to stress the importance of education, skills upgrading and productivity in a rapidly changing world where science and technology dictate the way we do things. He concluded his speech by telling the port workers, "the Government is pro-you; it is pro-workers; it is pro-your children."

Sir, this Budget was described by many as pro-workers because of the generous rebates the Finance Minister dishes out. But I say that every budget is pro-workers. Last year's budget was hailed by many as pro-business. But what for? Was it not for the workers who will benefit from a more competitive economy? In fact, are not all Government policies pro-workers, be they COE, GST or revised civil servants' medical benefits? To me, the main message of this year's Budget is to reaffirm that Government will share the fruits with our people when the country does well.

Singaporeans must view the generous rebates in the right perspective. The rebates can cut both ways. They can either give Singaporeans more incentives to work harder, to support better economic growth or to cause them to treat such payments as something they are entitled to year after year, regardless of their efforts.

Minister Lim Hng Kiang told me that when S&C rebates were given in 1992 for the first time, he received a number of letters thanking the Government for its generosity. But last year, not a single letter of appreciation has he received. I do not know whether Singaporeans have now taken the rebates for granted. But I do hope they will be encouraged by the rebates to do better year after year.

Sir, the Government has announced in January its intention to raise the CPF Minimum Sum from $34,600 to $80,000. The Prime Minister has said then that the Ministry of Labour was working on the details of the Scheme. May I ask the Finance Minister when these details will be announced because workers are concerned how the implementation of the scheme would affect them.

Sir, the purpose of the CPF Minimum Sum is to ensure that retirees will have at least a certain monthly income to see them through their old age. I am concerned, however, that there will be some workers who will not have enough CPF savings to make up the required Minimum Sum. The CPF Share Ownership Top-Up Scheme is one way to help them. Through the buying of shares at discounted prices of Government-owned companies or statutory boards which are privatised, workers can benefit from the appreciation of value of such shares.

But, Sir, we need to do more to help as many workers as possible to try to reach the Minimum Sum target. CPF Share Ownership Top-Up Scheme benefits all Singaporeans. As such, the benefits cannot be large. So it cannot help those who are in need very much. May I ask the Minister whether he would think of a scheme, such as a CPF Minimum Sum Top-Up Scheme, to help deserving Singaporeans to meet the Minimum Sum target. For example, if a worker continues to work after 55, the Government can consider topping up his CPF based on the amount which the worker contributes to his CPF. The principle is not unlike the Share Ownership Top-Up Scheme. But I think it will be more helpful. Will the Minister care to comment on this proposal?

Finally, Sir, I also wish to speak for the pensioners. I commend the Government for its intention to set up a pension fund. This will make sure that future generations will not be saddled with the burden of providing for the pensioners.

Our pensioners have served our country well. We have laid the foundation for the next generation to build on to achieve greater economic success. But every time when civil servants receive their year-end bonus, pensioners do not have a share. Sir, pensioners may not have directly contributed to the present economic growth, but they have certainly contributed indirectly. May I therefore ask the Minister to consider giving year-end bonuses to pensioners in the future? They may not get as much as the serving civil servants, but at least they should have a share of the nation's economic fruits.

With this, Sir, I support the Budget. 3.18 pm

Mr Heng Chiang Meng (Cheng San GRC): Mr Speaker, Sir, I rise to support the Budget presented by the Minister for Finance.

Sir, this year, I wish to focus my views on the high costs of land transportation in Singapore, in particular, the Certificates of Entitlement (COEs). Before that, Sir, I must say that the Budget, far from a disappointing one, is one very appropriate for the economy. After a 9.9% growth in 1993 and with prospects of a growth rate of 7% or more in 1994, it is difficult to see how any responsible Minister for Finance could come up with a highly stimulative budget. Sir, have we forgotten the lessons of the 1970s and the curse and ravages of inflation?

Sir, the wealth of Singaporeans, by and large, lies in the values of their homes and shares quoted on the Stock Exchange of Singapore. With the high appreciation in values of these two assets last year, the pressure on inflation which could be caused by the wealth impact is very real. The wealth impact is the tendency of people to spend more, especially in conspicuous consumption, as their overall wealth increases.

True, the Minister has given much in the way of rebates and concessions to the people. These mostly benefit the poorer segment of our population living in HDB estates. This is rightly so, especially since it is an economic fact that higher asset values will sooner or later be reflected in higher prices of goods and services.

Further, the policy to give more personal responsibility to the people through more choices but at market prices will also increase the cost of living. Already, fixing various Government services and fees such as medical services, independent school fees, wet market, hawker stall and shophouse rentals, COEs, etc., at or closer to market price levels, has affected the cost of living in more than one way. The implementation of GST next month will also add to the pressure for price increases.

Such a policy of pricing Government services at market levels is certainly not wrong for the economy, because for the economy as a whole, it will certainly help to ensure that misallocation of scarce resources will be minimised. The majority of Singaporeans, I believe, can afford it because of higher affluence and lower tax burden.

However, Sir, there is a minority, and a significant minority, who cannot keep up with such increases. They do not have the ability to earn enough to afford the higher prices. The lower tax burden is of little use to them because they do not pay taxes, or pay very little taxes, in the first place.

True, the rebates in HDB rentals and service and conservancy charges will benefit them. So will schemes such as Medifund and Edusave. But are they adequate? Also, what about those not living in HDB flats? What about the handicapped whose costs of living in Singapore are higher because of their handicaps?

So, instead of tackling this problem on a piecemeal basis, why not consider a general solution? Why not consider the concept of a general negative income tax to be given to these people? The concept is not new. Western nations such as the United States of America use food stamps as one particular way of providing such people with negative income tax. Instead of food stamps, I see no reason why we could not use their CPF accounts to be credited with negative income taxes. By way of an exhaustive means test, the CPF accounts of these people could be credited with funds for specific expenditure such as school fees, medical fees, HDB rentals, service and conservancy charges, and other approved items.

We have shown the world how good we are at honouring and rewarding our best and brightest. It has resulted in a Singaporean society striving for excellence. Let us now show that we can be equally good at caring for our poor and our less fortunate. It will give us the communitarian values needed to glue together our society of excellence. Athens and Sparta alone are not sufficient to withstand the test of time. A heart is very much needed.

The time for implementing a general payment of negative income tax to the poorer and less fortunate in our society is here. The system will also give them greater responsibility as they would decide how much they wish to spend on each item. Or even none at all. I hope the Minister will seriously give some thought to this idea.

Let me now turn to the issue of land transport and COEs.

Sir, I would like to bring to your attention the size of the operating revenue the Government received from land transportation in 1993. The total was $2.955 billion, of which the vehicle quota premium, or commonly known as COE fees, was about $1 billion. If 50% of the excise and import duties from petroleum products, which is approximately $595 million, were incurred by motorists, and therefore giving us a figure of $297 million, if we add this figure, we would have a grand total of $3.252 billion of taxes and fees collected from motorists in 1993. This works out to be 34.2% of the total operating expenditure of the Government of $9.5 billion. In other words, Sir, motorists in Singapore are financing more than one-third of the Government's total operating expenditure, excluding expenditure on development. I ask this question: Is this a fair burden on the Singaporean motorists?

The irony of it all is while the general public complains about the GST of 3%, the biggest single consumption tax paid willingly by the public is the COE fees. In 1993, it was $1 billion. In 1994, the Government has estimated this consumption tax to be about $1.03 billion. On the other hand, the total estimated sum to be collected from GST is only $959 million.

Why do I say that this is a consumption tax willingly paid by the public, or rather by the owners of motor vehicles? It is simple. The Government determines a quota of available vehicles. If the demand is more than the quota amount, the total number of available vehicles is sold, regardless of the level of COE fees. Sir, I would like to repeat this point. Under the system, the cars, lorries, vans, etc. are sold regardless of whether the COE prices are $60,000 or $1,000.

Put it in another way, it means that if members of the vehicle-owning public cooperate with each other, the COE prices could be much lower. The concept is simple. Sir, let me give you an example of such a method of cooperation. I stress it is only one example. There could be more.

First, let us reduce the cut-throat competition by reducing the number of bidders at each monthly tender. Let everybody agree voluntarily to bid only in the month corresponding to the last digit of their identity card numbers. This means that those with IC number ending in "1" should bid only in January; those ending in "2" in February and so on, until those ending in "0" bidding in October. November and December would be reserved for companies; November for those with business registration numbers ending in "1-5" and December "6-0".

Next, let us also agree that we bid at a maximum price of, say, only $20,000, but always trying to go as low as possible. Then, to prevent speculation, let us all agree that we should not purchase any second-hand car less than one year old.

As I said earlier, the concept is simple. But the cooperation? That, Sir, is the rub. The idea will work only if everybody cooperates and agrees to play by these guidelines.

Mr Chiam See Tong (Potong Pasir): What about counter-measures from the Government?

Mr Heng Chiang Meng: It is coming. Do not worry. The system may even withstand a limited number of abuses, but not if the numbers are large. The question is whether such an idea will actually work in practice. Alas, I must say that I doubt it very much, because Singaporeans, with their kiasuism, afraid of losing out and striving to be one up on their neighbours, will kill any idea which demands voluntary restraint and cooperation. I may be cynical, Sir, but this is certainly one area where I hope to be proven wrong.

Sir, why then do I test your patience and this House's patience by bringing up such an impractical idea? Certainly not because it is practical, but more to show that the high COE prices are not the result of the current COE bidding system, but rather the dog-eat-dog attitude of Singaporean bidders. The final choice of paying the consumption tax for the COEs and the amount to be paid lies in their hands, not with the Government nor with the motor car dealers. If the prices are too high, consumers must be prepared to use their ultimate weapon, which is, do not buy. Not owning a car in Singapore will not kill anybody.

Sir, I would like to also propose that even as I said that the high COE prices are the result of the dog-eat-dog attitude of the car-owning public, I feel that the Government has a duty to ensure that the prices of COEs are as low as possible. This means that the Government should welcome any system which can minimise COE prices whilst providing an equitable pattern of allocation. The COE price, or to give its proper name, vehicle quota premium, is only the means to allocate a scarce resource. The objective, as officially stated, is to control the number of vehicles on our roads given our limited land area. This means that any fair allocation method should be acceptable to the Government, since the quota system will ensure that the physical number of vehicles will never get out of control.

It is, therefore, puzzling to me why the Government should repeatedly reject the "pay-as-you-bid" system, suggested by many members of the public. After all, the Government did respond to the public demand of non-transferability in earlier times and I see no reason why it should not continue to do so. That means to respond to the public demand as long as the quota system remains intact.

However, Sir, I must agree with the Government on one point. The argument that the "pay-as-you-bid" system favours the professional and places the man-in-the-street at a disadvantage is not incorrect. As somebody who used to participate in the bidding of Government treasury bills, which is based on the "pay-as-you-bid" system, I can testify to that.

Therefore, on this system, Sir, I would like to suggest that we first put all the COEs into one category. This system is basically to make sure that the numbers available for common bidding remain large. Large numbers will tend to even out the fluctuations whilst at the same time responding better to market demands.

Sir, in order to protect the man-in-the-street, let us divide the COEs into two divisions: one division for competitive bidding, and another for non-competitive bidding. In a competitive bidding, one can go for the normal pay-as-you-bid. And those who are interested, like the man-in-the-street, could buy on a non-competitive basis. Because they do not know how to bid, they can always apply for a COE in the non-competitive division, and the price they should pay is the average weighted successful price achieved in the competitive side. For example, if in the competitive side, the successful bidding ranges from $18,500 to about $22,000, the average successful price will be perhaps about $20,000. Therefore, $20,000 will be the price that is given to those in the non-competitive division. And if the demand is more than the available COEs in that division, they can always have a simple ballot to determine who should get it. But they pay close to the market price. It is not free for them.

Sir, by having one category, I would like to further suggest that we should retain the progressive nature of the COE, which means that the price they pay is the basic price for, let us say, the lowest category, the small car category. And for those who want to buy a medium-sized car or a large car, they can always pay a multiplier factor, say, 1.25 factor for the medium-sized cars, or 1.5 factor for the large cars. In this way, we will still retain the progressive nature of the COE system. And finally, with this system, we can scrap the open category. In fact, this favours those who want to buy small cars, because, as we know, under the present system, the open category is normally used for those who purchase large or luxury cars.

In order to prevent abuse by those in the non-competitive division, those wishing to purchase COEs should therefore submit their applications with large enough cashier's orders before the competitive bidding begins.

Sir, I am very sure that with such a system, the Government can respond to the public demand for pay-as-you-bid system whilst at the same time protecting the man-in-the-street because it provides for both the professional who can use the competitive bidding system and the man-in-the-street who can use the non-competitive system.

Sir, I would also like to suggest a new role for the COE premium. Despite what I have said earlier about motorists willingly paying $1 billion for COE fees in 1993, I always wonder whether the entire sum is necessary or not. So what do the COE fees represent? Does the full $1 billion represent the price of scarcity? Or does it also partially include the cost of inefficiency?

Sir, let me explain what I mean by the cost of inefficiency.

Basically, if we look at car ownership, there are two aspects: status and transport convenience. Both these aspects are currently reflected in the high COE prices. In other words, car owners in Singapore are willing to pay for status as well as transport convenience. I think most of us will not disagree with this statement. But what we may not agree is how much for status and how much for convenience.

Sir, in order to simplify this point that I wish to make, let us assume a scenario in which the Government can improve the public transport system to its ultimate efficiency, that is, the inconvenience of public transport is reduced to its absolute minimum. In such a scenario, the desire to own a car vis-a-vis the costs of car ownership would be at a lower price level than when public transport is not as good.

Sir, in other words, there should be less potential car owners if prices go up too high. This means that as the Government improves the public transport system, at any given point, COE prices should be lower. Conversely, a poor public transport system will lead to more potential car owners and higher COE prices, all other things being equal.

Sir, the difference in COE prices between the most efficient public transport system and the current situation therefore represents the extra cost paid by the public for Government inefficiency in not improving the public transport system to the level demanded by the public. Hence, my term, the cost of inefficiency.

Using this argument, surely there is merit in suggesting that some of the COE fees collected should go towards improving the public transport system, particularly buses. While the MRT system forms the backbone of the public transport system, it is the buses which form the rest of the bone structure. Many parts of Singapore not served by the MRT must thus be served by buses. Unfortunately, given that the two bus companies in Singapore are monopolistic and profit-oriented, there are areas not served or inadequately served by buses on grounds of non-profitability.

Sir, I can understand why profit-oriented bus companies do not want to serve those loss-making routes in the third segment. Here I am referring to the general guideline of segmenting bus routes from the most profitable to the least profitable or most loss-making. The first segment consists of profitable routes. The second segment consists of the least loss-making routes. The third segment consists of routes with the highest losses. In general, the bus companies operate the first and second segments since the profits from the first segment are more than adequate to offset the minor losses from the second segment. They do not operate the third segment on the grounds that they cannot afford to absorb the losses from the third segment.

However, the wide dispersion of the population all over Singapore has created a higher demand for bus services in more and more remote areas. Unfortunately, the demand is not high enough for these routes to be in the second segment.

Mr Speaker: Order. Mr Heng, this is a debate on the financial policy statement of the Minister for Finance and we are supposed to debate on principles. It appears to me that in the course of your speech you are entering into details. Could I urge you to confine yourself to arguments on principles? You may proceed.

Mr Heng Chiang Meng: Thank you, Sir. I am confining myself to principles. But I have to explain something so that I can go on to the principles.

Mr Speaker: These are very detailed principles you are embarking on.

Mr Heng Chiang Meng: Sir, but with land transportation providing one-third of Government's total operating revenue, may I say that it is a large sum and we cannot ignore that.

Mr Speaker: That is a principle, but I suggest you confine your arguments just to principles.

Mr Heng Chiang Meng: Yes, Sir, I will do that.

Sir, the result of this is a higher demand for car ownership, thereby adding to the likelihood of higher COE prices and more revenue for the Minister for Finance.

Hence, if the Government were to use part of the COE fees collected to encourage bus owners to operate some third segment routes, as well as to increase feeder bus service routes, the pressure on car ownership and COEs would be lessened by the extent of those not needing cars because of a better transport system.

Sir, I am not asking for subsidies because I know that the word "subsidy" is a dirty word in the Government's lexicon. Instead, I am asking for a grant [Laughter] to the Public Transport Council to help support the operations of buses operating such unprofitable routes and improving the general service level.

Sir, I do not understand why the House laughed at this, because it is not a new concept. The Government has been giving grants to Town Councils. So, therefore, I ask, why not the Public Transport Council? Both are serving the majority of the Singaporean public.

Sir, if that is too much to ask, why not allow the Public Transport Council to collect the COE premium? Let it use some of the funds to help defray the costs of unprofitable routes as well as improve the general service level of public transport in Singapore. The surpluses then could be transferred later to the Consolidated Fund. Again, I must add that the concept is not new. The Government already allows the Singapore Broadcasting Corporation to keep the TV and radio licence fees to help defray the costs of loss-making public service broadcasts. Why, then, Sir, not help to defray the costs of loss-making public transport services?

Sir, with that, I support the Budget, and thank you for your indulgence.

Mr Lau Ping Sum (Ang Mo Kio GRC): ( In Mandarin): Mr Speaker, Sir, recently, the US Federal Reserve Board cautioned against inflation and adjusted the Federal Reserve's interest rate by 0.25%. As a result, the stock markets, although not taken by surprise entirely, declined all over the world.

But according to the economists, even if the US interest rates were to rise to a limited extent, the overall economic performance of the world would not be damaged. Japan will resume its growth. The Asia-Pacific region will maintain its leading position. China's target of tripling the economy by the year 2000 will be achieved, perhaps in 1995.

Our economic performance has been good. Based on future needs, the Budget is aimed at economic upgrading and tax reform. The Government hopes that the people of Singapore will be more adaptable and seek opportunities in the rest of the world. The role of the Government is to provide the infrastructure, a healthy environment, improve education, and upgrade our quality of life.

In order to avoid the ills of Western welfarism, we always remind our people of the responsibilities towards the family and society. They should not be enamoured of the entitlements considered as a matter of course by some countries.

The European society represents the ideal of the welfare state. They have all kinds of schemes and programmes which reflect the tolerance of matured societies and the principle of community support. The idea of helping the weak and the poor is compatible with the tenets of many religions. In fact, welfare schemes are easy to introduce but hard to withdraw. The European countries have large deficits and economic difficulties. Apart from having to pay for the retraining of East Germans, Germany had to spend one-third of its GDP on welfare such as pension, medical, education, family and unemployment benefits.

Sweden is reviewing the continuation of daily allowance to prisoners because a large number of Russians have entered the country, committed offences to get arrested to earn such allowances which are eight times what they earn in daily wages in their own country. More than 15% of the workers in Holland are paid an allowance meant for the permanently disabled. Western Europe is reviewing the quantum and standard of such benefits. Even if they had the political courage to carry out basic reforms, it would not be easy to implement. The productivity and competitiveness will decline. In the end, it is their people who will suffer.

Recently, the changes in our civil service medical benefits have given rise to criticism and dissatisfaction. Fundamentally, everyone must be responsible for his own health. That we all agree. With increased allowance, the civil servants must bear a higher proportion of their medical expenses. There is nothing wrong about this. In recent years, medical costs have risen steadily. The trend is likely to continue. Ageing brings about declining health. But many people have yet to understand fully the new schemes. A decision made in haste is not right. I would urge the Government to give more time to the civil servants to appreciate the various schemes and avoid making a wrong decision.

Mr Speaker, Sir, under the present taxation system, taxpayers can apply for relief for their aged parents and grandparents subject to a maximum of two such dependants, that is, a maximum relief of $7,000. But there are people who have to support more than two aged parents or grandparents. So will the Minister consider increasing the $7,000 limit? My reasons are as follows.

With the implementation of GST, the tax net has been extended significantly. The dependence on income tax will correspondingly be reduced. Secondly, the average life expectancy of Singaporeans has increased and there will be more and more families with grandparents. Thirdly, we encourage respect for the old. The colonial government of Hong Kong has given such tax incentives on 2nd March this year so as to encourage people to support their grandparents. The Minister has also given some incentives for people working overseas, for example, CPF for these workers will be tax deductible from 1995. I would like to ask the Minister whether the scheme can be implemented earlier so that those people who are already working outside Singapore will have both moral support and appropriate recognition.

Mr Speaker, Sir, over the past few years, our economy has been developing steadily. Even Arafat of the PLO intends to use Singapore as a model. The management of finance in a country is highly complex. Fortunately, we have an experienced Minister for Finance, Dr Richard Hu, who has natural talents for such work.

Mr Speaker: Order. I suspend the Sitting and will take the Chair again at 4.10 pm.

Sitting accordingly suspended at 3.50 pm until 4.10 pm Sitting resumed at 4.10 pm