DEBATE ON ANNUAL BUDGET STATEMENT

Mr Robert Chua Teck Chew (Nominated Member): Mr Speaker, Sir, the Finance Minister, Dr Hu, in his hongbao Budget, handed out plenty of goodies for the individual: rebates on income tax, rebates on S&C and rental charges, Share Ownership Top-up Scheme, etc. Dr Hu, Singaporeans love you for your generosity and recognition of their hard work.

However, the businessman must feel like the child waiting expectantly at the end of the line to receive his hongbao, but when Uncle Richard reaches him and runs out of red packets to give him, he is understandably disappointed and upset. Although Uncle Richard keeps reminding him that he had already given him a large hongbao last year, he is still waiting and hoping for Uncle Richard to give him something from this year's hongbao Budget.

To add to his disappointment, the businessman was given a few new bills to pay, such as the 1.5 percentage point adjustment to the employer's CPF contribution rate and the revision of the ceiling for the Skills Development Levy from $750 to $1,000, and all these are on top of the GST compliance costs. But businessmen are not ingrates and, on their behalf, I wish to thank the Finance Minister for lowering the corporate tax rate from 30% to 27% for the Year of Assessment 1994. However, in view of the recent reduction of the Hong Kong corporate tax rate by one percentage point from 17.5% to 16.5%, I appeal to the Finance Minister to bring our corporate tax rate down to 25% from the Year of Assessment 1995 or, alternatively, give a one-off 5% tax rebate for corporate tax for the Year of Assessment 1994, as it is being done for personal income tax, both as a way of rewarding the businessmen for their hard work and enterprising spirit which help to strengthen our economy in the face of tough international competition and also as a means to help them build up their reserves to enable them to venture overseas.

Businessmen would have preferred a more gradual restoration of the employer's CPF contribution rate to 20% to keep their Relative Unit Labour Cost internationally competitive. But it seems like they will have to bear with such cost increases and look forward to other means of improving their productivity.

In this respect, I wish to propose a new scheme to encourage more employees to upgrade their knowledge and skills through continuing education and skills training. Quite often, employers have expressed concern that owing to the tight labour market situation, they face great difficulty in persuading their employees, especially the more mature workers, to attend courses to upgrade their knowledge and skills. Under my proposed scheme, which I shall name the Employee Education Account Scheme, instead of paying the full 1.5 percentage point increase in employer's CPF contribution into the employee's CPF Ordinary Account, pay only 0.5 percentage point into this account. The other one percentage point of the additional 1.5 percentage point of the employer's CPF contribution should be paid into a special Employee Education Account in the employee's CPF account. Whenever an employee attends an SDF approved course to upgrade his knowledge or skills, an amount equivalent to the course fee paid by the SDF would be transferred from his Employee Education Account to the credit of his CPF Ordinary Account. For example, if he attends a course and the SDF gives a subsidy of $200, he will then receive a transfer of $200 from his Employee Education Account into his CPF Ordinary Account. However, if at the end of a two-year accounting period, the employee did not attend sufficient approved training courses to warrant transferring all of his two-year cumulative balance from his Employee Education Account to his CPF Ordinary Account, the remaining balance in his Education Account will be transferred to the SDF so that it can be used or recycled for training other workers. This way, it is hoped that the employee could see that 1% of his wages will be credited to his CPF Ordinary Account provided he has used the SDF of the same amount to put him through SDF-approved courses, preferably sponsored by his employer. I hope that the Government, trade unions and employers will take a closer look at this proposal. The ultimate objective is to produce a better educated and highly skilled workforce through the use of SDF and such incentives.

Singaporeans should be grateful to the Finance Minister for his generous tax rebates, rebates on service and conservancy and rental charges. The tax changes to encourage Singaporeans to venture overseas are timely and will help companies in persuading their employees to take up overseas assignments to ensure the success of our regionalisation efforts.

Mr Speaker, Sir, the reduction in property tax rate from 16% to 15% is a most welcomed move. I hope that the Minister will accelerate the process to lower this rate to 12%. However, many people feel that this reduction is academic as they have received hefty upward revision by the IRAS of about 30% to 60% of the annual value of their properties, resulting in enormous increases in the absolute property tax paid. The worst hit are owners of owner-occupied industrial properties who feel that such property tax increases would only add to their operating costs and reduce their international competitiveness without adding any tangible value to their current business operation. I wish to appeal to the Finance Minister to give a special concessionary property tax rate of 4% for owner-occupied industrial properties, similar to that accorded to owner-occupied residential properties. Already, our manufacturers are paying much more for their industrial properties and land or factory rentals compared to their competitors in the region, and such large upward revision of annual values and property taxes will seriously erode their international competitiveness and threaten their survival.

On the subject of annual value, with residential property value escalating in the past few years, owners of older owner-occupied properties are also facing large upward revision of their annual value. Many who used to pay no personal income tax on rental income for owner-occupied properties because of the exemption from income tax for such properties with an annual value of less than $75,000, suddenly found their old owner-occupied property had been revalued to more than $75,000 and are now therefore subjected to income tax. I hope that the Finance Minister will grant a blanket exemption from income tax for the first owner-occupied residential property regardless of its annual value. This way, older folks who have been living in their old but now much more valuable property will not be unduly burdened to pay such income taxes on the notional rental income or be forced to sell their properties in order to pay such enormous taxes.

To grow, sooner or later, our small and medium enterprises or local enterprises must venture overseas. However, they soon find themselves facing enormous challenges and obstacles. A major problem is the lack of funds for financing such ventures as local banks are not too sure about how to secure their loans while overseas host banks are not familiar with our companies and will therefore hesitate to support them. I propose that the Government look into forming a joint venture with the local banks and business groups to set up a bank or financial institution to help our businessmen, especially those running SMEs to finance their overseas ventures. The involvement of business groups will help the proposed financial institution assess the viability of and the risks involved in each project.

The good news is that the economy grew by 9.9% in 1993 and the manufacturing sector, the health of which indicates our international competitiveness, grew by 9.8%. The bad news is costs might escalate as a result of the tight labour market, the GST implementation and other cost increases. I urge the Government to freeze or moderate any fee or cost increases so as not to precipitate any price spiral which will damage our international competitiveness.

The Finance Minister in many ways has been generous to the people with his tax cuts. On the other hand, businessmen felt let down when they found very little for them in the hongbao Budget. I hope therefore that the Minister will study my proposals and respond positively with at least some hongbaos for the businessmen to keep them smiling until the next Budget.

I support the Finance Minister's motion.

Mr Koo Tsai Kee (Tanjong Pagar GRC): Mr Speaker, Sir, before the Budget for 1994 was announced, the mood in the stock market was expectant. The day before the Budget speech, the stock market rallied. But after the Budget was announced, the mood turned sour. And the Budget was unfairly blamed for the downturn.

Sir, I don't play shares, but the ups and downs in the stock market do affect me because my friends and colleagues are affected by it. Their laughter and their sorrow rub off on me too.

Shares, I am told in my Economics 101 course, is the economic bellwether of the nation. If the share market goes up, the economy is supposed to be doing well. If it comes down, the economy might be heading for a bad patch. But my economics tutor apparently was living in a closed world (the world was about the 70s) where people make decisions partly based on sound economic principles, and where markets do not attract huge inflows and outflows of foreign funds in anticipation of interest rate movements, and other real or imaginary political developments.

Sir, the Singapore economy was on solid ground in 1993. It will continue to perform well in 1994. It was simplistic, therefore, to lay the blame for the fall of the market on the 1994 Budget which did nothing to rock the fundamentals of the Singapore economy. The sympathetic downturn of the major foreign markets over the same period suggests that the pessimistic mood is global in nature.

But, nonetheless, as Mr Robert Chua has pointed out only just before I took up this stand, the Singapore market appears to be unhappy over three local issues. The first issue is that the Budget did not allow for an anticipated cut in corporate tax. The second issue, which keeps coming up in this House, is that the employers' share of the CPF was raised by 1.5%. And the third point appears to be that the ceiling for SDF levy was raised from $750 to $1,000.

The 1994 Budget is certainly a pro-worker, a pro-consumer budget. But that does not mean it is also anti-business. The market has selectively forgotten that there was already a 3% corporate tax cut in the 1993 budget. That was given even before GST was implemented. The implementation of GST, therefore, is no reason for a further tax cut. In fact, with the economy going at 9.9% last year, there could be serious problems of overheating if further tax cuts were given this year. Sir, apart from the implementation cost of GST, which of course companies will pick up some cost, most companies have decided to pass on the 3% tax burden to consumers. So the GST does not really affect them that much, except for this initial transition period where they must change their accounting systems to capture the cost.

Sir, it is true that business costs over the last few years have gone up. But relative to our neighbours, Singapore is still a very profitable place to make money. One proof was the productivity increase last year which for the first time in many years exceeded wage increase. And the returns on investment in capital by MNCs are still very healthy. Only last week, a Japanese MD of a major MNC company was posted from Singapore to Malaysia. I had met this MD once or twice in my union visits to his company. He asked to see me in my capacity as Executive Secretary of the United Workers of the Electronics and Electrical Industries. He wanted to say goodbye in my union office somewhere in Katong. He wanted to introduce the new MD to me before he leaves for Malaysia. Unfortunately, the new MD did not arrive in time.

Still, the old MD and I met in my union office and we reminisced about several things. And I asked him: is it true that Singapore is becoming an unprofitable place to do business? He said that over the years business costs have gone up but Singapore is still a very good place to do business. He said, "No! Singapore is the place that I would like to be posted to and when I go to Malaysia, I will ask my management to look south and learn how you manage the system here." And his parting sentence was, "I am very grateful for the help of Mr Anthony (Mr Anthony is the Branch Chairman at this company)." He is going to a bigger set-up in Kuala Lumpur in Malaysia. There are 16 companies there as opposed to nine here. I asked him, "Isn't it cheaper to do the manufacturing in Malaysia?" He said, "Yes. When it comes to manufacturing, it is. But in Singapore you have a whole system in place. Your IPOs are in place here and with the opening up of the world, with the ratification of GATT, Singapore for now is still the best place to do business."

So it is not true that business costs have gone up so much that the bottom-lines are affected. And I think this point must be brought home to some of our businessman MPs in this House that business cost is only one factor. The final factor must be the bottom-line. Because if business cost is cheap and you do not make money, then you should not be in business.

This brings me to the second point. Why are employers still groaning about the 1.5% increase in CPF contribution? Again, Mr Robert Chua and others echoed the same view that this will raise cost, erode profitability and diminish our importance as a business centre. In fact, over the last eight years when CPF was cut dramatically, radically and suddenly from 25% to 10%, there were only two bad years. And over the eight years we registered an average of 6-7 percentage point economic growth every year. Last year we hit 9.9%. If we still cannot restore the percentage cut in the employers' CPF, I do not know when we can do it. In fact, many workers still consider a 20% CPF contribution from the employer a retreat of 5% from the original 25%.

But the union's position is that we will settle for 20%, we will leave the past behind us and we will move on towards the 21st century. In other words, unions are going to write off all their "losses" over the last eight years and work for the future. We are therefore disappointed that employers and businessman MPs are nit-picking over this 1.5%. Some businessman MPs have said that the employer's CPF restoration was totally unexpected. Sir, I just went to the Library and I picked up the Hansard. Dr Richard Hu gave advance notice that this year's CPF will probably be restored. And I read you what he said last year under the heading "Outlook for 1993". He said, and I quote him [Hansard, Vol. 60, col. 543]:

'If the world economic environment remains favourable in 1994 and our economy continues to grow satisfactorily, Government will further adjust the CPF contribution rates in 1994 by an additional 1.5 percentage points, bringing the contribution rates for the employer and employee to 20% each on 1st July 1994.'

So it is inexplicable, Sir, that some MPs in this House claimed that the announcement came as a bomb shell.

Sir, the third point is about raising the ceiling for the SDF levy. The simple message the union wants to tell employers is that if companies send more workers for training, then they will get back their share of the contribution. In fact, I am told that right now, because bigger companies are more active in training, they are already using up the lion share of the SDF. Bigger companies usually employ staff at the higher starting salaries in excess of the present SDF levy of $750 which means that they are using up the SDF, while not contributing as much to it. Smaller companies which are the main contributors to the SDF, unfortunately, are not very active in sending workers to the SDF-sponsored courses. I think this announcement by Dr Richard Hu will serve to balance the redress between what big companies use and what small companies pay in.

Sir, I want to move on and talk about a strange phenomenon, about how Singaporeans, in general, have acquired the habit of remaining silent when policies are good for them, while they scream and moan when they are affected by single issues.

Consumers and workers should be happy for the goodies they get from this year's Budget for precisely the same reasons that business people appear to be unhappy. Because it must be, is it not? If businessmen are unhappy, obviously the Budget, according to the business people, has been skewed to favour workers.

But, Sir, as I scan the daily papers and letters to the press, there were few cheers for the Government. In contrast, the headlines and the sub-headlines appeared to have been hijacked by people who were unhappy about the Budget.

The majority who have benefited from the Budget, the ordinary persons in HDB flats, the consumers, should come out and cheer the Government. I think the Government has done well. I think we should cheer them otherwise they might also lose heart. Sir, between 1993 and 1994 Budgets, between the last two Budgets, everybody has gained: business people, workers and consumers.

About two weeks ago, I attended the Tanjong Pagar Town Council meeting. It was the last Council meeting before the new Council comes in. And I was listening to the briefing by my General Manager on the new rates which the Tanjong Pagar Town Council will impose on its residents because of the 1993/94 Budget. If I may ask that the Table be distributed. [Copies of Table distributed to hon. Members.] You will see the dramatic reduction in the S&C rate. This is only correct for Tanjong Pagar because every Town Council sets their own rates. Sir, you will note that for 1-roomers, they used to pay $15.50 per month for their S&C charges before the 1993/94 Budget. But after the 1994 Budget, they will be paying $3.50 per month, ie, from $15.50 to $3.50. And for this year, they will get rebates in April, August and December. The yearly saving for the 1-roomer comes to $154.50, representing a whopping 83% savings. If you go down the last column, 2-roomers will save $167 this year, representing 62%; 3-roomers save $142 this year, in percentage terms, 38%; and even 4-roomers save 8% this year.

Sir, here we assume that 4-roomers are taxpayers. So they also have the tax rebate of $700 plus 5 percentage points this year. So, virtually, even the 4-roomers and 5-roomers will not be paying any taxes. If we factor in the CPF Top-Up Scheme, the Edusave Scheme, there will be negative income tax. In other words, the Government is paying them instead of they paying the Government. But even for this good news, in my Meet-the-People Session for the last few weeks, nobody has come to say that the Government has done well. In fact, they have remained embarrassingly silent. So I assume that is good news. But my businessman friends have lambasted me and they told me that the Budget has caused the share market to go down and it was totally unnecessary. They said the Government should have given the businessmen a 1% token corporate tax cut, if nothing else. But Dr Ow said it well yesterday. He said that the more you give, the more people want. Perhaps, on hindsight, the 3% corporate tax cut should have been withheld until this year, or 1.5% last year and 1.5% this year. Good things should be spread out over a long distance.

Sir, taken together, the 1993/94 Budget lays the foundation for a bright future ahead and one that allows us to move confidently into the next century.

I support the Budget.

Assoc. Prof. Walter Woon (Nominated Member): Mr Speaker, Sir, first of all, I think I should thank the Finance Minister for a very generous Budget. I do not think any individual taxpayer can justly claim to be short-changed.

In his Budget speech, the Hon. Minister for Finance outlined the role of Government in economic management. He said that the Government's role is to provide a conducive environment for private initiative while intervening directly only in areas where there is market failure. This philosophy is to be welcomed since it places the responsibility for economic growth where it should belong, with the private sector. I hope that the same philosophy will be employed in non-economic matters as well. The problem is that the Government is always tempted to intervene in people's lives, not just in the economic sphere but also in other matters.

In the past, we have been told how many children to have, when to have them, when to marry, who to marry, how long to keep our hair, and even for those with long memories, to eat more wheat. Then people complained that Singaporeans lack initiative. Even the Government Ministers complained that Singaporeans expect the Government to do everything for them. I find this strange, if not, a little ironic.

Before 1963, no one ever accused Singaporeans of lacking initiative and depending on the colonial government. If there was a need for a university, people went out and found the funds. They formed self-help groups themselves without Government prodding. They did not need Government to tell them where to invest and how to do business. Between independence and today, something seems to have happened to this natural initiative.

If there is a lesson to be learned from the woes of the welfare states of the West it is that governments which create a dependency syndrome in their people are courting disaster eventually. And the dependency syndrome is not created only by welfare. It can also be created where the state takes over basic decision-making and refuses to let the people exercise their minds. If you never let your children choose their own clothes, you should not complain that they do not have any taste. If you do not let them make their own decisions, do not moan that they lack initiative. Parental control is often well meant, but over-control leads to over-dependent, maladjusted children.

The analogy holds true for society. We have a very controlled society. No doubt the Government intervenes for our own good, or for what they think is our own good. But the effect is to stultify initiative and enterprise. The Government has gone from being a stern parent - with a whole list of "Thou shall nots" - to a concerned parent, but a parent nevertheless. The result, over the last two generations, is an erosion of the feeling that people are responsible for their own well-being and that it is not Government's job to take care of everyone and pander to their needs.

When medical benefits were changed for civil servants, there were a lot of grumbles and rumbles from affected persons. Some of this unhappiness, I think, was because all of a sudden people had to think for themselves. From a Government pays-all scheme which is very easy for most people, you suddenly have a choice, you have a choice about which ward to be admitted to, you have a choice about which scheme to take, you have a choice about insurance, what plan to take, how much insurance to take. And for some people, I think, the effort of planning was painful. This kind of attitude is insidious and if it becomes widespread, it is a danger to Singapore in the long run. In the long term, it can sink us. But a well meaning, caring Government can still unwittingly foster a dependency syndrome by trying to do too much for people. If we are not careful, one day we will wake up in a society where people have lost the habit of thinking and deciding for themselves. Woe betide us if people ever reach the stage where they expect Government to spoon-feed them, cosset them and think for them, and then they will complain vociferously like they do in some other countries when things go to the dogs. It has happened in countries which were economically phenomenal, 50 years ago. I do not think that we are necessarily immune from this if we are not careful. Sometimes it is better to let go and let people make their own decisions and live with their own mistakes. More has to be done to foster an attitude of independence and self-reliance.

A case in point is provision for old age. This is the problem that will be with us for a long time. It exercises the best brains in Government. We have heard senior members of the Cabinet mention the possibility that the CPF withdrawal age will be raised. We can understand Cabinet's concern. People are living longer, they should set aside more for old age. But should they be compelled to do so by Government? That is the question. Or should they be left to make their own provision? The temptation is for Government to work out in fine detail, how each and every one of us is to husband his CPF so as to last his lifetime. I think that would be a bad mistake. When you stop a person taking out his CPF savings at 55, or 60, or at whatever age, you are saying to him, "You can't be trusted to manage your own money. So we will manage it for you."

This sort of thing does not go down well with intelligent people; and make no mistake about it: Singaporeans are more intelligent than the Government seems to think they are. What rankles, I think, is this implicit assumption that the Government is better able than the average Singaporean to decide what to do with his own money. If a person wants to use his CPF savings to start a new business, or to educate his children, or to go on a pilgrimage, or even to see the world, is the Government right to stop him? It is not the raising of the withdrawal age per se that irritates the people. It is the fact that the Government is patronising them, treating them like children. The CEOs of multi-national corporations, successful professionals, the businessmen, the senior employees holding positions of high responsibility, the parents who have brought up and nurtured their own families to adulthood, are these people incapable of seeing the problems of old age and adequately responding to them? Do they need the Government to think for them and decide how to employ the CPF funds? People will be put off by the Government's well meaning efforts. They will be cynical and grumbling and, ironically, do not expect thanks from those who do need Government's help to plan for their future. They will equally resent what they see as Government's patronising attitude.

Paradoxically, I think the best thing for Government to do is to do nothing. Hand people's money back to them at age 55, and say, "Here, this is your money. We have done our bit, we have kept it safe for you. We have got your employers to give 20% on top of your salary. Now it is yours, invest it as you like." Make it clear that there will be no handouts to the prodigal son who blows the whole lot in one hedonistic binge. Then step back and let the people take over responsibility for their lives.

We can understand Government's concern for welfare but lack of initiative and enterprise will sink us in a competitive world. The best thing the Government can do to foster initiative and enterprise is do less for people and let them learn from their own mistakes. I only cite old age provision as one area where Government can get people thinking for themselves. There are myriad others. Back off, and let people breathe. Singaporeans cannot be driven like sheep into the First League of Nations. If we are to make it into the First League, there has to be a genuine partnership between the Government and the people, not the partnership of the rider and the horse, with the Government as the rider and the rest of us as the horse, but a partnership based on mutual trust and respect. The Government says, "People trust us. Use your vote responsibly." I ask the Government, "Please, trust the people. Trust us and have some faith in our good sense, in our common sense." People should be given as much choice over as wide a field as possible. Let people take responsibility for their own lives.

Mr Peh Chin Hua (Jalan Besar GRC): ( In Mandarin): Mr Speaker, Sir, the Budget Statement by the Finance Minister, Dr Richard Hu, has provided various tax reliefs and rebates to the people. For example, the rebates on rental and service and conservancy charges for HDB flats and the second CPF Share Ownership Top-Up Scheme, which would be of great benefit to the ordinary citizens. This can be said to be the first time since independence that the Government has been giving out such generous reliefs to the ordinary citizens. This is indeed the ordinary citizens' Budget. However, the business circle is quite disappointed. But they should know that so long as we have budget surpluses and the Government does not have to increase taxes or impose new taxes, then they should be thankful to have this painless and unexciting budget.

The Opposition Member, Mr Chiam See Tong, said in the Budget debate yesterday that this year's Budget does not benefit the business, nor does it benefit the lower-income people. He is, as usual, trying to deceive others as well as deceiving himself and he is speaking against his political conscience. He felt that the Government's rebates for S&C charges for 1- to 5-room flats are not good enough and a few more months' rebates should be given.

The Potong Pasir Town Council under Mr Chiam See Tong's management has operating surpluses too. Why does he not give another one or two months' rebates to his residents so that the Potong Pasir residents could be more happy? Let them share the success of his management of the town council.

Mr Speaker, Sir, when we are implementing this budget, apart from reading from the newspapers the reaction of the ordinary citizens on whether they are happy or unhappy, I feel the Government should also consider what Mr Chiam See Tong said in Parliament yesterday. He said any government which has accumulated massive amounts of funds shall one day be tempted to use them for its own political ends. I think we should follow his suggestion so that we can test the ordinary citizens' reaction to our budget. What will be the reaction of the residents in the wards of the ruling party and the Opposition parties on the tough and unpopular Government policies which have long-term benefit to them? Would they not agree that we should have a good and experienced government before we could have good economic results? Are they going to just continue to share the fruits of success irrespective of whether the Government is good or bad? Have they not thought that if we do not have a good government, we would have no such fruits of success to share?

Mr Speaker, Sir, this reaction would have a great effect on the future politics of Singapore. Therefore, I feel that the Government may consider what Mr Chiam See Tong said yesterday. Otherwise, the Opposition parties will be laughing at the Government for being so stupid. Moreover, some Opposition town councils have been using the service and conservancy charges collected from the people to carry out political activities for their own political purpose.

This afternoon, Mr Low Thia Khiang, raised objection to the withdrawal of Government subsidies to the town councils. I must tell him that this subsidy is not a subscription of the political parties. It is the people's money. You should not use people's money for your political purpose. So long as the service and conservancy charges are properly maintained and used, I think this should not be a problem of the town councils.

Sir, Mr Low Thia Khiang also created an unnecessary fear among us. He said the Government is giving incentives to induce the people and then exert pressure on them. We all know that many governments have to increase taxes to provide for expenditure. There is no other country in the world which acts like the Singapore Government where all sorts of rebates and reliefs are given to the people to prepare them for GST. Therefore, the Government has given rebates on service and conservancy charges and rentals and other reliefs to the people so that the lower income group would be able to cope with GST, and that they will not be so adversely affected by the implementation of GST. I believe that in the long run, the people, particularly the lower income group, will understand that the PAP Government is more caring for the people than the Workers' Party. The unnecessary fear that he had created, I think, will not be really the workers' fear. He felt that the workers in Singapore have more and more burdens to bear. I will ask Mr Low: Why is it that more and more developing countries like Vietnam and China are always praising the Singapore Government and envious of the lives of the workers in Singapore?

Sir, another point that I would like to raise is that the small and medium enterprises in Singapore should be allowed to use their overseas assets as collateral for bank loans. I support the proposals by Dr Ow Chin Hock and Mr Leong Horn Kee that the Government set up an overseas development bank to provide loans to local enterprises and to allow CPF to be used for designated overseas investment plans.

Sir, I feel that the Finance Minister, although he said that the Government encourages people to venture overseas, has failed to relax the restrictions imposed by the banks. I feel that our banks are really too conservative. They have indirectly restricted our capability to venture overseas. I hope that the Monetary Authority of Singapore would consider relaxing all these limitations so that the SMEs would be able to use their overseas assets as collateral, at least part collateral for their loans, so that they would have more funds to invest overseas. Particularly when they are purchasing overseas properties which are reliable, they should be allowed to use these properties as collateral for bank loans. Since overseas banks are able to accept these properties as collateral for loans, I do not understand why our local banks cannot do the same. I think when the Government encourages people to venture overseas, they should also consider relaxing these rules.

Sir, with the economic recovery in the United States, Europe and Japan, and also with the economies of the East Asian and South East Asian countries like Malaysia, Indonesia, China, India and Vietnam, getting more and more prosperous and having a good prospect in the future, I think we would have a very good future and we are now encouraging our people to venture overseas and to develop our external economy. However, from a businessman's point of view, our overseas business faces very strong competition from others. We must be able to understand the situation overseas so that we will have an advantage over others in getting the deals. As it was said by Sun Tzu, "Know our enemies as we know ourselves, and we can win all the battles." So with regionalisation, we should set up more funds. For example, the Edusave Fund, which has been increased, is a very wise move. More importantly, we should also adjust our curriculum so that we will be able to cope with the demand in our overseas ventures. In this respect, I hope that the Government could consider a few proposals:

First, we all know that English is the common language in our multi-racial society. It is also the nucleus for our multi-racial unity and it is also the key to the opening up of the western markets - the United States and European markets. Many people benefited because they know English and they are able to venture overseas. However, with South East Asia's economies picking up, I think we should also encourage and improve the teaching of our mother tongue so that we will be able to cope with the need to converse and communicate with our counterparts in this region. To improve the teaching of the mother tongue would be of great help to our future development.

Mr Speaker, Sir, I hope that the Government would be able to raise the standard of mother tongue in Singapore so that our students will be able to learn more, not only in reading and writing, but also in the ability to communicate and understand the culture and the various aspects of doing business in this region. We know that the economic progress in this region is going much too fast. So we have to speed up in this respect so that we can meet the demand.

When the future generations of Singaporeans go for overseas ventures, they must master the languages in this region. Therefore, we must strengthen our study of the history, geography, culture and customs of this region, particularly in China, India, Malaysia and Indonesia. We should encourage our younger people to study more on the Asian and South East Asian cultures, economy, geography and history. And we should also encourage them to step up their studies in this respect and to train them so that they would be able to work in multinational companies and to contribute to our future economy.

Sir, the 1994 Budget is the ordinary citizens' Budget which is full of compassion. I support this statement.

Mr Low Thia Khiang: ( In Mandarin): Sir, the Member made some allegation against me. He alleged that I used town council's fund for political activities. I want him to tell me what activities he was referring to.

Mr Peh Chin Hua: ( In Mandarin): Sir, I did not say that it was Hougang Town Council which had been using its funds for political purpose. I only said that some Opposition town councils had been doing that. Well, if he has not done so, then he should not be guilty conscious.

Mr Low Thia Khiang: ( In Mandarin): Sir, Mr Peh's allegation is not fair. He should not be insinuating in Parliament. He should be specific. He should not insinuate.

Mr Peh Chin Hua: ( In Mandarin): Sir, if he has not done anything wrong, then he need not be guilty conscious.

Mr Low Thia Khiang: ( In Mandarin): Sir, Mr Peh is saying that I am guilty conscious. Can he give specific examples to say why I should be guilty conscious? He is not conducting himself like a gentleman.

Mr Peh Chin Hua: ( In Mandarin): I said that if he was not guilty, then he should not be guilty conscious. Why should he be?

Mr Low Thia Khiang: ( In Mandarin): Since the Member does not want to substantiate his claim, then he is making an innuendo.

Mr Peh Chin Hua: ( In Mandarin): Sir, he should understand the practice in the other Opposition town councils before he makes any remark. 5.30 pm

The Minister for Finance (Dr Richard Hu Tsu Tau): Mr Speaker, Sir, I would like to thank all Members of the House who have spoken on the Budget over the past two days.

Criticisms there have been, but they have been all very mild, even from Members of the Opposition for which I am grateful. So I must be improving. Time will not permit me to address the Members' concerns point by point and I will therefore focus on major issues and leave matters of detail to be dealt with during the Committee of Supply.

This year, I am building on the tenets which I introduced in my previous budget. One is the reform of our tax system through the introduction of a broad-based Goods and Services Tax (GST) and, two, the strengthening of our external economy. These moves are vital to our long term economic growth and development.

I will now address the specific major concerns. Rationale for GST

For a start, the Government's rationale for introducing GST is worth restating. GST will give the Government greater scope to lower income taxes. In other words, the Government would take a smaller share of every dollar earned by companies and individuals in the form of direct tax. This strengthens the linkage between work and reward and will encourage greater effort, enterprise, investments and savings. The aim is to achieve a better balance between income tax, which is a tax on the factors of production, and GST, which is a tax on consumption.

GST is definitely not introduced to raise additional revenues. The restructuring of the tax system is not an exercise by a profit-driven Government to enrich its coffers at the expense of the people, as many wrongly believe. This was why I announced the reduction of corporate and personal income taxes as well as non-tax rebates to offset the revenues collected through the GST system. The Government fully intends to implement the GST in a revenue neutral manner. In fact, in fiscal year 1994, the tax offsets granted add up to some $1,200 million compared to an estimated GST collection of $960 million.

While I am on the subject of GST-related offsets, I would like Members to note especially that the income tax changes take effect from the Year of Assessment 1994. This means that individuals and companies are already enjoying lower income taxes on income earned in 1993, even though GST will only be implemented from 1st April 1994.

As I have said, the GST-related tax and non-tax offsets will ensure that Singaporeans are no worse off after the introduction of GST. The majority will in fact be better off. Nevertheless, for this year, I have decided on some extra measures to further benefit the lower income groups. They are the additional S&C and rental rebates for one- and two-room flat dwellers and S&C rebates for three- to five-room HDB residents. These extra measures are possible because the Singapore economy is flourishing and the Government's revenue position is strong.

Despite the offsets, some still believe that they will be worse off after the introduction of GST. Let me reassure the House that this should not be the case. When GST is in place and the individuals know their actual tax and non-tax offsets, they can do their own sums. Every taxpayer will be told how much tax is saved as a result of the GST-related income tax changes. The tax savings will be shown in all Notices of Assessment this year.

Mr Heng Chiang Meng has suggested that we should consider a negative income tax. I have said before, and I say it again, I am not in favour of such a scheme. It is but a first step towards a welfare state. In any case, if a strict means test is needed to control such a scheme, it in fact reduces this negative income tax proposal to our existing social welfare scheme, or to our CCC Fund Scheme, to help the lower income group cope with GST.

Mr Cheo has argued that some countries which have introduced GST have not become competitive. I find that this is a very naive statement. These countries are not competitive not because of the introduction of GST but because they have extensive welfare systems which led to extremely high business cost and therefore they are not competitive. It has nothing whatsoever to do with GST.

Mr Chiam See Tong also said that more than 75% of our taxpayers are no longer in the tax net, that they will not be able to benefit from the tax cut. Mr Chiam should remember that with economic growth, these taxpayers will, in the course of time, graduate into higher income groups that allow them to enjoy income tax savings. I hope that he does not believe that no one's income will rise permanently.

Public education for GST

We have embarked on an intensive on-going taxpayer education programme. To-date, the IRAS has conducted nearly 300 seminars involving 44,000 participants and held 380 dialogues with various trade associations. It has also visited 3,670 traders at their own premises. In addition, it has handled 40,000 enquiries through the telephone helpline. The assistance given has helped business understand and prepare for GST. IRAS has also reviewed its procedures based on feedback received. This is to make it easier for businesses to comply with the procedures for the collection and accounting of the tax. For businesses with specific difficulties, IRAS will continue to work with them to overcome these difficulties.

We launched our consumer education programme earlier this month. Consumers are being made aware of GST through TV and press advertisements, cartoons in the press, radio programmes, advertisements in the MRT and bus backs and videos in schools and public libraries. We will intensify the programme closer to the GST implementation date. This is to make consumers understand the rationale of GST and assure them that they will be better off.

Cost of implementing GST

I am surprised that so many businessmen expected a corporate tax rate cut to be announced in the budget to help them offset the start-up and operating costs of GST implementation. They have obviously forgotten about the three percentage points reduction, as Members have pointed out, which was announced in last year's budget. My intention then was to give businesses the tax savings ahead of the GST implementation date in order to help them offset the initial cost of implementing GST. On hindsight, as someone has suggested, perhaps we should have kept the tax cut allowance until this year. Doing so would have made it easier for businesses to see the connection between the reduction of the corporate tax and GST.

As for the on-going expenses incurred by businesses in collecting GST, experiences elsewhere, especially in the United Kingdom and New Zealand, have shown that compliance costs are low. They range from a fraction of a percent for companies with turnover of $10 million and above to only 0.2% for companies with turnover between $1 million and $2 million. In Singapore, we expect the cost of compliance to be low because our GST system is a simple one without complex exemptions and zero-ratings. However, we recognise that compliance costs will fall more heavily on small businesses. For this reason, we have exempted businesses with annual turnover below $1 million. Only bigger businesses with proper accounting systems will have to collect the tax. Businesses should also note that expenses incurred in the implementation of GST are deductible for income tax purposes. Nevertheless, the anxiety expressed by businessmen is understandable. GST is a new tax. The actual compliance costs are not known. IRAS will therefore undertake a study on the compliance costs of businesses one year after the implementation of GST. Should it be necessary, we will take further appropriate measures to minimise the costs.

Dr Ow Chin Hock has suggested that in view of the implementation of GST, the Government should impose a two-year moratorium on Government and statutory board fees and charges. This is not wise. Fee increases are necessary when manpower, material or operating costs have risen significantly. The Government's policy is to recover unavoidable manpower and material-related costs through gradual and periodic fee increases in order to minimise their impact on inflation. Delaying such increases would only result in larger and more painful adjustments later on.

I should also point out that the introduction of GST does not mean that there should be no price increases whatsoever for whatever reason. In the normal course of business, material and wage cost changes can lead to legitimate price increases. What is not acceptable, however, is for unscrupulous businessmen to use GST as an excuse to raise prices and profiteer at the expense of the public, and then to blame the Government for it. Where this can be demonstrated, I can assure the House that severe sanctions will be considered.

The Committee on Profiteering and Inflation has been set up under the Ministry of Trade and Industry to monitor price increases on the back of GST. The Minister for Trade and Industry will elaborate on the projected inflation rate and the measures his Ministry has taken to prevent profiteering during the Committee of Supply proceedings. It is important to note that while we may guess that many prices are being increased, the overall figure to look at is the monthly CPI changes because that gives you an assessment of what is the true cost of prices of baskets of goods which affect the people. So whilst we will look at individual items of costs, we should also closely watch the CPI movement.

On the issue of tax incentives, I have already put in place a comprehensive package of tax incentives for various sectors. From now on, I will concentrate on fine-tuning the existing incentives to make them more attractive instead of introducing new ones.

As for tax incentives to promote regionalisation, I announced seven of these for companies in last year's budget. It is much too soon to add any new ones. I intend to allow the existing incentives to work through first. However, I have introduced two personal income tax changes to complement those for companies. One will help lower the tax burden for Singaporeans working overseas who opt for non-resident tax status. The other will help reduce the tax burden of those who declare residential status. The objective of both changes is to encourage more Singaporeans to accept overseas postings from their employers. This will in turn facilitate Singapore companies and entrepreneurs to venture abroad.

Mr Lau Ping Sum has suggested that we bring forward the implementation date of the CPF-related personal income tax change to the Year of Assessment 1994. I think this is not necessary. Individuals and companies can only act upon the tax change after it has been announced, that is, from 1994 onwards. The Member should note that the Year of Assessment 1995 refers to income earned in the year of 1994.

Dr Ow Chin Hock has commented that factor income from abroad declined between 1992 and 1993. I must point out that it was net factor income and not factor income from abroad, which declined between 1992 and 1993. The decline was due to lower foreign nominal interest rates which dampened public sector investment income from abroad.

Dr Ow has also offered an interesting view that GLCs might be more a hindrance to projects in our efforts to regionalise. This differs from the other view that GLCs are better suited to undertake large-scale infrastructure type projects that require substantial investments, expertise and resources which reside in GLCs. The fact is that GLCs are private companies run on a purely commercial basis. The Government does not interfere with their day-to-day operations. Neither does the Government favour them in projects vis-a-vis the other private sector companies. Like such companies, GLCs are responsible for their own investment decisions. They have to compete with the rest of the private sector for business. They have to seek out opportunities and seize them quickly before it is too late. Many of the GLCs are listed on the Stock Exchange of Singapore and are thus accountable to shareholders for their performance. If it is true that GLCs are too bureaucratic in their decision-making process and take too long to evaluate projects, their regionalisation efforts will not succeed and their bottom-lines will be affected.

Nevertheless, the Government's preference in our regionalisation effort is for the private sector to take the lead. To help local enterprises regionalise, the Government has implemented the Local Industries Upgrading Programme whereby Government agencies like the PSA can help upgrade their capabilities. GLCs will also partner private companies where it is in their mutual interest to do so.

Dr Ow and several other Members have also commented that some companies are unhappy about Singapore banks requiring local collateral for overseas ventures. Entrepreneurs were asking whether this is a regulatory requirement imposed by the MAS. I would like to point out that there are no legal restrictions on our banks providing loans for the purpose of investing overseas. These are commercial decisions to be made entirely by the banks. As banks accept deposits from the public, they are fiduciaries of public funds. They, therefore, have a responsibility to their depositors and shareholders to extend credit facilities in a prudent manner by ensuring that the borrowers are creditworthy and adequate collateral is provided, if necessary. Banks may require the borrower to provide assets in Singapore as collateral, particularly if the borrower is not able to provide adequate collateral overseas or if the laws in the foreign country concerned do not allow legal mortgages to be given. Such collateral may also be needed in countries where the legal system is not well established and does not provide adequate protection of the rights of the mortgagee company.

Mr Leong Horn Kee has also suggested allowing CPF funds to be used for overseas investments. In order to safeguard CPF members' savings, we have not allowed them to invest their savings abroad. Even with the recent liberalisation of CPF investment schemes, members are not allowed to invest their CPF savings abroad. They are only allowed to invest their CPF savings locally.

The objective of the CPF investment schemes is to help Singaporeans take a stake in Singapore. Allowing CPF for direct overseas investments will not achieve this purpose. Another consideration is the risks involved. Because of the distance, individual CPF members might not be able to monitor the overseas markets closely. Besides, different markets behave differently and are governed by different laws. There are also foreign exchange risks involved.

I believe we should continue to allow CPF to be used for investment in Singapore companies only. By allowing members to invest in Singapore companies which are investing abroad, we are indirectly allowing them to play a part in Singapore's regionalisation and to derive benefits from the extension of our economy outside Singapore.

At this point, I would like to merely say that in the Government's regionalisation drive, the intention is not to induce every Singapore company to open up overseas, whatever their financial, commercial or technical capacity. Only companies well placed in terms of finances, technical know-how, business connections, with surplus funds, should undertake these relatively risky businesses. For the rest, unless they have nowhere to place their funds, other than in the stock market, it is probably more prudent for them to remain in Singapore for the time being until overseas markets mature.

Concerns have also been expressed about the effect of the 1.5 percentage points rise in the employer's CPF contribution rate and the increase in income ceiling for the SDF levy on business cost. Employers should remember that employees accepted a 15 percentage points slash in the CPF contribution rate in 1986, as many Members have pointed out. Employees have therefore waited eight years for the rate to be restored to 20%.

As for the SDF levy, it is used for the training of workers. Raising the qualifying salary to $1,000 from $750 is estimated to raise an additional $15 million a year. This is not a large sum and employers will benefit directly from the productivity gains of better trained workers.

Last year's economic growth at 9.9% was exceptionally buoyant. The unit labour cost consisting of wages, employers' CPF contributions, staff benefits, foreign workers' levy and SDF levy fell by 0.5%. The unit business cost in the manufacturing sector also fell by 1.2%. In addition, this year's growth estimate of 6% to 8% exceeds the medium-term target of 4% to 6%. Most employers should, therefore, be able to absorb the CPF cost increase relatively well. Moreover, the CPF increase should be factored into wage negotiations.

Mr Leong Horn Kee has commented that the CPF and SDF increases will raise labour cost by 2%. The Department of Statistics has, however, estimated that the unit labour cost for the manufacturing sector would only increase by 1%.

At this juncture, I wish to reassure employers that the Government will always do what is necessary to ensure that the business environment in Singapore remains competitive.

I have given a commitment to reduce the property tax rate from 16% to 12% over the next few years, with a cut of 1% effective 1st July this year. Last year, I gave commercial/industrial properties a one-off 25% rebate on property tax. However, the feedback I have received is that most private sector owners did not share the rebate with their tenants. I have, therefore, decided to reduce the property tax rate over a number of years to lower the cost of doing business in Singapore. The certainty of tax cuts should give tenants greater scope to negotiate better rental rates with their landlords, and thus benefit directly from the cuts.

Some Members have also commented that the property tax rate cut does not reduce business cost because it is negated by rising annual values. I would like to point out that the annual value of a property is the estimated annual rental the property can fetch if it is rented out. This is determined by market forces. Just as annual values are reassessed upwards when the property market is buoyant, they are adjusted downwards when rentals fall. Market rentals for commercial and industrial properties have softened in the last year and they are expected to stabilise this year. Annual values should come down correspondingly. This, together with the cut in property tax from 16% to 15% and ultimately to 12% over the next few years, should help reduce the property tax burden of businesses.

Zero growth in manpower policy

Mrs Yu-Foo Yee Shoon has asked the Government not to impose the zero growth on manpower policy in specific areas such as community development. The Government is flexible in implementing the zero growth in manpower policy. It does not mean that no manpower increases are allowed. Indeed, increases are allowed where there is good justification for additional positions. What the policy does is to try and balance the increases in one area against reductions elsewhere so as to achieve overall zero growth. In this connection, manpower increases have been allowed for functions like the senior managers of community centres which have little scope for automation. A total of nine senior manager and senior Community Development Officer posts have thus been added since fiscal year 1990.

Mr Ling How Doong and Mrs Yu-Foo Yee Shoon have asked several questions relating to the Government's revised civil service salary and medical benefits scheme. As they touch on matters of detail, I will respond to them during the Committee of Supply discussions on the estimates of the Ministry of Finance.

Dr Vasoo has urged the Government to review the Singapore Allowance for pensioners in the light of the increase in the cost of living. The Government has already increased the Singapore Allowance with effect from 1st April 1993. The specified pension limit was also raised by $50 per month to $900 per month from the same date, so that a larger number of pensioners would benefit from it. The changes cost the Government $3.8 million per annum and benefit 10,600 pensioners.

Long-term CPF contribution rates

Mr Zulkifli Mohammed has asked whether the CPF contribution rate will be restored to 50% in the long term. In 1987, after a thorough study of the old age and housing and medical needs of our workers, the Government decided that the long-term CPF contribution rate should be 40% (20% each from the employer and the employee). Contributing at this rate, CPF members should have adequate savings to support a retirement income of between 20% and 40% of their last take-home pay and have enough Medisave to meet their medical needs after paying for a home commensurate with their income level. The 40% rate of contribution is therefore considered adequate. The Government has no intention of raising the contribution rate beyond 40%.

Mr Chin Harn Tong has expressed concern that the privatisation of Government entities might only benefit the Government. He fears that privatised companies will only be profit-motivated and be driven to raise prices and lower performance. His concerns are misplaced. Privatisation should have the opposite effect. It exposes companies to competition and should lead to greater sensitivity for customer needs.

Some Members have asked for an update on the Government's privatisation programme. Singapore Telecom was successfully floated in November last year. The public offering of ST shares was by far the largest flotation in Singapore's corporate history. The Government expects to privatise other major Government-owned companies or entities from time to time. The next major exercise would be about two years from now.

In order to help Singaporeans build up enough CPF savings for the next exercise, I have announced that the Government will implement a second SOTUS scheme to top up CPF accounts of Singapore citizens aged 21 and above. The Government will pay $300 into the account of a CPF member when he or his employer contributes at least $750 during the 18-month period from 1st March 1994 to 31st August 1995. In addition to the major share ownership exercise which the Government will conduct from time to time, other Government-linked companies will continue to be floated on the stock exchange.

The SOTUS or Topping-Up Scheme

The main objective behind the CPF SOTUS scheme is to encourage Singaporeans to save so that they will be able to participate in the next major share ownership scheme, just as they have done in the last SOTUS exercise. We are aware that not all adult Singapore citizens participated in the last SOTUS. For the coming SOTUS exercise, we have therefore made it easier for them to qualify for the $300 top-up by extending the qualifying period to 18 months. The $750 co-payment needed for citizen CPF members to receive the full $300 top-up amount corresponds to a CPF contribution of about $42 per month over a 18-month period or a salary of about $105 per month. Almost all working class Singaporeans should be able to enjoy a full top-up.

Mr Low Thia Khiang has complained that the Government requires a matching contribution for giving the top-up. This is in line with our basic economic philosophy of staying clear from welfarism. Government's approach in the asset enhancement programme is to assist Singaporeans who are able to save to build up their assets. It is based on this fundamental principle that we require co-payment from citizen CPF members.

The CPF Minimum Sum Scheme was introduced in 1987 to help employees to set aside a sum of money for their basic needs after the age of 60. It provides a monthly income and acts as a safeguard against their CPF savings running out prematurely. To ensure that the CPF Minimum Sum will be sufficient to meet the needs of old age, the Government has decided to increase the sum gradually from $34,600 to $80,000. As these savings are held over the long-term, the Government has decided to pay a higher interest rate for the CPF Special and Retirement Accounts. I have announced that the extra interest rate will be 1.25 percentage points above the normal CPF interest rate.

Dr Vasoo has, however, commented that the higher interest rate of 1.25 percentage points is inadequate. He has suggested higher interest rate differentials of between 2% and 2.25%. The additional 1.25 percentage points are considered reasonable and is comparable to what long-term investments in the market would yield above the savings deposit rate. At present, the normal CPF interest rate is 2.5%, and the additional 1.25 percentage points are 50% of the current normal interest rate.

Dr John Chen has asked when the Government will announce details of the CPF Minimum Sum Scheme and when will the new scheme take effect. I understand that the Minister for Labour will be announcing details of the revised scheme later this week. In his announcement, he will also address the complaint by Mr Ling How Doong that raising the Minimum Sum will mean that thousands of Singaporeans who earn $1,300 per month or less will not be able to draw out any money at all when they reach the age of 55.

Dr John Chen has also suggested that the Government do a Top-Up Scheme for the Minimum Sum to achieve the Minimum Sum amount. This is an interesting proposal which we will have to study very carefully.

Mr Chew Heng Ching has asked if the Government will consider setting up a fund with revenue collected from COE and road tax to finance road improvement works. As far as possible, the Government's policy is not to match specific sources of revenue with expenditure. Like all other Government revenue, collections from COE and road tax are credited to the Consolidated Fund. This forms a common pool that the Government draws on to finance its expenditure. This will ensure that each Government programme is funded on its own merits, taking into account competing claims on Government resources and the total amount that the Government can spend. In this way, all important programmes will be adequately funded.

As regards road improvement works, a significant 15% of the Government's development expenditure, or $900 million, is going into road development, road maintenance, MRT construction, bus interchanges, ERP and other public transportation schemes and improvements in fiscal year 1994. This amount is 80% more than what was spent, on average, in the last two years. The Government has also announced its intention to build a network of underground roads to relieve road congestion in the Central Area. When completed, this will allow more COEs to be released. The whole programme is estimated to cost several billion dollars. It clearly demonstrates the Government's commitment in constantly reviewing and improving the public transportation infrastructure. There is, therefore, no need to set up a special road improvement fund.

Mr Chiam See Tong has commented that the Government's reserves are too large. He has asked why such large reserves are necessary and of what value are they. I would like to point out to him that our budget surpluses and large reserves are viewed with great favour by international investors. BERI, which is the Business Environment Risk Intelligence organisation in Switzerland, has consistently awarded Singapore its highest 1A category. This company is used extensively by foreign investors to assess the safety of investing in foreign countries. The rating criteria they use include a country's inflation rate, budget status, whether it is positive or negative, and reserve level and external debts. In all these categories, Singapore scores very highly. We have consistent surpluses, large reserves and negligible external debt. As a result, Singapore has been able to maintain its position as an attractive location for foreign investors, notwithstanding our obvious limitation in land and resources. Last year, we were able to attract a record $3.8 billion in new investments against a background in which foreign investments in the region as a whole declined because of recession in the United States, Japan and Europe.

I have here with me an extract from the BERI rating comparing Singapore with a country like Nigeria which is unfortunately facing many problems. It is a much larger country but their track record, on the criteria used for assessment, is very poor. It says, "Nigeria: Profit Opportunity Recommendation is: Initiate no business transactions without pre-payment". In the case of Singapore, a summary of Profit Opportunity Recommendation, classified 1A, is: Invest in this low-risk environment. And they show tables giving budget deficit as a percentage of GDP. For Nigeria, it ranged from 11.4% in 1988 to 15% of GDP in 1992; foreign exchange reserve is less than $1 billion; current account balance, negative last year. Singapore, of course, you know all our figures.

So the presence of our reserves not only confers specific comfort to us in times of need but also is an important asset which draws foreign investors to Singapore consistently and at a rate much higher than other countries which have much more resources.

Fiscal Policy

At this time, I would just like to restate and explain to Members about Government's basic fiscal policy. Our Government's fiscal policy is to maintain a balanced budget centred around a long-term sustainable non-inflationary rate of GDP growth of between 4% and 6% per annum. On this basis, revenue and expenditure projections are planned accordingly because there is a strong link between revenue collection and GDP growth. Following from this, it means that in good years when GDP growth exceeds forecasts and expenditures are kept under control, budget surpluses will be realised and these surpluses are set aside in reserves to be drawn upon in times of economic downturn. However, lest we become too complacent, I have to remind Members that economic downturns are bound to happen from time to time due to movements in the business cycle. So far, we have been fortunate to have been insulated from the severe recessions in the United States, Japan and Europe by the boom in the East Asian economies.

In fiscal year 1993, a large budget surplus was realised because the economy grew at an exceptionally buoyant 9.9% and there was considerable under-spending in the development budget arising from delays in the implementation of several large projects. For fiscal year 1994, we are forecasting a more modest surplus. The forecast for the fiscal year is a GDP growth of between 6% and 8% which is still above our long-term level of between 4% and 6%, while the development budget estimates for fiscal year 1994 are substantially higher than actual expenditures in fiscal year 1993 due to carry-overs of delayed projects. And this accounts for the more modest surplus forecast.

The Government's aim is to maintain strict control over Government expenditures, particularly, recurrent expenditure. The targets we have set ensure that total expenditures should not exceed 20% of GDP. With recurrent expenditure capped at 12% of GDP and the balance of 8% going towards development expenditure, we have consistently maintained overall expenditures below 20%. It has been around 17% in recent years.

I will now come to the few issues raised by the more recent speakers. Mr Robert Chua proposes a new scheme to induce employees to attend training on SDF courses using the CPF system. I shall not go into this any further. It is for the Ministry of Labour to consider.

I have explained why property tax cuts are not necessarily all offset by increase in annual values. They tend to fluctuate. He has asked for a 4% property tax rate for owner-occupied industrial properties. I think this question has been asked previously, and I have said no, because we do not want to give special preference to owner-occupied industrial premises against rented premises. There is no economic justification for that. I do not think the companies' competitiveness will be affected by not receiving this special grant, or special concession, because basically, for many companies, occupation costs represent quite a small fraction of total costs and, unless the movement is very large, most companies do not find it an unacceptable burden.

He has proposed the setting up of a joint venture bank to finance external investments, particularly for SMEs. I am not sure exactly what is a joint venture bank. Presumably it is some form of development bank which issues loans at subsidised or low rates. It is a possibility, but I have not heard of any demand for it. But one has to be careful that this does not encourage small companies to go overseas simply because of cheap money. For those who really need it and can demonstrate the projects which are viable, I think we can try and arrange special facilities for them.

Assoc. Prof. Walter Woon has expressed great concern over the Government's excessive paternalism and suggested that we should not coddle our people to the extent of trying to make sure that all old and retired people will be looked after. Effectively, if we take his theory to its ultimate limit, we should dismantle the CPF scheme altogether. I hope this is not what he suggests, because that would be the ultimate test of self-reliance. But if he means that we should not do anything to withhold money after 55, I should point out that even with the increase of the Minimum Sum to $80,000, the amount withheld is not very large for a large number of persons on the CPF scheme. It is certainly not a problem for graduates or people with tertiary education who will be quite able to look after themselves and will have savings substantially larger than $80,000 which they can withdraw. Our concern is confined to the older people who have not had the advantage of a good education, because they were born in an unfortunate earlier period, and we have substantial numbers of these people. The Government feels that they should not be left to fend for themselves. Otherwise, come the next century when large numbers of these people begin to retire, with low educational skills, and probably with inadequate know-how to manage their finances, we do not want a situation to arise when we say, "Okay, I have given you all this money. If you have lost all of it, just too bad. You sleep on the streets." I do not think this is socially acceptable. Hence the scheme to be put up. It is not something which will be raised from $34,600 to $80,000 overnight. It is going to be a scheme introduced over a period of time. And as the Minister for Labour will explain, it does not mean that you cannot withdraw anything at all at 55. It is a phased withdrawal programme. When the details are announced, Prof. Woon may find it is acceptable.

On the issue of paternalism and individual initiative, I would also point out that he is, in fact, drafting a law to oblige parents to be looked after by their children. Is that not the ultimate dependency?

Mr Peh Chin Hua has also asked about the proposal for a development bank. I think I have answered that question.

Finally, Mr Speaker, Sir, allow me to sum up. 1993 has been an exceptionally good year. 1994 should also be a good one as economic growth has been forecast to be between 6-8%. Nevertheless, we cannot afford to rest on our laurels. World economic conditions change rapidly. At the end of 1993, there was euphoria about the successful conclusion of the GATT talks. Two months on, there is growing concern about the potential fall-out from an ongoing Japanese-US trade dispute and there are fears about its escalation into a trade war. We must recognise that Singapore is but a very small point in the world grid. We cannot afford to be complacent. We must not be lulled into a sense of security and take progress and prosperity for granted. To remain successful, we must constantly take pre-emptive measures to ensure our international competitiveness. I am confident that as long as we continue to value entrepreneurship, productivity, savings and investments, we will be able to manage the leap into the First League of Nations. [Applause].

Mr Low Thia Khiang rose ---

Mr Speaker: The debate is over, Mr Low.

Question put, and agreed to.

Resolved,

That Parliament approves the financial policy of the Government for the financial year 1st April, 1994 to 31st March, 1995.

Mr Low Thia Khiang: Sir, can I seek clarification from the Minister?

Mr Speaker: We have finished the debate, Mr Low.