THE FY95 EXPENDITURE ESTIMATES

Total operating and development expenditure in FY95 is expected to amount to $18.5 billion, which is 16.2% of GDP, up from 14.8% in FY94. The increase is due entirely to higher development expenditure, which rises from 4.4% of GDP in FY94 to 5.9% in FY95. Operating expenditure on the other hand will remain at 10.4% of GDP.

Total expenditure in FY95 is about 21% higher than in FY94. The largest share of the budget will continue to be allocated to social and community services, which will take up 38%. Education accounts for more than half of this share, with the rest going into healthcare services, subsidies on public housing, improvements to the environment, community development and promotion of the arts. The second largest share, at 36% of the budget, will be taken up by national security, including defence. The third largest share, at nearly 16% of the budget, will go to economic and infrastructural development, including transportation, infrastructure, research & development, promotion of the regionalisation effort and inward investments, and other infrastructural and civil engineering projects.

Let me now elaborate on the FY95 expenditure proposals.

Operating Expenditure

Operating expenditure encompasses expenditure on manpower and other operating expenditure of ministries, and grants-in-aid to Government-funded statutory boards and other organisations. In FY95, operating expenditure is expected to be $11.8 billion, a 10% increase over FY94. Defence spending will account for the largest share, at nearly 45% of the total. Education will take up the second largest share at 23% of the total.

Expenditure on Manpower or EOM will go up by $291 million or 11% to $2.8 billion. The increase includes a $133 million contribution to the Pension Fund for on-going service liabilities mentioned earlier. The remaining increase is to cover normal salary increments and for filling vacancies. Increased workloads of Ministries will have to be accommodated through productivity improvements where this is possible without affecting the level of service.

Other Operating Expenditure or OOE will increase by $1 billion or nearly 20% to $6.6 billion. In addition to higher workload and general cost increases, additional funds will be required for larger provisions for the armed forces. Part of the increase is also to pay for maintenance of new installations such as the flue gas cleaning system in incinerator plants, and more services being contracted out. Higher provisions are also made for teaching bursaries, scholarships, child care subsidies and the Small Families Improvement Scheme. Funds are also needed for the Malay tertiary tuition fee managed by Mendaki, setting up new overseas missions and technical assistance to third world countries.

Grants-in-Aid to Government-funded statutory boards and other organisations including restructured hospitals will amount to $2.4 billion, up 7% from FY94. Schools and tertiary institutions will need larger operating grants to cater for a 11,000 increase in students and to pay for more teachers and administrative staff. Higher operating and rental subventions will also go to restructured hospitals and Voluntary Welfare Organisations for providing subsidised medical care. The Singapore Tourist Promotion Board will need additional subvention to compensate for a reduction in the cess rate from 4% to 1% with the introduction of GST. A new grant will be given to the Trade Development Board to cover its operating deficit as the revenues from its sale of various quotas are expected to decline.

Development Expenditure

Development expenditure is projected to reach $6.7 billion in FY95, up by 46% from FY94. This is 36% of total expenditure, higher than the 30% spent in FY94.

Development spending on education will continue to focus on building new schools and tertiary institutions or improving existing ones. Major on-going projects include the construction of Temasek Polytechnic, the upgrading of NUS campus and the construction of staff quarters at Kent Vale to house NUS lecturers. As computers have become increasingly important as educational tools, more money will be spent on upgrading computer equipment and facilities in schools and tertiary institutions.

The near doubling of healthcare-related spending is mainly for the construction and fitting out of Eastern General Hospital, the new Kandang Kerbau Hospital and Tan Tock Seng Hospital, Phase III of National University Hospital, and the combined Institute of Health and National Dental Centre.

The Government is committed to providing Singapore with an efficient and convenient public transport system and substantial funds are provided for transport-related expenditures, including the continued development and extension of the road network. The MRT extension to Woodlands is progressing well. Feasibility studies will be carried out on a new Northeast Sector MRT Line and an MRT extension to Changi Airport. Pilot studies will also be made to ascertain whether Light Rail Transit (LRT) feeder systems can be used to complement and extend the main MRT network. The development of an Electronic Road Pricing System to control road usage is on schedule.

The capital subsidy to public housing is expected to be $719 million, almost 67% higher than in FY94. The upgrading of HDB flats, including interim upgrading to improve the older estates, will take up the bulk of the allocation. Funds will also be needed for subsidising new flats and paying for the discount on the sale of HDB tenanted shops and rental flats. Provision will also be made for specific works and other improvements to existing HDB estates.

As part of the measures to improve the environment, open sewage treatment works will be covered to control odour emission, an offshore sanitary landfill will be built at Pulau Semakau for dumping refuse, and the drainage infrastructure will be upgraded and extended. Land reclamation works are currently underway at Changi East, Tuas, Buran Darat, and the cluster of petrochemical islands in the south-west to form Jurong Island. Projects to promote community cohesion and sports include the building and renovation of community centres, upgrading of residents' committee centres, redevelopment of the Outward Bound School, and upgrading of the Singapore Sports Council facilities. Funds will also go towards providing welfare homes for the aged and facilities for disabled and low income families. Other infrastructural projects include the development of waterworks and the relocation of the Queenstown Gasholder.

Research & Development (R&D) is critical for raising our industrial competitiveness and for attracting higher value added investments into Singapore. We will therefore raise Government-funded R&D by nearly 30% to $368 million, which is slightly more than 0.3% of GDP. The focus of R&D spending will continue to be on economically-relevant R&D, which is driven by the National Science & Technology Board (NSTB) through an allocation of $298 million. Another $50 million will be provided for the Academic Research Fund to enable academic research to be carried out by various institutions under the Ministry of Education. As a step towards keeping doctors abreast of medical advances and to develop more cost-effective methods of medical care, medical research will be stepped up under the supervision of the newly set-up National Medical Research Council. A sum of $20 million will be made available for this purpose.

To promote our regionalisation drive, funds are allocated to the Economic Development Board (EDB) for venture capital funds to assist local SMEs to take advantage of regional opportunities. Funds will also be made available for EDB to make strategic investments and to assist local SMEs through various economic development schemes.