ANNUAL BUDGET STATEMENT

[Mr Speaker in the Chair]

Debate resumed.

Mr J. B. Jeyaretnam: Mr Speaker, Sir, may I echo what was said by the first speaker? I asked this in a Question and you disallowed it, but may I just say that, as he himself said, we are more than three months late in discussing this Budget Statement. We hope that we may have some explanation as to why we have had to wait till July to debate this Budget.

Having said that, Mr Speaker, Sir, if I may move on to the Budget. I do not wish to repeat what has been said by speakers before me, except perhaps to underscore some of the matters that have been said. As has been said, this Budget - what one has come to expect from this Government, and which I knew when I was in the House years ago - is long on generalities and very short on practical suggestions on what should be done for the economy of the country. It is very long on generalisations that we should do this, we should do that, we should be careful, but nothing is said about what the Government proposes to do.

The Minister says the outlook for 1997 is "cautiously optimistic". I wish he had gone on to elaborate a little bit further on what he meant by "cautiously optimistic". Others have said before me that many a Singaporean do not share the view that the economy is taking off again. In fact, the people that I have spoken to and, of course, I speak to the middle or the small businessmen, a lot of them are very pessimistic about the future for their business and the country, and a number of them think there will be a further slowdown, which has been already said by others.

In the face of all this, what is the Government planning to do even though it may be a small recession or a slowdown in the country's economy? The Minister says in his Budget Speech, and I quote him, just this phrase, "there is no choice but to stay internationally competitive". Elsewhere he says, "we must watch the overall cost of doing business in Singapore". Again elsewhere, he says, "labour costs in Singapore are high too". But what the Minister dismally fails to answer is whether the Government has any part in the efforts that are to be made to see that we remain competitive and that we are not priced out of the market for our goods and services. Many have spoken and I think it is public knowledge - it does not need repeating - that the cost of doing business in Singapore has risen and is rising. What has the Government got to say about this? Has the Government any proposals to see that not only the cost does not rise, but it can perhaps be reduced?

I think it was about two years ago after the PSA increased its handling charges or rates, sitting at a small restaurant I heard some people (they were expatriates who must have been in the importing or shipping business) talking that Singapore was becoming too expensive and that the PSA stood for "Please Stay Away from Singapore". The PSA was saying, "do not come in, we are going to charge you very high rates." It is not only the rates that are being charged to people doing business in Singapore, but it is also the fees and charges that are being made for services rendered by the Government. Something has been said about the fees and I think it was Mr Chiam who spoke on the very substantial increase in the fees and charges. Has the Government not got anything to say about this? Does it still propose to maintain the fees and charges at the present level? Or does it propose to try to reduce them so that the burden on people doing business is lightened even a little bit? So I think we should hear from the Minister what is the Government's contribution or what is the Government's part in helping Singapore to remain competitive? Or is it to be left to the businessmen, with the Government's exhortations, "Oh, you must be competitive. You must keep your prices down."? We have heard enough of that. What we want from the Government, to develop Singapore, is to set an example. The Minister has talked about the labour costs in Singapore and about the lack of skilled labour, expert workers in Singapore. And Mr Chiam has rightly pointed out the educational level of our workers. What does the Government plan to do about this?

Mr Speaker, Sir, it is no good preaching to the workers that they must improve themselves, they must acquire new skills, they must learn more to remain in their jobs. Has the Government considered at all running workers' classes at no cost to the workers, providing them free education, especially for workers who may not find it possible to meet the cost of education to better themselves?

As Mr Chiam has pointed out, a great proportion of our workers have not even got the basic education that is needed. Will the Government consider starting workers' classes for them to improve? But it is not just that, Mr Speaker, Sir. I was talking only yesterday to two Ministry of the Environment workers in the area where I am living, and they are grass-cutters and road sweepers. When I asked them, "How much are you paid?", they told me, "Well, Mr Jeyaretnam, at the end of the month we take home the princely sum of $600." "Oh," I said, "that's a lot, isn't it?" This is after payment of the CPF and other things. So I said, "What do you do then?" They said, "Well, the moment we leave here, we have got to run on to other jobs. We finish work at 2 o'clock or 2.30. Then we start another one at 3.00." And they go on till 10 in the night? So what time do they have to improve themselves when they have to work for 12-14 hours a day, just to keep themselves and their families going?

The Government collects huge sums in foreign worker levy. What is this foreign worker levy being put to use? Is it not possible for that to be set apart to improve the workers' skills and give them the basic education that is needed? The Minister says that they have recently cut the foreign worker levy for the manufacturing sector. But the question that arises, Mr Speaker, Sir, is if we do not have the skills in our workers, and we need the skills and the expertise brought in by foreign workers, then is it right that we should make the companies doing business pay and incur further costs by paying the levies? Is it not time to reconsider the whole question of foreign worker levy? I am not saying that it should be for all, but you have to try to come to some judgment as to how much, what is the need of foreign workers in Singapore's economy? And if that is so, then should it not be made easier for those who need them to bring them into Singapore?

If I may move on to the expenditure policy of this Government. No one will quarrel with the Government when it says it will exercise prudence as the cornerstone of its expenditure policy. And no one will quarrel with expenditure to improve the infrastructure and the economy of the country. But is it not time, Mr Speaker, Sir, that we should also make an attempt to see whether all the expenditure, not on the development or the infrastructure expenditure, but particularly the administrative expenditure, can be cut down now? It does not follow that because we are able to show budget surpluses year after year, running into billions of dollars, that we should be spending money when it could be put to better use. We have got to, first of all, have a scale of priorities in the expenditure of our monies. It is the people's monies. What merits the highest priority? Of course, education does. I see the new British Labour government has put education as number one in its top priority.

So I ask: is there a need to examine this question of cutting down on some of the administrative costs of governing us? We are after all, Mr Speaker, Sir, a nation built upon about 3 million people, smaller than many of the big cities. And we have, to govern us, 16 Ministers, three Senior Ministers of State, five Ministers of State, two Senior Parliamentary Secretaries and three Parliamentary Secretaries. Could we look into this question as to whether this is really necessary?

May I move into some posts. We have a Minister without portfolio. Could the people of Singapore be told what exactly is the Minister without portfolio being paid for? What is the work that he is doing that the Singapore taxpayers have been called upon to pay his salary amounting to almost a million dollars a year, without being told exactly what is it that he is doing for his salary? Then we have three Ministers in the Prime Minister's Office. We have, of course, the Prime Minister. Then we have the Senior Minister and one Deputy Prime Minister attached to the Prime Minister's Office. Could we be told exactly what is it that these Ministers are doing?

The Senior Minister, we read from time to time, is often overseas. And I have asked for the amount of money that has been spent on travels and I have been given some figures, and I may come back to it later in the Committee of Supply debate. But may we know exactly what the Senior Minister does? We know that he goes abroad, as I said, from time to time, preaching to the other countries about democracy not being viable or desirable for Asian societies which a departing governor describes as being fit for the birds.

And then we have got two Ministers in the Ministry of Foreign Affairs. Do we really need two Ministers in the Ministry of Foreign Affairs? I must not be taken to be cavilling, but it is not just the Ministers. I think I mentioned some years ago that a Japanese economist wrote that Singapore was a place of high salaries and low wages. We should look at the whole salary structure in Singapore, not only Ministers but of the top civil servants, the judges and the others, to see whether perhaps we are paying them too much. So I would ask that we do examine our expenditure or some attempt be made to examine the expenditure.

If I may move on, Mr Speaker, Sir. I told the Straits Times - a reporter rang me up four or five days ago, I do not often speak to this press, they know it, but he must have caught me in one of my generous moods and I responded. This is, as has been said, a budget that favours the big companies, the MNCs and the rich men in Singapore. It is not a budget for the ordinary working man. He does not see any joy in this budget. The Minister says, "We had 7% growth in 1996. It is good and is due in no small part to the hard work and enterprise of our people." It is enterprise of our people, the entire nation, I hope, not just a select few. And then he goes on to say, "I have decided to reward their effort." Now, how does this Santa Claus of our nation reward the people?

He says that he proposes to give a rebate of 10% in the income tax paid by our people. But he goes on to say that 70% of our people do not pay income tax. So the rebate does not, on his own admission, do anything for this 70%. How could they say? It is not because of the GST.

Mr Speaker, Sir, in the Labour Force Survey of 1996, you will find that 62.5% of our employees earned below $2,000 per month. I have obtained from the Income Tax Department a table on the income tax paid, and I found that if you had a chargeable income of $14,603, then you do not pay any income tax. That is why they are not paying any income tax because they are too poor. So who is going to benefit by this 10% rebate in the income tax? Again, from the Income Tax Department, in an appendix setting out the assessment made up to 31st March 1996, I find that 385 residents in Singapore, each had an assessable income of more than $1 million a year. They would each get a rebate, as promised by the Minister, on an average, of $56,913 each. Not everyone is going to get that. It is an average. You divide the amount of the whole rebate for 385 and you get that figure. And he says that the 10% rebate will cost the nation $250 million. So who is he rewarding? He is rewarding, without any question, Mr Speaker, Sir, the wealthy.

Mr Speaker: Order. Mr Jeyaretnam, your time is up. Mr Zainul Abidin.

Mr Zainul Abidin Rasheed (Cheng San): Mr Speaker, Sir, I rise in support of the motion in the name of the Minister for Finance.

Before that, I must say that it is quite a task having to speak after Mr Jeyaretnam. It can be quite disorienting, in terms of the mind, and sometimes it makes me wonder whether we are sitting in the same Parliament, or in the same Singapore, for that matter. Here, we have nine other speakers responding to the Minister for Finance's Budget Statement, asking questions, suggesting improvements, refinements and yet we are told that the Budget Statement is nothing but long on generalities and short on what the Government is expected to do.

Previously, when it came to the President's Address, the same tack was taken that the Address was nothing in preparing the people for the 21st century and was thrown out. But yet we are now back facing the same kind of tenor, same kind of questioning on things which had been asked before, which should have been answered before, but yet we have to listen to the same tune all over again.

Mr Speaker, Sir, before I move on to my comments proper, I would just like to comment on one aspect of Mr Jeyaretnam's comment and that was on PSA. Since I am also on the PSA Board and representing the Singapore Port Workers' Union, I would like to reassure Mr Jeyaretnam and Members of the House that, in fact, PSA is very prepared for the challenges and competition that are coming our way and that is the reason why PSA is corporatising. It is precisely to meet that kind of challenge and I am confident that we will meet the challenge squarely.

Mr Speaker, Sir, when I was last in Hong Kong in May, during the drive from the airport to the hotel, I could not help but notice the sorry state of affairs of many of the apartment buildings that line the route. They were dirty and dilapidated.

A thought flashed my mind. How lucky we Singaporeans are. Not only is our policy on maintenance of buildings in place but we are fortunate to have the kind of reserves and budget surpluses to allow the Government to implement our IUP and MUP Programmes.

The point I would like to make here, Sir, is that, thanks to the Government's budget policy, Singapore has had a healthy budget surplus for some time now. According to the World Competitiveness Yearbook of 1997, Singapore runs the world's highest budget surplus in 1995, both in terms of percentage of GDP and in dollar terms. It registered 15.5% of the GDP in 1995 at US$9.1 billion. In fact, it has had a surplus for many years. And this trend is likely to continue in the years ahead.

I agree with the Hon. Minister for Finance, Dr Richard Hu, that, and I quote:

"we have a robust fiscal position and a sound economic framework . and that the Government has managed the economy prudently, accumulating those surpluses".

While some people may have wondered if too much money was being set aside for a rainy day, I feel that there is no harm, when the rain could turn into a monsoon, even though it seems unlikely in the near future. There are others who will say that the growing surpluses are because of too much taxes. That is surely worthy of review and worthwhile checking upon for we certainly would not want our Singaporeans to feel that they are over-taxed. Perhaps, the Hon. Minister for Finance could best answer that, for I am sure he would be the first to remedy that situation if he thought the consequences would be detrimental to Singapore's economic growth.

It is worth reminding ourselves that although this proposed Budget comes with the lowest surplus since 1992, it has not stopped the Government from giving out the goodies to the people. After all, there is the Government's promise to share and plough back part of the surpluses to the people.

My question is: what is the Government's policy, philosophy if you like, behind the question of what constitutes a fair surplus? When does the surplus get overdone' and become counterproductive? What are the possible minefields? On the other hand, what is the Government's guiding principle, in terms of sharing the manna' with the people?

For this Budget proposal, is it right to say that nearly $1 billion or about a quarter of the surplus will be given out in various forms, mostly in terms of income tax rebates for all and assistance for the needy and the lower-middle income earners? While it is generous to many Singaporeans, it is inadequate to others, including those from the private sector who were hoping for more incentives to boost certain lagging sectors or to make them more competitive. Perhaps, the Hon. Minister would like to explain why he could not do more for the business sector and whether his hands were temporarily tied while awaiting the outcome of the Economic Committee on Competitiveness' recommendations. Admittedly, much has been done for the financial sector but what about the industrial sector where the SMEs were reported to be grasping for breath while waiting for some goodies.

Many will agree with Dr Hu that "the aim is not to seek palliatives for current problems" nor are they in a terminal stage, seeking advance monetary directives. But was there not room for some booster injections in the interim?

For me, in the spirit of Racial Harmony Day today, I wonder whether the Government could not do more for `social therapy' to help foster a more cohesive Singapore. I know a substantial budget has been set aside for the new and old CDCs, the PA and programmes such as Sports for the People, but certainly more could be done for the self-help groups in their efforts at community upliftment, especially those who have proven to be a boon to society.

Allow me to end here, Sir, on a harmonious note by thanking you and other Members of the House for their patience, tolerance and understanding.

Mr S. Iswaran (West Coast): Thank you, Mr Speaker, Sir, for allowing me to join in this debate.

Sir, the Budget for 1997/98 bears the hallmarks of this Government's policy on financial management - prudence, equity and incentives for wealth creation.

On the point of prudence, I was in fact about to commend the Government for the way it has been able to keep its operating expenditure below 10% of GDP but I was somewhat perplexed by the point made by the NCMP. I think if he were to draw a comparison with any mature economy and most of our regional economies, he will find that 10% compares most favourably. The forecast for 1997/98 is 9.6% of GDP which is the same for the previous year and allowing for some extraordinary items. I think that is no mean feat in an era when Government agencies are under increasing pressure to provide a wider range of services at ever higher quality. So I would like to commend the Government on its prudence in being able to restrain expenditure. Indeed such notable frugality on the expenditure side compels one to turn to the usual suspects to explain why we have a "modest" budget surplus of $4.8 billion.

The other point the NCMP makes is that there is not much joy in this Budget for the average Singaporean. I suspect this must be due to some selective reading on his part, because I do have here some numbers which I thought were a good sign in this regard. Government has been fairly generous in the redistribution of income amongst Singaporeans in this Budget. A sum of $420 million has been set aside for the S&C and rental rebates, utility and S&C grants and the Medisave Top-Up schemes. In addition, $500 million will be given to the Endowment Fund for Edusave and $100 million for Medifund. These are not insignificant amounts and I do believe that they will bring joy to the hearts of many average Singaporeans.

As regards the additional reliefs for parents, wife, children and the 10% rebate, Mr Jeyaretnam dismisses them as payments to the rich or the well-off. I disagree with him. I look at them as incentives to the wealth creators in our economy. Unless the top 25% are rewarded and given incentives to perform, we will not have the wherewithal to do all the other socially desirable programmes that Mr Jeyaretnam and others desire.

Sir, on incentives for companies, the tax changes for companies are notable for their focus in terms of sectors and scale. Clearly, the Minister is desirous to focus on a few key sectors such as finance, logistics and satellite operations for fiscal incentives. Two questions beg to be asked.

The first, which has been repeated several times, is what about the manufacturing sector which accounts for one-quarter of our GDP, the small and medium-sized enterprises who are deemed to be our indigenous engines of growth and the ailing retail sector? The Budget is conspicuous by its silence on this front. There is, however, a hint - and I assume that it is a hint - from the Minister's Statement that these and other sectors have not been forgotten. In his Statement, he mentioned the establishment of an Economic Committee to study the important issue of Singapore's long term competitiveness. In particular, this Committee is charged with identifying long term solutions and strategies to address the underlying challenges that Singapore has to overcome. Perhaps March 1998 or sooner may bring forth more good news for these groups.

The second question pertains to the qualifying criteria which appear to be rather stringent. A case in point is the tax incentive for the fund management industry. To qualify, a fund manager must be managing at least the equivalent of S$10 billion of non-resident funds in Singapore, employ at least seven professional fund managers and analysts, and have a track record of three years operating in Singapore under the tax exemption scheme for fund management. I would appreciate it if the Minister could let us know how many fund managers based on current data would qualify for such incentives.

Sir, I would now like to turn to the social policy embodied in the Budget Statement. It is reassuring to note from the Minister's Statement that the Government continues to accord high priority to the fostering of a cohesive, resilient, caring and gracious society. This commitment is backed by the allocation of the largest share, 38%, of the overall budget to social and community services. This group of services accounts for 39% of operating expenditure and 41% of development expenditure for FY 97/98. The fiscal priority accorded to Community Development, Health, Environment and National Development is fitting, given that these investments in our people and their living environment are likely to yield the most durable returns for our country.

I would like to focus, in particular, on the resource allocation to the Government's family and support services programme. This programme is responsible for the provision of services for child welfare, child care, senior citizens, the disabled and destitute, family welfare and a host of other social services. Increasingly, such services are being rendered through community organisations including the Community Development Councils, self-help groups, Citizens' Consultative Committees and voluntary welfare organisations.

I was particularly pleased that the allocation for this programme will increase by nearly 24%, from $138 million in FY 96/97 to $172 million in FY 97/98. The absolute figure may be modest but the rate of increase is heartening.

Sir, even as we allocate more financial resources to these essential services, I would urge the Government to review the basis on which financial support is given to the community organisations that deliver the services. Today, the Government policy is to finance 90% of approved capital expenditure and 50% of recurrent expenditure. This approach is based on the principle of co-payment to ensure that the recipients of such support also bear a share of the costs.

Sir, in principle, I have no objections to this approach. However, I do believe that it needs moderation in practice, because it imposes a considerable, at times onerous, financial burden on these community groups. Many a volunteer has remarked to me that if he or she is not busy selling donation draw tickets, he or she is busy buying them or participating in a walk-a-jog. It is the perennial problem of too much charity chasing a finite pool of funds.

This problem will be exacerbated as Government, true to its motto of "Many Helping Hands", devolves more services to community organisations. For example, CDCs will be responsible for the Rent and Utilities Assistance Scheme and Financial Assistance Scheme, formerly administered by the Ministry of Community Development. The community organisations have also increasingly taken on the responsibility of running Family Service Centres, Student Service Centres and the like. Their recurrent expenditure will inevitably rise and with it their fund raising needs. It also raises invidious questions as to whether through such devolution, Government is also seeking to divest itself of the fiduciary responsibility for such services.

I would therefore urge the Government to adopt a different basis for extending financial support to community organisations. Government could first identify a cluster of core services or programmes that it deems to be an essential part of the national social development programme. Such services, and the organisations rendering them, should then be given financial assistance invoking the principle of co-effort instead of co-payment. There would be an implicit contract whereby Government undertakes to absorb the bulk of the financial cost of providing such services, say, up to 90% of recurrent cost, and the community organisations in turn undertake to mobilise the volunteer manpower and meet certain qualitative and quantitative standards spelt out by the Ministry. In other words, volunteers' sweat equity will be matched by the Government's financial equity. Indeed, Government has already recognised this need in extending a $3/$4 for one matching grant for funds raised by the CDCs. It is a small step to extend it from here to other community organisations. Such an approach, I believe, will certainly ensure that our volunteers channel their energies into their value-adding component of their activities.

Finally, Sir, a word on estate duty. It has been said that the only two things that are certain in life are death and taxes. Estate duty has the dubious distinction of merging these two seemingly immutable facts of life.

Notwithstanding the revisions in recent times, I have been asked by several Singaporeans why the need to continue with this fiscal device. There seems to be good reasons behind their question. Estate duty raised about $69 million in the last financial year and is projected to raise $70 million in FY 97/98. These amounts, whilst not insignificant, are dwarfed by other sources of revenue. Estate duty accounts for less than one half of one percent of total revenue. Its value as a revenue-raising or income-redistributing fiscal device is therefore limited.

On the other hand, the duty does distort inter-generational transfers of wealth by creating perverse incentives for high net worth individuals to undertake estate planning. Singapore is also one of a few countries that continue the practice. Neighbouring countries do not have estate duties, eg, Australia, Malaysia, etc. This disparity may take the shine off our attractiveness as a location for wealth and distort the flow of capital into Singapore. If one takes costs of these distortions and the costs of collection and compliance into account, one can reasonably question the economic efficiency of the estate duty and its place in Singapore's fiscal policy. I would therefore be grateful if the Minister could give us an elaboration.

Mr Kenneth Chen Koon Lap (Hong Kah): Mr Speaker, Sir, this year's Budget Statement did not generate too much excitement probably because it did not match last year's very generous delivery. But against the backdrop of an economic downturn, I would certainly view this year's Budget Statement as positively optimistic.

The NCMP commented that the Government is handing out crumbs. Either he has not taken time to go through the whole Budget in detail or he is trying to mislead our Singaporeans. Because apart from the income tax and S&C and rental rebates, which have been highlighted by the Minister, the ongoing schemes such as Edusave bursaries and scholarships, IUP and MUP to HDB estates, Medisave top-up scheme and share ownership scheme will cost the Government billions of dollars. And these schemes benefit mostly the majority of our citizens, and not the so-called privileged group. To say that these are crumbs is simply absurd.

We must congratulate our Minister for Finance for delivering a very positive tax reform for the financial sector. It is farsighted and, in time, would definitely yield good results. The business community is particularly disappointed because the expected cut in corporate tax did not come about. But the challenges faced by the manufacturers, investors or entrepreneurs are much more daunting and a mere reduction in corporate tax by even one or two per cent cannot be effective in improving our competitiveness.

As Singapore is being classified as a developed nation and has performed well in economic growth in the past years, more and more of our neighbouring countries are emulating our success formula. China was first to open her doors for foreign investments. Other countries in South East Asia and in the Indian sub-continent have followed suit. Like Singapore, they have become very aggressive in attracting foreign investments, offering very attractive packages. The advantages Singapore gained have slowly been diminishing and as we become more developed, the cost of doing business is also becoming much higher. In all probability, double digit growth may be a thing of the past.

The costs of labour, rental and other utilities have shot up tremendously, and our competitors are fully exploiting their competitive edge in terms of abundant labour and natural resources. It is fortunate that we have built up such good economic fundamentals. We must always emphasise the importance of training and quality control by constantly upgrading the skills and productivity of our labour force. These measures have generally been successful. This allows us to retain our competitive edge over the others up to now. In addition to that, it is our sheer will to compete and to succeed.

However, the gap of our competitive edge can be expected to be narrowed as time goes on, and we have to find new innovative ways to stay ahead of our competitors, otherwise we will be left behind. Already our star performers in information technology, telecommunications, airport, port and petrochemical have been under great pressure from our competitors, especially from China and Malaysia. The Committee set up to look into business competitiveness is an appropriate measure our Government has undertaken to help the manufacturing and business sectors. I am confident that their findings and recommendations will go a long way to help them to become more competitive. I hope the Government will respond positively to their recommendations and take appropriate measures to help the business community to increase their competitiveness against our neighbouring countries.

The Government's effort in building up our second wing economy in order to sustain our continuous economic growth is slowly showing positive results. The rationale of having this second wing economy is well recognised. The Government has taken the lead in opening markets in and around the region by making the necessary contacts to pave the way for Singaporean investors, manufacturers and entrepreneurs to venture into these areas. Projects such as the Suzhou and Bangalore Industrial Parks as well as numerous medium and small ones in other parts of China and Vietnam are some such examples. Many of these ventures are spearheaded by the Government-linked companies. The advantages of Government-linked companies are obvious with their strong financial backing and abundance of human resources and networking. The Government also encourages the private entrepreneurs to move into these places and explore all investment possibilities. It is important that the Government-linked companies and the private sector should work as one unit in order to maximise their combined efforts. Each sector must recognise its inherent strengths and weaknesses. While the Government provides the opening and the official connections, the Government-linked companies and the private sector can then concentrate on the implementation. But we must recognise the special characteristics in dealing with countries like China, Southeast Asia or the Indian sub-continent. One such example is that contact and working between official channels will invariably encounter a lot of red tape and bureaucracy and sometimes take a great deal of time as well as energy to come to a final agreement. Very often, a highly feasible project would become a non-starter.

The private sector has the advantage of being more flexible and able to fully exploit the personal relationship - quanxi - to cut through this red tape and bureaucracy and therefore achieve better and faster results. The private sector will also be able to take more calculated risks. The worst that can happen is for our Government-linked companies and the private sector to harbour distrust for each other and view each other as competitors. The existence of such a negative mindset should be eradicated. I would therefore like to see better coordination and cooperation between the Government-linked companies and the private sector, especially in overseas ventures. They should share resources, information, and cooperate, where possible, and project themselves as a single unit. It has to be acknowledged that if the private sector's venture is successful, it will bring as much benefit to Singapore as the successful Government-linked company's venture. Because all the resources and the gains will be brought back to Singapore to strengthen our national economy.

We have to always remember to turn our weakness into strengths. Our smallness can, therefore, be a plus factor as it lets us work as a more compact unit and move a lot quicker than others. But this also means we must be united. The Government-linked companies, the private sector and the Government should all work in unison.

I support the motion.

Mr Inderjit Singh (Ang Mo Kio): Mr Speaker, Sir, thank you for allowing me to join in the debate on the Budget proposed by the Minister for Finance. Given that this is an interim or half-time Budget, the Minister could have made it a bit more all rounded had he thought about and given concessions so that the issue of the cost of doing business in Singapore could have been addressed. Although we may hear of more comprehensive measures next year, many businesses really need help right now and for some it could have made the difference between surviving or succumbing to the pressures faced.

Summary of Budget

In summary, the Budget announced by the Minister last week provided good incentives for the financial sector, though it will benefit just a few existing businesses in Singapore. The added incentives for the logistics operations and the siting of satellite operations here also indicate the direction being set by the Government. For all these sectors, I can understand why the impact of the incentives will be felt only by a few big players in their respective fields, and I support the thinking behind it because it is very key that we are able to attract a few of the big names who are the leaders in their fields to locate into Singapore. These big players will form a vital base in Singapore that will stimulate supporting industries. They will bring in the expertise and technology that we lack and we can learn from them. With the support of a group of big international players based in Singapore, we can become an important regional centre for the selected sectors. I believe that the incentives also reflect the growing importance of these sectors as the future components of the overall Singapore economy.

I feel that the Minister for Finance has overlooked two very important areas in our economy. These are the manufacturing sector and the Small and Medium Enterprises (SMEs). Given that manufacturing contributes to about 25% of the total GDP, I would have thought that the Minister could have provided some help, especially during this period where the manufacturing sector is going through a rough period. On the other hand, the SMEs form a very important part of our economy, employing a relatively large percentage of our workforce and contribute a significant amount to our GDP. They too have been neglected in this Budget.

Manufacturing sector

Sir, the manufacturing sector has been experiencing sluggish growth and even decline in certain quarters for the last six quarters. Although the electronics and semiconductor industries have been through some cyclical low periods, one of the key issues facing Singapore is its competitiveness as a manufacturing base. This is especially critical since foreign investors now have wide ranging choices as the capabilities and attractiveness of other Asian countries improve. There is a particular threat from our close neighbours who now have the people and infrastructure to manufacture as well as us, at attractive costs, quality and cycle times. I was therefore anticipating some help from the Government to address such competitiveness issues in the two areas of concerns for the manufacturing sector, namely, cost of land and labour. Land cost

As the Minister rightly pointed out, the costs of land in Singapore, be it residential, commercial or industrial properties, have risen artificially high in such a short span of the past five years. The Government has failed to control asset price inflation, unlike its good job in controlling consumer price inflation in Singapore. The sudden and steep increases in industrial and commercial property prices have caught many businesses too suddenly and they have not been able to restructure or adjust their businesses to become profitable again fast enough. Multinationals may be encouraged to accelerate their relocation to lower cost countries, if the cost of land overshadows other attractive features of the Singapore economy, like the highly skilled and productive workers, good infrastructure support and incentives for companies to invest here.

Areas for Government to focus on

Sir, given all the problems related to the asset price inflation, I was therefore expecting the Minister for Finance to announce measures that will control any future steep increases in property prices. Although the measures introduced in May 1996 were useful to reduce widespread speculation in the property market, I feel that more needs to be done so that we do not go the way that Japan went some years ago. Singapore being small cannot afford to see the bubble bursting all of a sudden. We therefore need many more measures to curb any future steep increases in property prices.

Improve efficiency of land use

Some of the suggestions that I have are, first of all, to improve the efficiency of land use. One of the areas, especially in the industrial land use, is that we need to actively look for opportunities where industrial land can be more efficiently used so that the overall cost can be brought down. We need to allow some flexibility as to how the land needs to be developed and consider better plot ratios. Also, there is a possibility of allowing multiple uses for a single piece of land. Control of foreign ownership

Although we have some controls in this area, I believe more can be done and one area we need to seriously look at is further restricting foreigners from purchasing private properties in Singapore. If we look around the world, there are many countries with good measures, even countries like Malaysia and Australia, which have abundant land, have more stringent control on foreign ownership of land and property in their countries than we have here.

Allow attractive subsidies for new businesses

To bring in investment dollars, the Government needs to consider allowing a wider range of businesses which can enjoy the subsidies of land and building rentals. This should be especially encouraged for companies pumping in large amounts of capital dollars in Singapore. I understand we have such a system for a selected group of industries like wafer fabs, but I feel we need to allow more businesses to qualify.

Labour availability and cost

(a) Availability of Workers

Another area which really impacts the efficiency of the manufacturing sector is the availability of the right type of workers with the appropriate skills. We need both skilled as well as semi-skilled workers. Because the manufacturing sector cannot attract enough Singaporeans, there is a need to further open up new sources of workers, especially from the ASEAN countries.

(b) Productivity and training of workers

In order to remain attractive, we need to ensure the productivity of our workers continues to improve so that we can justify the wage increases. To achieve this, companies need to invest a lot more than what they have been investing in the training of our workers, especially the older workers. However, if they do this, it adds to the total labour cost. I therefore hope the Government will be able to do a lot more in providing attractive incentives that will encourage employers to invest in training and productivity improvement programmes for their workers.

(c) Strength of the Singapore dollar

Sir, even if our wage increases have been in line with productivity improvements, if the Singapore dollar continues to strengthen against foreign currencies, then in their home currency terms, for the multinationals operating in Singapore, the wage cost and other related social cost of doing businesses in Singapore go up at a much higher rate than real productivity improvements. We therefore cannot just look at wage increases in Singapore dollar terms, but also in foreign currency terms. We may not be able to sustain competitiveness in the long term if our dollar continues to strengthen too fast, as it happened in the past few years. The recent "devaluation" of the other ASEAN currencies will create added pressures for us. I hope the Minister for Finance will consider proactive measures that will moderate any steep changes in the exchange rates in the future.

Regionalisation and Small and Medium Enterprises

We have to continue to encourage regionalisation among our local companies. However, we must be realistic that many of our local SMEs are not in a position to do it on their own and to take full advantage of Singapore's regionalisation effort nor fully tap the incentives given by the Government. Although there are a number of incentives targeted for the SMEs, they have not been able to take full advantage for various reasons, including a lack of understanding of what is available and how to apply. I therefore feel that we may have to set up a body or organisation specialising in helping the SMEs, just like the various specialised departments in the Economic Development Board that help multinationals do business in Singapore. The SMEs need special help to restructure their businesses until they can ensure long term competitiveness for themselves. We must remember that in order to regionalise, we still need a home base capable of developing the skills and technology to fan out to the other sites in the region that we manage. We therefore cannot neglect the competitiveness of our operations and companies in Singapore.

Summary of competitiveness

I feel that we may face a different situation from the one we faced in the mid-1980s where Singapore was in a recession during the bottom of the electronics and the semiconductor cycle. At that time the world was also in a similar situation, especially the USA, while this time round it is not. At that time, our neighbours were not on par with us and they had not sufficiently developed their infrastructure to become alternate investment choices for foreign investors for certain types of high technology and high value-added investments. Now, our neighbours have caught up and are providing strong competition and they can take on the same investments that we are targeting. I therefore feel that we may take a much longer time to get out of a down cycle from now on, should we go into a slump in the manufacturing sector.

I also hope that the Government will, to a larger extent, allow market forces to rule the business environment and release more control that they have had up to now. Of course, this cannot happen overnight as we have been used to our current system for a long time. There are many examples where we could have done better had we allowed market forces to decide on issues with less Government control.

One question that many businessmen and industrialists have is whether we can live with a slightly lower surplus. Do we really know what is the optimal level of surplus that is healthy for our economy in the future, especially as we approach developed status? Can we actually release some of our funds so that our local businesses and companies can use these funds to restructure their businesses to ensure that they will survive in the face of tough competition ahead?

In conclusion, Sir, the Budget reflects the long term plans of the Government. It also reflects the PAP Government's commitment to continue to share the success of the country with Singaporeans. This is reflected by the huge sums of money set aside in this budget for the HDB upgrading programme, the Medisave Top-up Scheme, increased funds for Medifund and Edusave. Above all, the Government has not forgotten those who will be impacted by the utility rates and other increases, by giving them utility, S&C and rental rebates. Hence, I conclude that, just for a few areas, the Budget announced is almost an all rounded one. It is a pity we fall short of making it one that is all rounded.

Mr Lim Swee Say (Tanjong Pagar): Mr Speaker, Sir, I rise to support the motion in the name of the Minister for Finance.

Mr Speaker, Sir, once there was a man, he was seen searching for something under a lamp post. After a while, he could not find what he was looking for. Another person came along and asked him, "What are you looking for?" He said, "I have lost my key. I am looking for my key." And the person said, "Where did you lose this key? Is it here?" He said, "No. Over there." The person then asked, "Why don't you look for your key over there then? Why search over here?" He said, "Because it is too dark over here. It is brighter here than there. Easier to search." Obviously, he could not find his key.

Mr Speaker, Sir, when the NCMP said that he saw nothing in the Budget to enhance the competitiveness of the Singapore economy, my conclusion is that maybe he was looking for the key at the wrong place.

My view on competitiveness is very simple. If we look at competitiveness as a function of cost alone, obviously to enhance our competitiveness is to lower the cost of everything in Singapore - make the land cheaper, make the office rental cheaper; better still, get the workers to take a pay cut. Then, in that way, cost of doing business in Singapore will decline overnight, businessmen will turn healthy profit overnight. But if we adopt that approach, then we are thinking of a win-lose situation. Win on one side on profitability, lose on the other side for the workers. Obviously, that cannot be the case because at the end of the day, what is economic growth for? It is not to help businessmen make more profit but, at the end of the day, to make sure that every Singaporean can live a better life. Therefore, Mr Speaker, Sir, my view of competitiveness is that competitiveness is a function of not just cost, but cost and capability. If we can upgrade our capability not just in the short term but over the long term, then over time workers can get higher salary, businessmen can still make more profit. That is what I meant by "win-win".

If I may quote an example. Last month I was in Europe, in Switzerland. I visited a company known as ESEC. This company is in the business of producing back-end semi-conductor equipment and it is now one of the top three in the world. Its business is growing very fast, at 50%, 70%, every year, even during the slowdown of the global economic sector. We asked them, "How big is your market in Switzerland?" They said, "0". Everything the company produces is exported to the rest of the world, including Asia, Europe, USA, but nothing in Switzerland. How then can this company survive with no domestic market, with a high cost of doing business in Switzerland, and yet able to be profitable, able to grow?

The answer is very simple. They strengthen their comparative advantages. So, over the years, they have developed their capabilities in the areas of R&D, innovation, marketing and final assembly and testing. Eighty per cent of the manufacturing is out-sourced from the suppliers from lower cost locations. In this company, all the managers, the marketeers, the technicians, the skilled production workers, everyone is well paid. And yet at the same time, the company is profitable, and the business is growing. I think here is an example of the kind of "win-win", the kind of competitiveness we should be talking about.

Having said this, Sir, I would like to convey this message to the Minister for Finance that, in my view, Budget 1997 is a good budget. I said Budget 1997 is a good budget because I feel that it actually addressed the competitiveness of Singapore in a hard-headed way, and not taking a soft approach. All the new policies that were introduced for the financial sector, as well as the enhanced resource allocation of budget for the industrial and business sectors, like in the areas of R&D innovation, cluster development and upgrading of the local enterprises and so on, will go a long way to make sure that Singapore will continue to strengthen her position as a global hub in the Asia-Pacific in the 21st century.

In that sense, Budget 1997 has been a pro-economic growth budget. At the same time, Budget 1997 is also a pro-worker budget. Because of the slower economic growth this year, workers are asked to accept moderated wage increase. Many of them are concerned that they have to live with a lower pay increase but higher transportation cost and higher water tariffs. They were all looking for some reliefs from Budget 1997, and they were not disappointed. I have consulted many of my grassroots leaders in my constituency as well as the unionists in the NTUC. Many of them have responded very positively.

So, all in all, I would like to commend the Minister for giving Singaporeans such a pro-economic growth Budget as well as a pro-worker Budget.

Mr Speaker, Sir, please allow me now to go on to offer some suggestions on how I feel future budgets can address some of the issues that will further position ourselves for future competition.

I feel that the budget in the future should, firstly, address the pricing policy over the long term to make sure that the limited economic resources in Singapore can be put to better use, in particular in the areas of land and water. In the case of water, I feel that the recycling of water in the industry today is still very limited. Obviously, from the industry's point of view, it does not make sense for them to put in place all these expensive recycling equipment to save water, given the relatively lower price of water. Obviously, increasing the water charges is not the solution, because they are already paying more, and to charge them more means that it will reduce our cost competitiveness. But I think one approach is to encourage the industry to do more in the area of water recycling, bearing in mind that the opportunity cost of not recycling water has gone up by eight times with the high cost of desalination.

Another example is in the area of industrial land. Industrial land in Singapore is limited. It is expensive and yet at the same time, if we drive around Singapore, we see many factories in Singapore are still low-rise, only one-storey or two-storeys. Why is that so? Obviously, developers will give you many reasons. Firstly, some factories cannot go higher up because it is very process intensive. But in some cases, they will claim that it is because of logistics consideration, very cumbersome operations, and so on. But the bottomline is this. The way we charge differential premium and development charges today has to a certain extent also discouraged the intensification of industrial land. I hope that in future pricing policy, we can bear this in mind.

The second area where I think we really have to pay more attention is with regard to the upgrading of the capabilities of the Singapore workforce. We have to make sure that we will continue to have one of the best workforce in the world in order to bring us forward into the future. Here, I recall what Deputy Prime Minister BG Lee mentioned, that Singapore has the potential to grow at 7% a year over the medium term. But to realise this 7% growth potential, we have to expand our workforce by 3% and achieve 4% growth in productivity. So three plus four gives us 7% potential. Therefore, I feel that our Budget should really concentrate on these two targets of how we can expand our workforce by 3% and our productivity by 4%, so that we can fully realise our potential.

Firstly, in the area of expanding the workforce. Obviously we can expand the workforce by at least three ways. First is to encourage more Singaporeans to have more children; second is to bring in more foreign workers; third is to bring more Singaporeans who have left the workforce back to the workforce. On the first approach, in fact we are already encouraging Singaporeans to have more babies. If you look at the population growth, it has gone up from 1.3% in 1980 to 1.7% in 1990, to 1.9% last year, and most probably stabilises at 2% a year. That is probably as far as we can go.

On the second approach of bringing in more foreign workers, again, we are already doing so. According to the Department of Statistics, there are today 568,000 foreigners living in Singapore. Of course, not all of them are foreign workers. This number includes the foreign students and dependants and so on. But the point I would like to highlight is that one in six persons in our society today and one in five workers in our economy today is already a foreigner. So, while we should continue to bring in more foreign talents and foreign workers to supplement and complement the shortage of workers in Singapore, I think we must recognise that there is a limit to which we can do this because of the social, political and economic implications, if we are overly dependent on the foreign workers.

Therefore, a more desirable and sustainable approach is really to expand our workforce by bringing back Singaporeans, Permanent Residents (PRs) who, for whatever reasons, have left the workforce. According to the Department of Statistics, the labour force participation rate in Singapore today is 64.6%. Given our small population, this is actually a very low rate, compared to, say, 67% in USA. One of the reasons why the labour force participation rate in Singapore is low is because among the female Singaporeans and PRs, only 51.5% participated in the workforce. For women aged between 40 and 49, our participation rate is only 52% compared to 71% in Japan, 76% in USA, 79% in UK. And for those aged 50 and above, our participation rate is only 41%. So one of the reasons could be that many of the Singaporean women left the workforce to look after their children when they are young, but did not re-enter the workforce. I feel that if we can find ways to bring them back, we can increase the workforce by maybe 30,000 to 50,000 if we can increase the workforce participation rate comparable to that of other developed economies.

Likewise, the group of older Singaporeans who are in their 50s and 60s can also be an additional source of workforce. Again the number is quite big and I will not go into it. But the bottomline is that if we increase the participation rate by 10% to 15%, again, we can increase the workforce by 15,000 to 25,000. Altogether, these two sources of supply can contribute 50,000-75,000 more workers in the near term. In fact, over the long term, the number is likely to grow even bigger because of the aging population in Singapore. The Ministry of Labour, the PSD, the SNEF and the NTUC have already started doing this. They are trying to bring the housewives and the retirees back to the workforce. So far, the response has been positive. More than 4,000 workers have already signed up. But the success rate in terms of matching them to jobs is still fairly low, at about 20%.

My point therefore is that maybe the Government should consider giving this programme a stronger push through some incentives. For example, the Government can help to defray the cost of job design, or to introduce some new measures, for example, for companies which want to employ more foreign workers, one of the conditions attached is for them to employ some of these housewives and retirees, so that on the one hand, while we continue to bring in foreign workers to supplement the shortage of workers in Singapore, at the same time, we make sure that we maximise the participation of Singaporeans and PRs in our workforce.

The second issue is even more important. This is regarding the employability of our mature and lower educated workers. Mr Speaker, Sir, last month I visited three countries in Europe together with my fellow unionists. We went to Europe to study the unemployment situation in Switzerland, France and Germany. 18 million workers are now jobless in Europe. In Switzerland, unemployment today is 5.3%; in France, 12.6%; Germany, 11.1%. Some of these workers are out of job because the economy is going through a bad patch and as a result, workers are out of job. But this kind of unemployment, known as a cyclical unemployment, is nothing of great concern to these countries because in the near future, when the economy moves again, I think the workers are likely to be able to go back to the job market. But what is of greater concern to these countries is that the majority of the workers are out of job not because the economy is going through a bad patch but because there are structural weaknesses in the economy.

In the case of Switzerland, for example, 3% of the unemployment are structural unemployment. In the case of France, it is about 9.7%; in the case of Germany, it is about 8.8%, which means 70% or so of the unemployed in Europe today are due to structural unemployment. And the scary thing about structural unemployment is that it is due to a mis-match between cost and capability. So to solve structural unemployment, either cost must come down or capability must move up, or preferably both. But in reality, cost cannot come down overnight because of a rigid labour market and high social contribution. At the same time workers cannot acquire new skills overnight. As a result of this, European countries have accepted that they will have to live with structural unemployment at least in the near term. Therefore, unemployment in Europe is not likely to decline very rapidly in the near future.

Mr Speaker, Sir, judging from the experience of European countries today, we recognise that we must never take full employment in Singapore for granted. The point about the need to upgrade the skills of workers has been discussed by various Members here. Here, I would like to point out that in this world, there are many willing people. Some are willing to work, whereas some are willing to let other people do the work, whereas they only do all the talking.

Mr Speaker, Sir, in the case of labour MPs present in this House, we are very willing people. We see the problem of structural unemployment, of employability, and we take action to solve the problem. But earlier I heard Mr Chiam See Tong and Mr J.B. Jeyaretnam say that in Singapore, the Government is not concerned at all - of course he did not say that the labour movement was not concerned at all - about this problem of under-educated workers. This cannot be the case.

I would like to share some statistics to show that the labour movement and the Government have been working on this issue not in the last one year, or last three years, but, in fact, we have been working on this problem for the last 10-20 years. For example, in 1983, the Government introduced the BEST programme. In 1987, we introduced the WISE programme. And the union movement has worked together with the Government to make sure that the BEST and WISE programmes reach out to those workers who are under-educated. As of now, after 14 years of implementation, 212,000 workers in Singapore have gone through the BEST programme. Another 75,000 workers have participated in the WISE programme. So from these numbers, you can see that, in fact, the Government and the labour movement have been taking this issue of training of workers very seriously for the last 20 years.

On top of that, the Skills Development Fund (SDF) has been supporting and encouraging training in the economy. Last year, I was told that SDF had created one training place for every three workers which means that one out of three workers last year took part in training. On top of that, the total expenditure in training last year stood at about 3.6% of the payroll, one of the highest in the world. In fact, our long-term target is 4%. We are well on our way to achieving that.

Mr Speaker, Sir, even though I talk so passionately about this threat of structural unemployment and about the need to retrain our workers, my point is different from Mr Chiam's or the NCMP's. My point is not that we have been sleeping, the Government has been sleeping or the labour movement has been sleeping for the last many years. My point is that we have been working so hard and we do not take any chances. Even though much has been done up till now, we should continue to do even more because if we are affected by structural unemployment, the implication can be very serious.

I would like to offer one suggestion. The NTUC, in formulating our vision for the 21st century, known as the "NTUC 21 - A Better Life", has in fact indentified life-long employability as the most important pillar in enabling our workers in Singapore to live a better life in the future. In that regard, the NTUC, working with the Government, has introduced various programmes to make sure that workers are being retrained so that they can be kept up to date. One such programme is the Skills Redevelopment Programme (SRP) whereby at this moment, 3,000 workers from 27 companies have already signed up for this programme and they are now going back to school to gain skills certification. We have gone beyond training. We are talking about skills certification where workers can now receive skills which will make them employable in the next century. These are skills which should be transferable across companies and industries. And we hope that in future budgets, the Government can consider setting aside more resources to support programmes, such as the SRP.

Mr Speaker, Sir, I would like to conclude by emphasising that the way forward for Singapore is very exciting. We have Singapore 21 to make Singapore our Best Home in the 21st century. It is very important that we make sure that every Singaporean, young and old, is given a chance, given the assistance and given all the facilitation to participate in the creation of wealth in the economy, to share success in the society and to move forward together as one united people.

On this note, I would like to appeal to the Government to invest not only in the young but also the not-so-young Singaporeans so that the 21st century can lead to a better life for all workers in Singapore.