ANNUAL BUDGET STATEMENT

Resumption of Debate on Question (27th February, 1998) [Allotted Day],

"That Parliament approves the financial policy of the Government for the financial year 1st April, 1998 to 31st March, 1999. ". - [Minister for Finance].

Question again proposed. 1.10 pm

Mr Leong Horn Kee: Mr Speaker, Sir, this year's Budget is a difficult one. One main reason is that because of the region's financial turmoil and the resultant economic slowdown, there is much public expectation of the Budget. The second reason is that while the region is indeed in turmoil, Singapore has held up quite well. We are not in a recession. At least, not yet. Hence, the Government cannot portray a picture of doom and gloom, and talk ourselves into a recession. In fact, the most striking feature of the Budget is what it is not! Unlike many other countries in the region, ours is not a crisis Budget. It does not have the word "crisis" written all over it.

For the purpose of gathering views and reactions from the business community, our GPC for Finance and Trade and Industry had meetings with members of our Resource Panel, representatives of the International, Chinese, Malay and Indian Chambers of Commerce, and trade associations such as the Singapore Confederation of Industries, Singapore Association of Small and Medium Enterprises, Singapore Hoteliers Association and the Singapore Retailers Association. They have given us very valuable feedback and I wish to thank them.

First of all, the various groups have suggested that there should have been pre-Budget consultations, in addition to the post-Budget meetings. This is a good suggestion. I feel that the relevant Ministries should consider this idea of having pre-Budget feedback meetings with selected industry groups. On our own, our GPC has decided that we shall conduct pre-Budget meetings for next year's Budget and convey the views received from the industry groups to the appropriate Ministries.

The main message we received from our meetings with the various industry groups is that, while it is not unwise for the Government to be prudent and cautious, they would have liked to see a more stimulative Budget. They are disappointed that the Budget does not offer enough measures to help companies to cut costs.

The Government has predicted the 1998 GDP growth rate to be between 2.5%-4.5%. However, many people in business felt that the economic slowdown is already here, and many individuals and companies are facing severe financial difficulties. The reaction is that the Government has chosen to adopt a wait and see attitude. The reality of the situation is that difficult times have arrived. Many companies are facing the double blow of shrinking business and credit squeeze. The Government should not adopt a reactive stance, but rather a proactive one. Most prefer the Government to take a bolder and anticipatory approach by introducing more serious measures now to help revive the economy. I share their views.

To verify and substantiate their positions, the Singapore Confederation of Industries (SCI) and the Singapore Chinese Chamber of Commerce and Industry (SCCCI) have conducted surveys among their members. The results they obtained was that about 60% of SCI members and 54% of SCCCI members (in both cases more than 50%) felt that their businesses would be badly affected this year.

The same reaction is more or less felt by the man-in-the-street. People are concerned that with the economic slowdown, their take-home pay will be smaller. Some are fearful of the prospects of retrenchment or prolonged unemployment. To make matters worse, some are faced with the problem of higher family expenses and other costs, such as higher interest costs for mortgage loans. When people tighten their belts, the contraction effect will ripple through the economy. The slowdown will be further aggravated.

What the business and ordinary people are saying is: why not recognise the problem now and introduce stimulative measures immediately. The comforting point is that the Minister for Finance has specifically said that he would introduce off-Budget measures, whenever necessary, to tackle problems that may arise or when the economy worsens.

Mr Speaker, Sir, allow me to elaborate on some specific measures which I feel the Government could have considered or introduced in this year's Budget or consider them as off-Budget measures.

For the individuals, the following measures could have been looked into:

Higher income tax rebate

Many people are puzzled why the Government has reduced the income tax rebate from 10% to only 5% this year. The resultant higher tax payable means that people will have less disposable income. They will spend less, which in turn will affect the retail and other consumer trades. Lower consumer spending means that the slowing economy will be further depressed. The retail industry has been facing poor business in the last three years, and the outlook for them for the next one to two years would not be better.

In contrast, during the mid-80s recession, the Government actually gave a 25% rebate on income tax in the 1986 Budget. I presume the objective then was to offer various tax reliefs to individuals and companies to help stimulate the economy. We wonder why the Government took the reverse tack this time round. Why not retain the 10% level of rebate? Better still, if it can be increased to 15%. Relief on mortgage interests

In the recent budget announced by Hong Kong's Finance Secretary, a new tax relief of HK$100,000 (approximately S$20,000) was introduced to help individuals get tax reliefs for their interest payments on mortgage loans. This tax relief was welcomed by the Hongkongers as it was targeted to help the "sandwiched" or lower-middle income earners who are faced with high interest costs for housing loan mortgages. As Singaporeans are also facing the same problem of rising interest rates on their housing loans, I would like to propose that the Finance Minister could consider a similar tax relief for interest payments on mortgage loans. This tax relief will be of great help to the younger families.

Residents of HDB estates may have less need for this relief as they get loans from the HDB at low preferential rates. For young families that recently ventured to purchase private properties, they will benefit from this tax relief. Moreover, while they are paying substantial income taxes, they are not enjoying the rental and S&C rebates given to HDB dwellers. I would like to urge the Finance Minister to consider introducing this tax relief as an off-Budget measure, when necessary.

As for the measures that can help the business sector, I have the following suggestions:

Reduction in JTC/HDB rentals

The Government has decided to freeze JTC/HDB rentals. While companies are relieved to hear this, they would have liked to see an actual reduction of, say, 10 to 15% in the rentals. Although it could be argued that the impact of the reductions would be minimal on a company's overall costs, I would say that any savings would be helpful during difficult times.

Reduction in CPF contributions

In the 1986 Budget, the Government made a 15% point cut in employer's CPF contribution, by suspending the 4% contribution to the Special Account and a massive 11% cut to the Ordinary Account. For this year's Budget, I feel that the Government could have considered a cut in the employer's contribution to the Special Account.

I agree that it will not be wise at this juncture to cut the employer's CPF contributions to the Ordinary and Medisave Accounts. Otherwise, the reduction in the CPF contributions to these Accounts will adversely impact the employees' needs for housing and medical expenses. However, a short-term cut of the 4% contribution to the Special Account will not affect the employees' CPF receipts which are meant to meet their housing and medical expenses. The amount of savings to the employers from this 4% cut to the Special Account will be substantial and, in fact, will offer them much relief.

My GPC members will have other suggestions to add to those above.

Development of local talents

Mr Speaker, Sir, I wish to move on to another topic that I feel is also very important. It is on the development of local talents.

The Government has announced its intention to source for foreign talents to supplement the local pool. Singaporeans can understand the objective as commendable, as it will help Singaporeans to achieve a higher plane of growth. Especially during this period of turmoil in the region, there will be a large number of capable and hardworking foreign professionals, R&D personnel and technicians who wish to seek employment in Singapore. We shall benefit from their contributions if we can attract them to come and work here.

However, Singaporeans are concerned about the competition from these foreign talents. The answer, I feel, is that while we wish to attract foreign talents, we must not forget to develop and maximise the potential of the locals. Therefore, I support the provisions in the Budget to continue to spend substantial sums on education and training.

Naming of the bond-breakers

Every Singaporean is a rare resource. The Government has set up several scholarship schemes to send our best students overseas to study. Upon their return, they can better serve the country. While we frown upon scholars who broke their bonds, the statutory boards, such as the EDB, should not have publicised the names of these bond-breakers.

Students break their bonds for various personal reasons. Many successful local leaders, including MPs such as myself, have broken our scholarship bonds, but we continue to work and serve in Singapore. I object to publicising the names of the bond-breakers because it is an insensitive move that could lead to the alienation of the entire body of scholarship holders, their families and friends. Worse, if these scholars chose not to return to Singapore, there will be a greater loss to the country. In addition, such a callous practice does not jell with the image of an enlightened Government and a cultivated society.

Moving ahead - Striving for a speedy recovery

The current meltdown of the regional economies offers many lessons. As stated by Mr Claude Smadja, managing director of the World Economic Forum, every government in this region has to learn how to deal with a new animal in front of us, which is "the Global Economy". He said that because of the new information technology age, with instantaneous flow of information and funds world-wide, the New World Order demands constant up-to-date information with transparency of rules in the operating countries. Singapore has stood up very well to the test of the turmoil as we have an efficient, effective and honest Government with a high level of transparency of rules. The regional turmoil demonstrates that countries with less transparency of rules have suffered badly by the massive erosion of confidence and outflow of both foreign and local funds.

There are threats, but the current regional turmoil also offers many opportunities. It is said that there will be abundant investment opportunities in the companies in the region around us. However, we must remember that major MNCs from Europe and America are also thinking of capitalising on the situation. They have large cash hoards, and will be scouting around for good buys in the region. In addition, there will be other healthy and strong regional companies which will also be looking for good investments.

One disadvantage we are facing is that the Singapore economy and the local firms are pulled down by the famous or infamous contagion effect. We have to rapidly revive the domestic economy and restore confidence. We should pick ourselves up as quickly as possible. We must take this opportunity to move ahead - while the companies in the region are still trying to regain their balance but have not gained a foothold. I wish to quote a prominent local businessman who puts it graphically in Hokkien: "Pak lang puat lok long kow, goon nang em tang teh yi nang puat lok gi". It means, in English, "Our neighbours have fallen into the drain, we should not be careless and jump into the drain ourselves". I feel that instead of trying to walk gingerly across a plank to cross the drain, the Government should help to put out as many spring boards as possible, to enable Singaporeans and local companies to leap over the drain.

To be able to source for investment opportunities in the region, our companies must first be able to get their shops at home in order, build cash reserves, then they can venture abroad.

Conclusion

Mr Speaker, Sir, may I conclude by congratulating the Finance Minister for preparing and presenting such a detailed and comprehensive Budget. Having heard the many feedback from the ground, I cannot help but to urge the Government that it is not time to be faint-hearted, it is not time to hesitate. The Government must watch the situation very closely, and have regular dialogues with industry groups and local organisations. When the need arises, off-Budget measures should be introduced before it is too late.

Let us put on our spurs. The first runner off the mark will win the race. The early bird catches the worm.

Mr Inderjit Singh: Mr Speaker, Sir, thank you for allowing me to join in the debate on the Budget proposed by the Minister for Finance.

Sir, last year, during the Budget debate, many Members made a call to the Minister to address issues related to the cost of doing business in Singapore and in particular, to give more consideration to the manufacturing sector and to the small and medium enterprises. At that time, when the interim Budget was announced, the business community did express the difficulties they were facing, but we were all hoping that this year, when the full Budget was announced, all their concerns would have been adequately addressed by an all-rounded Budget.

While I can understand the Government's long-term vision and plan to make Singapore the financial and logistics hub in this region, I feel the Minister missed out a few very important sectors of the economy, especially the manufacturing sector, small and medium enterprises, the tourism and the retail sectors. The biggest disappointment, in my opinion, is that the Minister did not do much for the manufacturing sector which contributes about 25% to the Singapore GDP. This and the other sectors I have mentioned, have seen continual pressures for the last two years and are expected to be badly hit this year when the full effect of the regional crisis is felt by our businesses and our companies.

So, in my opinion, the Budget is narrowly focused in the areas that the Government wants to grow and I am sure the intention is not to shrink the other important sectors. I, therefore, would have expected a telescopic focus from the Minister, looking at the bigger picture rather than a microscopic focus that ignores those sectors that fall outside the scope of focus.

Sir, I feel that there is a perception gap between what the businesses in Singapore are seeing and what the Government has projected for the next one year. In his speech, the Minister stated that the electronics sector in the west, particularly in the USA, is set for recovery and growth and therefore he expects that the electronics-manufacturing sector in Singapore will grow. However, many companies, including large multinationals, are seeing the exact opposite. In fact, the semiconductor industry, which is one of the largest components of the electronics sector, is starting to see book to bill ratios coming down, which means that orders are coming down. Similarly, the disk drive industry is seeing a slowdown. The Commerce Department in the USA recently published, just a few days ago, figures that showed a drop of about 2.6% in January for electronic products shipped out of the USA. Factory inventories were also up by about 0.1%.

I therefore am a little worried that we may not be aligned and hence the Budget may have been drawn based on statistics that may not be up to date, especially in this fast changing environment.

The Government has projected a 2.5% to 4.5% growth for the Singapore economy. In my opinion, although this may turn out to be so for the overall economy, certain sectors of the economy may, in fact, go into recession later this year. This may happen in the manufacturing sector, especially for the electronic products area. The retail and tourism sectors are set to see one of the worst times in the last 10 years.

What should the Government have done? In my opinion, the Minister for Finance could have been a little more proactive to anticipate a possible sudden downturn rather than waiting to react when it happens. In this environment of rapid changes, why should we wait for a crisis to happen? We must have learned from our neighbours that when it starts to fall, it will be too late to reverse things. As Mr Leong Horn Kee has stated, there are surveys done by the Chambers of Commerce and also the Confederation of Industries that about 50% to 60% of businesses expect to see a drastic fall in sales and profits this year. Also in the last few days, from the newspaper reports, we have seen very disappointing corporate results. So in my opinion, the Minister could have given the benefit of doubt to the businesses and the feedback that they have given about the tough times ahead.

It is my contention that at worst, we over stimulate the economy a little should the situation not be as bad as predicted and at best, we could have avoided a crisis by acting very early. In either case, Singapore would have gained tremendously should the Budget have been more generous in helping businesses address competitiveness and the regional crisis issues. Although the Minister mentioned the possibility of off-Budget measures, I hope that he can clarify how fast he would be able to react and how will this be done. Businesses need to be assured that the help will come on time when they needed it most.

Manufacturing Sector, SMEs and Regionalisation Drive - The Cost of Doing Business

Sir, the cost of doing business in Singapore becomes an even more critical issue as the currencies of our neighbours have devalued and thus making these countries more attractive for investors because of the cheaper land and labour costs. I therefore feel that the Budget did not adequately address these issues and in particular, it did not address the needs of the manufacturing and the small and medium enterprises sectors, as I have pointed out earlier.

I do not know the rationale for the lack of attention to these sectors, but I fear we may be giving the wrong signals to current businesses and potential new investors as to the importance they have to our overall economy. While the overall economy has slowed down and as competition from our neighbours increases, business costs in Singapore still remain high. As our neighbours become more competitive and increase their focus on the sectors of the economy which we are neglecting, they will be successful in attracting investments that otherwise could have been brought into Singapore. Worse, we may see flights of investments out of Singapore to our neighbouring countries.

The small and medium enterprises form an important pillar of our economy, employing a large percentage of our workforce. The regional crisis has a bigger impact on them because these companies get jerked around due to their smallness. These companies need special help, especially for those who have regionalised in the last few years. While there are many Government schemes to help them, the feedback that we have got from most of them is that these schemes are so complex that they just give up trying to apply. We need to be more organised in helping the small and medium enterprises more effectively. Currently, I feel that the bigger companies, especially multinational companies, are the ones that truly benefit from these schemes.

In the area of regionalisation, once again, I feel that the Government has been too quickly distracted by its narrow focus on a few sectors. Our long-term directions should still be to regionalise and to further develop the second wing of our economy. I therefore expected more to be done to encourage regionalisation, especially this is a good time for bargain investments in our neighbouring countries. Therefore, the lack of new initiatives in the Budget to encourage regionalisation was a let down. Furthermore, for companies that had already regionalised in the last two years, the regional crisis has badly impacted them in terms of loss of value of assets in the neighbouring countries as well as due to inability to collect debts. I was hoping for some temporary relief measures to such companies to tide over these tough times, such as provisions for losses in computing their taxes here in Singapore on a group basis.

Sir, I would like to refer the Minister for Finance to an article that appeared in the Straits Times on 28th February 1998 that analysed why the Taiwan economy was able to weather the regional turmoil while strong economies like South Korea and Malaysia collapsed. In the final analysis, among other things, two of the most significant reasons are, first of all, the competitiveness of the Taiwan economy is due to the manufacturing sector and, in particular, the electronics and the semiconductor industries which have grown from a mere 2.5% in 1990 to 37.5% of the economy in 1997. Secondly, Taiwan was focused on many small and medium sized businesses rather than conglomerates or big companies, thus giving the economy flexibility compared to other countries who were focused on its large companies. While I am not suggesting that we emulate the Taiwanese economy, I do believe that there are many lessons that we can learn from them and apply to Singapore.

Strong Dollar/Rising Interest Rates and Financing Problems

Sir, today, while the Singapore dollar has depreciated only slightly against the OECD currencies, those of our neighbours have drastically devalued. Therefore, more than before, the strength of Singapore dollar becomes a bigger issue in attracting investments and in competing in the export of our goods. I believe that Singapore needs to re-assess the level at which our dollar should be, compared to other currencies around the world.

We also need to moderate interest rate increases which have gone up about three times in the last six months. Banks are also tightening credit financing, thus making it very difficult for businesses that can still grow and be successful in the long term in getting loans. With losses made worse by the regional currency crisis, many companies are facing short-term cash flow problems.

In this area, I would like to urge the Finance Minister to consider providing temporary measures to help those countries that are willing to restructure and by independent assessment are companies capable of growing and competing effectively in the world markets. These are companies which are facing transient problems, not permanent problems, and they need to survive through the next two years or so. I would like to make one suggestion, and I will be talking about the details when we discuss the various Ministries, and that is, to provide an equivalent to an IMF bailout package that was offered to Indonesia, for our own businesses here. This package can be in the form of bank loans with some Government backing. Others include various types of rebates that have already been mentioned. The temporary measures need not be handouts, but one-off type assistance that will not impact the long-term measures or policies of the Government.

Property Sector

This is one area where I feel that the Government has done too much. As I recall, the general tone of our Government policy has always been that we should let market forces decide the property prices. However, in the last few years, I have noticed that many incidences of Government interventions where sometimes we tempered with the demand and sometimes we tempered with the supply in a seemingly uncoordinated and piecemeal manner resulting in the sector being jerked around many times.

I would like to encourage the Government to go back to the principle of `letting the market forces decide' and to be involved in only setting general directions and fundamental strategies and then let go. While we have made mistakes in the past in allowing asset price inflation in Singapore and hence property prices being out of control, and while I can understand the undesirable impact on our economy if the property market bubble bursts, I hope that no new measures would be put in to prop up the market. In May 1996, we had put in measures to remove speculations in the property market. The objectives should not change now. We should never allow speculation in land scarce Singapore. These measures must therefore stay even if prices slide downwards a little more.

I would like to quote Mr Chiang Pin-Kung, not in Mandarin but in English, the Chairman of the Taiwanese Council of Economic Planning and Development, who said "A lot of money borrowed in South-east Asia went not into manufacturing but into the stock and property market", when he analysed the causes of the regional turmoil.

In conclusion, Sir, while we know of people being unhappy of the income tax rebate being reduced by 5%, I would like to highlight that a majority of Singaporeans got many other rebates like rental, utilities and S&C rebates. I am sure this will help many of them, as we know about 70% of Singaporeans do not in fact pay income tax. The other area that I would like to compliment the Minister is in the area of development expenditures that have gone up this year. This reflects the long-term thinking of the Government and willingness to invest in our future. We will see the results many years from now.

I would like to conclude, once again, by urging the Government to be more pro-active and not reactive in determining policies, as this Budget has indicated. In this case, we cannot wait for companies to collapse before we step in. The accelerated loss of confidence if this happens cannot be easily recovered as we recently learned from what happened to our neighbours.

While I applaud the Government for focusing on the finance sector for our long-term good, I feel that we should not have neglected the other important sectors of our economy. I hope the Government will show more signs to substantiate its commitment in making manufacturing and services the engines of growth for our economy.

Mr Peh Chin Hua (Jalan Besar): (In Mandarin): I welcome the Budget presented by the Finance Minister. It calls for tripartite cooperation among the business sector, the Government and the people to overcome the financial crisis before us. At the same time, I would like to commend the Government for granting rebates and a whole series of assistance for the businessmen to overcome the present difficulties brought about by the currency crisis.

To the South-east Asian countries, 1998 is going to be a very difficult and painful year. The political factors in the countries around us are uncertain and their economies are still very unstable. In such circumstances, I am of the opinion that this Budget is prudent and balanced. It could ensure the orderly development of our economy.

However, I personally feel that in this Budget, the Government appears to be too optimistic about the impact of the regional financial crisis on Singapore. According to information I gathered from my friends in the business sector, the impact of this crisis is far reaching. Recovery is unlikely in the next one to two years, especially for the small and medium enterprises (SMEs). These people feel that the impact this time is much greater than what is being reflected in the statistics of the Government. Therefore, I fear that the Government has not sent a clear signal to the people. It may well give them the wrong impression that the regional financial crisis is merely a "flu" to the people.

Although the Finance Minister has indicated that if the economy should suddenly take a downturn, the Government will consider taking off-Budget measures to cushion the problem. Because the Government has all the resources to deal with any unexpected event, many Singaporeans feel that the Government should give a more definite and specific indication on how it will deal with this crisis, in terms of the impact and the long lasting effect on our economy, and take more comprehensive measures to prepare for any rainy days ahead. This is better than taking some temporary measures only when something has gone wrong. Prevention is better than cure. I feel that under the able leadership of the Government, we will be able to take more positive measures to deal with this crisis.

In the long-term interest, the Government has provided more for the education of our young, a substantial increase by some 30%. I am very happy about it because despite the present economic uncertainties, the Government has not overlooked the long-term investment for the long-term interest of our country. I think this is very good. The Government is always emphasizing the fact that our only natural resource is our talented people. For this reason, more money should be devoted to education, training and opportunities for the upgrading of our people. We must ensure that our education system remains world-class, to develop and nurture our young talents. At the same time, the Government wants to recruit more talents from all over the world to develop Singapore into an oasis of talents, with foreign talents supplementing our local talents, to ensure that we remain in front, to deal with the challenges ahead of us. To show its support, the Government has granted double tax deduction for recruitment cost incurred by companies which recruit professionals and experts from overseas. The Government is also committed to studying how to improve the "heart-ware" simultaneously with the improvement to the hardware, so that the imported talents can integrate into the Singapore society, thereby remaining permanently in Singapore and make a contribution towards the development of Singapore. This intention is good and well thought of.

But I think that while it is good to introduce foreign talents to Singapore, we should also make the best use of our local talent pool. While attracting foreign talents, if we overlook the problem of brain-drain from Singapore or if the problem is not properly dealt with, it may give rise to negative results. The people may get the wrong impression that the Government is adopting a double standard in this kind of situation, and unintentionally undermine the confidence and self-respect of our local talents, thereby causing them to migrate to other countries. This will be a serious loss to Singapore, where our human resource is very precious to us.

Recently, three scholars who broke their scholarship bond had their names published by the EDB and NCB. This practice has indeed shocked the public and created a controversy. There were a few articles written by the readers and published in the Lianhe Zaobao over the past few days on this matter. Of course, it is not right for overseas scholars to break their bonds. We should take measures to review the situation. But to publish the names of the bond breakers in order to achieve a deterrent effect, is something really worth re-considering. To the public, the breaking of bonds is only a breach of contract. It is not a criminal offence per se. It should be dealt with according to the terms and conditions in the contract or the bond. If payment has been made for breaking the bond, including the interest incurred and perhaps some form of penalty or compensation, then the matter should be closed. EDB and NCB have chosen to publish the names of the bond breakers in the newspapers and this seems to rank them among the criminals. I think this is unreasonable and unfair.

I would like to quote from the article published in the Lianhe Zaobao. Mr Loo Ching Koon said in the article that we should consider four key issues: Firstly, on what basis are the scholarships established? Secondly, why are the recipients of scholarships required to sign a bond? Thirdly, what are the reasons for them to break their bonds? Fourthly, why the names of the bond breakers have to be published? Will this be a practice from now on and do the bond breakers still need to pay compensation for breaking the bond?

I believe the purpose of setting up scholarships is to develop our talents, so that they will return to work and contribute to our society.

The article also says that we should be magnanimous by looking at the world as a whole and to understand that there are rapid changes whether in terms of concepts or in terms of technology. We cannot remain static all the time. If we stay where we are, we will be lagging behind and will eventually be eliminated. We will not be able to compete in the world. We should change our attitude towards scholarships and the scholars.

The EDB spokesman has also pointed out, as reported in the Lianhe Zaobao on 27th February, that in future, applicants who come from well-to-do families will be asked probing questions on why they are applying for the scholarship when they can well afford to go on overseas studies on their own means. I think this will worry the well-to-do families. They feel that scholarship is different from bursaries. Applicants apply for scholarship on their own merits in fair competition. If they are selected, they are selected on the basis of merit, not on the basis of poverty or wealth. Regardless of their family background, so long as the children have good results and good merit, they are eligible to apply for scholarships and they should be treated equally. They should not be discriminated against and they should not be subjected to such acute and probing questions. If we consider the family background of the applicants in awarding the scholarships, then it will lose the true meaning of these scholarship awards. Our scholarships should not be turned into bursaries or study loans.

The way the EDB and NCB handled the matter of these three bond breakers is very regrettable indeed. It gives people the wrong impression that while, on the one hand, we are talking about attracting foreign talents to come to Singapore to work and to settle down by giving them all kinds of privileges, on the other hand, we are punishing our own local talents just because they break their bonds, by publishing their names and shaming them in public. I think this will lead to a centrifugal tendency among our local talents, causing them to stay away from Singapore. They may just remain overseas for good. This will be against Singapore's motto that human resource is the best resource that we have. It is also a waste of our investment in education.

Today, the free flow of talents is a world-wide trend. All countries are competing for the best talents to work for them. Therefore, we should become more enlightened, more flexible in handling the question of overseas scholarships.

In last year's budget debate, I mentioned that the number of years for a bond should be reviewed for overseas scholarships so that our best talents can be attracted to stay here. Now, with this practice of shaming the bond breakers, I feel that a lot of our young talents will turn to scholarships offered by overseas universities, many of which are provided without any bonds attached. Therefore, we should review our terms of the bond to make them more attractive. For those who return after completing their courses of study under the scholarship schemes, so long as they come back to Singapore to work for the country, whether they work for the Government or in the private sector, I think it is acceptable. As Mr Leong Horn Kee has already mentioned, he himself had broken the bond but he is still serving Singapore. So if you feel that this is too liberal, then we should consider shortening the period of the bond. After two years of service in the ministry or statutory board concerned, I think they should be allowed to serve in another capacity, as long as it is in Singapore. I think this arrangement is better, because the eligible candidates will not be compelled to go for overseas scholarships and stay overseas. If the scholars want to extend their study period overseas, they should also be given more flexible arrangements so that they will be able to complete their higher studies before coming back to Singapore to serve.

I hope the Public Service Commission would take the lead in studying this issue together with other Government agencies. I think this will have far-reaching effects when we enter the 21st century.

I also hope that the Government will pay special attention to the attitude of senior Government officers. When they announce certain policies or when they receive feedback which are contrary to the Government policy, they seem to be very bureaucratic and very arrogant. When members of the public reflect the views of the people, the senior officers should not stick to their own views and become very discourteous to Members. I think this is wrong. They must not forget that Members of Parliament are representatives of the people. They must speak for the people. The senior Government officers are Government servants. So they should not put the cart before the horse. They should not think that they are Ministers and they are masters of the people. It will be very regrettable if they think so. I hope the Government will pay attention to this.

Finally, in this budget, the Government has decided to grant an across-the-board 5% income tax rebate and to increase the interest for the Special Account in the CPF. There are also rebates for public utilities, SC&CC to help the people to overcome their difficulties. All these show that in the face of the economic uncertainties, the Government can still continue to care and share with the people, especially the lower income group. I am very happy about this. I hope that in the midst of a financial crisis, the Government should continue to encourage the people to go global. In Chinese, the two words for crisis are wei ji, literally meaning: danger and opportunities. So long as we are careful and prudent in handling the situation, the dangers can be reduced, the opportunities can be increased. We must seize the opportunities and this is very important.

I support the Budget.

Encik Harun bin A. Ghani (Hong Kah): (In Malay): Mr Speaker, Sir, although the economic turmoil in the world has not seen its end as yet, the Budget presented by the Minister for Finance, Dr Richard Hu, has been able to provide the people with a number of reliefs and rebates which are very well received, particularly those that touch or concern their pockets. Although the amounts may be reduced such as the 5% tax rebate which is appreciated by the people who are appreciative of the efforts of the Government, I think in giving the reliefs and rebates, perhaps there might be a more equitable means which we can apply to ensure that those who truly need the rebates and reliefs receive the assistance provided. I am referring to the rebates given for the greatest majority of Singaporeans who live in public housing.

As announced by Dr Richard Hu, the Government will be granting rebates to HDB flat owners, including those who live in the larger flats, ie, 4- and 5-room flats. The 4-room flat owners, for instance, will be receiving all the rebates except rental rebates, and this is appropriate because there are no rental 4-room flats. 5-room HDB flat owners will be receiving the S&C rebates. In my opinion, a fairer and more equitable means, although it might be more complicated, would be to give the rebates based on the per capita income of each family, and not on the flat size. This will enable us to provide a better means of assistance to those who truly need them. I do not mean to say that we should not provide rebates to those who earn higher incomes. They should be entitled to such rebates. But I think a more accurate picture of ascertaining the financial ability of Singaporeans would be through their per capita income. Surely, we realise the ability of Singaporeans to own cars when we notice that our public housing estates are always congested with cars owned by the residents in the area. These vehicles include not only the small cars such as Mazda 1.5, etc., but also luxury cars such as Mercedes and BMW. These luxury vehicles can also be seen in 4-room flat precincts in our public housing estates. So a relief based on per capita income is more appropriate as a criterion for providing rebates to Singaporeans.

The second point I would like to raise is on the personal income tax relief. This concerns the relief provided to those who are looking after their parents and disabled siblings. In our effort to encourage children to continue to look after their parents, we should perhaps also extend the relief to the four parents, ie, one's own parents and parents-in-law. In this way, we will be helping to prevent and reduce misunderstanding between parents and parents-in-law because they are given equal attention by their children and children-in-law. The same relief can also be given not only to just one's own disabled siblings but also disabled siblings-in-law and relatives who are unable to go out to earn their own living. I believe this will go a long way towards strengthening family values among themselves, whether between parents and their own children, or between parents-in-law and relatives in the family.

Sir, another point I would like to touch on is our state of preparedness in facing the economic turmoil in this region. We have often heard how the people in neighbouring countries are forced to scramble in order to obtain their daily necessities such as rice and sugar which obviously have fallen far short in supply. I believe the Government has taken the appropriate measures to prepare ourselves for any possibility of the economic situation getting worse. But what are these measures? Can these measures ensure that in Singapore we will not be faced with a shortage of basic necessities?

Finally, I would like to touch on the Government's support for the training of our workers so that they can continue to compete in this challenging world. In my opinion, it is necessary for the Government to provide as much financial support as possible to ensure that our workers will continue to be able to compete. In this respect, we all realise that Malay workers form the largest group of workers who are lacking in skills. I fear that the concerns which have been raised about structural unemployment recently will affect more Malay workers. If more financial support could be provided for this purpose, I believe more active efforts can be carried out to assist this group of workers.

Sir, I support the motion. 2.05 pm

Mr Chng Hee Kok (East Coast): Mr Speaker, Sir, I rise in support of the financial policy of the Government.

Sir, Fortune magazine in its 12th January 1998 issue featured "The 100 Best Companies to work for in America". In this feature, there are a number of characteristics which make the 100 companies good employers. First and foremost, these companies work hard to retain their best workers. Employees talk of their companies as fun places to work. These companies exercise flexibility and balance the employee's work and family. Money, though important, is not the criterion why employees remain in those organisations. In short, these corporations accentuate the positive and place a premium on their employees. Talent is a very valuable resource in the 100 best companies to work for in America. Contrast this with what we do in Singapore.

In Singapore, we say very much the same thing. In the Finance Minister's Budget, he speaks of "human talent has always been our most precious resource, and will become increasingly critical as we develop into a knowledge-based economy". He went so far as to offer double tax deduction for approved relocation and recruitment expenses for hiring talent from abroad. In other words, there is a Government subsidy for bringing in foreign talent. This, I support. Yet, Sir, on the very same day, on the front pages of our major newspapers, two Government agencies, the EDB and NCB, announced the names of three scholars who terminated their bonds. Their crime seems to be that they have decided to return the monies they have spent in their academic pursuit. They terminated their contracts and returned the monies with interest and penalties. No Government subsidies here, but a rather heavy penalty for being talented. Have we been too harsh? Contrast this approach with that of the 100 best corporations in America.

The manner in which this issue was handled, one cannot help but feel sorry for Mrs Janet Yee, the mother of Hector Yee, one of the scholars named. As a mother who sees her son's future being potentially ruined, she has every right to use the word "wicked" on these two organisations. Her very interview reported in the Straits Times on the same day made the agencies looked vindictive and small. How have we come to this?

In the joint statement, the EDB and NCB claimed that naming those who terminated their bonds is not to shame these scholars. This sounds disingenuous. If splashing the names of scholars in such statements is not meant to shame or scare other scholars from thinking or doing likewise, then what is the very purpose of doing so? It may be argued that the use of terms such as bond-breaker and breaking bond are emotional terms similar to law-breaker and breaking the law. Anything you break cannot be right. Perhaps it is calculated to be so. Singaporeans take a serious view of names being flashed by those in authority. In the context of bond termination, surely the purpose must be to strike fear. In the Straits Times of 1st March 1998, page 3, the heading of the box article was headlined "THE NAME SHAME". Here, it is the press calling a spade a spade.

Let me quote two of the interviewees. One said "Singaporeans are afraid of embarrassment, so publishing names is like the Corrective Work Order". Another comment "EDB's and NCB's actions would turn people off. They are using it as a threat. But if the future employer trusts you, this measure is ineffective". Sir, the operative phrase is "if the future employer trusts you". Singapore is a small country when it comes to the work place. It is not uncommon to hear of employers who shun from employing Singaporeans who have incurred the displeasure of Government or Government agencies. Although this perception is not true, employers do not wish to take chances on doing the wrong thing. Hence, public naming of scholars has very deep repercussions. We can understand Mrs Yee when she said that she is afraid that her son may not come home - home to an uncertain future. Some form of disapproval can be expressed, Sir, in the case of those who terminated their bonds, but have we gone too far?

In the joint statement, EDB and NCB stated, and I quote, "Accepting a scholarship implies a moral responsibility to work with the sponsor upon graduation". Certainly, scholars do have an obligation other than legal to serve their bonds. We cannot encourage scholars to terminate their bonds. Moreover, a scholarship in Singapore brings much honour and prestige to the scholar and the family. Hence, terminating a bond must bring with it some dishonour. At the same time, with this very heavy handed approach, is there not a moral responsibility on the part of these Government agencies to protect Singaporeans like Hector Yee, Teo Hoon Ping and Huang Yian Teik, whose crime is to incur the wrath of some Government officials? They do so by returning monies advanced to them - and this action is contemplated in their contracts, and then have themselves shamed. This is not in the contract. Some form of displeasure must be attached to those who terminate their bonds. However, when a Government agency uses the moral argument, it must remember that it owes a higher moral duty through its sheer size, influence and clout not to overuse its power on individuals it comes into contract with. The exercise of moral responsibility is never meant to be one sided. Hence, I agree with Tan Sai Siong of the Straits Times when she said that two wrongs do not make a right.

In the Straits Times of 1st March 1998, it was reported that in the case of the PSC, only 4% of the scholars terminated their bonds in the last five years. The URA has reported in the same article that none of its overseas scholars terminated their bonds - a very enviable record. Obviously, Sir, the PSC and the URA must be doing something right. Why is the situation so different in the EDB and the NCB? Sir, going by press reports, perhaps these two organisations should examine their attitudes and inflexibility of approach.

Personally, Sir, I have an experience which lends weight to this point. On 12th October last year, I made a public speech against naming of scholars who terminated their bonds. This was reported in the Straits Times and Zaobao on 13th October 1997. In that address, Sir, I suggested that whilst the Government was trying hard to bring in foreign talent to increase our talent pool, shaming scholars ran counter to this objective. We should instead increase the number of scholarships by anticipating the small number who may terminate their bonds. Moreover, Singapore has the financial resources to do so. The other reason I gave then was that as long as the scholar continued to contribute his services to Singapore, as my friend, Mr Leong Horn Kee, has mentioned, the country has lost little. Whether in the private sector or public sector, a scholar can contribute to Singapore's growth.

Sir, this did not go down well with EDB. I was invited to a breakfast meeting in January this year with the most senior officers of EDB and NCB. I was shown a draft statement of their intention to name three scholars who terminated their bonds. Amongst many things said to me at this breakfast meeting, the most senior gentleman in the group accused me of sharing the values of these scholars and he said that if I shared the values of these scholars I should resign from public office. In other words, a civil servant telling an MP to resign. Despite this, Sir, I tried to keep a cool head. I tried to debate the issue but to no avail. We must always be on the lookout for such intolerant attitudes, especially of some in the apex of Government. We cannot value human resource if we are not able to win over those who do not see our point of view. I bring up this episode not with personal affront, but with sadness because today the PERC Report says Singapore has one of the best civil service in this part of the world.

Termination of scholarship bonds should not be encouraged. Significant resources other than money have been invested in those scholars. In some cases, the award of the scholarship enables the scholars to gain admission into the most prestigious institutions overseas. As the large majority of scholars do serve their bonds on completion of their studies, the situation is probably not getting out of hand. Even though the regional economies are in turmoil, I believe that the demand for talent will continue. Hence, there should be a review of this issue. There must be more creative solutions to this problem.

Firstly, since we are on the lookout for talent, the Government should allocate more financial resources for scholarships. As an example, a million dollars will see to at least five scholars a year.

Secondly, perhaps we should consider providing scholarship loans which may be converted into service bonds. Such a scheme, which comes with a small `penalty' like a longer bond period, will give the scholarship holder the flexibility of making up his or her mind after a few years of studies, bearing in mind that the scholar has taken up a scholarship at a very young age. If the scholar chooses to continue further studies, then the loan must be paid up. If the scholar chooses to return and serve a Government agency, the bond is of a longer duration than the norm.

Thirdly, the terms of the bond should be liberalised further. The recent announcement of a shortening of the period is a step in the right direction. Lastly, perhaps there should be a class of scholarships with bonds which may not be terminated. In other words, the bond must be fulfilled. The period may be shortened further. This latter scholarship will go some way towards addressing the concerns of those Government agencies which have earmarked the scholars for certain positions in the establishment. There are many ways to vary the terms of employment to achieve our objective.

In conclusion, Sir, in the wider context of increasing our talent pool, nurturing talent and attracting talent from abroad, the public shaming of scholars who terminate their bonds must not be part of the grand design. Putting such scholars on the same class as road bullies, Corrective Work Order offenders or those who choose to use our lifts as public toilets is not in the best interest of Singapore. The natural progression, I ask myself, is that if this does not work, what will EDB and NCB do? Perhaps the next logical step is to paste the faces of scholars on lift landings. Sir, I think we need more creative solutions, and I think we are better than the loan-sharks.

Dr Lee Tsao Yuan (Nominated Member): Mr Speaker, Sir, the official GDP forecast for this year has a very wide range, 2.5% to 4.5%. This is understandable because of the uncertainties in the regional environment. However, there is a large difference between a growth rate of 2.5%, and that of 4.5%. This difference in growth rates could be translated into significant differences in retrenchments, in bankruptcies and in economic hardship in general.

There are four main features of this year's Budget. First, it is a conservative budget aimed at achieving a small surplus. Second, there are no major tax cuts. Third, there is an increase in development expenditure. And fourth, there are tax incentives to promote the development of specific industries, particularly in the finance sector.

I agree that the budget surplus should be reduced during a year of projected economic slowdown. This is in part due to the increase in development expenditure from 6.3% of GDP in fiscal year 1997 to 7.5% in fiscal year 1998, which is entirely appropriate at this time, for three reasons: to continue our efforts in improving our medium to long-term economic capabilities; to take advantage of cheaper prices, for example, in land reclamation; and in light of the expected slowdown in private fixed capital formation, to boost investment expenditure by means of public sector capital formation. The current emphasis now is to further develop the financial sector, without at the same time reducing the importance of manufacturing, and the fiscal incentives offered for such activities as fund management are in line with this strategy.

However, the most significant aspect of the Budget is that there are no major tax cuts to stimulate the sagging economy and to help businesses. The business community has expressed disappointment regarding this, particularly since the recently announced Hong Kong budget contained a wide range of tax cuts, including a reduction in the corporate income tax rate, a freezing of most government fees, a reduction in property tax and in stamp duty on share transactions. And all this when the forecast for the Hong Kong economy is 3.5%, which is exactly in the middle of the range forecasted for Singapore.

I agree that there is no need for major tax cuts, but provided growth is within the upper half of the range. If, indeed, the growth rate this year is about 4% or even higher, then a reduced, small budget surplus with no major tax cuts is entirely appropriate. A 4% growth rate will mean that some companies will be forced to downsize, retrench, merge or adopt drastic consolidation measures. But that is part of commercial risk. There are upsides and there are downsides in business. Businesses experienced a very good bull run since 1987. And these two years - 1998, maybe 1999 - can be viewed as a consolidation phase after 10 years of uninterrupted solid growth.

However, if the growth rate for the economy is heading towards 2.5% or lower, then I do believe that the Government should adopt more measures to stimulate the economy. In other words, the Budget can remain as it is. But where I differ with the Government is the threshold for the activation of off-Budget measures to stimulate the economy. The Minister for Finance seems to imply that major stimulus initiatives will only be contemplated if there is an actual recession, ie, a decline to negative growth. I would argue for a higher threshold. In other words, a positive but low growth rate of 2.5% or below should be sufficient to implement further off-Budget measures.

There are two reasons for doing so. First, I do not see the need to go through a 2.5%, or even a 2% growth this year, because it would be due largely to the contagion effect of the Asian financial crisis, and not to weaknesses in our own domestic economic fundamentals. Yes, I agree, and I quote, that "our tax rates remain competitive and no major tax changes will be made against a background of declining revenue collections and rising development expenditures." But no amount of competitiveness in tax rates and rising development expenditures can solve the immediate business problems of high interest rates and low demand, and possibly, the inability to collect trade credit from neighbouring countries; and because businesses are in trouble, employees get retrenched.

Second, the Minister has further stated that it is important to have a budget surplus in order to continue building our financial reserves. I totally agree with this philosophy. But I see no harm in further reducing the surplus this year, in order to bolster the economy. To put things in perspective. The estimated revenue loss of the 5% income tax rebate is $130 million. The revenue loss from the 15% property tax rebate for commercial and industrial properties is estimated to be $145 million. Suppose these rebates were to be doubled, in other words, you have a further 5% income tax rebate and a further 15% property tax rebate. The additional revenue loss would be less than $300 million. The estimated budget surplus is $2.68 billion. In short, as the Minister has said, we have enough resources to activate further off-Budget measures.

The off-Budget measures that the Government could adopt to stimulate the economy and help businesses include: a corporate tax rebate, a further individual income tax rebate, the granting of further concessions in property tax, for example, in the form of rebates, reduction of stamp duty, or a rebate, for property purchases and share transactions. Needless to say, the magnitude of the cost-cutting off-Budget measures will depend on the severity of the downturn. The more severe the downturn, the greater the cost-cutting measure.

There is yet another aspect to consider, and that is, when would these off-Budget measures occur? Would they be implemented fast enough? Or would it be a case of too little, too late? The Minister has stated that "the situation will be closely monitored." This is of utmost importance in the next few months. Mr Inderjit Singh has alluded to a perception gap between the Government's forecast on the one hand, and the views in the business community on the other. By the time the first quarter economic results come out, it could well be too late. The Department of Statistics might need to work doubly hard to churn out monthly statistics fast enough in order that the Government can keep track of the pulse of the economy. In addition to hard statistical data, extensive and frequent consultations with various sectors of the business community are in order, so that the Government is ready to act, when necessary. Let us not be caught flat-footed again, as we were in 1985.

Regardless of whether off-Budget measures are implemented or not, the Government should implement an immediate freeze on public sector cost increases. Government rates and fees are one important component of business costs. Consider, for example, the unit business cost index of manufacturing. It is noteworthy that of its three components (unit labour cost, services cost and Government rates and fees), it is the Government rates and fees component which has increased the fastest since 1988. While the unit business cost index as a whole has increased by 26%, Government rates and fees, which include property tax payments, increased by 93%, or nearly doubled since 1988. While businesses are all scrambling to cut costs this year, Government charges should not contribute to costs.

In as much as wages still constitute a major portion of domestic cost, the NWC recommendations this year become even more important in cost determination. The decision to freeze the salaries of Ministers and top civil servants was a significant gesture in this regard, both politically and as a signal for caution and restraint in wage increases this year.

The Government's estimated budget invariably errs on the conservative side. In other words, except for 1996, the actual budget surplus, since the new system of accounting was published from 1990, has been larger than the estimated budget surplus. In today's context, this is not a welcome trend. The economy does not need any additional fiscal contraction from larger-than-anticipated budget surpluses. I would urge the Government to be more accurate in its budgeting this year. If the economy grows faster than anticipated in the budget planning and revenue increases, then the Government should correspondingly increase expenditure. Otherwise, actual budget surplus could well be 2.5% or even 3%, well above the estimated surplus of 1.7% simply because of budgeting inaccuracy. It has occurred since 1990, except for the year 1996, and I would urge the Government that it does not happen for this particular year.

My last point is that one of the major lessons that we can learn from this slowdown is the need to develop resilience in the face of international economic shocks.

The current slowdown is a painful reminder that there is no guarantee of economic growth in any economic system, whether capitalist or planned. The global economy will continue to exhibit cycles of booms and recessions. It will also occasionally be subject to shocks, which by definition are unanticipated.

The Singapore economy has experienced an economic slowdown only twice since independence - in 1975, where growth was 4.1%, and in 1985, with a growth rate of -1.6%.

The world recession which began in 1974 worsened in the first half of 1975. The OECD growth rate for 1975 was -2�%. World trade in real terms declined by 12% in 1975, and the volume of imports by OECD countries fell by 10%.

And yet in spite of the world recession, the Singapore economy grew by 4.1%. This was in large part due to the diversification of the economy. While manufacturing declined by 2%, the services sectors, in particular, transport, storage and communication; and finance and business services sector, provided 88% of the growth in GDP in 1975.

Similarly, in this current economic slowdown, it is expected that those sectors with final output destined for the US and Europe, namely, manufacturing will fare better than sectors which are regionally-oriented, namely, services such as tourism, retail and healthcare. The lesson we learn from this comparison is the importance of diversification, in terms of sectors and markets. Just like an investor, an undue concentration in any one sector or market could cause us to be vulnerable to upturns and downturns in that sector or market. In this context, I am happy to note that the Minister for Trade and Industry has announced that we would continue to emphasise the continued development of both manufacturing and services as twin engines of growth. Within each sector, there should also be sufficient diversification in terms of industries and export markets in order to develop resilience in our economy.

In 1985, the world economy grew by 3% as did the growth in world trade. The US economy slowed down compared to 1984, but still grew by 2.4%. In other words, in 1985, the external environment was not unfavourable. But in spite of that, Singapore suffered a recession. One main reason was because of the 43% increase in unit labour cost during 1980-1984 which caused an erosion of competitiveness domestically and this coincided with the slump in external demand in the key oil and marine-related industries. In addition, fiscal policies had a contractionary effect, and there was a slump in the property market.

The lesson we learn from the 1985 recession is the importance of sustaining domestic competitiveness. The 43% rise in unit labour cost in 1980-1984 was one major factor which tipped the scales and caused the recession instead of a mere slowdown as occurred in 1975.

In short, the recipe for developing resilience is sustained competitiveness combined with diversification.

To conclude, while I agree with the main thrust of the Budget, I hope that the Government will indeed not hesitate to respond with off-Budget measures if the need arises. I also hope that the Government will not consider 2.5% growth too high to activate such off-Budget measures. There is no need for us to suffer unnecessarily this time around.

Dr Tan Cheng Bock (Ayer Rajah): Mr Speaker, Sir, I rise to support the Budget.

The Budget emphasises on education and our educational system is moving towards creative thinking and creativity. Yet there can be no creativity if discussions are not done in a gentlemanly manner with opportunities to speak up and alternative viewpoints sought. It is in this context that I want to seek clarification from my Parliamentary colleague, Mr Chng Hee Kok.

Mr Speaker, Sir, I would like to ask Mr Chng Hee Kok whether he would like to confirm what he told me outside this House sometime ago that the Chairman of EDB asked him on these points: (1) that he should resign because as a Government MP, he should not disagree with this Government policy of naming bond-breakers; (2) that other MPs who disagree should also resign; and (3) that the EDB Chairman stormed out of the meeting. Can I ask Mr Chng Hee Kok to clarify?

Mr Chng Hee Kok: Mr Speaker, Sir, essentially I agree and confirm what my colleague, Dr Tan, has mentioned. Actually, on top of that, he (EDB Chairman) mentioned two other points. Since this subject has cropped up, I should mention that when he showed me the statement, he threatened that my name would be put into the statement because I supported those three named scholars by speaking publicly against the issue. My name was supposed to be included in the statement. He also suggested that I should send my speech (the speech which I made on 12th October 1997) to him for vetting. I want to assure Members of this House that in all my years as a Member of Parliament, no Minister or office-holder has ever asked me for my speech before I speak on any subject. I told him that I have never offered my speech to any Minister of this House for vetting, Sir.

Dr Tan Cheng Bock: Mr Speaker, Sir, I am not being personal. I just want this House to be clear on why I think this exchange should be made known to Members of this House as this involves a top administrator and elected Members of this House and it touches on areas of creativity, leadership and alternative views.

Mr Speaker, Sir, I listened to Chng Hee Kok's encounter with the Chairman of EDB with shock and disbelief. As an elected Member of this House, I cannot be a bystander.

Mr Speaker: Order.

The Leader of the House (Mr Wong Kan Seng): On a point of order. I am not intending to circumscribe Member's right of free speech. In this House, Members can bring up any subject. In the Minister's Budget Statement just two Fridays ago, he was elaborating the Government's financial policy and outlining the Government's Budget and these are important issues for debate in this House. I think we should confine our debate to the Budget Statement and at other times, raise a motion to have it fully debated as to whether or not we should publicise the names of the bond-breakers. I think there is another appropriate occasion to do so.

We should not use these two precious days for debating bond breakers because there are 45 MPs wanting to speak. With 45 MPs squeezing into two days and if we just divide by the number of hours that we have, I think each MP will have very little time to speak. I am sure all 45 MPs want to have their say and express their views. But I would suggest that they keep their focus on the Budget.

Mr Speaker: What is your point of order, Mr Wong?

Mr Wong Kan Seng: The point of order, Sir, is that we should confine our debate to the Minister's Budget Statement and this subject about the EDB bond-breakers and the Member's exchange with the Chairman of the EDB should be fully debated on another occasion.

Mr Speaker: The subject of bond-breakers of EDB scholars has actually been touched upon by two previous speakers and I have allowed it. Under the circumstances, it is not wrong for Dr Tan to continue with the point that he is making. But I would suggest to Dr Tan that he should confine it as much as he can within the context of the financial statement of the Minister. Dr Tan, you may proceed.

Dr Tan Cheng Bock: Thank you, Mr Speaker, Sir. I think this subject is important because we are allocating funds to the various Ministries and organisations, and of course, Singaporeans would like to know the funds we allocate to these organisations. They must also be accountable to this House whether in terms of their financial performance or the way they handle matters, and I still strongly believe that I have a right to speak on this matter.

Mr Speaker, Sir, as I said, as an elected Member of this House, I cannot be a bystander when my Parliamentary colleague is insulted in this manner. I cannot allow the episode to pass by without expressing my concern. I suppose my Parliamentary colleagues would have done likewise. We are the representatives of the people. We are here in this House to air the views and concerns of the people. Many of us in this House have spoken strongly against the Government policies. We were reprimanded by the Ministers and we were taken to task even by the Prime Minister, but we are still not embarrassed because we have spoken out honestly and frankly what we believe in and also to let the Government know how the people at the ground feel. Despite our differences in views, we were never asked by the Prime Minister to resign.

In this instance, my Parliamentary colleague was offering a view that was different from the EDB Chief and because of this, he was asked to resign. His reasons are: (1) he is a Government MP; and (2) naming bond-breakers is a Government policy. Let me state my stand on bond-breaking. I think it is not gentlemanly and should be discouraged, but not by naming them in public.

Mr Speaker, Sir, I have to continue because I have to paint the picture to this House why this subject is important. After he asked Chng Hee Kok to resign, he stormed out of the meeting. Should a man of his standing do such a thing to an elected representative who refused to agree with his views? I do not think our Prime Minister has ever done that. It is not a gentleman's behaviour. We want to build a more civil society and we must behave like one.

To add insult to injury, he wants Chng Hee Kok to let him know the names of those MPs who share Chng Hee Kok's views and he does this by way of a letter, signed not by him but by his Head of Human Resource Division, a Mr Timothy Sebastian, asking these MPs to meet and discuss with him. Since he has already concluded that those who disagree should resign, there would have been no civilised discussion. And I presume the MPs will be told off, similarly, the way he told Chng Hee Kok, and the demand for their resignation will be asked. Let me read the letter that was faxed to me by Chng Hee Kok:

`Dear Mr Chng,

Your meeting on the 19th January 1998 with our Chairman Mr Philip Yeo refers. During the meeting, the issue of scholars terminating their scholarships was discussed. It was also mentioned that there are other MPs who have differing views from our Chairman on this issue. Our Chairman would like to meet with these MPs to hear their views and further discuss the issue with them. In this connection, we would appreciate if you could let us have the names and contact details of the relevant MPs so that a meeting can be arranged.'

Mr Speaker, Sir, has he the right to summon MPs for a meeting to answer to him why they disagree? Is he getting too big for his shoes? And this is not the first time he has displayed such an attitude towards elected leaders.

Mr Speaker, Sir, when I discussed this with my Members of Parliament, I was shown a copy of a newsletter called Pioneers of Computing where he was featured as IT champion. In this interview, he had expressed views contrary to Government policy. For example, he questions Government upgrading of our HDB flats. He is quoted as saying, and I quote him:

"We spend millions of dollars renovating HDB apartments for people. What for?"

In other words, he disagreed with this major Government policy. No one asked him to resign. Yet, he wants Chng Hee Kok to resign and other MPs to also resign. On what matter, on a minor issue - a departmental issue on bond-breaking. He obviously has his own views as to who should lead Singapore. I quote:

`When we were a young country in the 1960s, we were creators, Lee Kuan Yew, Howe Yoon Chong [referring to all in the frontbench]. Now, we have the era of the CFOs. [I will explain what "CFO" stands for.] This is where Singapore is right now. Now we have to see if we go up or down.

You must get rid of these people. These people should never be allowed to be No. 1, because they are not creators.'

Mr Speaker, Sir, you judge for yourself. Is this not a reference to the present leadership, as no more than uncreative CFOs, which stands for chief financial officers? Earlier, in his interview, he equates CFOs as bean counters. Are our Ministers bean counters?

Is the naming of bond breakers a Government policy? No, it cannot be. It is a departmental policy. As Members in this House must have read in the papers that even PSC, the body that awards prestigious scholarships, is not naming the scholars. Therefore, he is not being fair to Mr Chng Hee Kok, and was hiding behind the Government to push his own view and belief. He then has the audacity to ask Mr Chng Hee Kok to resign as an elected MP and, as I said, on what issue? A minor issue, a different approach to management of bond breakers.

Mr Chng Hee Kok's electorate, those who voted him in, will be wondering why they have to lose their MP. Maybe the EDB chief should go to Mr Chng's constituency and explain to the constituents why their MP should go.

He talked of a lack of leaders with creativity in his interview with Pioneer IT. I think Members must read this. It is a very important paper and I will ask the Clerk of Parliament to circulate this later on. And I quote him:

`They are preoccupied with auditing, counting, making sure that every chair and table is there. They are so preoccupied with the material part, they forget that the most important is the creative part, the people.'

Mr Speaker, Sir, all that is well said, but you ask yourself: how to be creative when the leader of a company has no room for differing views? All this talk of creativity in that interview is just lip service.

Sir, this is a serious matter, because I see his action as an affront to the office of the elected Members of this House, by a member of the Administrative Service. May I ask the Minister what he intends to do?

Sir, I support the budget. I am very impressed by the Nominated Member's discussion on the budget. She did a very good job. And I am sure we support our Finance Minister's budget.

Mr Loh Meng See (Kampong Glam): Mr Speaker, Sir, there would not be any bond breaking in my speech!

This year's budget is oriented towards strengthening and elevating Singapore's position as a premier international financial centre. Whilst the countries in the region are struggling with the crisis of confidence in the banking and financial sectors, Singapore is in the enviable position of keeping our credibility and reputation intact. There is strong confidence in Singapore's banking system and the viability of the financial services industry. Even then, we are not spared from the ill effects of the meltdown in the regional economies.

The international financial community is a very important constituency. Our Government recognises this and tries to address the issues and concerns of the foreign fund managers and foreign players in the international capital markets. Some regional countries have blamed their sad state of affairs on "international conspiracy" of the currency speculators that started and fuelled the currency crisis. If indeed there are areas that foreigners can create problems on the domestic economy, we have to be careful that the rights of Singaporeans to decide their own destiny are not jeopardised. Singapore is already a very open economy. Foreigners are already owning assets and shares in Singapore. These foreigners will next want to seek control over "blue chip" Singapore banks and companies which are strategic to our national interest. We ought to ensure that the foreigners do not take over control of key sectors of our economy which pose dangers and security risk to our country. We should continue to open our economy so long as there are benefits to be obtained from as diverse a group of foreign investors as possible.

Singapore has taken active steps to support our neighbours. We hope to help restore confidence and bring the economies of our neighbours back to an even keel. We have not been very successful so far because of domestic circumstances, but the message and signals from Singapore have been clear. Singapore wants to be helpful during this period of currency turmoil. Our national interest and prosperity is tied to that of our neighbours. Singapore's line of credit under the IMF programme to Indonesia shows our Government's resolve to help in Indonesia's stability, progress and development. The sooner that the countries in the region recover, the better it is for all of us. A stable and prosperous ASEAN is indeed beneficial to all.

Sir, the main thrust of this year's budget is to prepare Singaporeans for the tough years ahead but, more importantly, to prepare ourselves for the recovery that will come, with Singapore emerging even stronger than we did in the aftermath of the 1985 recession. How long this economic slowdown will take, no one can predict because of the volatility and uncertainty of the situation. One thing is certain: the recovery will come. What is needed is for us to continue with the prudent long-term policies. Singapore, under the PAP Government, has consistently pursued sound policies with strong fundamentals that provide for the long-term good of our people. We are prepared and stand ready for difficult times ahead.

The Government has once again placed top priority in education. The hefty 30% increase provided for expenditure on education is very significant as it constitutes 3.6% of GDP and one-fifth of total Government expenditure. The investment in education has always been proved to be worthwhile. The high standards of education given to our young has paid handsome dividends in the quality of our manpower. Our well-educated and hard working workforce has given Singapore the competitive edge and contributing to strong economic growth and development.

However, the Government could have given working adults more financial help to encourage them to pursue continuing education programmes. In difficult times, many employers are not likely to provide additional funds for training and development of their officers and staff. Company training tends to suffer during times of belt tightening and cost containment. Also, there is likely to be more retrenchments this year and those who are out of work could go for further training whilst looking for alternative employment. Perhaps the Skills Development Fund could review its policy to be more generous in providing the necessary help to employers and individuals who seek to attend training courses to upgrade themselves and enhance their competencies to remain employable and perform their jobs better.

During this period of economic slowdown, many Singaporeans would be losing their jobs through retrenchment because companies are facing financial difficulties. We have, therefore, to be judicious and impose stringent standards when approving the employment permits for foreigners who want to work and settle down in Singapore. In fields where local talents are in short supply, for example, in information technology and telecommunications, there would be less repercussions. But it is still vague as to what constitutes "talent". Should we allow the employers only to decide? Are our bureaucrats competent enough to assess the true foreign talent? The Public Service Commission scrutinises all top talents that join the civil service. Is there not a need for an independent panel set up under the Ministry of Manpower to ensure that the foreign talents employed in the private sector are indeed assets to Singapore? We want to be fair to Singaporeans in the competition for suitable employment and that the foreign talents selected are indeed of very high quality for the long-term good of Singapore.

A few years ago, HDB sold shops and hawker stalls to the sitting tenants. In recent times, the businesses of these shops and stallholders have been adversely affected. With the economic downturn and the decline in business, the higher interest rates have made it difficult for some businesses to service the loans from banks. Is there any way in which the Government could help to alleviate the situation of affected owners of HDB shops and hawker stalls? Will HDB continue with its sale of shops programme in the new areas?

At the macro level, the general economic situation appears satisfactory. However, at the individual firm level, there are serious challenges and difficulties faced by our small and medium-sized businesses. The manufacturing and services sectors employ a large number of workers and contribute a substantial amount to our GDP. The Minister for Finance has indicated that there would be off-budget measures to tackle the specific problems of the different sectors. I hope that timely measures would be taken for if they come in too late, many otherwise good businesses that we wish to help would have gone asunder and would have become casualties. We have to try our very best to save as many jobs as possible. I think jobs will be important in the coming years.

Sir, I support the motion. 3.00 pm

Dr Lily Neo (Kreta Ayer-Tanglin): Mr Speaker, Sir, thank you for allowing me to join in the debate.

The regional economic crisis is certainly taking its toll on everybody. We are facing a period of uncertainty. Indeed, this is so even to predict the economic outlook for Singapore in the months ahead. It is therefore prudent for the Minister for Finance in his Budget Statement to have said, "we are keeping a tight lid on operational expenditure". In this context, Sir, it is a good opportunity for us to redouble our efforts at efficiency and economy. I would like to draw attention to this in terms of healthcare cost in the future and the need for its containment.

The continual escalation of healthcare cost, real or apparent, is of much concern to most Singaporeans today. And, although our country has not faced excessive hikes in healthcare cost, as in the United States, for instance, we need to be prepared for cost-related problems to contend with. This is especially so in terms of secondary-level and tertiary-level healthcare requirements.

Sir, this is as good a time as any to review our system and look for ways to contain further rapid increases in healthcare cost and to maintain the high-quality care we now have. There is no simple solution. We should be prepared to re-evaluate our present system with a different mindset and be prepared to tackle the problems with new perspectives and through multi-approach ways. What follows are some aspects in our system that merit our immediate attention.

1. There should not be plans for more new restructured general hospitals for a while yet; we certainly have sufficient of them now. Building more new ones will only cause further duplication of the various disciplines which frequently leads to wastage of resources. Sir, the likes of our existing restructured general hospitals are both expensive to build and expensive to run. A small country like ours should not need any more of them. We should, however, look into building more community hospitals instead. They will be cheaper to build and definitely cheaper to run. These hospitals will be much needed to treat the increasing numbers of elderly sick who usually require longer hospitalisation because of chronic illnesses. These community hospitals will be more accessible and more suited to provide better and cheaper care to the chronic sick. If we have sufficient beds to cater for these chronic sick, we will not waste the expensive acute beds in the general hospitals.

2. There should be enhanced collaboration amongst healthcare personnel and increased cooperation between the various restructured general hospitals. This is important for prevention of excessive duplication of under-utilised facilities and personnel. Wastage of resources in terms of equipment and of doctors and other personnel becomes significant when we have multiple centres for each and every speciality or discipline. The problem of finding medical staff to run all the general hospitals, especially when we are continually facing shortages of trained manpower, can become insurmountable. The fact that there is just not enough case material in some of the specialities or disciplines to go round at any one time compounds the problems. Mr Speaker, Sir, competition for excellence is desirable, but "fighting" for patient-load is not.

3. We should look for more practical and prudent ways to integrate and tap all sectors of our available healthcare facilities. We should induce the primary level care providers to cater for the increasing numbers of the elderly and the chronic sick. Perhaps they can work more closely with the hospitals in share-care schemes and remunerated by the Government in a reasonable and controlled manner to ensure affordability. The advantages from such schemes would be the significant savings on cost, the decreased demands on the hospitals in terms of beds and medical staff, but more importantly, the positive effects of having patients continuing to stay in their own homes with their loved ones. Thus, some sort of managed-care scheme between the general practitioners and the Government may be the way to go.

4. Preventive medicine as the key to maintaining good health in any population cannot be over-emphasised. This, therefore, is one area we can ill-afford to cut back on. Instead, we must seek out all avenues to help the healthy maintain their well-being for as long as possible. In the long run, it will be the ministry of continuous and concerted efforts in promoting preventive medicine that would contain the escalating cost of healthcare. Mr Speaker, Sir, this is especially so when there are increasing numbers of elderly folk. Now, for this group of citizens, I would like to again suggest that for the best results, "preventive care" should be started as soon as possible and through centres utilising a "total-care" concept. In other words, these Centres of Activity for Retired and Elderly (CARE) should cater for the physical, the mental as well as the social well-being of each elderly. For the general population, I would like to suggest that we increase mass public education on preventive healthcare and enable easier access to regular health screening tests. We have to reach out to the people and increase their awareness for this need.

5. The attitude and the mindset of our people in relation to affordable healthcare in Singapore has to be reviewed in the light of our increasing affluence and expectations. And, if we have to address the need for change in order to cope with a litigious public, it is likely that affordable healthcare may be jeopardised. When doctors and other healthcare providers are given to over-investigating and to over-treating the patients because of pressures from patients and because of fear from litigation, healthcare cost must increase and affordable healthcare, as we know it, will be impossible.

Sir, I feel that we are very fortunate here in Singapore. We have the means to afford a world-class healthcare service for our people. Indeed, we do have an abundance of what the medical world can offer and we do have some very good hospital facilities. Let us make sure we get the mileage from them.

With that, Sir, I support the annual Budget Statement.

Mr Chiam See Tong (Potong Pasir): Sir, this year, the budget surplus has shrunk to about $2.7 billion, showing that business shall be bad again this year. Last year, all sectors showed a decline, the stock market plummeted, the finance, property, tourism, manufacturing, retail sectors, all declined. Despite the poor business showing, the Government refused to lower corporate tax by one or two percentage points. At the moment, the corporate tax is about 26%. Businessmen expected the Government to reduce the corporate tax by at least one percentage point to 25%. But that expectation was not met. The excuse given by the Government was that it already had reduced the tax low enough and that if the corporate tax were reduced to 25%, Singapore shall be deemed to be a tax haven. I say these are all lame excuses. I think the true reason is that the Government is waiting for the 5-year moratorium for the Goods and Services Tax at 3% to expire next year, and then we will see the reduction of corporate tax. But, of course, we expect an increase in the GST from next year onwards.

With the shrinkage of the budget surplus, the Government shall have less money to be transferred to the Edusave account and to Medifund. I hope with this transfer of less money to these two funds, the Government shall not hold back disbursements on these funds, especially to needy pupils and the people who need them.

Sir, I can remember that in 1984-85, the opposition were calling for the employees' CPF contributions to be reduced so that they could have a bigger take-home pay. But at that time the Government asserted that the CPF contributions are sacrosanct. They are the workers' salary. They belong to the workers. They cannot be cut. But when the economy went really bad, to a minus 1.6% growth, the Government went back on its word and allowed the employers' component of the CPF to be reduced by a hefty 15 percentage points, from 25% to 10%.

Sir, with such a precedent, I believe that workers are worried today. Despite the fact that flexi-wage system has been introduced, they are still worried that the Government shall allow the CPF rate again to be slashed downwards. Doubtless, should the CPF rate be reduced again, the workers shall suffer greater hardship this round because HDB flat prices have risen much higher than those in the 1985-87 period. The financing of these flats is higher today and HDB flat purchasers have to pay much higher monthly loan instalments. I urge the Government to do everything possible and prevent the recurrence of another CPF cut.

Sir, another aspect of the CPF is that the Government should allow retrenched workers to draw on their own CPF. I remember that in the 1985-87 recession, the hon. Member for Tampines GRC, Mr Yatiman Yusof, called on the Government to allow a retrenched worker to withdraw $200 per month from his CPF account. I would now suggest that the Government allow retrenched workers to draw up to $300 per month from his CPF savings subject to, of course, the amount of CPF he has in his account. The Government should look into this proposal seriously because the number of retrenched workers shall increase. The expected number of workers retrenched is to be about 15,000 workers and some expect this number to increase to as high as the 1985-87 level of 20,000.

Further, a survey recently carried out by two international consultancy firms showed that 62% of our workers' savings cannot last them more than three months should they be out of a job. Another 22% of the workers interviewed said that their savings could last only up to six months. The survey also revealed that most of these workers have low education and they are employed as blue-collar workers.

Sir, most of these workers are also not young. There is merit for the Government to allow CPF savings to be drawn out by retrenched workers, especially if there are sufficient funds in their CPF accounts. After all, it is the workers' own money and they should be allowed to use it when they are out of a job and they are unable to find alternative employment or they have dependants to support.

It has been announced that the Government is not going to fully keep its election promise to upgrade HDB flats since there is going to be a downturn in the economy. The upgrading of HDB flats programme is going to be slashed down this year from 15 to 10 precincts. The question is: should the economy get worse next year, is the Government going to further cut down on the HDB upgrading programme? I would think so. We have seen the Government going back on its promise before. The problem is that in the last election, the Government thought that the Singapore economy shall be forever on the upward trend, accumulating surpluses year after year, more than $5 billion each year. Under such an illusion, it promised voters that the Government shall carry out upgrading of their flats should they support the Government policies, ie, in plain language, vote the PAP. Well, they have voted the PAP and returned all PAP candidates to Parliament except two.

What happens now? One-third of the voters may have to wait a very long time for their flats to be upgraded. The Government tells them now, "The economy is bad. We do not have enough funds." What is surprising is that the Government does not have enough funds in its coffers, yet it made a bold election promise to the people. Indeed, the Finance Minister in his Budget Statement does not think that the upgrading of HDB flats is a priority. The Budget does make special provision for education, defence, economic infrastructure like the reclamation of land at Jurong island, but there is no mention at all of HDB flats to be upgraded on a priority basis, although an election promise was made.

The other point is that the Budget also has not mentioned about retraining of retrenched workers. In fact, the Government only spends money on pre-employment training in schools and vocational institutes. The only source of funds for worker retraining is from the Skills Development Fund, which are contributed by employers. The Budget this year has not specifically put any money aside for retraining of retrenched workers. This only shows how caring the Government is for the plight of retrenched workers. I know it is not right to pamper our workers unnecessarily. But in times of economic difficulties, the Government must show some compassion to take care of our workers who are out of job and not rely entirely on the business concerns to retrain our workers. Business people are never altruistic. They are only profit-motivated. As such, they may even take advantage of the economic downturn and use the attract foreign talent policy to employ cheap foreign labour and to train them with skills so that they can take over jobs from Singaporeans. In the end, many of the top-paying jobs in our workforce may be taken over by foreigners - a situation where Singapore workers cannot accept.

The income tax rebate this year is only 5% compared to the previous year's when 10% rebate was given. Although the personal income tax rate this year has not increased, the net effect is that Singaporeans are paying more income tax due to the fact that rebates have been sliced by one-half. The 10% rebate should have been maintained because only a small proportion of the population is carrying the bulk of the tax burden. Since there are no tax reliefs this year, the Minister should maintain the 10% rebate.

The rebates and grants given to HDB flat dwellers in the 1-room to 4-room flats should be increased by at least one-half. The Government is spending $72 million on these grants and rebates, which is only about 2.7% of the expected accumulated surplus. The Government should double this spending because, firstly, many of the HDB flat dwellers or members of their families may be retrenched. Secondly, these grants and rebates are only sufficient to cover for the increased charges in S&C and the increase in electricity and water conservation rates. The HDB flat dwellers at most shall be put in a neutral position as regards payments for the utilities and S&C charges. They shall not gain by these grants and rebates. If the Government really wants to ease the hardship of HDB flat dwellers, especially the 1-, 2- and 3-roomers, it should double the amount allocated.

Mr Speaker: Order. I suspend the Sitting and will take the Chair again at 3.40 pm.

Sitting accordingly suspended at 3.19 pm until 3.40 pm. Sitting resumed at 3.40 pm