ANNUAL BUDGET STATEMENT

Debate resumed.

Mrs Yu-Foo Yee Shoon (Bukit Timah): (In Mandarin): Mr Speaker, Sir, I support the motion standing in the name of the Minister for Finance.

The financial and currency turmoil that engulfs the whole Asia has caught many people off-guard. Although the situation has somewhat stabilized, stock markets and currencies have collapsed and there is no sign that recovery is in sight. We are quite apprehensive about what is happening in our neighbouring countries. I believe Members have read from the newspapers that in certain countries tens of millions of people have lost their jobs. The loss of jobs also means the loss of incomes. Furthermore, there is no social welfare system to take care of them. The depreciation in their currencies coupled with two-digit inflation could only cause the situation to deteriorate further. This situation will remind elderly people of the days in the 50s and 60s when there was high unemployment and inflation. We hope international financial authorities would give a helping hand to these countries.

Singapore has been spared this financial and currency turmoil. Many Singaporeans are confident about their future because we have a strong foundation. Though affected by this regional crisis, we have been able to withstand it. Why is it that when our neighbouring countries are going through such economic crisis we come out unscathed? Singaporeans ought to ponder over this matter. In the last few years our regional economic situation has been good. We have surpluses in our budgets. Many people were rather critical about such surpluses. Had it not been for the surpluses we have accumulated over the past few years we would not have been able to maintain our currency value. That we are able to keep our Singapore dollar strong is due to the fact that we have massive surpluses to support us. We do not have natural resources, for example, oil or timber. We cannot support our currency with oil or timber. This goes to show that our Government is correct in accumulating surpluses. Perhaps now is the time to use some of the surpluses.

In the past 10 years our Finance Minister has worked very hard to give us prudent budgets year after year. The regional financial turmoil has taught us a few lessons. That is why we must have able political leadership and a sound political structure. Economic and social development should go hand in hand. The crisis has also put our stamina and mettle to the severest test in the most trying conditions. We have shown ourselves to be able to withstand such buffets and storms. This could be attributed to our sound economic and social structures.

In every election, our Government has been able to recruit able people to join the Government. In other countries, leaders are created by opportunity. We have been able to carry out self-renewal in leadership. The current budget shows that we pay great attention to the education of our young. While other countries have cut down expenditure on education we have increased it. When we talk about education we do not mean the acquisition of knowledge only. We mean the nurturing of an all-rounded citizen. In the last two days we have been debating the issue of bond breakers under the EDB scholarship scheme. If we had strengthened our moral education such incidents need not have happened. I hope that the Minister for Education would use this precious expenditure to nurture our next generation who should not only be well versed in knowledge and technology but who are also imbued with sound moral values.

This budget is a very pragmatic and prudent one. It reflects the Government's steadfastness in the midst of changes. If we are united and work for a common purpose, we will be able to weather such crisis. The last two days saw many MPs asking the Finance Minister to tell us more about his off-Budget measures to help our business community. I personally feel that the Minister has already got such plans to help our business community. When the time is right he will announce such measures.

Apart from education, I would like to talk about investing in economic infrastructure. We should be bolder in making such investments. Also the business community should make use of this opportunity to better prepare themselves for the years ahead when the economy turns around. Another issue is the training of our workers. I am a bit disappointed by the insufficient provision for the training of our workers. The Government has expressed that more funds will be provided when the need arises. Some Government agencies have formulated well thought-out plans to get workers to go back to training. I would like to speak at greater length on this issue when the allocations for the Manpower Ministry come up for debate. I hope the Minister would be more generous in allocating funds for this item.

While doing everything we can to promote economic development we must not neglect social development. We should set up a good and sound social safety net. This social safety net has a wider meaning. It encompasses several aspects. The first safety net refers to full employment for the workers. As long as we have sound economic policy and measures and our workers are prepared to upgrade themselves we will be able to achieve this first safety net. At present, this is not a problem.

The second aspect refers to the need for workers to continue to make themselves employable. We are worried about structural unemployment. The kind of investments we see in the future require a highly skilled workforce. The Government should not neglect this problem. Therefore, workers should try to make themselves employable as long as they are fit and healthy and their skills be made relevant to the latest technology.

The third aspect of the safety net is rather passive. The first safety net is to ensure full employment for our people. The second aspect refers to the need for workers to continue to upgrade themselves to be employable throughout life. The third aspect is social protection. I do not mean that we should adopt the western welfare system; we should not fall into such quagmire. I am referring to our CPF. Many people make use of their CPF balances to invest in this and that. Apart from purchasing homes, we also use our CPF balances to pay for education, medical expenses and for our old age retirement. During an economic crisis, our CPF contributions will be reduced. What I would like to suggest is that when a worker is retrenched something should be done to assist him. I would like to propose the setting up of a livelihood protection net. When we are in an economic crisis, when we are having negative growth, we can use this sum of money. How is this operated? We can encourage employers and employees to co-pay into this livelihood insurance ( ). They can use their CPF money to pay into this fund just like paying into their MediShield or MediShield Plus. When they are not able to maintain their basic living, they can use this money to pay for their basic living expenses.

Another point I want to talk about is: how are we going to help those elderly workers when they are retrenched? The NCMP mentioned about our Secretary-General's talk on retrenchment. He said other countries are doing something to help their unemployed workers. What about our Government? I want to explain to him. Our stand is that the best guarantee for the workers is to upgrade their skills and to give them training. When a company is faced with retrenchment or downsizing, the company will retain only those highly skilled workers. Therefore, we have to continue to urge our workers to be upgraded, trained and retrained. If our local workers' skill is as good as that of the foreign workers, we will retain our local workers unless the foreign workers are better skilled than our local workers. For those who are in the unions, we have approached the employers to devise other ways, eg, wage reduction, reducing the number of working days to cope with the downturn in the economy. Should they be retrenched, our Industrial Relations Unit also helps them to find new jobs. We also help them to go for retraining. We will pay for their training expenses. So I would ask the NCMP to read more of our union's magazines to have a better understanding of what we are doing.

When we adjust our budget, we should not neglect the importance of workers' training. It is important that while we should do everything we can to strengthen our infrastructure we should not neglect the importance of spiritual development. I am talking about the safety net provided by the family. In the past we used to receive support from the family, but nowadays the small nuclear families account for 80% of our household number. The close family ties have been eroded. I would urge the Minister to provide more funding to MCD to strengthen family bonding. Therefore, the Budget should provide support for technical education as well as social education and moral education.

With better political leaders, better economic policies, I believe Singapore will convert this economic crisis into opportunities so that the people and the Government can be united to upgrade themselves to move into the 21st century and we will emerge stronger than ever.

Mr Zulkifli Bin Baharudin (Nominated Member): Mr Speaker, Sir, I would, first, like to compliment the Minister for coming up with a good Budget during such a difficult time.

I would personally describe the Budget that was unveiled as focused and strategic, one that has laid the foundation for long-term recovery, productivity and competitiveness. However, for the short term, the Budget has failed to meet the immediate concerns of the general public and business community, especially the small and medium enterprises who hold a more pessimistic view of the economy. Quite naturally, Sir, they cannot appreciate the long-term benefits if they are worried and do not have confidence in the short term. Instilling confidence is crucial to business. You cannot do business by being pessimistic. We need to give businesses enough assistance that while they prepare for the worse, they can have enough hope for the best. Unfortunately, the Budget fails to provide the badly needed stimulus. The Minister diagnosed a mild prescription for an economy many see in dire need for stronger dose of economic stimulant. Off-Budget measures are indeed necessary and reassuring. However, the fear, as has been expressed earlier, is that it could be too little, too late, to help cushion the impact of further deterioration in the economy.

I would just like to touch on three main areas of emphasis in this Budget, as they really reflect our long-term priorities and strategies.

Firstly, education. Investment in education is crucial in good and bad times. The emphasis is, therefore, appropriate at least in keeping with tremendous momentum to prepare and develop Singapore into a knowledge-based economy. $1.3 billion has been set aside for development expenditure to pay for new school building programmes, media resource library, IT Master Plan, and a new polytechnic. Appropriately, there has also been a strong recognition that education is a continuing process throughout life, from pre-school to adult worker training and retraining. But I would like to highlight the need for more to be done for teachers by providing more resources in terms of training and development. Most of the training is now provided through the training and development budget. For in-service training, this can be increased and its availability be made more flexible, so that teachers can benefit from more resources and expertise outside the Ministry.

I would also like to suggest greater emphasis be given for parents to be more involved in their children's education by having them involved in new structured school programmes to emphasise the participatory approach, and that education of our young is a joint responsibility for all of us to shoulder.

Secondly, defence. While it is tempting we should not be lulled into thinking that defence priorities can be scaled down, when pressing economic challenges make resource allocation and competition with other social and economic priorities more problematic, it is precisely during these times that the lack of emphasis on defence can send wrong and unnecessary signals about the seriousness with regard to the defence of our nation. It is during these times that it is more urgent for Singaporeans to remain vigilant and aware of the vulnerabilities of our nation.

On a more practical note, Sir, I would like to ask for more resources, under public relations budget, to ensure that operationally ready units take on a more active role in communicating with NSmen, their families and their employers, instead of living it entirely to otherwise unknown officials or bureaucrats.

Thirdly, socio-economic. I would like to touch on a few of the specific incentives introduced and highlight some of the wish lists I have here. Firstly, while the freeze in rentals for HDB and JTC premises is a welcome move, there are indications that it may still be higher than some in private sector rentals which are more responsive to changes in the economy. Therefore, the Government should not hesitate to introduce rental reductions, if this is necessary. Government operating in the open market should be equally responsive when this is needed.

Secondly, the tax concession for the transport and logistics industry is timely in view of the efforts to reinforce Singapore's position as a global city of international trade. However, a foreign industry whose future survival is dependent on its ability to globalise its operation, incentives to help and encourage local companies to globalise through mergers, acquisition and establish global linkages would be more significant. Such incentives are absent from this Budget.

Thirdly, adjustment to land sales would help to ease the already excessive supply of private residential properties. One estimate puts it that it would take about three years to clear the existing supply of properties. Perhaps, the Government may want to review the whole issue of Executive Condominiums. The inherent restriction on foreign property ownership and limitations on Singapore dollar borrowing by foreigners for property purchase could perhaps be reviewed in the light of the current property crisis. The review is also timely in view of moves to attract foreign talents to settle in Singapore. I appeal to the Government to now consider allowing CPF monies to be used to pay for the initial 20% downpayment for property purchase.

I support the increase in development expenditure. As it is a prudent move and would maintain stability in the construction industry, it is also more cost-effective to carry out major infrastructure and land reclamation works during a period of economic slowdown. I support earlier proposals to reduce corporate taxes and freeze public sector fees and charges.

Sir, I hope that we do not forget those who face problems during these difficult times. Charitable organisations will find fewer generous and willing corporate sponsors to fund their various social and community programmes. Children and students whose families may have lost their jobs, though temporarily, we have the responsibility to ensure that they continue to go to schools and higher tertiary education through bursaries, scholarships, loans and grants. More funds should be made available, for example, through the Community Development Councils to fund these programmes as CDCs too will find it more difficult to raise funds through voluntary contributions from the public. Employers will face retrenchments, not just skilled or unskilled workers facing structural unemployment and therefore requiring retraining, but also white collar staff and professionals who need to acquire new skills and knowledge as their specialist knowledge and expertise now find fewer alternatives and opportunities. I am sure we have the necessary resources to help these people should and when the need arise.

But most important of all, Sir, is the need to galvanise our people during such times, for example, to help social community organisations. It must be made a parcel of every Singaporean life to contribute to society in whatever form. There is enough goodwill in our people that we can win their hearts and minds to help make Singapore a better place to live by helping our friends, neighbours and communities. Therefore, social community programmes should be enhanced and not reduced. We should not let the economic crisis make us more selfish, insular and damage the social progress that we have made so far. We must come out of this crisis not only to be economically stronger but also to be socially, culturally and racially more cohesive.

Sir, I support the motion.

[Mr Deputy Speaker in the Chair]

4.05 pm

Dr Tan Boon Wan (Ang Mo Kio): Mr Deputy Speaker, Sir, thank you very much for allowing me this opportunity to add my support to the Budget Statement. 37 hon. Members have spoken before me. There have been a lot of specific suggestions made to Minister Dr Richard Hu. Let me now confine myself to some general comments on the Budget.

The world and the market see our Government as rational and take the decisions it makes and what it says seriously. This is our strength and a national asset. We have worked very hard to achieve this image and confidence. The Budget encapsulates the Government's view of the economy of Singapore for this year. The firmness and prudence of the Budget reflect the quiet confidence of the Government. The market has read the signal and shares this sentiment. Hence, the Singapore dollar and the Stock Exchange of Singapore have remained relatively calm. I am also happy that the Government has kept open the option to introduce off-Budget measures later should the regional crisis worsen and our businesses and industries need help. This is a much welcomed assurance which further enhances confidence in Singapore.

Sir, there are two sides to a crisis. Because of the pain and suffering that accompany it, we tend to see the gloomy side. But there are silver linings to it, especially for the strong and the prepared. As a nation and a people, there are useful lessons to be learned from the crisis. These are life's lessons of hard knocks. If we imbibe these lessons, it would be like a body developing antibodies after a bout of sickness. With the antibodies, the body is strengthened and better prepared should the disease strike again

Sir, I am happy to share with the House my experiences of many discussions on the regional economic crisis with my residents and grassroots activists. They understand the regional crisis and appreciate its effects. It has affected them, their relatives and their friends. But there is little discontent or moaning. They have taken it stoically. They have hunkered down. They have not blamed the Government. In fact, they praise the Government for its foresight. Many said that they now appreciate the correctness of Government policies, the importance of good, competent, frugal and honest governance with a long-term view and a sound financial and banking system to the country. They understand that this is what has saved us from the worst of the crisis. They also realise the importance of individual responsibility, prudence and thrift. We must take this opportunity to drive home these lessons, the importance of good governance and individual responsibility, prudence and thrift, clear to our people, especially our young. This is also a time to unite our people. Once we have experienced such a crisis and understood the causes and the defence, these lessons become part and parcel of our psyche as a people.

The crisis is a costly lesson for the region and for us. We must learn and benefit from it. We must not let slip this oppportunity. An economic system goes through cycles. It is the law of nature. Good times follow bad times and vice versa. We should not be surprised by it. What we should do is to prepare for the bad times and for the opportunities to surge forward to greater height on the rebound. During good times, even the weak do well because there is plenty to go round. However, economic inefficiencies set in as resources are not efficiently allocated. This will go on until the system can no longer sustain the growing inefficiencies. An economic downturn occurs. When this happens, the weak are weeded out, clearing the way for the survivors to push the system forward to a yet higher level of performance on the upturn. The cycle will go on.

Sir, the market must be allowed to do its work. The system must be allowed to rejuvenate itself for the next cycle. This is not the first crisis that Singapore has faced nor will it be the last. In the same vein, the good time enjoyed by the region and Singapore is not at an end. We will rebound and the next stage of our prosperity will be even higher if we can seize the opportunities. To do this, we must keep our head during the madness of the crisis. We must plan and prepare to ride the next crest of the wave. In this light, I am assured by the Government's allocation of more resources for education, security and economic infrastructure development. This will put us in a stronger position to tap the future growth in the region. This is a rational and correct decision. However, these are expenditures that many countries in similar situation have chosen to cut down as they appear less urgent. This would be a mistake.

We must not be complacent that we have weathered the crisis better than others and allow hubris to blind us. Comparative advantage is relative. We have benefited from the weaker systems of our neighbours. Their deeper problems in comparison add to our competitive advantage. But this is temporary. When they recover, their systems will be stronger. In the long term, this will reduce our advantage and our efforts to keep ahead will become more difficult. We must take this opportunity now to move faster ahead. We must review our systems, assumptions and fundamental beliefs and make changes to strengthen them further to make them more robust. In any case, we need to carry out this exercise regularly, especially now that the world is getting smaller and changing faster all the time. The Government has been doing this. An example is the announced changes to our financial system. The Minister is right to provide incentives to develop the financial sector.

Another is the announcement of the modification of the entry requirements of the universities, something which was viewed almost sacrosanct. This will give added credence to our profession of creativity and innovation. Yet another is the recent announcement changes to our road tax structure. These are but three examples. These are glaring testimonies to the ability and the willingness of this Government to meet difficult but necessary changes for the future. We may need to do more, much more in this area.

Sir, as I reflect the impact of the regional crisis on our people, I am reminded of the fable of the ant and the grasshopper. During the warm summer, while the ants steadfastly prepared for the cold winter, the grasshopper went about his carefree ways. The pains and the joys change position during winter. The colony of ants knows this and has imbibed the lesson. They will survive. I would like our people, institutions, businesses and industries to be like the ants. During the good times, we should work hard and prudently build up our reserves in anticipation of the bad times. If the bad times do not come, we will have extra reserves and resources and we would have lost nothing. But when winter comes, we are prepared for it and we will survive in relative comfort until spring comes around again.

Dr Wang Kai Yuen (Bukit Timah): Mr Deputy Speaker, Sir, allow me to add my support to the motion standing in the name of the Minister. At this time of economic contraction and regional political uncertainties, I believe it is wise for the Minister to be prudent and conservative. While no recession is in sight, the situation could be changed unexpectedly if economic upheavals rock those Asian countries hitherto unaffected by the Asian flu. There are lingering uncertainties as to whether China could avoid devaluing its currency in order to remain competitive. The IMF has withheld the release of additional funds for Indonesia as the conditions for market discipline are not being met. As we read from the papers, President Suharto has declared that the mandated IMF measures are against the Indonesian constitution, perhaps indicating to the market that more shocks are in store for the regional economy.

In my view, Sir, our treasury therefore must have sufficient surpluses to instil confidence in our financial system and to react to unseen circumstances. Many Singaporeans are experiencing pains when the growth slows down in the current time, and are urging the Government to provide stimulus to the economy. In my view, given that Singapore has experienced more than 10 years of double-digit growth, it is not necessarily bad to pause for a breather and to wring out the excesses in our economy that had happened in the last two years. Indeed, I applaud the Minister for resisting calls for measures to stimulate the economy the very moment we have encountered a small correction.

Mr Deputy Speaker, Sir, let me now turn to the findings of the Feedback Unit. Last week, the Feedback Unit conducted a series of five sessions with the business community and the general public. I chaired the session for the business community and would like to take this opportunity to provide a summary of the reactions of the business community. In this particular session, representatives were drawn from the various Chambers of Commerce, small and medium enterprises as well as selected corporations.

The general consensus of the budget is that the Minister for Finance has adopted a reactive rather than a proactive posture in this uncertain time. Given this mental framework, the resultant budget is actually reasonable despite its lack of financial stimuli. However, participants have questioned whether the Minister has taken into consideration that the economy has contracted rapidly in the last two months, and is indeed much worse off than the time the budget was prepared, given that the budget was probably prepared in December and then reviewed in January. The Singapore International Chamber of Commerce's representative highlighted that there are instances to indicate that MNCs are repatriating their expatriates from Singapore and taken this as an indicator that the trend has been going downwards rapidly and is still accelerating.

Generally, all the participants felt that the budget is biased towards helping the financial sector and not enough attention has been paid to the manufacturing sector. In fact, several participants even mentioned in jest that perhaps the financial sector has the ears of the Government. So I think it is important for the Minister to dispel this misperception.

On the subject of helping small and medium enterprises, participants felt that increasing the risk sharing of loans in the Local Enterprise Financing Scheme (LEFS) by the Government is laudable. However, the relaxation of this scheme should not be viewed as tantamount to extending greater help to SMEs. Relaxation in qualifications for LEFS only increases the number of firms that will qualify for this scheme, in particular, those with higher turnover and those who are probably already stronger than others. But it did not increase the benefits for those who are already qualified but need greater assistance.

Most participants have looked forward to the Government helping to reduce the cost of doing business in Singapore. They felt that the rental freeze by HDB and JTC and the 15% property tax rebate, while welcome, do not truly address this problem. The reason being that rentals have been on the downward trend for more than half a year. So the rental freeze for another 12 months is a non-event. For those renting private commercial properties, they would typically enjoy little or no spin-off as a result of the 15% property tax rebate.

On the issue of property tax, several participants took the opportunity to point out that the Government's action is an irony, in the sense that IRAS has sent out recent tax increase notices for residential properties. Yes, they understand that such notices are sent out after tracking the market for several months, but the action is still contradictory to current trends and also adds to the financial burden of the taxpayers.

The Minister has encouraged companies to deal with excessive labour cost by trimming the variable component of the flexi-wage system. Several SME representatives pointed out that in the boom years, small companies have been forced to pay high wages to keep their workers, and they did not develop a flexi-wage system, as the Government encouraged them to do and as the larger companies have already implemented. They pointed out that it is not accurate to assume that all companies can adjust their wage cost by adjusting the variable component of the flexi-wage system. Perhaps these companies have themselves to blame for getting into this current state of affairs. But that is the reality of the labour market and they continue to urge the Government to look into the reduction of the employer's portion of the CPF contribution as an option to help them to reduce business cost.

Coming to the challenge of workers' training and retraining, most participants, including those from the SMEs, believed that the current lull period is the best opportunity to train our workers in preparation for the upturn in the business cycle which will inevitably return. With lower business activities, employers could release workers for training without missing their deliverables. And workers' loyalty could therefore be enhanced and cemented. Participants urged the Government to support the call by the unions to fund additional workers' training and retraining. They also urged the relevant fund administrators to speed up the reimbursement of training grants so that their cash flow problems could be reduced, as interest cost has become quite volatile and has increased in recent months.

Mr Deputy Speaker, Sir, it is obvious that the retail sector will be facing another year of worsening business. Participants expressed surprise that the Government would reduce consumers' disposable income at this juncture, when in fact the reverse should be the case to help the retail sector. Their rationale is as follows: for several years now, the Minister has granted one-off personal income tax rebate of 10%. It has almost become part of the income tax structure. Therefore, this year's one-off 5% rebate is equivalent to an increase of personal income tax and the $130 million of disposable income has been withdrawn from the economy. If the Minister has retained the traditional 10% rebate, it would only reduce the $2.7 billion surplus by a minuscule 5%. This percentage is not very significant to the surplus but very important to the domestic retail sector at this very difficult time. Hence, most of the participants could not understand what moved the Minister to take this step at this point in time.

At the feedback session, the Singapore Chinese Chamber of Commerce and Industry reiterated its request for a central committee to coordinate all Government fee increases so that their impact could be moderated over time. In this respect, the Singapore Power's recent rate increase of 5% is being held up as an example, and most people felt that the increase is untimely. Electricity being essential and unavoidable to all businesses, the electricity rate increase adds to the burden of enterprises and manufacturing precisely at a time when cost reduction is what all of us should be concerned with. Many wondered whether the corporatisation of Singapore Power with its goal of increasing its return of assets is the real reason for the rate increase, rather than the higher fuel cost. The Singapore Chinese Chamber of Commerce and Industry also reiterated its call for the Minister to make use of some of the $2.7 billion to assist businessmen at this time. And my colleague, Mr Tay Beng Chuan, has gone into it in detail, and I would not do so.

Sir, the regional economic crisis also brought difficulties for small traders whose businesses have always been done on credit. Their businesses have been squeezed by the regional economic crisis. And with the collapse of the Indonesian rupiah, the credits extended to their Indonesian clients have turned into bad debts. This problem has already dragged down the profits of the big four banks. The small traders are suffering in silence. They are hoping that the credit guarantee scheme proposed by the Prime Minister could be put in place quickly to enable them to continue their business.

Many companies have ventured overseas in response to the call by the Government to sprout a second wing, and many have suffered losses in their overseas subsidiaries. The participants would like to appeal to the Minister to allow these companies to make use of such losses in their subsidiaries to offset taxable profit in the Singapore parent company. They are aware that the Minister has not been sympathetic to this appeal in the past. But they would like the Minister to review the situation, as much of the losses recently is not due to bad business judgment but circumstances beyond anyone's anticipation and control.

Sir, that summarizes the feedback of the business community in the Feedback Unit's discussion. I believe the views expressed are fairly representative. Everyone present was very grateful for the undertaking given by the Minister to make use of off-Budget measures to assist the businesses if the economy takes an unexpected turn for the worse, although they would like to know what those measures are likely to be. What is interesting to me is that everyone has an unshakable confidence in the Government's ability to turn the tide if the need arises. Maybe that is a compliment to the Minister for Finance.

As an additional comment on the timing of the feedback, the Singapore International Chamber of Commerce and Industry feels that it would be more meaningful to have a session with the Ministry before, rather than after the Budget sessions. The practice by the Hong Kong and Malaysian authorities was cited as examples of other governments' practices.

It would be a disservice to the participants if they came across as being too parochial in their views. Therefore, I would also like to reflect their attitude when other aspects of the budget are being touched on. When it was pointed out to them that the Government indeed increased allocation for infrastructure expenditures such as Jurong Island, Changi East as well as provision in the Ministry of Education for new schools, they agreed that these are important stimulus measures albeit confined to the construction sector of the economy. It is also useful to note that they have no issue with the defence expenditure, despite its substantial increase from 4.4% to 4.6% of GDP. Indeed, they were very supportive of the need to maintain defence capability, especially at this time of uncertainty. They generally feel that their concerns would pale against the consequences of potential social upheavals in Indonesia if riots over cost of basic necessities become widespread and uncontrollable. Put in this context, all participants agreed that the Minister for Finance has achieved a judicious balance between being conservative and proactive in managing our nation's finances at this juncture when the future is so uncertain.

Mr Deputy Speaker, Sir, I would like to compliment the Minister for an excellent budget, giving something for everyone although the amount given out is a little bit less than last year. At a time when other Finance Ministers in the region have to scramble to keep their nation's finances afloat, our Minister can still boast a budget surplus. He must be the envy of Finance Ministers everywhere else. If any Singaporean still has doubts of the effectiveness and the farsightedness of our political leadership and of the PAP Government, I believe that this budget should dispel all such doubts.

Mr Yeo Guat Kwang (Cheng San): (In Mandarin): Mr Deputy Speaker, Sir, this year's budget can be said to be a sure and steady budget. It is like a description in the Chinese kung fu story: "when a blow is delivered, only 50% of the power is used with some power kept in reserve. Contain motion with quietude and counter changes with no change." I support this kind of budget. When we make the offensive, we must always reserve some strength for the defensive.

On the positive side, this budget seeks to strengthen the financial services sector which is the first to bear the brunt of the regional financial crisis. The financial services sector is a high-value added industry. It provides the impetus for the other trades and industries to progress and to ensure their long-term steady growth. It has the greatest effect in promoting the overall economic development and to provide job security and good remuneration for the workers.

In this year's budget, emphasis is given to the areas of infrastructure construction, education and defence. At the present stage, these are the areas which need to be strengthened to enhance our competitiveness. It is a wise move.

However, enhancing the skills of our limited human resources and their employability is also a task which brooks no delay. Can the Government consider increasing the allocation of funds to support those who are willing and prepared to upgrade their skills, so that they can go for training to enhance their employability? Just as my colleague, Mr Lim Swee Say, has said just now, this is in line with the long term interest of our economic development.

After the recession in the 80s, we came to know of an effective and not too painful way to help the nation and the people to tide over the crisis, ie, the flexi-wage system. Where necessary, the flexi-wage system can help lighten the burden of labour cost of the investors without affecting the basic wages and income of our workers. Can the Government consider introducing some measures to encourage the private sector to fully adopt the flexi-wage system?

For the time being, Singapore's economy has not gone into a recession as in the 80s. I urge the Government not to consider reducing the CPF contribution rates on either the employers' or employees' sides. I hope the Minister will give our workers an assurance that until and unless all other options are exhausted, the Government will not reduce the CPF contribution rates for the employers and employees.

Under the effect of the financial and currency crisis, and the uncertain market situation, the voluntary welfare organisations (VWOs) are heading for a hard time. They are facing tremendous pressure in trying to meet the target for their fund-raising efforts. The Chinese characters for raising fund are chou kuan [ ]. The first character chou sounds exactly the same as the Chinese word [ ] for worry or anxiety. To these VWOs, to raise fund is to "worry about the fund". It is like the Chinese saying: "the worries reflected on the frowning brows strike deep into the heart". The famous female poet Li Qing Zao from the Song Dynasty once wrote a well-known line: "All the boats on the two rivers are not enough to ferry all my worries." Many of these voluntary welfare organisations may be paralyzed because they are unable to raise enough funds to attain their target.

At the moment, organisations which provide convalescence service, recuperative service for the chronic sick or day care service for the aged, enjoy a uniform 50% subsidy from the Government. Can the Government consider granting a higher subsidy to the financially troubled organisations such as those providing these convalescence or recuperative services? Can the Government increase the subsidy from 50% to, say, 65%?

There is a Chinese idiom kai yuan jie liu [ ], meaning, increase income and decrease expenditure. If the Government is unable to provide more subsidy, ie, to increase their income, then perhaps it may consider setting up a special task force to help these voluntary welfare organisations improve their efficiency so as to reduce the recurrent expenditure. Can they be given higher rebates on the road tax of their vehicles? This will help to lighten their burden. The Government may also consider providing some professional and less expensive medical supplies to reduce their operational cost. Finally, I hope that despite the shadow of this economic crisis, the Government may seriously consider introducing some measures to allow the cultural organisations to have some discounts when they rent the venues for performances to send the signal that the Government's effort to promote the arts to develop Singapore into a gracious society will not be slackened.

Dr Teo Ho Pin (Sembawang): Mr Deputy Speaker, Sir, I rise in support of the motion proposed by the Finance Minister.

This year's budget is indeed a prudent and focused budget. The budget signals to all Singaporeans to be prudent in their spending in view of the current regional financial turmoil. As highlighted by the Finance Minister, and I quote, "The regional crisis is far from over." Singapore must be both mentally and financially prepared to overcome this crisis.

The budget has also taken the opportunity to further increase the economic competitiveness and capabilities of our country. The 24.9% increase in development expenditure clearly shows the Government's commitment and long term strategies to position Singapore as a global player in the next millennium. I fully support the increase in capital expenditure on education, defence and economic infrastructure.

Sir, let me now discuss the details of the budget.

Rebates for individuals

In view of the regional crisis, Singaporeans, especially the low income earners, will face tougher times ahead. Some may even face unemployment or disruption in their monthly income. During such times, they would need every assistance rendered. Being a people's Government, this Government must offer more financial assistance in whatever forms to help Singaporeans to tide over the crisis.

There are about 3,000 families living in 1-, 2- and 3-room HDB flats which will be affected by the rental and S&C rebates. The S&C rebate ranges from 0.5 months to 2 months. In many town councils, arrears for S&C charges range between 10% and 15%. The majority in arrears owe one, two or three months. Thus, rebates for S&C as provided by the budget will not have any direct benefit to these families except helping the town councils to improve their financial position.

Last year, the Government gave $36 million in rental and S&C rebates, which have benefited many Singaporeans. I would like to urge the Finance Minister to consider increasing the rental and S&C rebates for 1-, 2- and 3-room HDB residents. We should provide at least three months' rental and S&C rebates to 1-, 2- and 3-room flats.

In addition, a more direct way of providing assistance to the low-income earners is to increase the utilities rebate for these families. Low income families, in particular those with large families, will encounter much difficulty to cope with the increase in utility rates. I do not think the provision of utility rebates will hamper efforts by the Government to encourage Singaporeans to save water and energy. In fact, many of these families are very careful in the utilisation of water and energy, as many could not afford to pay high utility bills. Thus, I would urge the Finance Minister to at least provide $300 for utilities rebates during this difficult period.

Property tax for residential properties

Although the budget provides a 15% property tax rebate for commercial and industrial properties, no relief was provided for home-owners. Many home-owners, especially those in the private residential, are facing high costs of servicing their property loans due to rising interest rates.

In 1993, the Government introduced the GST to widen our tax base, and focused on taxing consumption instead of income and investment. Traditionally, property tax provides a major revenue source to the Government and enables the Government to stimulate investment and encourage development in the country. With the introduction of GST and the Government's thrust on asset enhancement, the role of property tax must be reviewed.

Today, over 90% of Singaporeans are homeowners as a result of the efforts of our Government. To levy a 4% property tax on owner-occupied properties amounts to taxing 90% of all Singaporeans. This works against the GST taxation philosophy and the asset enhancement programmes.

Furthermore, the computation of property tax, which is based on annual value valuation, has resulted in lots of unproductive administrative work and unhappy home-owners. In the last recession in 1985, there were 20,285 objections raised by homeowners on the annual value valuation of their properties. Just imagine how much time and efforts were spent by the Inland Revenue Authority of Singapore and Singaporeans to resolve these objections.

Therefore, I would like to urge the Finance Minister to take the drastic step to initiate a gradual property tax reduction mechanism which will finally remove property tax for owner-occupied properties.

Development expenditure on education

I commend the Finance Minister for allocating a generous budget for the Education Ministry. I fully agree that we should continue to invest and upgrade our educational system to produce a quality workforce which will spearhead our country's economy into the international market in the next century.

A total of $847 million has been allocated for the upgrading/rebuilding and construction of schools and the provision of IT resources. While it is good that we continue to strengthen our education system, we should also take this opportunity to increase the capabilities of our own local IT firms.

Special tie-ups with the Local Enterprise Financing Scheme could be arranged to allow small and medium IT firms to provide services to the Education Ministry. These exposures will definitely increase the innovative, creative and competitive capabilities of our IT firms.

Thus, I hope the Finance Minister would further expand the Local Enterprise Financing Scheme to give priority to local IT firms which are keen to serve our Education Ministry.

IT grant for pre-school centres

In order to develop a national attitude of "Thinking Schools, Learning Nation", we need to initiate programmes for our children at a very young age. IT provides an excellent means to arouse interest in creative learning and develops thinking skills for our children.

We need to start early, and pre-school education plays an important role in facilitating the IT Master Plan of the Education Ministry. The PAP Community Foundation, NTUC and some private kindergartens are providing excellent pre-school education services to prepare our children for primary schools.

About 80,000 students are enrolled in the PAP Community Foundation pre-school centres and kindergartens each year. A large proportion of these students enter the main stream primary education yearly. However, not all pupils have the privilege to learn IT skills in these centres. The PAP Community Foundation and NTUC are non-profit making organisations and thus have limited financial resources. As a result, they are unable to provide computer-aided instruction facilities to all its education centres.

I understand that the Education Ministry would like to concentrate on main stream education, and let the private sector provide pre-school education services. But the Government should provide support to encourage private pre-school institutions to improve their teaching facilities, especially in IT-related areas.

I would like to urge the Finance Minister to provide capital grants to approved pre-school institutions for the setting up of IT teaching facilities. To further encourage Total Education of our children, the Government should also set up a Pre-School Edusave Fund. This fund can provide subsidy for pupils in pre-school institutions to take up enrichment courses such as IT, music, thinking skills, and drama to further develop the potentials of our children.

Finally, I hope that the Finance Minister will seriously consider providing more rebates for the 1-, 2- and 3- room HDB flats, increase the utilities rebates, reduce property tax and provide grants for pre-school centres to improve their IT facilities. If this cannot be done now, I hope the Finance Minister will take off-Budget measures to provide financial assistance to low income families when the full impact of the regional crisis takes place.

Sir, I support the motion.

Mr R. Ravindran (Bukit Timah): Mr Deputy Speaker, Sir, I support the Budget. First, I would like to extend my sincere appreciation to the Government and, in particular, to the Minister for Finance for the prudent fiscal policy implemented over the years. This can be seen in the degree to which we have been affected by the on-going economic crisis and how we are able to weather the present crisis. Many Singaporeans in many feedback sessions have stated that they now understand better and, in fact, appreciate the Government's foresight and prudence in building up the large reserves over the years.

Sir, let me now move on to the current Budget. The Budget has been hailed by some as a thinking man's Budget. I wish instead that it had been everybody's Budget. While I commend the Government for being prudent, I feel that this time round the Government has been far too conservative in its fiscal policy.

Sir, the regional economic environment has turned for the worse. The latest delay in the review of the IMF package for Indonesia and the disbursement of the second tranche of loan will mean that the political, economic and social environment in the region may get worse. The latest earnings warnings last week from big US electronics corporations will mean that the outlook for the local electronics sector, which makes up half of the manufacturing industry, will not be too bright. The regional economic climate, the local retail, tourism and property slowdown, coupled with the high interest rates, lower incomes, and high Government charges, fees and rentals, will only add to the economic slowdown.

While some fiscal stimulus was introduced by increasing capital expenditure, I was disappointed by the lack of fiscal stimulus in increasing personal consumption. I certainly expected more preventive medicine to prevent the economy from getting sick.

Sir, I commend the Government on continuing with its long-term objective of developing a good educated workforce, an excellent economic infrastructure and a strong defence force. These are basics which are vital for our survival and in maintaining our economic competitiveness.

Sir, let me now move on to some of the budgetary issues that are of concern to Singaporeans.

Income tax rebate for individuals

The first issue, Sir, is the income tax rebate for individuals. There was general disappointment in the smaller amount of income tax rebate that was given to individuals. Many have expected a 10-15% income tax rebate. Many feel that the tax payable will become an increased burden in the present environment, as many Singaporeans use their current income to pay last year's income tax. Many find it hard to understand why the Government is less generous this year when the economy is slowing down and many are expected to earn less, or even be jobless. The Government could have been more generous as the budget surplus is usually underestimated in the Budget.

Local Enterprise Financing Scheme

Let me now move on to the second issue, which is, the Local Enterprise Financing Scheme. Our businessmen appreciate the recognition by Government of the difficulty in getting capital and the increased cost of capital to support their business activities. The increase in provision from $760 million to $1.1 billion looks substantial on first sight. However, some businessmen have expressed concern that the impact on smaller companies would be negligible for the following reasons:

Firstly, there will be an increase in the number of companies which will qualify for these loans as the eligibility threshold has been increased.

Secondly, there may be a tendency to devote more of these new loans to the bigger and better capitalised companies.

Thirdly, banks have already become very stringent in their lending and smaller businesses would find it even more difficult to obtain these loans from banks which administer the scheme.

Sir, I would urge the Minister for Finance to ensure that the following requests be looked into:

First, that small and big companies are equally assisted under the expanded LEFS scheme to avoid complaints of any bias towards the bigger companies. The Minister may perhaps consider imposing a quota on the total amount that can be disbursed to the bigger companies to ensure that smaller companies are not left out.

Secondly, that banks are not too conservative in setting the criteria or standard in considering these loan applications, in view of the present business conditions. In view of the Government sharing a greater part of the risk in the LEFS scheme under the Budget, I think the Government should play a bigger role and have a greater say in the credit analysis and disbursement of these loans.

Thirdly, I would request that a Government-nominated officer sit in the credit committee of the banks considering loans under the LEFS scheme, so that Government can gather faster feedback on the criteria and standards set by the banks. This would enable the Government both to monitor the loan disbursing process and make changes in the criteria and standard, if necessary, to assist local companies. Such timely feedback would be essential as companies' financial needs and problems must be attended to promptly before they go under.

Sir, let me move on to another topic. No increased taxes on alcohol

Sir, the Government has traditionally sent a strong message to discourage cigarette smoking by increasing the duties on cigarettes. However, I was disappointed that the Government does not view the serious consequences of alcohol consumption. It is becoming increasingly clear that more and more Singaporeans are consuming alcohol. Even the young are starting to consume alcohol at a younger age. By keeping the duty on alcohol at existing rates, the Government is sending the wrong message to the population, particularly to the young. I must express my disappointment that the Government has not made alcohol more expensive and help prevent many Singaporeans from getting into this habit which is seductive in the short run, but addictive in the long run. Sir, I hope the Government takes further measures to highlight the health hazards of alcohol and the problems of alcoholism.

Mortgage interest relief scheme

Sir, let me now move on to the fourth issue, ie, the mortgage interest relief scheme, which was introduced in the Hong Kong budget. One of the consequences of the property bubble until May 1996 has been the increased number of Singaporeans who have committed to property. Many middle income families, particularly those with fixed income, are affected by the sudden increase in the mortgage repayment amounts. Some are tiding over with savings. Some have surrendered and let the banks repossess their properties. With the continuing economic uncertainties, more may not be in a position to repay their property loans. The general feeling among Singaporeans is that local banks are quick to raise interest rates on loans but are very slow in reducing them. It may perhaps be some time before interest rates on property loans come down.

It would go a long way if some form of mortgage interest relief scheme could be extended to residential property owners, if not as a permanent relief, at least as a temporary relief, on a year-to-year basis. Such a scheme could for a start be extended to owner-occupied residential property and be limited to one property. I hope the Minister could consider such a scheme to help residential property owners.

Help for manufacturing sector

Fifthly, Sir, in respect of help for manufacturing sector, many in the manufacturing sector have criticised the Budget for focusing too much on the finance sector. Their criticisms may not be totally unjustified. The Minister may perhaps have chosen to wait for the report of the Committee on Singapore's Competitiveness before introducing more measures to help the manufacturing sector. I would urge the Minister and the Government to hasten the Committee's Report, as the manufacturing community is becoming more worried each day with economic conditions turning for the worse. So when the Report does come out, I hope the Minister will move equally fast to implement the recommendations to help the manufacturing sector.

Freeze on increases in Government fees and charges

Sir, the sixth issue is the call for a freeze on increases in Government fees and charges, which was also highlighted by two other MPs in their earlier speeches. In the light of the continuing deterioration of economic conditions, it is quite clear that the incomes of Singaporeans would remain unchanged or even drop. Government leaders have already agreed to a wage freeze. It is quite clear that the private sector will take the signal and follow suit. It is important that Government Ministries, statutory boards, autonomous agencies and other Government agencies freeze any increase for the next 12 months until the economic outlook changes for the better. If Government and related agencies increase fees and charges, it would naturally mean a drop in real income for Singaporeans. It will also send the wrong signal to the private sector that it is okay to increase their rates and charges. Sir, here, I hope the Government can set an example and lead. On this note, I must say that the recent increase by Singapore Power in the tariff for electricity did not go down with businesses and Singaporeans at large. I hope the Minister can implement a policy to freeze all increases for one year and not restrict them to JTC and HDB rentals.

Feedback from business and ordinary Singaporeans

Sir, the seventh issue which has been covered by the Deputy Chairman of the Feedback Unit, Dr Wang Kai Yuen, is basically that feedback from the business and ordinary Singaporeans is not obtained before the Budget is finalised. Even if the views of businesses and ordinary Singaporeans are not acceded to, they are by and large generally happy to at least feel that they had their fair share in giving their opinions and views. I must agree that timely feedback from the interested quarters may make a difference. For example, the Minister and his officials, while preparing the Budget some time back, may be of the opinion that matters have not deteriorated to warrant further measures in this Budget. However, the business community which is involved in the day-to-day running of business will tell you that matters are deteriorating too fast and that urgent action needs to be initiated before many go down. I would like to urge the Minister to initiate dialogue and feedback sessions with various interest groups prior to the preparation of future Budgets. This will certainly enable more timely feedback to be obtained and enable the Minister to formulate a Budget that takes into account all views and opinions. It will certainly create a sense of participation by all Singaporeans in their national Budget.

Sir, in conclusion, let me say that this year's Budget will certainly benefit our country and enhance our long-term competitiveness. I am confident that Singaporeans will rally behind the Government in these uncertain times. Many business sectors and individuals will be affected by the ongoing regional economic crisis. I urge the Minister to act early and generously to help the affected groups and individuals as part of his off-Budget measures before it becomes too late.

Sir, I support the motion.

Mr Kenneth Chen Koon Lap (Hong Kah): Mr Deputy Speaker, Sir, it is always difficult to be the last speaker on such a well-responded debate, with so many eloquent and capable speakers before me. Every aspect of the Budget is covered in such great depth and detail. Nevertheless, being from the private sector, I have to join in with those Members who appeal to the Minister for more speedy and positive response to the current economic turmoil.

The tax incentives given to the financial sector are most generous but will only yield results in the long term basis. The business sector needs more immediate stimulation. There is a Chinese saying, "Yuan shui bu neng jiu jin huo" [ ] - roughly translated, "Distance water cannot fight close fire".

Sir, I am alarmed at how fast and unpredictable events have deteriorated during the mere one week after the Minister has introduced the Budget. Conflicts have surfaced between the Indonesian government and the IMF. The possibility of IMF withdrawing its rescue programme is very real. The rupiah has plunged to more than 12,000. The whole region's currency and equity market is going into another tailspin. In Singapore, our banks' profits drop sharply and the international investment services have lowered the ratings of our top six traditional solid banks, from stable to negative. Corporate results released are disappointing. And the likelihood of us going into a recession in all probability may become a reality.

In the building industry which I have very close contact with, the situation is far from stable. Some construction companies are already in danger of going into liquidation and have assigned their existing work for others to carry on. Most of the consultancy firms in this industry are actually engaging in retrenchment exercise. Some have gone into restructuring where they combine retrenchment and overall pay reduction in the hope that they can preserve as much as possible the existing organisation structure. Although this is a move in the right direction, how long and to what extent they can last remain a very pessimistic question. Although it should be the Government's responsibility to ensure the success of private enterprises, in times of very unusual crisis like this one we are confronted with, the Government can be instrumental in assisting them to survive through this difficult period.

It is not a question of propping up the interest of a few individuals but rather how to ensure our long-term national interest can be safeguarded. For example, if the Government introduces measures to stabilise the property market, it should never be seen as an act of helping a handful of developers. Their individual survival is inconsequential, but for the reason that a complete collapse in the property market will not only affect nearly 90% of our people who are home-owners and the implication of such fall-out will also have a very serious negative domino effect on our economy. One only has to look at what is happening in the property market in Indonesia and Thailand to realise the serious consequences.

We have always taken comfort in the fact that we have built a strong foundation in Singapore through having good governance, developed a world-class infrastructure and cultivated a highly educated and skilful workforce. This is the reason why we have achieved phenomenal economic success in the last decade. Therefore, it is of paramount importance to preserve this irreplaceable asset, be it in the private or public sector. We have to ensure that in coping with the inevitable crisis in our economy during the next few years, we must do everything we can to keep the infrastructure in all our businesses, manufacturing and professional sectors intact. It has taken us the last 20 to 30 years to build up this infrastructure and much has been invested in time and money to build up the hardware and software as well as to develop to the fullest the human resources. If we allow it to disintegrate, the implication can be extremely negative. Not only all this talk about the advantages we have over our neighbours in being able to jump start our economy when the region's economies recover will be neutralised, but our achievements in the past three decades may be just mere history and our vision for the future may never be a reality.

Therefore, it is essential for the Government to act now to induce greater confidence into the already depressed business climate. Much more can and should be done in terms of tax reduction, rebates or any measure to reduce the cost of doing business. We must help to lift the sentiment and restore confidence in the market. We must position ourselves as a strong economic force to ride the wave of recovery. Otherwise, we will have to join our neighbouring countries to struggle to rebuild our economy long after this crisis is over. I have full confidence that, with sound and decisive Government action and our resilient population, we will be able to ride through this storm. All we need is for the Minister to provide some high octane fuel to keep our economic engine running.

Mr Deputy Speaker: Order. I propose to take a break now and will take the Chair again at 5.20 pm.

Sitting accordingly suspended at 5.05 pm until 5.20 pm. Sitting resumed at 5.20 pm