ESTIMATES OF EXPENDITURE FOR THE FINANCIAL YEAR 1ST APRIL 1998 TO 31ST MARCH, 1999

Order read for consideration in Committee of Supply [1st Allotted Day].

[Mr Speaker in the Chair]

1.38 pm

The Chairman: Estimates of Expenditure of Singapore for the financial year 1st April, 1998 to 31st March, 1999, contained in Paper Cmd. No. 3 of 1998.

I shall take the totals for each head of expenditure in the Main and Development Estimates appearing in the last columns of the Main Estimates and Development 879Outlays for FY 98 on pages 35 and 36 respectively of the Command Paper.

Besides the "guillotine" times for heads of expenditure, which I have fixed under Standing Order 89(7)(a), I have also allotted the time for the discussion of each amendment in the Estimates. The time allotted for a discussion includes the replies from the Frontbench. I shall announce these times whenever necessary as we go along.

Although the sitting time of the Committee of Supply has been extended to 6.45 pm each day and we have added an extra day, we will still be hard pressed for time. The time we have available falls short of the times Members have indicated would be required for discussion of their amendments. Members will therefore not necessarily be given the amount of time they have requested. Other Members who would like to join in the debate on a particular amendment will be allowed to do so only if there is sufficient time left on the amendment.

We have received a total of 465 notices of amendments. This is the highest number we have ever received for the Committee of Supply. Together with the replies from the Frontbench, this means my Deputy and I will be listening to a great many speeches in the coming days. Because of the shortage of time, there may be occasions where I will have to exercise the guillotine on Members. However, I hope the inflicting of such pain on you will be minimal, better still not necessary at all if speeches are kept short and sweet. As in previous years, with the cooperation of Members, I will endeavour to keep the debate going at a brisk pace.

I shall deal first with the heads of expenditure in respect of which amendments stand on the Order Paper Supplement.

Head V

The Chairman: Head V Prime Minister's Office. I am afraid the discussion on the Ministerial Statement has eaten into the time I have allotted for this Head. So I urge Members to come to their point when making their speeches. Dr Lee Tsao Yuan, please move your amendment.

Dr Lee Tsao Yuan (Nominated Member): Sir, I beg to move,

That the total sum to be allocated for Head V of the Main Estimates be reduced by $100.

Sir, the Prime Minister, during his National Day Rally Speech last year, discussed the reasons for a greater inflow of foreign talent. It is to continue to develop Singapore into a dynamic, vibrant city state, an important node in the network of global cities such as New York and London. However, the announcement of the foreign talent policy has set off some disquiet in Singapore. Concerns expressed range from whether foreigners will take away our jobs, or our children's jobs, to whether this will result in landed property and cars being even more out of reach of the ordinary Singaporean.

I agree with the importance of attracting foreign talent into Singapore and they will augment our limited human resources. This policy has benefited us in the past, and will benefit us in the future. Some of the foreign talent will leave after a short stay while others will sink their roots here and obtain either permanent residence or Singapore citizenship. When they adopt citizenship, they are every bit a Singaporean, as those of us who are born and who grew up here.

I believe that part of this disquiet stems from uncertainty as to what it means to be a Singaporean as distinct from a foreigner in Singapore. What are the rights and privileges of Singapore citizenship? Is it merely the right to vote? Is it eligibility for subsidized HDB housing? But what about those whose income levels are above the ceiling and do not qualify? Does it include the promise of Government funding for basic education and retraining so that local talent can be developed and fulfilled, utilized to its maximum potential? What are the obligations and responsibilities of citizenship? National service for men? Is it more than that?

I would urge the Government to define the parameters in order to give the discussion a better focus. While welcoming foreign talent and making it easier for them to work and live here, the Government should also spell out at the same time the privileges and responsibilities of Singapore citizenship. Foreign talent and citizenship are two sides of the same coin. Both have important contributions to make to Singapore, economically, socially and culturally. Both define the essence of Singapore, its cosmopolitanism, its ancientness, that which makes our country and culture uniquely Singapore. The Singapore 21 Committee, of which I am a member, will consider this issue. But it would be good if the Government could, at some point, elaborate on what it means to be a Singaporean.

Mr Zainul Abidin Rasheed: The importance of overseeing the national talent pool by ensuring continuous inflow and integration of desirable foreign talent and retention of local talent cannot be overstated. For a country with limited resources, it is even more urgent, as in Singapore. Thus, I am most glad to see PMO spending more on its PSD's programmes, in particular, its talent management programmes. The holistic approach in terms of attracting and retaining the right talent, the SDU in promoting marriage among graduates and formation of families, and the Personnel Guidance Unit's work in conducting psychometric and other assessment procedures to assist the civil service in selection, placement and development of staff, is commendable. It is very relevant to what we just discussed in terms of scholars and bonds. It should help to minimise the problem of attrition and enhance retention.

But PSD must be aware of the growing competition for such talents from other countries. As globalisation grows in importance and Asia's economy gets plugged in a bigger way to the west, particularly the US, the latter will be looking for more Asian talent. Prime talent from Singapore will be much more in demand. In fact, it comes with a premium. For our scholars keen on R&D, our budding R&D facilities may not be able to match. Bill Gates and his type will be hungry for such talents, as his giant business grows. That is our challenge. How does the PMO and PSD intend to meet that challenge and competition for talent?

PSD should look into possible strategic and collaborative alliances in the competition for that limited talent worldwide. While the more than 18% increase in the talent management programme is impressive, it may not be sufficient to match the growing competition. Expose more of our better brains with the best in the world to allow better flexibility in retaining the much needed brains trust for the civil service and even the private sector through the statutory boards and the GLCs.

Mr Chiam See Tong: I want to speak on bond breakers. When I filed this amendment, Sir, I did not realise that this topic will be so hotly debated in this House and I also did not realise that some Members were bond breakers themselves and they seem to have some personal interest in it. We also heard this afternoon a lengthy Ministerial Statement on this issue. The question is: are the bond breakers wrong in doing so?

Purely, from the legal point of view, they have committed no wrong. They just have to pay damages, as has been pointed out. Like other Members, I think they do have a moral obligation. They are morally obligated to carry out their bond. On the other hand, I would also stress that, in fact, the bond givers themselves also have a moral responsibility. They should not impose harsh and onerous terms on the scholars. We have heard the hon. Member for Bishan-Toa Payoh that he served 10 years of the bond before he broke it. I take it that the Member's bond lasted longer than 10 years. I think it is utterly wrong to be tied down for 10 years. A 10-year bond is definitely too long. Such a contract is harsh and onerous. Under such circumstances, I can understand why scholars want to break their bonds. It is said that in every action there is a reaction. If harsh and onerous terms were imposed, the reaction of scholars would be to try to get out of the contract at the first opportunity. The givers of scholarship have also to be fair and equitable in their attempts to bind recipients of the scholarship.

At one time, a scholar had to serve a bond period equivalent to the number of years he spent overseas to complete his course. I believe this can be a criterion, but subject to not more than four years' bonding of scholars. I think a maximum bond period should not exceed four years.

The other issue is: why do our scholars break their bond? As I have mentioned, they are the cream of the population. I would urge the Government to look into our education system and also the Ministers themselves should look at what they have done, whether they have set a high standard for our young people to follow.

Mr S. Iswaran (West Coast): Mr Speaker, Sir, if you will allow me, I just would like to share a few comments from my perspective as a scholar or one who had the privilege of taking a Government scholarship. I think DPM has given a very extensive account and I believe that the force of his arguments is particularly strong in the context of civil service scholarships. We need to invoke the spirit and value of noblesse oblige that privilege entails responsibility, and with Government scholarships, I firmly believe this is true for three reasons.

First, they are funded by tax dollars contributed by DREs through to CEOs. Second, because it is a privilege that the people of Singapore are bestowing on a scholar, it is not just a manpower recruitment device. Third, it is given with the expectation and hope that the scholars will come back and serve in the long term for Singapore's interest.

Sir, this cannot be a simple financial calculation. It would do Singapore or Singaporeans no good, in my view, if someone comes back to serve simply because he cannot afford to break his bond. Today, it may be a cost-benefit analysis of whether they come back to serve an organisation. Tomorrow, it may be an economic analysis of whether it is worthwhile staying in Singapore. But if a scholar has truly imbibed the value of noblesse oblige, of wanting to serve, I think we would have a real national asset in that individual, for that person who serves Singapore and Singaporeans. In that spirit, I have two suggestions for the Deputy Prime Minister to consider.

First, can more be done to imbue scholars with the values and culture of the civil service? When I was a scholar, the first contact I had was a note telling me I had been given the scholarship and intermittent, during my study period, I got letters asking for my results and progress. And that was about it. I understand from the Deputy Prime Minister that things are more enlightened now. Nevertheless, I think more can be done and, in particular, scholars would benefit immensely during the period of study if they have regular dialogue sessions and discussions with senior civil servants and Ministers. I think this would give them a chance to appreciate first hand and learn from role models what the civil service stands for and why they have been selected.

Second, Sir, whilst we talk about bond breakers and highlighting their questionable actions, I think it is equally important that we highlight the good role models. The focus has been on a minority and a balance must be restored in this debate and in public perception. The best way is to demonstrate by example. I would urge the civil service and the Deputy Prime Minister to consider highlighting the many others who have come back and who have also had attractive alternatives at their disposal, but they have come back to serve, and they have succeeded in their careers.

Mr Zainul Abidin Rasheed: With your indulgence, Sir, I have the privilege of working with some of the senior and top civil servants, including Mr Lim Siong Guan and the Director of the Civil Service College, Ms Lim Soo Hoon. I find them very bright, very enlightened and very open-minded. The development of the higher echelon of the civil service, in fact, is in good hands. But my attention is drawn to the question of how much attention is given to the lower echelon of the civil service.

I have had the privilege also of attending a joint seminar between PSD and the public sector unions at Batam recently. There again, the experience was rewarding because it gave the opportunity between the higher echelon of the civil service to interact and have a better understanding with the union representatives. So I would like to ask PMO whether in fact more of such opportunities could be provided so as to allow better interaction and better understanding of each other's aspirations and also to allow the members of the civil service, especially those of the lower echelons, to feel that they are an important and an integrative part of the civil service, which we all know is one of the pillars of the success story of Singapore.

Mr R. Sinnakaruppan (Kreta Ayer-Tanglin): Sir, I would be much obliged if I can take the three cuts together.

The Chairman: Yes.

Mr Sinnakaruppan: The Government had earlier announced that the retirement age will be raised from 60 to 62 from 1st January 1999. Sir, before legislation comes into effect, there are important concerns and issues in the civil service employment and salary structure that need to be addressed. The NTUC and the unions have been discussing some of these concerns and we would like to raise some of these concerns for the Government's consideration. Basically, there are four main concerns.

(1) The principles which should be used on the wage cut.

(2) The mode in which the wage cut should take place.

(3) Job out-placement.

(4) Alternative health care scheme.

Sir, on the first point. Given the Tripartite Committee on the Extension of Retirement Age guidelines, the NTUC and the civil service unions would like to propose that the Government adopts a wage cut for all officers, as recommended by the Tripartite Committee. This may have to include Superscale officers. However, exceptions could be given based on the following three broad principles:

(1) Whether base-up wage system is already in place. Where wages reflect the actual job worth, then there may not be a need for a wage cut; and this may apply to higher scales in the Upper Timescale and Superscale grades.

(2) The supply of and demand for the services of the officers concerned. Where demand exceeds supply, implementing a wage cut would only aggravate the vacancy situation.

(3) The changes in job responsibilities, before and after the age of 60.

Sir, in considering pay cuts, it must be noted that the up to 10% wage cut does not include the 3.5% cut in CPF. In other words, it is actually up to 13.5% in wage cut. The civil service unions do not strongly object to this principle because they know that it is costly for an employer to employ someone beyond the age of 60 when they can actually employ a much younger entrant into the workforce at lower cost. However, the unions feel that the cut in wages should be effected through the annual wage component rather than the monthly salaries. However, the caveat is that if one resigns before the year is out, then pro-rated annual wage cuts must be made from the last drawn monthly salaries.

Sir, next, job out-placement. On job placement, the Tripartite Committee recommendations should be followed. In addition, I would like to urge the civil service to participate actively in the Skills Redevelopment Programme, an initiative of the NTUC. However, the issue of paying for payroll and training costs from INTECH funds may have to be adjusted to suit the financial procedures of the civil service. 2.00 pm

Already some very good initiatives have been made by the Ministry of the Environment which has started reskilling programmes for DRE workers, through the insistence of NTUC, and using the SRP funds. But the fund principles may need to be further refined. I urge that other Ministries be encouraged to participate in the SRP actively for workers up to the age of 62. This should especially be so because Dr Richard Hu had announced yesterday that the SRP may be considered to become a national programme, and when it becomes a national programme the civil service must take the lead.

Sir, on the last point, the Alternate Healthcare Scheme, the unions suggest that new employees under the Alternate Healthcare Scheme be given Medisave top-up of an additional 1% of salary, subject to a minimum of $15 and a maximum of $70. The MSO currently has a maximum of $70 but there is no minimum. I would like to urge that a minimum of $15 be set, particularly to help the DRE workers whose pay is generally very, very low.

Finally, I just want to end by saying that I would like to emphasise that until we are able to resolve these issues, it is difficult for the public sector or the civil service to raise the retirement age before 1st January 1999. We need to step up the pace of the union-management discussion.

Sir, the second cut is on union representation. While union membership is declining in most parts of the world, it is increasing steadily in Singapore. This is because of the pragmatic approach and the right kind of leadership and policies adopted by the Singapore NTUC. It is also because of the recognition by the PAP Government of the positive role of NTUC and its affiliated unions. In many other countries, union leaders and Government leaders or the union leaders and employers will never sit down together and have a peaceful cup of coffee. However, in Singapore, union leaders, employers and Government leaders meet very frequently in both formal and informal settings and discuss and resolve issues that arise from time to time in a spirit of mutual trust and cooperation.

The profile of our workforce has changed rapidly in Singapore because of rapid improvements in education. For example, 20% of each cohort attains a university education; 40% a polytechnic education; and 25% a post-secondary education at ITE.

As a result, the profile of the workforce who can join unions has altered somewhat over the years. To address this, the NTUC introduced the General Branch Membership. The NTUC leadership has also set a rule of thumb that at least 80% of the workforce can join the union as an ordinary member and the remaining 20% can join as a General Branch member, depending on the position that they hold in the organisation. For example, very confidential senior staff in a company may choose not to join as a General Branch member because, from the management's perspective, it might be seen as inappropriate. And rightly so, it is their prerogative. Although this rule of thumb of NTUC

The Chairman: Mr Sinnakaruppan, I am sorry to intervene. But would you like a reply from the Deputy Prime Minister?

Mr Sinnakaruppan: Yes, I will summarise.

The Chairman: Then could you ask your questions so that there is time for the reply?

Mr Sinnakaruppan: I would like to say that although this is not legislated, we are pursuing this matter in the private sector. And I would like to urge the PMO to convince its officers, particularly those in Division I, who form almost 25% of the total officers in the service, to join the union. We have a parliamentary debate on tripartism here not too long ago. I would like to urge that the civil service take the lead in working hand in glove with the unions by joining us.

The last cut -

The Chairman: Mr Sinnakaruppan, could I ask you to stop your speech now, because we are approaching guillotine time. I think it is only fair that the other Members who have spoken can have their replies.

Mr Sinnakaruppan: Could I speak on my third cut, Sir?

The Chairman: If there is time, you can move your cut later on. BG Lee.

BG Lee Hsien Loong: Sir, Members have raised several points. First, Dr Lee Tsao Yuan asks what does it mean to be a Singaporean.

I do not think what it means to be a Singaporean can be reduced to dollars and cents, subsidy here, grant there, shares, asset top-up, or whatever, therefore so many thousand dollars. It is an identification with Singapore. You belong here, this is your country, you will fight for it, you determine its future, together with other citizens. That is how we became a country, fighting for independence, first, during the Japanese occupation; then the British colonial government; then in Malaysia; now out. And that is how you have to survive, by identifying yourself with the country and feeling that this is where you belong and this is where your responsibilities are. We have a very long discussion on this just now and I do not think we need to go into a lot more details again. I think that many Singaporeans know that whilst foreigners will come and compete with them for cars, houses and jobs, we are still better off having them here working with us, than not having them here, and having Singapore a thinner talent pool, a less vibrant economy. You can have cheap land, but your incomes are going to be low and you are not going to be able to afford cars or grand houses either.

So it is not a matter of dollars and cents. It is a matter of intangibles, of rooted-ness and feel. And I hope the Singapore 21 Committee, which is looking into this issue, will take such an approach.

Secondly, on talent management. Mr Zainul Abidin has asked what we do to work harder to attract talent into our civil service. First, we must have competitive terms, challenging job opportunities, good work environment, and systematic talent development. So good people will come, they will stay, and they will rise. And we will develop them as they go. We will make sure that our terms and conditions are competitive, and we make sure that this applies not just to a small elite group of scholars or administrative officers but to the whole civil service, whether you are an administrative officer or a professional officer, a clerk, or somebody looking after some other responsibilities. We will make sure we treat each one individually well, feedback on performance, and give timely recognition in terms of promotions, bonuses, national awards, in accordance with performance.

Mr Zainul Abidin also asks about improving the quality of civil service. Continuous learning and training is indeed one of our priorities and not just at the top, but all the way down. And we have made a special effort to make sure that we reach down with programmes which are relevant to Division II, Division III, and Division IV officers. For example, over the last six months it has introduced four new programmes for the lower division staff, including English, writing and personal effectiveness courses aimed at Division III and IV officers. We are now working on a programme to complement WITs and the Staff Suggestions Scheme to bring out the creative spirit amongst the civil servants, to encourage them to open up and speak up, and contribute. And we are also working on another language programme to help Division IV officers achieve N' and O' level English standards. Both the creative and language programmes should be ready in the next financial year. So we are working on developing more opportunities for them.

On scholars and bonds raised by Mr Chiam and Mr Iswaran, I do not propose to respond in any detail. Indeed, scholars have to be morally obliged to serve and their sponsors have to make sure that the terms are not onerous. And indeed that has been our policy - to make sure that pay is competitive, that the opportunities are competitive, and it is not just money, but you come in, you have a fulfilling career and standing, and you are doing something which you are proud of.

Regular dialogues, highlighting role models, imbuing people with the correct values and cultures, as Mr Iswaran has pointed out, we have improved, but we can do still better, and we will try to improve further.

Mr Sinnakaruppan's point, first, on extension of the retirement age. Mr Sinnakaruppan has explained many of the things being done by the Tripartite Committee studying this matter. It is a very complex subject. In principle, we have decided to extend to 62. In practice, when you want to work out the implementation details, it becomes very, very complicated. How do you implement a pay cut? It cannot be across the board, without modulation, because it depends on the circumstances, what are the principles by which you will vary it, and these have to be worked out, not just academically but in agreement with the unions, so all parties acknowledge that the basis is fair and workable.

We are studying the proposals and we are currently discussing with the unions how to implement it. If we can do it before 1st January 1999, we will do so. But I am not confident that we will be able to do it very easily.

On union membership, I have told this House before that civil servants are allowed to take up union membership as long as they meet the membership rules of unions, and there is no bar on Division I officers joining civil service unions, unless they have been specifically designated as such. There are staff who are handling sensitive and confidential personnel portfolios, or who have direct influence and authority over personnel decision-making, or are involved in labour-management actions and policies and may hesitate over the propriety of becoming union members. Because you have to act entirely impartially, and it has yet to be tested whether if you are a union member and there is a fellow union member, it is going to be workable for one to discipline the other. It could be an awkward situation, resulting in potential conflict of interests or divided loyalty and representing the employers when dealing with unions on specific issues. We are now working out the rules to clarify the position of this group of officers to minimise the likelihood of conflicting duties and interests. I can be candid and explain to the Member that one of the areas where this is most tricky to do is the teaching service because traditionally teachers and principals have been union members. But as we devolve more and more powers to school clusters and to schools, and to principals, more and more principals who used just to be administering, now have management and personnel responsibilities over the teachers in their schools. And this will cause some difficulty. We are studying the matter. We have not quite decided, but we will do.

The Chairman: Mr Sinnakaruppan, your third amendment.

Mr Sinnakaruppan: Sir, this base-up wage system has been recommended to address the problems caused by the seniority-based wage system.

Sir, the civil service already has many features of the base-up wage system in its present day salary structure. But there are still some areas that need to be addressed. NTUC and the civil service unions would like to see that the civil service adopt the full implementation as soon as possible. Really the missing link is in the determination of the appropriate minimum-maximum ratios. The desirable minimum-maximum ratios would, in general, be different for different jobs. One possibility is to have different ratios for jobs at the different Division or job grade as follows: for Division I, it could be 1.8; for Division II, it could be 1.6; and for Divisions III and IV, it could be 1.5. The exact ratios would have to be ascertained from job evaluation or market surveys. But this is the proposal that the civil service unions would like to put up to PMO.

Mr Shriniwas Rai: Sir, I will be very short. While credit must go to the political leaders for our achievements, I think the role of civil servants in assisting Ministers in achieving Government's promise cannot be understated. I would urge the Prime Minister to try to get more people from outside to join the civil service for two to three years. If they cannot be persuaded to join the political circle, they could at least join the senior rank of the Administrative Service.

BG Lee Hsien Loong: Sir, on the base-up wage system, yes, there are ideas to work it out. In the civil service, we will have to find ways to narrow the ratio between the maximum and minimum salary points. Right now, more than half the salary scales have a ratio of exceeding 1.5, which is the desired target. The way we have implemented the NWC revisions - 2.15 pm

The Chairman: Order. BG Lee, it is 2.l5 pm, "guillotine" time.

Dr Lee Tsao Yuan: Sir, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

Mr Jeyaretnam: Mr Chairman, Sir, do you think you could allow me my questions? We have had a lot of time with the Ministerial Statement.

The Chairman: Yes. But you also took part in it. Dr Lee has withdrawn her amendment. The House has already agreed .

The sum of $147,697,030 for Head V ordered to stand part of the Main Estimates.

The sum of $26,922,700 for Head V ordered to stand part of the Development Estimates.

Head K

The Chairman: Head K Ministry of Defence. Amendment No. (1), Dr Ong Chit Chung.

Dr Ong Chit Chung (Bukit Timah): Sir, I beg to move,

That the total sum to be allocated for Head K of the Main Estimates be reduced by $100.

Sir, Machiavelli, the famous sixteenth century strategist and the author of The Discourses and The Art of War, reflected upon the fate of Florence and other Italian city states, which fell prey to foreign invasion and occupation. His conclusion: "The first way for a state to lose its independence is to neglect its defences." And his advice: "The foundation of a state is a good military organisation." In other words, Sir, neglect defence at your own peril, especially for small city-states like Singapore.

That is Machiavelli from the West. And from the East, we have Sun Tzu who wrote The Art of War in the fourth century B.C. And in the opening paragraph of his book, he proclaimed that: "Defence is a matter of vital importance to the state, the province of life or death; the road to survival or ruin." Sun Tzu's formula is not for going into battle per se, but to build up our defences in peacetime, and deploy them in such a way as to prevail, overwhelm or deter the enemy by strategic planning and deployment, or what we will call today, deterrence, balance of power or the indirect approach.

Sir, we are in the tail-end of the 20th century. It is a time of changes and uncertainties in Asia Pacific, a time of paradigm shifts in the strategic environment. It is the most challenging of times; it is the most unsettling. It is as if we were in the birth pangs of a new era. The point is that the unexpected does happen in history. Few predicted, Sir, the collapse of the Berlin Wall or the collapse of the Soviet Union or the outbreak of the Gulf War. We must therefore in Singapore prepare ourselves for the worst turn of events, while hoping for the best. We must expect the unexpected.

We will do well, Sir, to remember Athens, which despite its affluence and excellence, lost to Sparta in the Peloponnesian War. A democratic and commercial Athens was vanquished by a militaristic Sparta. Athens fell because of the lack of military preparation. We, in Singapore, should draw a lesson from the city states like Florence and Athens. We should avoid being driven or consumed by materialism and we should never, never neglect defence.

We can also draw a lesson from World War II with regard to defence closer to home. We know that on 15th February 1942, it was a day of infamy for the British. On that day, the British surrendered to the Japanese at the Ford factory at Bukit Timah. As Winston Churchill, the British Prime Minister declared at that time, it was the `worst disaster'. It was too late, too little.

I am glad that the Government in Singapore is giving high priority to defence. My question is: in view of the uncertainties in the region and the unpredictable turn of events and the nature of events, are the funds allocated for defence sufficient? If the Minister considers they are inadequate, we will be happy to oblige and support his appeal for more funds. After all, the defence allocations will amount to 4.6% of the GDP, still well below the cap of 6% of GDP declared earlier by the Government.

As a Chinese proverb puts it: (yang bing qian ri, yong zai yi zhao) "Train an army for a thousand days, for use on the day of need of crisis." We just cannot wait for the crisis to happen and then pour our resources or funds in. We cannot build and train an armed forces overnight. It will be too little and too late.

Sir, we are all for defence. But we also want to know that the defence dollars, or indeed the taxpayers' dollars will be well spent. We want to know whether the defence expenditure is cost effective, whether we are getting good value for the hardware we purchased. I wish therefore to ask the Minister whether he would elaborate on the measures to ensure that the defence funds are maximised in terms of cost effectiveness and the judicious mix and selection of hardware.

Mr Charles Chong (Pasir Ris): Sir, as mentioned by the Chairman of the GPC for Defence, our long standing policy on defence expenditure has been to cap it at 6% of our GDP. This would have been an adequate level as long as the economy continues its healthy growth enabling our expenditure to keep pace with inflationary increases without compromising the quality of training and equipment of our armed forces. However, with the economy now facing uncertainty as a result of regional crisis, our GDP growth is projected to slow down. This would have a direct and immediate impact on our defence expenditure which will decline correspondingly.

Sir, development of a well-trained and competent defence force and the acquisition of defence assets are usually long-term processes. If we subject our defence expenditure to the mercy of economic cycles, we may be compromising the effectiveness of the SAF in building up and maintaining itself as a credible defence force. Having a strong defence force is essential not only for our national sovereignty but also for our continued economic well-being. Foreign investors are here because we offer them a safe, secure and stable haven for their multi-million dollar investments. The relationship between our sovereignty, our prosperity and our stability is an indivisible one and a strong SAF is the linchpin in this situation. Because without a strong SAF to protect our sovereignty, stability and prosperity all talk about more money being allocated to education, workers' training, healthcare, social welfare or even helping the businesses would merely be academic. Older Singaporeans who have lived through the Japanese Occupation and other periods of hard time may be well aware of this.

Sir, ours is a small military force and with falling birth rates, we need to augment the effectiveness of our citizens army with the best defence technology, equipment and training available. But the best defence technology, equipment and training do not come cheap. However, in order to ensure that we continue to live in peace with everybody, we must be prepared to defend ourselves against anybody and that nobody should doubt that Singaporeans have the capability and the will to defend themselves if the need arises. I would therefore like to request the Minister for Defence to review the 6% of GDP cap on our defence expenditure to ensure that the SAF will continue to have the best defence technology, equipment and training even during economically troubled times and especially during periods of uncertainty.

Mr Sin Boon Ann (Tampines): Mr Speaker, Sir, I have always understood our defence philosophy to be premised on the principle that the best assurance for peace and stability and safety in our country is deterrence. Although we are a small country, we have over the years invested much of our resources in developing the SAF into an effective and credible fighting force. The SAF today is a modern, balanced and well-integrated tri-service armed force that is capable and willing to defend Singapore when called upon. To use an analogy shared by our Prime Minister some time ago, although we may be a small shrimp, we are at least a very poisonous one. Any potential aggressor will have to think twice or many times over when taking us on. And our defence philosophy has served us well since Independence.

Sir, I note that in the Budget this year, we have increased our spending on defence. To many, it seems strange that the Government is spending so much on defence when faced with a difficult economic climate ahead. Is it prudent that we should be maintaining our defence expenditure at this level when we should be cutting back and saving our resources?

Let me say at the onset that I do not subscribe to the view that we should cut back on defence spending. In fact, I support our proposed expenditure on defence for the coming fiscal year. It is no argument when it comes to security and defence to say that we should be cutting back on defence expenditure in the face of a rough road ahead, especially when the economy can still afford it. Whether in good times or bad times, the issue of our vulnerability as a small state remains. Steady expenditure on defence is to be seen as an insurance premium for security and survival. We have seen how vulnerable small states can be. We cannot depend on other people's goodwill or largesse to come to our assistance. On the contrary, we have to stand on our own when it comes to the crunch. Events can quickly take a rapid turn for the worse and we have to be ready for such eventualities.

Sir, modern warfares are a contest of technology. Military hardware built on the latest technology determines to a large extent the outcome of any battle. Modern weapons are not cheap. It takes time and money to maintain the SAF at a high standard of operational readiness. There should be no compromises on the state of its men, weapons and machines. Without maintaining this necessary expenditure, the ability of the SAF to perform its role will be seriously compromised. The issue is a very simple one. Would you rather have your son go to battle with a bazooka that is a relic of Second World War or with the latest guided anti tank missile? The choice is obvious. In order to stay effective, the SAF must continue to update its equipment and acquire a new state-of-the-art equipment and, more importantly, be led by capable men even if it means continuing to pour resources in.

I note that although this year's defence budget has increased in real terms, the sum total expenditure is still within our cap on defence spending at 6% of our GDP. As our economy continues to grow, the 6% cap on GDP will also continue to grow in absolute numbers. Maintaining defence expenditure at 6% of GDP gives us the assurance that the economy is not over burdened as a result. The SAF has built up its credibility as a fighting force over the last two decades and must continue to do so in the coming years to remain effective. Having said that, I am confident that the SAF will at the same time recognise that in the face of the softening economy, it would make some adjustments to its programme by consolidating its resources without sacrificing its effectiveness.

While supporting an increase in the budget for defence is not, to me, an issue, I believe the people would like to know whether the Ministry would be making adjustments to its defence spending and, if so, what these adjustments are. Additionally, I share the concern of my colleague, Dr Ong Chit Chung, in asking for assurance from the Minister that the money allocated to defence will be well spent.

Mr Jeyaretnam: Sir, after hearing the last three speakers, I am sure what I am going to say must sound treasonable. But, nevertheless, I propose to say what I wish to say on this subject. But, first of all, may I assure the House, although I do not think it needs any assurance, the Workers' Party does not for one minute suggest that we should compromise on our defences and our capabilities. But the question is: has there been clear thinking about what the objectives are and where the threat is coming from and how best it could be met? The Minister says in his Budget Statement that the Government is prepared to commit up to 6% of its GDP on defence expenditure.

Sir, I have made a study of 167 countries on their expenditure and the ratio it bears to the GDP. I find that among these 167 countries, only 25 spent more than Singapore on their defence expenditure as a proportion of the GDP. May I say that these figures are for 1996. But these countries where they spend more are in what has been known as troubled spots, the Middle East, in Central Asia and in other countries where it is recognised that troubles are brewing. Is this region a troubled spot? We must, first of all, try and formulate what are our objectives in our defence. What are the threats that we may encounter and where will they come from? 2.30 pm

A number of countries whose spending on defence is much less than Singapore are committed to peace-keeping operations which require them to send their troops outside to keep the peace. I do not see Singapore has ever been called upon to send its troops on peace-keeping operations. So what do we see the need in Singapore? Do we see a need to keep ourselves in readiness for threats from our neighbours or threats from elsewhere? And if so, what would be the nature of the threats? I think there should be clear discussion on these subjects. I do not know why it is not possible for the Ministry to put out a White Paper on the defence of Singapore, so that these questions that I have asked are discussed openly and that the people could see the need for spending what we are spending. It is already, as I said, much higher than almost all other countries in the world, except for 25 countries. I would urge the Minister that we should not just follow what may have been our policy in the 1960s and a little beyond that. Times have changed. The world has become a safer place, and this region has become a safer place. Where it used to be a troubled area, there is, comparatively, now peace in this area. So what are we preparing for? Should we not, first of all, outline what our objectives are in our defence expenditure?

Dr Wang Kai Yuen (Bukit Timah): (In Mandarin): Sir, the 1998 Budget is a prudent one. However, despite the shadow of the regional financial crisis, our defence spending is not reduced but increased. It accounts for 4.6% of our GDP, up 0.2% from last year. In other words, defence spending has increased from last year's figure of $6.445 billion to this year's $7.228 billion, an increase of $830 million, or 12.8%. This is a substantial increase.

The question is: why are we increasing this spending? The NCMP has been asking the same question again and again. There is peace around the region, why should we spend more money on defence?

We know that the NCMP is English educated. He is not quite familiar with the Chinese history. Let me enlighten him with a story from Chinese history. During the warring periods, in order to show appreciation to the state of Jin for helping it to negotiate for peace with the other states, thereby avoiding a conflict, the state of Zheng gave a lot of chariots, musical instruments, musicians and songstresses to the king of Jin. The king offered to share these gifts with his meritorious minister, Wei Jiang. Wei Jiang declined the offer, and instead turned to advise the king that he should think of the dangers ahead and be prepared, even when he was enjoying peace and prosperity. So I hope the NCMP can appreciate that national defence is the basic foundation and most important role for an independent and sovereign Singapore to guard against external aggression, to protect the lives and properties of the people, and to ensure security, stability and prosperity of our country. At the same time, it will boost confidence of our foreign investors in us.

Just now my colleague mentioned that it takes a thousand days to raise an army to be used one day. So a well-trained army cannot be produced overnight. In the present context of science and technology, apart from a well-trained armed forces, we must also ensure that our armed forces are equipped with advanced military hardware. We can learn from the Gulf war the importance of the supremacy of advanced military hardware. So even in peace, we must also make sure that we have a well-trained, well-armed and well-equipped armed forces, and be prepared at all times.

When we are enjoying peace and security, we tend to forget the hardship of nation building, especially the young people who have not gone through the experience of disorders in the 50s and 60s. We have to remind them time and again of events that are happening all over the world. Take the lesson from the Gulf war. Kuwait was invaded overnight by Iraq. For a small country like Singapore, I think we can learn a good lesson from that. Our defence is to maintain our stability and security, especially in this time of uncertainties. We cannot afford to be complacent. We should restore the confidence of investors and make every effort to promote peace and security in this region.

This regional financial crisis teaches us a lesson and makes us realise that the future is very unpredictable. It is only when we live in peace and do not forget to anticipate the dangers ahead, be prepared at all times that we will be able to tackle the problems as they come along, in order to continue to enjoy peace and prosperity.

Mr Hawazi Daipi (Sembawang): Sir, our huge defence expenditure has been well accepted by Singaporeans. The investment over the years in equipment and personnel has contributed immensely to our strong, credible defence force. The best time to invest in our defence capability is surely when we are doing well economically, so that Singaporeans can continue to enjoy better life with a greater sense of security. Surely that sense of security is also based on the state of security in the region we live in Southeast Asia and the Asia Pacific in general. My question is: what is the Ministry's assessment of the state of security in the two regions?

Our enhanced defence capability through the investment in hardware and training must surely mean that our armed forces are operationally ready to defend Singapore's territorial integrity and sovereignty. Given that our armed forces consist of a citizens army, their ability to train safely during peace time will enhance the sense of confidence of our soldiers' families, particularly because our soldiers train locally as well as overseas in realistic live-firing exercises. The SAF does have a very good record of safety in training and safety is not an issue here. What I would like to know is how the SAF tries to improve further its safety record in training and ensure the high quality of safety standard of the equipment and weapons that it has purchased.

I think there is one other area of investment for security that Singapore must continue to enhance, ie, in defence relations with neigbouring and friendly countries. Some foreign observers tend to look at the defence expenditures of countries in the region as a reflection of the arms race. I look at it as individual building blocks of regional defence. In this respect, we should build on further bilateral defence relations with other countries. My question is: how are we progressing here?

The Deputy Prime Minister and Minister for Defence (Dr Tony Tan Keng Yam): Mr Chairman, Sir, I would like to reply to some of the points which have been brought up by Members of Parliament.

Sir, the region today faces economic gloom. The scale of the financial and economic crisis which has hit Southeast Asia is unprecedented. In the months ahead, perhaps even in the next few years, economic growth in the region will be severely affected. This gloomy prospect is a far cry from the outlook less than a year ago when Asia was deemed to be the global powerhouse. Investments then flooded into Asia in search of opportunities. No one could have foretold how drastic the economic plunge would be.

Sir, serious as the economic crisis is, my intention today is not to discuss the crisis, but to highlight the lessons which we can learn from the crisis for Singapore's security and defence. The economic crisis which has hit Southeast Asian countries is another stark reminder of how quickly a favourable situation can turn bad.

The lesson is clear. We must never take our success, stability and security for granted. As I have said many times, it takes many years of hard work to attain economic growth and prosperity but it does not take very long sometimes only a matter of weeks for the situation to deteriorate rapidly. We must therefore never assume that prosperity and plenty will be ours to enjoy forever. The lesson which we have to learn from the economic crisis is that our prosperity depends on our having sound policies, always being prepared and never being complacent.

Singapore's security, like our economic prosperity, is also not something which we should assume will be ours to enjoy forever without the need for sound policies, to be always prepared and never be complacent. As a small country, Singapore's security, like our economy, is very vulnerable to the influences of the external environment. We have seen time and again in the Asia-Pacific region over the past few years just how quickly tension and threats to stability and security can develop. In 1996, the tension in the Taiwan Straits was a cause of grave concern throughout the region, including Singapore. Last year, there was a crisis in Cambodia. But, fortunately both these crises were defused in time and the rest of the region could go on with their pursuit of economic growth. 2.45 pm

This year, we have an economic crisis. The link between economics and security is inescapable. Today, the economic turmoil which has engulfed much of the region brings with it possible repercussions for stability and security as well. One of the most striking features of our region over the last couple of decades has been the level of cooperation among the various countries both bilaterally with each other and through multilateral arrangements, and in a wide range of sectors and activities. Regional countries blessed with economic growth and prosperity found it in their interest and to their mutual benefit to cooperate. Such cooperation in both the economic and security sectors in turn underpinned the tremendous progress in the Asia-Pacific region. If the economic downturn is very severe and there are attendant political and social problems, the stability and security which we now enjoy may start to unravel.

Sir, as Dr Ong Chit Chung has said, it is imperative that Singapore is prepared for any challenges to our stability and security that may arise in an uncertain regional environment complicated by the present economic turmoil. Newsweek magazine last November advanced three fundamental reasons why Singapore had emerged relatively unscathed from the currency crisis. First, we are vigilant and always prepared for trouble; second, we have a preoccupation with efficiency; and, third, we emphasize strategic planning. Newsweek concluded that Singapore had kept its balance because we always took into account possible dangers over the horizon, and when the troubles arrived, the preparations were already in place.

The same factors apply to our efforts to build a defence capability to protect Singaporeans, and to safeguard our sovereignty and territorial integrity. Ensuring peace and security requires constant vigilance, a commitment to efficiency, and strategic planning. Building a strong defence capability requires sustained effort and the support and commitment of our people to the defence of our nation. Singaporeans must always be mindful that there may be dangers over the horizon, and unless we have a defence capability which is credible enough to deter a threat, and to defeat that threat if the need arises, we will pay very heavily.

Paying the price now to build up our armed forces will spare us the much bigger price that we will have to pay if we get caught unprepared and unvigilant. In the economic sphere if things fall apart, you will still have future opportunities to rebuild again, and to prosper, but we will not get a second chance if we cannot defend ourselves. A security threat could mean the loss of lives and the end of Singapore. So, just as the right economic policies have enabled us to weather the regional economic turmoil, we must have the right policies in defence to help us ensure our security and survival.

Sir, building a credible defence force is a long term process. I have made this point in Parliament before. The modern battlefield is a fast evolving one. We have to ensure that our armed forces do not have yesterday's capabilities to fight today's wars. This requires constant investment in training in new skills and technologically-advanced weapons. Technology is also important to give us the multiplier to overcome our manpower constraints.

Building up a credible defence capability therefore requires prudent and steady investments over many years. Feast-and-famine budgets will only result in sub-optimal "start-stop" implementation of programmes. You cannot build a strong and effective defence capability using such an approach. We must plan our defence spending carefully, over many years and not year by year in fits and starts. We must always maintain a suitable level of defence spending each year. Our policy has, for a long time, been to set a cap of 6% of the GDP for defence spending. This policy has served us well. I am encouraged by the comments from Dr Ong Chit Chung and Mr Charles Chong that we should review this 6% cap to see whether it is sufficient. Sir, we have actually spent well below 6% for the last few years. For this financial year, the Defence Ministry is spending 4.62% of our GDP. But I think the 6% cap is valuable because it is a commitment which facilitates planning and a smooth development of capabilities. Equally important, the 6% is an expression of the importance we place on ensuring Singapore's defence. Our fate as a people and as a nation hangs on this. If it is necessary to review the 6% cap, we will certainly do so, but for the time being, that is sufficient for our defence needs.

Sir, Mr Jeyaretnam has brought up the point as to why Singapore is spending so much on defence. I am sorry that he is not here now to listen to my reply. But let us consider the consequences of spending less on defence. Sir, with a small population, the SAF needs high technology systems to overcome our manpower constraints. In fact, it is fortunate that we are able to use technology to overcome our shortage of manpower. In the days when sheer numbers counted for everything on the battlefield, there could have been little that we could do to fight back against an enemy who has vastly more men than Singapore that our small population could ever hope to muster. Singapore is also land scarce which means that much of our training has to be done overseas. This is more costly -- although we must not forget that the benefits of more effective training and the opportunities to interact with other armed forces often more than make up for the extra cost.

Cutting back on defence expenditure will mean slower modernisation, less defence R&D and therefore not as big an edge over a potential enemy, and fewer training opportunities for our soldiers, sailors and airmen. What this means is that it will translate into a degradation of our defence capability and our operational readiness. Our deterrence level will then be lowered. And our security policy is based on the concept of deterrence. Sir, we are not looking for a fight with anyone. We pay great attention to maintain good defence relations with our neighbours and with other countries. I would like to assure Mr Hawazi Daipi that this is given daily attention by both myself and my colleagues in the Ministry of Defence. But, Sir, where defence relations fail and in case anyone has hostile intentions towards Singapore, he must know that it will be extremely costly for him to carry it through, and it would be best for him not to contemplate such a venture. If our defence capability is not credible, a potential aggressor might well reach a different conclusion and feel bold enough to go on a military adventure against Singapore. A weaker defence capability also means that the SAF may have to fight at a disadvantage against the enemy. So, cutting back on defence expenditure would amount not only to higher risks for our nation but also, more directly, to the Singaporeans who have to fight to defend Singapore.

Sir, as Mr Sin Boon Ann has said, defence expenditure should be seen as our national insurance policy for peace and prosperity. You have to continue to pay the premiums, in good times and in bad times. The greatest return we can have on our investment is never to have to go to war. We are already collecting on our policy in terms of the peace of mind that the people of Singapore and foreign investors have as a direct consequence of knowing that we are ready and willing to make all necessary commitments in resources and money to ensure the security of our nation.

Sir, these are our objectives in spending on defence. The SAF that we have today is the result of years of investment in the best people, equipment, doctrines and tactics. The SAF demonstrated its operational readiness and effectiveness when events in Cambodia took a turn for the worse last year and the SAF was called upon to bring Singaporeans home. More recently, the SAF responded promptly and effectively to provide assistance in the search and rescue and recovery efforts after the tragic SilkAir crash in the Musi River. The SAF must constantly be prepared for all contingencies, including providing the necessary response should there be a threat to Singapore's sovereignty and territorial integrity. We must therefore attract the best talents to serve in the SAF, and augment our limited manpower resources with high technology weapon systems.

Sir, MINDEF will continue to invest in the necessary equipment and weapon systems and exploit technology as a force multiplier to compensate for our limitations in manpower and to maintain our technological edge. In the future, the challenge will be to broaden the scope and quality of defence technology that is used by the SAF. This will increase its effectiveness manifold. To achieve this, MINDEF will continue to emphasise greater integration among the SAF, the Defence Technology Group and our defence industries, as well as optimise our scientific and engineering talent. The most vital element is good people. We need motivated and professional officers and men who are willing to take on an onerous career in the SAF and who are prepared to make the ultimate sacrifice for our country.

Sir, Singapore has come a long way, and a strong and credible SAF is a key fundamental which has contributed to our success. More important, a strong SAF will determine whether we can preserve that success or whether we or future generations of Singaporeans will have to stand by helplessly while our country comes under attack and we lose everything we have built up, or worse, lose our freedom as a people and a nation. Sir, this is a point which has been aptly brought up by Dr Wang Kai Yuen. Our long-term investment in defence will allow us to face any uncertainty with confidence. Even in difficult times such as those we face now, we must continue to be committed to building a strong and credible defence force. This is the best guarantee for Singapore's continued peace, stability and prosperity.

Sir, my colleagues, the Second Minister for Defence and the Minister of State for Defence, will reply to some of the other points brought up by Members. 3.00 pm

Dr Ong Chit Chung: Sir, it is a time of changes and uncertainties in Asia Pacific, a time of paradigm shifts in the strategic environment in the region. In such circumstances, we must be single-minded and focus on the operational readiness of the SAF. We want to be certain that the SAF is ever ready, when the chips are down, to discharge its missions in any scenario.

Last year, Sir, we read in the Parameters, a quarterly journal of the United States Army College, and I quote:

`Singapore's ground forces are considerably more competent tactically than those of its neighbours . . Singapore's equipment, personnel, training, and overall readiness are considered the best in Southeast Asia.'

This year, I came across the Australian Strategic Policy, a paper published by Australian Department of Defence. And I quote from this paper:

`Singapore's forces are the most advanced and effective in this region, making it a valuable partner for the Australian Defence Force in terms of peace time interaction.'

Would the Minister care to comment on these external assessments, and whether the SAF is operationally ready, come what may, and that the SAF is more than equal to its tasks? That having invested substantially in the SAF, we can count on the SAF in a crunch.

Mr Shriniwas Rai: Sir, I am reassured having heard Dr Tony Tan's reply. We have come a long way from the days of Dr Goh Keng Swee to that of Dr Tony Tan's. The fact that the Prime Minister has given three Ministers the responsibility of defence shows the priority the Government has. I would like to urge the Minister, and I share the sentiments shown by Dr Wang and Mr Charles Chong, that the fact that 6% is the upper limit should not deter us from reviewing this upper limit should the time arise.

Sir, our defence, our peace, will ensure the quality of life that Singaporeans are going to enjoy. The fact that your area has not been burgled does not mean that you keep your house open. There is an Indian saying: in order to have peace, you have to defend it at a price. The fact that we do not have enemies around us is a good sign. But the fact still remains that we live in a very turbulent world, and we must build our defence capability. Sir, it is reassuring that none of the Members, when the debate on the Budget Statement took place, questioned the spending on defence, and I think that is right.

I would like to touch on another area which I think has equal priority, and that is, the people must realise that defence is part and parcel of their life. It is not just our armed forces. Every Singaporean must realise that he has a role to play. And I urge the Government to reconsider giving the citizens a right perspective of our defence. And I would urge the Minister, in collaboration with the Minister for Education, to ensure that every school child in Singapore shall realise that the defence of Singapore is also his responsibility. His parents must tell him how we must nurture ourselves in the world we are living in.

Similarly, the employers must realise the important contribution that their employees do when they perform National Service. And I will go one step further, that those employees who have done outstandingly well in their National Service should be considered as a plus point for promotion.

Sir, I cannot overstate the fact that the defence of Singapore is the responsibility of everyone of us, including the Members of this House, some of whom are actively serving National Service now.

Sir, in order to have a good armed forces, we have to have money invested both in machines as well as men. And I would urge the Government to second some of the best brains of the country into the armed forces, which I think the Government has been doing. I think it is gratifying to note that we are developing defence ties with other countries, like Sweden. The fact that they are prepared to have defence ties with us shows the capability and efficiency of our armed forces. I would urge the Minister to go and explore and have defence relationships with as many countries as possible.

Sir, there are many Members who are going to speak. I will just touch on only one point which is of importance to us. We always think in terms of production, in terms of money, dollars and cents. The defence personnel may not be helping in GDP, but let us bear this in mind. Without them, we would have no GDP. So, please give them their dues, and I think we should salute these men who have helped in defending Singapore.

The Chairman: Order. I propose to take the break now.

Thereupon Mr Speaker left the Chair of the Committee and took the Chair of the House.

Mr Speaker: Order. I suspend the Sitting and will take the Chair again at 3.30 pm.

Sitting accordingly suspended at 3.07 pm until 3.30 pm. Sitting resumed at 3.30 pm

[Mr Speaker in the Chair]

Debate in Committee of Supply resumed.

[Mr Speaker in the Chair]

Head K (cont.) -

Dr Ong Chit Chung: Sir, MINDEF has many years ago embarked upon and launched the concept of total defence, embracing and encompassing not only military defence, but also psychological defence, social defence, civil defence and, not least of all, economic defence of which we are painfully aware of in view of the economic turmoil in the region.

Total defence is part and parcel of our national education. While we train our National Servicemen on how to use and maximise the hardware that we have, we must not forget the heartware. Each and every National Serviceman must know what he is fighting for, why the sacrifices, why we hold dear our sovereignty, integrity and independence and our hopes and visions for the future.

Our National Servicemen should have, through national education, a sense of history, an abiding commitment to our homeland, an appreciation of our strength as well as vulnerabilities, and an unshakeable faith in our own national defence. Through national education, our National Servicemen, indeed all Singaporeans, will be rooted in our own homeland.

If our National Servicemen have their hearts in the right places, Sir, we will win every battle. We must drum into our servicemen the `can do' or the gungho attitude or to put it in the local Hokkien context: pa see bo chow. I would like therefore to ask the Minister whether enough has been done to promote national education in the SAF and whether there are better and more effective ways to win over their hearts and minds of our National Servicemen.

Sir, can I continue with the other items?

The Chairman: Please do.

Dr Ong Chit Chung: Sir, for a small country, with a small armed forces based on National Service, we have to know our own strength and weaknesses, adopt the right strategy and have the right mix of weapon systems. We cannot rely on mass manpower. Our competitive edge lies in high technology, in firepower and mobility, in other words, in quality rather than quantity.

The same applies in the area of training. As a national service armed forces, we have limited time frames to train our own men. We also face the limitation of space in a city state. With the constraints of numbers, time and space, our answer must lie in high-tech. This is very much so in training. We should harness high-tech to train our National Servicemen, maximising the returns in terms of manpower and space. High-tech in training would also make training more relevant, realistic and interesting to our younger National Servicemen.

I request the Minister to elaborate on the use of high-tech in training and whether he would consider expanding the role of high-tech in more areas of training, locally and overseas.

Sir, last year, unfortunately, there were a series of accidents and fatalities in the SAF training, both local and overseas. It raised much concern amongst parents and family members. I am glad that MINDEF took safety seriously and instituted a thorough review of training procedures. Safety in training is the order of the day in the SAF.

I wish therefore to ask the Minister on the current state of safety in training and whether he is satisfied with the safety measures in place and what are the responses of the troops in the field to such measures.

Mr Sin Boon Ann: Sir, in his Budget speech last year, the Minister gave his assurance that the SAF placed most priority on training safety. To achieve this, would the Minister point out that the SAF has focused on three main areas. Firstly, risk assessment and management. Secondly, close range supervision, and thirdly, safety education. We have no doubt that the SAF takes training safety very seriously and that no effort has been spared in this regard.

Sir, if you will recall, these assurances came fresh from the tragic aftermath of the explosion of the artillery shell in New Zealand which killed two of our servicemen. Despite the assurances given by the SAF, accidents still do happen. The public, I believe, has come to accept that this is to be expected in organisations as large as the SAF. Foremost in people's mind is whether there has been any improvement in the safety training record since last year. Will the Minister please supply this House of the training safety record to-date?

The Second Minister for Defence (RAdm Teo Chee Hean): Sir, the SAF that we have today is the result of years of investment in people, equipment and doctrine. It is a modern and well-integrated fighting force, operationally ready to deal with any contingencies that involve our national interest. Its operational readiness is maintained through frequent mobilization practices and realistic training.

Dr Ong has mentioned two articles, one, Parameters and another, Australian Strategic Policy that have complimented the SAF on its readiness. Those armed forces that we have interacted and trained with have also found that the SAF is a professional and proficient outfit. As I said last year, we do not just depend on magazines, reports and foreign forces to assess our readiness. We conduct regular readiness checks and exercises. Also when the SAF has been called upon to carry out missions at short notice, it has performed well. This is a test to the high operational readiness of the SAF. Recently, the SAF was called upon to evacuate Singaporeans caught in the midst of factional fighting in Cambodia in July 1997 and to carry out a month-long search and recovery mission in Palembang, Indonesia, in December 1997. If we delve further back into history, many Singaporeans will remember the role that our commandos played in ensuring the successful resolution of the SQ 117 hijack in 1991, or our air force executing the dramatic cable car rescue in 1983. The Government will continue to ensure that the SAF is operationally ready to deal with any contingency.

Sir, Dr Ong, Mr Sin Boon Ann and Mr Hawazi Daipi have asked about safety training in the SAF. The SAF has taken great pains to ensure that whilst we train hard and well, no compromise is made to the safety of our servicemen. Nothing is more important than the safety of our troops.

Training safety in the SAF is overseen by a high-level committee chaired by the Chief of Defence Forces. The Committee meets regularly to review safety efforts undertaken by the SAF. We have in place a safety management system that systematically seeks to minimise all conceivable risks to our servicemen.

For a start, there are detailed safety procedures for every activity our soldiers undertake. These procedures are well documented and widely disseminated to all our officers and specialists. They are updated whenever valuable lessons are learnt either from our own experiences or from the experiences of other armed forces.

All officers and specialists are required to pass training safety regulation tests as part of their training. The SAF also regularly conducts Safety Education and Awareness seminars for all our officers and servicemen to remind them of the importance of safety.

Safety officers are appointed whenever major exercises or live firings are conducted. Commanders are also required before each exercise or training to review the risks associated with the exercise or training and take steps to minimise these risks.

Like the more established armed forces, the SAF also has safety agencies whose primary aim is to audit all SAF training activities at every level to ensure that all the necessary safety training measures are implemented fully. These safety agencies also investigate all training incidents, including those that do not result in any bodily harm.

We have also established an electronics training safety bulletin where every serviceman can access and share the latest in safety developments.

Sir, the SAF recognises that any training accident is one accident too many. No effort is therefore spared to ensure that our servicemen can train safely.

Dr Ong asked about the use of technology in training. Sir, less than one-tenth of the Singapore land area is used for SAF training and MINDEF recognises that the area available for SAF training will shrink with time as we face competing demands for land to meet our housing and economic needs. A two-pronged approach is adopted to deal with this. Firstly, we look for training areas overseas and today, the SAF conducts large scale training in several countries. The SAF will continue to look for suitable training areas overseas. Second, the SAF uses technology to make up for the shortfall on land and air space. For example, emphasis is placed on the use of simulators. High-end simulators can provide extremely realistic and safe training. It reduces the need for live firing and is not constrained by the lack of space. Examples of simulators developed for SAF training are the air combat manoeuvring instrumentation system, the air defence complete engagement simulator, naval tactical simulators, flight simulators and the tank and training systems. The SAF will continue to look for innovative training methods using high technology to make up for the shortfall of training areas in Singapore.

Sir, Mr Shriniwas Rai and Dr Ong spoke about national education and reminding our citizens about the importance of defence. I could not agree more with Dr Ong and Mr Shriniwas Rai that it is very important for all Singaporeans to take defence seriously. MINDEF introduced the concept of total defence in 1984. Since then, MINDEF has, in conjunction with relevant Ministries and other agencies, implemented various programmes to enhance public awareness of the importance of total defence. These programmes reach out to all Singaporeans. Most recently, the Total Defence Heroes exhibition at Fort Canning which commemorated Total Defence Day on 15th February was aimed at increasing the awareness of Singaporeans about the roles that they can play in Total Defence.

In the SAF, we have for many years had national education programmes which reach out to NSmen, regulars and non-uniformed personnel. These programmes serve to strengthen the servicemen's commitment to Singapore and to explain the need for a defence capability. MINDEF also contributes actively to the Ministry of Education's national education programme and conducts its own national education programme for school children aimed at creating a greater awareness of defence and security issues. I can assure Mr Rai that the Ministry of Defence and Ministry of Education are well coordinated on this matter.

Now that the Ministry of Education is developing a comprehensive and extensive national education programme for young Singaporeans reaching all the way from primary schools to the tertiary institutions, MINDEF has adjusted its focus slightly to provide national education in a cohesive and systematic manner for all SAF servicemen and women which complements and reinforces the national education programme in schools. The SAF's programme covers many levels from basic military training to specialist and officer cadet schools. The national education packages stress the importance of national service and the roles our servicemen play in providing for the security of our country. MINDEF also conducts national education courses and seminars for middle echelon officers and specialists both for regulars and national servicemen during in-camp training on specific issues as well as to remind them of the important role they play in defence. I would like to assure Members of this House that MINDEF is fully committed to ensuring that servicemen and Singaporeans at large, especially the men and women who serve in the defence of our country, understand why we cannot take our security for granted and why each and every one of them has an important role to play in ensuring the security of our nation. 3.45 pm

Mr Sin Boon Ann: Sir, the SAF, like any organisation, requires good and capable men to manage and to lead. Without these men having the most sophisticated weapons that are at the cutting edge of technology would not have served any purpose. Accordingly and, quite rightly, the SAF has never spared any effort in paying competitive salaries in order to get men and perhaps, in this day and age, women into service. As a result of the intensive recruitment exercises conducted over the years, the SAF has had a fair amount of success in getting men and women of the right quality to make a career out of serving the organisation.

In the last two decades, we have seen the transformation of the SAF into a credible and effective armed force capable of defending the security interest of Singapore. Whether it is the navy, air force or the army, there is very little doubt that these military services are very highly regarded, not just by our own people as we have heard earlier, but also by those who have had the opportunity to work with them. This transformation is in no small way attributable to the men and women who have made sacrifices to bring the SAF to where it is today.

Sir, I understand that it is the policy of the SAF to keep its organisation young. Accordingly, very often, in the SAF, we see officers who are put in very senior command positions. These men have been challenged by the very high demands that these appointments require. It is not unusual to find men in their early 30s occupying senior staff positions in the SAF. With younger officers, the organisation will reduce the risk of being encrusted in complacence. Younger officers with more energy and perhaps with fresher ideas would provide the impetus for advancing the organisation forward.

Keeping the organisation young does have its price. I would like to touch on two broad areas. First, officers in the SAF would have to vacate their appointments at a relatively young age in order to allow younger officers to take over. In many cases, the retiring officers are still young and are capable of carrying on. For them, because they are still economically active, they are compelled to look for second careers and starting life afresh there.

I know the SAF has a programme of preparing its officers and men for a second career in advance. In this regard, much credit must go to MINDEF in making the effort to look after the well-being of its employees. While the soldiers are being returned to civilian life through these courses, I wonder how many of these soldiers have been successful in reintegrating themselves in society. Will the Minister please tell this House how many ex-servicemen have been able to find jobs, for example, in the private sector, what kind of jobs these are, and whether any study has been done on the morale of these retiring soldiers?

My second concern arises from the fact that the early retirement officers will lead to the question of relative experience of those who come to succeed them. One would agree that no matter how bright a soldier is, intelligence is no substitute for experience. What assurance can the Minister give to this House that in appointing young officers to senior command positions in place of the retiring officers, the output from the offices that these officers occupy will not be compromised for lack of experience?

Dr Ong Chit Chung: Sir, defence relations with other countries constitute an important function of MINDEF and is part of our overall defence strategy. Good defence relations among Armed Forces Chiefs and personnel will enhance bilateral communication and relationship, and help us to avoid misunderstanding and tide over difficult periods of time. Good defence relations, I believe, will yield good dividends, giving us access to overseas training, facilities, enabling us to conduct bilateral and multi-lateral defence exercises, giving us the opportunity to test our doctrines and measure ourselves against the best armed forces in the world or in the region.

As the Minister has earlier said, we are short of local training areas. The overseas training facilities will, I believe, provide us with good alternative areas and terrain for hands-on training. I would therefore like to ask the Minister to update us on our defence relations with the other countries, the joint military exercises that we have and whether we are having more access to overseas training facilities.

Mr Shriniwas Rai: Sir, the topic that I am going to raise, I believe, has been raised earlier. I am suggesting that we consider the proposition to allow our girls to serve some national service or what you call community service, for a period of three to six months. I do this in seriousness, because some Members felt that this matter should not have been brought up. I think we are being unfair to our girls. We are discriminating against them. They should be given the opportunity also to serve the country. Some of them are already serving in the non-uniformed branches. May I urge the Minister, as a long-term policy, to consider my suggestion. He may be aware that some other countries are having national service for girls. They have a longer period which I do not agree. I do not think girls should serve the same period as the boys. I think anything from three months to six months would be sufficient, and they could be a contributing factor, both in time of peace and in time of crisis.

Sir, boys who have served national service have developed a sense of camaraderie, a bond which only the school days can rival. Similarly, the girls too can benefit. I urge the Minister to give some consideration to this matter in the long-term interest of Singapore.

The other point is that we are having a declining workforce. If we could allow girls to serve from three to six months, then we may want to consider I am not saying that we should reducing the period for the boys from two and a half years to two years and three months.

Mr Zulkifli Bin Baharudin (Nominated Member): Sir, I propose to the Minister for Defence to introduce institutionalised programmes for key appointment holders in NS units to meet with employers directly, both during and outside in-camp training, to improve community relations.

Employers' support is extremely important. We must recognise their contribution. We can do more to overcome some of the perception gaps and frustrations that sometimes confront employers when they communicate with the SAF. The most important and frequent reasons why employers would want to communicate with the SAF is to ask for deferment of in-camp training for their staff. Usually this happens a little too late, but, quite understandably, business unpredictability sometimes makes it difficult to plan one's in-camp training, even when notices are given six months ahead. Sometimes employers get the feeling that their problems are not being understood or appreciated adequately, especially when they deal with some unknown officials either in writing or through the phone.

I think NS units can play a very important role here. They put a human face and touch when dealing with employers. Such institutionalised programmes can lead to more meaningful and strong relationship between NSmen and employers, and thereby effectively enlarging the SAF community. Who but the NSmen themselves can better demonstrate that when employers ask for deferment on behalf of their employees, they are actually asking other NSmen to shoulder additional responsibilities brought about by the absence of one soldier.

The SAF, like any other forces for that matter, is organised such that the absence of one member in a unit or group can seriously affect training and handicap the capability of a unit as a fighting force. I ask for a new focus and emphasis to establish and enhance the relationship between employers and the respective units to complement the roles already played by SAF public relations unit.

Over the years, the NS units have grown from just being operationally ready and competent to undertaking other administrative responsibilities. NS units, given the necessary resources and assistance, can and are ready to play a larger role in community relations.

The Minister of State, Ministry of Defence (Mr Matthias Yao Chih): Sir, Mr Sin Boon Ann asked about early retirement from the SAF and also how these retired servicemen are faring in the civilian world. MINDEF has a policy of keeping the SAF young. This ensures that the SAF is always fighting fit and effective. It also allows a healthy renewal of leadership, and a constant infusion of new ideas at all levels of the SAF.

MINDEF recognises that transition to a second career is never easy. Preparations for a serviceman's retirement therefore start well before his actual retirement. About one and a half to two years before their retirement, servicemen are invited to attend special workshops and seminars to help prepare them for their retirement and second careers.

While in service, MINDEF provides ample opportunities for servicemen to upgrade themselves. Many sponsorships are offered for diploma, undergraduate and post-graduate courses. We also sponsor servicemen for certified supervisory and management programmes offered by the Singapore Institute of Management and the Singapore Productivity and Standards Board. The training provided will not only enable the servicemen to contribute more to the SAF but also better prepare them for a second career. There is also a scheme to subsidise retiring servicemen who wish to take up training to prepare themselves for their second career.

MINDEF also helps retiring servicemen to look for suitable jobs in the public and private sectors. Furthermore, retiring servicemen may start work with their new employers up to six months before their retirement from the SAF. And during this period, the SAF pays them half their pay and allows them to keep whatever their new employers will pay them. Sir, these measures will help the SAF servicemen to make a smooth transition into their second careers.

I have no specific numbers as to who have gone to what jobs but, anecdotally, we know that our retired servicemen are well looked after in their new careers by their new employers. We know that there is a network of retiring and retired regular officers with national servicemen who form the network of employers and employees in the civilian sector. And we know that they constantly keep in touch with each other to find out who is retiring and who they can hire and can contribute to their companies.

Sir, the other aspect of moving young officers up very quickly within the SAF hierarchy will not compromise on their ability and expertise, because we have a well planned route of advancement where we prepare junior officers to take senior appointments. We train them and properly prepare them through courses and expose them to experiences, command appointments and exercises to ensure that when they get to the higher appointments, they will be able to perform well in their jobs.

Dr Ong Chit Chung, Mr Hawazi Daipi and Mr Shriniwas Rai asked about defence relations with other countries. Our defence policy is based on deterrence and diplomacy. Therefore, diplomacy is a key pillar of our defence policy. Singapore places great emphasis on developing good defence relations with other countries, both within and outside of our region. Over the years, we have developed a network of strong defence relations with many countries, and we will continue to invest effort and resources to strengthen existing relationships and develop new ones.

Our defence relations with ASEAN and FPDA countries are good. The SAF trains and exercises with their armed forces on a bilateral or multi-lateral basis. We also send officers for training in each other's military academies and colleges. We organise regular visits and exchanges for all ranks. Such interactions enable us to learn from each other professionally and promote mutual understanding and confidence building. Such exchanges also facilitate the development of rapport at various levels between SAF personnel and their foreign counterparts. 4.00 pm

Across the Pacific, our defence relations with the US are strong and warm. This relationship has been steadily growing in depth and scope. The Air Force continues to have access to valuable training facilities in America. Exercises with the US conducted locally have grown in complexity and scope over the years. These exercises and access to facilities testify to the value both sides derive from such interaction. We have also recently signed a Memorandum of Understanding which allows the Air Force to do flying training in Canada. Defence interactions between Singapore and European countries, in particular France and Sweden, are increasing. Our Navy conducts submarine training in Sweden. The Air Force had their first bilateral exercise with their French counterparts recently. MINDEF is working towards more cooperation between the SAF and European armed forces.

Over the past year, we have also stepped up defence interactions with countries such as South Africa, China and Japan. We would like to see this continue. As for training areas, these are limited in Singapore. While the SAF has invested heavily in simulators and other forms of high-tech training aids to overcome our constraints, there are limits to what technology can provide. There is no substitute for actual flying and on-ground manoeuvres. Hence, the SAF has little choice but to conduct more of its training overseas. The SAF has access to training facilities in 16 countries. We are grateful for these opportunities. We will continue to look for new training areas overseas to meet the growing needs of the SAF.

Mr Shriniwas Rai asked whether girls should do some form of national service. As far as military duties are concerned, MINDEF has no immediate need to consider the option of enlisting women by way of national service. The number of males enlisted for national service is indeed dwindling because of falling birth rates. This has led to a squeeze on national service manpower for the SAF. But so far the measures, such as making better use of technology and commercialisation of non-essential support functions, have enabled MINDEF to cope with the squeeze. These measures have allowed us to free up more manpower resources for combat vocations or we can do more with fewer men. However, Mr Rai's question touches on cohesion and bonding among women and perhaps also non-combat duties for them. If that is so, then perhaps I should pass this question to other relevant Ministries to consider for further study.

He also asked whether or not we should consider reducing the period of training for boys in full-time national service. Sir, as explained by the Minister and the Second Minister before me, we are increasingly going into high technology and sophisticated equipment and these equipment require a long time for the boys to get familiar with and to be operational with them. The sophisticated weapon systems and equipment require a long period of basic training, first, for the soldiers themselves to understand their own personal weapons and how they should react on the battlefield and slowly move on to team building and then get to operate those sophisticated equipment. Furthermore, Sir, the training is not by way of small sections of 10, 20 or 50 men. They have to increasingly also operate with larger formations such as the battalion, the brigade or even the division. Therefore, because of these two reasons, we need a long time to prepare a young boy, coming in as a recruit till the time he is operationally ready, to operate within a far larger formation and to operate very sophisticated weapons and equipment.

Mr Zulkifli Baharudin asked about community relations and, in particular, interaction with employers. I thank him for his suggestion. MINDEF has always regarded our relations with the community as very important, especially given that the SAF is a citizen armed force. Families and employers, all have a keen interest in what the SAF is doing. MINDEF is also conscious that in a small country like Singapore, military activities will inevitably result in some inconvenience to the community.

MINDEF set up the Advisory Council on Community Relations in Defence (ACCORD) in 1984 as a means to keep the community informed of developments in the SAF and to obtain feedback. The ACCORD members represent employers, trade unions, grassroots organisations, schools and institutions of higher learning and also Members of Parliament. We have found ACCORD most valuable, as it helps MINDEF to explain its policies and activities to the community and to garner the support of Singaporeans for our defence effort. The feedback from ACCORD also helps us to fine-tune MINDEF's policies and programmes to take the concerns of the community into consideration. MINDEF also conducts regular dialogue sessions with various groups, including employers and grassroots leaders. At the same time, we organise visits to the SAF units for them so that they have a better idea of the SAF's capabilities to defend our country and a better understanding of what it is that our young men do when they perform national service. Our three services, ie, Air Force, Army and Navy, also hold open houses for members of the public. SAF units themselves invite members of the public to such events such as passing out parades, unit anniversary celebrations and the Commanders' Evening so that the members of the public and employers can interact with the officers of the individual unit. So I assure the hon. Member that this has already been done and the unit commanders are encouraged to organise more of such activities wherever possible.

Dr Ong Chit Chung: Sir, I wish to thank the Ministers for their full and comprehensive replies and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr Low Thia Khiang (Hougang): Sir, I beg to move,

That the sum to be allocated for Head K of the Main Estimates be reduced by $10 in respect of Code KA 1500.

(In Mandarin): Sir, the Ministry of Defence is a very important Ministry in Singapore, especially for a small nation like Singapore that is surrounded by the big countries in Southeast Asia without much breathing space. Most information relating to defence expenditure are sensitive and cannot be disclosed. Although defence expenditure is necessary, we must still be prudent in our spending.

In the 1997 Auditor-General's Report, I saw a lot of shortcomings in the Ministry of Defence's expenditure and administrative procedures. For example, in the tendering procedure, the tender boxes were opened before the closing date. Secondly, some tenders that were submitted after the closing date were also accepted and considered. Thirdly, the fax machine was not installed at a proper place, and some of these documents and quotations can be read by other people in the office.

There was also an incident when the tender price was negotiated down by $630,000 after the tender was closed. Yet, when payment was made to the successful tenderer, the amount of $630,000 was not deducted from the original tender price. I wonder what the Ministry is doing about the matter. How did this happen? Has any investigation been conducted, and what is the result of the investigation? How can the Ministry of Defence ensure that this type of mistake will not occur again?

Mr Matthias Yao Chih: Sir, I assure the Member that MINDEF takes the Auditor-General's Report very seriously. Indeed, we are very conscious of the need to spend the budget given to us wisely and ensure that there are no biases in the tenders nor any discrepancies in the tender system. There is no mystery as to what happened. The Member read these reports from the Auditor-General's Report. Let me explain what has happened with regard to what he told us.

On the question of tender boxes being opened, on average, about 50 MINDEF tenders are outstanding at any one time. In other words, as of today, there are 50 or more tenders which are currently open. The tender periods for the different types of tenders range from three weeks to four months, depending on the complexity of the requirements. But as tenderers are allowed to submit their offers any time before the closing date, it is possible for MINDEF to receive offers from different tenderers at any one time. It is not practical to set aside one box for each tender. MINDEF therefore sets aside eight tender boxes and, as far as possible, tries to consolidate tenders with similar closing dates over a two-week period in the same tender box. Otherwise, if we have 50 or more boxes and tenderers put their tender documents in the wrong box, it will result in a lot of confusion and unnecessary extra work.

Tenders submitted more than two weeks before the closing date are also allowed to be submitted into the eight boxes that we have kept open. Hence, when the boxes are opened periodically to take out tenders which have closed, the same boxes may contain other tenders which have not closed. This practice, admittedly, was not consistent with the provisions in the Instruction Manual. The Auditor-General has pointed this out. MINDEF raised this matter with the Ministry of Finance and the Ministry of Finance has recognised the problem faced by MINDEF. It has subsequently agreed to allow MINDEF to continue with the current practice. Meanwhile, MINDEF will explore other ways to improve the practice further.

Mr Low said that there were 13 late tenders which were considered after the tender dates have closed. That is not correct. The point at issue here is that none of the late offers were accepted. But it does not serve the Government's interest to completely disregard the late offers and not look at them when they can be used to evaluate the reasonableness of the valid offer. Following the Auditor-General's Report, MINDEF has consulted the Ministry of Finance and the Ministry has agreed that there is no reason to return late offers to the tenderers. The revised Instruction Manual now allows the procurement agency to retain late offers for reference, but it still requires the purchasing agency to inform the supplier concerned that his late offer is not valid and will not be considered for award.

On the location of the fax machines, tenderers are advised in the documents that if they want to send their tenders by fax, it is at their own risk. Nevertheless, in MINDEF, the fax machines are always located in restricted areas, for example, in the registry or in the tender office, and access to these machines is tightly controlled and has been further tightened so that the office would not be left unattended and will be locked at all times. In addition, we have implemented a system which electronically directs the faxes coming in to the recipient through an e-mail system, thereby reducing the risk of exposure inherent in the manual way of delivering faxes to the desk of the recipient.

Mr Low Thia Khiang: Sir, how about the question of $630,000 which was offered by the tenderer after negotiation and was not deducted in the main contract?

Mr Matthias Yao Chih: Sir, I am aware of this case. After an investigation it was found that there was a mistake made by the officer concerned and the supplier was asked to refund that $630,000. 4.15 pm

Mr Low Thia Khiang: Sir, may I seek a clarification. How was the mistake made? Apparently, MINDEF negotiated with the contractor and a discount was offered. Why was this offer not reflected in the contract awarded, in terms of the amount?

Secondly, I do not think that MINDEF has given any assurance that a tender box should not be opened before the tender is closed. Should MINDEF not have any innovative solution, instead of saying that the Ministry of Finance has allowed them to carry on with the practice because of the current situation?

Mr Matthias Yao Chih: Sir, regarding the $630,000, it was not captured in the original tender document and therefore there was a discrepancy. Later on, this was pointed out and the money had been recovered.

As far as the tender boxes are concerned, the issue is not whether the tender boxes remain open or closed. The issue is whether every tender that comes in is properly kept, properly registered, and not opened before the proper time. And under the system as it exists, when the tender boxes are opened, all the tenders which are meant to be opened or due for opening will be set aside and given to the officers in charge for processing.

Tender documents for other tenders which are not due for opening are then properly registered in a register and put back into the box. And this procedure is properly witnessed so that nobody can claim later on that he has submitted a tender and it is not in the box or that the box was opened and the tender document was taken away. Nor somebody can claim that he put the document in the box before the time was up when actually he did so after the period had closed.

So the issue is not whether the box is opened or closed. The issue is whether every document that comes in is properly registered and properly processed.

Mr Low Thia Khiang: Further clarification, Sir. The Minister of State mentioned that the $630,000 was not captured in the original contract. That, I think, is understood. But how did, after the negotiation was done, the contractor agree to the deduction and why was it not communicated and deducted from the contract sum? And even at the payment stage, I understand the sum of $630,000 was paid to the contractor. Why was it so? How did it happen?

Mr Matthias Yao Chih: Sir, it was a mistake by the Department and the money was correctly pointed out as a discrepancy by the Auditor-General and we have since then recovered the money, and we would tighten the system so that it does not happen again.

Mr Low Thia Khiang: Sir, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The sum of $6,489,453,240 for Head K ordered to stand part of the Main Estimates.

The sum of $775,000,000 for Head K ordered to stand part of the Development Estimates.

Head T -

The Chairman: Head T - Ministry of Law. Amendment No. (1), Mr Chng.

Mr Chng Hee Kok: Sir, I beg to move,

That the total sum to be allocated for Head T of the Main Estimates be reduced by $100.

Sir, recently, at the last Parliament meeting, we amended the Films Act, as a result of changes in technology. Now, the Inland Revenue Authority of Singapore has also implemented the e-filing system or electronic filing system for those who file their income tax returns through the Internet. Sir, such electronic filing with modern technology raises several questions. For example, the integrity of the electronic system, what is the liability for wrong filing, and what happens if there is a fraudulent filing by somebody on behalf of another taxpayer. Where is the applicable law when filing through electronic means, through the Internet, which can be done from a point outside Singapore? The source of the filing may not be in Singapore.

There are many questions related to this issue, as technology is in fact moving at a much faster pace than what we all can imagine. The question really is this: do we need to update our laws more regularly, and which other areas the law need to be updated? May I ask the Minister that perhaps he should look into the setting up of a Review Committee, and to include technical consultants or experts in this Review Committee, to review laws that need to be amended so as to ensure that we are up to date. Having a Committee will also enable some form of uniformity of the law because we do not want to have the same set of laws on different issues with different penalties, if they are for the same offence, for example.

Sir, will the Minister consider setting up a Law Review Committee to make sure that our laws will be reviewed in line with technological changes?

Assoc. Prof. Chin Tet Yung (Sembawang): Sir, our legal system is much respected and admired. It is due in no small part to the various institutions that make up the system - our Judiciary, Legal Service and the professions. Our laws too have been much admired. We have had many visits from legal professionals in the region who are interested in our laws and our legal system. We are looked upon as a country where every law is thought through carefully, where once it is enacted is enforced. These visitors will probably be surprised to hear that currently our law reform is not centralised. We have the Singapore Academy of Law Committee on Law Reform that has done an excellent job in specific cases. We have the Attorney-General's Chambers' Legislation Division, and we have the various Ministries each proposing laws.

It may be time to take a more holistic view to law reform. We may also need to speed up reforms of the law in relation to a number of areas. We need to keep up with the fast pace of change, for example, in areas of cyber laws. We need studies also to be made in relation to a number of legal institutions such as sentencing policies. I am sure that they are done currently by a number of agencies, but that is precisely the point why we need to have a Law Reform agency capable of and able to respond quickly and a singleness of mind to the business of coming up with modern and well thought-out laws. The time surely has come to think of a full-time agency dedicated to law reform. Such an agency can be used to recommend and draft new laws and to study the impact of existing laws to see whether they are working well and, if not, how they can be improved.

I can think of at least three areas where such an agency may help. Firstly, in the area of substantive law, there need to be more coordinated efforts, for example, in the laws relating to the media, especially electronic media, integrating intellectual property laws, and laws relating to electronic commerce. In procedural law, the time has really come to review the antiquated codes of procedure evidence, such as the Criminal Procedure Code and the Evidence Act. In legal institutions, we need studies done, for example, on the operation of the various new ways of dispute settlement, such as mediation and conciliation, on the relationship between mediation and adjudication.

Sir, in today's modern societies and fast paced economies, we may need to have an efficient and effective law reform agency that can not only keep pace with developments but enable us to plan ahead. That is part and parcel of being Singapore. And I hope that in the not too distant future, we can have this agency to help make the legal system even much more admired and respected.

Mr David T. E. Lim (Aljunied): Sir, many small businesses are heavily dependent on trade with regional countries. In today's economic climate, many are stuck with inventories they cannot sell and debts they cannot collect. I am told that the number of bankruptcies in 1997 has risen some 30% compared with the year before. No doubt this number is likely to increase.

These business failures bring with them some unexpected problems. Recently, for example, I was approached by a businessman who had left the running of a company to his business partner. His business partner disappeared together with all the books and business records. As the only remaining director, he is now responsible for the company but is unable to file any reports or conduct any business. He does not know who his debtors or creditors are, who has paid, or who has been paid. He is afraid that the Registry of Companies and Businesses (RCB) would impose a fine on him for failing to submit his annual accounts. But at the same time, he does not want to wind up the company for fear that he may be disqualified from being a director of another company he owns. And if he does nothing, he may still become disqualified on the grounds that he has repeatedly been fined by the RCB. I am told by fellow MPs that they have encountered other similar cases.

The laws which govern business failures and the obligations of directors are not confined to just one Statute or one Ministry. To the small businessmen, they can be very complex and complicated. Not knowing exactly what they are required to do by law in such circumstances adds considerable anxiety to the anxiety of businesses which are already in trouble. And hurrying lawyers to figure out a particular situation is costly at a time when they are trying to conserve cash.

I would like to suggest three measures for the Ministry to consider to help in this particular time. Firstly, I hope the Ministry of Law would be alert to such problems and unusual situations as the years wear on. The Ministry should be proactive and prod further when early and unusual signs of distress are seen. We should take the lead to coordinate a thorough response to deal with the situation, especially when the rules and regulations cut across a number of Ministries.

Secondly, where appropriate, the Ministry could perhaps issue guidelines for small businesses on how to deal with the unusual situations such as the one I have described earlier. This would save businessmen a lot of time and costs figuring out what to do.

Finally, I also hope that in situations when businessmen are caught through no fault of their own by the technical requirements of the law, the Ministry would adopt a more sympathetic interpretation of the rules or initiate modifications to the relevant laws to help the businessmen cope.

Mr Chng Hee Kok: Sir, the Bankruptcy Act was amended last year to raise the limit by which bankrupts may be discharged. In view of the fact that the economy, because of the regional currency crisis, is due to slow down, there is likelihood that there will be more bankruptcies. As my colleague has just mentioned, bankruptcies have gone up by 30% last year. I want to ask the Minister, in view of the changes in the Bankruptcy Act and that the economy may go through a more difficult period, whether the Official Assignee and Public Trustee (OAPT) has sufficient manpower to cope with the workload to make sure that those who are in need of help to be discharged will be discharged. Perhaps more can be done in this area and how bad is the situation?

Mr Shriniwas Rai: Sir, may I take both cuts together?

The Chairman: Yes.

Mr Shriniwas Rai: Much obliged, Sir. First, I will deal with the Official Assignee and Public Trustee. The Office of Public Trustee is a very important legal office. The present holder of the office, Dr Chandra Mohan, besides being a Public Trustee and Official Assignee, also acts as the Registrar of Moneylenders, Commissioner for Charities, Registrar of Pawnbrokers, amongst other things. He administers all monies collected under road accident cases. As the Registrar of Pawnbrokers, he has reorganised the auction of pawned goods for the benefit of the public. There is greater transparency now. In fact, the public has benefited. The public is getting more out of these auctions. I commend him and his men for doing a fine job. 4.30 pm

There is another area which I would like the Minister to consider, and that is, the Office of the Public Trustee. With growing affluence, more people are leaving properties behind and we should consider increasing the jurisdiction of the Public Trustee. As Members may be aware, the Public Trustee is allowed under the Act to administer estate with a certain limit. I think it will be beneficial to the community at large if this was increased.

Also, Sir, we should think of corporatisation of this aspect of the Public Trustee. When I visited Australia, the State of New South Wales has got this and it offers its service, as lawyers do, to administer estates. Sir, I am suggesting this because in normal cases, the court takes about six months to get the proper documents for administration. The Public Trustee takes a shorter period because he does not have to go to court and I would urge the Minister, for the benefit of our people, to look afresh at the legislation and amend it, if necessary,

Sir, I would like to commend the Public Trustee because, from time to time, whenever lawyers, and I myself, avail themselves of the service, and we feel that clients would be better served by the Public Trustee, the Public Trustee has unstintingly obliged and has done a good job. I think this House should be aware of this fact.

May I be permitted to move to land titles, Sir. When the British started the settlement of Singapore, we had what we lawyers call "common law titles". Sir, I would at this stage like to declare my interest. I am the owner of a private property and I have made an application for conversion of this property to land title.

Sir, when the common law title started, and many Members who have bought properties would have known each document is added after each transfer and it becomes very cumbersome and difficult. Sometimes it is difficult even for lawyers to read one title from the other. And rightly, the law was changed. We have what is called the Registry of Titles and they have done a good job over the years. I stand corrected, but I think there is a plan to have all of Singapore under the title deeds. I am concerned, and feel perhaps the Minister may want to enlighten the House as to how long it would take before the whole of Singapore is governed by this Torrens system.

Sir, I think we are moving very fast and the Registry has now been computerised. I think Members and the public will be interested to know when the Land Titles Registry expects to convert the common law title to that of land titles.

Sir, it would be in the interest of Singapore lawyers as well as the business community and property developers to have the entire Singapore under this title deed as soon as possible.

Mr Chuang Shaw Peng (Nominated Member): Sir, it is known by now that the property market in Singapore is bad. The chances are property prices will continue to fall further. Quite a few property developers had halted their construction projects. If the situation persists, it is not unimaginable for some property developers to go under and the bank will take over their building and land.

Sir, under such circumstances, the professionals, the builders, the suppliers and the workers working on the project will suffer greatly. And this is because under our current law, it is stated that whatever sits on the land belongs to the land. If the land has been mortgaged to the bank, then whatever contribution that the builders, the professionals, the suppliers and the workers had made during their building process will go with the land. The CPF of course has the first charge. The residual amount would be first taken by the lending bank with whatever remaining distributed to other creditors, such as the suppliers, professionals, builders and workers.

It is not unusual for an ailing developer to slow or stop payment to the builder months ahead of their collapse. Hence, a lot of values, contributed by the professionals, builders, suppliers, workers, etc. are not paid for and yet they are taken away by the bank. What makes it worse is that under the law the builder has no statutory right to stop work even if it is not paid. Therefore, it is very inequitable under the present law to protect the banks and not the others who by right should be given a lien on the property or on the project account to protect their interest.

I like to cite the UK practice on statutory right to suspend work. In 1996, they enacted a law to give builders the statutory right to suspend work in the event of non-payment under section 113 of Housing Grants (Construction and Regeneration) Act 1996. That means a contractor can, after giving seven days' notice, suspend performance of its obligations for non-payment. There is also provision for automatic time extension for completion for the period during which their employer remains in default of his payment obligation.

Sir, I would like to ask the Minister to study this biased and unfair practice and provide an equitable protection to the parties involved in the building process.

Mr Kenneth Chen Koon Lap (Hong Kah): Sir, the Legal Aid Department is providing an invaluable service to those who cannot afford to seek help from the private lawyers. However, due to the educational background of those who seek assistance plus the fact that most speak only dialects or mother tongue, such as Malay and Tamil, sometimes there may be problems in communication between the officers and the clients. Although the Department does provide translators, but because legal cases often involve legal terminology, many have complained that they could not quite follow what has transpired between the various parties involved, especially when they receive official letters in English.

Another common problem is that after they have received the court ruling, the officer involved often consider the case closed. However, there may be follow-up action to be taken. For example, a divorcee may have problems in collecting the maintenance or receiving the proceeds after the common property has been sold. They are often at a loss as to what to do as they would be told that as far as the Legal Aid Department is concerned, they have obtained the court ruling and the case is considered closed.

I would therefore like to request the Minister to look into these two problems, and perhaps assign more bilingual lawyers to the Department and alert the translators to be more patient and take greater care in explaining every detail to the users. As for follow-up action, the officers can explain to those who seek their help that they will be attended to even after the court ruling and that they will be provided with continuous assistance should they encounter any further problems.

I would also like to request the Minister to look into the existing $800 ceiling for anyone who is qualified to seek help from the Legal Aid Department. For example, a wife with two or three kids and earning around $1,000 wants to seek legal aid for whatever reason will never be able to afford to engage a lawyer from the private practice. Nor can a breadwinner with a family earning the same amount and who encounter any legal problems do the same. They would have no option but to seek legal assistance from the Legal Aid Department. Therefore, I suggest that certain flexibilities be exercised to deal with these cases.

[Mr Deputy Speaker in the Chair]

4.40 pm

Mr Jeyaretnam: Sir, my subject is how we treat or deal with those members of our community who fall foul of the law and have to be dealt with. And of course, I am speaking of our sentencing policy in Singapore. Under our present provisions, there is an increasing number of offences which carry mandatory sentences that are determined by the legislature. I can see the need for a mandatory minimum sentence in some cases. But this should be left or kept to a minimum. For one thing, mandatory sentences take away the function of the Judiciary whose functions it is to determine what the proper sentence is. So I would urge the Ministry to consider whether they are perhaps going over board in trying to provide mandatory sentences for very many offences. But a more particular concern of mine is the sentence of caning that is now being inflicted on a great number of our offenders and even where they have committed offences of which violence was not a major part or even a minor part.

Mankind has come a long way from the time when it treated its prisoners inhumanely and cruelly. There was a time when they were put on the rack. There was a time when they were made to do hard labour and we even had hard labour in our laws at one time. But as I said, we have moved on. And it has been said that one indicia of a civilised society is to see how it treats its prisoners and people who have fallen foul of the law.

The caning that we carry out, as I am sure everyone knows, is not the caning that is carried out in schools or even in boys' institutions where boys are kept. This caning that is carried out in the prisons is designed to inflict as much hurt as possible upon the individual and to leave scars. This has been acknowledged as being the aim of the caning sentence. May I say, Sir, it brutalises the society to see that caning of this nature is one of the policies of the Government. Advocates who are urging the abolition of the death sentence have called the death sentence "state murder". Similarly, this imposition of caning by the state may be characterised as "state violence" upon the individual. As I said, it brutalises our citizens. It lowers their resistance to resorting to violence in their own relationships with others. And I did not inform the House that under the United Nations Declaration of Human Rights and under the covenants, caning is not encouraged or is prohibited. Governments are urged not to resort to caning or to any violent punishment. And indeed the European Court of Human Rights has taken it much further. It has declared corporal punishment, not only of persons who fall foul of the law but even of schoolboys, illegal as it violates the human rights of the child or person. 4.45 pm

As I have said in a number of other things, there should be greater public awareness of what should our policy be on caning. I think it is time that we moved on and not stick to the old idea of punishment, but to see whether our present system of punishment is fit for a civilised society and whether it serves the purpose. I hope the Ministry will take steps to initiate public discussion among our citizens on the punishments that are being carried out, because it is very much a matter that concerns our people. If that is not possible, will the Ministry consider setting up a committee to study the whole question of sentencing policy that we adopt in this country? It is not a matter that should be just left to one or two Ministers or even to the Cabinet. It is a matter on which the public should state their views and a national policy on sentencing reached.

Assoc. Prof. Chin Tet Yung: Sir, Singapore, in recent years, has been introducing new methods of dispute settlement. These have gained much attention, acceptance and favour. In particular, the setting up of the first Community Mediation Centre was well received. Residents now have recourse to a Centre where they can settle disputes among themselves instead of complaining or quarrelling or calling for the police.

I would like to ask the Minister how well this centre has operated. Has there been a good response among the residents and grassroots leaders towards this centre? In particular, how has the Centre coped with the disputes sent to it, whether these disputes have been settled amicably and what lessons have been learned from its operations?

Also, in relation to the recruitment of mediators, last year, I spoke about the need to involve the grassroots leaders in the mediation process in any neighbour dispute. I should like to know whether action has been taken to involve more grassroots leaders in the mediation process. Are there any facilities set up to train such mediators?

In these days of economic stringency, I am concerned that the mediation programme may be set back. I would like to ask the Minister whether there will be more centres in the pipeline, especially as mediation is now growing in importance, and social disputes are becoming more in number when economic circumstances are less favourable.

Apart from community mediation, I understand that there has also been mediation undertaken by the Singapore Mediation Centre set up by the Academy of Law for commercial disputes. I am sure this is most welcome as parties who contract, of course, intend their contracts to be kept and that they should remain in the business relationship. Going to trial usually sours relations and adds to transactional cost. I hope that gradually parties going to courts for relief will consider mediation as a precursor to any court action that they may wish to pursue. At the moment, it seems that mediation is an unfamiliar method of dispute settlement. I wonder whether more could be done to promote this method before parties take on the more familiar route of fighting it out in the courts. Litigants will need to understand that mediation is, in most instances, a better way of resolving disputes than adjudication. Will the Minister consider ways in which the mediation process can be promoted at all levels of society, between neighbours, between businessmen, indeed between Government agencies and the people?

The Minister for Law (Prof. S. Jayakumar): Sir, responding to the various comments that have been made, may I start with Mr Chng Hee Kok and Prof. Chin Tet Yung's remarks on law reform.

Firstly, let me say that different countries have diverse approaches to the way in which they undertake law reform. Some countries have more than one instrument of law reform. Some have, as Prof. Chin has said, a centralised body to undertake law reform. Whatever the approaches, I think we can agree that law reform is important in Singapore.

By law reform, we need to be clear what we mean. It includes, first, the updating of laws, to make sure that they are not out of tune with latest developments in other jurisdictions. It also means examination of the laws to ensure that modern problems, previously not anticipated, are adequately dealt with under our laws information technology, the example that he mentioned is a good illustration.

In Singapore, Prof. Chin is right that we do not have a centralised body. What is the present system? Our present system is that there is a Law Reform Committee under the Academy of Law. The Committee has inputs from the Attorney-General's Chambers as well as the Ministry of Law. The Ministry of Law acts, in effect, as a coordinating body, whether there are consultations needed with other Ministries or economic agencies, such as EDB, TDB and other agencies. The Ministry of Law, on its own, also initiates and embarks on law review and law reform processes. A good example is the recent exercise on intellectual property rights where we introduced fairly comprehensive amendments to the Copyright Act. And there is an on-going exercise to review trade marks, industrial designs, integrated circuits and so on.

For the future, while we may not immediately proceed to one centralised agency, I can assure both Mr Chng and Prof. Chin Tet Yung that the Ministry of Law, together with the Attorney-General, will set up a special unit to coordinate and promote law reform and law review at the national level. Such a unit will work closely with relevant agencies in the legal fraternity.

What are the areas that such a unit might usefully focus on? I can think of three areas which should have priority. First, the full range of intellectual property laws and laws concerning information technology. This includes some of the points that have been made by Prof. Chin and Mr Chng Hee Kok. This would also include laws that support the development of the emerging sciences in the medical field and biotechnology.

The second area is to study, together with the economic agencies, what changes have to be made to legislation in the fields of business, banking, finance and commerce. In this regard, I think we should realise that law reform is not just an academic exercise. We should view laws, the legal institutions and legal procedures as an important infrastructure to support our overall objective of establishing ourselves as a financial and commercial centre.

Much has been spoken about the need to be competitive in these areas. In that context of being competitive, laws, the effectiveness of legal procedures and legal institutions must be considered as part and parcel of the infrastructure to support our commercial competitiveness.

So we will consult relevant agencies on what should be done to update and make changes to laws such as the Companies Act, Trustees Act, Bankruptcy Act, Bill of Sales Act and other current laws in the areas of banking and securities. Therefore, the aim of the Ministry of Law in setting up this unit is to be able to support economic Ministries like the Ministry of Finance and the Ministry of Trade and Industry, to ensure that our laws keep in pace with changes which are vital to Singapore.

I would say that the third area where we will work closely with other Ministries such as Home Affairs, Community Development and Health is to review laws to improve community relations and to increase social peace and security. In this area, we will continue to evolve our own laws on ADR and mediation, which will be touched on in greater detail by my colleague, the Minister of State. What I should emphasise is that whatever method we have to review our laws and whatever instrument we have for law reform, it cannot be done by one agency acting alone. It has to tap available resources in the Academy of Law, the Attorney-General's Chambers, the Law Society and, of course, the academic talents and brains that exist in the University of Singapore's Law Faculty. In this way, I think we can ensure that our laws keep in pace with the rapid changes that are taking place both in Singapore and in the global economy.

As to the specific points that have been raised by Mr Chng Hee Kok and Prof. Chin, let me say that the Attorney-General's Chambers currently chairs a committee which examines the legal, regulatory and enforcement issues concerning information technology and electronic processes. Actually, we are already looking at a number of draft legislation, including one on electronic transactions which will regulate digital signatures, a point which Mr Chng Hee Kok alluded to when he asked for safeguards in the context of IRAS' latest requirements.

Amendments may also have to be made to the Computer Misuse Act, the Rules of Court and other existing intellectual property legislation, and we will do so in close consultation with agencies like the NCB, MTI and MHA.

In addition to the reply to Prof. Chin's point, the Attorney-General's Chambers are looking into the review of the Criminal Procedure Code to streamline and update criminal procedure and police powers, to review also the Penal Code, to update penalties and to modernise code. And, if I may say so, we are also looking at various aspects of the Evidence Act and the Criminal Procedure Code to examine, for example, the scope of the hearsay rule.

To sum up, on law reform, it is under control. It may not be exactly in the shape and form that Prof. Chin wants a centralised agency, but we have to constantly review the mechanism. What is important is to ensure that the law reform actually does take place. 5.00 pm

Mr David Lim, and related points were made by Mr Chng Hee Kok, touched on the plight of directors who find themselves in a situation where they are the remaining directors and may have to comply with obligations to file the statement of affairs. I will focus really on the role of the Official Receiver and the duties of the Official Assignee and Public Trustee's Office. He wants us to be sympathetic and I take note of his point. But let me also say that obviously each case has to be considered on its own merits.

There is a need to balance the difficulties and plight of inactive directors with the loss suffered by creditors and investors of those wound-up companies whom the law is duty bound to protect. Because when one becomes a director, say, as a favour to a sibling or friend, he must be aware that there are certain responsibilities. There is a duty towards a company and one is accountable for its affairs. The statement of affairs which a director of a wound-up company is required to file with the Official Receiver is an important document because it enables the Official Receiver to inquire into the extent of a company's assets and liabilities. In the past, it is a fact that the Official Receiver faced considerable difficulties in getting directors to file the statement of affairs. The situation improved after 1993 when a number of them were convicted in court and fined. But fewer and fewer summonses are now issued against company directors. I am told there were 56 in 1992, 38 in 1995 and 31 in 1997. I am also told that to-date, no director has been disqualified because of convictions or failure to file his statement of affairs. Let me also add that before the Official Receiver applies for a summons, at least three reminders are sent and extensions granted to him to submit the statement of affairs. The Official Receiver also gives guidance and advice.

On Mr Chng Hee Kok's question, let me say that in 1997, there were 1,694 new bankruptcies as compared to 1,252 in 1996, which represents some 35% increase. But in an economic downturn, it is not unexpected. From our viewpoint, what is important is that the bankrupts have the opportunity to get out of bankruptcy as quickly as possible. This is where the Official Assignee comes in.

In case the impression is given that the Official Assignee does not have in mind the plight of the individuals concerned, I should remind the House that in fact it was due to the Official Assignee's initiative that we amended the law in September last year to enable bankrupts who have been in bankruptcy for more than five years and with debts of up to $250,000 to be discharged by certification of the Official Assignee. Before the amendment, the ceiling was $100,000. The point I am making is that following the amendments to the law, a large number, some 6,500 bankrupts, became eligible for consideration for discharge. In fact, 3,400 bankrupts, or 52%, have already been discharged.

Despite the high volume of bankrupts, the bankruptcy clearance rate, ie, the number of cases discharged compared to the number of new cases rose to a record high of 161%. Creditors too have had their interests served receiving record dividend payments of $30.7 million in 1997, which was 29% higher than what was received in 1996. So the Official Assignee, through laws and through the administration, has tried to serve both the interest of individual bankrupts, not forgetting the interest of the creditors, which are two duties that he has to bear in mind.

Mr Shriniwas Rai asked about increasing the jurisdiction. We have to examine what has happened in other countries and see whether it is appropriate for our own system. I would say that comment also applies to his suggestion for corporatisation because the Official Assignee and Public Trustee's Office is already an autonomous agency since 1st August 1997. This has enabled it to manage its resources more effectively and efficiently. Whether we should go one step further and corporatise it, I do not rule it out, but I would say we will have it under review and take that step if and when it is absolutely necessary.

On Mr Chuang Shaw Peng's question, I hope he would understand that I will not be able to give a very specific reply to his point at this stage because it is a matter that I would have to consult with other agencies like the Ministry of National Development, the Monetary Authority of Singapore and so on. After getting the necessary inputs from them, we will respond to Mr Chuang.

My understanding is that the position in the United Kingdom is pretty much the same as in Singapore on the rights of mortgagees of land, ie, builders have no special lien in respect of materials they provide for the construction of the building. But he has referred to certain specific subsidiary legislation. I have taken note of it and we will look into that.

Mr Kenneth Chen talked about legal aid. He has made three points. One is about the problem of translation. Let me assure him that in my discussions with the Director of Legal Aid, I have been assured that they have adequate translators, but I do take note of his point that if it is not sufficient we should ensure that whatever resources are necessary are made available.

The two more substantive points were the closure of files. I must assure him and the House that it is not true that once a decree nisi is obtained the file is closed. On the contrary. The Bureau informs the applicant of the progress of the case and the file is not closed till the decree absolute is obtained. When an order of court on ancillary issues is obtained, an applicant faces problems. For example, with regard to division of matrimonial property, the Bureau still advises and assists the individual to deal with these problems and will continue to do so.

As for the means test, let me also assure the Member that the income ceiling was increased only two years ago. But we should not look just at the increase in the income ceiling because, in addition to the quantum and the deductions which are made for HDB flat or CPF and so on, people who have more than the income ceiling qualify for legal aid. In fact, the present system is that nearly 80% of those who apply for legal aid do qualify for legal aid. I think that is not an unimpressive figure.

Sir, I will stop here to enable the Minister of State to respond to the other two questions.

Mr Jeyaretnam: May I ask the Minister a clarification?

The Chairman: Mr Jeyaretnam, there is very little time left. Can you allow the Minister of State to reply first.

Mr Jeyaretnam: It is just a question. But it is all right.

The Minister of State for Law (Assoc. Prof. Ho Peng Kee): Let me reply to Mr Jeyaretnam. Mr Jeyaretnam shows concern about our tough punishment regime, focusing in particular on mandatory minimum sentences and caning. Sir, first, let me say that our tough stand against crime and all those who perpetrate it is well known. Deterrence is a key pillar of our tough penal regime. This has resulted in Singapore being a safe city, well known around the world and as a place where even ladies can be out at night. In 1997, we enjoyed the lowest crime rates for nine years. This approach has worked well for Singapore. Having said this, let me add that imprisonment and caning are not the only punishment options available here. As a lawyer, Mr Jeyaretnam will know that in our law books there are also other options that are available, such as granting of probation to juveniles and even to adults, mandating payment of compensation by the offender to the victim, suspension of licences and even making the offender perform Corrective Work Orders. In other words, there is a range of punishment which is available to the courts to choose the punishment that fits the crime.

Let me focus on Mr Jeyaretnam's two concerns. His first concern is minimum mandatory sentences. Mr Jeyaretnam should be assured that we do not use it willy-nilly. Indeed, we use it quite sparingly. In the Penal Code, for example, there are only about 25 out of the 230-odd offences there that have this minimum mandatory requirement.

Mr Jeyaretnam: There are other Acts.

Assoc. Prof. Ho Peng Kee: But it is mainly in the Penal Code. These are all serious offences: aggravated rape, aggravated extortion, aggravated molest. In other words, when we have minimum mandatory sentences, it is sending a signal that these are serious offences and they should not be trifled with. Anyone who perpetrates the offence will be dealt with in a tough way. Again, as I said, it has played a part in helping to keep Singapore safe.

The last time the Penal Code was amended in a relatively bigger way to incorporate mandatory minimum sentences was in 1984. In fact, I was reading the Hansard just now and Mr Jeyaretnam also participated in the debate. That was already some time ago. Having said this, minimum mandatory sentencing, quite contrary to what Mr Jeyaretnam says, does not remove the court's discretion entirely. Because beyond that, there is still a maximum tariff and the court can still decide the sentence to fit the crime.

The other concern of Mr Jeyaretnam is caning. All of us know that caning is indeed an effective deterrent. Even hardened criminals fear caning. We know this because, as Members know, the Ministry of Home Affairs is planning to toughen the drug regime to have caning for hard core addicts. Our agencies on the ground tell us that this already has had an effect on the ground, both anecdotal as well as in numbers. So the point to note is, what works. Again, here we do not use caning willy-nilly. It is carefully considered whether caning is required, looking at the nature of the offence and the incidence of occurrence and then caning as an option is put into the law.

Mr Jeyaretnam talks about other jurisdictions like Europe and other places. In terms of penal philosophy, every society has to decide for itself. What are the punishments that should be imposed?

Mr Jeyaretnam: That is what I am asking.

Assoc. Prof. Ho Peng Kee: So I am saying that in the Singapore context, this is what we have. We decide what is best for us and it works.

Mr Jeyaretnam: Can we have a public discussion? That is what I am asking.

Assoc. Prof. Ho Peng Kee: We are thinking about it all the time. The Ministry of Law together with the other Ministries is always looking at ways in which our legal system can be improved. Just now, we heard praises from various Members here. Assoc. Prof. Chin talked about international praise for our legal and judicial systems and our laws. Mr Kenneth Chen praised the Legal Aid Bureau. Mr Rai praised the OAPT. That is the mindset that we have. So we are continually looking at how our legal system, including our punishments, can be improved. This is not something that is cast in stone. They can evolve over time. 5.15 pm

The Chairman: Order. "Guillotine" time.

Mr Chng Hee Kok: Sir, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

The sum of $204,696,350 for Head T ordered to stand part of the Main Estimates.

The sum of $418,568,400 for Head T ordered to stand part of the Development Estimates.

Head E -

The Chairman: Head E - Judicature. Mr Rai.

Mr Shriniwas Rai: Sir, I beg to move,

That the total sum to be allocated for Head E of the Main Estimates be reduced by $100.

Sir, may I have your permission to take the three cuts together?

The Chairman: Yes.

Mr Shriniwas Rai: Sir, we have the most independent, honest Judiciary that anyone can talk about in the world. The abolition of the Privy Council has led to the establishment of our own Supreme Court. When the Privy Council was abolished, there were a lot of concerns. I had spoken, in fact, to Prof. Jayakumar long before the abolition. I appealed to him to have it abolished, and I am happy that after the abolition of the Privy Council, our Judiciary has come of age. In fact, it is due to our judicial system that one of the judgments, the famous Pertamina case, that was heard by Justice Lai Kew Chai, disagreed with the Privy Council's earlier decision, and it was a very bold decision, and the Privy Council was persuaded by Justice Lai's decision.

Sir, I am suggesting to this House that we should look afresh at our judicial system especially. In the last five years, the Supreme Court and Subordinate Courts have achieved outstanding results and it is to the credit of the Chief Justice, the Judges of the High Court, the Registrar and his officials, as well as the Subordinate Court Judges in bringing this about. The Court is moving from a long-established adversarial system, which is the British practice, to one which is keeping with our Asian tradition - mediation, conciliation and arbitration. In fact, in the High Court of Singapore, less and less cases go to trial. Most cases get settled either by the court officials or through the intervention of the Singapore Mediation Centre set up by the Singapore Academy of Law. In many Commonwealth countries, Sir, the courts are crowded with cases. We are very fortunate. We do not have such a situation.

Sir, on the quorum of the Court of Appeal, as it is now, in most cases, only three Judges sit on the Court of Appeal. I am suggesting to the Minister to consider whether in important cases - I know that from time to time we have five Judges, but that is very rare - we could have five Judges sitting in important cases, whether it is criminal law or constitutional law. In this way, Sir, we would have greater participation and I think the public interest will be served. I have discussed this matter with senior lawyers and they are supportive of this move.

Sir, I move to another area of concern, and I know I am going to touch on a very sensitive issue. Drug offences, which now carry a capital offence, are heard in the High Court whilst cases which carry 20 years' imprisonment are heard in the District Court. I am suggesting that these cases should be transferred to a Special Court which could be headed by either Senior District Judges or senior members of the Bar. I say this because it costs the public immense amounts of money to hear these cases. And after all, our District Judges are interpreting the law (Misuse of Drugs Act) every day. The principle of law is the same. Unlike murder and treason and other capital cases which are heard in High Court, crimes of passion, I call it, you have the mens rea, you have all sorts of defences, and the Judges have to be experienced. But I see no reason why the law which is applied in the District Court cannot be applied to these cases. For the benefit of Members, let me say this. I was in India recently. In India, for a long time, murder cases are heard by District Judges, and a single Judge. I think this is, of course, a very radical departure, but I think we ought to look into it.

The other area which I would like the Minister to consider, Sir, is this. We have landlord/tenant cases and accident cases still being heard by the High Court, although the jurisdiction of the District Court has been increased considerably, to $250,000 now. I think it would be better to have it transferred to the District Court, as we have done in the case of family law. And I think family law is more important than landlord and tenant cases. I urge the Minister to consider this.

Time is running short. Sir, I will just be very brief on the subject of mediation, since Prof. Chin has touched on it. I would like to urge the Minister, in private summons cases involving neighbours and family members, we have a different set of hearing. Instead of going to the court, let us create a Community Tribunal, and we could do justice. Because in my experience as a member of the Maintenance of Parents Tribunal, I have found it very conducive to have a hearing where no lawyers are involved, no press is involved. And I think the Community Tribunal could be a proper forum to hear cases, and not the District Court where the atmosphere is intimidating and, of course, lawyers are always involved. As a lawyer, I would urge the House and the Minister to reconsider the position and try to use mediation even on small-scale private summonses which involve members of the same family as well as the public.

Assoc. Prof. Ho Peng Kee: Sir, Mr Rai has correctly observed that our courts have been proactive, making many innovations to improve the system whenever it has seen a need for such changes. Here, in this House, Mr Rai has made several suggestions for further changes. The question is whether there is a need for these changes.

First, he has suggested setting up Special District Courts to hear certain types of cases, like drug cases, landlord and tenant cases. Presently, the District and Magistrate Courts already hear all these cases, except, of course, those punishable by death for drug cases, and within the monetary limit of $250,000 for the other cases that he has mentioned. Some are heard in the High Court which, I understand, the waiting period, in fact, is very short, just a few weeks. And the waiting periods are also constantly monitored by the High Court. So we feel that there is no need to transfer everything to the Special District Courts.

The division of jurisdiction and cases between the High Court and Subordinate Courts, in fact, has been effective in adjudicating these matters that Mr Rai mentions. Case precedents have been developed over a period of time in these cases. Mr Rai mentions the Family District Court. Indeed, a Special Court was set up in the District Court, called the Family District Court, and matters which were originally heard in the High Court were transferred down. But he would agree that family matters are quite different. Family, matrimonial matters, with its complexity involve not just legal issues but also social issues. And indeed having a Special Court set up at a District Court level has allowed the Court to be very creative in using counselling resources, community resources in the family justice process.

The other suggestion of Mr Rai is whether or not our Court of Appeal could have five Judges hearing the appeals. In fact, as he himself has mentioned, currently under section 30 of the Supreme Court of Judicature Act, the provision is already there for the civil and criminal jurisdiction of the Court of Appeal to be exercised by three or any greater uneven number of Judges of Appeal. Appeals are generally heard by a three-Judge Court in Singapore, which is adequate. But there have been cases in the past, important cases, where the Chief Justice in his discretion had constituted a five-man Court of Appeal to hear such cases.

So the point is that there is no need really to institutionalise it, because then you have five Judges, and resources are used up in a Court of Appeal hearing just appeals. So I think the current position is good enough where you have this flexibility reposed in the Chief Justice to constitute a five-man Court of Appeal when the need arises.

The third point that Mr Rai mentions is whether or not criminal matters involving private summons and other minor offences should not, in fact, be mediated at the community level. With the setting up of the Community Mediation Centres, indeed this is being done. Because there is one rule, under the CMC Act, which spells out the powers of the Community Mediation Centres whereby in a suitable case, a Magistrate hearing a complaint of a minor dispute involving a criminal nature - it could be voluntarily causing hurt or mischief - could ask the parties to go to a CMC to settle the dispute, but, of course, with their consent. So the process is there.

The CMCs are fairly new. We have just set up our first Community Mediation Centre at Marine Parade, which has worked well. And 10 or so of such cases were, in a sense, diverted from the Magistrate Courts to be heard before the Community Mediation Centre.

Let me say a few words about the development of the CMC which is something of interest to Mr Rai and also to Prof. Chin. The first centre was set up in Marine Parade CDC in January. We are targeting to set up a second centre somewhere in the central part of Singapore, probably in the Ang Mo Kio/Cheng San CDC to be operational by the end of this year. Thereafter, we will assess. We plan to set up two more centres to serve the northern and western regions of Singapore, probably by the end of the year 2000. So that is our game plan. Four centres in the east, central, north and west.

Prof. Chin talks about the need to have trained mediators. In fact, this is the heart of mediation, and much efforts have been expended by the Ministry of Law's Alternative Dispute Resolution Division in this matter. As a foundation, a core group of trained mediators has been assembled. These are experienced mediators who are lawyers and other professionals, as well as mediators from the Singapore Mediation Centre. In addition, suitable grassroots leaders from diverse backgrounds have been assembled and trained. They include a school principal, a retiree, a doctor and two managers. So this core group is the first group that will do mediation at the Marine Parade CDC, comprising about 30 in number.

The first CMC at Marine Parade has made a good start. So far, 14 cases have been successfully mediated, and 20 more cases are scheduled to be mediated over the next few months. And feedback from residents have shown they appreciate the opportunity they now have to have their disputes resolved amicably at the CMC. So as more CMCs are set up, more grassroots leaders will be identified for the task. As you know, the plan is to co-locate CMCs with Small Claims Tribunals. So over time, Singaporeans will find convenient one-stop centres where they can have small claims as well as minor disputes settled at one location. 5.30 pm

The Chairman: "Guillotine" time.

Mr Shriniwas Rai: I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The sum of $63,564,790 for Head E ordered to stand part of the Main Estimates.

The sum of $23,924,900 for Head E ordered to stand part of the Development Estimates.

Head B -

The Chairman: Head B Attorney-General's Chambers. Mr Jeyaretnam.

Mr Jeyaretnam: Sir, I beg to move,

That the total sum to be allocated for Head B of the Main Estimates be reduced by $100.

Sir, I have two amendments here. I propose to take them together.

The Chairman: Carry on.

Mr Jeyaretnam: But first I will deal with the second of those two amendments, and that is, the accountability of the Attorney-General as Public Prosecutor. I am sure Members are aware that in the United Kingdom and most of the other Commonwealth countries, the Attorney-General is a Member of Parliament. He is appointed from Parliament upon election of the new government and he holds office for the duration of that government. That is not the situation in Singapore, although I stand corrected on this, I think the Constitution does allow for someone from the elected Members to be appointed as Attorney-General and for him to vacate his office upon the dissolution of Parliament.

In Singapore, we have an Attorney-General appointed outside Parliament. So the Attorney-General is not in Parliament to answer questions and any questions on his decisions are answered at second hand by the Minister. The Attorney-General, as Public Prosecutor, serves a very important function in the administration of justice. He is, no less than the judges, administering justice and ensuring that justice is done in Singapore. And he is therefore accountable in respect of his decisions as Public Prosecutor, just as judges are.

It has been said more than once that when judges try a case, they themselves are on trial by the public watching over the conduct of the case and the reasons that they give for their decisions. So should the Public Prosecutor not be accountable to the public through Parliament for any decisions he makes in his capacity as the Public Prosecutor? It cannot be said that because the prosecutions are vested in him and it is in his discretion that he is not therefore accountable to anybody. This was somewhat the answer given by the Minster of State, when I asked about the directors of Keppel, that the Public Prosecutor decides in his discretion.

There were two matters lately on which the decision of the Public Prosecutor has been called into question. One of course was his refusing to prosecute the Prime Minister and the two Deputy Prime Ministers and the other Members of the ruling Party for having, what we say, violated the section in the Parliamentary Elections Act.

The Chairman: Order. Mr Jeyaretnam, there are three more speakers after you. You have got three more minutes left.

Mr Jeyaretnam: Yes, I will be very brief. I must finish this. For me, it is an important subject. Of course, the other was his not prosecuting the directors of Keppel. In the first instance, we had a written explanation. But may I say I found that written explanation most unsatisfactory. May I say that a great many members of the public did not find that explanation satisfactory. In the case of the directors, there was even no written explanation. All we had was the explanation, as a guess by the Minister of State, as to what may have guided the Public Prosecutor. May I ask whether we can have the Public Prosecutor devise a system or machinery whereby the Public Prosecutor is made to explain in public the reasons for his decisions as Public Prosecutor where they are called into question?

The second amendment is the separation of functions. May I suggest to the Minister that there is a lot to be said for separating the functions of the AG and the Public Prosecutor. The AG is the chief legal advisor of the Government. The Public Prosecutor has a different role to play. In the United Kingdom, we have a Director of Public Prosecutions who makes the decisions. No doubt, he is made accountable to Parliament through the Attorney-General. Is it not possible for us to consider now separating the functions of the Attorney-General as chief legal advisor from his functions as the Public Prosecutor by appointment of a Director of Public Prosecutions?

Mr Shriniwas Rai: Sir, I am rather surprised that Mr Jeyaretnam should question the right of the Attorney-General's office. He himself is a trained lawyer.

Mr Jeyaretnam: Are you answering?

Mr Shriniwas Rai: I am giving my views. Would you bear patience with me?

The Chairman: There is not much time left, so just proceed with your speech, please.

Mr Shriniwas Rai: Sir, the office of the Attorney-General is a constitutional appointment and he has the sole discretion to prosecute or not to prosecute. And we in this House should never question it. To do so would be to undermine the office of the Attorney-General. The Attorney-General is assisted by the Solicitor-General, and I will come to that later. What I would like to say is that in many countries the office of the Attorney-General has been politicised but, here, it is separate from the Executive. He is not accountable to Parliament and we should not in any way question the discretion vested in the office.

Now I come to the Solicitor-General, Sir. The Solicitor-General is the next senior person in the most important office of the land and, regrettably, I see no appointment to this office after the retirement of the last Solicitor-General. It is indeed a sad reflection and I think there is no lack of challenge either in the legal service or outside. To have this important office vacant for such a long time does not speak well for our judicial and legal system.

Sir, the other topic I would like to touch on is plea bargaining. Sir, whether it is white crime or any crime under the Penal Code, the accused person may be prepared to plead guilty or to plea bargain with the Attorney-General's Chambers. I am suggesting that we should do away with our traditional British practice and follow the American practice. If the prosecution and the defence can work out a bargain, then it would be in the interest of the community. Money could be saved and the poor accused will know exactly what he is going to meet at the end of the day. As it now stands, he does not know what sentence the judge is going to give to him. So I am suggesting that we should look afresh. I know a lot of lawyers, who are conservative, are not in favour of this. But I would urge that we should introduce a new system.

Sir, on the question of mediation, I know the Attorney-General is committed to sending disputes for mediation. But what I am suggesting is that whenever the Attorney-General is a party, either as plaintiff or potential defendant, the Attorney-General's Chambers should first look at the option of mediation and not wait for a writ to be filed in the court and then talk terms. I think it would save a lot of time.

The other point which I would like to touch on is the legal officers. It would be in the interest of the country if the Attorney-General's Chambers pass some of its work to the members of the Bar. This is practised in other Commonwealth countries. In this way, we could save some funds. In this way, he could also benefit from seeking opinions from members of the Bar on important issues, whether it is a constitutional issue or other issues. Once again, Sir, I think we should be loath to question the Attorney-General's office and, as I have said earlier, it is a constitutional appointment and, as a practising member of the Bar, I say let us not undermine the confidence that the Constitution has given him.

Prof. Jayakumar: Sir, I will respond to Mr Jeyaretnam's points and my colleague, the Minister of State, will respond to Mr Shriniwas Rai.

Of the two points raised by Mr Jeyaretnam, let me first deal with his second point, that is, the point of accountability of Attorney-General as Public Prosecutor. His proposition is that the Attorney-General as Public Prosecutor must be accountable and answerable to this House for his decisions when his decisions are queried or called into question with respect to prosecution. I think I want to make it clear, Sir, that I completely disagree with his proposition and I would say that it would be wholly wrong and improper for us to subject the Attorney-General's prosecutorial decisions to scrutiny in this Chamber.

Let me elaborate. First, let us recapitulate the two key functions of the Attorney-General under Article 35 of the Constitution. Under Article 35, clause 7, of the Constitution, he has two key functions. One is to advise the Government on such legal matters that are referred to him. The second is the prosecution function. The Attorney-General shall have the power, exercisable at his discretion, to institute, conduct or discontinue any proceedings for any offence. What does "exercisable at his discretion" mean? It surely means what it says, that he has, as holder of that office, discretion to conduct or discontinue any proceedings, whether to charge a person for an offence, under what provision of the Penal Code or some other Act of Parliament for a lesser offence, for a more serious offence, and when the trial is on, if convicted, what kind of punishment to press the courts. These are all prosecutorial decisions exercisable in his discretion. He is not subject to requirements of acting on advice or consultation. Does he mean that he must give an explanation?

Mr Jeyaretnam: On a point of clarification.

Prof. Jayakumar: He can clarify later.

The Chairman: Mr Jeyaretnam, will you resume your seat?

Mr Jeyaretnam: All right. 5.45 pm

Prof. Jayakumar: Does the Member mean that after the AG has taken a decision, he is answerable to this Chamber about his decisions, why he prosecutes in one case and not the other, why he appeals in one case and not the other? I think it will be wholly wrong and improper to proceed along the course recommended by Mr Jeyaretnam. And I think we can cite several other reasons. Apart from the fact that it will be contrary to the express provision of Article 35, because we cannot say in one breath that the Attorney-General has power exercisable in his discretion and, in the same breath, ask him to have his decisions subject to legislative scrutiny, questioning or debate in this Parliament.

The second reason is that it is in the public interest that the Attorney-General should make his decisions on such matters unencumbered, without any fear or worry that the matter will be subject to scrutiny in this Chamber.

Thirdly, let us recall that when the Attorney-General decides to prosecute in any particular matter, he does so on two main principles: (a) whether there is sufficient evidence to proceed; (b) whether there is a prima facie case for prosecution. If there is a prima facie case for prosecution, whether there is some public interest element against it. These are two considerations that are generally recognised in Commonwealth jurisdictions. In both considerations, there is a host of factors which he has to take into consideration and evaluate. He has to make judgments on each of these factors.

Fourthly, because of these considerations, the Constitution has placed the office of the Attorney-General on a special footing. I would say on a footing analogous with the position of Judges. For example, the Attorney-General's appointment is subject to the safeguard of the President's veto. It is a safeguarded appointment. Then Article 35 also has safeguards to ensure that he cannot be removed arbitrarily. The grounds on which he can be removed are narrowly framed and the procedure for his removal calls for a tribunal of judges, chaired by the Chief Justice.

Fifthly, it is not surprising, therefore, that it is an established practice in all common law jurisdictions that the Attorney-General will not publish his detailed reasons for any prosecutorial decisions. There are very good reasons for this practice, because if reasons are given in detail, surely it must lead to public debate in this House and outside this House about the case and on the guilt or innocence of the suspect. It must result in that. And it is best that such questions be decided in the courts and not be subject for trial by public debate in this Chamber just because a Member of the House or a Member of the Opposition is unable to agree with the legal advice or decision of the Attorney-General.

Sir, we have followed this practice in Singapore for the past 30 years, and I think this system has worked well. If the prosecutorial system in Singapore is not to break down, we should continue with this practice.

The other point made by Mr Jeyaretnam is that we should separate the functions of the Attorney-General as legal adviser and Attorney-General as public prosecutor. I would commend to Mr Jeyaretnam to read a paper called "Emerging Problems in Defining the Modern Role of the Office of Attorney-General in Commonwealth Countries", a memorandum prepared for the Commonwealth Secretariat by Prof. Edwards of Canada, where he surveyed Commonwealth practice. There is no lack of models for us to follow. In some countries, the model is that the Attorney-General is distinct from the public prosecutor. In some cases, the public prosecutor is a public officer and the Attorney-General is a member of the Cabinet or member of the Legislature. Where it is distinct, the public prosecutor is answerable to the Attorney-General. Indeed, in most of the Commonwealth jurisdictions where the officers are different, the public prosecutor's role and function are answerable to the Attorney-General.

In Singapore, we have this system where the Attorney-General has two functions, but this is a system we have had ever since we were independent, and even before independence. It was as a result of a recommendation, and I have been advised by the Attorney-General, which finds its roots in the Report of the Reid Commission, 1957. The Reid Commission then recommended as follows and I quote from paragraph 127:

`. Some Commonwealth countries, the Attorney-General holds a political office. In others, the political functions normally exercised by a political Attorney-General exercised by Minister of Justice or Minister for Law. While the Attorney-General exercises the more professional functions of giving independent legal advice to the government, representing the government in the courts and perhaps assuming responsibility for public prosecution. On the whole, we prefer the latter.'

This is a system we have had since independence and before independence. It has worked well and I see no reason why we should change it.

Let me say that, ultimately, it boils down to the strength of character and personal integrity of the holder of the office that is of paramount importance when we look at the position of the Attorney-General.

This does not mean that there is no accountability. The Attorney-General is a constitutional office. I reject the notion of Mr Jeyaretnam that his individual decisions must be subject to scrutiny in this Parliament. But the Attorney-General is accountable to the Government in discharging the functions of his office, because the Constitution provides that he may be removed from office by the President if he, acting in his discretion, concurs with the advice of the Prime Minister. Under Article 35 of the Constitution, there are grounds for removal of the Attorney-General. And as I have mentioned, he may be removed from office only on narrow grounds and similar to the grounds and the procedure provided for Judges of the Supreme Court.

Let me also add that the office of the Attorney-General carries with it very important functions and powers which cannot be abused. If there is any abuse and any infraction, it will, of course, carry with it consequences if allegations of impropriety are substantiated.

If Members have forgotten, in 1988, the example to drive home the point that holders of public office will have allegations of impropriety examined has been firmly established. Because in January 1988, the then Prime Minister, in respect of rumours and allegations of impropriety of the previous Attorney-General, categorically stated and I quote:

`Every allegation made against any official of corrupt, illegal or improper conduct or action will be investigated. The fact that the official complained against is the Attorney-General, the highest legal officer in charge of investigations, will not prevent such investigations.'

And he said:

`The allegations in that particular case had been investigated and they were unfounded.'

Let me add what the then Prime Minister said:

`If they had been substantiated, the Attorney-General would have had to face the consequences.'

The point I am making, Sir, is that the holder of the office of Attorney-General has important functions and duties. If he exercises his functions and duties in a manner that amounts to abuse or impropriety, there will be a proper investigation and consequences. But that is separate from the point made by Mr Jeyaretnam that just because he disagrees with individual decisions of the Attorney-General on particular cases that that decision must then be subject to scrutiny in this Chamber, and the Attorney-General has to be accountable and answerable and to give reasons for his decision. As I said, that will be wholly improper and unwise to do so. We have not done it for some 30 years and I commend to the House that we continue to stay that course.

The Chairman: Prof. Ho.

Mr Jeyaretnam: Sir, may I, by way of clarification

The Chairman: Let us give other Members a chance to have their answers first.

Mr Jeyaretnam: All right.

Assoc. Prof. Ho Peng Kee: Sir, I think I should respond to Mr Rai who has made a few points. His first point is on plea bargaining. Plea bargaining or charge bargaining involving the prosecution is well established in Singapore. But as Mr Rai explained, what he has in mind is the American form of plea bargaining which involves not only the prosecution but the judge as well. The procedure is for the parties to appear before the judge and seek his views on the type or spectrum of sentences that the judge will impose if the accused person were to plead guilty on a set of facts given to the judge. The accused person will then decide whether or not to plead guilty on the basis of the judge's indication.

Sir, we have studied this alternative approach carefully but have concluded that there is no need for plea bargaining of this nature. It is not superior to the present system. There are advantages and disadvantages. As Mr Rai has mentioned, the main advantage is that it may save the State time and effort, in having to prepare for the case only to find out that the accused person would have pleaded guilty much earlier if he had been told what the sentence would be. However, there are also disadvantages which, in our view, outweigh this advantage. The main one is that the whole process can go to waste where the accused person does not accept the indication given by the judge, resulting in the case having to be postponed, so that another judge can take over the case. In Singapore, it may not be possible to insulate other judges from knowing that the accused person had sought plea bargaining. So this could prejudice the accused if he is tried before another judge who is aware of the failed attempt at plea bargaining.

Another point that Mr Rai mentions is mediation. The Attorney-General is, by law, the nominal defendant in all civil suits against the Government. Not all actions, however, are suitable for mediation. If they are, the AG's intention is to advise Ministries concerned to proceed to mediation first before trial. In addition, the AG's Chambers support the initiatives presently under way to expand mediation. As a general rule, the Chambers will propose mediation in all disputes where it is a party. In fact, the Chambers advise Ministries to include mediation clauses in all Government contracts where mediation is appropriate. These clauses provide for parties to first attempt to resolve their differences in accordance with the procedures of the Singapore Mediation Centre.

The next point Mr Rai raises is why not AG farm out work to private practitioners. The AG's Chambers have a system of employing legal officers on contract when there is a need. For example, if the expertise

6.00 pm

The Chairman: Order. "Guillotine" time. Mr Jeyaretnam, can you withdraw your amendment?

Mr Jeyaretnam: Before I decide on my amendment, may I say, by clarification, one or two things?

The Chairman: No. Please withdraw your amendment.

Mr Jeyaretnam: I thought he said I could take it up later. May I not have just two minutes?

Amendment negatived.

The sum of $34,517,090 for Head B ordered to stand part of the Main Estimates.

The sum of $7,764,700. for Head B ordered to stand part of the Development Estimates.

Head N

Mr Leong Horn Kee: Sir, I beg to move,

That the total sum to be allocated for Head N of the Main Estimates be reduced by $100.

Sir, the Singapore dollar has encountered some volatility in recent months due to the regional currency turmoil. In the last one year, the Singapore dollar exchange rate has weakened from about 1.42 to the US dollar in mid-1997 to a low of nearly 1.8 towards the end of 1997. Now, it is hovering at about 1.62 to 1.65. The Singapore dollar has depreciated some 13% against the US dollar.

Although the Singapore dollar has weakened against the US dollar, it has strengthened against the regional currencies. Compared to the Thai baht, Malaysian ringgit and Indonesian rupiah, the Singapore dollar has appreciated by between 20% and 50%. My question to the Minister is: what is the Government's short to medium term strategy for the Singapore dollar? On the one hand, a strong Singapore dollar will enable Singapore companies to purchase foreign goods at low prices. It will help to keep domestic inflation low. On the other hand, a strong Singapore dollar will cost Singapore to lose its competitiveness against the neighbouring countries. Our manufacturers will suffer a disadvantage. Their products will now be dearer than products in the neighbouring countries.

During this period of great volatility, it may be difficult for the Government to stabilise the Singapore dollar. However, in view of the sudden shifts in the exchange rates of the various currencies against the Singapore dollar, the Government may need to do a review of its exchange rate policy.

Could the Minister enlighten the House on how the Government intend to balance the conflicting effects of the strength of the Singapore dollar?

Mr Inderjit Singh (Ang Mo Kio): Sir, one year ago, the Singapore dollar was strengthening against the US dollar and to some extent against the regional currencies and this badly impacted the cost of doing business in Singapore. Today, the regional currencies have devalued substantially against the US dollar and against the Singapore dollar while our dollar remains relatively strong against most OECD countries.

Sir, I would like to ask the Minister the following questions:

First of all, just as Mr Leong has asked, can the Singapore dollar remain strong at the current level for our economy to continue to be competitive or will this erode our competitiveness against our neighbours and also against the countries in North Asia?

In a recent report in the Business Times, it was argued that the Singapore dollar needed to be around $1.83 (at that time comparing against the value of other North Asian currencies) for our exports to the west to remain competitive. In fact, the report suggested the sensitivity of export competitiveness to the value of the North Asian currencies against the Singapore dollar and should these currencies fall some more, the Singapore dollar will have to devalue accordingly to remain competitive. I would like to ask the Minister's opinion on this report.

Thirdly, what can the Monetary Authority of Singapore or the Ministry of Finance do to moderate interest rate increases which have risen three times in the past six months?

I do believe that the Ministry or the MAS should set a strategic direction for both the dollar strength and the interest rates while it minimises interferences in other areas by letting market forces rule. Of course, certain fundamental parameters of the economy must still be the instruments that the Government can handle, to turn the knobs to set the general long term of the economy.

Once again, I feel that the strength of the dollar and the interest rates are something that the Minister should moderate.

Mr Shriniwas Rai: Sir, my two other colleagues, Mr Leong and Mr Inderjit Singh, have already spoken on this matter. I would like to ask the Minister two questions. First of all, whether he is happy with the present arrangement in our basket of currencies or whether we should change the composition. The other concern is that lots of Singaporeans have this nagging question: what would be the exchange rate of the Singapore dollar in months to come?

Unlike other countries, Singaporeans have faith in their currency. They have not gone to the money changers to change or put their money in fixed deposits. This shows the inherent strength of the Singapore dollar. But, as Mr Inderjit Singh pointed out earlier, we have to also look at the exports and since the regional currencies have actually fluctuated and gone down considerably, what are the Minister's options in case the regional currencies go further down.

Another point that I would like the Minister to answer is: what would MAS do to see that the interest rate does not go on rising? In fact, we have three increases within the last few months. It is important that doing business does not become expensive, and mortgage loan does not become expensive, which will affect the man at large. Even a quarter point increase is going to be quite painful. So I would urge the Minister to address these issues.

The Chairman: Mr Lim Swee Say is not speaking. Mr Sin.

Mr Sin Boon Ann: Sir, the Companies Act presently seeks to protect members of the public by requiring any public invitation to apply for shares or similar instruments to be distributed together with the prospectus, a copy of which has to be registered with the Registrar. The prospectus referred to in the Act is a statement containing very detailed disclosures about the company. These are matters which directors are required by statute to be disclosed. These disclosures range, for instance, from a description of the directors of the company, its property transactions to the interest of the directors in a property that the company may have an interest in.

Sir, it is not my intention to go into a complete description of the requirements of a prospectus under the Companies Act. Suffice it to note that doing a due diligence with the company directors to ensure the accuracy of the statements in the prospectus is a tedious and time consuming exercise. However, the effort put to the exercise provides the investors some assurance that the statements are reasonably accurate and it helps the investors to make informed decisions about their investments. For the directors who make false statements or statements which they do not have any basis to believe in, they face the prospect of criminal prosecution. This is sufficient deterrent to most directors who may contemplate such acts.

Sir, unfortunately, the standard of protection which the law affords to members of the public does not appear to be uniform. In the interest of time, let me just cite one example. While a promoter who invites members of the public to subscribe for shares in his company is required, among other things, to file a prospectus giving a detailed account about the company, its accounts and its directors, the same standard of disclosure is not applied to property developers. Presently, foreign developers promoting properties overseas in Singapore do not come under the same regime of regulation as would a promoter of shares. As far as I am aware, the property developer, once he registers his business, is practically free to launch his project and sells such developments to members of the public. If a foreign promoter seeks the assistance of a local property agent, the Inland Revenue Authority places the responsibility on the property agent to check the credentials of the developer. Even then such checks may be publicly qualified and it then becomes caveat emptor for the buyer.

What happens then is that the foreign developers of different shades of honesty sell projects in Singapore. Unwary Singapore buyers who have not done their due diligence may well end up buying a property which is a lemon of an investment, and with limited recourse against the promoter who probably by then has either disappeared or is insolvent. We have seen such failures in recent months with respect to property projects in China. Singaporeans who have invested in some of these developments have been sent on a wild goose chase to recover their investments. Property purchasers are just one example. In recent years, some other forms of investments have surfaced, which raise basic questions of adequacy of regulations under our present system of laws. I refer to time-share schemes, investments in ostrich farms and other soft commodities.

Sir, it seems strange to me that the law should provide one standard of protection for one type of investors and another standard or an absence thereof for another type of investor. I would like to ask the Minister whether the Government would consider bringing the regulatory standards for such investment promotions to be in line with or surpass that which presently apply to the offer of shares to members of the public. I am aware that the Government is looking at regulating time-share schemes. I wonder if the Minister can at the same time hasten the review.

Mr Leong Horn Kee: Sir, the Minister for Trade and Industry recently announced that the future twin engines of growth of Singapore's economy will be the manufacturing sector and the services sector. I support this strategy. A major component of the services sector is the banking industry. The Government's desire is to firmly establish Singapore as a financial hub. Therefore, the financial and business sector now contributes to about 30.9% of the total GDP, as compared to 24.3% for the manufacturing sector.

The regional turmoil shows the frailty of the smaller banks in Singapore. When hit by bad or doubtful loans, the provisions made by them have a heavy impact on their profits and total assets base. The larger banks are better placed to weather the impact. Hence, I would like to ask the Minister whether the Government intends to foster the mergers of local banks.

The following table shows a comparison of the sizes of local banks as compared to the major international banks. For example, our big four banks, DBS, OCBC, UOB and OUB, have a total shareholders' fund of between $3 billion and $7 billion. The big banks around the world, for example, HSBC has S$47 billion, Bank of Tokyo/Mitsubishi has S$46 billion, Group Credit Agricole has S$37 billion, Chase Manhattan has S$34 billion and Citicorp has S$33.5 billion. The above comparison shows that our largest local banks are only about one-fifth to one-seventh of the size of the world's largest foreign banks. If local banks were to merge, they will be better placed to compete internationally.

On another topic, Sir, the Government has announced the reduction of the total qualifying non-resident funds under management for preferential tax treatment from $10 billion to $5 billion. I understand that most local banks are not able to qualify because they do not manage offshore funds of over $5 billion. I would like to ask the Minister to consider whether it could adopt a two-tier approach. For example, to keep the $5 billion qualifying level for foreign banks and a lower qualifying level of, say, $2.5 billion for local fund managers.

Mr Shriniwas Rai: Sir, the banking sector is an important part of our GDP. Our banking sector has growth potentiality. Mr Leong has urged for mergers of local banks and DPM had earlier indicated to this House that he would encourage mergers. But I think the Government may have to take a lead in persuading these banks to merge earlier than planned so that they could take advantage of the regional opportunities that are being offered, like what DBS has done by going into Thailand, which other banks may want to consider.

The other points which I would like to make is this. Banks are an important part of our institution. They should regularly publish their results and I would urge that they should do so every three months. This would be very transparent and transparency will help both the shareholders as well as the public in knowing how the particular bank is doing. 6.15 pm

The other concern which I would like to raise is this. In the past, the banks in Singapore have been also allowed to trade in shares. In view of the opening of fund management to the outside world, should we also encourage and give different criteria to our banks, but not as high as required for fund managers? I think the banks should also seriously think of these areas if they want to compete with other international banks.

BG Lee Hsien Loong: Sir, I will answer the points on the Singapore dollar and the banking issues, and the Finance Minister will take the point from Mr Sin Boon Ann concerning investment disclosure rules.

First, on the Singapore dollar. As Members know, we manage it flexibly against a trade-weighted basket of currencies, comprising Singapore's major trading partners. We revise the basket from time to time. We believe it is reasonable, in line with our trade patterns now. We have no immediate plans to change it. We have strengthened against the ASEAN currencies significantly but, as you know, we have weakened against the US dollar and other major currencies. So on a trade-weight basis, the Singapore dollar has been relatively stable. In fact, it has appreciated slightly since July last year when the trouble started. It has enabled Singapore to maintain price stability while protecting the overall competitiveness of the export sector.

What will happen if our neighbouring currencies go down further? Will we drive down, do we need to go down to match their competitiveness? As I have explained, I think in the last sitting, the countries whose currencies have depreciated against us, we expect will experience high inflation, and this will erode their competitiveness over time. We are already seeing this in Indonesia - very high inflation in January, even higher in February.

So it is the real effective exchange rate which matters and not the nominal effective exchange rate. Therefore, I do not see us having to make major adjustments to our policy as a result of regional currency movements. As we have said, in MAS, our policy is not on auto-pilot. There is a trade weight which we monitor, but we exercise judgment in deciding how closely to follow it over the short term.

As for interest rates, both Mr Inderjit Singh and Mr Rai expressed concern over high interest rates. Interest rates have to follow market trends, market forces and reflect liquidity conditions in the market and risks, and also interest rates overseas. We are a very open economy. So we do not have the luxury of setting our own independent interest rate policy, apart from what happens overseas and apart from what happens to our exchange rate policy. They are inter-related. If conditions are tight and banks judge that they need a higher interest rate to compensate for the risk of lending, interest rates will go up, and the banks will hold more cash. If the banks feel more confident of economic circumstances and they are prepared to accept a lower margin, then interest rates will tend to be lower, other things being equal. So it is not something which MAS has a luxury of directly manipulating or influencing. I think we have to accept that. As I have said, many countries have got into serious trouble because they try to influence their interest rates one way and their exchange rates another way. And when the two policies were incompatible, they crashed, and they took a long time to unwind the pieces.

I think in Singapore, the interest rates are not very high. They went up to 14% briefly, short-term rates, went down back to 4+%. Now they are 6+%. I can understand that companies which have borrowed will worry about every quarter point in their interest payments. But we have to accept that. For the small companies, we have the Local Enterprises Financing Scheme, and the Finance Minister has announced we are improving the Scheme and expanding it and putting more capital into it, so that we can lend more to the local companies. I think that will make a difference.

As for banking mergers, as I explained on14th January in this House soon after Keppel Bank and Tat Lee Bank announced their intention to merge, the Government will encourage our local banks to merge and will support them bringing in foreign minority partners if they can add technology and expertise. Each of the banks is financially sound and indeed they are among the soundest in Asia, according to Moody's and according to many other assessment agencies. But they add to their competitive strength by merging, as Members have pointed out. And also there is a question of POSBank and what its role should be in the banking system. That is a policy, but whether they merge or they do not merge, I think the shareholders have to decide. And you have seen some of the statements made by two of the banks, I think, in yesterday's Business Times. So I believe that they understand the imperatives but they want to judge the best time. So we will continue to encourage them.

As for fund management incentives, Mr Leong asked about the $5 billion offshore management incentive and whether we should make it lower. I think, if I remember rightly, when the Finance Minister announced this incentive, $5 billion is not a hard lower bound. In other words, even if you do not have $5 billion to manage, you have less, but you are going to do substantially more than you did before, you can come to MAS and MAS is prepared to consider giving you tax-free status on your income from managing these funds, perhaps not for five years but for a shorter period. So the door is not completely closed, even if you have not reached $5 billion. We know that it is quite a high target, but I think psychologically that is not what we want to aim for, and it is achievable over a period of time.

As for having two tiers, one tier for local fund managers and the other for foreign companies managing funds in Singapore, I do not think that is desirable. I think we should have an even playing field and the same rules should apply, whether you are a local company or a foreign company. We operated like that with manufacturing. I think that is right. And we should operate it similarly, increasingly, in the case of the finance industry.

As for publishing banks' results quarterly and having more transparency, I think the banks have a Committee under Elizabeth Sam now working on disclosure standards. I am not sure that they are looking into the question of quarterly publication of results. But it is something which we will put to them to consider. There are pros and cons. The Americans do it. It used to be thought that this is too much of a short-term approach because everybody was watching the share pricing. Every wiggle up or down causes great anxiety amongst managements who have share options. So you may have a fixation with the short term rather than the long term. But since the countries, which have a long term view, ran into some difficulties, like Japan, this criticism has not been heard so often. I think we have not been working on quarterly results, but we have been reasonably successful. I would be hesitant to change in a hurry.

As for banks doing fund management and being encouraged to do so, they already do, not in a very big scale but they do, and there is potential for them to build up further. It depends mainly on their finding the right team to do this. It is not the same sort of skill or mindset as managing other people's money, deposits, loans. You need a different set of instincts and aptitudes, but it is something which we can build up over time.

The Minister for Finance (Dr Richard Hu Tsu Tau): Sir, Mr Sin Boon Ann has expressed concern over the variety of investment schemes which have been promoted to the public and whether sufficient protection can be offered to them. As a general rule, investment schemes offered by banks, insurance companies and other financial institutions are regulated directly or indirectly by the Monetary Authority of Singapore (MAS) which licenses the institutions. MAS ensures that the institutions are financially sound, that investors' rights are protected under the law.

Other investment schemes which fall outside the purview of MAS are subject to the basic anti-fraud provisions contained in the Companies Act and the Penal Code. Members of the public who suspect fraudulent activity of purveyors of these schemes can get in touch with the Commercial Affairs Department or the Police. In addition, the Consumers Association of Singapore helps aggrieved members of the public to seek redress over false or misleading advertising and marketing practices.

The Government is re-examining legislation in certain areas. For example, time-share schemes and schemes run by soft commodity brokers. Relevant Government bodies and agency practitioners will be consulted and comparable provisions in other countries' legislation will be adopted if they are found appropriate. This would include the promotion of foreign properties. And we are now considering the establishment of an Estate Agents Bill which will regulate the sale and promotion of foreign properties, although this particular problem is probably no longer an issue now that the market is very quiet.

I would like to stress, however, that no regulatory system can completely protect investors from making losses. And Singaporeans are advised to stay away from any investment schemes which are dubious, particularly if they offer unrealistically high returns. That is probably the best protection that I can offer. Any scheme which offers returns which are unreasonable or even absurd cannot be safe.

Mr Leong Horn Kee: Sir, I go on to my next cut. In Singapore, the tax authorities do not allow the group offsetting and relief of losses incurred by subsidiaries of a group of companies. I understand that the group offsetting of losses is not allowed because of concerns on tax loopholes being created. However, group offsetting is now allowed in some developed countries, such as the United Kingdom. In recent years, many companies have answered the Government's call to venture out regionally. They have invested heavily in the region. Some of them could be encountering losses because of the regional knock-down. They are facing problems of higher overheads, higher manpower costs, lower selling prices and larger bad debts.

I would like to ask the Minister whether he could consider group offsetting of losses as a short-term measure to help companies tide over their difficult period. To alleviate the risk of large tax loopholes, perhaps partial offsetting of 50% of their losses could be considered.

Mr Chuang Shaw Peng: Sir, in this year's Budget, the financial sector seems to get the giant share of the incentives. In a time of tight credit and falling business volume, it is only fair that some of those tax incentives given to the banks will also be given to the non-bank taxpayers. For example, an administrative incentive has been given to the banks to effectively allow tax deductions for unrealised foreign exchange losses and tax unrealised foreign exchange gains. In my opinion, a similar concession can also be given to the non-bank taxpayers such as manufacturers. Also, the Thai and Indonesian governments had recently announced changes to their tax law to even allow a five-year amortisation of exchange losses. Therefore, in this regard, Sir, I hope the Minister for Finance can look into such incentives to help Singapore companies.

The second area I wish to bring up is similar to what Mr Leong has just pointed out, and that is, on the group loss relief. At this point, I would like to add that not only UK has this provision, USA and Australia also have this provision for group loss relief, and it is commercially sound for a group of companies to be set up for whatever reasons, usually for commercial and strategic reasons so that they can position themselves in the best position to do business. But with this currency crisis, some companies would be in a loss position and other companies would be in a tax-paying position. With this group loss relief, it removes the unnecessary tax burden on the other members of the group. And I hope the Minister for Finance would seriously look into the possibility of offering such relief to the companies. 6.30 pm

Mr Ahmad Mohd Magad (Pasir Ris): Sir, the point I wish to raise has somewhat been covered by Mr Leong and Mr Chuang. However, it pertains more to SMEs who have gone regional. Many local SMEs were encouraged by the Government in the course of the last five years or so to regionalise, to help create an external wing for our economy as a means to sustain growth. The Minister for Finance has over the years also introduced a variety of tax measures, such as unilateral tax credit for dividend income, tax exemption schemes for venture capital and regional funds to encourage investments in the Asia Pacific and also the overseas enterprise incentive to promote regionalisation. The Government's active promotion, coupled with a host of attractive incentives, motivated many of our local SMEs to jump on the bandwagon and set up operations in our neighbouring countries. Unfortunately, as a result of the unforeseen currency crisis, they are now finding themselves exposed and are incurring heavy losses due to the drastic exchange rate depreciation, particularly that of the rupiah and the Thai baht and, to some extent, the Malaysian ringgit.

Sir, in view of this fact, I would like to ask the Minister for Finance to consider the feasibility of allowing a one-off tax deduction or offset strictly arising from unrealised exchange losses for Singapore companies operating in the countries affected by the currency crisis. The unrealised deduction allowed could be monitored perhaps by the tax authorities and whatever gains, if any, realised at the time the transactions mature could be recovered back by the authorities in the next accounting period. Such allowances will enable companies exposed to the region to improve their cash flow during the period of the financial crisis.

Mr Inderjit Singh: Sir, many Members in the last few days have spoken about the critical cash flow problems that many businesses are facing due to the overall slowdown in the region. While I can understand the Minister's reluctance to reduce corporate tax by 1% to 2% because we cannot change the overall long-term strategy due to transient problems, we therefore are not asking for such changes but rather a one-off extraordinary action like some of the Members have already proposed for the next two to three years.

I would therefore like to propose the following measures. The first one is not new, a one-off 10% to 15% tax rebate for the next two years for our businesses. The second proposal is related to tax deductibility on a group level. And the third one, to ease cash flow problems, is the allowance for businesses in Singapore to pay their income tax in instalments over the next two years. So hopefully, we can have some short-term cash flow problems resolved.

Can I take the second cut now?

The Chairman: Yes.

Mr Inderjit Singh: While I know there have been calls by some quarters and some Members in this House to reduce the GST by about 1 or 2 percentage points, I disagree with this because there are no clear reasons for this at this stage and also the 3% that was set some years ago is a realistic level. My request is a very specific one for the purpose of helping the very small businesses that cannot afford the resources needed to process and keep track of GST collections. This then becomes a hassle for them. While the $1 million level set as a threshold for businesses that have to apply the GST ruling some four years ago might have been all right, but now, as our economy has grown, I believe we can review this.

With this in mind, I would like to propose the following two suggestions: First of all, can the threshold be raised from $1 million to $2 million? For companies that do sales less than $2 million per year, I suggest that we no longer need to process GST. This will help them reduce the processing and manpower cost, especially for the smaller companies, and also hopefully result in lower cost which will be passed on to the consumers in the long term. Secondly, can the GST collection be delayed by about one to two quarters so that the short-term cash flow problems can be resolved?

Mr Leong Horn Kee: Sir, over the past few years, the Government has been reducing the property tax rates from about 16% to 12%. These reductions have helped those who own commercial properties and residential properties which are held as investments.

However, about 90% of Singaporeans own their own homes and live in them. They pay a lower owner-occupied property tax rate of 4%. This 4% concession has not been reduced for a long time. The effect then is that while people who own properties for investments have benefited from the reduction of property tax rate over the years, the majority of Singaporeans are not enjoying any property tax reduction for their owner-occupied properties. On the other hand, they are actually paying higher property taxes due to higher property tax assessments made over the years. I would like to ask the Government whether they would wish to consider reducing the owner-occupied property tax concession by, say, even �% to 1% so as to give some concession to property owners who are owner-occupied.

On the other hand, I would like to ask the Finance Minister as to why the Government has, for this year's Budget, given a 15% rebate to commercial and industrial properties only. Why has he not decided to include residential properties, at least for residential properties which are held as investments, for example, apartments for lease, rented apartments or service apartments? For that matter, why is the rebate of 15% not given to residential properties which are owner-occupied? The Minister may wish to explain the rationale.

Dr Richard Hu Tsu Tau: Mr Leong Horn Kee and Mr Chuang Shaw Peng have asked for group relief for companies. I am afraid that we are not in favour of the idea of allowing group relief for companies as it will have grave implications for our tax revenue. Under group relief, profitable companies within the group will not have to pay tax on their profits if these could be offset by the losses of other companies in the group. This means that group relief will open up opportunities for tax planning and abuse.

The experience of other tax administrations which allow group relief has been that complex tax rules have to be drawn up to prevent abuse, thus creating complications for tax administration. This has been the experience of countries like the US, UK and Australia who allow group relief.

Our tax regime in Singapore is such that losses incurred by a company can be carried forward indefinitely to be offset against future profits earned and we believe that this is sufficient. The majority of countries in the region do not in fact allow group relief, for example, Hong Kong does not, neither does Malaysia, nor Japan, or Canada. Outside this region, Italy and Belgium do not.

Mr Inderjit Singh, Mr Ahmad Magad and Mr Chuang Shaw Peng have asked whether we could provide relief or tax deduction for losses suffered by companies arising from the regional currency turmoil. Mr Chuang has further suggested that the Government should extend tax deduction given to banks for their foreign exchange losses to companies as well. I should point out that foreign exchange losses incurred by companies could be either on the capital account or on the revenue account. For items under capital account, such as loans or equity investments in overseas operations, we do not allow tax deduction for such losses, whether realised or unrealised, as we do not tax capital gains. In the case of items on the revenue account, such as trade receivable from foreign customers, tax deduction is allowed for realised foreign exchange losses. Paper losses or translation losses, whether due to exchange rate differences or for other reasons, are not allowed for tax deduction as they are not realised losses and may be reversed at any time prior to disposal of the assets.

Mr Chuang has also suggested that the administrative concession for banks in respect of their foreign exchange losses be extended to companies in general. Under this administrative concession, banks are allowed tax deduction for unrealised foreign exchange losses on their trading account. The concession was granted mainly to facilitate tax compliance by the banks in view of the nature of their operations and the mark to market basis commonly used by them to recognise profits or losses in their books. Under this administrative concession, unrealised losses may be allowed but unrealised profits will also be subject to tax. The operations of other companies do not require a similar administrative concession. Companies also may not want to have their unrealised profits subject to tax as in the case of the administrative concession for banks.

Mr Inderjit Singh has asked for corporate tax rebate of 10% to 15% over the next two years to assist companies who are facing problems in this difficult period. I would like to point out that Singapore's tax regime currently is still very competitive and I believe, based on what I said yesterday, that a tax rebate of this size is not really necessary at this stage. Our corporate income tax was recently reduced from 27% to 26% and took effect from Year of Assessment 1997. We also have a wide variety of tax incentives targeted at selected industries and activities which we want to promote. This means that, effectively, our tax rate is lower than the corporate tax rate of 26%. We also have a comprehensive network of tax treaties, numbering 36 at the moment, which helps to reduce the tax burden of companies in Singapore. Nevertheless, I recognise that the economic outlook is uncertain and if developments require, we will be prepared to take further action to help companies.

Mr Inderjit Singh has also asked that companies be allowed to pay their tax by instalment over the next two years to help ease cash flow. Currently, companies are already allowed to pay their income tax by instalments if they arrange for the payments to be made through GIRO. The instalment plan is interest-free. If necessary, IRAS is prepared to, on a case-by-case basis, look into further adjustments to this instalment plan to help companies which face particular cash flow problems in arranging their tax schedules.

Mr Inderjit Singh has also suggested that we change the GST threshold for companies which register from $1 million to $2 million and to delay collection of GST by one quarter to help companies in their cash flow problems. We believe that the current GST annual turnover limit of $1 million is already sufficiently high to exclude most, if not, all small business. With this high turnover threshold, almost all small businesses, such as provision shops, market and coffeeshop stallholders, hawkers, HDB shopkeepers are already exempt from GST.

The Chairman: Order. It is 6.45 pm.

Thereupon Mr Deputy Speaker left the Chair of the Committee and took the Chair of the House.

Dr Richard Hu Tsu Tau: Mr Deputy Speaker, Sir, I beg to report that the Committee of Supply has made progress in the Main and Development Estimates for fiscal year 1998/1999, and ask leave to sit again tomorrow.

Mr Deputy Speaker: So be it.