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

[Mr Speaker in the Chair]

Order read for consideration in Committee of Supply [5th Allotted Day].

[Mr Speaker in the Chair]

Head S (cont.) -

Resumption of Debate on Question [16th March, 1998],

"That the total sum to be allocated for Head S of the Main Estimates be reduced by $100." - [Mrs Yu-Foo Yee Shoon].

Question again proposed.

The Minister of State for Labour (Encik Othman bin Haron Eusofe): Sir, yesterday, the Member for Bukit Timah GRC, Mrs Yu-Foo Yee Shoon spoke about union membership. She has pointed out that with the changing educational profile of our workforce, the trade unions have found it increasingly difficult to recruit union members and to identify union leaders. She would like to find out how effective the Ministry's Guidelines on Determining the Eligibility of an Employee in Joining a Rank-and-File union.

Sir, the Guidelines were formulated in consultation with the trade unions and employers in 1992. It was in response to unions' concern that the pool of employees eligible to join a trade union or remain as union members is declining. Sir, the unions felt that this trend would not only affect union membership but also reduce the talent pool for union leaders.

Sir, I would like to inform the House that the Guidelines have been implemented smoothly. It has enabled the Ministry to examine the duties and responsibilities of middle management personnel and to determine whether there would be a conflict of interest if they were to be represented by a rank and file union. The smooth implementation of the Guidelines is reflected from the fact that the number of disputes involving union representation of middle management personnel has declined significantly over the years.

Sir, in 1992, when the guidelines were first introduced, the Ministry received a total of 57 such cases. The figure has dropped substantially to 33 in 1993 and in the last four years, from 1994 to 1997, the number of disputes has further reduced to an average of about 10 cases a year. Sir, this trend, together with the fact that all disputes have been amicably resolved, clearly shows the Guidelines' effectiveness. It also indicates a positive change in employers' mindset to allow more of their middle management staff to join rank and file unions.

Sir, I understand the concern of the Member that with an increasingly better educated workforce, more and more employees who are in executive positions may not be able to join trade unions and be represented in collective bargaining. However, with the introduction of the General Branch by the NTUC, employees in the executive and managerial positions could now join the unions as General Branch members although they will not be represented for collective bargaining purposes.

Sir, Mrs Yu-Foo has advised those in the executive and managerial positions to seek the help of the Ministry if they have any grievances with their employers. Sir, they can always do so. And our conciliation officers have the necessary experience and are committed to do their best to assist them to work out amicable solutions with their employers.

Sir, yesterday, Mr Cyrille Tan, Nominated MP, said that the conciliation officers must be capable with good command of labour laws and industrial practices. Sir, I would like to assure him that our conciliation officers have been given proper training and exposure and are well-grounded in labour laws and industrial relations practices. This would ensure that they are competent and effective in helping the disputing parties to resolve their differences amicably.

Sir, we have also recently implemented an attachment scheme for our conciliation officers to work in NTUC on a short-term attachment to the NTUC Industrial Relations Department. This would provide them with an opportunity to develop close rapport and understanding with the union leaders as well as to sharpen their ability to deal with industrial relations issues. At the same time, NTUC has also sent their officers on short attachment to the Ministry of Labour's Industrial Relations Department. Sir, this arrangement enhances the ability of both union and Ministry officers to deal with industrial relations and personnel issues more effectively.

Sir, on the issue of union leadership, while the talent pool may be reduced, as a result of a better educated workforce, there is now greater opportunity for better educated rank and file members and officials to upgrade themselves by attending courses at the Singapore Institute of Labour Studies (SILS). SILS was set up to develop and improve the quality of union leadership. And over the years, many grassroots union leaders have completed the Industrial Relations Diploma courses at SILS which cover the study of economics, industrial relations, human resource principles and labour laws. They are now equipped with the necessary knowledge and are in a better position to deal with labour-management issues and to be more effective in providing leadership. Sir, the Government will continue to support SILS in its efforts to upgrade union leadership and capability.

Sir, in summary, I agree with the Member that unions add value to the human resource management process in a company. Particularly in this uncertain and difficult time, our unions can play a crucial role to help employers and workers cope with business downturn. Hence, apart from cases where there will be clear conflict of interest, there is no reason why employers should deny or resist the employees' desire to join unions.

Sir, a dynamic and progressive trade union movement, able to galvanise workers in productive pursuit of skills upgrading and enhance competitiveness, is certainly a plus for Singapore and employers.

The Minister for Labour (Dr Lee Boon Yang): Sir, yesterday, Mr Jeyaretnam spoke of workers losing their rights as a result of amendments to our labour laws in 1968. It is unfortunate that he is not here this morning to hear the response to his allegations. He spoke of the Lim Yew Hock era when, according to him, workers had rights. He waxed lyrical when referring to those days and perhaps, should I say, through the haze of time, the picture looks rather different.

Sir, I feel obliged to complete the picture for hon. Members in this House. Mr Jeyaretnam forgot to tell Members that in the Lim Yew Hock era, workers faced great difficulties in getting jobs. Unemployment was very much higher than it is today. Workers who had jobs were paid poorly. They were indeed at the mercy of their employers. This was the case because, with so many unemployed people, employers could pick and choose. Workers and their families lived in squalid huts or over-crowded tenements. Many workers' children had to leave school early to help the family eke out a living. The economy was going nowhere. The future was bleak.

Mr Jeyaretnam also forgot to inform this House that in those days, trade unions often took industrial actions without securing a mandate from their members, the workers, and without giving due regard to the viability of the company or the welfare of the workers. Trade unions also intervened in issues which should rightly be the management functions, such as hiring, promotion, transfer, dismissal and assignment of duties. The union's intervention had resulted in endless disputes leading to confrontation and strikes at the workplace. They did so because many unions had a political agenda and workers' rights and interests and welfare were the least of their concerns.

Sir, the labour laws, prior to 1968, had inherent weaknesses that caused low productivity and inefficiency which were often subjected to abuse by workers and their unions. This was the era of highly adversarial and confrontational labour-management relations. There were more than 40 strikes a year paralysing trade, commerce and, indeed, the lives of ordinary citizens. In 1955 alone, there were 275 strikes resulting in the loss of almost 1 million man-days. The damage inflicted on the economy was devastating. The outcome of confrontational and adversarial labour-management relations was a poor investment climate, economic stagnation, unfavourable working conditions and terms, high unemployment and the bleak future for Singaporeans. It was for this reason that the labour laws were amended in 1968 to provide a more rational basis for industrial relations. The distinction was drawn between the functions of management and trade unions for balancing the interests of both parties. Thus, under the new provisions in the Industrial Relations Act, matters like promotion, transfer, hiring, right to retrench, dismissal and assignment of duties were excluded from collective bargaining between trade unions and employers. To prevent abuses by employers, the law enables workers and trade unions to seek redress through conciliation and adjudication including appeals against unfair dismissal.

Sir, under the Employment Act introduced in 1968, the basic terms and conditions of employment as well as the rights of employees were rationalised. I must, however, point out that while employers were given the discretion to carry out fundamental management functions without being subjected to the process of collective bargaining, the rights of unions to take industrial action were not removed. These rights continue to be enshrined in the Trade Unions Act. The only difference is that a union which intends to take strike action must first obtain the consent and mandate of its members through a secret ballot. I would like to inform the House that the need to seek a mandate of members through secret ballot before an industrial action has also been introduced in countries like the United Kingdom and Australia. The requirement of the secret ballot is in line with democratic principle that such an extreme action must reflect the collective wishes of the members of the union.

Sir, Mr Jeyaretnam has advocated a return to confrontation and adversarial labour-management relations. He fails to notice that many countries all over the world are trying hard to promote industrial harmony so that they could provide a favourable investment climate for economic growth and job creation. Would Mr Jeyaretnam like to see a return to the industrial strifes of the 50s that resulted in low productivity, economic stagnation, poor working conditions, low wages and high unemployment? When he called for the restoration of workers' and trade unions' rights in the 50s, does he realise that he is in fact setting the stage for abuses of rights and labour-management confrontation and job losses? On the other hand, the PAP Government's effort over the years resulted in close labour-management cooperation, discipline and higher productivity. This has helped us to attract high quality investments and better paying jobs for Singaporeans. Singapore has been enjoying full employment since the early 70s. 12.45 pm

Sir, Mr Jeyaretnam also commented that there was a need to set up a tribunal with representatives from employers and trade unions. I find that strange. But then he has already admitted to this House that he does not read NTUC News. I know that he is not likely to read the Lianhe Zaobao. I am not sure if he reads the Straits Times and many other publications issued by the Government and even from my Ministry from time to time. Generally, I find that he is quite ill informed on many issues. If he had been more widely read or taken the trouble to research his topics that he wants to speak on, he would have discovered that such a tribunal already exists in our system. When a dispute, involving a trade union on the one hand and an employer on the other, cannot be resolved through conciliation, arbitration of the dispute would be heard by a tripartite panel, comprising representatives from the trade union and employers and presided over by a neutral third party who is a High Court Judge. This tripartite panel is our Industrial Arbitration Court.

Mr Jeyaretnam says that he hardly heard of disputes being dealt with by the IAC, and then implies that the mechanism is not functioning properly since he has not heard of disputes being dealt with. The main reason for the lack of disputes and the low number of cases having to be referred to the IAC is the result of cooperation and amicable resolution of differences at every level. Because of responsible union leadership and enlightened management, most of the disputes had been settled amicably through discussion, either at the company level or conciliation at the Ministry of Labour. We should keep it this way.

Sir, our ability to strike a fair and equitable balance between the interest of employers and workers within our legal framework has enabled Singapore to be consistently rated as one of the most attractive places for investments, and has often topped the world competitiveness ranking. Our favourable legal framework has also been a key factor in Singapore's workforce being regularly rated by BERI as number one in the world.

Sir, let me take this opportunity to quickly explain to the House the dangers of over protective labour laws. The experience of many European countries has shown that over protective labour legislation has caused labour market rigidity, leading to unsustainable cost of doing business. They impede companies' efforts to restructure and upgrade their operations to meet new challenges. As companies are unable to operate efficiently, many of them had, over time, become uncompetitive. The end result is loss of jobs, economic stagnation and higher unemployment.

Sir, an OECD study on unemployment in May 1994 concluded that employment protection legislation, which is designed to discourage dismissal by raising the cost of releasing workers, has made employers more reluctant to hire new workers. Many countries in Europe, which have particularly stringent or restrictive labour legislation, generally have a higher unemployment rate and employers frequently resort to temporary contract and other non-standard forms of employment to meet their needs for workers during times of market upturn.

The study made many recommendations. I will just quickly highlight three for Members' interest. (1) Wage and labour costs be made more flexible and that unnecessary restrictions be removed. (2) Employment security provisions that inhibit the expansion of employment in the private sector be reformed. (3) Unemployment and related benefit systems be restructured to achieve society's fundamental equity goal, such that - and this is important - the infringement of the efficient functioning of labour markets would be minimised.

Sir, the OECD study and its recommendations clearly demonstrated that rigid and over protective labour legislation would undermine the efficient functioning of the labour market, stifle entrepreneurship and retard job creation. Hence, we must learn from their experience and avoid making the same mistakes.

Sir, with the liberalisation of the world economy, global competition has intensified. We must therefore guard against the tendency to introduce protective and popular policies that will in fact introduce rigidity into our labour market and undermine our long-term competitiveness. Mr Jeyaretnam's question on workers' rights, therefore, sounds hollow and irrelevant. If workers had their rights removed unfairly, why did Mr Jeyaretnam, as leader of the Workers' Party, wait 30 years to raise this issue? The Workers' Party should have campaigned in every general election for the restoration of these so-called rights. Perhaps he knows in his heart the danger and foolishness of taking a course of action that can only lead to more disputes and upheaval.

Dr Lily Neo (Kreta Ayer-Tanglin): Sir, on the "Gender Income Gap", the Department of Statistics in Singapore found that the ratio of female to male income declined from 73% in 1990 to 59% in 1995; that the income of the male workforce grew at a faster rate; that there were more males in the higher income groups and that there was a larger increase in the proportion of males with monthly incomes of $3,000 and above. All these indicate the significant widening in wage gap and career potential to the disadvantage of women in general.

Why should this be so in Singapore? We are supposed to have equal opportunities, regardless of gender, in education and in career-seeking. And we have a system based on meritocracy. Why are the returns from investing in our female population not yielding the same accretion? Is there a shortfall in the contribution of our women to the economy as a result of this?

The following are some areas that are worth looking into in this context.

1. Human capital investment. Firms may anticipate a higher quit rate from women than men. As such, they may be cautious when it comes to investing in female employees for fear that they would not recover their investment. As a result of such forfeited career opportunities, women not only have loss of earnings but also loss in economic values within the society. Perhaps employers may adopt a new mindset with some sort of help.

2. Double burden. There is a possibility that women may be more likely to shirk on the job than men. This might be the case because child-care responsibilities are more a distraction for women than men. Having children does impose workplace limitations on women. Perhaps we should look deeper at our child-caring facilities, namely, maids, grandparents, foster homes and child-care centres.

3. Women's perception. Women are often subjected to socialisation as less able to handle risk-taking and as being less confident of their abilities. This could be a factor that plays a critical role in their expectations towards the salaries they deserve and therefore their perceptions towards the careers they choose. This factor may also result in the lesser demands by women when it comes to wage negotiations.

4. Societal conditioning. The influence of societal conditioning as the source of occupational crowding towards a narrow set of "women's occupations" is worth looking at. Whether these "women occupations" are really worth so little that they usually command less lucrative rates on the whole ought to be studied. Are there stereotyping and bias amongst the policy-makers, teachers and counsellors that deter girls and women from advancing their education and entering the traditional male domains?

5. Technological innovations. There is increasing stress towards higher value-added activities. New-age technology that points towards the ascendancy of electronics and computer-related industries may require people with strong background in mathematics. This is an area which is traditionally the stronghold of men. Are Singaporean women more likely to shun these "high-tech" occupations by choice or by preference? Do we need to change this mindset?

6. Reproductive role. To fulfil this role, women are required, at one time or another, to consider discontinuity and subsequent reintegration in their jobs. Effectively, they are prevented from full integration at their jobs. The resultant effect is that they renounce their ambitions and resign themselves to those lesser employment prospects than what their qualification would warrant.

Sir, it should be a worthwhile exercise to study and ascertain these elements within the Singapore context. I would like to suggest that the Ministry of Manpower do this and help us overcome some of our shortcomings and enable the Singapore woman realise her true and rightful place in the Singapore economy.

Mr Inderjit Singh (Ang Mo Kio): Sir, in this cut, I was originally going to ask the Minister for Manpower to help reduce the cost of hiring skilled foreign workers, basically the foreign worker levy to $100. I am glad to note that I was pre-empted and the Minister has announced that this is going to happen very soon.

I am sure this will go a long way in helping the manufacturing and service sectors reduce the labour-related cost. I hope that this will apply to foreign workers of all nationalities and not restricted to certain nationalities only. However, I would like to still ask the Minister to consider some temporary measures for all existing foreign workers, including unskilled workers. This request is to help companies get through the tough times expected in the next two years or so. I would like to suggest that the Minister consider temporarily reducing the levy for all foreign workers to $100 for the next 1-2 years. And with the understanding that it would be raised to the original levels once things stabilise in our economy. I am sure this will help our businesses survive the tough time in the next few years.

Mr Goh Choon Kang (Marine Parade): Sir, I would like to address the problem of run away foreign workers and foreign maids. I would like to suggest imposing a security bond on all foreign workers and foreign maids, as one way to tackle the problem of run away foreign workers and missing maids.

Sir, yesterday, the Minister for Home Affairs announced that such a security bond would be imposed on foreign workers from two foreign countries. I see no reason why this should not apply to foreign workers and maids from other countries.

Alternatively, I would suggest that the foreign workers and foreign maids can be asked to contribute 20% of their monthly income to a foreign labour fund to be administered by the Manpower Ministry. This is to make all foreign workers themselves responsible for their good behaviour while in Singapore. Upon completion of their contract in Singapore or upon the cancellation of their work permit, their contribution will then be returned to them when they pack up and go home, perhaps with some interest earned, similar to the CPF fund.

The foreign labour fund can be deemed as some kind of a good behaviour bond. By running away or committing serious offences, foreign workers would put their foreign labour fund savings in jeopardy. This could deter many from misbehaving while in Singapore.

Secondly, irregardless of whether an employer is at fault when a work permit holder goes missing and cannot be traced, the security bond of the employer is forfeited. I would like to suggest that in cases where it can be established that an employer is not at fault, then the security bond or deposit should not be forfeited. Of course, the burden of proof should be on the employer. 1.00 pm

Mr Ahmad Mohd Magad (Pasir Ris): Sir, still on the issue of foreign maids. The Ministry of Labour announced in November last year that the foreign domestic worker levy would go up by $15 a month with effect from 1st April 1998, ie, next month. This is to be followed by small annual revisions thereafter. The objective of the foreign domestic worker levy, according to the Ministry, is to regulate demand for foreign domestic workers, and to discourage Singaporeans from becoming overly reliant on them.

Sir, a working couple trying to juggle between babies, housework, career and upgrading their skills and studies are already finding their lives very stressful. Thus, it would appear to me that even if the Government continues to raise the foreign domestic worker levy, the demand will remain fairly inelastic. For those in this category having a maid is really not an option. The concern over the levy increase lies not only in the higher costs to households, especially for young working couples, but more importantly, the availability of alternatives such as childcare centres. There are also those who are in need of a maid to look after their beloved elderly while they are at work. Having a maid for this group is a necessity.

The Government must not be seen to be sending confusing signals. If Singapore wants its women to come forward to contribute economically, then there must be assurance that their children are not deprived of proper and dedicated care. The question then is how the Ministry could ensure that the measures taken to increase the maid levy really meet its objective in terms of controlling the numbers while at the same time ensuring that those really in need of a maid service are not deprived. In the wake of the current economic downturn, will the Minister reconsider deferring the increase of the foreign domestic worker levy until the situation improves, as it may adversely impact those who are affected by the current economic conditions, but at the same time are still dependent on the services of foreign domestic maids.

The Chairman: I have to remind Members that the "guillotine" time is at 1.55 pm and we seem to have still quite a long list of speakers. Mr Chuang.

Mr Chuang Shaw Peng (Nominated Member): (In Mandarin): First, I would like to declare my interest as a Director of a construction company. However, I have no pecuniary interest in the subject matter that I will be speaking on.

In Singapore, more than 90% of the workers in the construction industry are foreign workers. At present, an employer has to pay foreign worker levy to the Government at $200 for each skilled worker and $440 for each unskilled worker. The difference of $240 is to encourage the employers to engage more skilled workers in order to improve productivity in the construction industry. This policy is correct and encouraging.

The construction industry is a very competitive industry. Since the Government's announcement of the adjustment to the foreign worker levy at the end of last year, many construction companies have been trying very hard to secure more skilled workers to replace the unskilled workers, in order to cut cost.

At the present moment, the Singapore Government's Construction Industry Training School has been flooded with applications from many construction companies for their workers to be trained and to sit for the skills certification examination. The response was so overwhelming that the school is finding it difficult to cope. Obviously, this strategy to actively encourage the workers to increase their skill level is like "sending burning charcoal in a snowing weather". It is a timely help to the industry, and is significantly effective.

Furthermore, the original purpose of the foreign workers levy is to increase the cost of employing foreign workers so as to prevent the employers from employing cheap foreign workers to replace the more expensive local workers. However, after years of implementation of this policy, and the levy being raised year after year, the number of local workers entering the construction industry has not increased, but has actually reduced. Even the supervisory-level work, which was formerly dominated by Singaporeans, is now gradually taken over by engineers employed from foreign countries.

Apparently, construction work has not much attraction for Singaporeans. Unless the Government thoroughly changes its policy, like last year's large-scale incentives for the employers to employ skilled workers, it will not be easy to change the local workers' present attitude of fighting shy of the construction industry. At the same time, the levy for unskilled workers will be raised to $470 with effect from 1st April. Other than increasing the construction cost, it will not have much encouraging effect.

I believe that when the Government was formulating this policy it was considering the need to attain budget neutrality. However, from 1st April onwards, when the new rates take effect, so long as the number of skilled workers is lower than 15% of the total number of construction workers, the Government's income in foreign worker levy will be increased, and not neutral. According to the statistics of the Construction Industry Development Board (CIDB), at the moment, skilled foreign workers who are paying the foreign worker levy account for approximately 10% of the total number of foreign construction workers in Singapore. Since the new policy on foreign worker levy was announced at the end of last year, and although the Singapore Construction Industry Training School has increased the number of its courses, it will be impossible to rapidly raise the percentage within a short period of time. In any event, so long as the Government's income is increased, then the wool must still come from the back of the sheep - the cost in the property sector will surely go up.

At this present economic turmoil where business is bad, all the trades and industries are asking for reduction in taxes and rents, and the construction industry is also hoping for some concessions. All these years, the Government has been collecting more than $100 million a year from the foreign workers levy. However, there are more and more foreign workers coming to Singapore. This merely indicates an increase in the Government's revenue from the foreign worker levy, and not the best plan to improve productivity. I hope that the Government would respond to the public's request not to increase the foreign worker levy.

Over the past few years, the Government and the construction companies are actively advocating the concept of "builderbility". In the past two to three years, this concept has been extensively affirmed. The concept of "builderbility" is mainly to encourage the top-level people in the construction industry, such as the developers and the architects, to actively consider, during the project design concept stage, the various problems of "builderbility" at the construction stage in order that the contractors may effectively make use of more machines and less workers to complete the project.

If the Government speeds up the legislation process to promote this concept of "builderbility", coupled with the slight revision to the foreign workers levy, I believe productivity in the construction industry can be significantly improved in the near future.

Sir, my second topic is on foreign domestic maids. At the present moment, the Government's policy is to encourage housewives to rejoin the workforce. The Ministry of Labour has specially formulated a "back-to-work" scheme, with the hope that more housewives would receive some training on the latest skills and some psychological preparation before they rejoin the workforce. I fully agree with this policy. However, with effect from 1st April, the levy on foreign domestic maids will be increased once again. Does this not run contradictory to the above policy? At the moment, with the economic slowdown, wages are not increased but the expenses will surely go up with the upward adjustment of loan interests and charges from the various departments. For example, instalment payments for housing and vehicle loans, and utilities charges have gone up. Although the additional $15 on the foreign maid levy can be offset by cutting down on sundry consumption expenses, this will affect the entire retail industry, causing the market to be even more depressed. Moreover, the Government has announced the extension of retirement age, and now it is going to increase the foreign maid levy. The Government intends to improve the quality of childcare centres. This will not only be ineffective, but may even end up with a blunder, causing the psychological burden of the people to be heavier at this time when everyone is on tenterhooks.

I hope that the Minister can be circumspect and farsighted, and not to further increase the unskilled foreign workers levy and the foreign maid levy after 1st April.

Mr Ong Ah Heng (Nee Soon Central): (In Mandarin): Sir, I also wish to talk about the run away of foreign maids.

Recently, some voters came to me to seek assistance in appealing against the forfeiture of security bonds for their foreign maids or workers who had run away.

A family employed a foreign maid to help look after their aged parents and parents-in-law at home. When the couple came home from work, they found that their maid was missing. They could not get help from anywhere. Even the police would not help them because the police do not deal with such matters unless the absconded maid has overstayed in Singapore. Even if the employer knows the whereabouts of the maid, there is no organisation he can turn to to get the maid home. With the maid running away, the employer has to apply for no-pay leave to look after his aged parents and parent-in-law. The moment the Immigration Department comes to know about it, the employer will be asked to surrender the maid to the authority for repatriation, failing which the security bond of $5,000 will be forfeited.

I hope the newly formed Ministry of Manpower will render some assistance to these employers. Give them a grace period before forfeiting their security bond of $5,000, unless there are compelling reasons why the grace period cannot be granted.

Mr Lim Swee Say (Tanjong Pagar): (In Mandarin): Sir, there is a Chinese fable which runs like this. There was a mountain in front of the house where an old man was living. It caused the old man a lot of inconvenience because every time he wanted to go to town, he had to go round the mountain. One day, he decided that this mountain had to be removed. His neighbours asked him, "Is it possible? The mountain is so high." The old man replied, "Yes. Although the mountain is high, it does not grow any higher. So long as my children, their children and their children's children persevere, this mountain will be removed one day". The moral of this story is, "if there is a will, there is a way." This old man may not be clever, but he is certainly not stupid.

Sir, you may ask, "What has this got to do with our topic today?" Well, the unemployment problem is just the mountain. If we want to achieve full employment, we have to remove the obstacle, this mountain. The difference is: once the mountain is removed, it will not come back, but unemployment will. Full employment is difficult to achieve. To sustain it is even more difficult. As economic reform gathers momentum, job creation alone cannot guarantee that the state of full employment will be sustained. In this regard, MTI alone cannot shoulder the responsibility all by itself. It will have to work in tandem with the new Ministry of Manpower to upgrade the skill level of the workforce. Challenges are plenty. We have to get our priorities right.

I have three recommendations for the consideration of the Ministry of Manpower. Firstly, enhance the workers' employability; secondly, remove all prejudices against the older workers; and thirdly, enhance the competitiveness of the professionals. First Priority: Three groups of workers need to enhance their employability

With all the industrial and commercial restructuring, the basic skill requirements of the workers are gradually being raised. Workers with a primary educational level and below are already facing the threat of being eliminated. In the next three to five years' time, if they do not upgrade the level of their skills, they will be structurally unemployable. This is the first group of workers.

The second group of workers are those with Secondary 4 education, who are either unskilled or semi-skilled. As companies are accelerating their process of restructuring because of competition, there will be more opportunities for promotion. If the workers do not upgrade their skills, they will miss these promotion opportunities. On the other hand, certain industries will be short of skilled workers and have to be over-dependent on foreign workers, resulting in structural under-employment. 1.15 pm

Our low value-added industry has contracted and thousands of workers in this industry are being laid off. On the other hand, the high value-added industry is booming, but it is faced with a shortage of workers. If we fail to enable our workers to upgrade their skills and to move them from the low value-added industry to the high value-added industry, then they will be faced with the situation of structural unemployment. This is the third group of workers.

If these three situations become a reality, it would imply that we have not fully utilised the potential of our workers in Singapore. The tripartite cooperation among labour, management and the Government should try their best to avoid paying a higher price in these situations.

Second Priority: Remove all prejudices against the older workers

Aging of our population is an unavoidable fact. The number of our workers who are above the age of 40 has now exceeded 750,000. A fortnight ago, within one week there were 330 recruitment advertisements and half of them stipulated that the maximum age for eligible candidates was 35, and one-third of them wanted only people who were not more than 40 years of age. In other words, 85% of the companies would accept only applicants who were below 40 years old. If we do not correct such prejudice against the older workers, a vicious cycle will emerge and it can become a serious social problem.

Third Priority: Enhancing the competitiveness of our professionals

The value chain of our economic activities can be divided into upper, upper-middle, lower-middle and lower streams. "Upper stream" refers to R&D "lower stream" covers market development; "upper-middle" calls for creativity and innovation; while "lower-middle" refers to mass production.

While pursuing the upper stream activities, such as R&D, we must always emphasise the importance of creativity and innovation and market development.

With comprehensive professional capabilities and equal emphasis on the abovementioned four streams, we will be able to build up a world-class workforce and turn ourselves into a global hub for Asia. Although we have sound economic fundamentals, we have to continue to excel and strive ahead. If MTI and MOM could work closely together to create more opportunities for good jobs, while at the same time upgrade our workers' skills and the competitiveness of the professionals, we will be able to ride out such economic storm and better position ourselves for the next century in Asia as well as the world. We believe we will be able to find an economic niche for ourselves in the next century.

Mrs Yu-Foo Yee Shoon (Bukit Timah): Sir, according to the latest Labour Force Survey, there are about 53,000 married women who have indicated that they want to go back to work. The majority have young children. This is the major reason why they could not take up normal, full-time jobs. Unlike the situation in most developed countries, our women do not re-enter the workforce in their later years, after their child-rearing years are over. The participation rate for women aged 40 to 50 years is only 52% compared to 71% in Japan, 76% in US, and 70% in the United Kingdom. For those aged 50 years and above, only 41% are economically active in Singapore compared to 66% in Japan, 57% in the US and 52% in the UK.

With such a huge pool to tap from, it is a great pity that we are still relying heavily on foreign workers. And now we are talking about attracting more foreign talents. It is time that we took stock of our own existing resources and see how best we could develop them. We must try to do much more not only to attract such women into the workforce but also try to retain those who are already in the workforce. If we look at countries with high female labour force participation rates, we will also find that there are many flexible work arrangements that are in place to help women balance work and family. I think they do not want to depend on foreign maids.

A key element of these work arrangements is flexibility. This comes in the form of flexible working time, job-sharing, part-time work or home-based work, or work located near their homes. With the vast improvements in telecommunications, there is no need even for women to leave their homes. With a little planning, many jobs can be converted to home-based work. Journalism is one example, as the primary tools of a journalist are a laptop and a telephone which do not require them to be in the office all the time. Vast opportunities can be created, if only employers are prepared to be flexible and spend time to redesign their jobs. Singapore Post is one example of an employer who did a marvellous job in bringing work to the doorsteps of women. Instead of depending on male postmen, now they have housewives to distribute letters.

Apart from flexible work arrangements, we find that where there are adequate community facilities and pro-family incentives, in the form of tax incentives or child care leave, the labour force participation rate increases. In Sweden, for instance, either parent could take up to 15 months of child care leave with full pay for the first three months and 75% of the salary for the remaining period. Whilst I am not suggesting that we follow the Swedish example, it nevertheless highlights the importance attached to child caring and the reason why many Swedish women could go back to work after their leave is over. We could perhaps adopt more modest measures. Employers could consider allowing women to take unpaid leave, after their paid maternity leave is over, for another six months. Presently, this scheme is found only in the public sector which gives up to one year's leave, but is almost non-existent in the private sector. Employers who provide pro-family benefits could even be given tax incentives and subsidised assistance from PSB to redesign jobs.

Many women also need training, both in raising their skill level and developing their self-confidence to re-enter the workforce. With the new Ministry of Manpower, a more coordinated strategy for the development, training and funding of such programmes would hopefully be in place. At the end of the day, what we hope to achieve is to help women lead meaningful lives and contribute to society by allowing them to balance family and work.

Sir, can I continue with my amendment on CPF?

The Chairman: Mrs Yu-Foo, I think the Minister would like to reply now.

Dr Lee Boon Yang: Sir, allow me to, first, reply to the points raised by the Member for Kreta Ayer-Tanglin, Dr Lily Neo. She has observed that according to the Department of Statistics' data, the income ratio between male and female declined from 73% in 1990 to 59% in 1995. I would like to point out that the Department of Statistics' findings reflected the income of the total workforce, which included all the foreign workers. The statistics, therefore, has been somewhat distorted by the increasing number of lowly-paid female foreign domestic workers over the years. To better reflect the trend, we should look at the wage data of our resident workforce. These data are captured in the occupational wages survey, CPF Board earnings data and Labour Force Survey data. These data are for resident workforce and they have, in fact, shown a narrowing of the overall wage gap between resident males and females in Singapore over the years. For instance, based on CPF records, the average monthly earning of resident females rose from 68% in 1987 to 76% in 1997. So, in fact, the gap is actually getting narrower.

Factors which could account for the wage gap include the differences in job nature and job level, as well as years of service, working experience and educational attainment of the jobholders. Statistics from the latest Labour Force Survey showed that female labour force participation peaked at 82.4% for the 25 to 29 age group, and thereafter declined, as was also observed yesterday by Mdm Claire Chiang. These data, in fact, suggest that women tend to drop out of the workforce after marriage to take care of the family responsibility. As a result, the average years of service and experience of women remaining in the workforce will naturally be shorter compared to their male counterparts, consequently their wage levels will be lowered.

Sir, discrimination in employment exists only when persons of equal capability doing the same jobs are paid differently by the same employer on factors unrelated to their performance. Hence, we must understand the basis for the national occupational wage data and not conclude that there is indeed a discrimination on basis of gender or that women, in general, are being disadvantaged. This is because the occupational wage data are based on the aggregate of similar jobs, regardless of the level of authority, job complexity, responsibility or work experience. In Singapore, women who do the same job as men are paid the same wages as men. This is clearly reflected in the practice of the public sector when men and women in the same position, with the same years of service, receive the same remuneration.

The Member for Kreta Ayer-Tanglin has also raised many other issues relating to the difficulties of the challenges facing women in employment, including the difficulty of balancing work with family responsibility and also the general mindset of employers with regard to the role of women in the workplace. These are relevant issues. These will have to be studied further. Yesterday I mentioned that my Ministry had already appointed an Advisory Committee to our Back-to-Work programme, and this Committee would, in fact, look at some of these issues. And I will certainly convey the Member's concerns to the Committee so that they could be considered in totality.

Sir, in a tight labour market, as what we have been experiencing all these years, employers have to be innovative in order to recruit the workers that they need, and they should not omit the potential of recruiting more women workers to join the workforce. I think we can satisfy some of our labour requirements if we make a special effort to recruit more of the women who are presently not working to rejoin the workforce. And, in fact, this is the main thrust and target of our Back-to-Work programme. The Ministry of Manpower will continue to develop this programme to enlarge its outreach, so that it will be more effective in getting the women back into the workforce.

Sir, I next turn to the Members who spoke on foreign workers, in particular the foreign worker levy. First, Mr Inderjit Singh has asked whether the lower levy which we are granting to skilled workers, with effect from 1st April, will be extended to workers from all sources. Yes, I would like to assure Mr Singh that, in fact, the lower levy which will be pegged at $100 per month will be extended to foreign workers in all sectors and from all sources, including skilled workers from the non-traditional sources.

Next, I would like to address the point raised by Mr Magad and Mr Chuang on reducing the foreign worker levy. Firstly, both Mr Magad and Mr Chuang have suggested to defer the levy increase for foreign domestic workers. This was the increase of $15 which we announced in November last year. It will take effect on 1st April. Sir, I want to point out that the adjustment is on account of changes in income levels of Singaporean employers of foreign domestic workers, and also because of the increase in foreign domestic workers, since the last levy revision in 1995. The levy increase is necessary to ensure that the cost of employing a foreign domestic worker keeps pace with the rise in income of Singaporeans. Otherwise, the number will continue to increase and it will reach unmanageable proportions. As it stands, there are already more than 100,000 foreign domestic workers in Singapore. If we do not implement any measure to moderate demand, the number could increase much drastically. 1.30 pm

Sir, real income level, as measured by the average monthly income for Singaporeans, rose by 9% cumulatively for 1995 and 1996. And if you compare this to the proposed increase in foreign domestic levy which is only 4�% increase, this seems to be totally reasonable. In fact, it means even if income growth were to be slower this year because of the slow economic growth, the foreign domestic workers have already become relatively more affordable compared to 1995 when the levy was last revised. If we defer the levy increase this year, it will hamper efforts to control or to moderate the rising demand. As the intention is to increase the levy to keep pace with rising income, we should make this adjustment regularly so that it is a small increase, small steps, along the way, rather than defer it for a few years. Then a few years down the road, we would have to bring in a very hefty increase which would lead to even more unhappiness and greater difficulties for the families to adjust.

As for Mr Chuang's call to defer the increase in levy for the unskilled foreign construction workers, I would like to point out to the Member that, despite the economic slowdown and the Ministry's announcement of the impending levy increase, the demand for work permit applications for unskilled foreign construction workers is still very strong. And we are also seeing an increasing number of these foreign workers being deployed to work illegally in other sectors, such as food establishments and cleansing work. This has obviously distorted the demand for construction workers. The levy increase, coupled with enforcement measures and the new work permit allocation system, is necessary to curb the rising number of unskilled foreign construction workers and to tackle the problem of construction workers working illegally in other sectors.

Sir, foreign construction workers have contributed, as Mr Chuang pointed out, to the bulk of our construction workforce. In fact, foreign construction workers also contribute to the bulk of the increase in foreign workers, from more than 350,000 in early 1996 to more than 450,000 currently. Most of the increase came from the unskilled foreign construction workers. The heavy dependence on unskilled foreign construction workers is not sustainable economically and socially in the long run if we want to remain competitive. The negative productivity growth in the construction sector for the last three years clearly illustrates how the heavy dependence on foreign unskilled labour had retarded the growth of the industry. One indicator of the low level of the construction industry here in Singapore is seen in the fact that only 14% of the workforce are considered as skilled workers. In other words, they are on the current low levy scheme for skilled workers. In other countries, with a much more productive and efficient construction industry, there are many more skilled workers. For instance, in Australia, skilled workers represent 40% of the construction workforce; in Finland, 60% of the construction workforce. They have so many more skilled workers. They are so much more productive. They need in total fewer workers to meet the demand of the construction industry there.

Furthermore, I also want to point out that having a low level and unproductive construction industry totally dependent on large numbers of unskilled and inexperienced foreign construction workers has also resulted in high rates of accidents at construction sites. These people come to Singapore to work without any experience and training and very often, they are involved in unnecessary work site accident.

We have provided an alternative to contractors. If they have difficulty meeting the higher levy from 1st April this year, they should make greater efforts to recruit skilled workers or send the existing workers for some training and trade testing so that they can qualify for the lower levy, which is $100. I have to stress that the levy saving for each skilled worker is more than 12 times the levy increase for an unskilled worker. So it is well worth the while of the contractor to make a special effort to bring in a skilled worker or to upgrade the skills of the existing workers.

Our announcement since November last year had already started to take effect. Since the announcement, we have been seeing more contractors sending their workers for training and trade testing at the construction industry training institute. This is a very good trend. It should be encouraged. If we defer the levy increase, the trend might reverse itself and the contractors could well go back to the past practice of recruiting more and more unskilled workers. Therefore, my Ministry has decided to proceed with the levy increase on 1st April.

I would like to point out to the Member that in fact in reviewing the foreign worker policy, budget neutrality is really not a factor. Overall, our revision of the foreign worker policy that was announced in November last year, will result in a levy saving to employers of more than $200 million a year, both in the manufacturing sector, service sector and construction industry. There is a potential to have enormous levy savings. And in fact, if contractors move to recruit more skilled workers and put them on a lower levy of $100, the savings would be far more than the $200 million that we have estimated.

Sir, Mr Goh Choon Kang and Mr Ong Ah Heng both spoke on the problems faced by employers of foreign domestic workers whose domestic workers run away from their homes. I think all Members are aware and the employers of foreign domestic workers are also aware that they have to post a security bond, which is $5,000. The security bond is a safeguard to ensure that the employers take full responsibility for their foreign workers, including foreign domestic workers, and that they repatriate these foreign workers when their contract or work permit expires. This condition is made very clear to each and every applicant of a foreign worker, including the applicants of foreign domestic workers. It is the responsibility that the employers have to factor into their decision in employing a foreign worker. Without the security bond, the employers may not exercise proper management and supervision on their foreign workers resulting in more missing foreign workers and creating more social problems. Furthermore, we may even see the emergence of another problem, namely, employers wilfully abandoning their foreign workers. Because if they have no obligation to repatriate their foreign workers, if they do not have to post a security bond or if the security bond will not be forfeited, then they may just abandon their workers to their own devices and say, "You find your own way around."

The number of cases of missing foreign domestic workers is small, considering that there are more than 100,000 of them working in Singapore currently. To date, the cumulative number of foreign domestic workers who have gone missing is only about 500 compared to the several hundred thousand foreign domestic workers who have worked in Singapore over the last 20 years or so. So on balance, we should retain the system of the security bond. There is no reason for us to change the security bond requirement. It has worked well. It has kept the number of such cases and abuses of foreign workers down to a minimum.

The Member also asked what assistance or advice my Ministry would give to employers when their domestic workers go AWOL. I would like to advise employers to promptly inform the Work Permit Department when their foreign workers run away from the homes. They can also seek assistance from the employment agency which brought in the foreign domestic workers in the first instance and also check with the respective Embassy because, very often, these domestic workers would go to the Embassy to complain or to report their grievances they may have with the employers. When they inform the Work Permit Department, we will allow the employers to cancel the work permit and give them time to locate the foreign workers without having to pay the foreign worker levy during the interim. They can in fact also apply for a new foreign domestic worker thereafter.

We will exercise flexibility with regard to the bonds. We are not going to forfeit the bond immediately. In general, we will give the employers a grace period of up to a month after the cancellation of the work permit to try to locate the foreign workers. Even after the security bond has been forfeited, a refund can still be considered if some months later, the employer can provide some information or assistance which leads towards the repatriation of the run away domestic worker. So we are fairly generous and we understand the difficulties of some of the employers and we will try to help them.

Mr Goh Choon Kang suggested a foreign labour fund. He suggested that 20% of the workers' wages should go towards this fund which would then be paid back to the workers when they leave the country. I would like to point out that, as it stands today, there is nothing to stop an employer of a foreign worker, whether he is a worker in the construction sector or a foreign domestic worker, to strike up a contract with the foreign worker that if he completes his term of contract for two years, or whatever it is, he will be paid a contract gratuity and this contract gratuity will represent so many percent of the wages that he earns over a period of time. This is entirely possible. But I would advise employers that if they want to do this, the contract gratuity should be clearly spelt out in their contract of service with the foreign worker so that in future there will be no argument about unlawful salary deduction or retention. This would meet the objectives spelt out by Mr Goh. It will ensure that the foreign worker stays on to the end of the contract, completes the contract properly and then collects his contract gratuity before he leaves the country.

Mr Lim Swee Say raised several points about ensuring employability, particularly of the lower educated workers and problems faced with reskilling the lower skilled workers, and also the need to look at the redeployment of workers as they get dislocated from one sector, for instance, manufacturing, into another sector. I would say that I agree entirely with the views of Mr Lim. I think these are valid issues which must be considered and we must not take the full employment that we have enjoyed since the 1970s for granted. I think we were very fortunate that we had been able to achieve steady economic growth and to maintain full employment over such a long period. Our current economic slowdown is in fact a timely reminder that we cannot take full employment and steady economic growth for granted. It is also a timely reminder that the problems of our neighbours can very well become our problems too. As a result of the currency crisis and the economic slowdown in the region, we are likely to see slower growth this year and retrenchments are likely to rise as the regional crisis takes its toll. So the Ministry will adopt a proactive approach to quickly address the threat of structural unemployment or retrenched workers as well as the long-term employability issue mentioned by Mr Lim.

Yesterday, I have already explained the roles, responsibilities and priorities of the Ministry of Manpower come April this year. I will not repeat these points other than to emphasise that MOM will work closely with our tripartite partners to achieve our vision of a world class workforce and to ensure that Singaporeans gain a higher level of skills to remain employable.

I think ensuring lifelong employability for our workers will have to be a key priority of the new Ministry. We would have to work on new initiatives and invest more resources in order to achieve this level of skills training and retraining. So MOM will endeavour to put in place a system for continuing education and training for all our workers, whether they are young or old, unskilled or skilled, including even those who are better educated. Every worker needs to continuously upgrade his skills to be relevant to the changing needs of the industries. 1.45 pm

Finally, I turn to the Member for Bukit Timah, Mrs Yu-Foo Yee Shoon, who commented on the need to promote flexible or part-time work, particularly for women who have to balance the needs of the family and their career. Sir, the promotion of part-time and flexible arrangement is very important, given our objective to increase the labour force participation of married women aged 30 to 54, because this is the age group of women where we are seeing a very rapidly declining female labour force participation rate.

Sir, part-time flexible work and teleworking, which has been mentioned by the Member, are all viable options that would enable women to balance their family needs with a career. In the 1997 Labour Force Survey, half of the 37,700 economically inactive persons, who indicated that they wanted to seek employment within the next two years, said that they preferred part-time work. I think that was why in 1996, we formulated the part-time employees regulations to provide a legislative framework to facilitate the creation of more part-time employment. These regulations spell out the rights and obligations of employers and part-time employees, and provide flexibility in terms of encashing certain statutory benefits. However, part-time employment is still not prevalent in Singapore and constitutes only 3% of employment in Singapore. So there is still a lot of room for improvement and we will make greater efforts in order to promote this idea of having more part-time jobs or flexible work schedules, particularly for women.

The Productivity and Standards Board is, in fact, planning a job redesign programme. This job redesign programme will provide a framework for organisations to enhance productivity in continuous work process improvement and skills upgrading, as well as to help organisations address the issue of manpower shortage and an aging workforce. Under the programme, basic job redesign models will be developed by consultants hired for this purpose. And once the models are developed, we will share them with employers so that they can help employers to restructure the jobs in their workplace. The models will certainly include options for part-time employment and flexi-work arrangements. The Ministry of Manpower will work closely with PSB in order to promote this programme.

The Member for Bukit Timah also mentioned the example of Sweden where many women are able to work. In fact, Sweden's female labour force participation rate is almost equal to the male labour force participation rate through the various age groups, suggesting that Swedish women do not withdraw from the workforce upon reaching marriage or child bearing age, unlike women in Singapore. Swedish women are able to enjoy, what the Member described, an excellent set of benefits to enable them to stay in employment while at the same time raising a family. This support system, I must point out, is sustained by very high tax rates. Therefore, the model s not wholly relevant to us. And for Members' interest, the level of social and welfare support provided by the Swedish government requires extremely high tax revenues. 90% of the employees pay approximately 30% of their salary in income tax, and the remaining 10% of the employees pay more than 30% of their salary as taxes. And that is not the main source of the revenue for the state. The main source of revenue for the state is, in fact, the 25% value-added tax, which every consumer pays. With such high rates of taxation, they can afford to redistribute to all these welfare services.

In comparison, in Singapore, only 30% of individuals pay income tax. 70% do not pay income tax. According to the Inland Revenue Authority of Singapore, the effective tax rate in Singapore is only about 8.1% in 1997, 8.2% in 1995 and our GST is only 3%. So we are looking at two totally different systems. While they may have some good points, we should be careful about which are the ones that we want to adopt and modify for our application in Singapore.

I would like to take this opportunity to highlight that one of the problems facing women who want to take on part-time jobs is that employers do not have the right attitude towards part-time workers. Very often, employers consider part-time workers as being less committed and less reliable. They see their employment as being supplementary and transient in nature, and hence many employers are not prepared to hire part-time workers. And if they do hire, they are not prepared to invest in training or upgrading the skills of their part-time workers. I think this mindset has to change, if we want to promote part-time and flexible work arrangements. Employers have to be more open, more innovative, as I said earlier on, with regard to attracting workers, particularly women, back into the workforce. They have to accept that some women would only want to take on part-time jobs and they will be equally committed, equally dedicated and equally reliable compared to full-time workers.

Mrs Yu-Foo Yee Shoon: Sir, I want to touch on CPF policy. My concern is that CPF originally started off as a pension scheme catering for the retirement needs of Singaporeans. But today, we use it for housing, medical care and even education. More recently, CPF could even be used for investments in stocks and shares. I would like to ask the Minister what are the average balances in the ordinary and special accounts of members, and whether the Ministry considers such amounts sufficient to meet the needs of the average workers upon retirement.

The other question is that, lately, we also give the flexibility for CPF members to invest their CPF funds. I would like to say that there is a need to educate CPF members who are ignorant of the mechanism of the stock market. There should be more safeguards so that CPF savings are not excessively exposed.

Dr Lee Boon Yang: Sir, Mrs Yu-Foo is concerned whether CPF savings are adequate, especially for the older CPF members. I would like to quickly point out that low CPF balances of older CPF members is the result of low wages and low CPF contribution rate in past years. While this may be inevitable and actually reflects the gradual growth of our economy, we, as a Government, have launched various efforts to help older CPF members to build up their CPF savings. Examples are the CPF Top-Up Scheme, Pre-Medisave Top-Up Scheme and Minimum Sum Top-Up Scheme for both spouse and parents.

I would like to point out that the net CPF savings have actually been increasing over the years. For instance, the median net balance, which is the total CPF savings less savings committed for investments in property or stocks and shares, for those who turned 55 in 1995 was about $45,000. For those who turned 55 in 1997, the median net balance had gone up to $52,000, an increase of about $7,000 over the two years.

Furthermore, I also want to point out that all of a member's CPF assets including the cash in the CPF account, property, insurance and investments are available for old age, not just the cash component. We cannot just look at what is the net balance and say, "Is this adequate?" We must look at the total CPF portfolio. For instance, investments under the CPF investment scheme can be easily converted into cash. The shares can be liquidated or sold and the cash can be used to meet the needs of the retired members. Furthermore, a retired CPF member can also sell off, for instance, a 5-room flat and then move to a smaller 3-room flat to free up cash to meet his needs for daily expenses. And if we look at the regrossed balance of members who turned 55 in 1997, 70% of them already have balances which exceed the current minimum sum of $50,000.

Younger CPF members should be able to save up sufficiently to meet their basic needs when they retire. For instance, the median net balance in the ordinary and special accounts for the younger workers between 45 and 55 years is already $47,000. And the regrossed balance is, in fact, much higher, about $100,000 for CPF members in the same age group.

Sir, by the year 2003, when the minimum sum scheme will reach its target of $80,000 with $40,000 in the cash component, about 80% of the active CPF members would be able to meet the minimum sum requirement.

The Member has also asked about the CPF investment scheme. 1.55 pm

The Chairman: Order. It is "guillotine" time.

Mrs Yu-Foo Yee Shoon: Sir, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

The sum of $64,498,540 for Head S ordered to stand part of the Main Estimates.

The sum of $6,723,300 for Head S ordered to stand part of the Development Estimates.

Head I

The Chairman: Head I, Ministry of Communication. Amendment No. (1), Mr Chay.

Mr Chay Wai Chuen (Tanjong Pagar): Sir, I beg to move,

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

In general, the latest measures announced by the Minister on ERP are much to be welcomed. The Government announced five principles which will be the basis for the new vehicular tax structure. These five principles are: first, charging on road usage; second, charging based on three factors - charging on the use of road space, damage to the road and the progressivity factor; third, tax concession to taxis and scheduled buses; fourth, rationalise existing structure; and, fifth, to maintain revenue neutrality globally.

I wish to examine the new charge system for motorcycles, which I think is not very fair. We are told that a motorcycle is 0.5 pcu (passenger car unit), when a normal private car is 1, similar for a taxi and a light goods vehicle. A bus, for example, has a pcu of between 1.5-2. A car entering the gantry at the East Coast Parkway from 1st April 1998 will have to pay $1 from 7.30 am to 8.00 am, compared to a fee of 50 cents for the two-wheel motorcycle, which has a pcu rating of 0.5. A two-wheel vehicle, such as a motorcycle, should proportionally cause less damage to the road, compared with a four-wheel vehicle, in addition to the fact that it is, of course, half the size. Should not the rate for a two-wheel vehicle be less than 25 cents? At that rate, it would be the same as a light goods vehicle which is charged at 25 cents. Also, presumably because they are used for business.

Motorcyclists also go to town a lot in the course of business. And if we were to factor in the progressivity element and rank the ordinal scale of charge, I would put it at less than that of a LGV, and definitely less than that of taxis. However, in the present scheme as proposed, the charges for the motorcyclists are higher than the taxis and the light goods vehicles, at off peak and peak hours. I think this is quite unfair.

Mr Chng Hee Kok (East Coast): Sir, I must commend the Minister for Communications for the implementation of the ERP system. I think the ground has been well prepared and also the justification for ERP has been made fairly well known. I have no complaints about the charges and there have been no criticisms of the ERP charges that will be implemented. The charge proposed for cars from 7.30 am to 8.00 am is $1. From 8.00 am to 9.00 am, it is a $2 charge, a doubling of the charge. From 9.00 am to 9.30 am, it is $1.

Sir, this very large jump from 8.00 am onwards will lead to an uneven and non-smooth flow of traffic. We all know of the current CBD and ECP charges. When there is a charge, drivers slow down in order to avoid paying the charge. And some drivers actually park their cars by the side of the road in order to make sure that they get in at the correct time. So if we have this jump from $1 to $2 at 8 o'clock, then the drivers will slow down their cars and traffic becomes uneven. And marginally, the few minutes before eight o'clock, what will happen is that there will be very light traffic because cars will not be sure that they will meet the eight o'clock deadline. There will be very few cars going in just before eight o'clock. So those few minutes before eight o'clock will be quite crucial when drivers will slow down. 2.00 pm

Since the system is electronic, I suggest to the Minister that he should look into the smoothening of the charges.

For example, let me give an illustration. If there are intermediate charges before 8 am and there are more intervals for charges, traffic will smoothen out. There could be a compromise of the peak charge. Instead of 8 am, maybe it could be delayed to, say, 8.15 am. So we may have a charge system like 7.30 am to 7.45 am, $1 charge; 7.45 am to 8 am, say, at $1.25; 8 am to 8.15 am, $1.50; 8.15 am to 9 am, a peak charge of $2 or some combination of these charges. If we can do that, the traffic flow would be much smoother. Since the system has not been implemented yet, I urge the Minister to consider this point.

Sir, the second point I have to make on the ERP is that the process of planning for ERP has been going on for nearly two years and what we see as a result in the implementation of the ERP is that there are several gantry points sprouting all over Singapore island. Although a lot of tests have been done on this system, we have looked at the functional aspects and I think we miss out on form. The archways look very unsightly, and to make it worse, at the CBD gantry points, we have more than one gantry steel structure. Is it not possible to combine the CBD and ERP gantry points? They look so unsightly. This is especially so in the case of the CBD as this is the main approach to our city centre. Visitors coming to Singapore will not understand why a nice and beautiful city has these very unsightly steel structures.

Mr R Sinnakaruppan (Kreta Ayer-Tanglin): Sir, the ERP scheme, the first of its kind in the world, reflects not only the Government's ability to create a world-class transportation infrastructure, but also its ability to set world standards. But in every conquest, in every pinnacle of achievement, there will inevitably be teething implementation problems that need to be resolved and the ERP is no exception.

Sir, presently, for the normal motorists, the Ministry intends to allow the use of Cashcard but not the NETS card or the credit card for ERP payment. Presumably, the argument against allowing the use of NETS or credit cards is that confidential information about the motorist and the whereabouts of his car could be tracked by the authority and, therefore, the public could be unhappy about it.

Sir, I think, this may be a fallacy. Let me explain. There are a number of problems that can occur with Cashcards. For example, the drivers can end up with fines because the Cashcards, as luck might have it, may not be topped up in time with sufficient cash. I can say with confidence that, using a rule of thumb, 80% to 90% of the drivers would prefer to use their NETS or credit cards for ERP payments as it would not really matter to most of them if the authorities do track their movements. In fact, Sir, the truth is, many members of the public have the perception that their movements would be tracked anyway even with the use of Cashcards. Sir, I know this is untrue but that is a separate point. My point, Sir, is maybe less than 10% or 20% of the road users may prefer to ensure confidentiality of their travels because they either attempt to cheat their companies with false transport claims or they are trying to cheat their spouse with false claim of where they went or for some other reasons of their own. So it is only a minority. I would like to urge the LTA, particularly the LTA officials, the civil servants, to give motorists an option to use the Cashcard or the NETS or credit cards.

In the day and age of e-commerce, which is central to our national project, Singapore One, confidential information would be transferred through NETS and credit card transactions through the Internet. It is certainly the way we are heading towards.

Sir, I would like to ask the Minister whether it is technically possible for ERP gantry booths and IU units to incorporate the use of NETS or credit cards and, if so, what would be the additional costs. Would it be so exorbitant that the e-commerce through the NETS cannot handle?

Sir, I would like to also urge the Minister to consider this point. The Minister is a very gentle Minister. He listens, so does his MOS but I am not sure about the LTA officials. Just to make my point, last year I made a hard-hitting speech on the civil servants in the Environment Ministry and their lack of effort in training the DREs. After my speech, a lot of headway was made in the last one year, and today, I am happy that some of the senior civil servants in the Environment Ministry want to be a model Ministry in labour-management relations. I would be happy to nominate ENV for an LMR Award. So the scene has changed, and I do not want to make a hard-hitting speech on the civil servants in the Ministry of Communications, but I hope they will take this in a positive light.

Sir, I would like to urge the LTA officials to go to the NETS and credit card companies with an open mind so that ways can be found for motorists to use the roads with a peaceful frame of mind. Sir, motorists would like to have a smooth and fine road journey without the fear of being fined.

Dr Toh See Kiat (Aljunied): Sir, I would like to congratulate the Minister for a very well thought-out plan on road management as represented by the Electronic Road Pricing Scheme and the accompanying rebate and road tax reform programme. I would also like to congratulate the Minister for having spent much time and effort in explaining all the ramifications of the plan and answering all the various questions that have arisen, privately, publicly and in the media. My colleagues and I on the GPC (Communications) have also made many queries and suggestions which the Minister and his staff have forbearingly and patiently tolerated. I thank the Minister for this.

Sir, I hope the Minister would forbear one more time for a simple request. There has been some anxiety about the safety of the in-vehicle unit used to pay ERP charges. There have also been requests to reveal the details of the tests and the conditions in which they have been conducted. I suppose the people who have asked want to evaluate for themselves whether it is indeed safe or not. Above all, there have been queries on many aspects of implementation and on the operation of the system. As these have appeared in various media and fora in dribs and drabs at different times and different places, can the Minister consider putting these and other frequently asked questions (in Internet jargon, it is the FAQs) on their website or some other websites dedicated to this topic and give us the URL, the address of this website, and then for those who are not Internet ready, to have these answers compiled and disseminated in hard copy brochures and booklets in the four official languages? We would all be very grateful if the Minister could oblige.

Mr Chiam See Tong (Potong Pasir): Sir, my cut is on Electronic Road Pricing. It was reported that the Electronic Road Pricing system cameras erected in the ECP, the highways and other roads have shown to be very efficient in detecting those vehicles that cross the gantries. The cameras there can produce very clear pictures of those vehicles who pass that way without an in-vehicle unit or Cashcard. In fact, the system has been described as foolproof by Mr Chin Kian Keong, LTA's Manager for Road Pricing. This means that the Government shall have another efficient means of collecting revenue. In the eyes of the Government, the ERP system is to control vehicle use but from the public's point of view, it is viewed more as a device set up by the Government to collect more revenue. The Government has already set up a quota system. When this quota system was first implemented, it was touted as the ultimate system to control the number of cars on the roads. This means that traffic jams are cut to a minimum and a desired number of cars is only allowed to be used on the roads.

Now we have an additional system to regulate the number of vehicles which is only allowed to pass certain points, purportedly which will not cause traffic jams. But in the first place, we have already a system whereby the number of vehicles is controlled to prevent or to cut down traffic jams. So the question is: Will the quota system be eventually scrapped since we have a new system? Otherwise, the quota system does not make sense at all. In the first place, you control the number of cars and the Government says that this is the ultimate number of cars allowed on the roads. Then you have another system to control this number of cars which is supposedly allowed on the roads in the first place. So we either use one or the other system, otherwise it does not make sense at all.

Mr Low Thia Khiang (Hougang): (In Mandarin): Sir, I think I can tell Mr Chiam See Tong that the Government will not abolish the COE because the COE is a steady source of income for the Government.

The Government claims that the purpose of implementing the ERP is to ease the congestion on our roads. It will also switch from a fixed road tax system which taxes on ownership to that of a road pricing system which taxes on usage. Road tax rebates will be provided for the next five years, and the Government claims that the implementation of ERP will not increase its revenue. But what will happen five years later when no more road tax rebates will be given? With higher ERP fees, the Government's revenue will surely go up.

There is another thing that we should know, that is, with the ERP system, whenever we use the road we will have to pay for it, like GST. You cannot escape from it. On the other hand, the Government is assured of a steady income, irrespective of the economic situation.

I am of the view that the reason for the Government to revise the various tax structures was to ensure that the Government will have a steady tax revenue irrespective of the economic situation. In recent years, taxes on motor vehicles have become an important source of revenue for the Government. For example, in last year's budget, the Government expected to collect more than $4 billion from COE, import tax, ARF, and road tax. However, apart from the road tax which is a fixed income, revenues from the other taxes were affected by the economic downturn and the number of COEs the Government could issue. For the financial year 1st April 1996 to 31st March 1997, the Government's income from COE was $120 million less than the expected amount. On ARF, the revenue was $174 million less than the expected amount. For this reason, the Government says it is allowing more people to own cars by issuing more COEs. This would make up for the loss in the above revenue. At the same time, apart from the fixed road tax, the Government is now implementing the ERP system to ensure they have a steady income. 2.15 pm

Dr Michael Lim Chun Leng (Cheng San): Sir, the ERP will be implemented soon. The implementation of the ERP has been explained very clearly. And as we all know, the ERP is meant to dissuade excessive usage of the roads in the areas which are very heavily congested with traffic, for example, CBD. In general, I do support the concept of the ERP. There are certain advantages and disadvantages. For myself and others like me, who have to use the CBD or CTE, I would say that it is an advantage. At the present moment, if you want to go there, you have either to choose between a daily or a monthly pass. Therefore you have to make a detour to a post office or somewhere which sells monthly pass and buy the pass. If not, every day, you have to scout around for a booth, stop by the booth and buy the pass. Sometimes, in a hurry, you may forget and then you enter these areas inadvertently and end up with a fine.

For these people, who are probably the large majority of those who use these areas, I think things have become more convenient where you do not have to make a detour or you do not have to stop by a booth to buy your passes, but you can just enter these areas as long as you have the Cashcard and the IU. And some of us, like myself who buy a monthly pass, the number of times I actually use the gantry points at the permitted times would be probably less than 10 a month, but I buy a monthly pass because of its convenience. So for those of us who are in this category, we will benefit from these changes. In fact, we will pay less.

By and large, I think the Ministry has explained to us that the intention is not to earn revenue. However, there are certain areas in which the Ministry can further improve upon to reassure the majority of us that that is not their intention. As announced, the cost of the ERP charges will be levied on a per entry basis. Therefore, vehicles will be charged every time they pass through the ERP gantry. I think we want to alleviate the burden on the motorists.

Firstly, we may want to relook at the boundaries carefully, especially the CBD boundaries, so that those who work within the CBD and have to travel from one point to another in the CBD should be able to return back to their office without having to go in and out of the ERP gantry points and incur unnecessary cost.

Secondly, the Ministry may want to consider a rebate system or a diminishing charge for a motorist who has to make multiple passes during a single day. I believe that those who have to make multiple passes through the CBD every day have to do so not because they really want to do so, but because they have to do so. I do not see any great attraction in the CBD that would attract people to make multiple trips into the CBD. Some who are in the sales line or the delivery services may have to make multiple trips into the CBD as part of their business. I think the aim is to dissuade people from using the CBD. However, as I said, if they have to make multiple trips, it is usually because of business reasons.

For these reasons, the Ministry should have a system where people who make multiple trips, say, three to five trips into the CBD or pass through the gantry several times, they may want to either give them a rebate or reduce the charges during the repeated entries, so as not to add unnecessarily to the cost of business.

I hope that the Ministry will reconsider these comments.

Mr S. Iswaran (West Coast): Sir, the Minister and his team have struck a fine balance between the need to move towards usage based charges, rationalise tax structures and ensure an element of progressivity in the system. I would just like to highlight three points for the Minister and his team to consider in implementing the system.

First, it must be administered flexibly. The changes are wide-ranging and the system is complex. Road users and the industry need time to digest and adjust to the system and, therefore, I think the Ministry needs to be flexible in responding to any unanticipated issues or problems. The recent response to bring forward some of the reduction in charges was, I think, a case in point where the Ministry responded flexibly.

Second, there is a need to closely monitor the impact of ERP on public transportation. The question is how this cost will be transferred or passed on to the users of public transport. This is particularly important now because the Minister has, in conjunction with this ERP initiative, announced the deregulation of taxi fares. In Singapore, we have less than a handful of taxi operators and in such an oligopolistic market structure, the scope for cartel-like behaviour does exist. Sir, I fully support the principle of deregulation and its attendant benefits. But I do believe there remains the need for Government to retain a residual anti-trust type of function to ensure and protect against non-competitive practices such as price fixing.

Thirdly, Sir, the move towards ERP and other usage based charges must be matched by a commensurate improvement in road services. It is gratifying to see the underpasses, tunnels, flyovers, which improve traffic flow. The most recent addition to this series has been the EMAS (Expressway Monitoring and Advisory System). Some motorists are still puzzled or uncertain as to the value that this system adds to the traffic management. In part, Sir, this is due to some confusion over the name. Some think it is a MINDEF initiative, that it stands for Emergency Mobilisation Announcement System. And others who are more mischievous point out that EMAS is the word "same" spelt backwards, meaning traffic condition remains unaltered.

Sir, there is a need obviously to explain clearly to motorists what is the value that this system brings, especially since a lot of it already is provided through radios. In addition, I would appreciate it if the Minister could elaborate what further use is envisaged for this EMAS system.

Mr Seng Han Thong (Ang Mo Kio): (In Mandarin): Sir, just now, the Member for Hougang told the Member for Potong Pasir that the COE is a source of revenue for the Government. We all agree that taxes are meant to be sources of revenue for the Government. But this is not a one-way traffic, but a two-way traffic. When the Government collects taxes from the people, they spend them on improving the standard of living of the people.

Sir, in this year's budget of the Ministry of Communications, there is a breakthrough. There is finally a reduction on diesel tax. Under the new vehicle tax system, the taxi diesel tax will be reduced from $6,600 to $5,100, a reduction of $1,500. In a dialogue between Minister Mah and the taxi drivers, he said that this is an angpow to them. According to LTA's calculation, with the reduction in taxi diesel tax, after offsetting the slightly increased road tax, there will be a tax saving of $109 million for the taxi operators over the next seven years.

In order to show appreciation to the taxi drivers' contribution to public transportation, LTA will discuss with the taxi drivers' association and the taxi companies on how to allow the taxi drivers to enjoy a share in this rebate.

At the last debate on the Ministry of Communications' budget, my Parliamentary colleague, Mr Ong Ah Heng, and I suggested that if there were any rebate on the taxi diesel tax, it should be channelled to the Medisave account of the taxi drivers. I hope that this would be done. This has been the common wish of the taxi drivers all these years, because in this way, they will not have to pay from their own pocket to top up the Medisave account for the self-employed persons. I am very glad to note that the three taxi operator companies have indicated that they will be discussing with the taxi drivers on how to share the savings on taxi diesel tax with them.

However, my question to the Minister for Communications is: What is the long term policy on diesel tax? From the present $5,100, will the diesel tax be further reduced every year and eventually be completely abolished? Or will the taxi diesel tax be reduced to a certain amount and remain stagnant there?

Although LTA has indicated that they will monitor the taxi mileage and said, "If taxi mileage comes down further, there will be scope to further reduce the diesel tax.", I feel that the Government's transparency in this matter can be further enhanced. Why can a decision not be made now to completely abolish the diesel tax by a certain time? Then, when they are discussing on how to share the savings with the taxi drivers, they would have a better idea.

Our new vehicle tax system seeks to shift from taxing on ownership to taxing on the usage. In other words, "use more, tax more". So during the peak hours, the charges will be higher. Diesel tax is a product of the old transport system. It does not fit into the new principle of taxing on usage. This is also the complaint of the taxi drivers all these years. Why do we not solve this old problem simultaneously with the implementation of a new tax system?

Mr Goh Chee Wee (Boon Lay): Sir, the Minister has announced a package of vehicle tax changes. The rationalisation exercise has been a comprehensive one. I welcome the changes as they are fair and rational. Except for the motorcyclists and a minority few who are adversely affected by the changes, most motorists could benefit from the new tax structure as the emphasis is shifted from ownership restraint to usage restraint. The package of rebates has also been carefully formulated so as to lighten the burden of the motorists subsequent to the introduction of ERP.

Sir, before I go on, I must declare my interest as a director of Comfort Group Limited.

Sir, in formulating the tax changes, the Ministry had held consultations with various groups, including the taxi operators and taxi drivers. During the dialogue session, the taxi operators and drivers have put forward several suggestions, which would accord taxis with some concessions, in recognition of their public transport role.

There are two specific requests which I would like to highlight: first, is to reduce the taxi diesel tax, the point already raised by Mr Seng Han Thong. The other is to phase in ERP charges for taxis gradually.

Sir, I am glad the Ministry has taken these requests into consideration and has agreed to reduce taxi diesel tax as well as to phase in the ERP charges over a period of three years. The reduction of this taxi diesel tax came as a relief to the taxi drivers and operators who have long lobbied for it. However, the Ministry has also decided, at the same time, to raise the ARF imposed on taxis to bring it on par with private vehicles. This will raise the upfront cost of purchasing a taxi substantially. For new and replacement taxis, therefore, the savings in diesel tax will be largely offset by the increased vehicle taxes. The actual cost savings to the taxi operators would, therefore, come only from the existing fleet of taxis which were subject to the old tax regime. Nevertheless, there are sizable savings which could be passed on to the taxi drivers. And I have no doubt that the taxi companies would discuss with the taxi driver representatives on ways to pass the benefits of cost savings to the drivers in a fair and equitable manner.

Sir, in speaking on this amendment, I do not intend to pose specific questions to the Minister. I just wish to offer some comments on this subject and commend the Minister for consulting and seeking the views of the various interest groups, including the taxi operators and drivers, while formulating the new tax structure.

Mr Gerard Ee (Nominated Member): Sir, first, I would like to declare my interest in the subject as President of the Automobile Association of Singapore.

One of the responses to the forthcoming vehicle tax changes has been a tremendous disappointment in the 10% reduction in ARF. There has been an expectancy of a much larger reduction in the ARF and some people even look forward to the day when ARF is reduced to zero.

It is said that any reduction in ARF would be more than offset by an increase in COE price. When the ARF was reduced to 150%, the increase in COE more than made up for the reduction. But then again that was when COEs were transferable and people were not familiar with the mechanism. No one expected COE to ever fall in price. When the COEs were made non-transferable, except for the Open Category, COE prices went for a tumble. 2.30 pm

Sir, COEs in recent months have been on a downtrend. There was even a freak result of $50 for one of the categories. People are getting wise to the fact that a vehicle is not an investment and that the COE is a cost factor not to be speculated in. It can rise or fall. There is no doubt that the immediate impact of a reduction in ARF would lead to an increase in COE prices. Some dealers will package the deal where any saving in ARF would be thrown into the bidding price for a COE. Although the overall package price for a vehicle would be lowered the savings would not reflect the reduction in ARF.

Reducing the ARF would be reducing a fixed cost and transferring it, to some extent, to the variable cost. The COE is a variable cost and one which the consumer can influence. This would no doubt pose some problem for the finance company. With a larger variable cost, they will have to compute carefully the limit for the financing of a vehicle because the value would fall when COE prices fall.

Sir, in principle, ARF should be removed. It was introduced to increase the cost of owning a vehicle. It is an ownership control mechanism to discourage vehicle ownership. When it failed to achieve the desired effect, COEs were introduced to cap the vehicle population and ARF was reduced to 150%. Now with the introduction of ERP, the ARF should be quickly reduced to 100% and eventually be removed.

Sir, I agree that it is undesirable to suddenly remove ARF. The market must be given time to adjust to the change otherwise COE prices may swing wildly upwards. An acceptable annual rate for reducing ARF to zero would be 25% per annum. This way, equilibrium in COE prices can be maintained and fluctuations would merely reflect the economic outlook and the consumers' purchasing power.

May I take the next cut?

The Chairman: Yes.

Mr Gerard Ee: Sir, a common complaint of the ordinary motorcycle owners is that the COEs for motorcycles are much too high. A buyer of an ordinary motorcycle, 200 cc and lower, has to bid high to secure a COE because of competition from the buyers of the large capacity bikes.

At the end of 1997, 76.7% of bikes have engine capacities of 200 cc and lower. It was 81.5% at the end of 1991. Although the percentage fell by 4.8%, the numbers grew from 98,783 to 100,949, an increase of 2.2%. In contrast, at the end of 1997, 23.3% of bikes have engine capacities of above 200 cc. It was 18.5% at the end of 1991. The number of bikes with engine capacities above 200 cc grew from 22,381 to 30,642, an increase of 36.9%. The biggest increase was for the very large bikes, those with engine capacities above 500 cc from 3,220 units in 1991 to 6,526 units in 1997, an increase of 102.7%.

The on-the-road price of a bike with engine capacities of below 200 cc ranges from $5,000 to $8,000. In fact, the price of a bike with engine capacity of below 100 cc is less than $5,000. On the other hand, the on-the-road prices of popular large bikes can go as high as $34,000. Thus, the buyer of a bike costing less than $5,000 has to compete with a buyer of a bike costing $34,000 for the COE.

On the basis of social equity, Sir, there is a need to create at least two categories of COE for the buyers of motorcycles. I would suggest one category for bikes with engine capacities of 200 cc and lower, and another category for those bikes with engine capacities above 200 cc. It is even desirable to consider a separate category for bikes with engine capacities of 100 cc and lower. Just as it is desirable to maintain different categories of COEs for motorcars, it is desirable to create different categories of COEs for motorcycles. The same principle of social equity surely must apply here.

Mr Goh Choon Kang: Sir, I want to urge the Minister to consider extending the statutory lifespan of a car beyond 10 years by revising the PARF scheme and also the validity period of COEs.

Sir, currently, there is a graduated PARF benefit scheme calculated on the basis of percentage of the open market value of cars from 80% to 130% for cars registered on or after 1st November 1990. Sir, the PARF is an incentive given to car owners to change their cars before the 10-year period. However, given the improvements in car technology since the PARF scheme was introduced more than 22 years ago and the compulsory annual inspection of older cars, the PARF scheme can be modified to extend the 10-year lifespan of a car. New car models are also more fuel efficient, the engine more robust and they break down less frequently than their counterparts 20 years ago. With regular maintenance and inspection, most of the cars on Singapore roads can be roadworthy beyond the 10-year limit.

So I would like to propose that the Government consider extending the PARF incentive for cars from the current 10 years to, say, 12 years. The PARF for a car which is 11 years old can be 10% lower than those of a 10-year old car, ie, 70% of the open market value, and a 12-year old car, 20% less, that is, 60% of the OMV.

Sir, it is very wasteful for a well-maintained 10-year old car to be scrapped just because it has become uneconomical for the owner to pay for a new COE and at the same time lose the residual PARF value of the car. Moreover, with the introduction of ERP, motorists are likely to minimise the use of their cars which is what the ERP is meant to achieve. Relatively speaking, these cars are likely to be roadworthy for a longer period of time. It would therefore be appropriate to extend the statutory lifespan of a car in Singapore to 12 years. With the extension of the PARF benefits to 12 years, I think COEs should also be valid for 12 years with the option to extend for another five or 10 years.

Mr Chng Hee Kok: Sir, the Certificate of Entitlement (COE) is a key component of our road management system and acts as a control mechanism on the car population. Hence, with the recent announcement on the changes in road tax structure and the implementation of the ERP, I think an announcement on the COE should have been made at the same time. No announcement was made on what the COE policy would be like.

Sir, since this has not been done, I wish the Minister to also consider making some basic changes to the COE. We have now rationalised that a motorcycle is equivalent to half a car on the road. This being the case Sir, then all cars must be treated as the same, whether it is a large car or small capacity car. The amount of road space taken up or used is the same. Moreover, it can also be argued that we do not have different sizes of car park lots. All car park lots are drawn in the same manner and they are of the same size. In fact, the motorcyclists may even argue that although their motorcycle is equivalent to half a car, actually in terms of parking space, one car park lot may be equivalent to three or four motorcycle parking lots.

Sir, since cars are all the same, perhaps we should relook at how the COE categories may be removed. There may have been sociological or political reasons for having different categories of cars in the quota system. But as a result of supply and demand, there have been occasions when in fact a COE for a small car is higher than that of a large capacity car. This rationalisation of putting all the COEs as one class, when put in place, may mean lower COE cost. One cannot assume that even those who can afford a large car may not wish to own a small car from the viewpoint of economy. Presently, an affluent person who wishes to own a small car has no choice but to place a bid in the small car category. If it is a wrong timing, the aberration happens and there may be a bigger demand for small cars and the COE becomes more expensive than the large cars.

Sir, as an intermediate measure, I like the Minister to consider removing the categories in the COEs and make it only one class. But for sociological and other reasons like discouraging large car ownership, maybe we can have a premium set for different type of cars. At the end of the day, since all cars are equal, I think we should only have one class of cars in the COE.

Dr Wang Kai Yuen (Bukit Timah): Sir, listening to Mr Chng Hee Kok, I am surprised that we think alike. Because I too want to point out the problems with the current systems. We all remember the $50 COE and my colleague, Mr Gerard Ee, already said it was a freak result and, to me, it was also a fluke of the system. Based on the prevailing COE quota premium, in that particular exercise, the loss of COE revenue was probably of the order of $15 million. So in a way, Sir, it is like distributing this amount of money to the 300-odd people who were successful in that particular bid. So it is like tikam tikam. It was a lucky draw for them. It does not truly serve the system well. All these years, the Government has been very careful when it comes to spending public money. Similarly, it is also true that we should be very careful in collecting public revenue. So if we were to have a system that allows freak results like this to happen, I think it is not a good system. It should be reviewed.

Also, similar to Mr Chng, after seeing the quota system being in operation for several years, there are several peculiarities of the COE system that I am not satisfied with. I refer here to the successful bids of the various categories. One would expect to see that the bigger the car, the higher would be the COE. What happens is that the incremental increase, as you go up to the higher category is smaller. At certain times, a COE for a large car is in fact more expensive than a COE for a luxury car. I would also project that when the ARF is reduced from 150% to 140%, the reduction will be transferred to COE. But the amount transferred will be smaller in the large car category and larger in the small car category. In that sense, it would definitely benefit the large car users more.

The road tax system announced recently by the Minister embodied within it a progressivity formula. And I would like to see the same progressivity in the COE prices. One can argue that we cannot really control that in the current COE system. But my response would be that perhaps the number of quotas allocated to each category is not appropriate with respect to this desire to achieve progressivitiy.

Furthermore, Sir, the current COE system has also an element of built-in bias of favouring big cars and luxury cars and, that is, we actually created a category called the Open COEs. And most Open COE quotas have been used to register big and luxury cars. Very few, I believe, have been used for other categories. Probably, none for small cars. So therefore, there is a built-in bias in the COE system with this Open category by allowing buyers of luxury cars and big cars to use the Open category to register their vehicles. Therefore, in essence, the luxury car and big car categories have a larger number of quotas than what we have allocated. In my view, it is also the reason why the COE prices level off at the high end of the car market. To overcome the shortcoming I mentioned, one proposal is what Mr Chng has said, to merge all the COE categories into one. In this way, the number of quotas allocated to the COE pool will be larger and it will be very unlikely that a similar freak result like the $50 COE would happen. I think it is time for us to review the COE system. I would like the Minister to consider this suggestion.

Dr Toh See Kiat: Sir, may I take my two amendments together?

The Chairman: Yes.

Dr Toh See Kiat: Sir, the LTA has recently opened some new flyovers and three-tier road systems such as the Queensway/Farrer Road junction and the Bukit Timah Road/Farrer Road junction. There are more to come, I believe, such as the one at the Braddell Road/Upper Serangoon Road junction. I would like to ask the Minister to enlighten this House on the principles, such as cost benefit analysis, which are considered when the LTA decides on where such three-tier junctions are to be built, whether there will be more of these, whether they have been found to be effective so far, and the respective cost of building a flyover as against an underground vehicular pass or tunnel.

Sir, next, I would like to speak on the deregulation of the taxi industry. The Minister has announced to this House that the LTA will be recommending to the Public Transport Council to deregulate taxi fares in Singapore. There are only three taxi operators in Singapore currently. Members of the public are worried that the three operators will get together to form a cartel to fix prices. If the prices are fixed at an unreasonably high level, commuters will suffer.

When I say cartel, Sir, I am also referring to the situation where the parties may not officially be a cartel, but would informally match each other's rates in an unspoken arrangement, such as what we suspect is happening in the petroleum industry. Would the LTA or PTC be monitoring this situation? To prevent this, it might be important to also liberalise taxi services so that more companies can enter the market to provide competition if they so desire. Further, if taxi services are to be deregulated and irrespective of whether more entrants are allowed, there must be a minimum service standard of quality, so that free market competition will not descend to unacceptable levels and tarnish the image of the world-class transportation system that we are building. I would urge the PTC to set such quality of service standards in future.

Mr Goh Chee Wee: Sir, once again, I wish to declare my interest as a director of the Comfort group.

Sir, the Minister has announced that the LTA will be recommending to the Public Transport Council to deregulate taxi fares when the new vehicular tax structure and the electronic road pricing system are implemented on 1st September 1998. This will allow taxi operators to set their own fares so that they will better meet the requirements of the various market segments and deploy their resources to best meet the demand.

Sir, with the deregulation, the onus of setting taxi fares rests with the taxi operators and not the regulator, as is the case now. In setting the fares, the operator would have to take into consideration the market conditions, the supply and demand for taxis, the cost of providing the service and what the commuters are prepared to pay. Competition among the taxi operators would also place a lead on fare increases, as those who charge higher fares risk losing their customers. The fear among the commuters is: with the deregulation, would the taxi operators raise fares arbitrarily? Would operators form a cartel to fix fares, and this is a point which has been raised by Mr Iswaran and Dr Toh See Kiat?

Sir, my view is that our taxi commuters are sensitive to fare increases. While one cannot rule out the possibility and justification for fare revision in the future, it is a fallacy to believe that the taxi operators can just raise the fares arbitrarily without due regard to the commuters' ability to pay. The demand for taxis is price elastic. The commuters can easily switch to other forms of public transport, like buses and MRT, if they consider the taxi fares to be unreasonably high. And we already had a previous experience in the mid-80s. In 1985, when the taxi fares were raised substantially, the demand dropped drastically, as a result of which the taxi drivers suffered badly. Consequently, the fares had to be lowered to a more realistic level.

In setting taxi fares, therefore, the operators cannot ignore the market conditions. Most of our taxi drivers could still remember the unpleasant experience which I have just mentioned. They themselves, not just the commuters, are apprehensive of the consequences of fare increases. They would rather not raise fares for fear of losing their customers if their operating cost could be contained and remain unchanged. The taxi company too would rather not raise the rental rate for fear of losing their drivers if the costs of doing business - the COE, ALS, financing cost and others - do not go up. But in real life, things do not remain constant. There are many variables. There are many economic factors at play and, finally, it is the market forces which would determine the supply and demand and price of service.

With deregulation, the taxi fares would reflect more accurately the state of supply and demand. For instance, there is a strong demand for taxis during peak hours. But during off peak hours, empty cruising of taxis is a common sight. We can try to address this problem through differential pricing - differential pricing according to the hour of the day and even by day of the week. In some of the cities in the United States, even the bus fares are discounted on Sundays in order to attract ridership. There is no reason why the same principle of differential pricing cannot be applied here either for buses or taxis.

Deregulation would also enable the taxi operators to introduce more differentiated and innovative service to suit the special needs of the customers. We already have Mercedes and London cabs on our roads to cater for those who are prepared to pay more to travel in style and comfort. One day we might have Kancil and Daihatsu taxis to cater to the budget-conscious commuters, provided the vehicles meet LTA's conditions. The end result of the deregulation exercise is that we would have a more efficient, competitive and responsive taxi service which would better serve the interest and needs of the commuting public.

Sir, I support the deregulation exercise.

Mr Shriniwas Rai (Nominated Member): Sir, the taxi service has improved considerably, when we compare to the taxi service of the 60s and when pirate taxis were a feature in Singapore. We have come a long way. But, unfortunately, during the peak periods, it is difficult to get a taxi, unless we book one. I think the Government has to think of ways and means to minimise this problem, because it costs $3.20 to book a taxi and not many people in Singapore I am not speaking of all of us can afford this and so they have to queue for a taxi.

Sir, we should also improve the training for taxi drivers. They are the first people the tourists meet. They should know some basic facts about Singapore. They should be smartly dressed and perhaps they should be persuaded not to grumble about Singapore's ills.

Sir, I now come to the SZ cars. I am glad that the tax for SZ cars is being revised. I would urge the Government to consider other means by which it would be economical for the people to use SZ cars. As a matter of fact, the other day I met a professional who is actually driving an SZ car on a long-term basis. In order to support the SZ car companies, the Government must look at the contribution that this group would make in minimising congestion on our roads. While doing so, I do not want to give the impression that the market force has to be abandoned . But sometimes, the market force has to be manipulated in order to serve the community better, and this would be one way. I hope the Government would not be too orthodox in its approach and see wherever they could help the SZ car industry to grow.

The other thing that I would like to applaud the Government is the move to support the car cooperative. This is something which we should encourage and, wherever possible, with Government's encouragement and help, this scheme will help us in minimising car ownership.

Sir, may I take my other cut?

The Chairman: Yes.

Mr Shriniwas Rai: Sir, we cannot run away from the fact that we are a small city state. The land for road transportation is limited. The matter is further complicated because we have a built-up city. The public has to acknowledge that the Government has spent huge sums of money in improving our roads and the land transportation system.

Sir, I know I am going to be a voice in the wilderness, because everybody who has spoken before me, has been asking for car ownership to grow, but I am going to speak against it. Sir, I am going to be a minority.

Most young Singaporeans aspire to own a car. There is nothing wrong in their dreams, but we have to be realistic. If every graduate decides to own a car within the first two years of his working career, our roads will be clogged. It will affect our economic life. We will be like the other cities and I do not think we want to do that.

Sir, sometimes I think the Government is trying to please the car owners more than the public transport commuters who are, in fact, the majority of the taxpayers. May I urge young Singaporeans to save their money initially and put their money in other forms of investment, and postpone the buying of a car to a later stage. On the other hand, those families with two, three or even four cars should think of minimising, or at least give up one car. I know it is a difficult proposition. Some of us may be affected. But in the interest of the motorcar-owning class, I think we may have to consider the proposal.

May I relate an anecdote, Sir. I know of a friend who, instead of buying a car, bought a terrace house and he was very fortunate. He upgraded and he now owns a bungalow in a good location and it is now worth a few million dollars. Now, he has a car. Since he has a very big family, he has SZ cars as well. I am not suggesting that all those who save could become millionaires overnight. But I am saying that they should get their priority right.

Sir, the other thing I am going to suggest is rather radical. I have suggested it to a Select Committee and I am going to suggest it again. I think that each car owner should be made to pay a levy of $50. Of course, they should get something in return. They could be given a free ride on the MRT and buses. This is only for the car owners but not members of their family. In this way, I think they will be persuaded to use the buses and taxis more often, because they know they are going to pay $50. And if they do not use it, of course, they lose the benefit of a free MRT ride. It is a very radical suggestion but I want the Minister to give some consideration to my suggestion.

Sir, I have got another cut. I wonder whether you would allow me to take it now.

The Chairman: We will give other Members a chance. Mr Jeyaretnam. 3.00 pm

Mr J.B. Jeyaretnam (Non-Constituency Member): Sir, my subject is, of course, the problem which the Government is attempting to tackle through electronic road pricing and other measures. The problem of keeping our roads from being clogged up which results in a loss of hours which may be put to better use. No one disputes that we should do whatever we can to keep our roads unclogged. The question is: how do we do this? The simplest thing is to ban every car off the road for certain periods of time. The second thing is perhaps, which is what the Government seems to be favouring, to raise the price for the use of the road. This is a monetarist policy. But this policy does not take into account, as I have tried to say earlier last week, those who have to use the car not just to get to work and home but who have to use the car or the motorcycle to earn their livelihood. And if you are going to tax them every time they use the road, then it would mean a lessening of their income, a greater increase in their expense, and so they suffer.

On the other hand, those who do not really need to use the car or to use that part of the road with their cars, because they have the necessary means, ie, the money to pay for it, have free access to that road or stretch. This is why my Party says the arrangements are discriminatory. Like most PAP policies, they tend to favour the rich and the privileged and they do not take into account the needs of those who need to use the road and who are perhaps not that well-off to afford the charges and fees that are being imposed for the use of the road.

I think it is time that the Ministry considered other solutions, non-monetary solutions, to this problem. Have they at all considered taking a census of people who need to use the road for their livelihood, as I keep saying, the tradesman, the doctor, or others who need to use the cars or the motorcycles, and those who just use the car to drive to work in the town and then leave it there, and then drive back? Is it not possible to categorise the users into "essential users" and "non-essential users"? And then restrict the use of that road to those non-essential users for some period of the day, and allow the essential users the unrestricted use of that road.

Sir, I was in Johor during the Japanese military occupation. And when they had this problem, not because the roads were clogged but because they were running short of petrol, they did not resort to a monetarist policy of just charging people more and more for use of the road. They categorised users into "essential" and "non-essential". Those who needed to use their cars and motorcycles were given black labels and they could use the car at all times. Those who did not really need the car for the livelihood but only wanted to get to the market or to send their children to school or get to work, they were given red labels, which meant that they could use the car for two hours in the morning and two hours in the evening. For the rest of the day, they were kept off the roads. And in that way, they achieved what they wanted - lesser use of the petrol.

So I would ask the Ministry whether they would consider non-monetary solutions to this problem and not just pick one which is the easiest, and that is, to raise the prices so that you discriminate against those who are unable to pay and favour those who are able to pay.

But before I finish, may I also point out what would appear to be some incongruities. The Minister was saying the other day that now with the introduction of the ERP, the Government can issue more COEs. In other words, he says the Government would be quite happy to see more cars on the roads used by people who are able to pay for this and can also pay for the COE.

Secondly, I do not understand why it is necessary to subject the taxi drivers and the taxi owners to paying the heavy diesel tax and the other ERP charges and what-not, for using the roads. They are public service vehicles and surely the objective must be to encourage people to use the public service vehicles rather than their own cars. They can only do that if you bring down the cost of the public service transport. And you do not do that, if you pile on the taxi drivers all these charges, heavy diesel tax charge, and then the ERP and other charges. So would the Ministry please give some thought to other solutions to this problem?

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 3.35 pm.

Sitting accordingly suspended at 3.08 pm until 3.35 pm. Sitting resumed at 3.35 pm

[Mr Speaker in the Chair]

Debate in Committee of Supply resumed.

[Mr Speaker in the Chair]

Head I (cont.) -

The Minister for Communications (Mr Mah Bow Tan): Sir, in the Committee of Supply in July last year, I announced that my Ministry would undertake a comprehensive review of the vehicle tax structure in conjunction with the implementation of ERP. We had two objectives in mind. One, was to achieve a better ownership between ownership and usage in managing our traffic, in better controlling traffic congestion; and, two, was to have a fairer, a more rational and a more consistent basis for taxing vehicles on the road.

The new vehicle tax structure announced last week on 4th March should not be seen in isolation. It has to be taken as a total package, in other words, taken together with the ERP implementation plan as well as the package of road tax rebates. Just to give a very quick summary and the bottom line of the new tax package, a majority or 70% of vehicle owners, especially companies and businesses, will benefit from savings in road tax. The remaining 30% will see an increase in their road tax mainly because they have been paying a disproportionately low road tax relative to other vehicles when you consider the amount of road space they use or the amount of wear and tear they cause on our roads. However, to help them adjust, the Government has phased in the road tax increase over three years. We should take it as a total package, ie, the new tax structure, the phasing in and also the road tax rebates which all vehicle owners will enjoy. Many of these vehicle owners, especially motorcyclists, will end up paying lower or no road tax in the next few years.

Reactions to the new tax structure have been generally positive and I would like to take this opportunity to express my appreciation to all those who have given their comments and feedback in the consultation exercise that my Ministry conducted last year. I would also like to thank Members for their support of the new vehicle tax structure and the ERP implementation plan.

There have been a few dissenting voices on the ERP which I would like to deal with before I address the specific concerns that were raised by Members. Mr J.B. Jeyaretnam, in particular, questioned the principle of charging for road usage. He asked whether it is fair to charge for the use of the roads. For many years, most countries, if not all countries, operated on the principle that all motorists just need to pay a lump sum for the use of the roads and thereafter, the use of roads would be virtually free. So irrespective of how many times they drove or how much congestion or how much pollution they cause, there would be no incremental cost involved in using the roads. This was well and good, until more and more people wanted to also enjoy this free usage, and as more and more people wanted to use these same roads at the same time, the roads became more and more congested.

The classic solution for many countries then was to build more roads, ie, not enough roads, roads are being congested, just build some more. If there is not enough land, you just build over, double-decker and triple-decker roads. But many cities are finding out today that their citizens are no longer prepared to have the road builders come along and rip up their country side or to see their cityscape destroyed by all these ugly concrete flyovers all over the place, and having all these cars polluting the country side or the city that they are living in. Why suffer all this in order to allow motorists to come and drive on the roads and pollute the environment?

Sir, the reality today is that people are now coming around to the idea that road space is a scarce resource, as scarce a resource like water, oil, or any other commodity which is in short supply. So when Mr J.B. Jeyaretnam said that he does not oppose the idea of unclogging our roads, that it is a good idea, I was very happy to hear that because I think it is the first time that he has accepted that roads are a scarce resource. So now we are getting somewhere in the debate.

But he does not favour the idea of charging. He says that if we charge for this road usage, this scarce resource, we are being unfair. He prefers to ration. He prefers to allocate this scarce resource by fiat. He decides, or the Government decides, or the civil servant decides who gets to use the road and who does not - black labels, red labels, no label, I guess, that would be the third category. So who gets the black label? Who gets the red label? It reminds me of some brand of whisky. But who are we to decide who is more deserving of using the road? The housewife who is driving a child to school, the businessman who needs a car to attend an important meeting, the salesman who has to take the car around to drive for appointments? Mr Jeyaretnam says salesmen, black label; doctors, black label; housewife with kids, red label; those who go to work, no label, because you have no right to be driving to work. I must say I sympathise with that point of view. But who are we to decide or to tell people that you cannot drive to work and that if you use your car just to drive to work, you get no label? Is it not better for us to give the choice back to the motorist to let him decide what he wants to do through a system of charging a fair price for the use of the roads? Is it not better for us to reduce the upfront cost of owning a vehicle, as we have done with the road tax rationalisation, to give back to the motorist a certain sum of money, not an inconsiderable sum of money, and then to let the motorist decide for himself whether he wants to give this money back to the LTA? 3.45 pm

Many cities are coming around to this harsh reality that, first of all, road space is a scarce resource and, secondly, that the best way of allocating this scarce resource is to charge a certain price for using it, like any other scarce resource, whether it is water, land, oil, etc.

In Singapore, we faced up to this harsh reality many years ago when we introduced road pricing in 1975, when we introduced the Area Licensing Scheme. At that time, the CBD was becoming congested. There were only so many roads you could build in the CBD and yet there were more jobs in the city. There were more people wanting to drive into the CBD. There were more offices, more meetings being held, more people wanting to drive their vehicles in. What do we do? We charge $3 if you want to drive in. If you have no business to be in there, do not pay the $3. That is one car less. And the motorist who pays the $3 suddenly realises, "Hey, I've got a little bit more space to move. My car moves a little bit faster. I get to that meeting a little bit earlier. I save time." And surely to a businessman, time means money. So at the end of the day, the $3 that he spends is more than recovered by the amount of time he has saved, by the amount of hassle he has forgone.

We have only so much land. There are so many competing uses for our land. We have to make optimal use of our land for housing, for catchment areas, for factories, for playgrounds, for schools, etc. And among these competing uses, we have to build roads. Today, we already have 12% of our land devoted to roads. How much more land should we give up in order to build roads? We cannot be building more roads. So we manage the use of existing road space. We encourage people not to use their cars if they do not really need to. But how do we define need? Who are we to say that your need is greater than the next person's need? We do not wish to define that. We let the motorist decide.

How do we make better use of the land set aside for roads? We give priority to buses. Why? Because buses make the most effective use of road space. And Mr Rai is absolutely correct and I am glad that, although he is in the minority, he has spoken up for the bus commuters, because this is also the reason why we are introducing ERP.

We introduce ERP to encourage people to use our roads wisely. We say that pricing is the most efficient mechanism to allocate this scarce resource. At the end of the day, we collect revenue from people using this scarce resource. Mr Low Thia Khiang says that this is a revenue collecting mechanism. Yes, it is a revenue collecting mechanism, and I am not ashamed to say that it is a revenue collecting mechanism. But what do we do with this money? When we collect the revenues from people who voluntarily decide to use the roads, we take the money, which is the property of all Singaporeans, and we put it to good use, whether it is for public transport infrastructure, education or housing. It goes into consolidated revenue which is then used for the public good. And what is wrong with that?

Mr Jeyaretnam then suggests that ERP is unfair because it only affects the poor, while the rich will not be affected because they can afford to pay. Has he not forgotten something? Most Singaporeans do not drive to work. They take the bus and the MRT. They will not be affected by the ERP. And, indeed, if we can make the roads clearer for the buses, then surely that must be welcomed by bus commuters if they can actually get to work on time and get to work faster. So, rather than saying that the ERP is actually discriminating against the poor, he has forgotten that actually there is a very large group of people in Singapore who will be benefiting, directly through faster travel, and indirectly through the revenues that we collect from ERP.

Mr Low Thia Khiang and Mr Chiam See Tong made the comment that ERP is a revenue collecting mechanism. I have addressed that point earlier. Mr Chiam further asked whether COEs will be scrapped as a result of the ERP. Mr Low has already given him the reply, right answer but wrong working. I think he gets half mark for that. The right answer is that we cannot scrap COEs. We have to keep COEs, at the same time that we have to introduce ERP, because the two must go hand in hand. If we just carry on with COEs, we end up in a situation where it is very inflexible. We cannot continue to keep adding COEs. We are now talking about a 3% increase every year. Our land does not expand by 3% every year ad infinitum. At which point in time do we have to start to scale back on COEs? 20 years' time, 30 years' time, if we were to depend on just this mechanism alone? But if we also have in tandem a mechanism which regulates the usage of roads, which encourages people to use the roads more judiciously and if we put the two together, then we have two very powerful levers to allow us to manage road congestion but, at the same time, to allow for a regular increase in the number of vehicles on the roads, which is part and parcel of managing aspirations, managing people's desire to own cars. No, we cannot have ERP alone, we cannot scrap COEs, but neither can we have COEs alone without the ERP.

Is it a revenue collecting mechanism? I say, yes. But we do it in a way that gives the motorists the choice whether they want to pay that fee for using the roads or not. The upfront taxes have already been reduced, slashed in some cases. The ERP revenue is an estimate. If the system is successful, there is really no reason why we should be collecting more revenue than what we are collecting today. On that basis, we have decided to make those tax changes on a revenue neutral basis today by giving rebates, by reducing taxes. The tax reductions alone, including the estimate of increased ERP revenue over the next five years, is going to cost the Government something like $1.2 billion, over five years.

What happens after five years, Mr Low asked. The rebates will run out. By that time, people would have had time to adjust to the new ERP infrastructure. And in five years' time, if people continue to drive as they do today, if businesses continue to operate as they do today, in spite of the fact that now they will be charged for the use of the roads, that now they are going to be charged per pass, I would be very surprised. I expect that there will be changes and, in fact, this is what we hope will be achieved when we introduce the ERP, that we hope to change people's driving habits. And if motorists' driving habits are changed in such a way that they do not have to pay so much for ERP, so be it. That is the purpose of the ERP system. If they decide that they are going to drive irrespective of ERP charges, then we will collect the revenue, because the motorist willingly has decided that he is going to pay.

How will the revenue situation be like five years from now? I do not know. All I know is that we have a mechanism in place which puts the responsibility firmly in the hands of the motoring public. And that, I think, is a fairer way of doing things. It is more rational and, I believe, it is more effective.

Sir, I turn now to some of the specific concerns of Members. Mr Chay expressed some concern that motorcyclists are paying high ERP charges than taxis, and he felt that it was not fair. Dr Michael Lim also suggested that we should consider low ERP charges for those who use the roads more frequently. Sir, the principle of shifting upfront cost to the usage cost is really one of the fundamental principles of the ERP policy or strategy to manage demand for road space. Why? Because a vehicle owner who has paid a lot of money for his car or motorbike and pays very little or nothing for its use would have very little incentive to cut down on usage. So this is why in the new tax structure, we have reduced upfront taxes. We have cut registration fee. We have cut ARF and we have shifted more of the cost to usage, mainly through the ERP charges.

The ERP is a pay per pass system. The more you use, the more you pay. It is fairer and it is more effective in encouraging road users to cut down on their usage.

So on this basis, it is not possible to accede to Dr Michael Lim's suggestion that we levy a lower fee on those who, for one reason or another, need to use the roads more often. This is not fair to those who do not use the roads more often or who have managed to change their pattern in such a way that they do not use the roads more often. If we did that, it would defeat the purpose of the ERP. However, as Members would be well aware, we have recognised that this is a sudden change in the system. To the heavy users, it will come as a very sudden shock. To accommodate that, we have decided that we will phase in the changes over three or four years for taxis and commercial vehicles. And this is the reason why Mr Chay observed that motorcycles will be paying lower ERP charges than taxis, because we are phasing in taxi charges over three years. Of course, this only applies in the first few years. However, when the phasing-in period is over, ERP rates for taxis will be exactly the same as for private cars, by which time his concern is no longer valid. 4.00 pm

Mr Chng Hee Kok made some suggestions on road pricing. Yes, we decided to introduce the concept of shoulder pricing because of this phenomenon of "peak within the peak" where everybody tries to jam into that particular stretch of road at that particular time. So we have decided that we will try and spread out that peak load by levying lower charges in the shoulder periods. However, "shoulder" pricing is a new concept, and I think we should start off with a more simple structure. Therefore, we have decided to have a peak price, a shoulder price and an off-peak price. It is a little bit discreet, I agree. But let us try the simple structure first and, if it works, we will extend it to other congestion points, and we will also look at varying the pricing to suit the traffic pattern more accurately, as suggested by Mr Chng.

Mr Chng has some comments on gantries. Very quickly, I just wish to clarify that there are two gantries. Separate gantries for CBD and ERP are only a temporary problem. Come 1st September, there will only be one gantry.

Location of gantries - Dr Michael Lim suggested that we review the locations of gantries so that motorists are not charged unnecessarily. Yes, I agree. With the present system, we already have some problems like that. So, with ERP, we will take the opportunity to review. But at the end of the day, I would advise all motorists to continue to plan their journeys well in advance.

Mr Iswaran had a few queries about flexibility. We will be flexible, in terms of implementation and enforcement. But we hope that motorists will take the time and effort to get to understand the system, to use it and to be familiar with it, so that there are very little user-related problems, come 1st April.

He asked about EMAS, what is EMAS. Basically, it is an early warning system, to put it very clearly. I am not familiar with the MINDEF jargon, but I can assure him that it is an early warning system, just like MINDEF has early warning systems, and equally useful for motorists once they get used to it. There has been a rather protracted period of testing which has confused some people and attracted some rather snide comments. But I would like to suggest that we give it a try when it starts and, if it works as well as planners feel, I think it will be a great boon to motorists. Incidentally, this is not something new. Such systems are well accepted in Europe and Japan. If you travel on highways in Japan, for example, you will see these numbers on the expressways which give you times. Those are the times which tell you how much congestion there is on that stretch of highway. So 50 minutes mean that you expect to reach the next junction in 50 minutes; please, if you can, avoid that junction. That is basically what those signs mean. But, as I said, it is something new, give it a try, and you will be pleasantly surprised at how useful it can be.

Dr Toh See Kiat expressed concern about safety and reliability of the IU. I understand his concern because I think this is a matter which concerns every motorist, and for motorists to see a foreign object staring at him in the face in the car can be rather unnerving. But I have the assurance from the consortium which has tendered and is supplying the IU. It is an international consortium (Philips, Mitsubishi, Mitsui Electronics, CEI Systems in Singapore) and they have been awarded the contract. We have drawn up very rigid specifications for them to carry out very rigorous tests. In fact, the testing in the laboratory and the testing in the field took something like 18 months, longer than most new products which go to market. We had to be more than careful. We could have done the acceptance tests in a much shorter time. But we were dealing with 680,000 vehicles throughout Singapore and we wanted this system to last, we wanted the reliability of the system to be as high as possible, and we could not take chances.

This is the reason why the testing took longer than usual. It is another reason why it cannot be miniaturised. The answer is that testing started off 18 months ago and during that time, many things had happened. But the suppliers assure us that it is safe. They have consulted, as far as they can, with motor manufacturers on where it should be located. The installers have also been trained to install it in such a way that the unit would not be dislodged. All in all, I think we have to take the results of the tests as reliable and we will implement it come 1st April, with the assurances that it will be safe and it will be reliable.

But I will take Dr Toh's suggestion to put some of these details in the LTA Webpage, the Internet Website, eg, the FAQs, as he called it, on the IU and the ERP systems. If he is interested, the website address is "www.lta.gov.sg". If you cannot access that one, you can also go through the AA website which is "www.aas.com.sg", and this is hyperlinked to the LTA website.

There were other concerns raised by Mr Sinnakaruppan. He is suggesting that we use other forms of payment for ERP, like NETS, cash, and credit card. When we first drew up the specifications, we had to decide whether we wanted to use a passive system, in other words, a centralised billing system whereby we will send you a bill every month, and Mr Sinnakaruppan would go and check his bill and see where he has been for the last month, and he would decide whether the bill is correct or not. That was one option.

The other option was an active system, a smart card based system where you get deduction every time you pass through. No record is kept, no bills are sent to your house. We have decided to go for the smart card system for several reasons. First of all, in this way we do not need a centralised accounting and billing system, which is a very costly and very massive exercise. Secondly, by charging per pass, the moment you pass through a point and hear a beep, and you realise that your cash card balance has gone down by X dollars, you become more conscious of the cost of motoring. You become more conscious of the fact that you are actually passing through an ERP control point.

Thirdly, by using smart cards, we can also help to move towards a cashless society. Smart cards are an important way of commercial transactions. They can become more important if we can encourage more people to use it. I believe that the ERP will provide one of these "killer" applications, as they call it, for smart cards in Singapore.

And finally, last but not least, there is a question of privacy that I alluded to you earlier. Privacy is an issue for some motorists. In fact, I believe Mr Sinnakaruppan may have understated the concerns of motorists about privacy. It is a concern. If you recall, when Hong Kong was looking at the electronic road pricing system some years back, one of the reasons why they dropped it was because of this concern of privacy. And at that time the only system available was the centralised billing system.

So I would not rule out this concern about privacy. But that is not the major reason why we chose the Cashcard system. As I said, there were many other reasons. Nevertheless, his suggestion is a valid one because if we can do it, it does help to make the system more convenient. It is a direct debit system. It is almost a Giro system. It is like the transit link card system where you do not have to top up your transit link card. Every time it falls below a certain balance, as it goes through the MRT turnstiles, it automatically tops up for you. So it is possible to be done. It is convenient. And we will look into that. But, again, considering the complexity of the system as it is today, I would like to take it step-by-step and see whether the system works first. And then later on, once motorists are more familiar with the system and are more assured of the reliability, safety and effectiveness of the system, then we can consider further refinements, such as those suggested by Mr Sinnakaruppan.

Mr Goh Choon Kang suggested that the statutory lifespan of cars be extended to 12 years and the PARF benefits correspondingly. Sir, just let me point out that private cars do not have a statutory lifespan. In other words, you can keep your private car for as long as you want, so long as you pay the requisite taxes and so long as you pay the COE when it expires. So you can keep your car indefinitely, unlike taxis where you have to scrap the taxi after seven years, unlike buses where you have to scrap it after 15 years now, unlike rental cars, tuition cars, and so on. Private cars have no statutory lifespan. So the question of extending the statutory lifespan does not apply here.

Yes, you can introduce an extended PARF scheme. But here I would be cautious because what we have tried to do with our vehicle population is to try and keep it young. We have an aging population problem with cars too, because the age of the car population is actually getting older and older every year. And today, about 25% of our cars on the road, one in four cars on the road, is more than 10 years old. So if we were to relax on this policy, I think we will see a much greater proliferation of old cars. And no matter how you look at it, no matter how well you keep your car, there is no doubt that, generally speaking, older cars are more likely to break down. Our statistics at the LTA inspection centres show that. The AA's statistics on breakdowns on the roads show that. There will always be exceptions. Many people can keep their old cars very, very well. But the exceptions do not prove the rule. The rule is that generally old cars tend to break down more often. So I would hesitate to tinker with this policy because I think it has served us well.

Similarly, extension of COEs. First of all, we want to keep the population young. But I just want to highlight that if you extend your COE by two years, chances are that you are just going to bump up the COE prices, because the life of the COE has gone up by 20%, people are going to factor that in when they next bid.

4.15 pm

Mr Gerard Ee suggested that we should lower the ARF further. The reason why the Ministry decided not to do this was because of the very significant knock-on effects of such a move. As he realises, when we made the change in 1991, we reduced ARF from 175% to 150% at that time. Very quickly the COE prices rose in tandem. So it is also going to happen this time. Of course, people may ask what is wrong with that. When COE prices go up, the prevailing quota premium (PQP) also goes up and that has an impact on all those who want to renew their COE after it has expired. So we have decided to err on the side of caution as far as this is concerned. We will reduce, if any, on a gradual basis. For this time, we have decided that a moderate 10% reduction is sufficient.

Mr Gerard Ee also made a point about COEs for motorcycles. COE prices for motorcycles have fallen in recent months. In the past six months, about 90% of the quota of motorcycle COEs are actually used to register small bikes, those engine capacities of less than 500 cc. 90% of motor bike COEs are actually used for small bikes. So there is really no problem about small motorcycle owners getting their bikes registered or COEs registered. In fact, they are the ones who are really determining the price of the COEs, if anything. So I do not see any need at this juncture to do the separation. But, in principle, I must say that there is a case to be made for just one category for all vehicles. That is from the transport point of view. We just look at it from that point of view, we do not need to have Categories 1 to 4 for cars. But land transport tax structure, COEs, is not a straightforward matter.

When we implemented the COE system, we divided it into four categories because we realised that, at that time, if buyers of small cars competed with buyers of large cars, there would be a general sense of unfairness. For that reason, we have had the COE system of today where there are four categories and where the price of each category is determined by how many COEs are there and how much demand there is for each one. Each category of COE price reflects the price that the motorist in that category is prepared to pay. It is not the Government that decides what price it is. It is the buyer.

But there is a point that both Dr Wang and Mr Chng Hee Kok have made which I think is valid. We have had the COE system since 1990. It is timely for us to do a review from time to time. I agree that we should do a comprehensive review of the Vehicle Quota System this time round. In so far as timing is concerned, I think the appropriate time would be when the new vehicle tax changes are implemented and when the system settles down a little bit. Then I think we should do this comprehensive review and when we do that, I would welcome any and all suggestions on how we should rationalise the COE system.

Sir, at this juncture, I would like to make an announcement on the COE quota for the quota year May 1998 to April 1999. The new tax structure that was introduced together with ERP implementation as well as the road tax package will not only allow us to control traffic congestion more effectively but, as I have repeated, it will also give us this opportunity to increase the number of COEs if traffic congestion is controlled. I have announced previously that we will issue about 15,000 to 20,000 more COEs over the next three to four years depending on the progress and effectiveness of ERP. If you may recall, we released about 5,500 additional COEs for this quota year ending this month, when we extended the Road Pricing Scheme to the two Expressways, and that was last year. In conjunction with the widening of the Road Pricing Scheme, we released the additional COEs.

For the coming quota year, which is from May 1998 to April 1999, we will monitor the traffic patterns after the ERP has been implemented in the CBD - when we have extended it to the CBD and other RPS points on 1st September - before we decide on the appropriate number of extra COEs to be injected. Based on the current formula for computing COE quota, the total number of COEs for the next quota year is 47,885 which is higher than the current quota of 44,813 which included the extra 5,500 COEs. The LTA will release details of the quota of the individual COE categories shortly.

Sir, I now turn to the taxi industry. I would like to thank Mr Seng Han Thong and Mr Goh Chee Wee for their support of the new vehicle tax structure. Mr Seng's concern was how the new structure can be translated to benefit taxi companies, taxi drivers as well as passengers. First of all, under the new tax structure, all existing taxis will enjoy the reduction in annual diesel tax. The annual diesel tax will be reduced from $6,600 to $5,100. LTA will meet the taxi companies and the Taxi Drivers' Association to work out the details on how taxi drivers can benefit equitably from these savings.

Recently, I met the taxi drivers in a dialogue session. They suggested that the savings be used to top up their Medisave accounts. I will ask the taxi drivers, taxi operators, companies as well as the Association to put their proposals to the LTA and we will discuss together on how this can be done. I think it is a good idea.

Mr Seng also asked about the future policy of diesel tax. Will it be removed? First of all, to answer that question, I think we must go back to the history of the diesel tax. What is the diesel tax? Very simply, it is a tax to equalise the difference between tax on diesel and tax on petrol. The tax on diesel is very much lower than the tax on petrol at the pump. There are many reasons for this. But that is a fact. So we try to make the cost platform for taxis and private cars more equal. This is where Mr Jeyaretnam just now asked, why do we tax taxi drivers so high, why do we not just remove the diesel tax, why do we not tax it on the same basis as public transport. Yes, we are taxing taxis as public transport but not mass public transport like buses. Taxis are a personalised form of transport. It is not a substitute for cars and therefore it cannot be taxed in the way that Mr Jeyaretnam suggested, like public transport, so that we allow everybody to take taxis. Why are we making it so expensive for people to take taxis? Taxis are not subsitutes for cars. But they are a form of public transport at the very high end and therefore they should, on the one hand, pay taxes similar to a car but, on the other hand, be given some concessions in recognition of their public transport role. This we have done in the new tax structure.

So we have to impose the diesel tax to equalise this. We did this many years ago, calculated based on the average mileage travelled by taxis. With ERP, I would expect that the average mileage incurred by taxis will go down. Empty cruising will be reduced. Taxi drivers will be discouraged from driving unnecessarily looking for passengers as they do today. They will probably have to depend more on radio phones, radio calls or they will have to find some means of pooling their resources or whatever. The fact is that they will have to change their mode of operation in the same way that other industries will have to. If they do that effectively and if the mileage incurred goes down, then the basis of charging diesel tax, which is based on mileage, also suggests that diesel tax will trend downwards. But this is really up to the taxi operators, how they drive, how they react to the ERP system.

The question of taxi cartels came up from both Dr Toh See Kiat and Mr Iswaran who were concerned that taxi companies may form themselves into a cartel. Sir, under the new tax structure, all taxis receive reduction in diesel tax. They will all receive road tax rebates. We design the tax structure so that taxes for taxis, as I said earlier, will be comparable to taxes for private cars. The new tax structure also has been configured in such a way that the total cost of registering and running a taxi after the new taxes are implemented will not be more than what it is today. So there is no reason for taxi fares to increase suddenly when they are deregulated on 1st September.

I expect that taxi operators, as Mr Goh Chee Wee has stated in this House just now, will set their fares sensibly. They will have to see what the demand is like. They will have to match supply with demand. If they price their services too high, taxi commuters have other choices. They have got bus and the MRT. They can opt not to take a taxi. If they set their prices too low, then of course, there will be overwhelming demand and they will have to decide what is the correct level. It is a difficult task for the PTC to have to sit in judgement and to decide and arbitrate on taxi fare increases every time the taxi operators come to the PTC with their fare increase. They are not the ones who run the taxi companies. They are not the ones who drive the taxis. They have to look after the interest of the commuters. But in doing so, in looking after the interest of the commuters, they also have to balance the need to provide the taxi companies with a reasonable return and the taxi operators and drivers with a reasonable livelihood. This is a very difficult task. And every time they sit to arbitrate and decide on this, there is a lot of argument and at the end of the day, nobody is happy with the result.

So it is appropriate now that we have set the tax platforms and the tax structure correctly, that we return this responsibility to the taxi operators and the taxi companies. Of course, I would expect taxi operators to be responsible, to recognise their public transport role and the service to their customers in return for the freedom to set their own fares. The PTC will continue to monitor the taxi industry after deregulation. It will need to set guidelines on taxi fare revisions which taxi operators must observe and it will have to ensure that commuters are given adequate information to make informed choices. 4.30 pm

Dr Toh also asked the industry to set minimum standards. Yes, the LTA has introduced this performance evaluation scheme based on several criteria, and it will set the minimum performance standards for all taxi operators. We will watch and see what the situation is like, how it develops after deregulation. We will observe how the taxi companies behave, whether in fact, they are going to form a cartel to exploit the customer. If necessary, we will further deregulate the industry, as Dr Toh has suggested, to allow new entrants to come in to increase competition, and to let the market decide on the supply of taxis.

Mr Shriniwas Rai posed the question whether we can make taxis and car rental companies more attractive as an alternative to private cars. This is, in a way, what we have done with the new tax structure. We have re-looked at SZ cars and taxis and made all their operating costs roughly more or less the same. For example, for new rental cars, we have increased the statutory life span from seven years to 10 years. Taxes for taxis, we have treated them more like cars. Fares will be deregulated. So the stage is really set for all these different modes of transport to compete for customers in the way that they know best, to offer better service, more comfortable rides, or cheaper fares on weekdays, Sundays, as Mr Goh mentioned just now. It is really up to the taxi companies now and they are free to do so after deregulation.

With the tax changes, we are now, in a way, offering more choices. We are saying to those people who wish to continue to drive a car, here is a new tax package for you, slight reduction in upfront taxes, more weightage on usage, you decide what your lifestyle is like, which one suits you best. If you want the door-to-door convenience of a car, you want the reassurance of a car whenever you need it, you will buy a car. If you want to trade off some of that convenience for savings, you can either choose public transport or you can choose a combination of public transport and private transport. You can choose to rent a car, you can take a cab or you can join a car cooperative. So the choice is really up to you.

Mr Rai also mentioned that we should convince Singaporeans, especially graduates, that it is not possible to allow every graduate to own a car. I would like to assure Mr Rai that this is what we have been trying to do all these years. It is not an easy dilemma that we have to resolve. It is a tough challenge because, on the one hand, with progress and development, rising expectations invariably mean a demand for cars; on the other hand, a growing demand for travel overall. So we have to resolve this dilemma.

The Government has always stressed that cars are not like HDB flats. They are a luxury, albeit a legitimate luxury, as a recent Straits Times editorial put it, but a luxury nevertheless. So, while the Government can provide every household with a HDB flat, it cannot guarantee that everybody will own a car. This is the reason why we have put in so much effort into building up public transport, not just a public transport system that is so-so or can do, but we hope that we will improve the public transport such that it becomes a viable alternative to a car for most people.

We will continue to try and resolve this dilemma. We will continue to convince people that public transport is a viable alternative. But, at the same time, we will continue to try and meet this aspiration for people to own a car. That is the reason why we have ERP, because with ERP we can allow more people to own a car.

Mr Jeyaretnam said just now that he cannot understand why we want to issue more COEs. I could not understand why he could not understand that. If he has been on the ground and going around from house to house and talking to people, I think he will understand the strong desire of people to want to own a car.

The other example of how we can meet this aspiration is to try and introduce what I call more personalised transport services. Under this category, I refer to taxis, rental cars and, recently, to the car cooperative scheme.

I think there is just one last point that I have not addressed yet, and this is on Dr Toh See Kiat's question on the cost effectiveness of underground roads and flyovers. Basically, we have to build underground roads and flyovers because of limited land. There are many junctions in Singapore today which are very heavily used. It is no longer sufficient to just have a two-tier flyover. We need to have three-tier flyovers, because of the heavy flow of traffic in all directions.

He asked about criteria. We have to take into account traffic volumes and traffic flows. We have to take into account the site constraints. We have to take into account the topography. We have to take into account the value of the land in the area, whether we go over or under, and so on and so forth. These are some of the considerations that have to be taken into account. The Holland Road three-tier interchange, for example, was selected after taking these factors into consideration. Design studies were made, evaluated against various criteria and the final choice was made. Basically, we needed more three-tier interchanges because we have to relieve the existing traffic congestion at these junctions, and because it is part and parcel of our plan to optimise the use of our roads. Junctions are where bottlenecks occur. So when we have major traffic arteries, we have to make sure that those bottlenecks are removed. Otherwise, we are under-utilising our roads.

Sir, let me just conclude by taking this opportunity to remind Members that our land transport policy is not just ERP alone. Over the last so many minutes, I have been answering queries about ERP, but it is not just ERP. It is about more choices for the public in terms of good public transport. It is about expanding the road network. It is about building three-tier interchanges. It is about managing our roads to relieve congestion. It is about issuing more COEs so that more people can aspire to own cars. Since we debated the White Paper on Land Transport in this House in 1996, we have achieved a lot, but a lot more needs to be done. I am confident that as we press on with the implementation of the various policies and schemes that have been mapped out in this White Paper, we will achieve our vision of a world-class land transport system for Singapore.

Mr Chay Wai Chuen: Sir, last year, I raised the question of community-based bus services. I would like to raise it again this year.

The PTC, in the recent Government announcement, has liberalised many features of public transport including taxi regulations. I hope this is a step in the right direction and more such deregulation and control can be given for efforts to improve community bus services.

At the present time, bus services in housing estates and so on feeding to the main routes, trunk routes and MRT routes are done on a restricted feeder bus service. Very often, residents find that feeder bus services over a period of time diminish and disappear, leaving many residents rather unhappy. Because of the PTC's regulatory regime, it is difficult for anybody just on his own to come up with some idea or entrepreneurial effort to organise or to form companies for bus services. But I hope it can be considered within this context that communities which are interested in providing better services for their members, residents, families and children going to school can, on their own initiative with entrepreneurial effort and perhaps private entrepreneurial capital, be given this chance to run this kind of service within their community. With that, it can really answer the needs of that community of people.

Sir, I hope the Ministry of Communications will consider this.

[Mr Deputy Speaker in the Chair]

4.42 pm

Mr Shriniwas Rai: Sir, the work of the Public Transport Council is important, in that it sets the tone for bus services as well as taxis. I am glad that the Minister has comprehensively covered taxis, and I will not take the House's time on that. But I would like to highlight one aspect of PTC's work, ie, bus services.

I think at the last Budget sitting, two Members of this House, Dr Michael Lim and Mr Chay, spoke on this issue. My concern is: why is PTC so rigid in maintaining 40% of the buses should be non-air-conditioned service? With growing affluence, I think more people want to have air-conditioned buses and the ratio should be changed, maybe to 70:30 or even 80:20.

The other concern is on Scheme B buses. Maybe the Government wants to make a study to see whether they could be organised into a cooperative or some close-knit group. Because they are providing a valuable service for the bus commuters. I think we should appreciate and we should encourage them to form cooperatives. I remember years back in the 70s, a lot of Chinese bus companies were amalgamated. I know these are one-man and two-men operations, but some economic incentives could be given to them. They could then serve a very useful purpose.

Sir, I totally agree with the Minister that we have to depend on public transport. But the question that we have to ask ourselves is that until we have improved and I must concede that we have improved when are we going to come to the stage when the people who are using taxis and cars will be persuaded to switch. On the MRT, I already notice that members of the public take a trip on the MRT during the lunch hour. I have seen MPs, senior civil servants, and bankers, but I have yet to see somebody taking the bus. Maybe it is too long a distance. Now, we have bus shelters, but the time factor is also important. For some bus services, the wait is more than 7-8 minutes, and the MRT is about 3-4 minutes.

If the PTC could work out a scheme whereby it ensures a minimum service, I think the public would change their travelling pattern. The PTC should also consult the bus commuters and get feedback from them. It should listen to the taxi operators. They are an organised group. Unfortunately, the bus and MRT commuters are not organised groups. Nevertheless, the PTC should carry out a survey and get feedback to find out what are their needs, and whether the fare structure they are going to set is actually one that will meet the public's expectations. Of course, the public wants cheap travel, but it cannot be so, because the economic necessity dictates that economic forces work. What I am suggesting to the Minister is that he should organise with PTC.

4.45 pm

The other complaint I have against the composition of PTC is that I do not think any of the members of the PTC comes from the bus commuters. They all look like the car-owning class. I would suggest that they should at least put one or two members who depend on public transport. And I suppose this will help in giving the correct feedback.

Dr Teo Ho Pin (Sembawang): Sir, my topic is on construction of pedestrian crossings.

Last year, 217 pedestrians were either injured or killed while using zebra and signalised pedestrian crossings. The common causes of these accidents are failure to look out and failure of vehicles giving way to pedestrians.

Zebra crossings, which used to be a safe mode of crossing for pedestrians, have become a potential accident spot. Sometimes the crossings create bottlenecks in our traffic system. The following are some observations at zebra crossings:

(a) Pedestrians simply assume "absolute right of way" without due regard to their own safety.

(b) Some take their own sweet time to cross the zebra crossing.

(c) At certain zebra crossings, the stream of pedestrians is almost non-stop, thus making it impossible for any traffic to pass through.

(d) At night, it is difficult for motorists to see pedestrians at some of these crossings.

The above situations cause congestion on our roads, and also traffic accidents.

Sir, I understand that the Ministry has been closely monitoring the situation and has taken various measures. I hope the Minister could update the House on the measures taken. At the same time, I would urge the Ministry to conduct a thorough study to determine the possibility of replacing zebra crossings with other forms of crossings that are safer to pedestrians.

Mr Yeo Guat Kwang (Cheng San): (In Mandarin): Sir, over the past two to three years, the Ministry of Communications and LTA have vastly improved the transport system in Singapore, and the livelihood of the people is thereby improved. This is indeed commendable. MRT and LRT are also being developed and a lot of above-ground and underground projects have been completed. Our bus and taxi services have also improved. This can be said to be one good news after another. Whether we drive along the roads or commute by public transport, we cannot help but appreciate all these rapid developments.

Mr Low Thia Khiang said that the Government had been collecting money all the time. I think he is wrong in saying so. The facts show that the Government has been making good use of the taxes collected to improve our living conditions and social amenities. The Government has already done all this. We have accumulated strong reserves through years of prudent financial management to ensure that we can tide over this economic and financial turmoil.

Sir, recently, the Ministry of Communications announced that they were going to build a new MRT station near the Singapore Polytechnic. This shows that the Government is determined to meet the needs in our public transport. As a labour MP, I hope that, apart from looking after the needs of students, the Government should also consider the needs of the workers. In this regard, I hope that the LTA would consider building MRT stations in the industrial estates. For example, we should consider building a MRT station on the Woodlands extension line, near the Sungei Kadut industrial estate, for the benefit of the workers there.

Sir, with the implementation of the ERP system, especially in the CBD, I hope that the Ministry of Communications can consider giving the environmental vehicles some special concessions, especially the garbage trucks. Rebates should be given to them or to allow them to pay a fixed monthly rate, so that our environmental workers will not be adversely affected because their companies have to face the rising cost under the new system.

Mr Chuang Shaw Peng: Sir, I would like to declare my interest as a director of a construction company. With the impending introduction of ERP system, we are going to see a more accurate pricing in road use from a partial shift of charging for car ownership to charging for usage of road. I use the word "partial" because any user of ERP still has to own a car, and that is, you still have to pay for COE, road tax, ARF, etc. Even when he is not driving, the cost is still taken into account every minute.

No doubt the ERP represents the state-of-the-art in vehicular traffic management and we should unreservedly commend LTA for their bold effort to move in that direction. But I wish to point out that we already have in place a transportation system which charges usage even more accurately, and that is none other than our transit system (MRT). The users pay for the MRT as taxpayers and they pay as and when they use. If they choose to stay at home or walk to work, he bears no variable cost. And this concept adheres very closely to the tenet of pricing theory.

Sir, I notice this year, other than those already approved projects, the Budget has no special provision for building more MRT or LRT systems. It is surprising that a government as shrewd as the Singapore Government does not recognise the rare opportunity to embark on more MRT and LRT construction in the face of this regional economic slowdown. The justifications for building more of these projects are quite obvious. May I quickly cover some of these.

There is a tremendous slowdown in construction activities in East Asia. The construction materials are very cheap now. Lots of equipment are lying around idle. Big international construction companies are very hungry for jobs. The overall construction cost index has dropped 10-20%. If we build now, our cost on investment would be lower and that would mean we would get a higher rate of return.

There is also this substitution effect between road usage and transit usage. If our network of transit system is more convenient and less costly to use, the commuters will switch from using cars to using the transit system. This phenomenon can be clearly seen in Hong Kong, New York, London, etc. As more people switch to the transit system, the economic return on the transit system would be better and, hence, make the system more viable.

In the longer term, a more comprehensive transit system would benefit the nation as a whole. We definitely spend less foreign reserves to import cars and petroleum year after year. We also have less air and noise pollution. Our population possibly will spend less time on the road, suffering less from the stress of driving, spending more time resting, or even reading on the train, etc. These are the intangibles and softer factors that are hard to quantify but clearly beneficial, especially when we strive to move towards a more civic society.

In the past week, many Members of this House have pointed out that many of our companies are badly affected by the regional crisis. If the Government implements more MRT, LRT projects now, it will help to prime the economy and provide reliefs to our companies. And coupled with the points I have pointed out earlier, it is a win-win proposal for the Government to do more now. Before I end, I would like to point out that not only the transit system would use less land for a specific traffic volume, it actually would enhance the value of land along the corridor of the system, and such enhancement to a large extent will offset the construction cost of the system.

In summary, Sir, I am not calling here for more construction of MRT and LRT for the sake of economic stimulation without regard to the long-term viability of the projects. Singapore has one of the highest density of population per sq km in the world. Big cities like London or Paris have a bigger cosmopolitan area, lesser high- rise residential buildings, yet they operate some very efficient transit systems. I believe townships like Tampines or Ang Mo Kio have enough population density to justify some viable LRT system.

In my view, infrastructure work such as MRT or LRT is an asset. It is not an expenditure per se. Building this infrastructure is equivalent to converting cash in the balance sheet into a useful asset. And I call on the Minister to consider expanding our MRT and LRT network now, so as to cater for future increase in demand when the good times return.

The Chairman: There are 10 more speakers. "Guillotine" time is 5.20 pm. Mr Mah.

Mr Mah Bow Tan: Sir, Mr Chay proposed that we allow private companies to run their own bus services. I would just like to enlighten him that we have actually been doing that, ie, allowing private bus operators to operate scheduled shuttle services. Currently, there are about 28 such services run by Scheme B and they supplement the regular services of SBS and TIBS. But in addition to that, there are also 19 private shuttle services at the moment. Another 10 will be added once developments are ready. And they operate from private condominiums, commercial centres linking to MRT stations and bus interchanges. They are provided by the management committees of the private estates for the use of their residents or for the use of their customers. On top of that, there are private factories which supply bus services for their workers. All these supplementary services play a useful role in connecting services from the specific destination to the main transport system. PTC would welcome any organisation that wishes to apply to operate these services, if they find it feasible and cost effective to do so.

On the specific point about whether they should run feeder services in HDB estates, if that is what Mr Chay has in mind, I would add a word of caution. At the current fares, many of the feeder services in the housing estates are not profitable and, in fact, they are being cross-subsidised by the trunk services. So while PTC may not have anything in principle against having such services run in the HDB estates, I think there would be very limited scope or incentive for other operators to either run fully, or on a supplemental basis, these services. Nevertheless, if any grassroots organisation or town councils wish to run these services within their estates, and if they think that they can make it viable, they can submit their proposals to PTC for consideration. But I would like to reiterate this word of caution - that it is not a money-making proposition as such, because it is actually part of the bigger public transport network that the scheduled bus operators operate, and there is a fair element of cross-subsidy involved.

Mr Rai made some useful comments about the Public Transport Council. Let me address them. On the question of the Public Transport Council being rigid, I think, first of all, he may not be aware that the PTC's limit on air-conditioned services is actually no longer there. In fact, the lid has been lifted. It used to be 40%. Now, I think it has been brought down to 20%, and eventually probably it will be lifted altogether. But that is in a way reflective of the situation that the PTC finds itself in. Because, on the one hand, there is this school of thought that says, "Look, Singapore is a modern society, it is very hot, let's air-condition all the buses. People are prepared to pay for it." And on the other hand, there is another not insignificant group which says, "Look, we cannot afford to pay the 10 or 20 cents more for air-conditioned buses. We don't mind waiting for a non-airconditioned bus because this means a lot to me, and I cannot afford to pay." So there is still a small group of people, not insignificant, who would like to keep some buses in the fleet non-airconditioned and charging a lower fare. The PTC has to recognise this and take into account this feedback and, therefore, it has had to put this limit of 20% on airconditioned buses. But over time, I would expect that this limit will be reduced and eventually it will disappear completely. But PTC is not being rigid. It is actually being very sensitive to the different requirements of different sectors of the bus commuting public. 5.00 pm

Whether there should be a minimum service standard for buses, yes, there is actually a minimum service standard for buses and this minimum service standard is reflected in the minimum waiting times, minimum headways, maximum distance between bus stops, minimum number of services in an estate, and so on and so forth. Those minimum service standards are already in place and are applicable to all our scheduled bus operators.

Whether the PTC is well-organised to take into account different groups of people, I would say that its members come from all walks of life, including the labour movement, academia, professionals and grassroots organisations. It includes people who drive to work and people who take public transport to work. I can assure Mr Rai that when the Public Transport Council meets, the Chairman has actually quite a tough time trying to reconcile all the different interest groups represented by those members in his Council. And I must say that he is doing a very good job considering the difficulties involved. But the Public Transport Council can always do with more fresh ideas. So I would ask Mr Rai, if he agrees, that perhaps I should appoint him to the Public Transport Council. Unfortunately, he is not here to give me an answer straightaway. But I will ask him in the Members' Room later.

Dr Teo Ho Pin asked whether we can consider replacing zebra crossings with other safer forms of crossings. Yes, the LTA tells me that there are many different types of crossings and they have different users. Whether you have a zebra crossing or a traffic light crossing or overhead bridge really depends on where, on how much traffic, site constraints, and so on and so forth. So where it is possible and feasible, they will consider replacing it. But it is not advisable to have a blanket guideline or ruling to say that we do away with zebra crossings altogether. They do serve their purpose. There is a need for education to make sure that pedestrians know how to use the zebra crossings safely and motorists also know how to approach the zebra crossings safely.

Mr Yeo Guat Kwang asked about the garbage trucks. He asked whether we could give garbage trucks some concessions. I think I have made some comments on that earlier. Generally speaking, we apply the ERP charges to all vehicles and we expect the vehicle owners to either absorb, adapt or find some other ways. Basically, the message to all vehicle owners, fleet owners, bus operators, taxi operators is that they have got to live with ERP. They have to get used to it. They have got to adapt to it. There is nothing to be afraid of. Basically, there are many organisations that have learned how to adapt and taxi companies for one and I believe others, including the garbage collectors, will also learn how to adapt.

He also asked about additional MRT stations. Yes, we are looking at traffic volumes along all the existing lines and looking at whether we can justify the building of additional MRT stations like what we have done for the Singapore Polytechnic station. The space was allocated to the Singapore Polytechnic station on the North-South line but at that time, the study showed that the volume did not justify. But now with the polytechnic fully completed and the student population up to something like, I believe, 15,000 or thereabouts, it has become viable to build and operate that station at the Singapore Polytechnic. That is the reason why after a feasibility study, we have decided to go ahead to build the Singapore Polytechnic station. We will do similar studies for other existing lines. We will do it together with other statutory boards, JTC, URA and HDB. And if the ridership justifies, yes, we will build additional stations. But it has to be justified on ridership grounds.

Finally, Mr Chuang Shaw Peng suggested that the LTA speed up the expansion of the MRT-LRT system, basically to capitalise on the lower construction cost arising from the current economic situation. I have said many times in this House that the Government is committed to building a world-class land transport system based on a public transport which is very comfortable, very efficient, very cost effective and which can offer a good alternative to cars. And that public transport system is basically the rapid transit system, rail-based system, as opposed to public bus system.

Today, we already have a very extensive network of rail-based system. We have about 83 km of track. We carry about 1 million passengers a day. When we first started the system, we were talking about 250,000. Today, we are talking about 1 million passengers per day. It is a very well used system, viable, profitable, well-run, efficient. So it has attracted 1 million passengers, many of whom, as Mr Rai pointed out just now, are people who are car owners who use the MRT for some of their trips, and that is as it should be. So we will expand this network further. We will expand it as our urban development expands, as more new towns are built, as the downtown area is developed, and as more new centres of work and population develop. That is definitely on the cards. But every line we build, every station we build has to be economically justified. It cannot be a luxury. It has to be justified. And that is why in good times and in bad, we are able to justify and proceed with the building of the MRT or LRT system.

What the LTA plans to do is to implement an average of one rapid transit system a year. And if we can sustain this rate, in 10 years' time, we will be doubling our network from 83 km to something like 150 km of rail. That is a very, very ambitious plan, I must add. Because we will be doing what many countries have taken something like 30 to 50 years. In 10 to 15 years, we will be building what other countries took 30 to 50 years to build. That is the kind of pace that we hope to sustain.

As Mr Chuang pointed out, yes, the current economic crisis does present us with opportunities, more competitive prices for one. But at the same time, we have to factor in the weakening of the Singapore dollar because some of the contracts and some of the equipment actually come in US dollars and other European currencies. So we will have to do the weighing. But LTA will monitor the situation very carefully, see what advantages we can reap from this situation and seize the opportunity where we can. And if we find it advantageous and the sums are in our favour, yes we will speed up the implementation.

Dr Toh See Kiat: Sir, I will be very brief to allow the Minister to reply. My question is: when will the privatisation of PSA take place?

Mr Chay Wai Chuen: Recently, the harbour tug services in the port have been privatised and I hope this is the beginning of many other downstream services that can be privatised for the port. In introducing competition to the port services, this is a good way to keep the port efficient. So terminal handling, berth services, even distribution centre services, are examples of such downstream services that we can do with a dose of invigorating competition. This task is particularly urgent now when the exchange rates of some of our neighbouring countries who have been building ports have been lowered. We can see that once they begin to recover, their competition will become very keen. So I hope that our port services will continue to raise their competitiveness in this respect. The MPA could consider privatising more of the downstream services soon.

Mr Zulkifli bin Baharudin (Nominated Member): Sir, first, I would like to declare my interest as I am working in a logistics and forwarding company, not a local one though. But I would like to ask that more be done to support local transport logistics providers. I think we can be proud of our airport, our seaport and world class national airline and shipping line. We want to be, and we are already, a regional distribution centre but I feel that more should be done to help local forwarders to upgrade themselves. In the last many years, if you look at the top IATA forwarders in Singapore, about 10, only one is a Singapore company. This has been so for the last few years and I do not see many changes taking place in the next few years unless major strategic initiatives are taken to help local companies.

It is important to note that unless local companies are able to rise to this challenge and to complement the solid infrastructure that we have, we will find ourselves difficult to meet the competition, especially in some regional cities that have expressed interest in wanting to also be a regional hub. It is also not surprising to note that a lot of the local companies today are finding it difficult to compete and meet with the total logistics requirements of multi-national companies where their requirements have crossed the global and regional span. So we really need to do something about it.

I have got two suggestions. One is to establish strong alliances between Government-owned and GLCs with local companies so that local companies have the experience to upgrade and participate in bigger contracts. Secondly, when PSA recently announced a joint venture with a large German automotive logistics firm, I would have thought it be appropriate to also include local companies to be involved and gain some experience. Thirdly, maybe we could establish more forwarder linkages between Singapore and other major distribution centres where certain very expensive infrastructure that can be built by the Government can be shared by local companies who find it extremely prohibitive to set up on their own, especially when we talk about IT network and all. Fourthly, perhaps, we could use our strong bilateral relations with other countries in the region to have certain exemptions with regard to the existing bureaucratic and customs practices that some of the countries in the region impose on goods that are transhipped from Singapore. On the whole, I hope we could do a lot more so that the local industries can be upgraded. 5.15 pm

Dr Toh See Kiat: Sir, again, I will be brief. The question I have is with regard to the liberalisation of telecommunication services and the cheaper infrastructure that we could put in to allow for electronic commerce. Firstly, I would like the Minister to give this House an update on the progress of obtaining the third mobile and second fixed line operator, and whether there are any further plans to liberalise post and telecommunications.

We also have had complaints about the service standards of our Internet service providers and also about the high cost of lease line services. These are costs that people would have to bear if they go into electronic commerce. If we are to become an electronic commerce hub, we need to ensure inexpensive but high quality telecommunication infrastructure.

The Chairman: Dr John Chen, you have five minutes to reply.

The Minister of State for Communications (Dr John Chen Seow Phun): Sir, Dr Toh asked when the PSA Corporation will be privatised. PSA was corporatised in October 1997. The Ministry will monitor the development of the corporatised PSA closely and decide on when it should be privatised at a later date.

Mr Chay asked that we introduce more competition in port services. Yes, the MPA has already taken steps to open to more service providers. He mentioned about the towage services. This was introduced in the beginning of March, and they will be doing more.

Mr Zulkifli suggests to the Government how to help the local logistics companies to compete. The suggestions given by him are good ones. In fact, the Government has already started some of these things that he has mentioned. Let me just give you some examples. For instance, the Logistics Enhancement and Applications Programme (LEAP) administered by the TDB. If he is interested about this programme, I will get the TDB to brief him.

On providing linkages to facilitate quick and efficient movement of goods, TDB, EDB and Customs have put in place various IT systems to help freight forwarders and logistics service providers to improve their speed and efficiency in handling goods. Some examples include TradeNet Plus, which is a national IT framework to cover the entire international trading chain, from locating a product, compliance with regulatory requirements, to the delivery of the product using electronic means. Another example is Spectrum. It is a national air cargo community system which enables automated exchange of cargo information among airlines, cargo agents and Government agencies, both locally and internationally. Such a system helps our local companies track their shipments without having to set up their own IT network overseas which, as Mr Zulkifli has mentioned, is expensive. So they can ride on this.

Besides upgrading the local companies, the Government is also facilitating companies in expanding their global network and such efforts are targeted both at the government to government level, eg, at ASEAN fora, such as the ASEAN Framework of Services, and also at the company level, where potential partners and users are matched with local companies.

Dr Toh asked about the status of the further liberalisation of telecom services. The tenders for up to two more public basic telecommunication service licences and up to two more public cellular mobile telephone service licences were closed on 31st December 1997. There were altogether three and two pre-qualified tenderers respectively in the two categories. TAS is now in the midst of the tender evaluation process and will announce the results by mid-1998.

Dr Toh also asked about the quality of the Internet service. The Internet market has been liberalised in Singapore. The three Internet service providers (ISPs) and the many re-sellers have launched very competitive price schemes to meet the needs of different users, depending on their usage requirements.

The Internet service providers are also required to comply with TAS' strict quality of service standards. For example, in the last quarter of 1997, all the three ISPs exceeded the quality of service levels imposed by TAS. In fact, the quality of service achieved by our ISPs ranks among the best in the industry. Our users here, therefore, get good value for money. But there could be further improvements for the ISPs such as in their marketing effort and customer relations. No doubt the ISPs will strive to improve further, considering the competitive environment they are in.

As for leased line services, independent reports and monitoring by TAS suggest that our present rates are competitive. Although there were some complaints about high leased line cost, we found that in these cases the comparisons were not made on the same basis. According to surveys by Data Communication, SingTel is already the price leader when it comes to international leased line hubbing in the Asia-Pacific compared to other carriers in traditional hub locations such as Australia, Hong Kong and Japan. 5.20 pm

The Chairman: Order. It is "guillotine" time.

Mr Chay Wai Chuen: Sir, I thank the two Ministers for their very detailed replies and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The sum of $336,417,630 for Head I ordered to stand part of the Main Estimates.

The sum of $1,830,916,600 for Head I ordered to stand part of the Development Estimates.

Head U

The Chairman: Head U Ministry of National Development. Amendment No. (1), Mr Lew Syn Pau.

Mr Lew Syn Pau (Kreta Ayer-Tanglin): Sir, I beg to move,

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

Sir, everybody has a view on the property market. At the right price, we can be either a seller or a buyer. Singapore's home ownership policy has made almost everyone here a home owner. Many non-home owners today are also aspiring home owners. It is no wonder then that when the property prices go up too fast, or come down too fast, we get some people angry and frustrated, while, at the same time, others may be laughing all the way to the bank. Unfortunately, those who are happy because they are better off are usually silent, while those who are affected adversely tend to be very vocal. They express their views publicly and lobby Government officials and the media. Very often, the noise generated and the perceived vested interests of the lobbies make it hard to see the gravity of the real situation.

While not everyone can agree whether the price of the property market today is high or low or at just the right price, all of us agree, I believe, that we need some stability in the property market. The property price index of private residential properties doubled from about 150 in the first quarter of 1993 to over 300 in the second quarter of 1996, in just over three years. The Government was perceived by the general public then to have been slow in reacting to the runaway prices then. Since its peak in the second quarter of 1996, when anti-speculation measures were introduced by the Government, the index has only dropped about 16.5%. We are now back to the first quarter of 1995 levels.

Price stability in the property market is important as it affects credit facilities by banks and financial institutions. It influences sentiments and also the herd mentality of speculators and investors alike.

The Government has a duty to do its utmost to stabilise the property market. The property prices may still be considered high today relative to the early 1990s. However, it is in no one's interest to see it crash, as the consequences on the entire economy may be disastrous. The Government has already introduced several measures such as deferring the Government land sales programme, extending the project completion period for Government land sales sites and suspending the stamp duty surcharge on contracts for the sale of properties within three years of purchase to stabilise the market.

The question that I would like to ask the Minister is: what else does he plan to do to stabilise the market if it goes down drastically further? At the same time, the Government should also think of measures to prevent the market, after it bottoms out, from running away again, as it did between 1993 and 1996. What will the Minister do to prevent this from happening again? This is important as I believe the public expects the Government to be even-handed and respond as quickly to an upturn as it had been to a downturn in the market.

Mr Sinnakaruppan: Sir, I have spoken during the budget debate about relaxing the cash downpayment for the purchase of private properties from 20% to 10%, to help aspiring young professionals to become first-time owners of private property. And given the slow down in the property market, this offers them a good golden opportunity to catch their rainbow.

Dr Richard Hu, in his reply, dismissed it when he said that the banks cannot over expose themselves to the property sector, and that home buyers should not be highly geared. Dr Hu also turned down Mr Choo Wee Khiang's plea to use CPF savings in lieu of cash, because the CPF goes back to the buyer when the property is sold.

Sir, I am not sure if Government understands that I am talking about a very small pool of young professionals who are first-time buyers, maybe 10,000 or much less. I support all the anti-speculation measures the Government has implemented. But what I am talking now is for first-time buyers of properties, and not speculators.

I know that the Government's answer to meet the aspirations of this small group of people has been through the introduction of the Executive Condominiums (ECs). But we know from experience that young professionals prefer private properties for various reasons. Even so, the Government could also consider the relaxation of this 20% rule for applications of ECs.

Sir, maybe I am pre-empting the Minister's answer by saying that going by his past replies, he could probably say, "Please channel your request to the Minister for Finance." He is absolutely right. The plea that I am making to the Minister is that he is also the Chairman of the National Youth Council. Therefore, I would like to appeal to him on behalf of young professionals who have a real chance of chasing their rainbows now, in this soft market.

Sir, as the Chairman of the GPC has just pointed out, the prices are holding at 1995 prices. If this proposal is allowed, these first-time potential owners may get lower prices during the soft market situation. And it is not a question of these professionals over extending their credit, as some reporters have written over the weekend. They have hard assets, but not so much cash, and that is their problem.

Sir, I am not convinced with Dr Hu's argument that the relaxation of the policy would unduly over expose the banks, because the number of this target group that I am speaking for is very, very small to affect the banks in any big way.

Sir, I hope that the Minister will not dismiss this plea. I hope that I can persuade him so that he can persuade the other Ministers in the Cabinet and help these young talents. And as Dr Lee Boon Yang had said yesterday, local talent is the foundation of Singapore and I think we should put more emphasis on them before we find more ways of drawing foreign talent.

Mr Zainul Abidin Rasheed (Cheng San): Sir, the nexus between the private property market and public housing is clear. This is especially so for Singapore where home ownership is more than 90%. We know that the private property prices have an effect on public housing and vice versa. Thus, the need for the Government and the Ministry of National Development to tread carefully on this plain. It was, therefore, very reassuring to see how Prime Minister Goh handled the issue of upholding high standards when MP Mr Heng Chiang Meng, the former President of REDAS, was caught in the tricky position about Government land sales and the property market. In the words of the Straits Times editorial, Mr Heng, I quote, "did the honourable thing" by quitting as the REDAS President and resigning as Executive Director of Far East Organisation, which is Singapore's biggest developer. PM Goh, in making public his exchange of letters with Mr Heng, brought relief to many for it reinforced the belief in the transparency and accountability of our system.

5.30 pm

May I ask the Minister, Sir, what further assurances would MND give to ensure public confidence in its transparency and accountability would be preserved, if not, enhanced? Specifically, what are the critical considerations that would determine MND's policy on land sales? What effect do you expect land sales to have on current property prices, both on the private property and public housing? And finally, if I may ask the Minister, what effect did the Ministry's adjustments to the private residential policies announced last November have on our property market?

Mr Inderjit Singh: Sir, the property market in land scarce countries like Singapore has a direct impact on the country's economy. As property prices increase steeply, it creates asset price inflation, as we have seen in Singapore from 1992 to 1996. Asset price inflation translates to higher rental or property purchase costs, so business costs go up. This increase in cost has to be passed on to the customers, so ultimately, the consumers see an increase in expenditure. To afford the increased expenditure, individuals need to have more cash and hence need higher wages. For individuals, they have to pay a higher price to own or rent a property. To be able to afford these higher prices, they need higher wages, so the total wage costs go up. This creates a direct impact on the cost of doing business in Singapore. Sir, this is a vicious circle and the root cause of the problem is asset price inflation.

In the last few days of debate, we have been told many times that wage cost is the real issue affecting the rising cost of doing business here. I agree with this, but this is, as I have analysed earlier, just the symptom of the real problem, which is asset price inflation. Sir, this is one way the property prices affect our economy. On the other hand, many businesses and individuals have invested heavily in properties. Should the property price bubble burst, there will be a sudden devaluation of their assets. Banks may ask for repayments to bridge the loss of value or, worse still, force sell the properties to recover whatever residual value they can have, in the case of very heavy borrowings. Book value of company assets would also be much reduced. As an example, we can look at what happened in Japan, about seven years ago, when the bubble burst. The economy in Japan is still having problems recovering. We, therefore, must hope that the bubble does not burst in Singapore. However, this does not mean that property prices should not be allowed to slide downwards at a steady rate. Letting a little air out of the balloon may be a healthy thing to do, to reduce the growing tension and strains on the property market and hence our economy.

As the property market, like many sectors of our economy, is a cyclical one, we have seen the peak in 1996 and now prices are coming down, heading towards a trough. This cyclical effect is not necessarily bad, as we have a chance to make due corrections to an inflated market. However, if we intervene too early during the downside, we may risk artificially propping the market up at unsustainable levels in the long term. The effect will be seen many years from now if we allow a new higher base to be set now. In the next upturn, the prices will start to increase from this higher base when they should have, in fact, started from a more realistic lower level should market forces have been allowed to determine the prices.

There have been recent calls by certain developer groups to lift the measures put in by the Government in May 1996 and also calls to further stimulate the property sector. I would like to request the Minister for National Development not to lift the measures that have been very effective. It was recently reported in the Straits Times that all the major developers still expect to make a comfortable margin in their profits in 1997, despite making provisions for losses due to unsold units, and this comes after two years of record profits for them. We have already seen some of the corporate results in the last few days to confirm this.

The Government, therefore, should stick to its original objectives and fundamental strategy to curb speculation in the property market, whether times are good or bad. Any measures the Government puts in place should be long term focused, to give the general direction and it should avoid constantly interfering to avoid jerking the property market around with many piecemeal and seemingly uncoordinated measures, sometimes affecting the demand and sometimes affecting the supply, as I have said in my Budget speech. So I feel that the Minister should not have changed the land sales policy. In fact, if the market knows the volume of land available year after year, the market would have taken these into account. Therefore, in the long term, this should not be a major factor affecting property prices. So I feel that the land sales should have continued in the last two quarters.

One other issue I have, with the recent announcement of tax exemption for land under development, is that this will induce developers to develop vacant land that does not enjoy similar exemption, thus adding to the supply of private housing already available, and this would negate the intended impact of the new tax measure, as the developers accelerate the development of the vacant land.

Once again, I would like to call on the Minister to minimise interference in the property market and be involved in only setting the long term directions and not to give in to the lobbying and the pressure from the developer groups.

Mr Chng Hee Kok: Sir, in the Government's sale of land sites, substantial time and resources are committed by tenderers in their bids to secure Government land. In an uncertain market, such as what we have today, wide-ranging bids may be expected, for example, for the Marina South site. And this is a landmark site that involves a multi-million dollar investment.

But the poor market sentiments, in this instance, may invite bidders looking for bargain prices and those tenderers who do not wish to lose out may put up unexpectedly low bids. Such low bids may, in the already weak market, be a destabilising force. This will undermine the stability of the property market and, of course, the economy as a whole.

Sir, although these low bid prices may eventually be ascertained by the Chief Valuer as below the Government's reserve price, the detrimental effects on the market will have already been done. Therefore, I am in favour of some form of a public declaration of reserve prices in general land sales, so as not to affect the market adversely or wasting the valuable time of developers.

We should perhaps apply this approach for a landmark parcel, like the Marina South. In this instance, it may be better to have a situation where there are no bidders because there is not enough financial capacity of developers to bid, rather than entertaining a small number of bidders with very low prices. Low prices can shake the confidence of the property market.

Sir, for tenderers who believe that the price should be lower than the reserve price, they will not have to waste time and resources in the exercise. Just as an example, the tender for the Marina South site requires each tenderer to put in a tender deposit of at least 10% of the tender sale price. The market talk is that this land will be valued at about $1 billion. 10% of $1 billion or up to $1.2 billion is a deposit of some $100 million. So over a three-month period, the developer will be committing something like about $100 million of his funds. Adding professional cost and interest cost may mean a tender bid costing something like $3 million. Sir, these funds will be locked up for unproductive purposes. I would urge the Minister to perhaps reconsider some form of bidding whereby reserve prices are known so that there will not be a situation whereby low prices affect the property market. At the same time, developers will not waste time because they know that they do not have the financial capacity to do a project of a certain size.

Assoc. Prof. Low Seow Chay (Chua Chu Kang): Sir, my speech in the Budget debate last year I spoke on the same issue. At that time I pointed out three points: (1) The Government has committed to the long-term objective of achieving a 25% to 30% of private residential property to be private. (2) The Government is the largest land owner in Singapore. It must take a long term view in land supply and gradually release sufficient land to realise this objective. The Government's supply of land should not be affected by short term fluctuations of property price. (3) I pointed out that the private residential property price then was too high and beyond the affordable level of the targeted top 30% income earners. In the long term, the 30% target of private residential property could only be achieved if the price was settled at a level which was affordable to them. At that time, the reply from the Minister was quite favourable, in particular, on the issue of land price and, I quote, "The Government will not interfere in the private housing market in as far as target prices are concerned."

Following the slowdown in the residential market, the Government in November 1997 announced that the land sale target for the rest of 1997 would be deferred to the first half of 1998. And the 1998 figure would be pushed back to the second half of 1998. In the recent Budget Statement, it was stated that land sales for 7,000 units, ie, the combined 1997 deferred quantity and the targeted 1998 quantity would be reduced to only 2,500 units. From 7,000 units to 2,500 units is a substantial reduction.

I would like to ask the Minister what is the Government's long-term policy in land supply. Our private property price affects the Government's land sales. If so, will the Government cut back or stop the land sale from what was announced if the downward trend in property price continues, until there is an upturn again? The Government also announced a cut back in land allocated for Executive Condominiums from the planned 3,000 units to half, 1,500 units. The reason given in the Budget Statement is that demand has been reduced and that is why the number has been reduced by half.

Sir, Executive Condominiums, though related to the private residential property, have its own targeted buyers. It is a sandwich housing programme for those who cannot afford private condominiums but aspire to be in the list of public housing for Executive flats and which the HDB has ceased taking in new applicants. The Government's commitment to Executive Condominium housing is to provide partial subsidy in land cost. The first few launches were exceptionally successful. All units were taken up. Thanks to the Government which subsidises the Executive Condominium when it was then sold at about $410 per sq ft. The price was very much lower and attractive compared to an equivalent private condominium which was then sold at about $700 per sq ft. As time goes by, things change. The price of a private condominium has gone all the way down, from $700 per sq ft to $500-plus per sq ft, and in a recent case, a project in Woodlands was selling for only $410 per sq ft. On the contrary, the Executive Condominium price has moved up slowly to $450 per sq ft. It is no wonder only half the number of units in the recent launch of the Executive Condominiums were taken up. 5.45 pm

Sir, we must understand that Executive Condominium housing is sandwiched in between the private condominiums and HDB Executive flats. There are strings attached to the buyer and it receives a Government subsidy. The project will fail if the price is too close or exceeds that of private condominiums. The present dilemma faced by the property developers who tender for Executive Condominium lands is the result of misjudgment of the price trend. We must continue to release land for Executive Condominiums in such a way that provides an opportunity for Executive Condominium price to realign itself in relation to the private condominium price and to find a comfortable level at which the targeted sandwich group of buyers would accept. To hold up or reduce land sale will deprive the market from finding its own price level. Any outcome resulting from the current Government measure in the Executive Condominium land price will be man-made and artificial.

Sir, it is a dream of many Singaporeans to own condominiums through the path of the Executive Condominium Scheme. This is a good time for them to enter into the market because the price will be right. The move by the Government to cut back its supply will not be fair to them. The Government should release the land for Executive Condominiums as previously planned and, subsequently, based on a realistic price and demand, project and determine the future supply. By gauging the response for a right price but at the wrong time and arriving at the conclusion that there is a lack of public demand might not be a wise move.

Sir, I beg the Minister to review this situation and continue to release the land for the original 3,000 units of Executive Condominiums and not to cut back to only half.

The Chairman: Mr Chng Hee Kok is not speaking. Mr Zulkifli.

Mr Zulkifli bin Baharudin: Sir, I would like to ask the Minister to refine the Executive Condominium Scheme in view of the poor demand for such properties. Not too long ago, one of the main fears of young Singaporeans and would-be property owners is that private property ownership would be beyond the reach of many Singaporeans, especially professionals, graduates and HDB upgraders. The property sector also had a number of imperfections. One, the gap between prices of HDB Executive flats and private property is so huge to make upgrading financially prohibitive. What was needed was to have a continuum of housing options to serve different price structures. A gradual and narrower gap between prices of different housing types facilitate mobility and upgrading and give incentives and motivation for those who aspire to improve their standard of housing.

The introduction of the EC in August 1995 meets this objective. When 2,000 units were brought into the market in 1996 and 4,000 in 1997, the sheer size and number of units introduced made the EC a major factor in the local property market. In fact, it brought about a huge relief to the so-called "sandwich" class, the first layer of HDB upgraders and first time owners who felt that they have been priced out of the private residential market at that time. Unfortunately, those who have been rescued by the "sandwich" class by the introduction of the EC still remains sandwiched today as prices of residential market have fallen to EC levels. Some developers now find themselves unable to break even if ECs are sold at current prices. There have been suggestions that EC should be scrapped. With prices of private residential properties falling buyers will not find EC attractive, especially when it comes to restrictions not present in private properties.

However, on the contrary, I would argue that the philosophy and concept of EC remains relevant today as it was when it was first introduced. Yes, the market may have made ECs unattractive and unsaleable today. But what if the market takes an upswing? A new sandwich class will emerge again. The ECs must remain relevant in the long run. It is critical that we have different housing options to meet the aspirations of our people at prices that are gradual to make upgrading possible. As we all know, a flat is more than just a home. It represents a hope that many Singaporeans share, that they want to work hard to buy a property, the biggest that they can possibly afford for their own comfort and perhaps leave something behind for future generations. But for EC to remain viable and relevant in the future, it must survive in the short run. Refinements need to be made to the EC in order to be responsive to market conditions. It cannot remain rigid in the face of rapidly changing economic scenarios.

I would like to ask the Minister to consider some of these suggestions. (1) remove or reduce the resale levy imposed on HDB upgraders who purchase ECs. HDB upgraders who purchase private property need not pay such a levy. So why not the cases of EC? (2) consider allowing CPF to be used for part or the entire portion of the initial 20% for purchase of ECs. (3) allow preferential interest on loan for the remaining 80% of the purchase price, similar to that of purchases of HDB flat. If need be, this can be made available for, say, a five-year period after which purchasers can then obtain loans from banks at commercial rates. (4) for developers, perhaps the Government should allow developers a longer period to complete their projects and waive penalties imposed on developers for delaying the completion of their projects in view of the current slump in the property market.

The EC has been a good concept and introduced at a time when it was most needed. Market conditions, however, made it appear irrelevant and unnecessary today. However, with refinements, it can not only address and respond to market conditions but also ensure that the objective of ensuring mobility to meet the aspirations of our people to upgrade and improve themselves is still relevant and should be preserved.

Mr Lew Syn Pau: Upgrading of private residential estates. The Government has spent billions of dollars so far on upgrading the HDB estates, both in the Main and the Interim Upgrading Programmes. I do not think the residents of the private housing estates begrudge the HDB dwellers of old estates the benefit of this policy to prevent old HDB flats from degenerating into slums.

What is perhaps not as obvious or noticeable to the public policy makers is that private housing estates which are very old can also degenerate into slums if no attention is similarly given. The plan to change the legislation to facilitate the en bloc sales of condominiums may help to alleviate this problem. However, en bloc sales would only be viable in locations where plot ratios have been increased significantly. What about those without the benefit of increased plot ratios? Many old condominiums have problems getting enough support to embark on a major upgrading because the residents, many of whom are old and retired, cannot afford to contribute tens of thousands of dollars required for a major upgrading.

I would like to ask the Minister whether he plans to introduce any measure to help old private housing estates to upgrade. Could the Minister consider, for example, say, subsidising 20% of the total upgrading costs of old condominiums above 20 years old, subject to a ceiling of, say, $10,000 per household? This should apply only to condominiums where en bloc sales are not viable because the plot ratio has not been increased.

In the landed private residential estates, some upgrading is also taking place in the form of replacement of old pipes by Singapore Power. As the Minister probably knows, Singapore Power wants households affected to contribute to the laying of new pipes in the common properties, such as the road reserves or drainage reserves. And the cost per household can come up to about $5,000 to $6,000. If not enough households are prepared to contribute, the residents are asked to abandon their old pipes and convert to bottled gas. This has upset many landed property residents of old estates.

My question to the Minster is: is it not possible for the Government to bear the cost of this infrastructural replacement? After all, when roads and drains are replaced, for example, in the old private housing estates, the residents are not called upon to shoulder the costs collectively. Besides, residents in the private housing estates believe that the then PUB had made enough money from gas subscribers to build up a sinking fund to pay for these infrastructural replacements. I hope the Minister can comment on this.

The next issue related to upgrading here is regarding the establishment of residents associations (RAs). In the HDB estates, we have RCs while condominiums have their management corporations. Both of these have centres or clubhouses where the residents can meet to socialise. I believe we should try the same and establish RAs in landed housing estates in order to facilitate and build neighbourliness among the people living there. But to facilitate this, they need a small clubhouse to use for meetings and social activities. I would like to ask the Minister whether he could consider setting aside some land for RAs to establish such a clubhouse. This will make it easier for RAs to be established in the landed housing estates.

Dr Ker Sin Tze (Aljunied): (In Mandarin): The Government has been upgrading the older HDB estates under the Main Upgrading Programme and the Interim Upgrading Programme, costing the public a lot of money. The Government has announced that it will also be doing some upgrading work for private estates. But up to now, no specific measure has been announced. Residents in the private residential estates are anxious to know when the Government will commence the upgrading work for them and what will be the extent of the upgrading.

Some private residential estates were built many years ago. The roads are very narrow and parking spaces are very limited. Right now, some families in the private estates, particularly the middle-aged couples, have grown-up children living together with them, and they own more than one car. In most cases, there is only parking space for one car in the compound of the house. The other cars will have to be parked outside, along the roadside. For the rather narrow roads within the residential estate, the roads become even narrower with the cars being parked along the roadside, and it is very difficult for vehicles to move around. The neighbours may complain as they are inconvenienced, not just occasionally but day in and day out.

Apart from that, in the private residential estates, there is usually very little open space or public garden for the residents to enjoy themselves during their leisure hours. The Ministry of National Development should consider helping these private residential estates in improving their living environment. For example, the Government can buy over a few adjoining houses in a highly congested estate, demolish them and build a small garden there or a small car park for the convenience of the residents to park their cars and to enjoy their leisure. Apart from that, there may be other improvements and upgrading works, such as widening the roads, resurfacing the roads or to convert the overhanging cables into underground cables and to alter the gradients of the drains to prevent water stagnation. All these measures can further improve the living environment of private residential estates. I hope that the Minister for National Development can seriously consider my suggestions. 6.00 pm

The Minister for National Development (Mr Lim Hng Kiang): Sir, this is supposed to be an austerity year. I am surprised to hear such a long wish list from Members.

Let me first address the key issue raised by several Members, ie, what is Government's role in the private property market. Mr Lew Syn Pau stressed that the Government should strive for stability in the property market. Mr Inderjit Singh asked that the Government not intervene in the market and let the free market settle the private property prices. Earlier on, during the debate on the Budget, several Members such as Mr Inderjit Singh, Mr Simon Tay and Mr Chuang felt that there had been too much Government intervention and support given to the property sector and property developers.

I would like to take this opportunity to reiterate what the Government's role in the private property market is. First, can the Government adopt a completely hands-off approach and let the free market reign in the private property market? The answer is no. The property market is closely linked to the overall economy and the stability of the financial system. More than 90% of Singaporeans own their homes. No government can, therefore, take a completely hands-off approach to the private property market.

We all know that the private property market will go through the business cycles. Prices will go up and prices will come down. The Government has no intention of fixing property price levels, nor can it do so. The Government does not have a target price level to reach. However, the Government will intervene in the property market when it is necessary to prevent excessive swings in the market. This is because a severe overheating of the property market or a crash will have serious ramifications on the real economy.

Another reason why the Government cannot take a completely hands-off approach is because the Government itself is involved in land sales. At the end of the day, the Government must decide how much land to sell, and that will affect the supply side of the equation.

What is the Government's role in the property market? First, the Government will monitor the property market and dampen excessive volatility that can undermine the overall financial and economic stability of the country. Second, the Government will always ensure that property loans for development and for mortgages are within prudent limits. Third, the Government will release sufficient land to meet the medium term demand. Finally, the Government encourages market transparency by making clear Government's land sale programme ahead of time and providing timely and comprehensive information on property stocks, occupancy and potential supply. At the end of the day, market forces will settle the price levels, not the Government.

The second issue which was raised by the MPs is that the Government appeared to be passive when the property market was rising a few years ago, and now seem to be actively intervening when the market is declining. Let me set the record straight. When the market went up sharply in 1993 and 1994, it reflected the very strong double digit economic growth then. Furthermore, the region was booming. Foreign funds flowed into the region and into Singapore. As we all know, the region is now suffering from the excesses of that period.

Before 1987, the Government planned on the basis that public housing will constitute 90% of homes in Singapore. We realise that this did not reflect the rising incomes and rising expectations of Singaporeans. So in 1990, we announced a systematic Government land sales programme to inject more private housing units into the market. We started off with 1,500 units in 1990, rising gradually to 3,000 units in 1993. When prices started to rise sharply in 1993, the Government stepped up its annual land sales from 3,000 units in 1993 to 4,000 units in 1994, and then to 6,000 units in 1995, to meet the increased demand for private housing. So it is not possible for the Government to set a fixed land sales and expect to operate as an auto pilot.

I know Prof. Low Seow Chay himself argued for more land sales when the property prices were going up. Many MPs did so in 1993 and 1994. So it is not possible when prices are coming down to say that Government stay clear and do nothing at all. Similarly, the Government introduced Executive Condominiums in 1995 to make private housing more affordable to a certain group of people.

When the private property market stabilised for the first nine months in 1995, we thought we had solved the problem. However, the property market started to overheat again at the end of 1995 and in early 1996. The Government then had to introduce the anti-speculation measures in May 1996. This was necessary to curb market excesses and prevent the property bubble from further ballooning, as this would have made the subsequent market correction even more drastic.

The reason why I explained the history is to show that the Government anticipated the strong demand for private housing, as early as 1989. If the Government did not inject more private housing into the market through the Government land sales programme, prices would have gone up much higher in the early 1990s. Again, if the Government did not intervene in May 1996, the property market would also have risen much higher and a subsequent correction more painful.

So, when the markets do go up, people get caught up in it, and think that prices would not fall. We can call it exuberance or we can call it euphoria. Similarly, when markets do come down, there is gloom and doom. People stay away. The market declines further and it becomes a self-fulfilling prophecy. It is not possible to prevent such cycles. The Government can only take limited action to moderate the excesses of such cycles.

Since the middle of last year, the economic landscape has changed substantially. There is now an excess supply of properties and a contraction of demand due to uncertainties arising from the regional economic turmoil. Under the present circumstances, it will not be prudent for the Government to continue with the land sales at the same level as previous years. This is because releasing more land than the market can absorb will exacerbate the downward swing of the property market. The Government has thus decided to suspend the sales of sites for 2,500 residential units to the second half of 1998. However, let me assure the House that the Government remains committed to releasing sufficient land over the medium term to meet Singaporeans' aspirations to own private residential properties.

Prof. Low Seow Chay asked whether we have enough units in the medium term. As Members have noticed, in the fourth quarter 1997 land supply data, we have more than 40,000 units under construction, of which more than half are still not sold. 8,000 units, started construction, have all the building plan approvals, launched for sale and not sold. Another 8,600-over units started construction, not yet launched for sale, also unsold. So you have more than 17,000 units in the market unsold, ready for takers. The Government will continue to monitor the economic and property situation carefully, and will sell more units when the market recovers

Mr Inderjit Singh asked the Government not to lift the May 1996 anti-speculation measures. I agree with him. These measures will serve us well, both in the upturn as well as in the downturn. The Government, therefore, has no plans to lift them.

Mr Inderjit Singh was also concerned that the tax exemption for land under development and not for vacant land will accelerate the development and thus add to the housing supply. I do not think developers would start development and add to the oversupply situation simply because the property tax allows them to do so. Developers will add to the supply only if they think there is a demand and that they can sell the units for a profit. Therefore, property tax exemption for land under development will not exacerbate the land supply.

Mr Sinnakaruppan asked whether Government should lower the upfront cash payment for housing purchase from 20% to 10%, to help young first-timers to own private property. I must reiterate what Dr Richard Hu said, ie, that "Singaporeans should only purchase private property only if they can afford it. It is not advisable for banks to lend or for buyers to borrow beyond what is financially prudent for them, especially at this time of economic uncertainty." The 80% financial limit on mortgage loans in Singapore is still higher compared to 70% in Hong Kong. If young Singaporeans cannot afford the 20% cash outlay, then they should start off with the HDB flat and upgrade to private property when they can better afford it. Alternatively, they can apply for the Executive Condominiums where they will be given a $40,000 CPF housing grant if they are first-time purchasers.

Mr Chng Hee Kok asked whether the Government will set reserve prices for land tenders. I have discussed this with the Ministry of Finance and the Ministry of Law, and they are not in favour of stipulating reserve prices for the following reasons:

There is a fairly long time lag between the launch of a sale and the closing of the tender. For example, for the site that Mr Chng mentioned, the Marina South site, there is a five-month time lag. So if the Chief Valuer were to announce a reserve price in November last year and we close in May this year, I think his reserve price will be very much out of sync with the market. Similarly, it is not the market practice for private land owners to disclose their reserve prices. So I do not see why the Government should have a practice different from the private sector.

As to Mr Chng's comments about the results of the Marina South tender, I would not want to pre-judge the results. I agree with him that there is a certain upfront cost in preparing for the tender. I will get URA to examine how to minimise this cost, because it is a large site and we need not tie up a large deposit unnecessarily. In any case, it is not that the developers are tying up $100 million. This takes the form of a banker's guarantee and so it is not tying up capital unnecessarily. We will examine it. For large sites, perhaps we need not have such a big amount as a deposit.

Let me now turn to Executive Condominiums. Let me reiterate the objective of the Executive Condominiums. As many Members have highlighted, it is to satisfy those who want to buy something more than a HDB flat but yet cannot afford the private property. We can either call it a "sandwich housing", we can call it a hybrid between HDB and private housing. The intention is that since HDB now builds and sells 5-room and 4-room flats, we think that there is a group of Singaporeans who aspire to own more than HDB flats but cannot quite cross into private housing. That is why we introduced the Executive Condominiums. We think this concept remains valid in good times or bad, but we have to be realistic. If private property prices increase, then less people will be able to afford private property and the demand for Executive Condominiums will go up. Similarly or conversely, if private property prices decrease, then more people would be able to afford private property and therefore the demand for ECs will drop. So it is not possible for us to set a fixed supply of ECs and not adjust according to the market conditions. 6.15 pm

Based on our estimates of what this group of people would be, we think that out of 25,000 new households per year, between 5% and 10% would be the target group to own Executive Condominiums. And therefore between 1,500 and 2,500 units every year will be the right number to sell. We started off in 1996 with 2,000 units because of the sharp prices. We increased the number to 4,000 in 1997. We have therefore decided to cut back in 1998 to 1,500 units. As you can see, if you average this out, this is more or less the number that we expect to be able to buy Executive Condominiums.

The price of the Executive Condominiums has to settle between the HDB prices and the private property prices. What the price would be will have to be determined by the market and the developers who are building these properties.

Let me now turn to upgrading of private housing estates. I take all the comments of various Members. Let me just explain. First, the Government has the intention to upgrade private housing estates. We have said this before and we are still committed to upgrading private housing estates. Second, what is the scope of this upgrading? I am a little taken aback by all these suggestions about clubhouses. I think we want to make it quite clear that upgrading of private housing estates, as we see it today, will only take place in the public areas. It will take the scope something like the Interim Upgrading Programme of the HDB for the public areas. We are not likely to enter into the common property of the condominiums, neither are we likely to enter into the compound of the landed property. So I think the scope is limited to the public areas. The budget will be more or less like the IUP budget.

The next question will be when do we implement the project. We have hoped to implement it this year. But because of the economic downturn, we have to postpone it. It will be very difficult for me to explain how we can cut back on MUP and IUP on one hand and start off another programme on the private housing estates on the other. So I think it will be more prudent for us to launch this project when the economy recovers. At that point, we can reinstate the MUP and IUP programmes and at the same time launch the programme for the private housing estates.

As to Mr Lew Syn Pau's specific examples of laying of gas pipes, I think we are familiar with that issue. The bottomline is: do you implement an upgrading programme when it is not cost effective, when the alternative of using bottled gas is so much more cost effective? Do you need to re-lay pipes for town gas when each household could just make use of bottled gas? So it is not just a question of upgrading but also the economic usefulness of expending that sum of money.

On the establishment of RAs, I think we are supportive but not at the price of having to build a clubhouse for every one of them.

I believe I have answered most of the questions. Please point out any other issues which I have not covered.

Mr Lew Syn Pau: Sir, the upgrading of HDB estates has been well received by most HDB residents, even though it involves an element of cost sharing. The only negative feedback I have received is that the contractors for the works tend to take too long and hence inconvenience residents for an unduly long period of time of between two and three years, because they work on too many blocks (about 10 to 15 blocks) at the same time. My question to the Minister is: would it not be possible to get the contractors to work on a fewer number of blocks at one time, say, three to five blocks, so that they can shorten the duration of the upgrading works to just one to two years, instead of two to three years?

Dr Teo Ho Pin: Sir, my topic is on upgrading of 1- and 2-room flats. The HDB's upgrading programme has been a success. Older flats were rejuvenated to improve the living environment of those who have supported the Government's upgrading programme. But due to the criteria for selection, many of the flats upgraded are 3-room flats. Not much has been done to upgrade 1- and 2-room flats in the HDB estates.

Presently, there are about 3,200 units of 1- and 2-room flats in Singapore. Most of these flats are rented out to low income families, including older Singaporeans. Many of these flats were built in the 70s and 80s and do not have many facilities, especially for the senior citizens.

Sir, I lived in a 1-room flat for six years. I understand the plight of these residents. I understand their living conditions. I am sure Singaporeans will support any Government's effort to improve the living conditions of these fellow Singaporeans.

Thus, I would strongly urge the Ministry to consider implementing upgrading programmes for 1- and 2-room HDB flats. As these are mainly rented flats, HDB should bear the full cost of upgrading, thus alleviating any financial burden on these residents.

Mr Sinnakaruppan: Sir, upgrading of HDB flats, in particular IUP. The present grant given to IUP is $6,000 per household and if lift upgrading is included, the grant is $7,000 per household. I have the experience of managing two IUPs in my precinct in the Moulmein ward in the last few years. And my conclusion is that the budget of $7,000 per household is actually very, very tight for lift upgrading. This is because, firstly, slab blocks require two to three lifts per upgraded block and lift upgrading is a very expensive project but very essential for residents, especially older residents. Secondly, as a result of costly lift upgrading, there is very little money left for other block works and precinct upgrading, some basic facilities for children and other residents. And even if one spends very little amount on these fancy horticultural works, there is still not enough for precinct upgrading facilities.

Sir, I would like to ask the Minister two questions: First, whether he can consider increasing the funding for the IUPs that embark on lift upgrading and, if that is not possible, as he said last year, can he consider lift upgrading as a separate programme, like IUP and MUP? This question was also being asked last year. The second question really is that whether blocks which are four or five storeys can be considered for lift programme, as Mr Ang Mong Seng had brought up last year.

Mr Ong Kian Min (Pasir Ris): Sir, I welcome the announcement that the number of precincts, which will be selected this year for Main Upgrading, has been reduced. Some people have questioned whether the Government is going back on its promise on upgrading. But I believe the downward adjustment in the MUP schedule is prudent when we consider this issue from the perspective of flat owners who are or may be affected by the on-going economic downturn.

There is no doubt that the Main Upgrading Programme has proven to be very popular with HDB flat owners and they had happily voted in favour of the upgrading and shared the cost of upgrading during better times. Under the cost-sharing formula, depending on the room-type and the upgrading package, flat owners have to pay between 7% and 42% of the cost of upgrading. For the Basic Package, a 1-, 2- or 3-room flat owner would have to contribute $2,200 for the cost of upgrading. For an Executive flat owner under the Standard-Plus Package, the amount payable is $28,500.

However, this monetary outlay can prove to be a great burden, especially at a difficult time like this. We should therefore also consider whether, in this present economic climate, it is fair or reasonable to expect the HDB flat owner to spend that kind of money on the upgrading and beautification of this precinct and his flat. Or, would the flat owner be better off investing the money in things which will bring him long term benefits and returns? For example, with $2,200 which the 1-, 2- or 3-room flat owner has to pay for the Basic Package, he could buy a Pentium multimedia computer for his child. And, in the case of the Executive flat owner for the Standard-Plus Package, with $28,500, he could see his child through four years of tertiary education in our NUS or NTU.

Sir, the Government has announced that with slower economic growth, the MUP has been adjusted downwards this year. However, this does not mean that residents have lost out on their upgrading forever. The Minister for Finance has assured us that the pace of the programme is dependent on the size of the budget surplus. Therefore, when the economy recovers in due course, perhaps in the year 2000 or 2001, and we have larger budget surpluses at that time, the number of upgrading precincts will correspondingly increase.

I, therefore, urge those who question the Government's decision to slow down the pace of the Main Upgrading Programme at this time to consider whether it is prudent and wiser, in the light of the present uncertainty and economic climate, for flat owners to direct their resources to other more productive investments and uses. After all, one of the main reasons why Thailand ran into financial difficulties was that it borrowed and spent too much on non-productive property developments.

The Chairman: Mr Chiam See Tong is not here. Mr Zainul.

Mr Zainul Abidin Rasheed: Sir, I agree with Mr Ong that in these days of austerity the rescheduling of the MUP is understandable. But I must say that when Government announced that the MUP schedule will be slowed down to 10 precincts, many were disappointed. I think my GRC chief, Mr Lee Yock Suan, will know that. Even my residents in Punggol East were looking forward to their own IUP and MUP. They were hoping that their turn could come sooner than later. As we know, originally 15 precincts were scheduled a year from 1996 to the year 2000. But I am sure many will also understand, pending improvements in the economic outlook of the region, they will have to live with this new situation.

However, in view of the expectations raised earlier, I wonder, Sir, whether the Minister would continue to monitor the economic situation closely and review the MUP schedule as soon as possible. In addition to the question of surpluses, what other criteria would be used, whether, in fact, the economic growth rates and developments in the region would also be taken into consideration to determine the scale of the review.

Dr Teo Ho Pin: Sir, my topic is on lift upgrading. In land-scarce Singapore, the majority of Singaporeans have no choice but to live in high-rise flats. As we move into the next millennium, Singaporeans are more likely to be living in 30- or 40-storey flats. Living in high-rise buildings can be quite comfortable provided we have a reliable and safe lift system. If the lifts fail frequently, many residents will be inconvenienced and some may be trapped in the lifts. Thus, it is important that lifts are maintained, upgraded and replaced accordingly to ensure that they function properly.

According to the HDB, the recommended replacement cycle of a lift is 28 years. However, in practice, most lifts will begin to give problems after 15 years of operation. The average lift breakdown rate for HDB flats is 0.3 per lift per month. This means that 3% of HDB lifts (that is about 3,000 lifts) break down monthly. This is definitely not acceptable if we were to live in 30-storey buildings. In the Interim and Main Upgrading Programmes, lift upgrading is not a standard item of work. As such, some IUP and MUP did not upgrade or replace the lifts due to budget constraint. It costs about $95,000 to replace a lift for a 12-storey block with three lift landings, while the replacement of a lift for a 12-storey block with 12 landings will cost approximately $175,000. 6.30 pm

Thus, I hope the Government will consider increasing the grant for both IUP and MUP programmes. In addition, the Ministry must specify lift upgrading or replacement as a standard item of work for all IUP and MUP. Where possible, all upgraded blocks must have lift landing at every floor.

As for the private residential flats, there is presently no provision in the Land Titles (Strata) Act stipulating the percentage of contribution for sinking fund. As a result, some management corporations, especially the older condominiums, do not make adequate provision for the replacement of their lifts. The replacement of lifts is a costly exercise and some management corporations encounter difficulty in raising funds to carry out such works.

Thus, I would like to urge the Government to consider providing a grant or tax incentive for owners of private residential flats to upgrade their lifts.

Mr Ong Kian Min: Sir, since the last economic downturn in 1985, Singaporeans have enjoyed more than a decade of economic growth. This has formed the basis on which many families plan financially for their future. Therefore, it is understandable how the present economic downturn has taken many Singaporeans by surprise and upset their financial planning. This is probably nowhere more obvious than in financial plans for one necessity close to everyone's heart, and that is housing.

Our consistent economic growth over the past decade has led many a Singaporean to project their ability to finance the purchase of a home on the basis of assumptions, such as, first, a stable income. Until recently, most Singaporeans can look forward to good annual salary increments year after year in a competitive job market. Second, the rising property market where an investment in property will almost certainly yield profits.

It is no wonder that many applicants for new HDB flats opt for the bigger room types. As at 31st January 1998, 57% of the 131,100 applicants on the HDB waiting list have opted to buy a 5-room flat. In 1997, 59% of the new applicants for 4-room and bigger flats have opted for 5-room flats, compared to 36% in 1991.

However, in the light of the present economic crisis, these assumptions are not reliable. Family income might not increase as projected but could even decline because of retrenchment and lower bonuses and increments. HDB flats on the resale market no longer command the same premium.

Sir, I would therefore urge the HDB to consider the difficulties faced by the following three broad categories of HDB lessees. The first group are new applicants who are in the queue for flats which are now beyond their means. Could the HDB allow and facilitate this group of applicants to opt for smaller flats instead? If such applicants have to go ahead to complete their purchase, they would probably face increasing difficulty in fulfilling their repayment obligations under their mortgage loan financing.

I believe it would be most helpful at times like these that such applicants, who have miscalculated their future earning capability, be permitted to select smaller flats and hence lessen their financial burden.

The second group are those who have upgraded in the last two and a half years by buying a larger flat in the resale market and are now realising that they could not afford to maintain such a big flat. Under existing HDB rules, they cannot dispose the flat within two-and-a-half years of purchasing it. For such families who are compelled by circumstances to downgrade, could the Minister consider relaxing this rule and permit them to sell their flats in the open market in order to purchase a smaller one again from the open market?

The third group are existing flat owners who, because of a change in their financial circumstances arising out of the current economic crisis, are not facing difficulties in meeting the obligations under the mortgage loan repayments. Under section 56(1)(k) of the Housing and Development Act, the HDB has the power to compulsorily acquire the flat on the ground that the lessee is owing the HDB arrears of monthly instalments. The HDB has served section 56 Notices in the past for debts as small as a few thousand dollars.

In a good year like 1996, of the 407,200 households with mortgage loan account, four defaulted on their payments and had their flats repossessed by the HDB. Given the present economic circumstances, we can expect this number to increase. In the fourth quarter of 1997 alone, 4,278 workers lost their jobs because of retrenchment. More workers are likely to be laid off this year.

Sir, it cannot be easy for these retrenched workers, especially those who are sole breadwinners of large young families, to face the prospect of losing the family's roof over their heads because they have difficulties meeting the loan repayment schedule.

Under the scheme of things in Singapore, owning a HDB flat is a heavily protected right. Commercial creditors, who may be owed large sums of money, may institute legal proceedings to enforce their claims and make the HDB lessee a bankrupt, but they cannot take over his flat, they cannot throw him out into the streets and take away the roof over his head.

It would therefore be most ironical for the HDB, whose mission is to provide Singaporeans with affordable new HDB flats under the Home Ownership Scheme, to evict the debtor and compulsorily repossess his flat to enforce a debt of a few thousand dollars.

I would urge the Minister to take this opportunity to reassure HDB lessees that in difficult times, such as these, the HDB would not evict them but would view with sympathetic understanding and grant extension of time for repayment to help these affected families tide over their financial difficulties arising from this economic crisis.

The Chairman: Dr Tan is not here. Mr Zainul.

Mr Zainul Abidin Rasheed: Sir, many policies have been introduced by the HDB since 1992 that have pushed up prices of HDB flats. Just now, we heard from the Minister the milestone policy that was brought about since the 1990s. Whether it is a market valuation system adopted for mortgage loan financing, the MUP, SERS, the CPF Housing Grant, I think they all contribute to higher prices of HDB flats. However, the introduction of ECs in July 1996 helped to moderate prices. Similarly, there was further moderation when the Government announced in April 1997 the revised mortgage financing policy and the revised allocation of flats policy.

May I ask the Minister how effective are these last two measures in curbing speculative demand for HDB flats and do they make HDB flats more affordable for the public? How would the Minister measure that? I also like to ask what measures would the Minister introduce to make HDB flats more affordable, especially for the lower income group. What percentage of the lower income group own their own flats and how would he make more of them home owners?

Mr Low Thia Khiang: (In Mandarin): Sir, on 19th February this year in Parliament, I asked the Minister for National Development a few questions relating to the sale price and subsidy of HDB flats. In his written answer, the latest figures for the fourth quarter of 1997 and the first quarter of 1998 show that after deducting the construction cost and land cost, there is a lot of profit to be made from the sale of the Sengkang flats.

In Contract N2C27, there are 795 units. From each unit, the Government makes a profit of $39,221. After the sale of all the flats, the total profit may exceed $31 million. In Contract N3C1, there are 442 units. The Government's profit on each unit is $29,000, and after selling all the units, the total profit may exceed $12 million. In Contract N2C28, there are 444 units and the profit on each unit is $1,016. After the sale of all the flats, the total profit will amount to $451,000.

So, after selling all these flats in the Sengkang area, the Government can make a profit of more than $44 million. I would like to ask whether the Government is subsidizing the flats in Sengkang or making a profit from there.

Mr Kenneth Chen Koon Lap (Hong Kah): Sir, the number of applications received as at January 1998 for HDB flats stands at 47,218 applications for 5-room flats, 39,369 for 4-room flats and 2,635 for 3-room flats. And in Punggol 21, the queue for the period ending 31st January 1998, the number of applications for 5-room flats is 20,300, whereas for 4-room flats it is 12,900.

The proportionately high 5-room applicants do not quite correspond with the demographic nor the economic profile of the applicants. The high number of 5-room flat applications may not be a true reflection of the demand or special requirements of the applicants nor necessarily coincides with the economic ability to purchase the flat. Many apply for the 5-room flat thinking that there is an advantage to apply for a larger flat now instead of upgrading at a later date when the need arises. That is why there is such a high percentage of first-time applications for this type of flat which means that, first, they not only have to bear a higher purchasing cost but also higher maintenance cost, other utility and upkeeping expenses. Worse, in times of economic downturn, they would definitely feel the economic strain in acquiring the extra space that they do not need, as my colleague, Mr Ong Kian Min, stated that many have already asked to be downgraded.

Second, from the national point of view, it would be a tremendous waste of resources because the built-up areas are not being used to the maximum. Already in Singapore, the ratio between the built-up area and each occupant in a residential unit is one of the highest in Asia. I would therefore like to ask the Minister in what way the Ministry can advise the applicants to be more realistic in choosing the type of flat they want to apply so that they are more comfortable both with the need and the financial affordability. Perhaps some guidelines can be introduced requesting applicants of larger flats to have a minimum number of occupants or set a minimum combined family income for those who want to apply for such larger flats.

Dr Ker Sin Tze: (In Mandarin): Sir, in Singapore, 90% of our population live in HDB flats. Every eligible family can apply direct for a flat from the HDB twice in their lifetime. In other words, they can get the subsidies twice from the Government. But single persons in Singapore cannot apply directly for flats from the HDB. They have to wait until they are 35 years old before they can buy resale flats from the open market. Otherwise, they will have to team up with a person above 35 years of age to apply for a new HDB flat.

We understand that the objective of the policy is to encourage young people to get married, and start their own families. But sometimes, marriage can be a matter of destiny. To a girl, once the tender age is past, it may not be easy for her to find a suitable partner to be married to. It is not a matter of whether you want to get married or not! So if the opportunities are lost, because of incompatibility with the boy-friend or girl-friend, or because of heavy workload, you may just remain a single, not by choice but by chance. This is a matter of great regret. To add insult to injury, this unfortunate single person is not allowed to apply for a HDB flat. He misses the boat of marriage, and now he cannot even buy a flat directly from the HDB. I think it is very unfair.

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.

Mr Lim Hng Kiang: Mr Deputy Speaker, Sir, I beg to report that the Committee of Supply has made further progress on the Main and Development Estimates for FY 1998/1999, and ask leave to sit again tomorrow.

Mr Deputy Speaker: So be it.