INDUSTRIAL PROJECTS TO ACCELERATE INCREASED PUBLIC SPENDING

Mr Tay Beng Chuan asked the Minister for Finance whether the Government will (i) provide specific details on the current and planned infrastructural projects to be accelerated to increase public spending; and (ii) consider relaxing certain registration requirements stipulated by the Construction Industry Development Board or downsizing large-scale projects, thereby widening the opportunities for more local contractors to tender for these projects.

Dr Richard Hu Tsu Tau: This question is in two parts. I will address the first part. In my Ministerial Statement on off-Budget measures, I have given some details of the key sectors and specific development projects for which the Government will release an additional $670 million in FY98. This sum comprises $460 million to speed up existing development projects or to start new ones, $125 million for assistance schemes for companies, and $83 million to increase civil service recruitment. I will now highlight the main projects which will receive substantial disbursement of funds under the off-Budget package.

Additional spending on education accounts for the largest share of $282 million, or about 42% of total disbursement. This includes, in the area of IT development, $22 million for enhancing CAD-CAM facilities in the polytechnics, $22 million for upgrading computer facilities in NTU, and $30 million to incorporate IT in primary and secondary schools under construction. Another $38 million goes to accelerating on-going campus development at NUS and NTU, while $28 million goes to speeding up the acquisition of equipment for NUS. The recruitment of more teachers will cost $70 million.

Additional spending on economic infrastructure this year includes $50 million to assist the commercial rollout of Singapore One, $22 million to put in basic infrastructure for industrial land sales, $15 million to develop Chinatown as the first Thematic Zone under the Tourism 21 Plan, and $13 million to further speed up the Jurong Island reclamation.

A sum of $31 million is set aside to put in place the necessary basic infrastructure in HDB new towns such as roads and drains. Some $36 million will be spent to speed up public sector computerisation efforts to upgrade the operational capabilities of our uniformed services in the Ministry of Home Affairs. In addition, another $13 million is allocated to recruit more officers for our civil defence force, police, prisons and immigration departments.

Additional funds have also been allocated to help our workers and companies tide over this difficult period. This includes an additional $80 million for the Economic Development Assistance Scheme, $20 million in interest subsidy for the enhanced Local Enterprise Financing Scheme, or LEFS, $20 million for the Skills Redevelopment Programme, and $5 million for TDB trade promotion and facilitation programmes to help our retailers and companies with overseas marketing efforts.

In the second part of the question, the request is for information on the CIDB's programmes. The registration of contractors by the Construction Industry Development Board is an integral part of the Government's tendering process to objectively evaluate a contractor's capability and capacity to take on projects.

In the past three years, local construction firms performed quite well clinching about 63% of total public sector construction contracts in value terms, or 94% in terms of number of projects. There are more than twice the number of local contractors compared to foreign contractors in the $50 million and above registration category of G8. In the last year alone, the number of local construction firms registered with CIDB had risen by 9%, from 1,361 to 1,485, with the number in the G8 class increasing from 61 to 65.

Generally, foreign contractors' competitive edge in large projects stems not from just doing the construction work, but by being able to provide a total solution or package, which includes integrating both design and technological know-how. They offer alternatives and win clients over with superior solutions, which save time and costs.

Relaxing the registration criteria is not the solution to the current problem. It will not shift the competitive edge of foreign contractors over our local contractors in tendering for high value projects above $100 million where the local share of contracts awarded is significantly lower. Instead, it will lead to keener competition and cause more construction firms to get into difficulties, which is not beneficial to the construction industry at this time. Besides this, relaxing the registration requirement could compromise the objective of ensuring that firms tendering for jobs of different sizes have the capacity and capability to execute them satisfactorily. The reputation and credibility of the registration system as a guide to the firms' capacity and capability has been painstakingly built up over the years, and we should not change the criteria just to try and suit economic circumstances.

With regard to the Member's suggestion to downsize large-scale projects as an alternative way to widen the opportunities for more local contractors to tender for the projects, CIDB's record shows that most of the above $100 million projects won by foreign contractors were private sector projects. The public sector projects won by foreign contractors were mainly those where the capabilities lie with the foreign contractors, such as for the MRT line projects. Downsizing projects would generally require large contracts to be broken down into smaller parcels. Apart from losing the economy of scale and lower prices achieved in large contracts, the public sector agencies would also incur higher overheads to manage a larger number of smaller projects. Nonetheless, my Ministry will encourage public sector agencies to study and consider such project downsizing where feasible and where there is likely to be minimal impact on procurement cost and administrative overheads.