COMMITTEE ON SINGAPORE'S COMPETITIVENESS (Motion)

The Minister for Trade and Industry (Mr Lee Yock Suan): Mr Speaker, Sir, I beg to move:

`That this House endorses the strategies and policies set out in the Report of the Committee on Singapore's Competitiveness, contained in Paper Misc. 3 of 1998, as the basis for strengthening Singapore's competitiveness.'

In May last year, the Committee on Singapore's Competitiveness (CSC) was formed to critically assess Singapore's economic competitiveness over the next decade, taking into consideration global trends and development of existing and emerging competition. The CSC was tasked to identify problem areas and propose appropriate strategies and policies with a view to maintaining and strengthening Singapore's competitive position. The Committee has completed its work and released its Report on 11th November 1998. Copies of the Report have been circulated to hon. Members.

When the CSC first began its work, the focus was on the next ten years. The onset of the regional economic crisis in July 1997 has, however, altered the economic landscape significantly. Given our open economy and significant linkages with the region, Singapore too has not been spared from the contagion despite our sound economic fundamentals. The sharp currency realignments have also weakened our competitiveness. The scope of the CSC Report was therefore expanded to propose measures to help the economy cope with the crisis. The Report hence includes both short- and long-term recommendations to improve our competitiveness.

Short-term Measures

Mr Speaker, Sir, the regional crisis has significantly impacted our economic performance. Between 1st July 1997 and 21st November 1998, the S$ to US$ exchange rate and the Singapore stock market have fallen by 12% and 30% respectively. The GDP growth rate year-on-year has slowed from 7.8% in 1997 to 6.2% and 1.8% respectively in the first and second quarter of 1998. Third quarter growth was -0.7%, the first decline since 1985. On a quarter-on-quarter basis, the economy has been shrinking for two successive quarters. For the whole of 1998, Singapore's GDP growth is expected to be around 1/2-1%.

Businesses have been hit, some sectors more than others, and more than 20,000 workers have been retrenched in the first three quarters as a result. The seasonally-adjusted unemployment rate has risen sharply from 2.3% in June to 4.5% in September this year. The coming quarters will be difficult for Singapore. We will continue to face weaker demand for our goods and services from the region which is struggling to recover from the severe economic crisis. The slowing momentum in the US and the EU will dampen demand further. As external demand accounts for more than two-thirds of our total demand, 1999 economic growth is expected to remain weak. MTI's preliminary growth forecast for 1999 is between -1% and 1%.

A key concern is that the sharp currency realignments have eroded our cost-competitiveness. Our relative unit labour cost (RULC) has been rising gradually but steadily over the years. When the region was prospering, our rising RULC was a concern but not a critical problem. Now economic conditions have changed drastically in the region and we are competing for a global economic pie that is growing more slowly.

Feedback from EDB indicated that some companies were facing pressures to pare prices or relocate production to other countries because of the cost differentials between Singapore and the regional countries. Our total exports to the US have fallen by 8.2% in the first 9 months of this year while all the other regional countries still managed to register positive export growth to the US. This is due largely to the weak performance of our electronics industry. Our market share of electronics exports to the US has dropped from 9.3% in the second quarter of 1997 to 7.3% in September 1998.

For the short term, the key concern for Singapore is how to restore our competitiveness, help our companies to tide over the crisis and minimise further job losses. We also need to continue attracting investments to create new jobs for Singaporeans.

Besides raising productivity which takes time, there are two main approaches to restore cost competitiveness in the short term. One approach is through currency depreciation. While MAS has been managing the S$ more flexibly in view of the regional crisis, competitive devaluation is not recommended. A weak S$, in the context of an open economy heavily dependent on imports, will translate into larger imported inflation. This would in turn erode any competitive gains from a currency devaluation. A depreciating currency would also erode confidence in the S$ as a store of value, impact our position as a financial centre and diminish the value of S$-denominated assets held by Singaporeans.

The other approach which the CSC has recommended is to reduce business costs directly. This addresses the cost competitiveness head-on, without the disadvantages brought about by competitive devaluation. The Government took the same approach to tackle the 1985 recession, with great effectiveness.

In June the Government accepted the CSC's recommendation of a $2 billion package of off-budget measures which have been implemented. Since then the economic situation has deteriorated further and the contagion has spread to Russia and Brazil. The CSC has recommended that the Government should now implement a much larger cost and tax cutting package worth about $10 billion, equivalent to about 7% of our GDP, to help our companies compete during this difficult period. All the key components of business costs should be addressed, including wages, foreign worker levy, rentals, charges for services like electricity, telecommunications and port services, vehicle-related overhead costs, as well as Government taxes. Here I refer Members to pages 3 and 4 of the CSC Report which set out the details of these recommendations.

These measures should be implemented expeditiously to regain our competitiveness, minimise further job losses and position our economy to face intense competition as regional competitors struggle to export their way out of their economic difficulties. Besides the cost-cutting package, the CSC has also recommended measures to improve credit availability, seek out markets beyond the region, attract more businesses to Singapore and build up our capabilities.

Long-term Capability Building Measures

At the same time, we must not lose sight of the need to address longer-term challenges and take steps now to strengthen our competitiveness beyond the crisis.

We need to take into account the long-term global trends which will have an impact on Singapore. Continued economic liberalisation, globalisation and rapid technological change will shape the competitive economic environment of the future. These global forces will not wait for the economic crisis to blow over. We need to take cognisance of these changes and adjust our strategies and policies now to build up the capabilities to enable us to thrive in this future world.

Our sound economic fundamentals, stability and cohesiveness will enable us to do so. We do not face the serious domestic structural problems that some other countries are preoccupied with. We have ample resources and our people are skilled and well-trained. We must therefore use this window of opportunity now to enhance our capabilities to widen the gap with our competitors.

The CSC's vision is for Singapore to develop in the next ten years into an advanced and globally competitive knowledge economy, with manufacturing and services as the twin engines of growth. In a knowledge economy, the basis for competitiveness will be the capabilities and intellectual capital to absorb, process and apply knowledge.

To realise this vision, we require to strengthen our capabilities while managing cost competitiveness. The CSC has identified eight strategic thrusts. These are promoting high value-added manufacturing and services as the twin engines of growth to serve global needs; strengthening and diversifying our external wing and incorporating a global dimension; building world-class companies; strengthening our small and medium-sized local enterprises; developing human and intellectual capital as a key competitive edge; leveraging on science, technology and innovation; optimising resource management; and facilitating by the Government to enhance our business environment.

Mr Speaker, Sir, Singapore has managed to weather the crisis relatively well so far. This is the result of our consistent focus on getting our fundamentals right - a stable political environment, strong tripartite co-operation, fiscal prudence, careful financial supervision, investment in economic infrastructure, and a good education system. These are national assets which we must jealously guard and continually nurture. With our strong fundamentals and our steadfast adherence to an open-market philosophy, this crisis has in fact enhanced our international standing in contrast with the region.

Nevertheless, the regional economic crisis has created serious immediate challenges, as well as added an urgent dimension to our efforts to transit to a knowledge economy. Regional economies will emerge leaner, fitter and more cost-competitive after they have restructured their economies. This means we have to accelerate the upgrading of our economy so that we are even more productive and ready to soar when the region recovers.

The CSC had an extensive discussion of this problem over a year, with valuable inputs from hundreds of people, both in the public and the private sectors, both locals and foreigners, both practitioners and academics. I wish to thank all of them for their contributions. The proposed strategy and the specific recommendations of the CSC are comprehensive and mutually reinforcing, covering both the short term and the long term. I recommend them to the Government for adoption and prompt implementation.

Mr Speaker, Sir, the acceptance of the CSC recommendations will require a united response from all Singaporeans to accept painful cuts in CPF and wages. The world is watching how Singapore is responding to the crisis. Let us give a clear and resounding signal that as a people we will do whatever is necessary to compete, thrive and emerge stronger than before.

Sir, I beg to move.

Question proposed.

Mr Leong Horn Kee: Mr Speaker, Sir, I rise in support of this motion tabled in the name of the Minister for Trade and Industry, Mr Lee Yock Suan.

I am certain that this House will strongly endorse the strategies and policies set out in the Report of the Committee on Singapore's Competitiveness (CSC). I note with satisfaction that the CSC, except for the Chairman and Deputy Chairman (who are both Ministers for Trade and Industry), comprises mainly members who are from the private sector. Views were diligently collected from a wide segment of private sector members.

I would like to commend the two Ministers for Trade and Industry and the Committee Members for preparing a comprehensive report that is brimming with new and creative ideas and suggestions. In order for our GPC for Finance, Trade and Industry to gather feedback from the ground and industry members, we held discussions with representatives of the Singapore International, Chinese and Indian Chambers of Commerce and Industry, and representatives from the Singapore Confederation of Industries, the Singapore Hoteliers Association and the Singapore Retailers Association. Our GPC members and I would like to thank them for their contributions. We shall relay some of their important comments to this House during the course of this debate.

Sir, the Singapore's economy is officially in recession as we have negative growth for the third quarter 1998, and perhaps quite surely for the fourth quarter 1998. The CSC Report is timely as it sets out the key strategies for Singapore's survival in the immediate and long term.

The question I would like to ask is: is this $10 billion rescue package that the CSC has proposed sufficient to pull us out of the recession? The Government has previously announced a $2 billion off-budget measures in June 1998. We know now that $2 billion is not enough. The new package is now $10 billion. This amount would be more effective than the earlier $2 billion but the question still remains: is it enough?

The other key issue which I would like to pose is whether this package is in fact expansionary or deflationary. Central to the package are the wage and CPF cuts totalling $7 billion. This is the people's money that they are asked to contribute by tightening their belts and bear with CPF and wage cuts. Hence, while there is a $7 billion saving for the private sector, this is dampened by a similar $7 billion drop in consumer spending. Moreover, the impression is that Government's contribution to the $10 billion package is only the remaining $3 billion, which is 30%. The equation looks rather unbalanced as the people are bearing the main burden of 70% and the Government's share appears to be 30%. We feel that Government can do more, and use more of the reserves.

The Government has total reserves amounting to about $120 billion. Since the start of the recession, many individuals have dipped into their own reserves to weather this "rainy period". Hence, we must accept that the Singapore economy is not only in the rainy period but perhaps in a storm. Many Ministers and Government leaders have said this is the worst economic crisis that they have ever seen.

Hence, it is time to draw upon our national reserves. We have already decided that Singapore can spend $5 billion to help Indonesia and I do not know how much we would draw upon to help our neighbours like Malaysia. But what about helping ourselves? If the Government were to spend just 5% of the total reserves to help Singaporeans, the amount to be used would be at least $6 billion. If you want to be more generous and use 10% of the reserves, this would be a very large $12 billion. I feel it is time for Government to be bold and decisive. Having the correct measures and strategies, and using our reserves wisely, will be consistent with the effective, efficient and level-headed image of the PAP Government. Hence, I would like to urge the Government to be bold to draw more from our reserves to help Singaporeans now.

The proposed CPF and wage cuts would take up about $7 billion from the local economy in the form of lower disposable income of the people. The $7 billion is about 5% of our annual GDP. Based on a simple arithmetical computation, that means that the GDP could well contract by 5%. If we add the ripple effects of the loss of $7 billion in consumer spending, the impact on the economy will have a higher multiplier effect. Assuming that the multiplier effect is double, then the GDP could even shrink by a total of 10%. If this deflationary effect is to take its full course, this could be quite worrisome. Hence, counter-stimulating measures must be taken.

During a recession, the contractionary effect of the CPF and wage cuts is very undesirable. People will stop spending and the economy will contract. The local retail and commerce sectors are already facing bad business. The mood will be further depressed. It will cause the economy to spiral downwards much faster.

Therefore, it is imperative that the Government should introduce concurrently economic boosting measures. One area is by introducing cuts in Government tax, rates and fees. The first objective is to substantially reduce business costs. The second objective is to put back money into the people's pockets to mitigate the drop in their disposable income due to their loss in wages.

Hence, in theory, although $7 billion is taken out of circulation from the people's spending, it is hoped that the Government will put back $7 billion, if not more into stimulating the economy. This sum of course could in fact come from the savings of the employers in their business costs. It can also be a combination of other measures like government cuts in industrial rentals, port charges, utilities, taxes and levies as well as in the form of pump priming by the Government through projects such as infrastructure development, roads, schools, IT programmes and R&D spending. The public's expectation is that the Government should contribute an equivalent, if not more, or at least equal to the CPF and wage cuts, which is $7 billion of this total package.

We are in difficult times. It is crucial that the Government, employers and employees work closely together, hand in hand to overcome this formidable economic crisis.

Sir, I am generally in support of the proposed level of CPF cut of 10% and the 5-8% of wage cut. I feel any deeper level of cuts would have too severe a contradictory effect on the economy.

As a word of caution, I would like to urge that employers in the private sector do their part in preserving jobs and not overdoing the pay cuts of their employees. Companies that are doing well and maintaining profitability should avoid that basic wage cuts or year-end bonus cuts. At the same time, employers should also avoid using this occasion to be opportunistic and thereby deliberately reducing too excessively their workers' annual pay package.

To mitigate the effect of the proposed 10% CPF cut, I would like to suggest that a 5% cut can be applied to the Ordinary Account and the balance 5% be applied to the Special Account. This would alleviate by half the impact of the drop in available funds for homeowners with outstanding mortgages. A 5% cut in their CPF Ordinary Account will be more manageable.

In any case, the Government should nevertheless introduce some measures to help those who are badly affected and unable to continue servicing their existing housing loan repayments arising from the drop in the CPF contributions. The schemes proposed should be able to help not only those who are HDB homeowners, but also those who are private residential owners.

One scheme I would like to suggest is to allow taxpayers to claim for up to a certain amount, say, $10,000-$50,000 yearly, depending on how generous is the Government, as tax relief equivalent to the interest payable due to the outstanding housing mortgages. This tax relief has been introduced in Hong Kong. I suggest that, to be equitable, both HDB and private homeowners be allowed to enjoy this relief but only for loan mortgages taken for owner-occupied homes.

Sir, I know it is taboo or sacred cow to suggest that Government allow Singaporeans to draw on their CPF savings before retirement. Many people are now in severe financial difficulties. Their CPF savings of course are meant to be used for old age or retirement. However, I feel that for special cases, only on a case-by-case basis, the Government can allow Singaporeans who are out of job because of severe medical problems and very desperate of funds with no savings left to draw from their CPF savings now. If need be, even to allow them to withdraw from the CPF savings of their immediate relatives if they are in such desperate straits.

For the proposed wage cut, I feel that the lower level workers should not be made to suffer any basic wage cuts. There may be some cuts in their annual bonuses, depending on the performance of the respective companies. But for low wage earners, a cut of even $10 maybe very painful and difficult to manage as they are already living from hand to mouth.

Hence, I support a graduated scale of 5% cut for the mid-level employees and a 7.5% cut for the senior and top executives. For the Ministers, as they have to lead by example, I consider a 10% cut, at least a 2.5% larger cut than the top civil servants, would be quite adequate. It may be hard on the Ministers but as national leaders, they have to lead by example.

An hon. Member: MPs as well.

Mr Leong Horn Kee: Yes, MPs as well.

The amounts and rates of reduction in Government-related fees and charges have not been specified in the CSC Report. To be complete, it is necessary for the Government to also specify the targeted reduction in various rates and fees. In fact, so as to achieve the overall savings in business costs by 15%, the Government should set definite rates of cuts to be made by all statutory boards and departments, such as in port charges, industrial rentals, utilities and telecommunications. Without setting the desired quantum for each fee item, I feel we may find that the desired target of 15% cut in overall business costs may not be achieved.

The CSC has also suggested that the foreign worker levies be reduced. It has proposed that the reduction be from $50 to $100. This amount, I feel, is too low. To be bold, I think that the Government should consider a 50% cut in the interim 2-year period for such foreign worker levies.

Similarly, I also feel that the Government should allow a 50% cut in maid's levy for an interim 2-year period. This reduction will help many Singaporeans and companies, particularly the middle-income families who have maids, to have more disposable income, which will help them to offset their loss in CPF and wages.

Mr Speaker, Sir, I would like to pick on an important issue raised at page 130 of the CSC Report. The CSC has proposed that group tax consolidation be allowed. This will encourage companies to grow through new ventures and ease cash flow constraints.

During this economic downturn, many companies will encounter losses, including those incurred by their subsidiaries. This is particularly so for property developers but applicable to all companies. Under present income tax rules, holding companies are not allowed to offset the losses of their subsidiaries against their profitable ones, even though they are owned by the same group. This rule is particularly unfair for property developers as it is a Government requirement to impose on successful tenderers of Government land sales to form separate companies to own land sites purchased.

Here, I wish to declare my interest as a director of a property development company.

Because of losses incurred during this recession, companies are facing huge write-offs and provisions for losses. Yet, they cannot enjoy any tax offset against the profitable projects. Normally, if all the investments or projects (that is, both profitable and loss-making ones) are put into one company, they will enjoy the tax offsetting. The Government does not want to allow tax leakages by allowing group offsetting, especially for overseas projects. But I feel that for cases of definable local projects and investments, and also for new ventures in Singapore, R&D projects and other new investments that are likely to incur losses, the Government should consider allowing for group tax offsetting.

Taxpayers are given a 5% tax rebate during this year's Budget announcement. This rebate we now see is too low. The Government can consider introducing reductions in corporate or personal income tax cuts. Otherwise, I would like to suggest that the Government consider allowing the tax rebates for Year of Assessment 1998 and 1999 to be higher, say, 15-20% for tax rebate. If we recall, Dr Mahathir, who is now the Finance Minister of Malaysia, has allowed a total tax relief for taxpayers in Malaysia in 1998. The idea of a larger tax rebate is to encourage our taxpayers and companies to have more disposable income. Hopefully, some of this money will flow back into the economy.

Sir, the CSC Report has focused on the business sector. Rightly so, as we need to formulate plans for the immediate and long term, concepts and strategies for Singapore to survive this current recession and remain competitive.

The CSC Report contains 168 pages. It is a very thorough and well-researched report. Many sections are devoted to long-term strategies, some of which my other GPC Members will comment on.

I feel strongly that a total review should be done to help everyone in Singapore. There should be constant monitoring and feedback. Besides the business sector, we should not forget the individuals. The total economic rescue package should also include help for the individuals, especially for the poorer segments of the people. A comprehensive rescue package will help garner total support from the entire population. The chances of success will be enhanced. Let us take heart. With effective measures and determination in the implementation, let us work closely together to pull ourselves out of this recession.

Mr Bernard Chen (West Coast): Mr Speaker, Sir, let me, first, congratulate the CSC for the comprehensive way in which it prepared the Report, and also the rapid way in which they changed horses mid-stream to deal with the economic crisis at hand. The short-term packages, personally, I have no quarrel. In fact, the CPF wage cut has all been announced before the Report was published. But I only hope that the Government will also consider the assistance to be given to mortgage houseowners in order to alleviate the problem when the CPF is cut. And I also hope that Government Ministries and departments will respond equally fast to reduce charges in equal measure to keep tab with the wage reduction that the people will suffer in return. In fact, those of us in the private sector have already done so. Many of us have already cut the bonuses almost by 80%-90%, and some companies have already decreased wages by about 10-15%. As regards availability of capital, I do not think it is an issue. I think our banks have very sound fundamentals and if the projects are bankable, there will be no lack of finance.

What I would like to comment today, rather than on the short-term measures which I think other Members will have a field day, is to comment on the future competitiveness section which the CSC Report has delved on at length. I think the three elements that were mentioned in the Report are very important. First of all, the strengthening of the external wing post-recession; second, the human and intellectual capital that we have got to build up; and, third, the optimal resource management that we must exercise.

I think Singaporeans must realise that there is a basic shift in the economic climate in Singapore, and it is not just an economic crisis. This economic crisis, in fact, is a wake up call for us. Our competitiveness has been eroded since before the recession. It has progressively gone worse, but the regional crisis has brought it out into stark perspective, which therefore means that post-economic crisis the same issues will remain with us, that of competitiveness. If we at the end of this economic crisis are still as uncompetitive as before, then I think we will be in dire straits. Everyone of us Government, industries and our people must take this opportunity to make ourselves trimmer and leaner to prepare for the future.

I was in Mexico last year and I found in Mexico most of the MNCs were there. They were there because Mexico was competitive and they have NAFTA which provides the market. So a lot of industries, especially electronic industries, some of them are from Singapore, have moved to Mexico.

I just came back from Europe over the weekend. I visited Germany, France and Austria. Even in developed countries like Germany and France, they are taking very drastic measures to revamp the industries, to cut costs and they retrenched workers by the thousands. Why? Because they are facing competition from countries within Europe. In Austria, in fact, most of the big MNCs which have operations in Europe also have their plants there. Some of them even put their headquarters there. The reason is because the Austrians' wage levels are lower than most of Europe. The workforce is also intelligent and educated. This is not only to speak of Europe itself but Northern Ireland, for example, and Scotland. Scotland and Northern Ireland together account for 45% of export of electronic equipment to EC. So countries in Europe and the US have other alternatives, not in Asia, but in Europe and in their own continents. If we are to attract investments from these countries, then we must ourselves be more competitive than countries in these continents.

Our response is not just Government, because the Government does not make up the country. The people make up the country. The Government can have all the policies but if the people do not respond, there is nothing the Government can do. My message to Singaporeans is that we must adjust our abilities to meet these challenges. We must acquire new knowledge and we must respond to the Government's call for retraining on new ways to do things. All the people in the rest of the world are doing this. If we are not doing that, we are in deep trouble.

Secondly, we must also adjust our own living standards. We have been used to years of high growth and high wage increases, so much so that we do not know what bad times are. I think many people would not want to say this, but I will say this. I think we have got to have some pain. I think without pain, there can be no incentive to improve. I think we will be deluding ourselves if we think that this recession will pass and everyone of us will be better in the process. We are not. All of us will suffer. Some of us suffer less, some of us suffer more. The Government's duty is to help those who cannot help themselves and make their suffering a bit more bearable.

What does this mean? It means that we probably have to eat into our savings that we accumulated over the good years. As the Prime Minister has said, instead of going to the US for a holiday, go to Bintan. It is one-fifth the cost. You still have a good holiday. You still got some money left for your children.

I was very dismayed when I read in the New Paper two weeks ago that some children were saying, "I'm not going to take a cut in allowance, because there is no recession yet." This kind of attitude, I think, has to change, because without the pain, we are not likely to be galvanised into action.

What is in our favour? I think we still have a hardworking workforce. There is no denial about it and that has been our selling point all these years. Our workforce has been ranked number one or two consistently. We have a fantastic infrastructure, equal to none. Our educational institutions are one of the best, if not the best, especially in the technological field. So we can do a lot of things to help ourselves. The question is whether we are prepared to avail ourselves of this. If our people can respond to the retraining, to the tightening of the belt and to live a frugal life instead of spending money on wasteful things and if we complement this with the good fundamentals that the Government has put out, I think we stand a very good chance in overcoming the recession. That is not the problem. The recession will be overcome but, more important, I think we should be able to face the future stronger because we are dealing with a very fundamental problem, that of surviving in the long term, not the short term. For the short term, all of us can do it. But in the long term, we have got to be fit and able and the Government's duty is to ensure that we can do that and I hope that the people of Singapore will come together with the Government, change their lifestyles and work towards the common good of bringing ourselves out of this recession, leaner, trimmer, hungrier and, of course, more productive.

Mr Chiam See Tong (Potong Pasir): Mr Speaker, Sir, the workers shall bear the brunt of the cost-cutting measures recommended by the Committee on Singapore's Competitiveness. The CSC has recommended a 15% wage cut from the 1997 level, 10% of which shall be from the employer's component of the CPF and the balance from the flexi-wage scheme part of the wages.

On 12th November this year, the National Wages Council recommended a cut of 5-8% of the workers' wages. If the employers choose to cut workers' flexi-wage as high as 8%, then together with the 10% cut in the employer's component of CPF, the workers can lose up to 15% of wages a month. I urge the Government to be slow in implementing these recommendations. The workers already suffered once in 1985 when Singapore went into a recession. At that time, the workers' wages suffered a 15% drop when 15% of the employers' CPF were cut.

It was reported in the local press that for the first nine months of the year, 20,000 workers were retrenched. But how many of these workers are foreign workers? I understand that MNCs are allowed to hire as many as four foreign workers to every one Singaporean worker the company employs. So the Minister should make sure that the number of Singapore workers who are retrenched is significant before implementing the recommended wage cut.

At my meet-the-people sessions in my constituency so far, I do not have any resident coming to complain that he is out of job. Employers should not be encouraged to jump the gun and cut workers' wages prematurely, since there is so much talk of cutting workers' wages.

The NTUC is in support of the 10% employers' CPF cut. Instead of just recommending that 10% of the employers' CPF be cut, the NTUC should also recommend that the employees' CPF be cut by an equivalent amount. With the 10% employees' CPF cut, the workers can have more take-home pay. This is particularly important to single breadwinners in the family. If there is only one spouse working in the family, that family often finds that it cannot make ends meet. The single bread earner has to take on a part-time additional job which he may not be able to hold continuously. The extra 10% cash in lieu of a CPF reduction shall come in very handy. Some will say that in such a case, that worker will not have enough CPF in the account to pay for his CPF monthly loan instalments. In such a case, I would say that the HDB as well as the Government should give a helping hand. The HDB could restructure the mortgage loan and work out a longer repayment period. If that does not help the workers, then the Government should step in and use its surpluses collected over the last 10 years to pay for the workers' HDB monthly loan instalments.

The Government is reported to have accumulated $122 billion in surpluses. So setting aside $5 billion to help out our workers in time of need is not asking too much of the Government. I would say that the Government owes a duty to the nation's workers to tide them over the next one or two years when the recession takes its worst toll. The Government can charge a nominal interest rate of 2% and have the loans secured as a second mortgage after the HDB. I am certain a scheme like that can be worked out to help the workers since $5 billion is less than 5% of the amount of the Government's surpluses collected over the years. I wish the NTUC will support this suggestion.

I note that the CSC has only recommended a reduction of the levy for both skilled and unskilled foreign workers in the manufacturing sector, but not for domestic maids. I would urge the Government to reduce the levy of all foreign workers, including domestic maids, by $100-$200 per month. By lowering the levy, employers shall pay less for foreign workers and this should be all right since foreign workers mostly work in jobs which local workers are not willing to do so, for example, in the construction industry, road works or MRT sites. Local workers shall thus not be deprived of their jobs.

I agree that the charges for electricity, telecommunications and port services should be reduced. I would further suggest that Singapore Power stop collecting water conservation charges and also not to collect interest and penalties for late payments until the economic crisis is over. The reason is that electricity and water consumers have placed sufficient deposits with Singapore Power in their accounts. No interest is paid by Singapore Power to consumers for the use of their deposit money. Singapore Power can use the interest earned from the vast amount of deposits placed with them by account holders over the past years to offset the lost interest as a result of late payments.

I agree with the CSC that rentals for Jurong Town Corporation and Housing and Development Board land and factory rentals should be reduced. I would further suggest that the sale price of new HDB flats should also be reduced, since prices of building materials and building costs have dropped significantly.

I would also agree with the CSC that motor vehicle customs duty and petrol diesel duty be reduced, and the 55% property tax rebate be extended. I would also support the suspension of stamp duty on share transactions and to lower corporate and personal income tax. In these hard times, I would also call on the Prime Minister and his Ministers to voluntarily take at least a 25% pay cut. I understand that in the private sector, many workers are suffering a freeze on their salaries and others are taking a 20% cut on their pay. It is reported that company directors are taking a 50% cut on their directors' fees. Singapore Ministers are reputed to be the highest paid in the world. So a 25% cut on the Ministers' salary shall still leave them with a lot to live on comfortably.

Ministers are top leaders of the country and a significant gesture on their part in these difficult times shall be a great boost to the morale of the whole country. The Ministers should take a pay cut at this point of time. An act like that shall jell the whole nation, as they can say that they lead by example. They really show solidarity with the workers. They have a genuine feel for the people. The Ministers have gone down to the NTUC and tell them, "United we stand." Such a pronouncement on the part of Ministers sounds hollow if they do not share the sufferings of the workers who are expected to take a 15% reduction in their monthly wage.

Many people also are complaining about the 3% GST imposed on all goods and services. They want the Government to suspend GST for the time being until the financial crisis is over. I hope the Government can give a positive response.

Now, I would like to comment on the CSC's vision for Singapore in the next decade. It wants Singapore to become an advanced globally competitive knowledge economy. I quote the CSC's Report:

"We should be a knowledge economy where the basis for competitiveness will be the capabilities and intellectual capital to absorb, process and apply knowledge. We should have a strong technological capability and a vibrant entrepreneurial culture that thrives on creativity, nimbleness and good business sense. To develop into a knowledge economy, Singapore should be an open cosmopolitan society, attractive to global talent and connected with other global knowledge nodes. There should be a critical mass of Singaporeans who are risk-taking entrepreneurs, innovators and arbitrageurs. Together with the global talent, they will move Singapore ahead in the Information Age."

I entirely agree with this vision. In Japan they had this similar vision, ie, to develop a knowledge economy in 1992. The problem in Japan which hindered the attainment of this vision was their culture of bureaucratic leadership. The bureaucratic civil servants run the country. It is said that in Japan the measures adopted under bureaucratic leadership were aimed not at development for the future, but maintenance of the status quo. Can Singapore attain a knowledge economy within the next decade? I personally think that we cannot do so. Singapore is worse than Japan. We do not only have a culture of bureaucratic leadership but we have in place a dominant one-party rule that is bent in perpetuating its rule. The organisation of the whole of Singapore is such that the leadership must come from the party or the top. In the CSC Report, at page 118, it is mentioned:

"The World Competitiveness Yearbook indicated that Singapore has adopted a centralised, top-down decision-making approach in government."

I doubt that the PAP will change its style or form of Government. It wants a firm control of the country. On the other hand, the CSC envisages that in a knowledge economy "there should be a critical mass of Singaporeans who are risk-taking entrepreneurs, innovators and arbitrageurs". In the first place, will the present PAP political system allow a group of Singaporeans a critical mass of leaders who can think independently and develop independently? I do not think so. I make this assessment after having been in politics in Singapore for 22 years and an elected MP for 14 years. Just look at all aspects of the Singapore society, whether it be in business, sports, culture or social activities, you see a PAP Minister, a PAP MP or a PAP man in charge. So nationally I cannot see a critical mass of Singaporeans who are risk-taking entrepreneurs, innovators and arbitrageurs to emerge unless, of course, we have a reformation, a material change in the political system. Instead of a one-party rule, we have democratic pluralism, maybe a two-party system and the Government of the day behaves in a more traditional way, ie, to collect taxes, maintain internal security, external defence, foreign policies and leave the commerce and business to its private citizens. It is only under such a system where Singaporeans are given more freedom can truly great, great business leaders emerge.

I think the CSC Report has missed one important issue, and that is, our relationship with our closest neighbour, Malaysia. Malaysia is Singapore's most important trading partner. Our water supply is also from Malaysia. For the long term well-being of our economy, Singapore must enter into some kind of economic relationship with Malaysia which benefits both sides. I have suggested in this House that Singapore seek an economic union with Malaysia. The CSC Report has mentioned that "A limited domestic market poses a serious impediment to expansion and constrains investment in equipment, technology and modern management methods." If Singapore can bring about an economic union with Malaysia, the problem of our small size or limited domestic market can be solved. But the ultimate aim of our economic union must not only be for the benefit of Singapore, it must be for the mutual benefit of both countries. I call on the Government to strive for an economic union with Malaysia.

Mr Eugene Yap Giau Cheng (Marine Parade): Mr Speaker, Sir, I recall a conversation I had 10 years ago with the Chief Executive Officer of a very huge Japanese multi-national because I wanted to understand the bottoms-up philosophy among the Japanese workers. And he told me, "It is not as simple as you think because normally workers will be told what their leaders want and they will know what to do."

Mr Speaker, Sir, in these economic tough times, it is heartening to learn that Singaporeans understand and accept the need for painful wage cuts. Dr Yaacob Ibrahim summed up these sentiments very well in The New Paper of 18th November and I would like to quote him here: "The general feeling is that people understand and accept that there must be wage cuts. They are glad to have a job that pays less, than no job at all." Yes, isn't it better to have a job that pays less, than to have no job at all? But I would also like to stress that what is very important is that most Singaporeans today still hold their jobs.

Fortunately for us, Mr Speaker, the prudent policies and financial foresight of our Government have spared us from an economic meltdown of Titanic proportions. We should be glad that our Government and people did not see our economy as the Titanic's captain, crew and passengers did their ship in 1912. It has happened, it will happen again if we are not careful. So, therefore, it is worthwhile to recall that voyage made by the Titanic and its maiden voyage that was filled with exhilaration.

Spirits were high, the air was heavy with excitement and jubilation. The crew and the well-heeled passengers were fortified in their belief that they were on the safest ship ever built in the world. They all looked to the ship as unsinkable, just as many governments, corporations and people in this part of the world looked at their economies as though these economies were invulnerable. The celebratory mood among the passengers continued into the voyage and as the ship sailed towards its destination, the passengers wined and dined. They indulged in pleasures without a care in the world - just like some governments, some corporations and people around the world, especially this region, preoccupying themselves with mega-borrowings and spendings.

The passengers on board the Titanic were enjoying themselves to the extent that they were blinded to the fact that the ship could be in danger. When warning signals became apparent and the captain was told of them, he dismissed those dangers as nothing more than nuisances, as he did not believe that the Titanic could be in trouble. As the danger became more and more apparent, the captain and the people on board still chose not to heed it but carried on with their preoccupations. Finally, because of their over-confidence and slowness to react, the Titanic went smack into real danger - just like what happened to many countries and many economies in this part of the world that were caught unawares by the quick rises and falls of the markets caused by the way money was transacted at lightning speeds around the world.

Mr Speaker, Sir, amidst this current regional economic crisis, Singapore's economy has also been affected. While we have not emerged unharmed, fortunately, we have not been seen as badly hit as our neighbours. Hopefully, with the recommendations of the CSC, we will be able to avoid the worst and pick ourselves up again as quickly as possible, and be in the front of the race when others are still picking themselves up. While figures show that some 40,000 are expected to be retrenched by the end of the year, I think we are still relatively fortunate. The estimates are not very much higher. Meanwhile, the CDCs (Community Development Councils) will do all they can to find as many jobs as possible, to ferret them out, so that they will be able to find alternative jobs for those who lose their jobs or are being retrenched. For instance, in the case of Marine Parade district, last year, we helped 30 Singaporeans to find jobs; this year, in 1998 up to now, about 700 jobs. So who says that there is no one Singaporean that has lost his job? Thanks here to Ministry of Manpower, NTUC, ADECCO (ADECCO is a private international employment assistance company), and MDIS (Management Development Institute of Singapore). In fact, these two private organisations have done more than their fair share. What they have done actually is also to organise courses so that workers who choose not to go immediately into another employment can also choose to be trained or retrained.

Mr Speaker, Sir, I said at the outset that the most important point is that the majority of Singaporeans are still having their jobs. And I think that this is a very important point, and I attribute this to the kiasu attitude of Singaporeans and the Government. Contrary to common perception, kiasuism need not necessarily be bad. Who says it is bad? It is bad only when it makes the Singaporeans ugly - when they become greedy, self-centred, selfish, envious, discourteous and unkind. Mr Speaker, Sir, we certainly do not want to be like what the economist, Mr E. F. Schumacher, said in his book, "Small is Beautiful". Allow me to quote him:

"If human vices such as greed and envy are systematically cultivated, the inevitable result is nothing less than a collapse of intelligence. A man driven by greed or by envy loses the power of seeing things as they really are, of seeing things in their roundness and their wholeness, and his very successes become failures. If the whole society become infected by these vices, they may indeed achieve astonishing things but they become increasingly incapable of solving the most elementary problems of everyday existence."

In short, we must not allow selfishness, greed, anger to take priority over more important and serious issues. The recommendations put up by the CSC, taken in the right attitude and casting self-interest aside, could, I believe, bring us out of troubled waters and help us weather whatever storms that come in future and ride them out confidently. Therefore, these recommendations can be seen as worthy kiasu measures to ensure our self-preservation and success. We should see the recommendations as something that is good for all Singaporeans. And so I would like to urge every Singaporean to see it in its big picture, because squabbling and quarrelling must be avoided at all costs. We should channel our energies into ensuring that we pull through these tough times and not wallow in them.

Mr Speaker, Sir, so far we are all right. If we had been managed by a different band of less than capable people, then I think we would find ourselves in an entirely different position. Yes, we are small, and small is indeed beautiful, but only when it is properly managed. We have a combination of both. The beauty of being small in Singapore is that we can reach out to every corner of Singapore and be kept up-to- date with the latest goings-on. After all, we all do that, don't we? We walk our little corner of the island on weekends, we go from home to home talking to our residents, learning from them, listening to them, finding out what they want, what help they need or what help they don't need. So, in a situation like what we have today, we are able to confidently assess and describe how our people are doing and have our fingers on the pulse of the nation.

For instance, take Mountbatten, we were concerned with how our people are faring in this economic crisis, because they all have been moved from rental flats into 4- or 5-room flats, new ones, expensive ones too. I guess we must have walked a few hundred homes over a couple of months and I am relieved to know that many of them are still able to maintain their homes, they are able to pay their SC&C charges, their monthly instalments, and so on. But this brings out a very important point. Most of these people who have moved into new flats, they are living in extended families. You have your grandmother, your grandfather, your father, your mother, your brothers, sisters, and so on, and when one person gets retrenched, the others chip in. The strength and virtue of the extended family is still very strong. But there is a present tendency for families to break out into nuclear families. Therefore, Mr Speaker, Sir, the challenge in the 21st century is to find ways and means to see how we can keep family support healthy and firmly in place, so that people will remain safe not only in times of crisis but also in better times as well.

Mr Speaker: Order. I suspend the Sitting and will take the Chair again at 3.10 pm.

Sitting accordingly suspended at 2.43 pm until 3.10 pm. Sitting resumed at 3.10 pm