COMMITTEE ON SINGAPORE'S COMPETITIVENESS

Debate resumed.

Mr Chiam See Tong: Sir, I wish to seek a clarification from the Member for Jalan Besar. Can he please let me know whether I heard him correctly? He said that I did not get people coming to see me at my meet-the-people session because I could not get jobs for them. Is my understanding of what he said correct?

Mr Peh Chin Hua: (In Mandarin): Just now I was referring to Mr Chiam's remark that no retrenched worker had come to see him at his meet-the-people session for help to find another job.

Mr Chiam See Tong: I did not quite get his clarification. Can he please tell me whether my interpretation of what he said was correct?

Mr Speaker: Mr Peh has just explained to you.

Mr Chiam See Tong: That I could not get jobs for people who came to look for me. If that were true, then I would object to what he said. That would be alluding to me to be incompetent as I am unable to do things for my residents. I would like to remind Mr Peh that I am not a first-time MP. Residents there have elected me not once, twice or thrice, but four times. It shows that I have performed. So on what basis is he saying that I cannot get jobs for my residents if they come to me? I think he should withdraw that statement. It is a slur on my ability to help my constituents.

Mr Peh Chin Hua: (In Mandarin): Mr Speaker, Sir, I know that Mr Chiam See Tong is a veteran MP. In fact, I respect him. Unfortunately, after all these years in Parliament, Mr Chiam's Chinese has not improved much. He did not understand what I said just now. Let me ask him very slowly. Mr Chiam See Tong, did you say that no retrenched worker had approached you at your meet-the-people session for help to find another job?

Mr Chiam See Tong: Of course, I did. I made a plain statement like that just to illustrate that the problem of unemployment is not so serious in Potong Pasir. There are no people coming in a rush to ask for help to get jobs. If they do come, and if there are complaints that I am unable to get them jobs, then it is fair for Mr Peh to say, "Look, they have come to look for jobs from you. They do not want to come again because every time you fail to get them jobs." I think that is fair enough. But before that happens, he comes to that conclusion, which is a slur on my competence to help my residents. He should take back what he has said.

Mr Peh Chin Hua: (In Mandarin): Thank you for clarifying. Since the residents in Potong Pasir did not make any request to Mr Chiam See Tong as their Member of Parliament to look for a job when they are retrenched, the retrenchment problem is not very serious in Potong Pasir. As MP for Jalan Besar, every week I meet my people, and there are many constituents who come to me for help to look for a new job because of retrenchment. But the residents in Potong Pasir did not see him. Maybe these people went direct to the Ministry of Manpower to look for jobs.

Mr Hawazi Daipi (Sembawang): Sir, I am a first-time MP, but I would like to make a reference to what Mr Chiam said earlier about wage cuts. He said that our workers would have to endure up to 18% cut in wages. Let me just correct him because quite a lot of information has been given out to our workers during the dialogue sessions and speeches. I think Mr Chiam might have confused between a 10 percentage cut in the employers' CPF contribution and a 10% wage cut. What we are going to have is a 10 percentage point cut in the CPF contribution, and that constitutes about 8.3% of wages. With the proposal of the NWC for a 5-8% cut in other forms of wages, we could have up to 16% cut in wages, but do not forget, we have to subtract from that figure a wage increase of between 2% and 4% that we have enjoyed at the beginning of the year. That is just to correct the wrong impression that might have been created by what Mr Chiam said earlier. So it is very important that we get our facts right even if you have all the good intentions so that we do not confuse the people.

When the union leaders saw the trend of increasing retrenchments over the past one year or so, they asked themselves: Will it affect our members and, if so, when? What will be the impact on their families? And what can be done by the three social tripartite partners to buck the trend?

I believe that during the economic downturn our employers in general asked: How to cut costs in order to regain competitiveness? When will we recover? How can the workers and Government help to achieve it?

The Government on its part wants to ensure that the economy remains healthy, companies remain viable, unemployment is kept small, and hardship due to the loss of jobs is controlled and overcome. Two key points in the mind of the Government, I am sure, are that Singapore remains stable politically and investors' confidence towards Singapore is kept high and further enhanced.

On the part of the union leaders and workers, I am glad that our workers are pragmatic and responsible enough to understand that they have to make short term sacrifices, for longer term gains. They have accepted the need for wage cuts in order to save their jobs. By accepting to make these sacrifices, our workers have shown that they are willing to play their part to help ensure that their companies do not need to close down and that Singapore remains an attractive investment destination in order to create more jobs for their children. This is a case of our workers showing their willingness to take a smaller share of the pie when the pie itself has become smaller.

But, Sir, let me, if I may, recall and emphasise the purpose of the cost-cutting exercise. The objective is to help companies remain viable and competitive and not to make companies to profit from wage cuts, including CPF cut, per se.

While the economic crisis affects the bottom line of employers, there will exist some companies which are not in the red, and which are still able to stay afloat and make profits even if there were no CPF cut. I urge these companies to pass a part of the savings from the CPF cut back to their workers. This can be done in a variety of ways, for example, through a one-off year-end bonus, or variable monthly payment, or simply by topping up their employees' CPF accounts. This will be a much needed boost for those who rely heavily on their CPF savings to pay for their housing. Alternatively, employers can pay a performance-related incentive to encourage further improvement in workers' productivity.

However, Sir, I would like to caution that we should not resort to returning the savings to meet short-term objectives only. A larger part of the costs saved should be used to invest in skills training and retraining of their workers and in developing their capabilities to meet future competition and expansion. Investment in human capital can only rebound with positive results for employers. Over the medium to longer term, better trained workers will be more productive and more knowledgeable, which will enable them to contribute better to the companies. It is easy to take a short term view and think only of survival in these difficult times. However, I urge employers to take a long term view and help their workers transit smoothly to the knowledge-based economy. In fact, over and above the savings from CPF cuts and other wage cuts, the avenues and funds for skills training and upgrading are all there. It is for employers to take advantage and to make full use of such funds. So both employers and employees have no excuse not to take part in it.

There are, unfortunately, those companies which continue to face financial difficulties despite wage and CPF cuts. I urge these employers to consider retrenching workers only as a last resort. Why not use other innovative ways to cut non-wage costs? For instance, employers can institute a shorter work week, or mandate a compulsory clearing of annual leave.

Sometimes, all it takes is a little bit of creative thinking. Like the example of the Safe Superstore in Sims Drive, which was quoted in The New Paper last Friday, 20th November 1998, by NTUC Secretary-General and Minister-without-Portfolio, Mr Lim Boon Heng. By doing some simple research on customer traffic at certain hours, the store managed to cut down from two shifts to one. This reduced manpower and utilities costs. There is an increasing number of companies in Singapore which have been relooking into the operation and business processes. There have been many examples of QCs and Work Improvement Teams which have helped save their companies more than a million dollars. So it is good for companies to look into these areas to cut costs without first resorting to further wage cut or retrenchment.

Sir, to put it bluntly, by agreeing to the CPF and other wage cuts, our workers have actually agreed to give part of their income to their employers. The Government's plan to reduce charges is also transferring the public's money to companies. These decisions have been made in good faith and for our common good - the workers, the people, employers and the state. The money saved should thus be used to enhance the workers' well-being - especially their future employability - and improve the companies' capability and competitiveness.

The main thrust of my speech today is that we are in this together, and each of us - the worker, employer and the Government - must play our part to help our country's economy to recover.

While wage cuts are inevitable, it will not be fair to let workers shoulder the burden alone. Employers can and should make that extra effort to do what they can to lessen the pain of wage and CPF cuts on our workers. Now that we have agreed to cut costs, let us not forget that human touch; that small act of kindness and that gesture of consideration. Let us take that extra step to make each other's journey a kinder and gentler passage. We must think beyond this recession and for the longer run, I think we will have to take a re-look at our cost structure and fine-tune our wage system, worker training system and pre-employment training system in order to ensure that Singapore remain competitive. When we work together even closer, we will not only be able to overcome the current economic crisis, but we will make Singapore society even stronger.

Dr Michael Lim Chun Leng (Cheng San): Mr Speaker, I fully support the recommendations of the Committee on Singapore's Competitiveness, and I would like to add to some of the points that have been discussed in the Report.

Firstly, the development of entreprenuers. Many businessmen say that we lack the entrepreneurship spirit seen in Hong Kong. It is timely for Government to create the right environment to enable the development of an entrepreneurial culture. This would have to be instilled early in the life of our young children. We should encourage and nurture them in school by teaching them to be creative and understand that there is more than one way to approach problems. We must teach them not to fear mistakes but to learn from mistakes. More importantly, both the employers of the public and private sectors must change the present working environment and stereotyped mindsets for more open environment where free flow of ideas are expressed and exchanged among all levels of the hierarchy. We must not be too quick to penalise those who make mistakes which are not due to carelessness, negligence or ill-intentions.

In the business world, businessmen have commented that the GLCs have moved beyond their core businesses and have diversified into other businesses to the extent they are found in almost every trade. Because of their sheer size or, at times, monopoly, entrepreneurs feel stifled and are sometimes unable to compete not because they do not have a better product or skill but because they do not have the financial muscle to compete with GLCs when GLCs enter into the fray. Instead of stifling competition, GLCs should work with good entrepreneurs and provide the environment for them to succeed on a win-win formula. Instead of competing with each other, GLCs should link up with some of these local enterprises to compete in the international market.

Secondly, on world-class companies, I support the move to make our GLCs into world-class companies. In trying to recruit foreign talents to increase our skilled manpower resources, it is important that we attract foreigners who are truly talented and not people of second or third echelons but top echelon to serve these companies. Some have said that in many countries there is political cronyism. But in Singapore there is no political cronyism but there is public cronyism. GLCs are favoured. I think we must dispel this notion. This is all the more important during the process of making our GLCs into world-class companies. We must be able to show them that it is a level-playing field and dispel that misperception.

Thirdly, managing our limited resources. As our manufacturing industry grows and as our economy continues to expand, the use of water will continue to increase. We have already planned for desalination plants and there are occasional campaigns to save water. But it is time that more forceful steps need to be taken. We should inculcate water saving habits in the young children in schools. They must be reminded that water is a scarce resource and perhaps we should teach them to use water as if they were living in a desert community, so that their generation will learn to appreciate the importance of water.

Fourthly, reduction of wage cost to increase our competitiveness. Mr Chiam has proposed that Ministers' pay be cut by 25%. Yes, I think Ministers' pay should be cut as an example for others to follow. However, even if you were to cut the pay by 25%, I could not see how it could help to increase the competitiveness of the Singapore economy. I think he has forgotten that the main aim of wage reduction is to increase our competitiveness. The performance of our Government leaders in this economic crisis has been sterling. They have helped Singapore gain an impeccable reputation. I think they deserve better. Yes, Ministers and top civil servants should lead by example. The wage cut that will be advocated for the public sector, I think for Ministers and civil servants, they should be at the top of the range. But it does not serve any purpose if we cut their pay excessively without any good reason.

It is also important that the effect of wage cut be cushioned for those from the lower-income group. We have to understand their needs and ensure that they have a safety net, so that their families will not suffer excessively. Yes, we need to focus on the bigger picture to stimulate the economy. However, we must also remember that there are many families out there who will face increasing financial hardship. Government bodies should make downward adjustment costs selectively, for example, decreasing transport cost. Perhaps bus companies may want to consider decreasing the cost of bus stamps for school-going children. These are measures that will help the lower-income families. Perhaps when rebates are given to hawker centres and food courts, there might be a mechanism for these to be passed back to the consumers.

We do not want a situation where the families face so much hardship and are unable to get assistance that their spirit gets broken because of these setbacks. For example, I have a family in my constituency who has gone without utilities for months, and when they came to my attention and we made several efforts to approach them, and when we said that we would help them get their utilities (water and electricity) connected, the first response was, "No, please don't do that, because I cannot afford that." It has come to a stage where they feel that there is no avenue for assistance. I think we do not want them to reach to that extent. What we want to do is to help them regain their confidence and overcome their difficulties.

The Government should consider increasing funding to CDCs so that they will be in a better position to help these families tide over their difficulties. CDCs can become focal points and one-stop assistance centres for families who are faced with a barrage of unpaid bills and arrears from different agencies. As we undertake these measures to improve the competitiveness of our economy, we must let Singaporeans know that while we have to look at the big picture, we have not forgotten the individuals who face hardship. Instead, we will help them overcome their difficulties. Together, we will work towards building a stronger and more resilient Singapore.

Dr Wang Kai Yuen (Bukit Timah): Mr Speaker, Sir, this Report is a result of a lengthy deliberation involving the best and the brightest minds in Singapore. In terms of the depth of analysis and the rationale of its recommendations, there is actually not much one could add to it.

If we remove the emotional cobwebs surrounding the issue, the basic fact is that the cost of doing business in Singapore has gone up dramatically versus our competitor nations. Yes, our infrastructure, our management expertise, our stable Government, the skills of our workforce, etc, will allow us to charge a premium, but only so much. Therefore, we must reduce the cost to render ourselves more attractive to foreign investors. There are only two ways of doing it. One way is through self-engineered currency devaluation. At first glance, this apparently is a painless approach. Dr Ow Chin Hock, in his speech, earlier has already touched on much of the pitfalls of doing this. So I would not go into it in detail. I just want to say that in so doing, the cost of living inflation resulting in a weaker Singapore dollar will have its greatest impact on retirees who are living on their savings - people who have contributed greatly to the prosperity of Singapore in the past.

The second approach is through cost-cutting measures, as recommended by the CSC. It is heartening to say that the Singapore Government has decided to take the correct but politically more demanding route of reducing our wage cost and Government fees. This reflects the long-term perspective of the Government. Cutting wages of the wage-earners is always very painful. This requires political courage as well as a well-informed and responsible population who understands the needs of these drastic measures. I am glad to say that Singaporeans are responding positively to these Government policies through the various feedback we have obtained.

The Feedback Unit has conducted two sessions, one in English chaired by myself, the second in Mandarin, chaired by Mr Ang Mong Seng, the Member for Bukit Gombak. In the English Language session, around 50 CEOs of small and medium enterprises and multi-national companies attended. From the comments, I could easily classify those comments into two major categories, based on the perspective of the participants. The first group comprises those who are concerned with the external demand of Singapore's goods and services, and the second group involves businessmen serving the domestic economy. Not surprisingly, their perspectives and comments differ dramatically. For those faced with external demand and external competition, almost everyone lauded the effort by the Government in recommending this package as appropriate and timely. In fact, the foreign CEOs were especially impressed by the ability of the Government to put forward such a comprehensive package. In fact, they lamented that such packages and measures are unlikely to be successful or even contemplated in their own countries.

These participants were convinced that those measures recommended in the Report would help their business overcome the current crisis over the next two years. They said that while Singapore does not suddenly become more attractive to foreign investors, at least the push factor of business migrating away from Singapore has been reduced or eliminated. In fact, they looked towards the long term and expressed concern that cost containment should not be a once off or ad hoc process but should be an on-going process, because Singapore is no longer competing with under-developed countries but with developed countries. They expressed the worry whether Singapore will revert to the past practice or behaviour of cost escalation once the current crisis is over. For those CEOs who are in Singapore for their OHQ operation, they expressed concern about other costs, other than wage cost. For instance, one key factor is the high telecommunications cost. If Singapore wants to evolve into a IT society or knowledge society, or develop into e-commerce, they felt that our telecommunications cost is pretty high. And those with major manufacturing operations also expressed concerns of high energy cost, especially electrical utilities costs. Being CEOs, they all concluded that the major driving force of escalating costs in Singapore, besides wages, is actually the land cost in Singapore. Therefore, these CEOs would like to understand what is the Government's plan as far as land cost containment is concerned. How do we contain land cost in Singapore such that the two factors I mentioned, telecommunications and electrical power utilities, will not escalate out of reach?

In the second category that I mentioned earlier, those CEOs who deal with domestic demand are basically from the retail businesses. In fact, they are very concerned about the diminishing purchasing power of Singaporeans after the proposed 15% manpower cost reduction. In light of the reduced disposable income, they expressed concerns about how the lower income group would weather the wage reduction. Many proposed a reduction of GST by 1% to 2% or even the complete suspension of GST to stimulate domestic demand. When we pointed out to them that 3% is a very small number and whether a $3 charge, based on a $100 purchase, would influence the decision to spend or not to spend, their response is that it is not a matter of money but a matter of confidence. So despite many clarifications on GST by the Minister for Finance in the past, most still asked for the major reasons why the Government is so reluctant to consider a reduction of GST. Perhaps, the Minister should address this issue again.

Several participants commented that since manpower cost constitutes 75% of this package while Government fee reduction constitutes only 25% of the package, it would seem that wage-earners, including workers as well as high-income earners, are being asked to shoulder a high proportion of the sacrifice'. Many would like to see that the Government shoulder a higher proportion of this sacrifice'. In fact, a number commented that maybe there should be a 50%/50% contribution, ie, 50% from the wage-earners, 50% from the Government. The participants seem to be unaware that wage cost is close to 40% of the GDP while the various charges by the Government only amount to 10%. So in fact, they are unaware that the proposed 15% reduction, amounting to $25 billion, is actually more than the 15% recommended by the Government. It is actually coming up to 20%. So if we were to approach an equal proportion of 50/50, it would mean that Government fees and other levies would have to be reduced by a whopping 60% or more in order to achieve this goal. Surely, there is no way to do so. On the other hand, having said so, this particular message needs to be repeated by the Ministers.

In conclusion, Sir, I think the concerns of plunging domestic demand is actually a very serious matter. Many retail businesses, small and large, might be forced into difficulties as the disposable income of individuals is reduced. I understand that the CSC Report touches on the possibility of reducing company tax or personal income tax. Much as I am personally against unnecessary consumption, I think the current belt-tightening by Singaporeans have actually been overboard. So I would like to advocate a stimulative measure of personal income tax to counteract the reduced disposable income. Hopefully, the Minister can propose a reduction in personal income tax even before the March 1999 Budget debate.

Mr Speaker, Sir, the $10 billion package, or US$6 billion package, is equivalent to a cash injection into the Singapore economy. It is very hard for individuals to visualise what is US$6 billion and how large is that number. But if we consider that in the recent report, the United States, Japan and the World Bank will come together and propose a US$5 billion package for the ailing Thai, Korean and Indonesian economies, perhaps we can put that in a proper perspective. Singapore is a small country with 3.5 million population, and yet we are going to inject close to $10 billion a year into the economy for the next, hopefully, two or more years. So in that respect, I am very confident that our economy will turn around quickly in a V-shaped recovery after these particular measures.

The call of sacrifice by the Government to the people will be readily heeded if we can seize the opportunity while the sense of crisis is still very much heightened. The sense of crisis was at this highest point several months back when the Straits Times Index fell to about 800 points. However, as interest rate eases and stock market prices recovered slowly to the current 1,300 points, I believe the sense of crisis amongst Singaporeans is slowly dissipating even though much work is yet to be done. Therefore, grasping the timing is very important. If we can get the present generation of young Singaporeans who are facing their first major crisis to take this pain together with the Government, this would definitely strengthen the bond between our emerging leaders and this generation of Singaporeans. And this bond will serve us well as we ride out this crisis and move confidently forward to claim our rightful place in the history in the 21st Century.

On this note, Sir, I would like to congratulate the Minister for a very comprehensive policy package. I support the recommendations of the CSC.

Dr Lee Tsao Yuan (Nominated Member): Mr Speaker, Sir, I would like to congratulate the CSC on its Report. It is attractive in more ways than one. It is well written, pragmatic and comprehensive. There are six proposals to deal with the crisis and eight proposals to sustain competitiveness in the longer term. As they make sound economic sense, I agree with most of them.

I would like to highlight four main points. First, I would like to discuss the cost-cutting measures; second, the long run vision; third, the process of crisis management in Singapore; and fourth, balancing the wage and CPF cuts with relief measures.

First, the cost-cutting measures. The economic crisis represents for us in Singapore a severe external demand shock. The CSC advocates essentially four cost-cutting measures - labour costs, exchange rate, land prices and taxes and levies. The key issues, I believe, are, first, the magnitude of the cost-cutting measures; second, the balance of the various components of the package; and third, the timing of the measures. Please allow me to discuss each of these in turn.

[Mr Deputy Speaker in the Chair]

4.23 pm

Dr Lee Tsao Yuan (Nominated Member): First, the magnitude of the package. The key cost-cutting measure is the reduction of labour costs by 15%. The objective, as stated in the CSC Report, is to bring our relative unit labour cost (RULC) back to 1994 levels. While I agree that labour cost reduction is a drastic measure for a drastic situation, it would have been good if there was more explanation of why the Committee thought that 15% is the appropriate measure. First, RULC measures only unit labour cost in manufacturing vis-a-vis that of the Asian NIEs. However, unit labour cost in the overall economy has increased even faster than that of unit labour cost in manufacturing. For example, while unit labour cost in manufacturing has risen by 27% since the index was first compiled in 1988, unit labour cost for the entire economy has risen by much more, 43%. It would therefore have been appropriate if the Committee had compared the overall unit labour cost and not just the unit labour cost of manufacturing to that of other countries. In addition, the comparison is to the other Asian NIEs. However, are they our main competitors these days? In what sectors? And what weightage was given to each of the other three Asian NIEs so that only one graph was obtained and presented in the Report?

In short, while I agree with the fact that labour costs need to be cut, I wish that more explanation were given as to why the Committee thought that 15% was the appropriate figure. If the real reason is that 15% was the figure achieved via the process of bargaining and compromise between business and labour, with the 15% reduction in business cost in electronics sector as the benchmark, then I accept that it is actually a political compromise. I realise that, ultimately, the practice of policy is an art, not a science. Nevertheless, since it is stated in the Report that it is to bring wage competitiveness back to the 1994 levels and the RULC was used specifically, then I think that one should endeavour to be as rigorous as possible, when possible.

Regarding the exchange rate, I agree with the Committee that the main target of exchange rate management should be price stability. Having said that, I believe that there is room for some flexibility in the management of exchange rate on three counts. First, there is no risk today in the global economy of inflation. In fact, it is the very opposite. In Singapore, we have been experiencing not a positive inflation rate, but in fact a negative inflation rate for four months since June.

Second, while we are a very open economy and import most of our intermediate products, there is still a domestic component to costs, and an exchange rate depreciation would lower the cost of the domestic component in foreign currency terms. For example, it has often been cited that our imported components constitute a large proportion of our total output. That is true. For example, materials constitute 63% of total output in manufacturing in 1997, but it is 63%. Value added comprise 23.5%. So therefore even though it is true that the domestic component in terms of the intermediate inputs do actually comprise a large percentage there is still room to effect a real exchange rate depreciation.

Third, to the extent that a nominal depreciation is not entirely wiped out by inflation and wage increases in the other affected countries, then for them, a real exchange rate depreciation in fact has been effected, thus increasing their competitiveness. I am not suggesting that we engage in competitive devaluation vis-a-vis these other countries. I agree that this would prove counter-productive in the long run. However, I think that it is time and appropriate to adopt a more nuanced approach. In other words, I agree with the CSC's view that a delicate balance needs to be maintained between facilitating recovery of the domestic economy on the one hand and maintaining confidence in the Singapore dollar on the other. I would therefore echo the call of the CSC itself for greater flexibility and a wider band in the management of the exchange rate.

I now come to the issue of optimising resource management and the pricing of land in Singapore. This is a policy too because the JTC and HDB are major lessees of industrial land and zoning, plot ratios, usage and other regulations are important determinants of land price. In land scarce Singapore, property prices and rentals constitute one of the main reasons for cost escalation in the 1990s. This was pointed out by Dr Wang Kai Yuen in his speech. I therefore agree that land rentals should be reduced. I also support the CSC's call for an MTI-led multi-agency task force to develop competitive land pricing and zoning policies for our hub services. However, I would go one step further and ask that the terms of reference of this proposed task force to examine land pricing policy in Singapore be expanded to include not just hub services but all other sectors as well.

The last cost-cutting measure advocated is that of Government taxes and levies. It is here that I believe there is room for manoeuvring and some flexibility. And this, I think is the nub of the issue: is $10 billion enough? There is room to do more, if needed. I believe that budget considerations should not be the main consideration in this regard. After all, the budget surplus in fiscal year 1997 alone was $4.2 billion. On the other hand, in terms of the June cost-cutting measures, the estimated budget deficit was only $0.8 billion. In other words, there is room for much more expansion in this regard even without touching Government's reserves accumulated during pervious Governments.

I believe also that there is limited room for pump priming. And I believe that this should be seriously looked into particularly since the wage cuts will result in a decreased demand. I know that two-thirds of demand is actually externally driven. But if we look at some figures, in terms of the Input and Output Tables of 1990 - I realise that they are outdated but this is the most recent that we have - the 1990 Singapore Input-Output Table states that for every dollar increase in final demand, the value-added multiplier for commerce is 81 cents; for transport and communication, 67 cents; for seaport and related services, 61 cents; for financial services, 89 cents; business services, 88 cents. For manufacturing, it is very low and that is 40 cents out of every dollar of final demand for non-oil manufacturing. In other words, the pump priming measures that can be implemented should be seriously examined, particularly since there is anticipated fall in domestic demand because of the wage cuts.

What about the timing? Is the timing appropriate? The question here is whether the cut should actually be implemented sooner than early next year. The reason why I say this is recently, both the IMF and OECD have come out to forecast that positive growth is expected in most of the affected Asian emerging economies by the second half of next year. If that is indeed the case, then it could be true that again, maybe by the second half or the later half of next year, we could also have positive growth in the economy. If anything else, I think the depth of the recession in Singapore would be for the last quarter, this quarter and the first two quarters or maybe the third quarter of next year, provided there is nothing more serious in terms of a fall in demand or a global deflation or recession in the economy, for example, if Japan fails to recover or China devalues and a whole lot of other reasons. The global economy is very uncertain.

Having said that, it is of course difficult to convince workers to accept a wage cut if the economy were not in recession and I can imagine that it will be difficult to think of wage cut earlier than now because of the fact that we have to wait for the third quarter result of -0.7%. Therefore, I believe that now that we are considering all these cost-cutting measures, it is better to implement them as soon as possible in order that they can kick in as early as possible in order to save jobs.

My second point is regarding the long run vision. I suspect the CSC Report will be remembered for advocating the 15% cut in labour cost more than for its articulation of a vision for Singapore for the next 10 years or so. While the immediate survival is understandably the paramount issue, we should not lose sight of the longer term issues. It would be desirable to re-visit this vision again when the economy recovers and immediate concerns become less critical. Any vision, once formulated, needs to be disseminated. There needs to be a buy-in and greater ownership by the relevant parties, in this case, the business community and labour. In future, Singapore's economy would need greater and not less participation by the relevant sectors, namely, business and labour. A case in point is the objective of developing a vibrant, entrepreneurial culture and developing world-class companies that we can call our own. How can we forge a better partnership between GLCs and local companies? How can flexi-work hours be implemented which will help working mothers and the aged? These are all issues which can be deliberated in greater detail in the framework of a public sector business-labour partnership.

I would therefore like to propose that the CSC organise a conference on the long-term vision for the business community and labour sometime next year in order to extend the buy-in and ownership of the vision.

Some brief comments about the vision itself. One may ask: what is new about the vision? I believe that more than being a completely new paradigm, the vision is a useful articulation of a continuing trend towards greater technological sophistication and stronger capabilities. I believe that one of the main highlights of the vision is the fact that it articulates manufacturing and services as twin engines of growth for the economy and, for the first time, we see services coming to the fore in terms of the pro-planning approach of the Government. This is exactly in line with Singapore's likely future cost and capabilities profile. I therefore agree with this emphasis on manufacturing and services as twin engines of growth.

My third point is regarding the process of crisis management. The economic crisis has revealed the importance of fundamentals, not merely economic fundamentals but political and social fundamentals. In this time of crisis, social capital and the legitimacy of the political leadership are crucial. We in Singapore are fortunate that at a time of crisis such as this, the trade unions and politicians can gain support for a wage cut and maintain social cohesion so that racial and ethnic fissures do not appear. There is no policy indecisiveness, no dithering, no stalemate, as we see, for example, in some of the other countries around us. Instead, not only has there been the ability to garner the support necessary for the short-term measures, we have also been able to plan ahead and be pro-active and take measures necessary to sustain our future competitiveness. Here, we see, in some ways, good governance in Singapore in action and I believe that good governance must surely be one of Singapore's most precious assets.

My fourth and last point is regarding compassion. I would urge the Government to help ease the burden of the wage and CPF cuts. Although interest rates have fallen in recent months from their high early this year, many households would face difficulties in meeting housing loans, and the wage cuts would mean a consumption squeeze for many families. I hope that the Government would adopt a compassionate approach by accompanying the labour cost reductions with measures, including schemes to ease or defer mortgage payments and an increase in educational bursaries and textbook allowances for school children for families with financial difficulties. I would also argue for an income tax rebate to help alleviate the squeeze on disposable incomes.

One alternative to the proposed differentiated CPF cut that has been advocated by my Parliamentary colleagues is to find ways to reduce the financial burden of the lower income group, for example, in terms of rebate for S&C charges, and so on. The private sector can play its part. Banks, in particular, can also help by providing bridging loans for those who bought private properties.

In conclusion, I would like to state that the CSC's Report is indeed a well-conceived Report that not only provides for immediate relief but also for a long-term vision. I salute the Committee for being able to complement each of them by the other and include them in one Report. I support the motion.

Mr Inderjit Singh (Ang Mo Kio GRC): Mr Deputy Speaker, Sir, I support the motion as proposed by the Minister for Trade and Industry.

Before I go into the details, I would like to congratulate the Government, the workers and the business leaders in Singapore for working as a team to tackle a very tough problem that they are facing by delivering this very comprehensive Report. We have seen many examples of how a seemingly good infrastructure breaks down in times of crisis. If we look around us in Asia, in all the countries affected by the economic crisis, there has either been a leadership change in the country affected or the countries are in turmoil with political and social reforms taking place.

It takes a very stable Government with strong leadership to be willing to take bold steps that have been suggested by the CSC. It also takes a committed and responsible business community and citizens to work hand in hand with the Government to implement some very tough measures that we are talking about. Sir, I am glad that we in Singapore are sending a very strong and clear signal to the rest of the world that Singapore consists of a strong team of partners from the public, private and people sectors who can work in synergy to solve our problems despite the difficulties that we face.

While we have identified the solutions, they would only be effective in resolving our competitiveness problems if we implement them fast and decisively. We have done a lot of planning and talking in the past one year. We have to very quickly set the actions in motion. So I hope we would implement the measures that we have identified immediately.

I would like to recall that early this year when we were debating the Budget for the year 1998/1999, many of us highlighted the perception gap between the way the Government and the private sector perceived the state of the economy. Many of us had projected a rapid decline in our economy while the Minister for Finance had in his speech talked about the recovery and growth, especially in electronics and manufacturing sectors. Based on how the Government viewed the economy, we implemented a number of conservative measures at that time. Then we came in with off-budget measures about four months later because things turned out to be different as planned. However, things again deteriorated and the off-budget measures, being very conservative, did not do much to revive the economy.

Sir, let us look at the facts. While our economy is still in a much better position if we compare ourselves to our neighbours, nonetheless, we have slipped into a recession as many of us had predicted early this year. The worrying issue is not just the recession but is also the rate of decline from 6.1% growth in the first quarter to 1.6% growth in the second quarter, and to a negative 0.7% in the third quarter. The rate of decline is quite fast.

Sir, my point in bringing this out is that the mechanisms we have in place are not accurately addressing the real problems seen by the business community. Many of us have asked for bolder measures from the Government, as far back as July 1997 during the 1997/1998 Budget debate. Unfortunately, the outcome was otherwise.

This time round, it is a little difficult to assess the impact of the measures that we have identified because we do not have the details of the actions from the Government. However, I hope they will take our request into serious consideration, since we have not been very far off in the last one and a half years.

The Government must be more aggressive and not rely on small steps or piecemeal measures, like the $2 billion off-budget measures that we announced earlier this year. That $2 billion in my opinion did not move the economy even a little bit. We must learn from Japan's struggle for the last two years. Japan also tried to take many piecemeal actions and it resulted in wasted efforts and wasted money with Japan's economy still in trouble today. So I hope this time we do not waste our efforts and money and I hope we will be more aggressive.

Sir, in my opinion, the Government's share of the $10 billion reduction proposed is not sufficient. While I can understand that wages make up a large proportion of total business cost, I feel that the reduction in Government charges, levies, utilities and so on needs to be higher than the 15%. Frankly, the 15% reduction in business cost falls short of the business community's expectation of 20-25%. In fact, even the 20-25% is not a cooked-up number. In fact, I did a calculation. For the manufacturing sector, based on the real increases that have gone on in the last three to four years, and based on the currency depreciation in our neighbours we really needed about 25-30% of reduction to be competitive. So 15% falls short of our expectation. However, I feel that the $7 billion wage reduction is sufficient. But the Government's portion needs to be much more and I am suggesting 30-40% reduction in all the areas that I have just mentioned. While I understand that the real Government charges form a very small component of the total business cost, but really, there are many "hidden costs" in our system of governance in Singapore. Some of these are the COEs, the ERP, petrol tax, GST, worker levies, and many more. So although our official income tax is among the lowest in the world, the net effect of all the indirect taxes and charges is significant to the bottomline of businesses.

Our approach of autonomous agencies in the Government departments and statutory boards while, in principle, looks good, has resulted in `micro-managing' of our economy where all of them either want to make surpluses or profits individually. Collectively, the impact on businesses can be very high. So if we look at the charges from all these agencies, the net contribution to the business cost is more than what we officially classify as business charges. I feel that we may have to make sacrifices in certain agencies where they must be allowed to have deficits or losses, as long as the collective result to the Government's budget is positive, if that is what we aim for every year.

Sir, I suggest that the Government spend between $5 billion and $7 billion to boost the economy, not just the $3 billion. Of course, we have seen numbers that if we go for $5-$7 billion that would mean a 50-60% reduction in Government charges which may not be realistic. So, what we are asking for down here is that part of it should come in real reduction in charges and levies, and the rest of it could come in the form of pumping in some liquidity to boost local consumption, which also contributes to about 30% of our economy. These can be in terms of more generous tax rebates.

I also suggest that we temporarily bring down the GST charges from 3% to 1%. I am not suggesting a complete suspension of GST, as many business leaders have suggested to us, because I believe that we still have the right system in place and we should keep the machinery of the system going. If we completely suspend the GST, putting in the mechanism in place again in the future will be troublesome.

Sir, I believe that the $3 billion or so that the Government plans to reduce in terms of costs will come from our current account. I would like to suggest that we take this opportunity now to dip into our reserves. Since we were willing to do so for our neighbours like Thailand, Indonesia and Malaysia, the Government should seriously consider giving some of the surpluses and the reserves back to Singaporeans who badly need it now. It is the time to help stimulate domestic consumption.

Sir, as we are looking forward to substantial reduction in rentals by JTC and HDB for industrial and commercial properties, these reductions should not be in the form of rebates. They should be permanent reductions if we really want to build long-term investor confidence in Singapore. Rebates will go away after some time and do not give a feeling of long-term thinking on the Government's part. Given how much our land and property cost has gone up compared to our neighbours in the last few years, we need drastic reductions in rental, again to the tune of 30-40% reduction.

Sir, foreign workers form an important part of our economy. We know we cannot do without them. While I understand and support the need to bring in mainly skilled workers, however we already have a large pool of unskilled workers in Singapore. It will take some time to either replace them or train them to become skilled workers. Since they are already here, I urge the Government to reduce the levies by 50% for both skilled and unskilled workers. For skilled workers, the cut should be permanent. For the unskilled workers, we can issue a time table of increases back to the original levels over a period of three years. In this way, we will help many companies survive this downturn while we compel them to make long-term plans to train their workers.

Sir, many of our small and medium enterprises (SMEs) are affected by cash flow problems. While the Government has enhanced the Local Enterprise Financing Scheme (LEFS) to be broader based and pumped in more money to it, unfortunately, the banks are still the deciding bodies. Given the ultra-conservative stance of our banks in this environment in Singapore, many companies are still finding it very difficult to take advantage of the scheme. I would like to suggest that PSB or some other Government body take a direct approach in financing some of our viable companies, because they are finding it very difficult convincing the banks.

Sir, traders also contribute substantially to our economy. However, due to credit squeeze from our ultra-conservative banks in Singapore, they are not able to take advantage of the still attractive trades that exist in South Asia, China, Africa and Europe. I have heard of a number of big traders who are planning to move and relocate out of Singapore to countries like Hong Kong and Thailand to carry out their trading activities because of lack of credit facilities in Singapore.

I would like to suggest some form of Government supported trade financing scheme, quite similar to the LEFS. Sir, with a better trade financing scheme, we can avoid the drain of expertise out of Singapore or even prevent the collapse of some still viable traders who are located here.

Sir, so far, I have focused on the immediate cost competitiveness issues and the short-term action plan proposed by the Minister for Trade and Industry through the CSC Report. I would now like to touch on the long-term strategies. In my opinion, the strategies spelt out by the Committee are excellent and will without doubt get the whole nation mobilised to work towards achieving the plans that we have set up.

Sir, for the longer term, I see the economic recovery coming in a few stages. First, we will have to focus on our immediate cost competitiveness issues which I believe we are very well focused on. The second stage will be to build upon investor confidence in Singapore and also in investor confidence in the region. This is because a lot of investors, especially those from the West, look at the stability of the region as a whole and they do not just look at Singapore as a country. So if we can bring stability and confidence in the region faster, funds will flow in even faster. The issue of confidence building is an urgent issue and I hope that the Singapore leaders can take a lead to get ASEAN organised to speed up the recovery process.

The third stage of recovery will have to be in finding new markets and boosting demand. We cannot rely on our traditional markets. We have learnt this lesson very well. So both the Government and the private sector can play an important role by exploring new markets and regions. I believe this has already been set in motion.

Sir, on the issue of strategic land pricing, I am glad that the CSC has recommended a new way to price industrial land and properties and to benchmark increases to the increases in countries that are competing with us, as opposed to increases according to the market rates in Singapore. I call on the Government to learn from its past mistake in this area by putting in place measures that will prevent land prices from escalating so drastically in a short span of time, as we experienced in the last few years.

Sir, land prices do make a big impact when it comes to selecting an investment site for a manufacturing facility, although we have heard leaders saying that it forms a very small component of total operating cost. But when it comes to deciding a location to site a factory, it plays a major role. In fact, in the last few years, I have experienced two occasions when we were trying to select a new manufacturing facility. On one occasion, the land cost played a major role in causing my company to select Thailand as the site rather than in Singapore.

On entrepreneurism, I fully support the strategy because I believe that if we have to compete as a global player, we need to have more knowledge-based industries and we cannot continue to rely on an asset based economy as we have done in the past. We need to create an environment in Singapore that promotes business risk taking and to encourage more technopreneurs to emerge. In my opinion, the Government agencies that we have today are very entrenched in just supporting the MNCs, while the infrastructure to support local technopreneurs is not well developed. We need mindset changes among those involved in these agencies. Local start-ups and people who are involved in these start-ups feel discouraged by the lack of support given to them and their projects.

We also need to develop a culture of tolerance to failures and to give people second chances. Sir, success should not be measured by straight 'As' alone. How we classify and label people at such an early stage through practices like early streaming in schools affects our children's self esteem and many will end up giving up and not willing to try again, as they go along in life. Society and Government's attitude towards those without academic excellence needs to change and we must have a broader definition of "success" that goes beyond material, economic and academic measures.

Sir, another area that needs to be looked at is the help for entrepreneurs who need to raise funds necessary for their projects. I call on the Government to further liberalise rules on how funds can be raised for start-up companies and unlisted companies. Singaporean venture capitalists are highly conservative just as our banks are and we need more foreign ones to set up funds here in Singapore, so that they can create an environment similar to the one in Silicon Valley in USA and the Hsinchu based Science Park in Taiwan.

The goal of developing more world class companies is excellent. We need many more companies like Creative Technology who are global players. Sir, being small is not an excuse for the lack of such world class companies. We can learn from the small European countries like Finland and Switzerland who have many world class global companies like Ericcson and Nokia. I fully support the suggestion that the Government acts as a business facilitator. The Government should indeed only play a supporting role and create space for the private sector and entrepreneurs to move in. So far, the Government has been crowding some parts of the business environment. Similarly, Government-linked companies (GLCs) should not compete with local private companies in the domestic market. Instead, because of their size and access to substantial funds, GLCs should bring their competition to outside Singapore and in addition, bring along with them some SMEs by getting them to do parts of a big overseas project. This initiative has not been fully explored by our local GLCs.

Sir, in conclusion, I am happy that the Government is willing to react fast to tackle the problem of our declining economy. I hope that the measures implemented will be bold and I hope everyone will seriously implement them fast. I applaud the workers for their understanding for the wage cuts. The employers and the Government need to play their part and take their fair share of actions so that together we will emerge as a strong economy and as a country.

Sir, I support the motion. 4.56 pm

Mr Low Thia Khiang: (In Mandarin): Mr Speaker, Sir, under the impact of the regional economic crisis, many companies in Singapore are in danger of having to close down, and more and more people are losing their jobs. This has forced the Government to admit that the business cost in Singapore is much too high, and that Singapore has lost its competitiveness in the international market.

The Committee on Singapore's Competitiveness (CSC) Report points out that even before the currency crisis broke out, Singapore could no longer compete on the basis of business costs alone.

The PAP Government's policy has all along been to adhere to the so-called "market economy" principle, and to allow the various business costs to soar unchecked. This has not only made business cost heavier, but has also caused the people's burden in life to be getting heavier and heavier. When the market conditions suddenly turn bad, the businesses which are already overloaded with very heavy business cost will immediately find it unbearable and face the danger of having to close down. Eventually, the workers will become unemployed, and their burden in life will be made even heavier.

In fact, over the years, many businessmen have been complaining of high business costs. I have, on numerous occasions, pointed out in this House that with the Government continously increasing the burden of the people, once the economy unfortunately turns bad, the people will find their burden in life unbearable. But the Government just would not listen to me.

Prime Minister Goh said, "Because our business cost is too high, we are losing our share in the United States' electronics import market. Before the start of the regional crisis, in the second quarter of 1997, Singapore's share in the US electronics import market was 9.3%. In August this year, it has dropped to 7.4%".

In comparison, during the same period, Malaysia's share in the US electronics import market rose from 7.1% to 8.2%. For China it rose from 7.2% to 10.1%. However, during this period of time, the renminbi did not suffer a huge devaluation like the ringgit and baht. China has become more competitive, while our competitiveness has substantially diminished. Had the Government made preparation for the people and the businesses during good times, and exercised some restraint in its act to prosper the coffers by increasing the business cost here, today we may not have to face such drastic wage-reduction measures.

The CSC Report recommends a total wage-cost reduction of 15% and to set back the wages to that of the 1994 level. The Government immediately takes the cue and indicates that it is accepting the CSC's recommendation by proceeding to cut the employers' CPF contribution by 10%. The National Wages Council (NWC) immediately responded by announcing that wages should be cut by 5% to 8%.

I am puzzled with the CSC's recommendation of 15% cut in the total wage-cost to set back wages to that of the 1994 level. First, the Report does not give a clear explanation as to why it came to the conclusion that the total wage-cost should be reduced by 15%. Neither did the Report list out the cost structures of the various sectors in the economy nor produce convincing data to prove that the recommendation for wage cut is necessary and cannot be avoided.

Secondly, although the CSC Report mentions that the currencies of the other countries in the region have devalued substantially since July 1997, resulting in Singapore further losing its competitiveness, DPM Lee did not seem to think so. On 19th February 1998, he said in Parliament, I quote :

(In English): "Luckily, we are competitive. Our costs are not out of line. If you measure exchange rates against the US dollar, the baht, the ringgit, the rupiah and the won have all gone down much more than the Singapore dollar. This has made these countries cheaper than us, in a way, more competitive than us. But the effect is smaller than these numbers suggest." Then he went on to explain why he said so, and he concludes:

"So overall, although the exchange rate of the Singapore dollar has gone down much less than our neighbour's, I am still confident that our exporters can compete. They have problems if they are working in the region. They have problems if they are in difficult businesses like disk drives. But it is not because we are out of line and uncompetitive." That is what DPM Lee said.

(In Mandarin): That being the case, why has the Government suddenly decided to cut the wages of the workers because our competitiveness is in trouble?

Thirdly, although some people are worried that many companies may close down and result in serious unemployment if our workers do not accept a wage cut, the Secretary-General of NTUC, Minister Lim Boon Heng, did not feel that we should worry about this problem. He was reported in the Straits Times of 16th November 1998 as saying that Singapore had enough jobs for every Singaporean and no one would starve because of this economic recession.

Sir, if DPM Lee is confident that even when other countries' currencies have been devalued, our exporters can still compete and the Cabinet Ministers are not worried about unemployment, then why do we need to reduce our workers' wages and employers' CPF contribution?

The CSC Report has recommended that the total wage cost be reduced by 15%-10% reduction in the employers' CPF contribution and 5% from the wages. The whole cost-reduction package is worth $10 billion, of which $7 billion will come from the wage-cost and $3 billion from non-wage cost. Just now, some MPs mentioned that it was fair. Is this really fair? The Chairman of the NWC announced that labour, management and the Government should be in the same boat to share the same happiness and troubles. But now we can see that when there is trouble, the workers are the first to bear the brunt. They have to shoulder 70% of the sacrifice. But when times are good, do the workers enjoy the profit on a 7:3 ratio? Or do they just get 3:7? I shall leave it to everyone to make his own judgement.

I feel that, in the present circumstances, to reduce the workers' wages and to ask the workers to bear 70% of the cost-reduction burden is very unfair. As of March 1998, the Government's actual gross revenue was $27 billion, which was some $550 million more than the projected revenue. The Government should take the lead to substantially reduce its charges and rentals and not reduce the workers' wages and subject them to much hardship.

The CSC Report has recommended that the wage level be reduced to that of the 1994 level. This is a regressive step. The cost of living now is significantly higher than in 1994. But amazingly, the Government accepted this recommendation. The Government seems to have forgotten that it has promised to bring our standard of living to that of the Swiss.

According to newspaper reports, the taxation experts are of the view that there is nothing new in this Report. The Executive Director of the International Chamber of Commerce and Industry seems to want to see some meat left on the bone. He pointed out that although the report recommended a total reduction in the wage-cost, it did not give any specific suggestion on how to execute it, apart from the CPF cut. I am not an economist, but I must point out that this Report has failed to give adequate grounds and data to prove that the total wage-cost must be reduced by 15%. We are asking the workers to accept 1994 wages to pay for 1998 cost of living.

I feel that the Government should not mandate a 10% cut in the employers' CPF contribution, or for that matter, the amount of wages to be reduced. With the economy turning bad, many workers are already suffering a loss of income. I feel that wages of the workers will be automatically adjusted according to the market situation, and the profits or losses of the companies. What the Government should do is to reduce contribution rate to the Special Account and Medisave Accounts of the workers. And also it should reduce the employees' CPF contribution so that they could have higher take-home pay to tide over the difficult times. Although wage-cost takes up a bigger part of our total business cost, I feel that by reducing other non-wage business costs would also help to achieve the target of reducing the total business cost.

According to information given by the Ministry of Trade and Industry, in the the manufacturing sector, 51% of its business cost came from service cost, including transportation and communications, utilities and rentals, and other indirect taxes such as GST, import duty, property tax, etc. Among the labour costs, apart from salaries, there is also the foreign worker levy, SDF, training and welfare funds, etc.

During this time of economic depression, the Government should take the lead and make use of the reserves accumulated over the years to help reduce business cost by cutting the various charges and taxes, in order that Singapore would regain its international competitiveness.

In fact, the most important thing to do is to help our companies look for and penetrate into new markets. At the same time, stimulate consumption in the domestic market, so that our products may be marketed, and there will be capital to roll over. If a company has no business, its products cannot sell, then even if business cost is reduced, wages of the workers are cut, the company will eventually have to close down, and the workers will lose their jobs.

Mr Yeo Guat Kwang (Cheng San): (In Mandarin): I remember when I was a little boy, I used to venture into the compound of a certain house in the kampong where I lived. This family reared a few hens and a pig. I particularly enjoyed watching the hens laying their eggs. What amused me was the rate at which different hens laid their eggs. Some laid a lot of eggs while some laid not as many. One day I asked the master of the house, who was a respected kampong elder, why it was so. He smiled and told me, "The healthier hens, those well nourished and better fed ones, naturally are more productive and can lay more eggs. The under-nourished and sickly ones, of course, cannot lay as many eggs. But, If I were to slaughter these weaker ones, then I would not even get one single egg from them. "

This is like what the Chinese say, "If there is no soil, there are no flowers." Without hens, how do we get eggs?

It is the same with our workers today. They have answered the call for a wage reduction. They are prepared to accept a wage cut, not that they derive any pleasure in doing so, but because they know that this is a bitter pill they have to swallow in order to help their employers tide over the difficult times ahead. If the company can survive, they can keep their jobs, and they can then have take home pay to support the families. We should not slaughter the hens to get their eggs. Therefore, our opposition party members and their employers should understand the plight and intention of the workers. Our workers have made short term sacrifices and we hope that the employers will respond in kind. They should manage their companies well so that the workers' sacrifices will not be in vain. The 10% cut in CPF is painful but cannot be avoided. We must prepare well in advance.

If we are not prepared, Mr Low would ask why we did not see it fit to be prepared. When we are prepared, he asked why should we do so. We do so in order to ensure that our workers would keep their jobs.

Our workers have shown guts and determination. They are prepared to take a wage cut. However, the higher-income executives should make even bigger sacrifices by accepting a deeper pay-cut. If possible, the lower-income workers should be spared the wage cut. As the biggest employer, the Government should take the lead. I believe our Government will do so. Sir, today, our workers have manifested such determination and spirit of unity and their sacrifice deserves our applause. They must not be forgotten when the good times return. The employer should do the same. We should not act like the Opposition Members. We should not add more troubles to our workers. If we are pragmatic, adjust our measures, we can still live a comfortable life in Singapore. Our market economy, according to Mr Low, is without restraint. Our economy develops without restraint. Therefore, we are in this plight. However, what I learnt from the various reports, I see quite a different picture. Many economists agree that because the Government has made proper policies to guide our economy, therefore, we are not like other countries in this region who suffer gravely during the economic and financial turmoil. He said we are unreasonable in asking our workers to meet the 1998 cost of living with 1994 level of wages.

If we look at the figures carefully, we will find that various types of daily necessities have fallen in prices. The NTUC FairPrice has benefited from the off-budget measures and these benefits are passed on to the consumers. We hope other businessmen should not find any pretext not to do so. Whatever savings they get, they should pass them on to the consumers.

I would like to make another suggestion that our public transport cost be lowered. According to estimates, out of the total cost in operating public transport, 50% comes from the

workers' wages. So, with a 10% cut in the employers' CPF contri-Column: 1280

bution, the operational cost should be reduced by at least 4%. I suggest that the public transport operators give a 5% rebate to passengers who purchase farecards. For every $10 farecard purchased, a 50 cent rebate should be given.

The NTUC cooperatives have also announced a series of measures to help the workers. For example, NTUC FairPrice has announced price reduction to some of the sundry and daily essential goods in its outlets. This will help to lower the cost of living of the ordinary workers. We hope all these well-intentioned measures will receive similar response from merchants and supermarket operators to see how prices can be lowered. When we are facing an economic crisis, we need to have a spirit of unity. We should look for the root causes of our malaise to find out how the employers, Government and workers can unite and work together to solve the problems. If we take a short cut, as what our neighbouring countries have done, to devalue our currency or to make use of our financial surpluses and reserve to tide us over the crisis, we will bring more troubles and pains to our economy, although these measures may appear to be painless and superficially effective. Therefore, we should think of pragmatic measures. We should bear some pain. However, as long as we believe all these efforts and sacrifices are for a better tomorrow, then I think we are in the right direction.

Mr Low Thia Khiang: Clarification from the Member, Sir.

Mr Deputy Speaker: Yes.

Mr Low Thia Khiang: (In Mandarin): Just now the Member mentioned the hen-and-egg dilemma. In his speech, he said that the wage cut was to prepare for a rainy day. If what he said was indeed true, then I shall question the motive of the cuts in employers' CPF contribution rate and wages. Are the cuts necessary now? Or is there a political motive over the proposed cuts? You cut the wages and CPF contribution now and then just before the next General Election in the year 2002, the PAP Government will increase the workers' wages to show that this Government is better than those in the other countries. When we were at the outset of the economic crisis, many of our leaders said that our economy was very strong and our fundamentals were firm and sound. However, these fundamentals seem to be pretty shaky now. If the Government has been very effective, then our workers will not have to face this drastic wage cut now. This is like two athletes taking part in a 400-metre race. Athlete A fell down at the 200-metre mark, while Athlete B continued running but collapsed at the 300-metre mark. Although both athletes did not complete the race, Athlete B turned to Athlete A and said, "Look, I ran 100 metres more than you did. Therefore, I am the winner."

Mr Yeo Guat Kwang: (In Mandarin): I was not going into the argument of whether we have hens first or eggs first. The example I quoted was to illustrate the point that we must have a healthy hen in order to get good eggs. The recommended measures are meant to prepare us for the worst. Just now Mr Low remarked that in February this year, DPM Lee had claimed that our economy was quite all right. I do not know whether our Opposition Members are in the habit of not reading the newspapers. The economy changes every week, every day! Today's situation is very much different from what it was six months ago. As a matter of fact, even in the second quarter of this year, we still had a positive growth. But, by the third quarter of this year, we began to have negative growth.

From the various economic reports, we can see that certain countries were not seriously affected by the financial crisis in the beginning. However, they are in a significantly different situation now. For example, a worker told me that at the beginning of the crisis, people called it the "tongyam effect", because it originated in Thailand. Soon after that, other countries in the region were affected, and it became the "Asian flu". With the troubles in Russia and Latin America, this crisis is going globalised. It has become a global economic crisis. The world of economics is dynamic. It is not static. Therefore, we say that the across-the-board wage cut is necessary. No doubt, some companies are still making good profit. To them, I say, "Please do not take these wage-cut measures rigidly." They can reduce the price of their services or goods to help the workers. Therefore, we should look at the situation as a whole. If we look at the situation from some small micro-perspectives, then it will enhance our workers' anxiety, as they do not know what to expect next. We should be united, work as a team, be pragmatic, and then we will have a better tomorrow.

Mr Low Thia Khiang: Clarification, Sir.

(In Mandarin): We often hear that the Singapore political leaders are far-sighted, having good judgement, and that they have "helicopter views". Therefore, they should be paid very high salaries. According to Mr Yeo, things change every day. Our leaders' judgement is also changing all the time. How could they lead us if their views and judgements are changing all the time? They have taken pride in their extraordinary quality - their helicopter view. How do you explain these frequent changes in judgement? Can we rely on them to make the right judgement to lead us out of doom? If their judgements are changing all the time, they are no different from people who play shares at the stock market.

Mr Yeo Guat Kwang: (In Mandarin): Mr Low does not understand the expediency of "suiting measures to the time and local conditions". We should make decisions according to the situation here and now, to look for the most effective measures to tackle our problems head-on. This is exactly where we are different from the other governments.

Mr Low Thia Khiang: (In Mandarin): Mr Speaker, Sir, I think if the judgements were to be changed every three months, I do not know how the Government formulates its policies. When we want to take a long-term view, how are we going to say that we should be expedient and make changes whenever necessary?

Mr Yeo Guat Kwang: (In Mandarin): I do not understand why the Opposition Member holds the view that for one to be capable, one has to set rules and stick to them in spite of changing circumstances, without making the relevant adjustments. For example, if you are driving a car along a certain route, there is a puddle of mud ahead of you, do you drive straight on irrespective of the conditions of the road, or would you swerve to a side and go round the puddle? What we should do is to make accurate judgement with regard to the situation before us. Identifying the problem is important. But just identifying the problem is not enough. We must look for solutions to the problems. We cannot tell the people that the economic situation has changed and then stay on with the past policies and measures to deal with the present situation. Can we do that?

Mr Low Thia Khiang: (In Mandarin): I am talking about farsightedness, long-range view. You cannot say that you can see things only for the next two months. Otherwise, how can anyone say that our leaders are farsighted? The question is how you make your judgement, and whether your judgement is correct or not.

Mr Yeo Guat Kwang: (In Mandarin): If our Government's judgement is not sound, if they are not capable, then today how do we have a Singapore which is least affected by the economic turmoil?

Mr Peh Chin Hua: (In Mandarin): I support Mr Yeo's views. As in the game of Chinese chess, whenever you make a move, you have to take the latest development on the board into consideration. One wrong move, and the whole game is lost. Therefore, we look at it as a whole. If we want to win the whole game, then we must make every move correctly and at the correct time. I am confident that the PAP will win the game.

Mr Low Thia Khiang: (In Mandarin): When the economy is good, the PAP Government will claim that they have won because they have a capable leadership. But when economy is in a bad shape, they blame it on external forces. Now, you win the chess game. Is it because you are clever or because your opponent falls sick?

Mr Peh Chin Hua: (In Mandarin): The important thing is whether the standard of living of the people of Singapore, including the Member for Hougang, is getting better and better.

Mr Low Thia Khiang: (In Mandarin): Mr Speaker, Sir, of course, I want to have a better standard of living. But the PAP keeps saying more good years. But now what I see is that it is not getting better every year even though it is under the leadership of the PAP. When the external situation is bad, it will still be bad for Singapore. So it is not more good years.

Mr Deputy Speaker: You are going into a debate within a debate.

Mr Yeo Guat Kwang: (In Mandarin): Do I have to sum up? I do not understand what was the main point of Mr Low's intervention. What I know for sure is that 90% of our Singaporeans own their flats and we have a manageable unemployment rate although everyone says that the regional economic situation is very bad. But we are considered not bad. On the Internet, someone remarked that in Singapore, the acronym IMF stand for "I am fine."

Dr Tan Cheng Bock (Ayer Rajah): Mr Deputy Speaker, Sir, the effects of this severe recession are well known and keenly felt in all sectors of the economy. Companies have borne the brunt of falling businesses, rising unemployment, increases the anxieties of the consumers. In turn, the contraction of demand sets off another cycle of business downturn. Some have criticised the Government for responding too slowly to the recession. On the other hand, the Government has earned high marks both internationally and from a majority of Singaporeans for her steady and measured response. On a macro level, we are progressing well to address the problems thrown up. The Government has instituted steps to prepare and persuade our people to accept the bitter medicine. It has to be taken at this juncture. This is but the first step.

The economic situation is regional but could be global soon, if Japan does not stimulate its economy. We also know that the American demand is already flagging as is evident by the latest report on non-oil domestic exports. We should not be gloomy and just wait for changes in the region to benefit us. We know this will not be in the near future. Even then, things will not be the same again and we, the people of Singapore, must stand together to define and achieve relevant new roles in the future millennium. Cost-cutting measure is a temporary step to help business survive and save jobs. Doing this alone cannot ensure our success in the new environment of a global economy. Continual long-term development towards a creative and knowledge-based economy has to be pursued vigorously.

The Committee on Singapore's Competitiveness has recommended six strategic responses to the crisis and recommended five specific measures to deal with immediate challenges posed by the regional crisis. I do not propose to read out what is clearly stated in pages 2 to 5 of the Report. I think the one item that has made the headline is item 20.a. of the Report and I quote:

`Reduce total wage costs (including contributions to the Central Provident Fund (CPF) by 15% from 1997 level to bring our wage competitiveness, as measured by RULC, [that is the relative unit labour cost] back to the level of 1994. To achieve this, the employers' CPF contribution rate should be reduced by 10% points. The rest of the cost reduction should be achieved through the flexi-wage scheme, by a reduction in the annual and monthly variable components of wages. The public sector should take the lead in this;'

Mr Deputy Speaker, Sir, I support this recommendation. It will affect all individuals with CPF accounts. It will affect their housing loans and mortgage payments. And it will affect their overall old age savings. It will mean that they will suffer a drop in their take-home pay if there is a further cut in the variable wage component. All these will have a tremendous effect on Singaporeans, especially the middle and lower-income group. Added to this is the fear of job loss or retrenchment.

The CSC's recommendation had been hotly debated by many. Some good and useful suggestions have been made. But one thing is for sure, people are agreeable fundamentally to the various tough measures recommended. They differ only in the sharing of the burden over the three sectors - the employees, Government and the private business. Although it has been explained that the employee's share is in line with its proportion in the total cost, I think that there is a case for the Government to take on a bit more of the burden. It is not that the Government has not done anything. It has already given property tax rebates and taken other steps to alleviate various sectors in the $2 billion off-Budget package.

On the other hand, the labour movement, through NTUC union leaders' alertness and tireless work, not only persuaded successfully workers' acceptance of wage cuts but work speedily to come out with a package to help reduce the pain. The various steps taken by NTUC to help is commendable and should be highlighted. The NTUC should be praised for taking steps like cutting the prices of groceries, 122 items had about 9% cut, childcare centres, NTUC pharmacies, Denticare, and providing about $2 million loan grant scheme for students who need textbooks, and food outlets. In addition, I learn that NTUC is using $12 million to help NTUC Income policy holders and borrowers to pay premiums and housing loans. These measures worth $23 million will help to soften the effect of CPF and wage cut to lower-income Singaporeans. Singaporeans, on the whole, as I said, should be thankful that NTUC has come out to provide this safety net for some of the domestic costs. For those who lost their jobs, there are many agencies trying to find alternative jobs for them. These include our Community Development Councils, the Ministry of Manpower and, again, NTUC. Workers who need jobs should not be too fussy. They should take up the jobs given to them.

We have always depended on foreign workers to clean the tables at our hawker centres, domestic help and construction work. I think the time has come for Singaporeans to do some of these tasks and be less dependent on foreign workers. Attitudes must change to accept these jobs as an honest and respectable way to earn a living. I have come across many retrenched workers who are unable to meet payments in utilities and conservancy charges. Yet, they are reluctant to accept lower paying jobs. There are twin problems facing them. One is in the area of utilities and conservancy charges. The other one is to meet the daily household needs. I have therefore proposed to my Bukit Timah CDC to help pay part of their arrears in utilities and conservancy charges provided they first accept available jobs and show a commitment to stay employed. This will go a long way to ease their worries on overhanging debts. Businesses have also responded. Banks lower interest rates and reschedule loans. Rentals are falling everywhere and in every sector, although my feedback is that the largest property players are not responding in a significant way to the tenants' cries for help. I hope this perception is wrong.

The people at the business sector are stretched. But the Government still has substantial reserves and this is the time to stretch that hand and use that umbrella for a while. Limit to a quantum we can afford without seriously undermining the economic foundation. I ask the Government to look into this because a fair number of Singaporeans cannot reconcile the fact that they have to take cuts on their wages and CPF, and yet the Government is prepared to give billions of dollars of loans to our neighbouring countries.

Retrenchment and wage cuts are a real blow to many Singaporeans. There are a few categories. (1) Those who have been retrenched and cannot find another job easily. Many are sole breadwinners of the family. (2) Young couples have problems with their 20% cash payment for the new HDB flats. Perhaps, we should reduce this to 10% on a case-by-case basis. (3) Those whose CPF are fully committed to housing loans but have no disposable income left to make up for the shortfall of the 10% cut. The present unemployment figure of 20,000 and above will be growing. Unlike in 1985, this economic downturn is going to be more prolonged and its effects will be worse, primarily because of heavier loan mortgages and a higher cost of living. In 1985, housing was not so expensive and people's commitments were less.

The longer term issue is how are we to compete with our neighbours when recovery comes as costs of doing business in the neighbouring countries are very much lower. This is one big challenge we face: how to convince investors to want to come here and set up business and thus create jobs for our people despite our higher costs. Our strong Singapore dollar compared to the devalued baht, rupiah and ringgit is an obvious factor. But we have no intention to devalue our currency. The Prime Minister, Deputy Prime Minister and the Minister for Trade and Industry have many a time explained why and I do not think I can do any better except that I support this view that our imports are obviously cheaper with a stronger Singapore dollar. Our measures to bring down costs will definitely help. But I think it is still not enough to counter the much lower business costs in Thailand, Malaysia, Indonesia and Korea. Either we move our business to the region, as some are doing, or we stay and find niche businesses that the others are not able to compete with us. It is easier said than done. But we hope the EDB team will scout the globe and come back with businesses that will capitalise on our country's manpower and skills.

The CSC has made recommendations on the strategies for the future competitiveness. In particular, emphasis is in the manufacturing and services sectors as its twin engines of growth and these are correct strategies. We must avoid being a property economy as it is very unproductive. The emphasis on hub services is a good move in the right direction. We should build Singapore as a premier service hub in Asia, emphasising our existing hub services where we have achieved international repute, for example, financial services, international trading, transport and logistics, exhibition management and tourism, and of course develop new high growth hub services in health care, education, media communication and information technology services, e-commerce and direct marketing. All these are in the Report, and they are good.

To achieve these recommendations by the CSC, page 118 of the Report calls on the Government to review Government regulations and bureaucratic red tape. Page 118 of the Report, item 12.b., lays down how to minimise the costs of compliance incurred by businesses, and I quote:

`We should consider setting up an Inter-Ministry Committee to coordinate the formulation and implementation of all rules and regulations to ensure that there is no conflict or overlap. This Committee should be an extension of the SIU. Government agencies can further increase their cooperation so as to improve efficiency;'

I was reminded, Mr Deputy Speaker, Sir, when I was the Chairman of the Feedback Unit, there was a call for the setting up of an Inter-Ministry Committee. Many similar calls were made by the private sector then to see whether we could coordinate many of the issues that involve different Ministries and the setting up of an Inter-Ministry Committee was called upon. It never took off. Now that the Committee has made such a call, I do hope it will be implemented. And I guess one reason for the Ministry in not setting up this Inter-Ministry Committee is that most Ministries guard their turfs very jealously. I think the Prime Minister's Office should take the lead in establishing this Inter-Ministry Committee.

What we lose out in labour cost, we must make up through a highly-skilled, well-trained, disciplined and agile workforce, able to master new technologies, especially information technology and new skills. We must always be prepared for change. I agree with the Deputy Prime Minister when he said, "Change will affect not just individuals, but also entire sectors of the economy."

The way forward, Mr Deputy Speaker, Sir, is to strengthen our key success factors, that is, to build on our strength, good infrastructure, good communication links, good services, clean Government and, of course, very important, political stability. An investor wants to make sure he gets returns for his capital investment as quickly as possible. Through today's debate on the CSC's Report and other sub-committees' reports, we have shown the world that Singapore is determined to better the investment climate. This will be a clear signal that we will adapt change to meet the new business climate and Singaporeans will be seen as a unique people, ready to accept even pay cuts at a tremendous personal sacrifice to meet this challenge, a gesture that shocked my friends in the West and in Australia.

Mr Deputy Speaker, Sir, this is not the first time nor will it be a one-off affair. We did it in 1985 and I am sure we will do it again, if need be. Those who are watching how we manage the recession will marvel at our people's sacrifice. They know that we are a tough people, that we tackle our difficult problems head on and that Singaporeans work and fight as a team when the going gets tough. I support the recommendations.

Mr Tay Beng Chuan (Nominated Member): (In Mandarin): Mr Deputy Speaker, Sir, after much deliberation for more than a year, the Committee on Singapore's Competitiveness (CSC) presented this Report and its contents are down-to-earth and has touched a wide spectrum of issues. It has comprehensively reviewed the long-term competitiveness of Singapore in the international market and put forward many truly feasible recommendations. This can well be said to be the compass to guide Singapore's economy in maintaining its competitive edge to face challenges in the future.

This Report comprises two main components: short-term measures and long-term strategies. As a Nominated MP speaking in this solemn forum on national affairs as a representative of the industrial and commercial sector, I would like to present our views and raise some supplementary suggestions from the angle of the industrial and commercial sector. This is my obligation, as well as my duty.

Mr Deputy Speaker, Sir, first of all, let me reflect to this House the views of the industrial and commercial sector on the short-term measures as recommended in this Report. The CSC Report has recommended certain measures such as wage-cuts, reduction in foreign worker levies, land and factory rentals, Government charges, etc. As a representative of the industrial and commercial sector, I am most concerned with business cost and therefore I will spend some time on this aspect.

Our industrial and commercial sector, particularly the SMEs, is facing unprecedented operational difficulties. At this critical moment of life and death for companies and enterprises in Singapore, the suggested package of $10 billion or 15% reduction in business cost is like sending a pot of red-hot charcoal in a snowy weather, something deserving our support.

However, we feel that in order to assist our local enterprises effectively, particularly the SMEs, to continue to survive in this economic crisis, the business cost should be reduced by at least 20%. Only then can we maintain our competitiveness. Under the present economic situation, particularly at a time when our currency is much higher than the other countries in this region, we feel that a 15% reduction in the total business cost may not be enough to enhance our competitiveness in the international market.

In fact, as early as the beginning of this year, based on feedback from our members and businessmen in the industrial and commercial sector, the Chinese Chamber of Commerce and Industry has recommended some cost-saving measures such as a reduction on total wage-cost, Government taxes, foreign worker levies, land and factory rentals, etc.

In a recent interview with Lianhe Zaobao, the Chairman of the National Wages Council (NWC) Prof. Lim Chong Yah, said that in order for Singapore to be competitive, business cost should be reduced by at least 20%. Prof. Lim is a very serious economist and since he holds such a view, I feel that our request for a 20% reduction in our business cost is a reasonable one.

Although the CSC Report has recommended an annual 15% reduction on the total business cost in five areas, namely, wage-cut, reduction in foreign worker levies, lowering of land and factory rentals and lowering of Government charges, and tax-cuts, apart from recommending a 10% reduction in the employers' CPF contribution rate and the foreign worker levies to be reduced by $50-$100, there is no specific suggestion on the other areas. It is indeed a pity!

According to the figures released by the National Wages Council, the 10% cut in employers' CPF contribution would reduce the wage cost by $4 billion. By reducing 5% to 8% in the total wage-cost, there will be a further reduction of $2.5 billion to $4 billion. By combining these two measures, the wage-cost can be reduced by a total of $6.5 billion to $8 billion or 13% to 16% of the employee's national total income.

Mr Deputy Speaker, Sir, when announcing these guidelines, the NWC has also urged the employers to consider a smaller cut for employees in the lower income group and a bigger cut for higher pay senior executives in cutting the wage costs. Mr Stephen Lee, President of the Singapore National Employers' Federation and Mr Wee Cho Yao, Chairman of the Singapore Federation of Chinese Clans Association, also appealed to the CEOs and senior managerial staff, including company shareholders and directors, to lead in taking bigger cuts in their remuneration. We welcome this appeal and pledge to give it our full support. At the same time, we hope that Government leaders and senior civil servants would also take the lead in having a bigger wage cut to show they are prepared to sacrifice along with the people of Singapore.

According to a comment in the latest issue of the NTUC News, the cost-reduction package, recommended by CSC, totalling $10 billion is made up of 15% reduction each from the wage cost and non-wage cost components in the total business cost. Although in percentage terms, they are 15% each, in real terms the wage-cost reduction amounts to $7.5 billion but the non-wage cost reduction is only $2.5 billion. All the time, we have been emphasising the close tripartite relationship and cooperation of workers, employers and Government. DPM Lee has also pointed out recently that this is a unique feature in our economy that gives us our competitive edge. We feel that this very close tripartite relationship should not be undermined. What we are worried is that this lopsided arrangement, with the workers taking the bulk of the cut, may cause them to be unhappy, thereby weakening our such strong tripartite relationship. We are however relieved to note the clarifications by the leadership of the NTUC that the wage cost and non-wage cost reductions are of equal magnitude and there is no question of unfairness.

The question is: does the reduction of wage cost and non-wage cost components have to be the same? Should the workers' sacrifice and the Government's cost-saving offers be matched? We are of the view that the Government being the national resource controller and mobiliser should bear a larger burden of social responsibility. So long as it is within its means, the Government should make bigger sacrifices than the workers. The non-wage cost reduction should be bigger than the wage cost reduction, and it should not be a 50-50 ratio between the two.

In the past few years, when the Singapore economy was performing well, like the private sector, Government agencies have been making profits or at least not operating at a loss, and they have therefore accumulated lots of assets for the Government and the people. However, when the country is facing an economic downturn, the Government should change its strategies and make expedient plans to save the situation. It should reduce service charges and taxes so as to create a better environment for the business, and ensure that companies in Singapore continue to survive and the workers' rice-bowls are protected. This would also help to attract more foreign investments to Singapore, thereby creating more job opportunities for our people.

There is a Chinese proverb which says, "Store your grains to provide for the lean years". In the ancient agricultural society, whenever there was a bumper harvest, the authority would store the grains in the warehouse, so that when there was a lean year and when you faced famine, the local government would open the warehouses and use the stored grains to feed the people. Now that the Singapore economy is encountering a lean year, should not the Government consider taking out part of its accumulated budget surpluses to help the people? When the other countries in this region, such as Japan and Malaysia, proposed their packages to save their economies, they did not ask their people to accept wage-cuts. But in Singapore, we are asking our people to make such a big sacrifice and the Government is only matching it with an equal percentage of reduction in non-wage costs. I think this is not convincing.

In its Report, the CSC made some recommendations for non-wage cost reductions. Basically, we agree with these recommendations but we feel that the non-wage cost reductions can be more substantive.

Mr Deputy Speaker, Sir, we suggest that the rebate given by JTC on land rents be raised to 30%, and the factory rentals be reduced by 25%.

We also request the HDB to reduce the commercial and industrial property rental prices to that of the 1990 level, and we hope that Singapore Power could pass its savings in operational cost to the consumers by reducing the electricity tariffs. We also suggest that the property tax rebates for industrial and commercial properties be raised from 55% to 65%, and the rebates be extended to cover residential properties as well. This will help to stimulate the property market. The Government should also review the annual value of these properties quickly to reflect the current market value.

Corporate income tax should be reduced from 26% to 25%. Petrol duties should be reduced by 30%, and road tax should be further reduced by 30%. Port charges should be reduced by 20%.

We commend the CSC for suggesting that the foreign worker levy be reduced between $50 and $100. But, we feel that it should be reduced by at least $200. At the same time, the Government should cut the foreign maid levy down from $345 to $200.

We also suggest that the ERP charges should be capped at a maximum of $5 per day. We feel that the LTA should further reduce the ERP charges so as to reduce the transportation cost to help particularly the commercial sector, and also to stimulate growth in the retail industry. We would, once again, urge the Government to reduce the GST by 2% so that we pay only 1% GST. This will stimulate consumption.

Singapore Telecom should reduce the charges for commercial telephone lines by 30% and the residential lines by 20%. For mobile phones, the air-time charges should be reduced to 10 cents per call and the changes should only be levied on outgoing calls. We are of the view that Singapore Telecom should use the cost savings from wage cuts to reduce its entire telecommunication charges.

However, all the costs mentioned above are tangible costs. Apart from all these, there are also the intangible costs, eg, time cost. What is time cost? Time cost is something that is caused by the bureaucracy in the Government departments. In some companies, some officers have been deployed specifically to deal with correspondence with ministries, statutory boards and Government agencies. These are very complicated and time-consuming matters. Sometimes, you have to wait one to two months for a simple application to be processed and approved by the relevant authorities.

Mr Deputy Speaker, Sir, to the businessmen, time is money. If the processing procedure of official documents takes such a long time, it is not in line with the PS21 spirit of high efficiency, particularly in application processing. DPM Lee Hsien Loong has recently made an illustration to describe the difference between Singapore and Hong Kong. He said, "In Hong Kong, if there is no law to say specifically that you cannot do a certain thing, then you can just go ahead and do it. But in Singapore, if the law does not specifically provide for you to do it, then you are not allowed to do it!"

Mr Deputy Speaker, Sir, we are about to enter the 21st century. This is going to be a brand new era. It will be a sorry state of affair if Singaporeans are still stuck in the backward mentality of "no law to say you can do it, then you cannot do it". This certainly does not encourage creativity. Of course, we should not be like Hong Kong where "so long as the law does not say you cannot do, then you can do it". We do not want to have that! However, we should find a point of balance between these two extremes. I feel that if the Government can change old mindset and to be more open-minded, a lot of unnecessary bureaucracy can be done away, and its efficiency can be greatly enhanced.

According to a survey conducted on the 3rd November by the Singapore Chinese Chamber of Commerce and Industry, among the 101 people who responded to the survey, 28% indicated that they were prepared to use the savings from the cost-reduction package to discharge the company's outstanding debts. 44% said that they would use the money to seek and open new markets. 38% said they would strengthen their marketing activities to stimulate sales and 62% said that they would use the savings from cost-reduction to keep their existing employees in employment. 36% said that they would pass on the savings to their customers by reducing the prices of their products and services. 26% said that they would use the money to invest in new plants and equipment.

If the Government can make bigger reductions in non-wage cost, I believe that the companies would be more active in responding to the appeal of the Government and the NTUC to make greater efforts in the interest of their own survival and development to improve on their operations, explore new source of income, reduce wasteful expenditure and endeavour to reduce the prices of their products and services. By so doing, their productivity will go up, their sales will pick up, and confidence will be restored to the market, thereby assuring workers of their job security and career advancement prospects.

Mr Deputy Speaker, Sir, I would like to take this opportunity to call upon all the businessmen to lower the prices of their products and services by making use of the savings from the cost-reduction measures, and thereby alleviating the burden of our people.

As regards the other five short-term strategies recommended by the CSC, that is, to prevent a credit crunch, to sustain the confidence of our investors, to restructure our economy, to open new markets, and to look for new regional opportunities. We totally agree with the recommendations but the question is whether they are feasible or not. For example, the CSC has recommended a strategy to prevent a credit crunch by saying that we should expand our Local Enterprise Assistance schemes to our SMEs, so as to give our promising companies more liquidity in their capital. This is good. But the banks are now very cautious and have tightened their credit facilities. They do not want to commit themselves in providing more assistance to our SMEs. This may contradict the recommendation of the CSC and warrant our attention.

Sir, the CSC Report has also proposed eight major strategies in the long-term development of Singapore economy. Let me give my view on these strategies. The CSC believes that, for the next 10 years, manufacturing and services should continue to be emphasised as the twin engines of growth to develop Singapore into an advanced knowledge-based economy with global competitiveness. Such a vision is undoubtedly wonderful, and very attractive. If realised, it would certainly make Singapore a paradise.

The specific recommendation by the Committee is that our manufacturing industry, including our local enterprises and the MNCs, should work together to produce high value-added products and to provide a base for related services in this region. As for the service industry, it should develop its present areas of service, to cultivate new areas and to develop Singapore into Asia's No. 1 service hub. The Committee also suggests that the Government should appoint a lead economic promotion agency to review and champion the developments of each service industry with the support of other Government agencies as a total approach.

We are fully appreciative of the CSC for this specific recommendation, particularly the part that calls for a review of the existing policies and the departments which provide the regulatory framework. We feel that the Government should immediately establish an inter-Ministry task-force, preferably to be led by the Prime Minister's Office, to conduct a comprehensive review on the bye-laws and regulations of the various Government departments. All those which are no longer relevant, not conducive to business operations, or unnecessary over-lapping should be repealed and removed as soon as possible.

Secondly, strengthening our external wing. We agree that we should help our companies to go regional because the Singapore domestic market is much too small. Opening of oversea markets will beneft our local enterprises. However, we hope that the Government could set up an Overseas Investment Risk Fund. In this way, when our investments in the overseas markets were to encounter unfavourable situations, such as the political turmoil in Indonesia, then we would at least have some basic protection and we would not lose every cent of our investment.

The third long-term strategy is to build up world-class local companies. Our Government-linked companies are very strong in resources. They are in the best position to take the lead in developing our local skills, venturing overseas, and eventually evolving into our very own MNCs. But the question is: is there any part where our SMEs can play in the process? We hope that Singapore will emulate the companies in Japan or Italy, such as Toyota or Fiat. They go to various countries in the world to open their markets and their local SMEs were able to hitch-hike on their successes. The Government-linked companies should provide opportunities for SMEs to participate in providing peripheral services. They should not be completely profit-orientated and go for the kill in all their endeavours, such as speculating in the property market. It was said that recently a Government-linked company even wanted to venture into the roast duck business. Of course, there are many avenues for investment. But if you are using a cannon to hunt for sparrows, then you are wasting your talents and resources on petty undertakings.

Fourthly, strengthening our base of SMEs. The report recommended that we should help the SMEs to give full play to their potential so that they could be strengthened and eventually developed into our future MNCs. But there are no specific recommendations on how to go about doing it. We feel that the Government should grant more concessions to our SMEs on taxes, skill development opportunities and on the distribution of resources, so that they will not be stagnated at its present stage.

We fully agree with the fifth long-term strategy on having human and intellectual capital as a key competitive edge.

On the sixth strategy of leveraging on science and technology and innovation, we feel that it is a very good suggestion. The question is whether or not our business administration concept can catch up with the express train of information era, for example, whether or not we can accept the concept of having our employees working from home, using computer network and other information technology equipment. Then, they will not need to go to office to work. If we can let 30% of our employees operate from their homes, then we would be able to save a lot of office space, which means savings on office rents as well as transport expenses. The employees will save a lot of time travelling to and from office. Of course, LTA may lose some revenue as the number of vehicles passing through the ERP gantry points during peak hours will be significantly reduced. In any event, if Singapore is really going to leverage on the cutting edge of information technology, the most important thing is to change from our outdated industrial age business administration concept to fit into the various policies based on the latest information technology.

The seventh strategy is to optimise resource management. Yes, we agree that we should make full use of our land resources and to have better management of our water resources. We support the recommendation to set up a committee or agency to look into our land distribution and pricing policy. We should also proceed to have the desalination plant as planned so that we can make full use of the abundant water resources from the ocean around us. I suggest that the relevant authority should perhaps learn from the Chinese scientists and try to introduce the Chinese technology of desalination to Singapore.

We fully agree with the eighth long-term strategy ---

Mr Deputy Speaker: Mr Tay, your time is up.

Mr Cyrille Tan (Nominated Member): Mr Deputy Speaker, Sir, today we meet under difficult circumstances. Our economy is technically in recession. Many of my fellow workers have been retrenched. More will lose their jobs, not because they are incompetent or because the companies are badly run. It is because we are victims of the regional economic crisis. But we will fight to regain our competitiveness. That is why we have accepted an overall wage reduction. We in the labour movement fully support the measures recommended by the Committee on Singapore's Competitiveness. The CSC has not only proposed wage cuts, but it has charted a more durable future for Singapore. It is a future where the fortunes of one sector of the economy will not have too great an impact on the development of our economy as a whole. Yes, diversification is the in-thing. Over the years, our unions have secured better wages and more fringe benefits for our members. Despite this, we have been able to attract more foreign investments. Why? Because we have shown to be capable and productive workers. Regrettably, the currency of our neighbours depreciated to a larger extent than ours in relation to the US dollar. This has eroded our competitiveness.

As an employee in the electronics industry, I can sense the sharp downturn. It is difficult to have to tell workers, "Sorry, you have to go on shorter work week or you have to stay away from work for a while." This means not only the disappearance of overtime, but also a pay cut in basic salary. It is even more heart-rending when you have to tell the workers, "Very sorry, you are retrenched." Many of those retrenched workers have given the best years of their lives to the company. I must acknowledge here that it is equally painful for management to part with loyal and hardworking employees. To their credit, some managements have gone all the way out to work with unions to help these workers marked for retrenchment. They give us advance notice so that we can do two things: to arrange for training of these workers and find alternative jobs for them. Other companies have also been just as helpful. They take these retrenched workers on board, send them for training under the Skills Redevelopment Programme and give them every encouragement to do well, sometimes entirely in the new work environment. Without such caring employers, our workers would have to face even more trying times. But this is not to say that all managements are reasonable. Some have behaved disgracefully and treated workers with little or no compassion. But by and large, our managements are an enlightened lot.

Let me now address the problems faced by retrenched workers. Those with families to look after and housing loans to service are the ones who need to get jobs quickly. But what kind of jobs are available in the market? Sometimes these retrenched workers, especially the older ones, face particular difficulties. It is not because they want to pick and choose. Please let me explain. A factory operator may have a low education. But if he is laid off, can he find another similar post? In the past, yes. Today, it is not that easy. His low education, his low level of skills, his age - these all become barriers. Of course, we can tell him to go for training to acquire new skills but this is easier said than done. If he cannot upgrade his skills, does it mean that he will face structural unemployment? The answer is yes, unless he can change his mindset and accept any job open to him. Again, this is easier said than done.

Yes, we have 600,000 foreign workers in our midst. So even if 20,000 or 30,000 Singaporeans lose their jobs, we should not have any problems finding jobs for them. No, we are not asking for every retrenched Singaporean we should get a foreigner to make way for a Singaporean. This is not the way things work and this is not the way we do it. Foreign workers are here because we need them. Just because we run into a serious economic crisis does not mean that we have to send them back just like that. The point I am making is that there are jobs for those who are retrenched and they can apply for them. But these may not be the kind of job that they want. That is why our retrenched workers should reconsider the options. Is it the pay that is a deterrent? Is it the distance from home? Is it the conditions of work? Whatever it is, we must solve this problem, otherwise we will be stuck with structural unemployment.

Of course, employers can help by not turning people down for work simply on account of age. Allow me to raise the case of a man. He is 52 years old and who used to work as a storekeeper in a fashion house. He was retrenched. He applied for many jobs but was turned down. He thinks it was because of his age. Even when he applied for a job in a Government Ministry, the first question he was asked was to state his age. The man could not understand why his age was so critical when he was applying for the post of an office attendant. By the way, the man remains jobless, worried sick and he has to support his family.

We are no longer an economy with full employment. The unemployment rate has risen to 4.5% in September, but I am confident that we can have what it takes to overcome our present difficulties. Tripartism in Singapore is not a slogan. It is a reality. So there is no need for us to be despondent. We can and we will emerge from the crisis stronger and more resilient.

In conclusion, in the past, in good times when NWC announced the guidelines, food prices, especially cooked food, coffee prices and transport charges went up. I hope today in this difficult situation, when NWC has already announced a wage cost reduction, the hawkers, the coffeeshop owners and the bus operators are sympathetic enough to reduce their prices.