FY99 EXPENDITURE ESTIMATES

At 20.5% of GDP, total expenditure in FY99 is estimated at $29.2 billion. This is an increase of 5.6% or $1.5 billion over FY98. The increase is mainly due to a rise in development expenditure, which I will elaborate later.

As in previous years, the largest allocations go to defence and education at 25% and 19% of total Government spending respectively. As security provides the basis for our nation's economic growth and prosperity, it is important that we maintain a strong defence capability. Defence spending will therefore continue at the FY98 level of $7.3 billion, accounting for 5.1% of GDP.

As the future of Singapore will depend on the quality of our human resources, we will continue to invest more in education. For FY99, we have budgeted $5.7 billion for expenditure on education. Education's share of GDP has increased steadily from 3.0% in FY97, to 3.4% in FY98 and to just under 4.0% of GDP in FY99. Our medium-term target allocation for education is 4.0% of GDP.

Spending by the Ministry of Manpower to promote manpower development has almost tripled from $58 million in FY97 to $170 million in FY98, and is allocated $150 million in FY99. In order to sustain growth against rising competition, our economy will have to constantly restructure towards higher value-added economic activities. The importance of upgrading and re-training our workers to ensure employability in an increasingly knowledge- based economy cannot be over emphasised.

Overall, the social and community services sector is allocated the largest share of 39% of the budget, increasing its share over FY98, on account of higher spending on education and public housing. In the same order as last year, the security sector is next with 32% of the total budget, and economic and infrastructure development comes in third with 19%.

Operating expenditure

Operating expenditure is budgeted at $15.2 billion, a small increase of $300 million or 2% compared to FY98. Half of this increase is on account of a re-distribution of defence spending from development to operating expenditure. The other half of the increase is due to a central provision of $125 million kept by MOF to provide for new Government programmes which might arise in the course of the year.

Due to the policy of wage restraint in the civil service, manpower cost will remain at $3 billion, despite providing for a net increase of 4,400 posts. The main increases are some 5,000 teaching posts and 400 posts for immigration and prison officers. This is partially offset by the deletion of some 900 posts in PWD, with its corporatisation from 1st April 1999.

While running costs on the whole will rise by some $350 million to $14.0 billion, transfers will dip slightly by $50 million to $1.2 billion due largely to an extraordinary contribution of $79 million in FY98 to NTUC and ITE for the Skills Redevelopment Programme. Still, the level of transfers remained some 18% higher when compared to FY97. Subsidies to restructured hospitals take up about half of transfers, while a sum of $170 million is allocated to public housing subsidies such as subventions to town councils. Another $120 million is allocated to MCD for disbursement to community self-help groups, voluntary welfare organisations and needy individuals under various financial assistance schemes.

As a share of GDP, operating expenditure will rise to 10.7%, up from 10.4% in FY98 and 9.7% in FY97. This is largely the result of slowing GDP growth, as operating expenditure has not risen substantially in absolute terms and is practically held at a standstill compared to FY98. It has been our policy to constrain operating expenditure to grow in tandem with, and no faster than GDP growth, in order to keep public sector expansion in check. However, during periods of economic slowdown, we can accept a rise in the operating expenditure's share of GDP so as to avoid a degradation of basic public services and to support additional expenditure for early recruitment of teachers and other staff.

Development expenditure

Total development spending will amount to $13.9 billion, an increase of $1.2 billion from $12.7 billion in FY98. However, compared to FY97, the FY99 development budget is a hefty $5 billion or 50% more. In fact, Government has been increasing development spending over the last 5 years. Development spending has grown on average by about 30% each year since FY94. The FY99 development budget is about 3.5 times higher than development spending 5 years ago in FY94, when it amounted to only $4.0 billion.

I should point out that the large sums allocated to development spending is not to pump-prime the economy because this would have limited effect as we are a small open economy. Instead, our aim is to invest in strategic development projects, especially those with long gestation periods, such as land reclamation and IT in education. These are investments which would reap benefits several years down the road.

Against this backdrop, every sector of development spending has grown compared to FY97. The largest increase is spending on the social and community services sector, which has doubled from $3.1 billion in FY97 to $6.0 billion in FY99. In percentage terms, the social and community services sector is allocated the largest share of 43% of the development budget. The other major allocation goes to the economic and infrastructure development sector at 34%.

Spending on education increased from $1.0 billion in FY97 to $1.7 billion in FY98, and to $2.2 billion in FY99. This is a 31% increase over FY98. Of this, more than $1 billion goes towards development of schools and campuses, and another $350 million on IT Masterplan and IT projects in schools and tertiary institutions. A provision of $170 million is set aside to build residential and hostel facilities in schools and campuses, and $250 million for new projects comprising mostly buildings and further IT investment in tertiary institutions.

Spending on public housing increased from $850 million in FY97 to $1.9 billion in FY98, and to $2.3 billion in FY99. Deficit financing to HDB accounts for $1.2 billion, mainly due to a surge in demand under the CPF Housing Grant Scheme. Continuing HDB upgrading is allocated $430 million and compensation under the Selective En-bloc Redevelopment Scheme is allocated $370 million. The $400 million increase in public housing spending is mainly due to increased provisions of $150 million for compensation under the Selective En-bloc Redevelopment Scheme and $270 million for deficit financing to HDB.

Spending on environment has also risen steadily from $650 million in FY97 to $1.0 billion in FY98, and is set to level off at $980 million in FY99. The Fourth Refuse Incineration Plant at Tuas accounts for half of this sum, while the other half goes to improvements and expansion of sewerage and drainage facilities.

The economic and infrastructure development sector no longer occupies first place in development spending because of the large increase in allocation to the social and community services sector. Nevertheless, the sector is still allocated a sizeable sum of $4.7 billion. This is lower than spending in FY98 by $220 million, but 23% higher than the $3.8 billion spent in FY97. The sector is led by strong spending on communications and trade and industry projects at $1.8 billion and $1.7 billion respectively.

The North-East MRT Line and the Changi MRT extension projects account for two-thirds of the $1.8 billion development budget for communications. In all, rail projects account for $1.4 billion, while another $270 million goes to road improvements and development of bus interchanges. Provision is also made for continuing reclamation at Changi East.

Spending on trade and industry projects has slipped by $350 million compared to FY98. However, this does not reflect a lower commitment by Government, but rather the result of huge savings in lower tender prices for recent reclamation projects awarded for Jurong Island Phase III and reclamation at Changi East. More than half of MTI's development budget will go to reclamation at Jurong Island, Tuas View, Changi East and Sentosa Cove. Spending on these reclamation projects will increase from $810 million last year to $930 million in FY99. Other major projects in this year's budget are the Economic Development Assistance Scheme, the Tourism 21 Plan to re-develop Chinatown attractions, the Mega Exhibition Centre and the Singapore ONE project.

Spending on the general services and security sectors accounts for the remaining allocation at 12% and 11% respectively of the development budget. The allocation for general services will see an increase of $730 million from FY98. This is largely accounted for by $500 million to be held centrally by MOF for new projects, which Ministries may embark on in the course of the year, and $260 million more for the New Supreme Court building project.

Spending on internal security is expected to remain at the same level as the last two years. Provision is made for on-going projects such as the Civil Defence Shelters Programme, and new complexes for the Ministry of Home Affairs, Police Headquarters, Singapore Civil Defence Force Headquarters and Traffic Police Headquarters. Provisions are also made for the redevelopment of the Changi Prison Complex and Command Control and Communication Systems to improve the operational capability of the Police, Singapore Civil Defence Force and Central Narcotics Bureau.

Mr Speaker: Order. I suspend the sitting and will take the Chair again at 5.00 pm.

Sitting accordingly suspended at 4.48 pm until 5.00 pm Sitting resumed at 5.00 pm