ISSUES RAISED BY PRESIDENT ONG TENG CHEONG AT HIS PRESS CONFERENCE ON 16TH JULY 1999 (Statements by the Prime Minister and Minister for Finance)

The Minister for Finance (Dr Richard Hu Tsu Tau): Mr Speaker, Sir, on 16th July 1999, President Ong Teng Cheong held a press conference announcing that he would not stand for re-election as President. At this press conference, the President spoke of what he described as a "long list" of problems he had encountered in trying to protect past reserves. In particular, the President raised four issues:

(a) It would take the Accountant-General "52 man-years" to produce the list of physical assets of the Government.

(b) One "unpleasant" encounter where he had to withhold approval of a statutory board budget because it would have caused a draw on its past reserves.

(c) Whether Net Investment Income (NII) should be treated as current reserves or past reserves.

(d) His "disappointment" that the Government did not need him to unlock the past reserves to finance its package of cost cutting measures, because it had changed its treatment of NII.

These issues concern the working of the Presidential safeguards to protect past reserves. The Constitution had been amended in 1991 to provide for a directly elected President who would have discretionary powers to veto the use of past reserves and the appointment of key officials in the public service. Such a move was without precedent in any country. It was a novel experience for both President Ong Teng Cheong, the first person directly elected by the electorate to this new office, and the Government.

The past six years have therefore been a mutual learning experience for the Government and the President. Many problems were encountered and resolved. Both sides have worked together to interpret the constitutional provisions, and to develop working procedures for carrying them out. The agreed understanding is contained in the set of Principles for determining and safeguarding the accumulated reserves, which was published as a White Paper.

I will now give the House a full account of the four issues raised by President Ong, to clarify what had actually transpired. In the Government's view, these problems were neither fundamental nor intractable. They arose mainly because of differences of opinion on the accounting of Government's physical assets, and difficulties that arose in operating the new system. They were inevitable consequences of the two-way learning process.

Obtaining an Inventory of Government's Assets

The President had said it had taken the Accountant-General "more than two, three years" to inform him what the Government's reserves consisted of. He said that when he asked for an inventory of the physical assets, the Accountant-General had responded that it would take "52 man-years" to produce. He had replied, "Never mind. Go ahead", and finally he received the list plus diskettes a few months before the 1997 elections.

Members of this House must wonder why it would take "52 man-years" to produce a listing.

The President's office had requested a listing of physical assets from the Accountant-General, Mr Goh Khee Kuan, on 18th June 1996. At a meeting with the President on 14th August 1996, less than two months later, the Accountant-General provided a listing of State buildings, while the Commissioner of Lands provided a listing of State lands. Updates were subsequently sent to the President's office.

At this meeting, the President remarked that to protect past reserves, the reserves should ideally be denominated in dollar value. In response, the Accountant-General conceded that following accounting principles, one should take the value of what was protected at that point in time, but it would take 56 man-years (not 52) just to value the existing properties. He added that for the purposes of protection of the reserves, it did not matter when the valuation was actually made, and it could be at the point of sale. This was recorded in the minutes.

"56 man-years" does not mean it takes 56 years to complete the task. A man-year is a measure of the amount of work to be done, and not of the time it will take to do it. It means that it takes 56 men working for one year, or 28 men working for two years, or one man working for 56 years. It is not unreasonable for a team of 56 men to take one year to value the entire stock of land and buildings owned by the Government. The land was in some 50,000 parcels, including miscellaneous parcels like roads, drains and even some reservoirs. Such land parcels had to be verified through actual surveys.

Thus, the President's recollection of what the Accountant-General had said was mistaken. The Accountant-General did not say that 52 man-years were needed to produce a listing of physical assets. He actually said that it would take 56 man-years to conduct a complete valuation of the physical assets. Furthermore, at the time he said this, he had already produced the listing that the President had requested. He did not produce it only after two or three years, or only after the President insisted upon it.

It is therefore clear that the Accountant-General and the Government departments have cooperated fully with the President, and have not in any way sought to hinder the President in his job of protecting the reserves.

The question whether to revalue all State properties at each changeover of Government had arisen earlier. On 15th July 1996, the Auditor General had written to inform the Ministry of Finance and the key statutory boards and Government companies (Those listed in the 5th Schedule of the Constitution.) that he would require all state properties to be revalued at market value as at the date of changeover of the Government. He cited the Constitution, the impending general election, and the Audit Act.

The Ministry of Finance sought the Attorney General's advice on the Auditor General's directive. On 30th September 1996, the Attorney General's Chambers advised that, in so far as the directive concerned land, such a complete revaluation was unnecessary as a matter of law. It did not result from a Constitutional need to protect the reserves, as the question whether past reserves were being drawn down did not arise unless a piece of land is actually about to be sold off or alienated. Furthermore, the proposed revaluation was a waste of resources, as firstly the reality was that much of state land would remain as state land, and secondly the value of each piece of land depended on planning and zoning restrictions, which the Government could change.

The Ministry forwarded this opinion to the Auditor General. The Auditor General then revoked his directive to revalue all properties at changeover, stating that there was now no legal basis to do so.

How to protect State lands and buildings in the reserves is a complex issue which the Government and President's office subsequently studied in much greater depth. The final arrangements agreed upon make up an entire two-page paragraph (Paragraph 10 in Part A.)of the White Paper on Principles.

Withholding Approval of a Statutory Board Budget

President Ong said that public officers should change their mindset, and report to the President any improper transaction which may draw down the reserves. He said that he suspected that some public officers in the Executive, including some ministers, considered the President a nuisance.

The President cited as an example one "unpleasant" encounter when he had to withhold approval of the budget of a statutory board. Its expenditure of $27 million had exceeded its income surplus of $23 million, which would have caused a draw on its past reserves. He said he was prepared to approve the drawdown, but there were problems because of its accounting system. He brought the matter to the Government's attention, and the matter was resolved and he approved the budget.

The statutory board in question is the Central Provident Fund Board. The chronology of events is as follows.

On 8th November 1996, the CPF Board put up its budget for 1997 to the President for routine approval. The budget showed an operating surplus of $23 million. The submission was accompanied by a declaration signed by the Chairman, Dr Andrew Chew, and the General Manager, Mr Lim Han Soon, that the budget was unlikely to draw on the Board's reserves which were not accumulated during the current term of office of the Government.

On 6th December 1996, the Principal Private Secretary to the President informed the CPF Board that the Council of Presidential Advisors (CPA) had noted that the Board had budgeted a capital expenditure of $27 million, which exceeded the budget surplus of the year by $4 million. The excess would have to be funded by the Board's accumulated surpluses. But with a changeover of government scheduled to take place soon, all of the Board's accumulated surpluses would become past reserves. Therefore, the CPA wanted the Chairman and the General Manager of the CPF Board to clarify the basis on which they made their declarations, "knowing full well that there will be a General Election soon".

The General Manager replied on 7th December 1996 to explain that the CPF Board accounts were on an accrual basis. In accrual accounting, capital expenditure is depreciated over the useful life of the asset, rather than in one lump sum in the year of expenditure. The operating surplus of $23 million projected by the CPF Board had already charged annual depreciation of $11 million against the year's income. Therefore, there was no drawdown on past reserves, whether the elections were held or not.

The General Manager further explained that even on a cash basis, the CPF Board would still project a budget surplus of $7 million. On a cash basis, we would indeed deduct the $27 million capital expenditure from the projected operating surplus of $23 million, but we would also have to add back the depreciation of $11 million. Otherwise we would in effect be deducting the capital expenditure more than once, erroneously. The CPF Board's budget and accounts were thus in order and there would not be any drawdown on the CPF Board's past reserves.

However, the President did not accept the CPF Board's explanation. He wrote to the Prime Minister on 16th December 1996, stating that he would approve the budget because the expenditure was not wasteful and was in the public interest. However, following the Constitution, he would be gazetting his opinion that the budget was likely to draw on the past reserves of the CPF Board after the changeover of Government.

The Government did not agree with the President's approach. The Prime Minister replied the next day repeating the explanation given by the CPF Board, and requested the President to hold back gazetting his opinion. He suggested that since there seemed to be a difference in interpretation of the budget, we should get the Accountant-General or the Auditor-General to state whether or not there would be a drawdown on reserves following the changeover of Government.

The President replied on 20th December 1996. He agreed to hold back gazetting his opinion, and stated that he would also hold back his approval of the budget until the issue was resolved. In response to the Prime Minister's proposal to seek the views of the Accountant-General and the Auditor-General, the President wrote as follows:

"My duty does not include clarifying with the professional bodies the principles and interpretation. That duty lies with the Government."

The President also explained his reservations over accrual accounting as follows:

"My concern here is that this approach (i.e. accrual accounting) will allow a profligate Government to hide its lavish spending under the guise of capital expenditures. In the final analysis, it is the Government which would have to recommend whether this is a principle that should guide my actions. And in the absence of clearly enunciated and mutually agreed principles and procedures for dealing with such matters, I would rather err on the side of stringency. If the principles had been settled earlier, this uncertainty about what is or is not a draw would not have arisen."

Accrual accounting is a standard practice not only in statutory boards in Singapore, but in commercial firms worldwide. Companies and statutory boards have auditors whose duty is to ensure that what are declared as capital expenditures have in fact been properly spent on capital items. Furthermore, under the Constitution, the Chief Executive Officer and Chairman must declare whether the budget is likely to draw on past reserves, and board members and CEOs have a duty to inform the President of any proposed transaction which is likely to draw on past reserves. As an additional safeguard, the appointments of the Chairman, Board and CEO of the key statutory boards and Government companies are subject to the President's veto.

In view of the President's stand, the Government took an explicit decision reaffirming that statutory boards and Government companies should continue to prepare their accounts and budgets on an accrual basis. This has since been incorporated in the White Paper on Principles.

On 27th January 1997, the Prime Minister wrote to the President seeking his agreement to accrual accounting, and explaining the safeguards in place. On 30th January 1997, the President replied stating that he had approved the CPF Board's budget and agreeing to the principle of accrual accounting. But he still said that "the concern that a profligate government could hide its lavish spending under the guise of capital expenditure was not fully addressed."

This account of events makes clear that no public officer failed in his duty to report a possible drawdown on reserves to the President in this instance. The Government does not understand why the President regarded this genuine difference of opinion as "unpleasant".

Net Investment Income - Is it Current or Past Reserves?

The President raised the question of whether Net Investment Income (NII) should be treated as current reserves or past reserves. He said that he had been told that according to the Generally Accepted Accounting Principles (GAAP), NII constituted current reserves, but he was not sure, as he was not an accountant.

The proper treatment of NII is not a question of opinion. It depends on the constitutional definition, and on what constitutes standard accounting practice. On these matters, the Government does not act arbitrarily on its own. It takes legal advice from the Attorney General's Chambers, and professional advice from the Accountant-General and the Auditor-General. Similarly, the President and the CPA can obtain legal and professional advice, should they wish to. The Constitution does not envisage either the Ministers or the President and the CPA having to be their own lawyers or accountants.

Let me explain what exactly NII is. NII is the interest and dividend income earned from investing Government's reserves, net of expenses on investment and debt servicing. NII does not include any capital gains or losses that may be made from the disposal of investments, which are classified as Investment Adjustments.

Under the Constitution, the President has custodial powers over "reserves which were not accumulated during the current term of office of the Government". The Attorney General's advice is that this definition does not cover NII, because NII is accumulated during the current term of office of the Government. This is so even when this NII is derived from investing past reserves that are themselves locked up. Therefore, the President's second key does not extend to NII. The President has not challenged this legal opinion.

Treating NII as current income is also the standard approach under Generally Accepted Accounting Principles.

The President also said that the Government had locked up NII as part of past reserves since 1992, but last year decided that "the NII should now belong to the current account". This is not accurate. The actual situation is as follows:

Under the Constitution, NII is and has always been current income. The Government has not changed this treatment. However, it has carefully studied whether it should do so, and lock up part of NII as protected reserves, especially that part of NII earned from investing past reserves.

This is a complex issue. We have to project the likely state of the economy and the budget position of the Government over the long term, to assess how much revenues the Government will have and what it will need to spend. This involves many uncertainties. We must also weigh carefully the proper balance between restraining a profligate government on the one hand, and allowing a responsible government enough flexibility to operate on the other. The matter is not pressing, and if we decide hastily and make a mistake, it will be difficult to reverse later.

It was the Government, not the President, who first raised the issue of NII in January 1992, well before President Ong took office. Against a backdrop of comfortable surpluses, the Government decided to take the more conservative stance of locking up all the NII earned from past reserves, and to amend the Constitution for this purpose, not immediately, but after about a year of implementation.

However, subsequently the Government did not follow up to amend the Constitution. Revised projections of revenue and expenditure showed that earlier expectations of continuing large surpluses had been too optimistic The Government therefore looked for more flexible alternative ways to protect the NII.

The matter has been discussed at length between the Ministry of Finance, the Cabinet and the President's office. The Government seriously studied including a more stringent definition of NII in the White Paper on Principles. It finally decided against doing so, because the present uncertain economic outlook made long-term budget projections difficult. A second reason was that doing so would cause the Principles to go beyond the Constitutional provisions. The Principles cannot override the Constitution; they can only give effect to them. A future government would not be bound by the definition of NII in the Principles.

The President and CPA have given their opinions, including the suggestion to lock away half of the NII from past reserves. The Government has carefully considered their views. The suggestion to lock away part of the NII has merit. But we have to find the right basis for determining how much to lock away, as a fixed proportion like 50/50 may not be appropriate for all circumstances. The Government therefore has not yet made a final decision.

In March 1999, the Government informed the President's office that while it had earlier been inclined not to change the status quo treatment of NII, it had relooked at the calculations and concluded that there could be a case for protecting NII or a significant part of it. This would require a Constitutional amendment, rather than a provision in the Principles which would have no legal force. The Government needed time to study how best to protect NII. This study could lead to an amendment of the Constitution next year.

Therefore, while NII continues to be current reserves, the Government is aware of the problem which the President has highlighted, and has been working with him and the CPA to find a solution.

No Need to Draw on Past Reserves Because of NII?

The President also expressed his "disappointment" that the Government declined his offer to unlock past reserves to finance its package of cost cutting measures, and said that the Government was able to do so because it had changed its treatment of NII to count as current reserves.

This is not the Constitutional and financial position. As I have just explained, NII has always been current reserves under the Constitution. In any case, the Government has not needed to fall back on NII at all, whether these constitute past or current reserves, to fund its special packages and the budget deficit. Through careful financial stewardship, the Government has accumulated sufficient budget surpluses within its current term of office for this purpose. The budget surplus does not include any NII, because NII has always been an item "below the line" in the Government budget.

I informed this House during my FY99 Budget Debate round-up speech on 9th March 1999, that between 25th January 1997, which is the day the present Government took office, and 31st March 1998, the Government had generated an operating budget surplus of $6.3 billion. After taking into account the expected deficits in FY98 and FY99, we would still have a cumulative surplus of $368 million as at 31st March 2000.

As it has turned out, in FY98, instead of the budget deficit of $466 million originally estimated, we achieved a budget surplus of $925 million. Hence, by the end of FY99, we now expect to have a cumulative budget surplus, since this Government took office, of $1.8 billion, excluding NII.

Therefore, the Government has had no reason to ask the President to unlock past reserves, regardless of the treatment of NII. This is a positive outcome of our prudent policies, and not a cause for "disappointment".

Conclusion

I have explained that while there were difficulties between the President and Government, they arose from honest differences in views. The Government has extended full cooperation to the President and the CPA, and made no attempt to obstruct or show disrespect to the President. Despite the problems encountered, the Government remains committed to protecting past reserves and making the institution of the President with custodial powers a success.

The Prime Minister (Mr Goh Chok Tong): Mr Speaker, Sir, as Members know, I had originally wanted to make this statement on 3rd August, but decided to postpone it because the President's wife had just passed away. Ideally, this statement should be made later because President Ong Teng Cheong is still in bereavement. But the President's term will expire on 1st September and it would not be proper to make the statement after he has left office.

Dr Richard Hu has addressed the specific items raised by the President at his press conference on 16th July. But having listened to him, some Members of the House and the public may still wonder why the President should choose his end-of-term press conference to criticise the Government in this way. It could not just be the initial difficulties experienced by the President. After all, the problems happened three or four years ago. The public will continue to speculate that there must be more problems with the relationship between the Government and the President which it does not know about.

Public reactions to President's statements

The media have already reported some of these comments and conjectures. For example, Mr Viswa Sadasivan, Chairman of the Feedback Unit's Political Matters Group, told the Straits Times: "If a President who is a former Deputy Prime Minister can be given the push around in that way, I shudder to think what a newcomer to the scene would face."

Dr Kevin Tan of NUS told the Straits Times [30th July]: "The trouble is: either the President should be a figurehead President, or an executive President. To do a little bit of both is terribly confusing."

Mr Simon Tay told Asiaweek [30th July]: "There are two implications here - bad and good - that shock people. The bad one is that even though Ong was an insider, it was still hard [for him] to get straight answers. The good one is that Ong did not see himself as a rubber stamp".

Mr Simon Tay also published an article in the Straits Times [6th August] together with Mr Zulkifli Baharuddin, stating that "the elected presidency remains an institution whose powers are not yet fully worked out and accepted by all."

The Asian Wall Street Journal [9th August] reported that the President had talked of a "long list of problems" at his press conference, and linked this to the President's decision not to stand, stating: "Many political analysts believe that Mr Ong wanted a second term but was discouraged by senior political figures."

PERC, the Political and Economic Risk Consultancy based in Hong Kong, has marked down its rating of Singapore, in a recent report [Asian Intelligence, 28th July] comparing national institutions in different Asian countries. PERC stated that while Singapore's institutions were still professionally run, there were controversies suggesting that they may face some challenges in future. PERC cited the President's revelations of "behind-the-scenes struggles he had with the government and bureaucracy during his term of office. Apparently, the former deputy prime minister took his job of protecting the nation's reserves . rather more seriously than many had expected when he was chosen for the post back in 1993."

Need for Government to respond

We should not regard it as unusual for the President to publicly acknowledge differences between him and the Government. It shows the independence of the Presidency in the two areas in which he is vested with custodial powers, and this will help future Presidents. Unfortunately, President Ong's criticisms, both direct and implied, went beyond these differences.

The Government has to guard its honour and integrity jealously. If there are doubts over its probity, the Government cannot command respect and would lose its moral authority to govern. So the Government has consistently defended itself whenever its reputation has been unjustly called into question.

I am duty bound to respond to the points raised publicly by the President at his press conference. I am pained and saddened to have to do this now, at such a difficult moment for the President personally. Indeed at the time of the press conference, his wife was already gravely ill. But it is a responsibility I have to discharge.

Implications of President's Statements

The President's statements have left the following thoughts in the public mind:

(1) The Government had been unhelpful and uncooperative with the President in the discharge of his duties.

(2) Public officers, including possibly some Ministers, regarded the President's checks as a nuisance.

(3) The Government might have withheld information from the President.

(4) The Government had disregarded the independent views of the President; and

(5) The President's difficulties with the Government may have caused him not to seek another term, since his health was "fine".

Teething problems

The tone of the President's comments puzzled me. I thought the Government and the President had developed a good working relationship. Mr Ong Teng Cheong had done a good job in his six years as President. We had worked together to make the new institution of the President with custodial powers succeed. I did not expect him to cast doubts on the Government, that it was unwilling or reluctant to give him full access to all information and documents for him to discharge his constitutional duties.

There were indeed difficulties in working the new system of Presidential safeguards in the initial two or three years. This was due to the complexities of the issues involved. The Government had set up a new system. The President was new to the job; indeed the job itself was new.

These initial difficulties were not unexpected. In our speeches at the swearing in ceremony of the President on 1st September 1993, both the President and I referred to the challenges and likely problems ahead. I said:

"My Government has not the slightest intention of using the financial reserves . to finance wasteful, unproductive programmes. We will not squander the financial reserves which we have so painstakingly accumulated. . I do not intend to bring about a situation which will give you cause to exercise your veto powers. I have no doubt, however, Mr President, that if you are ever in disagreement with what my Government proposes to do in the areas spelt out in the Constitution, you will not hesitate to exercise your constitutional authority.

Mr President, you and my Government will have to work together to give effect to the letter and spirit of this new system of checks and balances. I pledge you my fullest support and cooperation and that of my Government." The President replied in his speech:

"The legislation creating the institution of the Elected President is still new. While its philosophy and intent are clear, the detailed Constitutional provisions have not yet been fully tested out. Nor is there established precedent on how the Elected President actually exercises his powers. Both the President and the Government will have to feel their way forward.

I look forward to developing a sound working relationship with the Prime Minister and his Government. As we accumulate experience with the new system, we can refine the arrangements, and define through practice and precedent how the Elected President will function."

Indeed this is what the Government, and I believe President Ong, have sought to achieve over the past six years. Most of the difficulties that arose were resolved after discussion and explanation. I regarded them all as teething problems. As we solved them, we refined and elaborated on the arrangements and workings of the Presidential safeguard. Many of the items in the White Paper on principles for determining and safeguarding reserves first arose from careful deliberations by both parties to deal with such practical problems.

As a result of our experience working the new system, we amended the Constitution several times to refine the provisions - in 1994, 1996, 1997 and 1998. The President supported all the changes, except for one - the amendment to Article 22H. This concerned the President's power to veto proposed legislation which circumvented or curtailed his discretionary powers.

The President took the view that he could veto the proposed amendment to Article 22H. However, in the interest of testing out the system, he requested that the matter be referred to the courts for a ruling, and indicated that he would abide by whatever ruling that was made. The Constitution was amended to set up a constitutional tribunal. The matter was referred to a tribunal of three judges, which ruled that the President could not veto the proposed amendment to Article 22H.

Notwithstanding these successive refinements to the scheme, we still cannot consider the system of a custodial President fully tested out and in its final form. It is still running in, and may well need further fine-tuning to make it workable. That is why the Government has not yet entrenched the provisions in the Constitution, to give the President a veto over proposed amendments to his discretionary powers.

Differences healthy - Full cooperation rendered

The Government does not expect the President to agree with it on every issue where he exercises custodial powers. That from time to time the two should hold different opinions on these issues is healthy, and to be expected. The President is assisted in his duties by a Council of Presidential Advisers (CPA) of six members. These are men of substance who have distinguished themselves by their balanced judgment. The President and Prime Minister each appoint two members. The Chief Justice and the Chairman of the Public Service Commission appoint one each. The President then appoints the Chairman of the Council from among the six members. Under the Constitution, the President has to consult the Council before making his decisions concerning reserves and key appointments. Differences between the Government and the President are therefore not personal, but reflect the independent judgment of the President and the Council.

My Ministers and I treated all queries and requests of the President and CPA seriously. Whether the Government agreed or disagreed with the President, his queries and requests had to be answered. And they were answered. At no time did the Government withhold information or co-operation from the President or show him any disrespect.

Contrary to what Mr Simon Tay and Mr Zulkifli Baharudin wrote in the Straits Times of 6th August, the Government fully accepts the custodial powers of the President. It was the Government which created this new institution to oversee two areas: reserves and key appointments. The Government worked out its powers and enacted the provisions in the Constitution. So it wants the new institution to succeed. It has absolutely no reason to obstruct the President.

Information Withheld? Procedures Exist

President Ong urged public officers to change their mindset and see it as their constitutional duty to help the President protect past reserves. He said:

"It is not possible for the President's office with a very small staff to know what's going on. The civil servants know what is happening in the ministries and departments. We have discovered in the past that, if they don't tell us, most of the time we would not know. And by the time we know, it may be too late."

This implied criticism of the Government is not justified. I agree that if a civil servant knows that his political masters are drawing down reserves behind the President's back, he should inform the President. But I do not think that every transaction of the Government, or every land sale, should be reported to the President. This would go beyond what is required of all civil servants, and also beyond the scope of the duties of the President as laid out in the Constitution.

There are established procedures for drawing up Government budgets, approving expenditures, and acquiring and disposing of assets. The accounting officer of a ministry is the Permanent Secretary, not the Minister. The accounting officer is responsible for the ministry's budget and its expenditure, as well as the proper accounting and management of public money and assets. The Government budget is prepared by the Ministry of Finance. When it is presented to Parliament, the Minister for Finance is required by the Constitution to certify whether or not there has been a drawdown on past reserves. That is provided for in Article 147.

Furthermore, Article 148G of the Constitution imposes on the Auditor-General and the Accountant-General a duty to inform the President of any proposed transaction which to their knowledge is likely to draw on past reserves. Members of key statutory boards, the boards of key Government companies, and their CEOs have a similar duty, as required under Articles 22B and 22D. All these appointments are subject to the President's veto. It is up to these officials to devise their own systems, staff support and channels of information in order to discharge their constitutional duties effectively.

Therefore there is adequate mechanism for keeping the President informed of what is happening in Ministries and Departments in time, rather than after the fact. The Presidential safeguard is designed to work through officials in the Government whom he has vetted and can rely upon, and not through a large parallel staff in the office of the President.

Using NII In Regional Crisis?

The President said that his greatest disappointment was his inability to use the second key during the economic crisis. He said this was because the Government had decided that Net Investment Income (NII) should go into current reserves instead of past reserves. The implication was that the Government had changed the rules in order to circumvent the second key mechanism.

The President did tell me that he would agree to draw down the reserves, should the Government need to use them to fight the regional crisis and prevent Singapore from going into recession. I thanked him, but told him that the Government would try its best not to draw on past reserves.

As Dr Richard Hu has explained, the Government had accumulated substantial budget surpluses since the 1997 elections, before the crisis struck. The budget surpluses exclude net investment income, which are "below the line" items in the Government accounts. But the accumulated surpluses were enough to pay for the budget deficits we expected last year (FY 98) and this year (FY 99), beyond the current term of the President. Thus we have not needed to use the net investment income at all. Whether the net investment income was earned from current reserves or past reserves made no difference to this.

The President was thus mistaken in thinking that it was because the Government had redefined net investment income to be current income that it did not need him to use the second key.

Some people may think that had the President used the second key, we would not have needed to cut CPF contributions. Let me explain that drawing on past reserves would not have solved our economic challenges. It would only generate a false sense of well-being, when our real problems are to ensure that companies survive and Singaporeans have jobs.

Our business costs had become too high. We had to bring them down to restore our competitiveness. We reduced Government taxes and charges. But we also had to cut wages and CPF contributions, which form a major part of business costs. We could not avoid tightening our belts.

The proof of a policy is in its outcome. Our rational response to the economic crisis is working. Our economy is recovering strongly, and we have earned the respect and confidence of investors and economic analysts.

The President meant well in offering to unlock past reserves for the Government to use to counter the crisis. But it is for the Government to decide whether reserves need to be used under any given circumstances.

A Custodial, Not An Executive President

Some of the comments and reactions after the President's press conference have shown misunderstanding or confusion over the President's role under the Constitution. For example, Dr Kevin Tan, in Straits Times of 30th July, maintained that we should either have a figurehead President or an executive President, and that to do a bit of both is terribly confusing. Allow me with the authority of the Attorney General to correct this ill-informed view.

There should be no confusion. The true Constitutional position is very clear. The President exercises custodial, not executive powers. Only the Government exercises executive powers. Under the Constitution, the Cabinet shall have the general direction and control of the Government. In contrast, the President's custodial powers are reactive and blocking powers. The President does not have any executive power.

I made this clear when I moved the Constitutional amendments in this House on 4th October 1990 to provide for a President with custodial powers. I then said:

"Let me stress here, however, that the Bill does not transfer the power of government to the Elected President, nor vest in him absolute veto power. Firstly, even though the President is elected by the people, he is not the Head of Government. He is the Head of State. He is not the Chief Executive of the country. The Prime Minister is. The initiative and responsibility of governing Singapore stays with the Prime Minister."

This is in the Hansard of 4th October 1990 [Cols 464, 465].

This is why the Constitution retained the principle, which existed before we created the custodial President, that the President always acts on the advice of the Government, except where the Constitution explicitly provides otherwise. Article 21 of the Constitution states:

"21.-(1) Except as provided by this Constitution, the President shall, in the exercise of his functions under this Constitution or any other written law, act in accordance with the advice of the Cabinet or of a Minister acting under the general authority of the Cabinet."

The President's new custodial powers are to veto certain actions proposed by the Government: to block the Government from spending past reserves or to stop the Government from making appointments to key positions. If the majority of the six members of the Council of Presidential Advisers agree with the President, his veto is final. Otherwise, the Government can overturn the President's veto with a two-thirds vote in Parliament.

No article of the Constitution gives the President any power to initiate any action, or to appoint, promote, transfer, remove or dismiss any officer, or to spend money, or recommend that the reserves be spent. That right is with the Government and the Public Service Commission. It is not the President's task to set policy or run the Government.

Let me reiterate. The Prime Minister is the Chief Executive of the Government. All Ministries and Statutory Boards answer to him. The civil service reports to him. The Prime Minister, not the President, chairs the Defence Council and has the overall responsibility for the SAF and the defence and security of the country.

In principle this distinction between custodial and executive powers is sharp, but in practice it may be less so. For example, the Prime Minister may consult the President informally before putting up a name for a key appointment, or the President may inform the Prime Minister that unless a statutory board's budget is revised, he will have to rule that it draws upon past reserves.

Such two-way informal communication is essential to the smooth working of a custodial President system. But it must not blur or obscure the Constitutional position: that the executive power remains with the elected Government. Singapore has always had a Parliamentary system of government, not a presidential one. The Constitution provides for a directly elected President with custodial, not executive, power. Singapore does not have an executive President, because Parliament did not create one.

Did The Government Oppose President Ong's Re-Election?

The most serious doubt which the Government must clear up is whether President Ong's problems with the Government are the reason he is not seeking re-election. Indeed, whether the Government, or some Ministers, opposed his re-election because of these problems.

The President opened his press conference saying

"Because precisely you asked about my health, we've waited until my latest health examinations to tell you about my latest health condition.

My current health condition is good; I'm physically fine. Notwithstanding that, I decided not to stand again for the coming Presidential Election. I find no compelling reasons to do so."

The Straits Times, the next day, reported it this way:

"Mr Ong made it a point to begin the press conference by stating that his health was "fine" and, by inference, not an impediment to another six-year tenure if he had so desired. His doctors had declared his cancer to be in complete remission."

Let me state clearly that the Government did not object to the President standing for re-election because of any difficulties in its working relationship with the President. It had no reason to do so. The Cabinet found no fault with the way the President had performed his duties, and the way he exercised his custodial powers. He discharged his duties faithfully and independently. It did not see the differences between the President and the Government that arose from time to time as irreconcilable or unhealthy.

In fact, the Cabinet would have been happier if Mr Ong Teng Cheong had been able to continue for another full term. Singapore would have had the benefit of a well-respected and experienced President, who had been involved over the last six years in establishing the processes by which the President would exercise his newly created powers.

However, the Government did have one reason to be concerned should President Ong seek re-election, namely, his health. The health of the person holding the office of President is not merely a personal matter. It is a matter of state as it can affect the proper functioning of a key institution in our political system.

The Cabinet knew that President Ong had lymphoma and the disease was progressing. It was concerned that his health might not permit him to discharge the duties of President normally and fully for another 6-year term. The public also knew that President Ong had lymphoma. If he stood for re-election, the state of his health would be a natural and proper question that the electorate would ask.

The President discussed his intention to seek re-election with me on several occasions. He first told me that he was thinking of standing for re-election in February this year. The President made it clear that he was not asking for my permission or the Government's permission to do so. He was just informing me as a matter of courtesy.

I welcomed the President's intention to stand for re-election. But I also advised the President that he should obtain medical reports on his condition from his doctors, to be published if he decided to stand for re-election.

The President went to the United States in March, to see Dr Saul Rosenberg of Stanford University Medical Centre. In April, the Cabinet met to discuss what position to take on the President's re-election.

I circulated two medical reports on the President to Cabinet - one by Dr Rosenberg, and another by Dr John Wong, who is the President's principal physician. It is normal practice for the Prime Minister to receive such reports. I have to be informed whenever the President or a Minister is hospitalised for a serious ailment.

I asked Dr John Wong to be present at the April Cabinet meeting, to explain the medical terms and the prognosis for the President, in simple laymen's terms. Minutes were recorded, and I gave a copy to the President.

On the basis of the medical reports and Dr John Wong's explanations, the Cabinet concluded that there was a strong likelihood that the President's health would affect the discharge of his official duties in the next few years. For this reason alone, the Cabinet unanimously decided it could not support the re-election of President Ong, should he decide to stand again.

I conveyed the Cabinet's view to the President. I knew his interpretation of his medical prognosis was more optimistic than the Cabinet's. The President said that he would decide whether or not to stand in June. It was for him to decide, he said. The Cabinet could only offer its view. I agreed with him on this point. It was for the President to decide what he wanted to do.

On 9th July, the President told me that he had decided not to seek re-election, and that he would announce his decision at a press conference on 16th July, which he did.

The President and I enjoy a good working and personal relationship. We have been friends and colleagues in Government since 1977, ie, over 20 years. Our discussion on his re-election was open and cordial. It was his decision to make, but I felt that it was only right that he knew the Cabinet's view.

President Ong Teng Cheong's Contributions

I would like to place on record before this House President Ong Teng Cheong's significant contributions as Singapore's first elected President. He took his job seriously. He has helped us to test the powers and workings of the new institution, and iron out ambiguities in the powers of the President vis-a-vis the Government. He set the pace to get the Government to complete and publish the White Paper on "The Principles for Determining and Safeguarding the Accumulated Reserves of the Government and the Fifth Schedule Statutory Boards and Government Companies".

Most important of all, he has demonstrated that the two-key system to safeguard Singapore's reserves and key public sector appointments can be made to work.

When President Ong stood for election to be President, some doubted whether a former senior Cabinet Minister and PAP leader could exercise independent judgment or make decisions against the Government in his new role. But friendships and past associations have not affected President Ong's independence of judgment in the two areas where he has custodial powers. President Ong has shown what the Government expected all along: that when an honourable man assumes this constitutional position, he has to exercise the powers of that institution without fear or favour.

Together with the Council of Presidential Advisers, President Ong has established an effective institution for those powers vested in the Presidency. That is a major contribution to Singapore.

The Government will be holding a farewell reception for President Ong on 30th August. At that function, I shall pay a formal tribute to him for his significant achievements as President.

Mr Jeyaretnam: May I ask the Prime Minister a question or two? I understood him to say that the Cabinet would have been happier if the President had decided to seek re-election. But the Cabinet was concerned whether he was medically capable. But the President had said in his statement that his doctors had given him a clean bill, that his cancer was in complete remission and the President clearly indicated that his health would not stand in the way of his becoming President. May I ask the Prime Minister to explain to this House on what basis or information did the Cabinet conclude that he would not be capable of discharging his duties?

Mr Goh Chok Tong: Mr Speaker, Sir, yes, the President had told the public at his press conference regarding his present health situation. But the Cabinet had two medical reports, one from the President's doctor in the United States, Dr Saul Rosenberg, and the other from his physician in Singapore. We studied the reports and it was quite clear from the reports that if you should focus or project the President's health condition into the future, there was a very strong likelihood that he would not be able to perform his duties normally. In a sense, it is like looking at a glass of water, whether it is one-third full or two-thirds empty. The Cabinet had to take the advice of the doctor and take a very careful view of what the President's future condition would be like. And it is on the basis of our understanding of the President's future medical condition, as given in the medical reports, that the Cabinet decided that it could not support the re-election of the President. But it is a matter for the President to decide. He could still have decided to stand for re-election and it would be his right if he wanted to stand for re-election. But we have given our views on the basis of what we think would be his future medical condition, as advised by the doctors, and that Cabinet could not support his re-election.

Mr Inderjit Singh (Ang Mo Kio): Mr Speaker, Sir, I would like to ask the Prime Minister whether the Government has been inconsistent when they supported President Ong Teng Cheong's attempt at the Presidential office six years ago knowing that he already had a similar medical condition and now, given that the condition has not changed, it is not supporting his bid for a second term.

Mr Goh Chok Tong: Mr Speaker, Sir, we have not been inconsistent. We knew of the President's condition in 1992 when he was first struck with low-grade lymphoma. And again, from medical advice, we knew the likely progression of low-grade lymphoma that, in the first six years of this disease, there would have been no great problem for the President to perform the functions. But the next six years would not be quite the same. If you ask his doctors, they would tell you that, in the nature of things, the next six years would not be the same as the last six years. And it is on the basis of the next six years that we are concerned with. The doctors were right in their assessment, as shown in the last six years. The President had performed his duties quite normally.

Dr Lee Tsao Yuan: I would like to thank the Minister for Finance and the Prime Minister for their clarifications. I would like to ask the Minister for Finance - unfortunately I do not have the Budget book here to refer to - what is the approximate size of the Net Investment Income and is it found in the Budget book. More importantly, I would like to ask the Prime Minister how come the President, who is supposed to safeguard the reserves, was mistaken regarding the definition of Net Investment Income. And how come he did not realise that there was no need to draw down reserves as a result of the cost-cutting measures because there was actually, as Dr Richard Hu pointed out, a budget surplus? It would seem to me that that kind of information would be readily available to the President whose official and constitutional function is to protect the reserves.

I am rather puzzled by this state of affairs and more importantly, the Prime Minister has mentioned that he and the President have been friends and colleagues for a very long time, but it seems to me that there has actually been a breakdown of trust between the Government and the President where this is concerned so that matters of definition, matters of information as it were, do not seem to be readily conveyed across the various offices. Could the Prime Minister please explain? I think it is more than just a question of differences of definition or opinion. I am rather puzzled that there is a very significant difference, not so much of opinion, but of a breakdown of trust.

Mr Goh Chok Tong: Mr Speaker, Sir, I am equally puzzled and I am still puzzled as to why the President did not understand fully the meaning of the NII as explained by Dr Richard Hu. The President did not deal with me directly on most of the issues. He dealt with the civil servants, normally through his Principal Private Secretary. I would normally come into the picture when they could not resolve certain issues. And of course when it came to my attention, I would then look at the matter and involve other Ministers who were concerned to resolve the issue. I do not think there was this breakdown in trust. It may be differences in the approach to the problems. And as far as the Government was concerned, there was never any reluctance in our case to cooperate. Where we disagreed we explained our disagreement. We finally sorted out whatever issues that we had. I do not get a sense that there was this breakdown in trust. It is just different approaches to the problems.

Dr Richard Hu Tsu Tau: The NII is in the first page of the Budget book, below the line. You can just add up the figures year by year. It averages between $3 and $5 million a year.

Dr S. Vasoo (Tanjong Pagar): May I ask the Prime Minister whether the Government has in any way put pressure on President Ong not to stand again?

Mr Goh Chok Tong: Mr Speaker, Sir, that would be very unfair to the President, and unfair to the Government too because whatever pressure we put on the President, he is a not a man who succumbs to pressure. And as shown, he has an independent viewpoint on many issues.

On the medical condition of the President, I did not want to be too explicit since the President is not standing for re-election. I think it would be unfair to him. But being less explicit, Members here may not understand what exactly is the position and why there is this difference. I would say that there was a difference in interpretation of the medical reports. We have to be advised by the doctors and we had to ask questions that we were not sure as to what certain words meant. We were also advised by his doctor that for the next six years, there would be a strong likelihood of certain events taking place. The President, from his point of view, can quite rightly look at the other aspect that these are all statistics. And from his point of view, he is the best judge of his own health. He said he felt "fine" and I have no reason to doubt him that he felt "fine". It is a question of how we interpret the medical reports. But in our case, we were guided by professional advice and not just how we felt over the medical reports.

Mr Leong Horn Kee (Bishan-Toa Payoh): Mr Speaker, Sir, I would like to ask the Prime Minister whether this issue of staff support for the President would be helpful because in the past when there was no elected President and there was no need to safeguard the reserves, the President only had one Principal Private Secretary. I am not saying that we should have a full presidential staff, but perhaps some more senior support for him would be helpful in his interaction with the other civil servants who are on a senior level.

Mr Goh Chok Tong: Mr Speaker, Sir, in the past, the President had just a personal secretary. There was no Principal Private Secretary. The difference is that the PPS is an Administrative Officer. Your private secretary looks after your office management and so on. We felt that it is not necessary for the President's office to have a large staff because if you begin to man the President's office in order to check the civil servants, we must have a super Auditor-General to check on the Accountant General. You need to have your own lawyer to check on the AG's office and you begin to build a White House staff, as you call it, which would then have its centre of power, and it is totally unnecessary because the key appointments are subject to the veto powers of the President. Under the system that we have devised, the President should work through the people in Government.

I too only have a Principal Private Secretary. I have a Press Secretary but I felt that he would be underworked, and I have given my Press Secretary three jobs. He is my Press Secretary. He is also holding a position as Deputy Secretary in the Ministry of Information and the Arts so that he can know what is going on and keep me informed of news. And I still find that he is underworked. So I thought he should also be the Chief Executive Director of the People's Association. And because he is from the Ministry of Foreign Affairs, he also attends briefings regularly in the Ministry of Foreign Affairs. This is how we use staff. We do not just have people who sit around looking for little faults here and there. It is totally unnecessary.

The President has the right to use staff in the Government to get whatever information which he wants. He does not require a big staff. Likewise, I have a right to go to any Ministry and demand information to be given to me and circumventing the Minister, if necessary. I do not require a big staff to run the Government.

Mr Seng Han Thong (Ang Mo Kio): Mr Speaker, Sir, since the only concern of the President's re-election is health and the only reason cited by the Prime Minister for the Cabinet not to support the President's re-election is health, may I know whether the Government intends to publish the medical reports to clear the public misperception.

Dr Wang Kai Yuen (Bukit Timah): On the same note, Mr Speaker, Sir, may I ask the Government whether it is setting a precedent that good health is a key criterion for persons seeking high office in Singapore?

Mr Goh Chok Tong: Mr Speaker, Sir, the Government has no intention to publish the medical reports of President Ong Teng Cheong. He is not seeking re-election. It is irrelevant now to publish the medical details of the President's health.

As for the other question whether we are setting a new precedent, I think health is important but it is not a constitutional requirement. We have not put this in. It is very difficult for us to devise a way where we have to define health before a person can stand for election. But I would suggest that any potential candidate who wants to stand for election as President should be asked the question by the press. What is your health condition? Do you have an underlying condition which you know, over time, will lead to problems? Nobody can forecast how a heart will tick over time, or whether or not you may get cancer. Nobody can forecast. But at that point of time, do you have an underlying condition which you know must progressively lead to bigger and bigger problems for you. I think it is a fair question for the press to ask. I do not think at this stage it is wise for us to change the Constitution or the Presidential Elections Act to make it a requirement for health to be declared publicly.

Mr S. Iswaran (West Coast): I would like the Prime Minister to clarify, since the projected health condition was the reason for the Government withholding its support for President Ong seeking a second term, what has the Government done to satisfy itself of similar consideration before extending its support to a candidate in the forthcoming elections.

Mr Goh Chok Tong: Mr Speaker, Sir, the Government has no authority whatsoever to demand Mr S R Nathan, as a candidate, to tell us what his health is. But of course privately, I have asked him when I saw him. I said, "What is your health condition?" He told me that he is able to discharge his responsibility. I asked, "Any underlying condition?" He said, "No." He had a heart bypass operation some years ago, but he has been to the National Heart Centre and has been cleared by the doctors. At this point in time, there is no legal basis that I can compel him to tell me what it is, but he has told me what his health condition was. So, personally, I believe his health is good and the press can ask him. If he goes to the nomination centre tomorrow, whether he is returned opposed or unopposed, the press can ask him about his health condition. It is a relevant question for the press to ask.

Mr Jeyaretnam: May I ask the Prime Minister again on the question of the President's health. The Prime Minister said that the Government had two reports. Were they conflicting reports from the report given by the President's own doctor? And who did the interpretation? Was it the Attorney General or did the Government seek an opinion from someone qualified, eminent in this field outside Singapore, to decide between the two reports? Did the Government report say that the President's powers would be affected and there was a likelihood that he would not be able to discharge the powers as President? Finally, may I ask the Prime Minister - he has been very candid - whether the Cabinet decided on Mr S R Nathan because they would find it less of a problem having him as President?

Mr Goh Chok Tong: Mr Speaker, Sir, there were two medical reports which I saw and one of them was from Dr Saul Rosenberg. He is the foremost authority in the world on lymphoma cancer. The other report is by the President's personal physician in Singapore, Dr John Wong, and he of course is also an authority in Singapore on oncology. The two reports were similar. They were not conflicting reports. We had Dr John Wong in Cabinet to interpret his report and the report of Dr Saul Rosenberg for us, and we were advised by an oncologist, not an Attorney-General. We were not qualified and, personally, there were many terms which were beyond me, and we had to satisfy ourselves by asking questions and getting the doctor to explain in layman's terms what the likely condition of the President would be.

Have I missed out any point?

An hon. Member: S R Nathan?

Mr Goh Chok Tong: What about S R Nathan?

Mr Jeyaretnam: May I just say a little bit more?

Mr Goh Chok Tong: No, please sit down. I will explain so that you do not have to say a bit more!

We have looked at S R Nathan very carefully and we chose him, because of the man's maturity and his balanced judgment. And we know that if he had to exercise his constitutional duties where he disagrees with us, he would exercise it in accordance with the authority which he has. I have no doubt about it. If we had any doubts, we would not have appointed such a person. We are not looking for yes man, as Members of the House would know. We are looking for people with independent views who can add to the system, not sycophants. We want people with that ability to perform the role of that particular institution, and S R Nathan, in our view, and in my personal view, qualifies eminently.

Dr Lily Neo (Kreta-Ayer Tanglin): Sir, may I ask the Prime Minister to define to this House the status vested on the wife of the elected President? What is the status of the First Lady?

Mr Goh Chok Tong: Mr Speaker, Sir, I am unable to find this definition in the Constitution. As far as I am concerned, she is the wife of the President. And as a matter of courtesy, many of us refer to her as the First Lady. But, in effect, the First Lady has no status in the Constitution, unlike the Minister, Prime Minister or the President.

Mr Zulkifli bin Baharudin (Nominated Member): Mr Speaker, Sir, first, in view of the uniqueness and infancy of the Presidency and the likelihood of differences of opinion between the President and the Government, does the Prime Minister see a need now to review the CPA, so that they are better able to handle the differences between the Government and the President?

Secondly, because the senior civil servants report directly to the Prime Minister, whether he could call upon the CPA to have senior civil servants report to them to answer issues of difficulties that the President may face.

Mr Goh Chok Tong: Mr Speaker, Sir, up to now, I do not think there is a need for us to review the composition of the CPA. It has worked fine. The President has sought advice from the CPA, and whenever Budgets were submitted, the CPA went through them quite carefully and gave their advice.

Whether we need to change this later on, I would not know. It depends on our experience in running the system. The CPA can, through the President's Office, call up any civil servant to answer any questions, if it wants to. There is nothing against that. I think the Accountant-General and the Auditor-General periodically might have been called up to explain certain statements or figures. It has the right to call up civil servants.

Mr Low Thia Khiang: Mr Speaker, Sir, I am puzzled over the puzzle of the Prime Minister. The Prime Minister is puzzled why the President, who was the Deputy Prime Minister, did not understand clearly that the Government does not need to draw on past reserves, and thereby made such statements. And he is also puzzled as to why the President decided to cast doubts on the Government. Based on the sequence of events the Prime Minister has given, in terms of whether to support the re-election, I wonder whether the Prime Minster is implying that the reason why the President has cast doubts and raised so many issues and decided not to stand for re-election was because the Cabinet failed to support his re-election,

I would also like the Prime Minister's opinion on whether or not the routine function of the elected President should be made more transparent, so that Singaporeans would know what the elected President is doing, rather than at the end of the term, the elected President comes out with something which has already passed.

My third concern is that although the Prime Minister says that the elected President can work through the Government system, the civil servants and all that, I wonder how would the elected President know if the Government or a statutory board decides that it has to sell land or dispose of assets within the budgeting period. Would the Prime Minister clarify?

Mr Goh Chok Tong: Mr Speaker, Sir, on his first question, it is one that can only be answered by the President. I would not know why he did not understand the NII and I would not know why exactly he chose to criticise the Government. But I thought it is necessary for the Government to state its position on a very basic area where we had disagreement, and that is whether we supported his re-election or not. The rest is for people to draw their own conclusions.

On the question of leaving matters to the last and at the end of the term of the President before we discuss them openly, I think when there are disagreements, if it justifies being aired publicly, they will be aired publicly. It is up to the President to decide. In the case of Article 22H, it was discussed openly in Parliament. So it depends on the issues concerned, and we have always come here each time we have certain problems over certain definitions or conventions, and we have come here to keep the public informed.

There should be no misunderstanding whatsoever if the public were to go back to the statements made earlier to see how the system should be worked. And because of the press conference, certain doubts have begun to creep in. It therefore gave us the opportunity to explain once again to the public.

On transactions during the Budget period, the civil servants have a constitutional duty to inform the President if, in their view, a particular transaction will draw down reserves. If a transaction like selling land at below cost will draw down the reserves, that civil servant has a duty to inform the President's Office or the President. In this case, it will be the Accountant-General or whoever is in charge of the statutory board that owns the land involved.

Mr Low Thia Khiang: What if he fails to report?

Mr Goh Chok Tong: If he fails to report, then I think he has committed an offence under the Constitution.

Mr Chng Hee Kok (East Coast): Mr Speaker, Sir, in my view, the most crucial point in this whole issue is the standing of the Government and our institutions among international investors. There was a suggestion by the Prime Minister that PERC has already indicated that the standing of our institutions and our Government has been affected. My question is whether the Prime Minister is planning to take any concrete measures or moves to strengthen and improve our institutions, if damage has already been done by this debate.

Mr Goh Chok Tong: Mr Speaker, Sir, at the moment, there is no need for us to think of ways to strengthen the institution. It is how the institution is being implemented which is important. The fact that we are debating this institution is part of the process of working the system. The President has taken certain issues into the open. He has let his views be known. We react in a way that we should. We come to Parliament. We explain why and we explain away the mistaken perception of the President. So it is more on how this system will be implemented. And when we have a new President, I have no doubt that he would have a new style of managing certain things in the two areas that he has got the powers. And we will still work the process through and, if necessary, we will come to Parliament and explain. At this stage, I do not think we need to change any particular Article in the Constitution to strengthen the institution.

Mr Simon Tay: Mr Speaker, Sir, this is not an occasion for me to clarify my own views, but I hope the Prime Minister could clarify some of the points that he has brought up.

First, I think it is very important that the Prime Minister has emphasised that this is a new and unique institution. The principles have just been published in a White Paper and the points he clarified after the President's comments are new to me and the whole House. I think if I have to make comments again, it would be different in the light of the clarifications the Prime Minister has made.

With that point, let me ask three questions. First, I hope the Prime Minister, as CEO, stands by the duties under Article 146 that the civil servants must report. A few minutes ago, he said that he thinks it is an offence. But can I ask him, as the CEO, to state very clearly to the civil service that this is taken as a clear offence and a breach of the constitutional duty. That point has to be made just as importantly, as he has said that the President must have the moral courage to be independent when necessary within his limited powers.

Secondly, I hope the Prime Minister will consider that there is a need at times to air both agreements and disagreements. I recollect that in the last ---

Mr Speaker: Mr Tay, can you ask your questions, please?

Mr Simon Tay: Yes, Mr Speaker. I hope the Prime Minister will take occasion to share points on which the elected President agrees with the Government that his action is not necessary, just as disagreements may surface later.

Thirdly, I would ask the Prime Minister whether in the next six years, the next term of the elected President, the Government will entrench the Presidency within the Constitution and therefore strongly establish an accepted office for the elected President.

Mr Goh Chok Tong: Mr Speaker, Sir, my statement just now had made it very clear that civil servants, ie, CEOs of particular Ministries or statutory boards have a constitutional duty to perform and, as CEO, I have made it very clear, as I have done in my statement, that if they have any reason to suspect that reserves are being drawn down, wittingly or unwittingly, they must indeed tell the President. In fact, it is a constitutional duty. If a civil servant who is required to do so does not do so, he is derelict in his duty.

The suggestion by Mr Simon Tay that we should, from time to time, raise in this House points which have been agreed to between the President and the Prime Minister, I think we can consider that. If it involves a matter of principle, I think we should let it be aired over here. But if it is just merely agreements on routine matters, I do not think we need to come to the House or we need even to go public on that. But where a principle is involved, a new principle in particular, where we have settled between the President and the Government, I think it is useful to keep the House informed.

Thirdly, whether we would entrench the Presidency in the Constitution, in terms of our inability to change the Article without his permission in the next term, I would not want to commit myself at this stage. I think it is better for us to work the system and be very satisfied that we have a good system before we entrench those powers in the Constitution. Otherwise, it is very difficult for us when we find that we should in fact do things in a different way to try to change the Constitution, because the President can block it. So I would rather err on the side of caution. I would say that we should try to entrench that within the next six years, but I would not want to commit myself at this moment.

Mr Goh Choon Kang (Marine Parade): Sir, this is a follow up question on the functions of the CPA. Can the Prime Minister say to what extent the views or opinions expressed by the President at his press conference were those of his own or they actually reflected the collective view of the CPA?

Mr Goh Chok Tong: Sir, I would not know the answer. But if I have to guess the answer, I think it was the President's own view.

Mr Chiam See Tong: Sir, I would like to ask a question about the NII. The Minister for Finance, Dr Richard Hu, said that the Government has got enough surpluses to tide over 1998/99 and the NII was held to be past investments from 1992 onwards. But suddenly it has now been changed to present reserves. What is the rationale behind this?

Dr Richard Hu Tsu Tau: No, it is not the rationale. You have just turned the question around. NII has always been current reserves. That is according to the Constitution. So there is no dispute over that.

Dr Lee Tsao Yuan: I would like to come back to this issue of the unpleasant encounters that the President had. The Prime Minister mentioned that civil servants have a constitutional duty to report to the President in the event of a drawdown of reserves. But has the President the right to query public servants directly regarding the areas of his constitutional duty? Secondly, would the Prime Minister undertake to investigate what were these unpleasant encounters that the President had or, maybe his Principal Private Secretary had, and also to ensure they would not occur again?

Mr Goh Chok Tong: Mr Speaker, Sir, when we talk about civil servants having the responsibility under the Constitution to report to the President, it is not all civil servants but only those who are designated with the responsibility to do so under the Constitution. The President has the right to call up anyone for information which he wants. It is for him to exercise that right if he needs to get further explanation of certain issues or figures.

As for the unpleasant encounters, I would not know unless the President raises them with me, privately or publicly, which he has done through the press conference. I thought he would probably have identified the major unpleasant encounters in his long list of problems at the press conference, and we have addressed those episodes in Parliament earlier.

Mr Sin Boon Ann: Mr Speaker, Sir, I would like to go back to the question of the President's health. If the condition of the President's health is crucial to the consideration of support given by the Cabinet to a candidate, why was not the present candidate, who is 75 years old and is known to have had a bypass, required to submit a medical report, even if he is not required by the Constitution to do so? Instead, we require the same of President Ong.

Mr Goh Chok Tong: Mr Speaker, Sir, there is no legal basis for us to get the candidate to submit a medical report. We have asked him, and he has satisfied himself that he is physically and medically fit to stand for election.

Mr Inderjit Singh: Sir, while I accept all the explanations that the Minister for Finance has given on the technical issues that were raised by the President, I think one issue that still remains to be answered is that of the mindset changes that the President talked about, ie, the attitudes of the civil servants and some of the Ministers that he had encountered during his term in office. Does the Prime Minister intend to address these issues of attitude among the civil servants?

Mr Goh Chok Tong: Sir, it is a matter of conjecture that some civil servants and Ministers found his attitude to be a nuisance. Unless I go around asking the civil servants and Ministers whether they indeed found the President's checking on them a nuisance, I would not know whether it is true or not. So it is not necessary for me to send out a general circular to the civil service and the Ministers to change their mindset.

Dr Michael Lim Chun Leng (Cheng San): As health was the main reason why the Cabinet rejected, and also at the point in time, like what the Prime Minister said, we had supported the President even though he had lymphoma, as a doctor, we have always been taught that low grade lymphoma would be difficult to cure, but it generally runs a fairly long course. In this instance, what I want to know, and I think it is also public interest, unless the course of the disease has taken a drastic change to become a high grade disease, or the disease cannot go into total remission, there would be little reason for Cabinet not to support him, if the lymphoma remains as it was in the past. Perhaps the Prime Minister would like to clarify this.

Mr Goh Chok Tong: Mr Speaker, Sir, the President's low grade lymphoma has indeed transformed into high grade lymphoma more than a year ago.

Mr Low Thia Khiang: Sir, the Prime Minister said just now that unless he sends a circular to civil servants to find out whether anyone finds the President a nuisance, he would not know. I would like to ask him if he would tell us, in this House, whether he has asked any Minister here who finds President Ong troublesome and a nuisance.

Mr Goh Chok Tong: I do not think it is necessary. If he wants to ask this question in the House he should get the Speaker to go around asking each one of us whether we do so or not. I think it is totally irrelevant. The point is, no Minister has withdrawn any cooperation from the President, and when most Ministers see him, we call him "Mr President". There is no disrespect shown to the President whatsoever. So it is totally irrelevant for us to try and guess whether Ministers regard the President's performance of his duty as rather vexing to them. I think we have always cooperated, and we should cooperate, and we will continue to cooperate with the new President.

Mr Jeyaretnam: Mr Speaker, Sir, I am sure the people of Singapore would have been very glad to hear the Prime Minister say in this House that the Government was not looking for sycophants to run for the post of President. If that is the case, what was the need for the Cabinet to shortlist certain people and then finally decide on Mr S. R. Nathan as the Cabinet's choice? Is it not better to leave the judgment to the electorate to decide who should be their President? Is the Prime Minister aware that there is a feeling among great many Singaporeans that they have been completely left out, cheated, of their chance to choose the President?

Mr Goh Chok Tong: Mr Speaker, Sir, the President has two roles. One is ceremonial, serving as a symbol of Singapore. The other are the custodial functions that he has under the Constitution. The two roles are now merged into one person and any Government would want to ensure that whoever becomes the President is somebody who can do Singapore proud, and can do the job competently. So we, as a Government, would therefore always have a vested interest to ensure that the right man emerges to become the President. But there is nothing to stop Mr Jeyaretnam from finding someone who qualifies under the rules to stand for election against somebody whom the Government supports, and the people can decide. In this instance, Mr Jeyaretnam has failed to find somebody who can become a contestant in the arena against Mr S. R. Nathan. There is no rule against it. It is within our right to try and get the best candidate for Singapore. Singaporeans are not cheated. In fact, our lament is not enough people are coming forward who can do Singapore proud in performing the role of the Presidency.

Mr Jeyaretnam: May I suggest to the Prime Minister that if he is sincere in what he said, the Government should now remove the restrictions on who should stand as President. The basic qualifications are laid down in the Constitution as for Members of Parliament. Let the public decide - not the Prime Minister, not the Senior Minister, nor the Cabinet - as to who should be the President.

Mr Goh Chok Tong: Mr Speaker, Sir, we have gone through these arguments when we debated the criteria for the Elected Presidency. I do not think we need to repeat them. We are looking for honourable men and women who can perform a particular function. You do not just want to have somebody who has bought and sold some shares, some private tutors or failed politicians, to demean the post of the Presidency, and let the people decide. We regard the Head of State as a very important institution and it is best that we have the right person who fulfils certain criteria to stand for election for that particular post, and the matter has been decided over here. Parliament has decided. The people have elected the PAP. This was an issue way back in the 1988 election. We won. We defeated the argument by Mr Jeyaretnam. So the people have spoken on this issue. We have got this through in Parliament.

Mr Jeyaretnam: Is the Prime Minister saying that this Government is not prepared to trust the intelligence of our people?

Mr Goh Chok Tong: We do not trust the opinions of certain politicians.

Mr Zulkifli Bin Baharudin (Nominated Member): Sir, Singaporeans heard of the President's problem through a press conference and today we are hearing the Prime Minister's clarification. I certainly think there is a better way for Singaporeans to know about the problems faced by the President and the Government. Is there a way we can find where we could discuss these problems, know about them, without having risk agencies downgrading us and without causing concern among the population?

Mr Goh Chok Tong: Sir, that is the choice for the President. He has chosen to go public with the press conference. I have chosen to come over here to explain and face MPs in answering any questions that they may have. I do not choose a press conference to rebut the points raised by the President.

Mr Speaker: One last question. Mr Tay.

Mr Simon Tay: One of the details in the President's press conference which caught the attention of the people was the reference to the reply of the civil servant saying that it would take 52 man-years. We have heard clarifications that it was 56 man-years. May I ask the Prime Minister, given that the President has a right to access the information under Article 22F of the Constitution, is it, in his opinion, the right thing for a civil servant to tell the President roughly how much time it would take to answer his question? Is that fulfilling the duty under Article 22F? Secondly, whether in his own experience as Prime Minister, civil servants come to him and before answering his questions, tell him roughly how many man-hours it would take?

Mr Goh Chok Tong: Sir, I have seen a copy of the minutes of the meeting where the President asked for the information to be given. I have read the minutes and there was no indication whatsoever that the Accountant-General was being disrespectful or rude. The President wanted certain information and it is quite right for the Accountant-General to explain that, "Mr President, Sir, if you would like to have all the lands owned by the Government valued, it would require 56 man-years." I saw the minutes. The minutes were approved by the President. It was entirely obvious to me that this was a very normal discussion between a respectful civil servant and the President.

The Senior Minister (Mr Lee Kuan Yew): Mr Speaker, Sir, the exchanges this afternoon establish two important principles. First, this new institution which we have established can function. In a way, it was perhaps as well that the President chose in his farewell press conference to vent his frustrations. He left the Government with the unpleasant task of having to rebut him in public. I have heard the exchanges this afternoon, and I would like to add these few points.

The integrity of the Government is of crucial importance to Singapore. Many people do not like what they call the authoritarian, dictatorial attitude of the PAP, which I have led since 1959. That was 40 years ago. We started with a reserve of about $50 or $60 million in the kitty. We are now able to guard for the future of Singapore, and the troubles we may run into from time to time, over S$150 billion. It's not as big as the Saudi oil reserves, but it is not peanuts.

So before my colleagues and I became unable to function, we discussed amongst ourselves whether we could trust a future generation to exercise the same prudence, the same care, over what we have accumulated and may need in the future. It is an open secret that some of my colleagues think that I am attempting something which is futile. Because if a generation is determined to spend its way through its patrimony, it will go back from rags to riches to rags. But at least we should have some mechanism to get the people to pause. Let me explain how a government works.

I had been in charge of the CPIB from 1959 to 1990. It has not got a huge, enormous apparatus ferreting out what is going on in immigration and the customs, and in tenders. But it has experienced investigators who can detect signs, and you can always be sure that when something wrong is taking place, and somebody is being shortchanged, that matter will come out.

Dr Lee Tsao Yuan worries about whether the President is given the right information. Let us suppose for one moment that what my colleagues and I feared did take place - that we have a spendthrift, reckless, adventurous, opportunist government that is willing to spend its way to prosperity, and is stripping off the family heirlooms. Does anybody in this House believe, in the culture that we have created, that public servants will quietly see their pensions go down the drain? Because as these reserves are drained away, the value of our currency will drop, as the rupiah dropped. They are going to take every step to protect their future, and will do so. And that is how the CPIB works. Have no doubts, I have no doubts, people will go and see the Auditor-General, lower officials, if the Permanent Secretary or the CEO of a statutory board is not on the job, and say, "Look, this is something dreadfully wrong. And this will lead to all of us being left with nothing."

But, as Mr Lim Kim San and Dr Goh have argued with me before we brought these provisions to the House, a good mobiliser can play ducks and drakes with the electorate and swing it around against the President and his Council of Advisors, and can get it through a referendum, then all is lost. But if you have these checks, you have certain hurdles, obstacles, then I hope that there will be people in this House, in spite of a large majority for the Government, who will say, pause, think about it before you take this step. Unlike Indonesia, Malaysia or Thailand, you have nothing to pledge to the World Bank. You have not got hidden reserves of oil, gas, uranium, copper or gold. It is that kind of climate of integrity, high standards that is our best protection.

So we put up with a lot of frivolous, irrelevant attitudes from some opposition members. What we have embarked on is for a very serious purpose. Why should I, before I stepped down from office, put impediments in the way of my successor, if I did not believe that this obstruction, this inconvenience, could prove to be a very valuable break, a circuit breaker, if the need were to arise? Today's exchange, as a result of what the President said on 16th July, was useful as part of the education of our people.

Mr Jeyaretnam: May I ask the Senior Minister - I am glad he is in the House - in his interview to the press he has said then that the President is not a check on the Government, that it must be the Opposition who will be the check on the Government. Is he then saying that the President was never intended to be a check on the Government?

Mr Lee Kuan Yew: I think there is something obtuse about the Non-Constituency Member.

In the context of the Q&A, I pointed out that those who were hoping that the President could act as a counter-force to the Government, they were wrong, because all he can do is to protect the reserves and protect the integrity of appointments. If you want a counter to the Government, a check against the Government, you must have them in the Opposition, and the Opposition to be an effective counter must offer a credible alternative, which unfortunately Mr Jeyaretnam, since 1972 when he first stood for elections, has lamentably failed to do. Therefore, however I answer him, it does not really matter, because at the end of the day, does he present an alternative? This is really at the heart of our problem, that until there is a viable alternative to the present Government, to the PAP, it is imperative that the PAP must have checks and balances within itself, or all would have gone down in the last 40 years.

For 16 years from 1965 to 1981, when Mr Jeyaretnam was first elected, there was no Opposition in this Parliament, but we had the system, of everybody being informed, the wheels of the system were kept going. When he came in, the system was functioning. I did not believe that the one-party system that many African countries had constitutionally legislated for was good for the country. It is bad for the PAP MPs if every time they went for election, only PAP candidates can stand against them. The very fact that they can be contested, and that the people want some opposition, keeps them on their toes. So the system works. It behoves us to remember that the system works only if there are men and women of integrity to man it. And that is easy to lose. Look at Vietnam, look at the People's Republic of China, they were led by men who were prepared to sacrifice everything for a cause. In power, with the cultural revolution, standards went down. In power, after they opened up in Vietnam, the whole country is awash with corruption and they have had to hang their bankers, their customs officers. I think we can take pride that we have been able in 40 years of PAP government and maintained the integrity of the institutions of the state.

Mr Low Thia Khiang: May I seek clarification from the Senior Minister? Is the Senior Minister implying that even with the PAP, the dominant party, continuing as Government, he has no confidence and that the PAP may one day produce a government that will squander the reserves, thereby you need the checks and the circuit breakers?

Mr Lee Kuan Yew: I fully concede that. I cannot tell Mr Low Thia Khiang what his grandson will be. I know what he is. I do not know what his son will be, never mind his grandson. A society goes through many phases. Those who missed the hardships of the Japanese Occupation will not understand my generation. Those who were born after the PAP formed the Government may believe that better roads, schools, hospitals, facilities come as the natural order of things. I do not blame them. Therefore, this setback which we had, which could become much more serious, was a reminder of how things could go dreadfully wrong. One day President Suharto was supreme; in 1997 he mismanaged a crisis. In May 1998 the country began to unravel. It is a natural sequence of the passing of the generations. He had to face a generation of Indonesians that no longer shared with him - the fight against the Japanese, against the Dutch - but a generation that had increasing frustrations and anger at what they saw was mismanagement of their resources.

Can I say that my successors will be as fortunate in passing on the baton to their successors? Can Mao Zedong predict that Deng Xiaoping would inherit his mantle because he castigated him and rusticated him three times? Can Deng Xiaoping predict that Zhao Ziyang would fail him? Or that Jiang Zemin would stay for so long? Can Jiang Zemin be certain that his next president will be as wise and astute? Nobody could foresee what happened. Therefore, we try our best to have institutions in place. They are not perfect. In the end, they may all fail. Then your and my grandsons will be the worse for it.

Mr Jeyaretnam: Mr Speaker, Sir, the Senior Minister, I am glad, has finally conceded a place for the Opposition. But he says there is no viable alternative. May I ask who is responsible for this? Is it not his Government which has gone out of its way to prevent a viable alternative coming up in this country?

Mr Lee Kuan Yew: I would have thought by his persistent questioning he has given the answer to the public.

Dr Lee Tsao Yuan: Point of clarification, Mr Speaker. I would just like to clarify the point whether the Elected President is a check and balance against the Government or not. I fully understand the point that the powers of the President are custodial. But I would like to quote from Hansard of 4th October 1990 from the then First Deputy Prime Minister, now Prime Minister [Hansard Vol. 56, No. 7, col. 461]. I quote:

"My Cabinet colleagues and I believe that a good system of government must have checks and balances. There are inadequate checks in our present parliamentary system of government. [This is in argument of the Elected President.]

Bear in mind that in introducing this Bill, the present Government is in fact clipping its own wings. Once the Constitutional amendment is effected, this Government will have some of its powers checked. The new Prime Minister will need to seek the concurrence of the President in certain key areas of government. I will be the first Prime Minister to be subject to these new checks and safeguards.

It is this same desire of wanting to check the potential abuse of power which prompts us to introduce additional checks on the government in three new areas, not mentioned in the first White Paper [referring to the ISA, proposed Maintenance of Religious Harmony Bill and CPIB investigations]." So, pardon me if I am obtuse, Senior Minister, but I thought I would like to ask for clarification on this point.

Mr Lee Kuan Yew: This is a technical point which Members should know. The Prime Minister, when he was First Deputy Prime Minister, made this statement when he moved the Second Reading of the Bill. He is not a lawyer by training. Therefore, he uses words in a non-legal way. If I had delivered that speech, I would not have used those words because "clipping one's wings" would evoke in my mind the swans we have at Botanic Gardens. They are there because they cannot fly away. And I would not have used that metaphor because I would not want a Prime Minister who cannot get up on his feet and do what he wants.

The powers are enshrined in the Constitution. Never mind what the Ministers or Prime Minister say when they move a Bill. The Bill goes through the process. It goes to a Select Committee. It comes back. Finally, it goes through the Third reading. It is usually a perfunctory ritual. But it underlines the fact that you have read this for the Third time and these are the words that define the powers. Therefore, I was surprised to see this academic constitutional lawyer from our university - and I was alarmed when I read he is teaching our students constitutional law - that he had not read our own Constitution and that he believed that the President was partially ceremonial and partially executive. If he had read the provisions, he would know that in no Article or sub-Article of the Constitution is the President given executive power. He has a certain veto, a certain blocking power. Partly because I was, by training, a lawyer, so as the principal provisions were enacted, I took some care to make quite sure that this mechanism we were putting into place would not obstruct a government from doing what it legitimately should be able to do. Take the Constitution, read it, quote the Constitution to me and if we disagree on the meaning, there is the court. You cannot quote the Prime Minister and say, "On that basis, I ask the President to clip his wings." I strenuously recommend against that.

Mr Jeyaretnam: May I ask the Senior Minister, when he says that the President has no executive power, is his decision to say "no" to the Government's proposal to use the reserves not an exercise of executive power?

Mr Lee Kuan Yew: I am not here, Mr Speaker, to show that I am a better lawyer than the Non-Constituency Member. The Prime Minister has quoted the Attorney-General's authority to read out certain passages, and the Attorney-General is prepared to go to court and argue that the President has no executive power. I was a lawyer. I have ceased to practise the law. I still understand certain basic principles but I always take advice, especially before I sue for defamation. I always consult people who are specialised in that practical branch of the law and who assure me that I have a foolproof case. Then I proceed.

Mr Jeyaretnam: May I ask the Senior Minister why has he not proceeded with his case?

Mr Lee Kuan Yew: I leave that to my lawyer, Senior Counsel Davinder Singh, who has great competence and is acknowledged as one who is extremely circumspect, knows exactly how to put a defendant in his place.