ANNUAL BUDGET STATEMENT

Debate resumed.

Mr Peh Chin Hua (Jalan Besar): (In Mandarin): Mr Speaker, Sir, I support the motion standing in the name of the Finance Minister.

In his Budget Statement, the Minister for Finance, Dr Richard Hu, said that about 65% of individuals no longer pay income tax and would not benefit from income tax rebates. To assist people in this group, the Government will continue to grant rebates on HDB service and conservancy charges, and rents. At the same time, they will also enjoy the utilities rebates.

I personally feel that this kind gesture of the Government will enable the people of Singapore to realise that the Government is very caring and is full of humanity. I commend the Government for continuing to help this group of Singaporeans as our economy recovers.

The Finance Minister also announced that taxpayers who stay with their parents and grandparents will enjoy higher tax relief, and the tax relief will be increased by $500, to $5,000. And also from the Year of Assessment 2001, taxpayers who top up in cash to his grandparents' and parents' retirement accounts will be allowed a tax relief. So, irrespective of the amount granted, the Government has clearly indicated that it wants to maintain the tradition of family core values to deal with our problem of an aging population. This rebate will help to promote family cohesion and family harmony and to encourage maintenance of parents and grandparents. The message of the Government is very clear and precise.

The Finance Minister also announced another scheme, ie, our people are allowed to contribute voluntarily over and above their CPF savings to the Supplementary Retirement Scheme with tax being payable only when the savings are withdrawn, and participants will have considerable flexibility investing their savings. I think this is attractive to the higher income Singaporeans. However, I urge the Government to also consider giving more favourable terms to Singaporeans who are in the lower and middle income groups, such as giving them a higher interest rate, higher than the bank's interest rate so that those Singaporeans who are in the lower and middle income group who do not pay income tax would also benefit from this scheme. This will make sure that the people in the lower and middle income group will have higher CPF savings in their old age and this will also help to solve and deal with our problem of an aging population.

Because of our economic recovery, the Government has decided not to grant the 10% income tax rebate as was given last year, but to give only 5% rebate this year. Many Singaporeans are disappointed. They said that with the recovery of the economy, our CPF cut has not been restored and yet our income tax rebate was reduced by half. Therefore, they had a misunderstanding against the Government. I can understand their feelings and their sentiments.

Mr Speaker, Sir, since our independence, we have gone through four economic crises and economic recessions. We have, fortunately, been able to weather through this recent Asian financial crisis. And under the Government's prudent management, instead of a $5 billion deficit in our 1999 budget, we had actually a $3.2 billion surplus. This was because our people and the Government have worked together in one heart to battle this financial crisis. However, I feel that the top up of $250 to our CPF account is good, but not enough. We should commend our people and give them more positive incentive rewards. I think the best way is to immediately consider restoring their CPF contributions even in a gradual manner. I feel that at this moment we are actually going into a period of high economic growth. We have emerged from the bicycle era in the 1960s to the F16 era now. Now that our foreign reserves are steady and increasing, I think so long as the people and the Government can work hand in hand, we would be able to grab hold of this opportunity, and the 21st century will be a high economic century for Singapore. I personally feel that we should also gradually restore the CPF to our people so that people and the foreign investors will have more confidence in us and then our F16s will be able to perform better and more successful.

In 1997, the Government reduced the corporate tax to 26% and from FY 2001, it will be further reduced by 0.5%, so that our corporate tax will be reduced to 25.5%. This is a very wise decision. This will enhance our competitiveness in this region.

With the competition in the region getting more and more intense, many developing countries, in order to attract foreign investments, are reducing the corporate tax and giving tax waiver for a certain number of years. Therefore, in order to maintain our competitiveness, I think we should further perfect our GST system, ie, to pay more when you consume more, so when you use less, you pay less. When GST becomes our main source of revenue, we should consider further reducing the corporate tax and individual personal tax, so that we may attract more foreign companies and foreign talents to Singapore, and to contribute to our economic development so that we would be able to compete actively in the international arena.

I also welcome the Finance Minister's proposal to further improve the stock option scheme. Many developed countries have realised that the stock option scheme is an important factor to retain talents in a company. And now with competition getting more and more intense in this region, I think it is very important that we be able to retain our team of talents. Because the talented people, whether they are the CEOs, scientists, engineers, researchers, technicians, MBAs or even an ordinary staff in the office, they would rather take the company's shares than to ask for high salaries, because they feel that to have shares in the company will be something that creates a sense of belonging to them. If the company makes money, they should get more benefit from it. Of course, I feel that we should fix a ceiling as to how much shares they can sell off, maybe 10% or 20% per year at the most. And when they were given the stock option and at a discount, then of course they would have to pay tax when they sell off the shares.

I feel that this is very important in our effort to build up Singapore as an international securities and financial centre. Only then many foreign high-tech companies will come to Singapore for listing. At the same time, it would also encourage our people to have shares in the company.

Another thing I like to mention about is how to establish a more healthy era of creativity. Apart from the development expenditure which will be increased by 21% and our tax system amended to encourage people to go into creative work and to start business, this is something that is truly commendable. I personally feel that when we encourage the people to go into business, we should not create misunderstanding. We should not let the people go into business impulsively or blindly. They should understand what is their ultimate purpose of going into business. We should not encourage them to go into business like a swarm of bees with the thinking that everyone can make money and everyone can be a Sim Wong Hoo. Then this will be ridiculous. However, if they can make good money and have great wealth because of the success in their enterprises, then, of course, it is well and good. However, I can only see young people going into business with the objective of making more money and wealth. This is wrong. In the next five to 10 years, if we have successfully created a new society, then it will be a very materialistic society where everyone just goes for money and greed. This is not something that we want to see. Therefore, because of this, I feel that when we are encouraging the people to be enterprising, we should also lead the young people in the right direction. First of all, they must have an understanding of themselves before they create business. They must have this human factor. They must have the talent and the wisdom to go into the business. Of course, nowadays, we have many young talents. They have this first condition. I think this is something that is beyond doubt.

Apart from this human factor, we must find out whether the surrounding environment is conducive to their starting a business. In this respect, the Singapore Government has encouraged people to venture into business and to go regional or global. The Finance Minister has amended our tax system to encourage our people to undertake creative work and to have the entrepreneurial spirit. This is something that is clear for everyone of us. Whether or not they will be able to raise enough capital to start their own business, this is again something that the Government should help. Of course, there are lots of venture fund schemes to help them solve this problem of shortage in capital to start their business. With the human factor and a conducive environment, the next thing is to look for opportunities, ie, the right timing. I think timing is very important. It is like when to produce and what type of products to satisfy the demands of the consumers. As for products, whether designing or manufacturing, do they really understand the market for it and what will be the competition? These are things that the young people will have to carefully consider before they go into business. So, when we see these people going into business like a swarm of bees, I feel that they are going into business with the belief that by just setting a few dot.com companies, they will become Sim Wong Hoo in a few months' time. This is very unrealistic and very naive. Money does not come so easily. They do not fall from the sky. So, when the young people go into business, even if they have the aforesaid conditions, they are only the pre-requisites. It is still a long way before they can taste success.

Mr Speaker, Sir, what I want to say is that if they are enterprising just at a moment's impulse, then it will not be sustained and it will wither away very easily. The Silicon Valley was not established in this way. Even if you have the pre-requisites, it does not mean you will be successful. Therefore, we have to consider all the complicated problems that you may encounter after you have started your business, whether you have the will power to fight on, whether you will give up half-way, whether you would get up again after you have failed. You must also understand that success is the accumulation of many failures. Your dreams are nothing but just a fantasy in your mind, you will never succeed. Furthermore, you will have to know whether you have this business acumen, whether you are sensitive about the market, when to get in and when to get out, how to analyse your business operations, how is your inter-personal relationship. These are all very important factors to consider.

Our young people must understand what is the highest objective that you should pursue. A successful entrepreneur will pursue a sense of satisfaction, the achievement in their business and a sense of mission and not just money. Of course, if you are successful in your business, if you have money, so long as you do not womanise, gamble or not greedy, you will have enough money to live through life. But a successful entrepreneur goes for a sense of satisfaction in the achievement of their business and a sense of mission to the society. This is the intangible wealth that is inexhaustible. Of course, an entrepreneur will have the imagination, the courage and the vision.

Young people going into business would of course want to make money. But we do not want just to make a lot of money and pay a lot of taxes. We have also to return some of our moneys to society to help those who are less fortunate than us. Of course, the pursuit of wealth is not a sin, but we must understand benevolence and wealth. There is no conflict between them. Only the very rich can exercise great benevolence. Our forefathers in the business world like Tan Kah Kee and Lee Kong Chian are great entrepreneurs but they have contributed a lot in helping our society. But at the moment I can only smell young people going like a swarm of bees, just to make money. This is indeed a profound regret.

Finally, I must say that in order for Singapore to flourish, we must have a very good culture in our civil service. First of all, I must declare my interest. Recently, I invested with a friend on a type of electronic product. It is something invested by a young Singaporean. It is what we call "creative cracker". It is not the real cracker, no gun powder and no danger. Once we announced the invention of these creative crackers, the police told us that we cannot sell them. We submitted our application. The Government's response was very fast. The Police was helpful. But when it went to the Ministry of the Environment, noise pollution was not a problem. It can be accepted. But they say this creative cracker will let out a lot of paper fragments and they will litter the public areas. So it becomes littering. They pushed the buck and finally it went back to the police. I feel that if it is just a question of littering, you can make rules and say you must clean up the paper fragments. Why must you push away such a creative invention? Finally, it just died a natural death. This is not an environment in which the Government is encouraging creative enterprise. Many of our civil servants are inflexible. When the rules say you cannot do this, then of course you cannot do it. When there are no rules to say you cannot do, yet you are not allowed to do it. I hope that our civil servants would not just say, if there is no U-turn, you cannot turn. Only if there is a U-turn sign, then you can make a U-turn. But if there is no U-turn sign, think about it. Do not do a U-turn but turn into a side road, make a 3-point turn and go on. This is creative!

The Government recently announced the setting up of Enterprise Challenge Trophy started by Dr Tan Chin Nam. They want to introduce this sort of creative spirit of the Silicon Valley into our public service departments. We encourage our public servants to keep on coming out with new ideas and to cultivate our civil service with this concept of creativity. Only then can we establish a very creative entrepreneurial society.

Mr Simon Tay: Mr Speaker, Sir, the Budget Statement by the Minister for Finance, Dr Richard Hu, seems notable to me for at least three reasons.

First, it officially marks the turn around that our economy has made in this past year. It is a marker in the change of mood from the doom and gloom of last year, and the fresh hopes of a new year and millennium.

Second, the statement recognises how much our continued recovery depends on the region and the wider world. Singapore's open economy can be buoyed or brought down by events in the USA, Japan, Indonesia and other parts of the world.

Third, the statement is a budget that seeks to deal with the effects of globalisation. The phenomena of globalisation increase competition between companies and nations. It creates great opportunities for some, with the right skills at the right price. For others, without such skills, it can mean the end of existing jobs and the start of persisting pockets of unemployment or of persistently low wages.

Many economic indicators and some stock markets have shown marked improvement since the third quarter of 1999. Some believe the crisis is over. I think that this is not the right way to look at things.

I believe instead that we are going to enter a period in which crisis may recur. These may be similar to what we experienced in 1997, or from a wholly new nature and source. There is little guarantee that the long decades of rapid and largely uninterrupted growth that we and much of the East Asian region knew until the crisis will again return, whether for us or for our neighbours. It is likely that we will instead experience a much more patchy pattern. Some years will be better than others. Some countries will surge forward while others in the region will struggle. Some sectors of our economy and society will prosper and others may experience a slow down or even extinction.

As such, the Budget of 2000 is not simply a budget for the new financial year. It may in fact be seen as a Budget for a new era. This is a post-crisis era in which new stresses from worldwide competition and globalisation must be addressed. This is an era in which the recovery would be real for some, uncertain for others, and a missed boat of opportunity for yet others.

Much depends on the policies that we adopt. The important policies, moreover, are not just on macro-economic and financial matters. They relate to technology, education, citizenship and foreign talent, rules and social norms that allow and reward risk-taking as well as to community, family and good relations with others in the region.

In this, there are special needs for financial and other policies that allow and encourage the new knowledge-based economy to flourish here in Singapore. Yet, there is also a need for measures that reaffirm many important and enduring foundations of our society.

In this setting, there are many points we must consider. I can only touch on some of these. Some relate to the general context the Minister has set out. Others relate more specifically to strategies that can be suggested to deal with the challenges of this new era. I shall deal first with the regional setting, and then with policies for Singapore.

Singapore, ASEAN and the World Economy

When we look at ASEAN and the world economy, we must see that we have generally enjoyed a special place in the world economy, as have others in the region. They have attracted, together with China, the lion's share of foreign direct investment that goes to the developing countries. Asia's trade, up to the crisis, had been the fastest rate of growth in the world. In contrast, many countries in Latin America and Africa have known years, decades, of slow or no growth. ASEAN countries, with some exceptions, have been relatively open to the world economy. Singapore is the most fully integrated and open of all. Openness has, to date, been part of our formula for success.

Minister Hu is right, therefore, in pointing to both the developments in the world that favour our continued recovery, and other events that may de-rail that recovery. With openness comes both opportunity and vulnerability. If others do well, we are most likely to prosper. If others fail and flounder, we may well be affected. This is the nature of the open and inter-dependent world economy.

Minister Hu has pointed out some of the major trends, both the upswings and possible downsides. May I ask him to additionally consider three factors?

These factors are (1) the need to renew our regionalism; (2) the prospect of increasing economic cooperation and integration in ASEAN and East Asia; and (3) the rising price of oil.

Sir, in his Budget Statement, Dr Hu recognised the rising competition with China. He also recognised that China's rise is not all negative for us all. There are also opportunities if we find ways to complement investments and growth there. The Minister also spoke of problems in neighbouring countries and the relative strength of our economy.

In this context, may I draw him out on how the Budget might set the context for a renewed wave of regional undertakings in China and elsewhere? I ask this question particularly in the light of our experience in the Suzhou Industrial Park, and of the financial and political fluctuations in other countries during this crisis. What new ways, if any, does the Government propose to complement investments and growth overseas so that Singapore might benefit?

I would ask the Minister if it is time that we provided better schemes for our businessmen to consolidate and write off losses from their overseas ventures. Or even to enjoy lower tax on profits they may remit from overseas ventures, when they return these profits back to Singapore's economy.

After all that has happened in the crisis generally and in Suzhou particularly, we must recognise that going into China and other countries is subject to risk. Yet, we also recognise that these risks must be taken, if our economy is to go regional, global and help sustain growth in Singapore. It may therefore be a strategic step forward for the Budget to provide greater financial incentive for such risks and reward.

Sir, some who heeded the Government's call to regionalise have been badly hit by the crisis. We should assist them to renew their commitment to going regional and global. New incentives would set the right signal.

Let me turn to my second point on economic cooperation and integration in ASEAN and East Asia. Sir, the Minister's Budget Statement recognises the importance of China and Japan. Additionally, we can and should make more ties with our fellow ASEAN economies, to increase economic cooperation and integration.

Despite the crisis, positive steps have been taken. A system of financial surveillance over ASEAN and East Asian economies has begun. There may be a temptation to slacken now the worst of the crisis seems over. Yet, such a system must be continued, the vital alarm bell to signal that danger of any recurrence.

Other positive steps forward taken despite the crisis have been in the ASEAN Free Trade Area (AFTA) and ASEAN investment Area (AIA). While these steps have been promised, there seem to be some negative trends. Countries that are newer to ASEAN and the world economy and free market system, such as Vietnam, Cambodia, Laos and Myanmar, may well have doubts about opening up their economies. These concerns are often not confined to economic matters. They also relate to social, cultural and political factors.

In this context, I would ask the Finance Minister and his colleagues in Government to do more to assist our neighbours in making the necessary but sometimes daunting transitions for these countries.

Singapore is both an open economy and one of the most developed ones in the region. We can and should do more. This should not be as a bandage or charity, but to help build the expertise, capacity, infrastructure, and for us to be true partners with our neighbours. This is as much for our good in the longer term, as for theirs. It would encourage and enable neighbouring countries to undertake the right policy reforms and allow the AFTA and AIA to proceed more smoothly and quickly. I will speak more on this matter when we come to the estimates of the Ministry of Foreign Affairs.

One related and further question, which is directly under the Minister for Finance's purview, is whether the Minister will consider more generous tax exemptions for foundations and institutions in Singapore who undertake or fund development and training projects abroad, in other ASEAN and Asian countries. Our private sector and civil society can play a significant role in helping our neighbouring countries. This can be in small but significant projects such as the provision of medical care in Bintan, or assisting environmental groups in Indonesia. Tax exemptions for such worthwhile overseas projects would encourage such good works and better recognise the growing interdependence between our society and those of our neighbours.

I would also ask the Finance Minister to play his part in continuing and strengthening the new ASEAN system for financial surveillance. Indeed, we might ask the Minister to look forward to a greater system of cooperation and coordination for financial and economic matters in ASEAN and East Asia.

We might also hope that the Government will proceed with more bilateral agreements on free trade, investment, taxation and associated matters. Singapore is presently studying a number of these, including those with New Zealand and Japan. With our ASEAN partners, we are also considering an agreement between ASEAN, Australia and New Zealand. We should do all we can to proceed with these with due dispatch. This is especially given that talks in the World Trade Organisation have stalled. Perhaps other regional agreements too might be usefully explored, such as one with China.

Let me turn to my third point on the overall context. This is on rising oil prices.

Sir, it is observable that there has been a sharp rise in oil prices. This may mark a reversal in the low prices that the world has known in these past years. We will remember how oil prices hiked up by the OPEC cartel in the 1970s caused many economies to slow and stall. This particularly affected economies such as ours which are highly dependent on energy, and yet have little or (in our case) no energy resources. May I ask the Minister how he thinks this trend may affect our recovery, and what we might do to meet this possibility, as best we can?

I myself believe that much more can and should be done to encourage greater energy efficiency in Singapore. I will return to this point when I outline my thoughts on the national economy. But at this juncture, I do wish to emphasise that my call for energy efficiency is not, in this sense, premised solely on environmental and ethical concerns, that I often raised in this House. Energy efficiency, like other forms of efficiency, is primarily a concern about our competitiveness. It is a way to enhance our economic security against sudden shocks and rising energy prices that seem to be on the way.

The Singapore Economy

Sir, thus far, I have spoken about the place of Singapore and our region in the world economy. Now, allow me to turn to the place of all Singaporeans in our national setting. In doing so, I will touch on three points. The first is whether we can keep the compact of 1999; second, whether we can provide opportunities for all in the new economy; and, third, of increasing the efficiency of government.

Sir, on the first point, the crisis saw the ouster of leaders in some countries and, in others, the betrayal of trust that people gave to their governments. The role of Singapore's Government in this context is very difficult. We weathered the crisis and the Government led our recovery, and people should acknowledge the role of the Government with gratitude. Singaporeans have a strong and resilient spirit, but good governance and leadership have been greatly important for our recovery.

In this context, while the Government has done well, I believe some further explanation of the Budget Statement is important. Some may otherwise wonder if the compact between the Government and people in facing the crisis of 1999 has been met.

This relates to two facts. First, that the Government was supposed to go into deficit, but did not. Second, that the CPF cut is not yet fully reinstated, yet senior civil servants and Government leaders will have their full pay put back.

In asking for further explanations, we should acknowledge that citizens were asked to make a sacrifice in their pay, and did, and this was real. In contrast, the Minister announced a surplus, instead of a deficit. This reversed a projected $5.1 billion deficit into a surplus of $3.2 billion. This is a variance of some $8.3 billion in total.

In his statement, the Minister explained that, in part, this happy state of affairs was due to lower development project spending, and the rescheduling of some projects. This may seem prudent to some. However, the state of the economy depends on a mix of both public and private consumption. A fall in Government spending may therefore create a surplus, but at the cost of lessening overall demand.

In particular, I note that the Minister acknowledged that the construction sector remained in recession, and remains so today. In 1999, this sector contracted a severe 12%, according to the Minister's statement. May I ask him whether, if the Government has not held back its projects, part of this contraction might have been avoided and the construction sector helped? What were the main or main types of projects that were held back by Government? Equally important, how will the unexpected surplus be used? The Minister announced various schemes that add up to some $685 million, but this is well short of the full surplus of $3.2 billion.

Allow me, therefore, to propose a way of spending some of the Minister's money.

Globalisation, as I have mentioned briefly, will increase the divisions between sectors in our societies. Some sectors will prosper and others may experience a slowdown. Those with little formal training and education have less chance to participate and benefit from the new knowledge-based economy. This may strain our social cohesion and the Singaporean ideal that all must have a chance to prosper. We should do all we can to increase the capacity of everyone to participate. If not, we are in danger of breeding resentment and our own tribe of Luddites.

The Luddites, if you recall, was a movement in the early 19th century that protested against new technology by rioting and breaking the new machines. The use of violence must, of course, be condemned. But what we have to understand today is that the Luddites did not wreck machines for no purpose or because they were against progress. In most cases, it was because they were displaced by machines and given no chance to join in the benefits of the progress. We must, therefore, be inclusive in promoting progress. Thus, while some sectors, such as younger graduates and professionals or even foreign talents, may have advantages in the KBE, we must act so that no sector is completely excluded. Worker retraining, which the Government initiated, is part of that.

But I believe we would benefit from greater attempts to bring IT and other new skills to the mass of people. We should in this recognise that Government cannot provide for everyone. I therefore ask the Government to consider giving all Singaporeans a new fund for their own self-improvement. This would be open to a wide range of courses in different skills. This could range from Masters courses at the university to language instruction or to computer skills or basic education. Such educational schemes should be recognised as creating assets, just as much (if not more) than buying a house with your CPF money or upgrading flats. This would be a fitting use for the surpluses that the Government has unexpectedly generated in 1999. Perhaps this new fund might be called "EdVenture", as it is like a venture capital for education.

Allow me to close, Mr Speaker, by looking at the forward projections for the coming year. One item that stands out to me is the operating revenue of Government. This will go up by some 8.6%. In particular, I note that manpower estimates will increase by some 10.8%. That is to say, Government is costing us more, and civil servants are costing us more. Of course, good governments do not come cheap. But expensive things are not always better. Most Singaporeans like their stuff cheap but good.

The increases in operating revenues and in manpower costs are notable in that they outstrip economic growth for 1999, which was 5.4%. They are also larger than the Government's forecasts for 2000, which is between 4.5 and 6.5%. Should these types of expenses grow faster than our economy? Or should they be pegged and made sustainable?

It is not my point that we must reduce Government costs at all costs. What I am suggesting is that we should set ourselves the challenge of doing more with less - having a good government, making good government better, but for less. And I am asking the Government to try to do more with less money, people and resources of land, water, and energy. To do so, Government should aim to be competitive, transparent and efficient. This is for all resources, but especially those which Singapore has in short supply, such as energy and land.

Let me at this juncture return to my concern about energy efficiency as an illustration of this broader point. As I said earlier, oil prices have risen and may well remain high, or go higher. Government and businesses can always do nothing more than just pass on these new and higher costs to their consumers and taxpayers. Or, and this is the alternative, they can seek to be more efficient in their use.

This can be done by incentives in our Budget for the private sector. Energy efficiency can also be mandated by new regulations with higher standards. Such measures need not be at the forefront of technology and risk undermining our competitiveness. But they can be usefully benchmarked against what other countries with good records achieve. Additionally, and perhaps most importantly, Government itself can set the tone for energy and other efficiencies in its own practices and principles.

In this regard, I would hope that the Government will see fit to release all or part of its own internal interagency report on energy efficiency. At the last sitting of Parliament, the Senior Parliamentary Secretary in the Ministry of National Development, Assoc. Prof. Koo Tsai Kee, said they might do so, under certain conditions and subject to certain caveats that he did not or could not specify. I would ask the Government to consider the need for greater transparency and leadership in this important arena of efficiency and competitiveness.

This is a critical aspect of good governance. Not just as it relates to the specific example of energy efficiency, but in all aspects of Government policy making.

Sir, I will take up and develop some of the points in my cuts on the estimates for the various Ministries. I hope the Minister will consider and respond to the points that I have made here.

Mr Speaker, I support the motion.

Mr R. Sinnakaruppan (Kreta Ayere-Tanglin): Mr Speaker, Sir, thank you for allowing me to join in the debate. I am much obliged.

Sir, the Nominated MP, Mr Noris Ong, said that it has become common practice to use a single word to describe the budgets in recent years. He used Millennium Budget, Cyber Budget, Withdrawal Budget, and many other words. If I were to follow that, I would call this year's budget an "e-Budget". Delivering the millennium's first budget, Dr Hu signalled the entry of Singapore in the world's burgeoning knowledge economy. I use the alphabet "e" not to just describe the new Internet economy, but rather I use "e" as the first alphabet of some of the key points that Dr Hu has raised in his Budget Statement and the tax changes that he announced.

First, e-Budget for economic recovery. This Budget signals our region's economic recovery. That was the reason why many found that the Santa Claus, Dr Richard Hu's gift-sack was much lighter relative to last year. This has even led to some people to dismiss the Budget, very unfairly in my opinion, as a non-event. Dr Hu, in his statement, emphasised that, given the favourable external environment, and I quote: "Unless we are among the world's best, we will be relegated to playing a peripheral role in the global economy". And this could be achieved through an educated and highly skilled workforce augmented by external ("e" for external) or foreign talent, promoting technoprise or technopreneurs, and by throwing open our financial services, communications, and power sectors.

Budget 2000 commentators, like Price Waterhouse Coopers, feel that there is not much tax incentive for skilling our workforce and the job has been left very much to the Ministry of Manpower. They and others who feel that way must recognise that Manpower 21 was just launched late last year and that MOM's development expenditure has increased by a whooping 684% from $7 million last year to $52 million this year. But I agree that the skilling needs much more financing beyond the $52 million and much more attention from all quarters of Government.

Sir, let me move on to the many more "e"s of this Budget 2000.

E-budget for Government expenditure. Sir, the Budget book says that this expenditure will increase by 12.5% to nearly $29 billion this year. Whereas the Nominated MP Noris Ong, and I think Mr Simon Tay as well, pointed out that when the year is out, this 12.5% increase would really be spent and not seen as surpluses in the following year. I hope that the Government will make up for the less expenditure last year by meeting this target of 12.5% increase. Entrepreneurship has been given more boost through various incentives, particularly for non-manufacturing sectors and for foreigners who carry out their work in Singapore. For example, the employee stock options scheme (ESOP). Changes have been announced and I welcome the Government's move in this much awaited direction to reduce taxes for employees when they exercise their options. This would help both budding high-tech start-ups and established companies attract and retain both local and foreign talent. Along with this, employer's CPF restoration of another 2% is a welcome gesture though there was greater public expectation for restoration of a higher percentage, despite DPM Lee's earlier announcement about the Government's schedule of CPF restoration.

E-budget for estate duty - the exemption for residential properties will certainly facilitate many budding entrepreneurs to work from their home, as many do in the garages of their homes in the United States and Europe. Sir, some MPs who have spoken earlier had said that Government has not announced too many incentives for entrepreneurs. Against the background of $1 billion that has been set aside for promoting technopreneurship, many have expectation of the Government doing more for the entrepreneurship.

Sir, an entrepreneurship is an entrepreneur if he finds his way given the facilities that the Government can provide and the environment that the Government can provide is for the entrepreneur to see a way through to make his money to succeed in his business. Sir, the best definition of entrepreneur is perhaps given by one American magazine that I read many years ago, and they talked about the logo of an entrepreneur association in America where it had a stone sculpture where a male's body up to his waist was already sculptured and he was leaning forward with a hammer and a chisel, trying to carve his own legs and putting himself into shape. That is how perhaps an entrepreneur should be evolved. He does not know what is ahead but he is constantly evolving and trying to make use of the environment before him. And the Government's job is to provide that environment, not to do everything for the entrepreneur.

Sir, in this regard, I am happy to see the changes that the Government has made so far and it must continue to open up the facilities so that more entrepreneurs can surface in Singapore.

Sir, I would like to move on to a few other "e"s that relate to society and education. Education of the young has indeed received a significant boost. The operational and developmental expenditure for the Ministry of Education is significantly higher at 15% and 22% respectively, signalling our commitment to prepare our school-going children for a knowledge economy.

"E" for elders or senior citizens. Senior citizens will benefit through this CPF top-up and through the new Supplementary Retirement Scheme which appears good in concept to prepare Singapore for a rapidly aging population. But as Nominated MP Noris Ong pointed out, there are a number of issues there and we would have to wait and see how this will be implemented and its full tax implications.

"E" for extended families. Extended families will benefit from increased income tax concessions for their dependants who are their aged parents. Let us hope that this will be one of the additional factors in increasing the number of extended families in Singapore.

Sir, finally, almost everyone has something to gain from this year's Budget. My congratulations to Dr Hu for delivering not an exceptional or excellent Budget this year, but an efficient Budget.

Sir, now I would like to move on to talk briefly about the advent of the new global knowledge economy and its impact globally and locally, and the role of our Government in this regard. The Internet economy is rapidly changing the way of life for people the world over. New developments are not only happening every day but every morning and afternoon.

Sir, the Internet economy, through the equity, money and debt markets, has been the catalyst in the redistribution of wealth of legendary proportions. Let me relate a folklore that is familiar to all of us here: Robin Hood and his band of merry men stole from the rich to feed the poor. Over the centuries of retelling, the Robin Hood legend grew: peerless archer, noble fighter against injustice and tyranny, champion of the little guy. A hero. Thanks to the Internet revolution, we cosmopolitans live in a Robin Hood economy, where redistribution of wealth in significant proportions is taking place. It is not so much robbing the rich to pay the poor, but it is not far off. And, irony of ironies, it is the money men, the venture capitalists who play Robin Hood. Sir, I want to say that I am an advisor to one of these venture capital firms and declare my interest, if any. And the twist is that in the Robin Hood economy, everybody who is involved wins, at least thus far.

Globally, North America, Europe, Asia, Australia and South America are the key continents that are very quickly adapting themselves to the new Internet world. But let us ask ourselves where Africa features in this new era. Already, Africa is far behind the rest of the world in the industrial age. Will Africa become a victim of the digital divide and become a digital outcast? Or will there be resources and the political will amongst the African leaders, to change this sad state of affairs? One distinct advantage if the above problems can be resolved, is that the absence of legacy systems would help Africa leapfrog into the Internet technologies faster. But at this moment, I am very sceptical. This is something that the world leaders have to address.

Zooming back to Singapore, very many of our cosmopolitans and our young are the immediate and future beneficiaries of this wonderful new money world, and the new technology infrastructure. And many of us in Singapore, unfortunately, just link the many dot.com companies to the equity market and we say that this Internet economy is going to burst. I like to just use this example that BG George Yeo had used, some years ago, when he talked about pornography on the Internet. He said that we should keep the main pornographic sites out of the main streets and if someone does go through the alleys and the lorongs and get there, well, we cannot help it the way technology is.

Let me follow on his analogy and just make this point on how this Internet economy is going to move. Suppose we were in the age when Raffles founded Singapore in 1819, or thereabout, when Singapore was just a fishing village, and suppose there was no PWD, no state agency to build roads, and if everyone who had his little kampong hut, had to decide to put a road in front of his house, and some of us did more extensively and succeeded in attracting more users to the road in front of us, and we did it together with others, then we will have some roads that would become Orchard Road, others would become Shenton Way, and some others who might not have been more successful might become the small lorongs, others might do it wrongly, or in their minds, might do it for different reasons, might become the Desker Road. But whatever the case, as more and more people use a particular road, it is going to become more important and the infrastructure around it is going to develop. And that is what the technology infrastructure is all about. As more and more companies go into this, the infrastructure is going to be there. But when we link it to the equity markets, it is a different phenomenon. It is something that nobody can foretell. But the Internet technology infrastructure is here to stay.

Sir, many of the MPs from the private sector, who spoke earlier, spoke at length about what Singapore should do to move towards this direction. Personally, I think we are one of the few countries in the world where the Government has proactively done so many things to move us to, what we call, the KBE. And one of the MPs who spoke earlier said that, although Hong Kong had started later than us, we are behind because of this SingTel-C&W HKT deal. I think the deal did not come true for different reasons, and it has nothing to do with whether they were faster or working at Internet speed. I think it is much more complicated than that. To be accurate, some of us who went on a Parliamentary visit to Hong Kong last year found that Hong Kong had started almost the same time as we did. And Hong Kong is a different environment. They have entrepreneurs for more than 20-30 years and an entrepreneur culture which we are just starting. But coming back, many MPs here, with the exception of a few like Mr Simon Tay, had said that we should not just focus on the business world. Yes, we have to succeed economically. But I think we have to be inclusive of the society at large.

When I sat here on 25th February to listen attentively to Dr Richard Hu's pronouncements on the economic challenges and opportunities that we face in this Internet world, I was somewhat saddened that the important aspect of the social dimension of the digital divide was not being addressed in his fiscal policy statement. Perhaps, I thought it may not need some fiscal treatment at this point of time. I told myself that perhaps it would be the key point that I would raise in this debate. I was however pleasantly surprised when MCIT announced a few days ago that IDA will get $20 million to address the digital divide issue in Singapore. Sir, I think it is a very good start, but much more needs to be done, and not just in terms of money. Let me elaborate.

Sir, presently, the SBA has under its wings the National Internet Advisory Committee (NIAC) (in both I sit as a member of the board and committee). The SBA and NIAC promote, among other areas, the use of Internet for housewives, senior citizens and non-working people, young, school-going children as well. It has set up Project I-Senior and the Family Access Network led by Mrs Carmee Lim, retired RGS Principal, and this has gone on for about two years. This pioneer work, I would say, is excellent, very commendable and has tremendous challenges ahead.

Sir, in Singapore, I estimate that the bottom 20% of the population can be regarded as relatively poor. My fear is that the digital age may increase and accentuate this percentage and the number as our population grows. This is compounded by two factors: a rapidly ageing population and a higher computer illiteracy amongst those who are above the age of 45 years.

Sir, the point I want to make is this. Singapore is known internationally as the first country in the world to be broadband networked completely. There are sufficient political, social and economic reasons why we need to prevent a digital divide in Singapore. Can we also become the first country in the world whose population is entirely Internet ready?

To underscore the importance of computer education for adults and senior citizens, I wish to ask the Government to consider setting up a Ministerial Committee with a social focus that can coordinate a national drive in this direction. Providing money or computers is but only a first step. The human psyche, the apprehension, the fear for computers amongst the older Singaporeans need much more attention. To support this effort, a new multi-agency can be set up under the Prime Minister's Office to achieve the same. Sir, I will speak more on this when we consider the estimates under PMO.

In conclusion, Dr Hu's E-Budget 2000 signals a new age. As we move forward, let us remind ourselves of some of the axioms that we often hear and speak of. We must create a thinking people and a learning nation. We must try and maximise the potential of not just every student or undergraduate in our universities or schools, but also every citizen, young or old, skilled or unskilled, who is in the workforce, and the housewives. We must develop and maximise their potential. Let us not allow the tentacles of the digital age divide us. Let us remain one nation, one people and one Singapore for many more years to come.

Dr Ker Sin Tze (Aljunied): Mr Speaker, Sir, thank you for allowing me to participate in the Budget debate.

Sir, the Budget tabled by the Minister for Finance is a carefully crafted Budget, with emphasis placed on the welfare of the ageing citizens and the low-income families, the need to encourage innovation, creativity and enterprise and the continued liberalisation of the financial sector. The business sector welcomes the corporate income tax rate reduction from 26% to 25.5% and the retention of employers' CPF contribution rate at 10% until 1st April this year. The Minister has obviously shared the concern of businessmen that, as the economic recovery has just begun and not evenly spread, it is still important to keep business costs at a competitive level. Workers, recognising that it is crucial to help keep business costs low, continue to accept the lower employers' CPF contribution. They are somewhat compensated by rebates on HDB service and conservancy charges and rental rebates. It is therefore a Budget of balanced consideration in the sense that it tries to take care of the welfare and benefits of the low-income earners, businessmen, as well as enterprising young entrepreneurs. In terms of revenue and expenditure, it is projected to produce a surplus of $2.45 billion. As both operating and development expenditures are greater than those of the last Budget, it is relatively expansionary, which is necessary to support the recovery of the economy.

[Mr Deputy Speaker in the Chair]

4.48 pm

Dr Ker Sin Tze (Aljunied): One emphasis of the Budget is to encourage innovation, creativity and enterprise. Under this heading, the Minister has proposed removing the restrictions that residential properties must not be used for any form of business activities, which is a qualifying condition for estate duty exemption up to $9 million. The purpose is to encourage entrepreneurs who may want to work from home and to support the Technopreneur Home Office Scheme. I have, however, doubts on the effectiveness of the proposed removal of these restrictions. Technopreneurs are mostly young risk-takers who have new ideas but limited financial means. They want to work from home in order to reduce the initial start-up costs. The notion of disqualifying them for estate duty exemption as a result of using their residence as home office is probably least of their concern. The reason is that they are young and paying estate duty upon death is something very remote to them. As such, the removal of the qualifying condition is equally least of their concern and will likely fail to excite them. I therefore do not see how the proposed relaxation would support the would-be technopreneurs.

As a matter of fact, estate duty itself has long been regarded as a disincentive for greater wealth creation by individuals in today's world. The purpose of the original estate duty, which was known as death and gift taxes, was to reduce inequalities in the distribution of wealth and to prevent large estates passing from one generation to the next generation. The rationale behind is therefore social and not for revenue generation. However, the social reason to retain estate duty may no longer be valid in our present context. We do not subscribe to the philosophy that income and wealth distribution should be completely equal for individuals. In fact, we support greater rewards to individuals who work harder and contribute more to economic growth. Furthermore, in Singapore, there are not too many large estates which warrant their being broken into smaller estates. In the few cases which we may have had, the natural process of inheriting estates by a number of children will break large estates into smaller ones. This, to some extent, fulfills the aim of the estate duty legislation without the agony of a complicated administrative process.

On the revenue side, the collection amount is small and relatively insignificant. In Singapore, the revenue collected from estate duty was $45 million, out of the total revenue of $15,628 million in 1998, which was only 0.28% and was the smallest tax item. In addition, estate planning will further minimise the collectable amount of estate duty. This includes the setting up of trusts and holding companies which are effective in avoiding tax payments. But the setting up of trusts and holding companies itself is a tedious process and it involves large amounts of legal costs. Perhaps, it is timely to review the estate duty ordinance to see whether the Act should be revised further, or whether estate duty should be exempted for residential properties, irrespective of their values.

The Minister may argue that most people are not liable to pay estate duty as the exemption amount of $9 million for a residence is high. But the agony of assets being frozen for investigation and valuation is an unnecessary burden to bear. In his reply in the old Parliament Chamber on 26th November 1998, the Minister promised to consider introducing legislation to exempt small estates, and to give an answer to requests for abolishing estate duty in the present Budget. However, I have found no reference on this topic by the Minister in the Budget Statement. I would therefore be very much obliged if the Minister could share with us his thoughts on these issues.

Sir, I support the motion.

Mr Ang Mong Seng (Bukit Gombak): (In Mandarin): Mr Speaker, Sir, this year's Budget is a cautious one. It is generally acceptable by the people in Singapore. Realising that in 1997 and 1998, we faced an economic crisis, and in 1999 we were beginning to recover, my constituency leaders are quite happy with the rebates and tax exemption and income tax of 5% granted in this year's Budget. The residents will also get rebates on service and conservancy charges and rentals for their flats. On top of that, everyone above 21 years old will get a CPF top-up of $250. These tax incentives, though cannot be described as a big "hongbao", are nevertheless a good gift. For the business community, the corporate tax has been further reduced from 26% to 25.5%. It is also a breakthrough. However, on property tax, the rebate has been reduced from 50% to 25%. I would like to express my views on this item.

At present, this tax rebate was geared towards high-tax enterprises but they neglect those hawkers and some small merchants and traders. In 1994, the Government announced a scheme to sell the hawker stalls to the existing stallholders. Altogether there were 1,627 cooked food hawker/market stalls. Out of these, 299 cooked food and 189 market stalls were sold. After they have purchased their stalls, the hawkers who took the loans from the commercial banks, the repayment period is 10 years and up to a maximum of 15 years. Some stallholders purchased their stalls in 1994 on a 20-year lease. After operating for six years, they decided to quit and wanted to sell the stalls. They could not find anyone to take over because the banks were not prepared to provide the loan as the lease had only 14 years remaining. Therefore, the stallholders have no choice but to carry on with their business at the stalls. These stalls are scattered in housing estates and their customers are mainly HDB flat dwellers. The hawkers have to raise prices to cope with the high overheads and this has affected the residents there. Many stallholders told me that they had to pay $2,500 to $3,500 in property tax and the monthly payment is from $250 to $300 which is more than the rental which they were paying prior to the purchase of the stalls. They were paying rentals at $160 per month only. This is a big headache for them. This is in addition to the loan payment they have to make to the bank.

The market stallholders particularly are finding it difficult to make ends meet. Their operating hours are very short, that is, from 7 am to 10 am. So I hope that the Government can give more rebates on property tax to them. If they could get 50% rebate, it would be better, or else they should revalue their stalls and then give them more tax rebate on property tax. If the stallholders find that their burden is too heavy, this will defeat the original aim of selling the stalls to them. On the other hand, residents of HDB estates will have to pay higher prices, thereby adding to their burden. Therefore, I would urge the Minister for Finance to consider giving them special treatment on property tax.

The second point is that the clan associations have to pay quite high property tax. Singapore is a multi-racial and multi-religious society. In order to forge racial harmony, to live together and to build a harmonious society, clan associations have made tremendous contributions in this regard. Before we set up grassroots organisations and RCs, the clan associations have already done a lot to foster racial harmony between the different races in Singapore. Even today, in the midst of prosperity in Singapore, our clan associations still play a very important role. There are many clan associations in Singapore like the Lee Association, Wu Association, Tan Association and so on and so forth. All these clan associations have done a lot for their members and they have carried out various activities for their members to strengthen the cohesiveness of their members. This is beneficial to our national solidarity.

Recently, a clan association conducted a seminar to discuss their common problem of having to pay very high property tax on their premises. Property tax is levied, based on the commercial rates of the buildings. Therefore, we hope the Government will give them special treatment. Of course, if these associations make use of certain areas of the premises for other purposes, then they should be taxed according to commercial rate. But if these premises are used for their own purposes and for conducting social activities, a lower property tax should be levied on them or no tax at all. These associations' revenue depends on the management committees and members' subscriptions or from voluntary donations. However, they have to pay income tax on these donations. Therefore, the council members of these associations hope that the Government can accord them special treatment, because the activities they carry out are charitable in nature. It is not profit-making. Therefore, these revenues should not be taxed at all by the Government. I hope the Government will consider the two points that I have raised.

Sir, I would like to make use of this opportunity to congratulate our Minister for Finance and the Government for turning a projected deficit of $5.1 billion into a surplus of $3.2 billion. I would like to applaud them for this special feat. This is also a testimony to their sound management of our economy and our finances. I would like to congratulate the Minister for Finance and I hope that we will accrue more surpluses in the next financial year.

Encik Harun Bin A. Ghani (Hong Kah): (In Malay): Sir, I support the Budget tabled by the Minister for Finance. I wish to congratulate the Minister for Finance, Dr Richard Hu, on the announcement of this year's Budget Statement in which he announced several measures which I think could foster family spirit among our younger generation. I am referring to the incentives given not only to parents but also to grandparents, and at the same time foster a three tier family unit that includes children, parents and grandparents.

If we look carefully at the financial incentives given to children for maintaining their parents and grandparents, it may sound odd. It seems that these measures encourage a materialistic culture among our young generation. In fact, if our children could look after the welfare of their parents and grandparents without the financial incentives, we should be thankful, because it is something ideal that we dream of. However, in reality, it would only remain as a dream because without such financial incentives, I think it is not easy for us to encourage our young generation to shoulder the responsibilities of looking after their parents and grandparents. This, however, should be an embedded value in our young generation.

I am also glad that attention was also given to the low-income earners who could not afford or are helpless in looking after the welfare of their parents through the ElderCare Fund. This is because the low-income earners often face hardship in their life. To maintain themselves is already a problem; what more if they have to look after the welfare of their aged parents who require medical attention.

In this respect, I would like to propose that more Malay/Muslim homes for the aged be set up in one or two years' time to meet the future needs of the Malay/Muslim community. It is not my intention to encourage the young generation to place their aged parents in these homes. In fact, I feel that the addition of these homes is necessary to meet the needs in the next five or six years.

Hopefully, by encouraging more Singapore citizens to upgrade their skills and secure better jobs with higher income would lower the number of low-income earners among the Malay/Muslim community. Once this is achieved, there is no need to increase the number of homes for the aged. In addition, the proposed Supplementary Retirement Scheme (SRS) would hopefully be able to meet the needs of the retirees. However, this objective may not be achieved in 10 years' time and, as such, I feel that while waiting for a better situation in the next 10 years, the addition of one or two more homes for the aged is necessary.

Sir, according to the Monthly Digest of Statistics, it is estimated that about 15,000 Singapore citizens die annually. Their deaths are due to various diseases - old age, accidents, homicides and so on. What I wish to highlight here is the deaths caused by road accidents involving vehicles and innocent people as a result of drunken driving and deaths by accidents. We found that 200 people have died, 396 with serious injuries and over 8,500 suffered minor injuries. From the 200 people who died, we were not able to identify how many were due to drunken driving; and the fights that took place at coffeeshops, hawker centres and at homes which were all due to excessive alcohol consumption. Drug addicts who could not get drugs would indulge themselves in alcohol consumption and when they become drunk, they cause social problems by committing theft, housebreaking and outraging modesty. As such, I wonder why there is no increase in the tax on alcohol. I hope the Ministry of Finance would consider my proposal so that alcohol consumption could be reduced and our youths will find it a pinch when buying and consuming alcohol. On the other hand, this will increase the revenue of the Government from $343.1 million to possibly $500 million a year. Otherwise, alcoholism will be a way of life for our youths to show that they are "cool" and somebody. And what will happen to our youths in future when they indulge in drinking alcohol? 5.15 pm

Mdm Claire Chiang See Ngoh: Mr Deputy Speaker, Sir, in 1998, we experienced the full impact of the regional crisis and economic growth had slowed sharply to 1.5%. In 1999, the Minister in his Budget Statement cautioned another difficult year ahead. In the end, we registered a remarkable turnaround and achieved that overall growth of 5.4%. I would like to register my gratitude to the Minister and the Government for having so ably steered Singapore out of the Asian economic crisis.

Sir, the general response to the Budget 2000 is "Nothing dramatic". The dominant sentiment is this: if the business measures adopted in the 1999 Budget had yielded such a remarkable V-shaped recovery, what are the reasons for not continuing with the measures for another 12 months to allow those sectors already rebounded to reap an even higher level of growth while giving more time for weaker sectors, like the construction, financial services and businesses to get out of their recession? The decision to stop these incentives and rebates which are particularly significant to these weak sectors seems difficult to understand when we weigh it against an unexpected budget surplus of $3.2 billion in FY99, a forecast of economic growth between 4.6% and 6.5% and a budget surplus of $2.5 billion in FY2000. We need some very good explanations.

While many would agree with the Government that we need to live within our means and accumulating surpluses in order to deal with sudden downturns again, many would query how the Government balances the gains by taking back the goodies and the possible losses to the private sector which needs continuing fiscal support for just another 12 months. If these firms cannot make it for FY2000, what are the implications for employment and family well-being? Is the Government prepared to pick up these companies when they fail, or is the Government going to let them vanish, sticking by the cardinal law of the survival of the fittest and ablest? Sir, many companies do not belong to this category. Hence, we need the Government to play a stronger, supportive role.

I would like to turn to the social and community sector. While observing that the overall expenditure priorities for the social and community services account for 39.6% of the total expenditure, or an allocation of $11.5 billion, it is education, public housing, health and environment which receive a larger chunk of the allocation. These are well-deserved investment, Sir. MCD, on the other hand, receives only 5% of the sector allocation followed by MITA receiving 3%.

Although the allocation of $610 million to MCD registered a substantial increase of 38% over the last year, and within the MCD, the Elderly Development Programme benefitting an increased allocation by 55% to $12.3 million, the feeling in the community is that the Government could do more. Within the perspective of the family and community services being seen as central heartware institutions to create the level of cohesiveness for Singapore to function as a competitive economy, $610 million spent on operations, People's Association Programme and delivering social services and sports facilities to a population of 3.8 million which averages a per capita annual expenditure of $160 per head, totalling a monthly $13 per head, are clearly not over generous. I would like to know how we fare compared with other countries, if the Minister could provide the figures.

Furthermore, our ageing population will need specialised care services and personnel which are expensive to develop and sustain. Without the many helping hands from the community and the private sector, this budget allocation to MCD cannot cater to the needs of the disadvantaged families, the young, the old, the vulnerable like the disabled and the intellectually challenged.

We have many loving and willing hearts, Sir, but the community donors and volunteers are stretched. The same fund-raisers are chasing the few generous donors and the needs are forever expanding, with more and newer services required to attend to the emerging needs of a complex society. Can the Government please look into its funding principles for social and community services in particular, and respond generously to future recommendations put forward by various community agencies, not only those working on the ageing population.

There is indeed a feeling that not enough is done for restoring family wellness, not enough is committed to youth activities and interests, even less is provided for the disadvantaged and dysfunctional families with multiple social problems. As to developing research competence to help us identify new concepts and methods in organising the community, our resources and effort leave much to be desired.

The Minister will ask how much is enough and caution me that giving more to one Ministry will mean less for another equally worthy programme, that I must always assess what counts and what matters in the overall scheme of development. But I urge the Government to look at people's needs, not at cost allocation alone.

I believe that investment on social fundamentals in matters related to the family and the community is a process of enhancement intrinsically important in themselves, while serving as a significant supplement to a market mechanism which leaves many struggling behind in the development race. After all, Sir, economic growth at 5.4% a year only means progress if we use more of the money to allow families to lead the kind of lives which they have reason to value.

I agree with the Minister that MCD, like any other Ministry, must get the most out of their allotted resources by managing them well in order to achieve the desired outcome. However, community programmes that deal with dysfunctional families and youths, including eldercare programmes and counselling programmes for the abused, rape victims and violent perpetrators do not yield easily tangible and immediate outcome, and they are not easily audited and measured. This is not to say that the Ministry must not attempt to do so, but the exercise requires a tremendous amount of human and research resources. Our habitual pragmatic scrutiny of outputs and tangible outcome very often make us fail to respond with open mindedness and accept a level of "untidiness" in the community sector. Because of this nature of complexity, all the more we need to commit energy, resources, skills and time to level up services and involve community participation in developing an audit blue-print to set best practices and performance indicators. The easy part in project planning is spelling out the social objectives. It is less certain that we are able to agree on clear indicators that are understood and shared by different Ministries and the people sector. Sir, this has to be an evolving process and we need more resources to set the right directions.

Last year, I noted the decrease in budgeted development for MCD by 15.4%. This year, I am pleased to note that the development expenditure of MCD registers a 98.6% increase over FY 1999 and many community projects are in the planning. I hope the Minister for Community Development and his team will continue to heed the appeals from the community and Members of this House during the debate on the estimates and champion our causes before the Minister for Finance.

Mr Heng Chiang Meng (Cheng San): Thank you, Mr Deputy Speaker, for allowing me to join in this debate.

The budget is indeed a conservative and a prudent budget. The economy has recovered. How else could the Government finances show a turn around of $8.3 billion last year - from a projected deficit of $5.1 billion to an unexpected surplus of $3.2 billion? Yet, in spite of this unexpected sterling performance of the economy, the Minister has seen it fit to remove or reduce almost all the measures given in prior years to reduce the tax burden of taxpayers, individuals as well as corporations.

The result, as we can see, is a projected Government surplus of $2.5 billion for the coming fiscal year. Given the Finance Ministry's well-known bias of underestimating revenue and overestimating expenditure, this figure could well be much higher.

Sir, I would like to bring the attention of this House to just one item, that of corporate taxes, as an example to illustrate this. In the Budget book on page 21, the revised collection in 1999 from corporate taxes is estimated to be $6.2 billion. The projected figure for FY 2000 is estimated to be $6.75 billion, an increase of $550 million.

Let us then look at the Minister's Budget statement on Corporate Income Tax section. In it he said that the revenue loss arising from the reduction in corporate tax rate from 26% to 25.5% would amount to $140 million. In other words, a 0.5% reduction amounts to a loss of $140 million.

There is nothing wrong with this, except that we must not forget that 1999's revised collection was estimated after a rebate of 10% from a tax rate of 26%, or effectively a 2.6% rebate. This rebate has been removed from this year's budget while the loss of $140 million will only take effect from next year, as this drop of 0.5% will only take effect in the year of assessment 2001. In other words, there is a claw back of tax collections in this section to IRAS for this year resulting from the removal of the 2.6% rebate.

What would this sum be? Based on simple arithmetic and the same corporate profit base, it would amount to $728 million. This is based on 0.5% is equivalent to $140 million, and therefore 2.6% would be equivalent to $728 million.

Moreover, 1999's collection was based on the actual corporate results in 1998, a year in which most corporate profits were ravaged. On the other hand, this year's tax collection would be based on last year's corporate results. We all know, Sir, that most corporations had been reporting much improved corporate figures for last year. Thus, I would expect the taxable base for this year, which is based on last year's corporate result, to be much higher than that of Year of Assessment 1999.

Based on this, Sir, I expect the increase in the collection of corporate tax could be much higher than $728 million, yet the Budget book shows only an increase of $550 million. I am not against the Government taking a bigger bite of the expected bigger economic pie. But I question the timing of this policy. We have just recovered from a recession. Private sector wealth of individuals and corporations has been badly mauled. In the light of economic globalisation and competition, the Government has been urging the private sector to take greater risks. Sir, a most appropriate and correct call, but how can the private sector do this when, at the first sign of recovery, the Government implements measures to nip the rebuilding of such private sector wealth so necessary to provide the basis for taking greater risks?

Nevertheless, budgetary measures such as those in this year's Budget are matters of judgment and timing. Whether or not the Minister's judgment to remove or reduce the tax relief measures now is correct, we will never know. The removal of these measures is not that major in that economic growth will be visibly affected. All it means is that we will have lost some time in the global competition of being there first. Unfortunately, in today's fast-paced global market place, especially in the new technological engines of economic growth, speed and being there first is of the utmost importance.

Sir, I would have expected that after the recession the Government would use the Budget to signal a more forward-looking policy for Singapore. Unfortunately, in this year's Budget, there are few such signals. I would thus like to touch on three areas where such signals should be set.

These are: (1) Tax deduction for contributions to S21 programmes; (2) Tax deduction for venture capital; and (3) Closing the digital divide.

Sir, in S21, we have come up with a first class vision of what we, as Singaporeans, want Singapore to be. We agree that we should take a more participative role as Singaporeans; active citizenship, civil society, helping our less fortunate and less able fellow citizens, and so on and so forth. All these call for greater resources from the average Singaporeans, in terms of willingness, time, effort and money. While the Government cannot, in the short term, do much to promote greater participation in the first three areas, that is, willingness, time and effort, there is much it can do to encourage more monetary contributions from Singaporeans.

I think the Government can afford to be more generous with the treatment of tax deductions to designated institutions and projects. For example, some institutions and projects could be designated as S21 institutions and projects. Contributions to such institutions and projects could then qualify for double tax deductions. Or if this is too generous, maybe 1.5 times tax deduction.

A strong signal will then be sent to all and sundry, that is, this is the direction we want to go, and the Government will do all it can to encourage all Singaporeans towards that direction. Double tax deduction as a means to promote desired objectives is not new. It had been done before; with success, I must add. Surely, it will not be misplaced in this instance.

More importantly, Sir, those supporting such specific institutions and projects, though initially encouraged by the greater financial benefit of higher tax deductions, may begin to identify with such institutions and projects. With time, ownership and subsequent involvement then becomes that much easier.

Mr Deputy Speaker, Sir, for suggesting financial methods to encourage the attainment of the high ideals and goals embodied in S21, I know that I take on the danger of being branded as crass or gross. How can I bring in the idea of sullying S21 with Mammon? If so, I make no apologies for it. First, let us not forget that however crass the idea may be, money is a strong motivating factor. Second, we need not be so altruistic that we forgo one of the strongest motivating factors to reach our objectives. Remember that the goal is to get greater involvement and participation. Once that goal is reached, very often the reasons why one started to participate and be involved in the first place are often forgotten.

As an example, we are always fond of quoting the participation of Americans in their civil society and their financial contributions to charitable and educational causes, and how we should emulate them. But how many of us realise that one reason for their generosity is the regime of high tax rates in the United States and the tax shelters that such generosity creates for them. Does it matter what the original reasons are, when in the final analysis, the nation benefits from a more involved citizenry?

Sir, these days, we are bombarded with calls to be more entrepreneurial and to take greater risks by our leaders, in particular the Prime Minister and the Senior Minister. The Government has also done much to develop an environment which allows technopreneurial companies to start up and thrive. As a matter of interest, only in last Friday's Straits Times Forum page, the National Science and Technology Board came up with a long list of initiatives implemented by the Government.

Sir, the first point of concern addressed in this letter was that of adequate financing being crucial to the development of technopreneurship. How true! And I applaud the truism of that statement. But what I would like to add is that what the Government had done is still inadequate.

Very often, many a bright idea has died an untimely death from the lack of seed money. While there may be venture capitalists, these people would not normally finance start-up ideas. Often, they want to see more concrete evidences of potential successes than a dreamer with an idea, a burning ambition and a willingness to work 25 hours a day. Luckily for technopreneurs-to-be, before venture capitalists, there are the business angels, normally individuals who are more willing to finance dreamers with their own money.

In Singapore, we do not have enough individuals who are prepared to be angels. I would certainly like to see more business angels. With more angels, we will be able to support more idealistic budding technopreneurs. We will be able to build a critical mass of individuals having some form of financial support. This is important as creativity will come from such individuals, not from corporations.

It is here that I have a bit of disagreement with my colleague, Mr Inderjit Singh. Sir, his call for more privatisation includes clusters of funds to be managed by the private sector. If this be the case, nothing much will be changed. The rules for managing other people's money, whether by the private sector or the public sector, will be the same. One still has to be very prudent, very careful and very circumspect in decision making, because you are managing other people's money. And that is why I am suggesting the incentives for individuals. It is only when individuals are making investment decisions with their own money that they can afford to be more generous and can afford to take more risks.

So I would like to suggest that the tax treatment in this area be changed to encourage the emergence of more business angels. Under the current Venture Capital Tax Incentive Scheme, the investor must invest in approved companies and can only claim relief as and when the losses from the sale of shares of the venture company are incurred. Sir, this is certainly not enough to encourage the growth of business angels.

Instead, the Government should allow relief for such investments at the point of making the investment. Also, the need for the venture company to be approved should be scrapped. The approving process implies that EDB can spot winners and losers. I doubt very much that EDB would dare to claim that it can do so. Instead, general guidelines could be used to ensure that abuse of the scheme is minimised.

Sir, if such a scheme were to be adopted, it would bring up two other issues.

The first is that of the possible loss of too much tax revenue. After all, the scheme as proposed creates a very big tax shelter for high taxpayers. To prevent this, there could be a limit on the relief given. For example, the relief could be limited to, say, 50% of the taxable income of a taxpayer. It could also be a graduated scheme, higher percentages for those with lower taxable income to lower percentages for those with higher taxable income.

The second is that of capital gains. Our current system is based on "no deductions for investments and thus no capital gains tax on gains from investments". Allowing tax deductions for venture companies would mean that the investor stands to gain from both ends; tax relief at the point of making an investment and no capital gains tax at the end when they are successful.

My answer to this issue is: why not? After all, we are encouraging a speedier fusion into a new world and a new economy. If this scheme promotes that objective, what is the loss of some tax dollars as compared to the benefits to the economy and community of the future.

However, if the Government still cannot accept such thinking out of the box and feels an instinctive need for order and symmetry, then I suggest a choice be given to the business angel at the point of investment. And this is, "Take the tax relief option now and pay capital gains tax when your venture succeeds later. Or forgo the tax relief now and you do not have to pay capital gains tax when your venture succeeds". Since at the point of making investment it is not possible for the investor to know whether his investment is going to succeed or not, I think it will be a fair choice to make.

On digital divide, I do not have to stress the importance of this issue. Enough of our leaders had brought up this issue for all Singaporeans to know that, if not resolved, it will lay the foundation for economic, social and perhaps, even communal divisions, in the future. Even the world's superpower and the powerhouse of IT and the Internet, the United States, is concerned about the digital divide, as evidenced by President Clinton's recent State of the Union address on the subject and his budget proposals for a multibillion-dollar plan to help poor Americans and minorities get access to the Internet and make it as universal as the telephone.

Hence, I was very pleased when the Minister for Communications and Information Technology recently unveiled a $25 million plan to bridge the digital divide and help every Singaporean go online. At least that is the objective. I just hope that it would be the thin end of the wedge to seriously address this important issue. If so, I hope that the wedge will thicken very quickly for there is so much to be done.

Perhaps, if the House could bear with me, I would like to relate a story while I was with the Monetary Authority of Singapore. It was in the late 70s and personal computers were just coming into prominence. In those days IT was not known as IT, not even known as IS (Information Systems). But in those days it was known more as EDP (Electronic Data Processing), because computers were then mainly mainframes and used in the backrooms for processing voluminous data. One day, we were told that every department was to get an Apple computer for its use. The Government also implemented a scheme whereby public sector employees could obtain cheap loans to purchase personal computers. We were surprised as few of us, other than those in the Electronic Data Processing department, knew much of computers.

Later, I heard it whispered at the corridors of City Hall and Fullerton Building that the late Mr Hon Sui Sen, the Finance Minister, had personally lobbied for this programme. I heard that he was told that the staff would only play games with the computer, as few then knew how to use the personal computer. So why should the Government spend this money to put computers in the department when they would be used to play games? His retort was reportedly this: "Let them play games, as it would teach them how to be familiar with the computer. However, someone somewhere will know something and he will use the computer for improving his work. And if that happens, we will progress."

Sir, that was exactly what happened. The computer in my department was first used mainly to play games, I must say. Subsequently, somebody came out with a VisiCalc program and also other programs and we were able to use such programs to improve our work. And the rest, as I said, Sir, is history.

Sir, I am aware that today in this House there are some who knew exactly what happened then. I have no idea whether the version that I have just related is true or not. If not, Sir, I stand corrected. I hope however that I am correct, not because I am afraid of being corrected but because such stories are the stuff of legends. We must remember that the late Mr Hon was known as an extremely prudent and careful man with money, especially those belonging to the nation. Yet, for such a man to come out with such an IT plan, even if the computers were used to play games in Government offices, is, indeed, visionary. I think all of us in Singapore owe him much. I know I do, as I would have never purchased my first computer, an Apple IIe, without the encouragement of the loan. And I thank him for his part in making me a bit less computer illiterate today than what I otherwise would be.

Sir, this story is related not so much as to add to the legend of Mr Hon (though I hope that it does), but more to illustrate that visionary thinking and speedy action are needed in this area. We should be bolder, much bolder in our plans to reduce the digital divide as soon as possible.

We should aim for a 100% PC ownership in every home, similar to the goal of 100% home ownership. We should ensure cheap and fast access to the Internet for without such cheap and fast access, the computer is just a machine and not the gateway to information and the future. We should harness the assistance of the private sector through a system of tax incentives. These are but some of the ideas that I can come up with for the moment. But I am sure that the civil servants could come up with more, if given the go-ahead. Sir, more importantly, the mindset must change. We should not make investments in this area on the basis of economic returns alone. Instead, we should look at such investments from a communitarian perspective. If the digital divide persists into the future when the use of IT becomes that much more pervasive, can our community survive the divide?

In this respect, I would like the Government to reconsider its policy on the ownership of broadband electronic highways, such as those provided by cable. Cable modem access to the Internet certainly is fast. But it is not cheap. Singapore CableVision recently announced the slashing of prices for its broadband Internet access service via the cable modem. The reduced prices would be $76 per month for those who subscribe only to the broadband service. To many Singaporeans, let alone the poorer ones, this is certainly not cheap.

Sir, I am concerned that, to date, SCV has only about 8,000 subscribers to this service, including the 5,000 who were on the trial service. This means that since they opened up in December last year to all and sundry, they have only increased it by about 3,000 subscribers. However, so long as SCV continues with its high rates, there will be many who would prefer to use the much slower dial-up service, especially when some are provided free. If it were just a matter of time spent on the computer, I would not be so concerned. But we know that there would be more and more Internet services needing broadband access. If because of the high charges, many Singaporeans continue not to use the SCV broadband access, then there could be more and more Internet services denied to them.

I urge the Government to take over the ownership of such electronic highways. They are like our expressways and should be publicly owned. Internet service providers can then rent them from the Government and provide the competition so necessary to improve quality and efficiency while reducing cost to the consumer. The events in the arena of the dial-up services have shown that this can be done and would be done, if only there were competition. Moreover, with public ownership, the Government can then charge a policy-dictated price that may not necessarily be an economic price. The losses could then be subsidised from the Government's general revenues.

Mr Deputy Speaker, Sir, the IT revolution has become too important for the Government to ignore and to be treated as simply another area of development. Instead, it should be treated as an essential public service, similar to health, education, housing and security. Anything less will be to the peril of our future.

Mr Chng Hee Kok (East Coast): Mr Deputy Speaker, Sir, I rise in support of the motion standing in the name of the Finance Minister.

The world of business and government is dominated by buzz words like "e-commerce", "dot com", "portals", "eyeball" and "Internet economy". But what is Internet economy or sometimes loosely termed as the new economy or digital economy? The truth is there is no universally accepted definition for "Internet economy". Economists have trouble defining what is the new economy, let alone understand it. Some used the term to describe the combination of the business of multi-billion dollar Internet companies like Yahoo and American On-Line as well as the effects that the Internet has had and continues to have on businesses. Since the driving force on the Internet is the US, some have gone so far as to suggest that the Internet economy is also the US economy.

What you know for certain is that Internet technologies and applications have grown more rapidly in the last few years than any other singular event in human history and the cumulative effect of technology and business transactions alone done through the Internet is the backbone of the new economy and this has a profound effect not only on our lives but governments all over the world. This new economy has continued to surpass all expectations and confounded experts and no lesser a person than even Alan Greenspan, Chairman of the Federal Reserve of the US.

Sir, the Internet economy indicators, an on-going study of the Internet at the University of Texas funded by CISCO System, seek to quantify the Internet economy. It reported that the industry generated US$300 billion annually, grew 68% from the first quarter of 1998 to the first quarter of 1999, accounted for 2.3 million jobs and is expected to reach US$507 billion by the end of last year.

Another report from the Commerce Department in the US measured the "digital economy" which they defined as the value of the hardware and software produced by the computer and telecommunications industries. It was reported that the digital economy accounted for 8% of America's GDP, a very remarkable figure considering how new this economy is.

Sir, these are mind-boggling numbers. There will be about 250-300 million global users of the Internet by the end of this year and still growing with some 65,000 new users every day. Some 2,000 new secure web sites (secure web sites are those set up by businesses) are added each month, reflecting the creation of new companies and shifting of existing businesses to the Internet. All these impressive growth numbers must mean that it is imperative that we understand the truly incredible impact the Internet will have on the global economy and Singapore's role in this new paradigm. The Internet economy is an economic phenomenon never seen before in human history.

The value of the Internet economy, or transactions done through the Internet, is experiencing exponential growth. Research company, International Data Corporation (IDC), reported that commerce on the Internet is expected to top US$1 trillion by the year 2003 on the World Wide Web. It is small wonder that businesses are moving their capital spending into technology, not just among technology companies, but also those in other mature industries.

In Asia, a GS Asia Web report recently released by Goldman Sachs concluded that Internet users in Asia will grow by a compound annual growth rate of 40% bringing the total number of Net users to 64 million by the year 2003. This is about twice the growth rate of the US. Extrapolating the e-commerce market in Asia is set to be worth US$32 billion by 2003.

Here, in Singapore, the Gartner Group Incorporated reported that Singapore spent US$484 million in business-to-business (B to B) transactions and US$101 million in business-to-consumer (B to C) transactions last year. They forecasted that by the year 2003, B to B and B to C will total US$11 billion.

Sir, with these huge numbers, Government's e-commerce plans and promotion of venture capital activities, many more companies are expected to jump on the e-commerce bandwagon. If these statistics are anything to go by, I think the Internet economy has arrived.

Leaving aside the social issues, the profound changes brought about by the Internet economy raises two key issues for the Government. Sir, the first relates to how this new economy affects Government planning and growth forecasting and how this will affect areas, such as manpower, economic modelling, accounting for productivity improvements and the effect of wealth creation through high-tech start-ups and stock market listings. The second issue posed by this new economy is the potential loss in Government revenue due to losses in GST and direct taxation. Underlining this of course is the question of how are we prepared for the new economy.

The explosion of the technology era will have implication on the manpower planning of countries hot on the heels of this new economy. The US, for instance, has experienced changes in its employment and wage growth patterns as a result of the rapid pace of adoption of new technology.

Workers on the job suffer from a lingering sense of insecurity. Technology has led to higher productivity, allowing firms to meet rising demand with the same number of workers. The remarkable growth of the US economy, coupled with low inflation in the last decade, is attributed to the high productivity contributed by technology and the Internet. The rapid increase in B to B and B to C e-commerce has also made redundant a whole host of middlemen from car salesmen to ticketing agents and stock brokers to insurance agents. The result is also a mismatch of skills and labour shortage. There is a shortage of workers in the new economy which cannot be filled by workers who are made redundant as their skills are not what is required. This must be a frightening prospect not only for workers who are not well versed with technology, but for Government planners as well.

In almost every industry it touches, the Internet changes the role of the middlemen. In a world in which the Internet can connect everyone, it is possible for businesses to have direct relationships with their clientele and not rely on distributors. For example, dramatic changes have also occurred in the brokerage business. Although middlemen remain in the on-line investing world, they charge more and provide fewer services than their off-line rivals. Moreover, the web gives individuals the ability to buy stocks without using a broker at all. Why transact on-line? In most cases, it is a matter of convenience besides lower cost. It is also easier to trade stocks on-line than it is to trade over the phone.

Sir, the not too distant future, the distinction between on-line and off-line financial services will fade away. Banks without Internet web sites will be as rare as banks without ATMs. Lenders without a web presence will find themselves losing market share. Insurers incapable of providing services over the Internet will shrivel. Eventually, not giving customers the ability to check balances, originate loans, buy insurance, or otherwise manage their financial lives over the Internet will cost institutions business.

In no time, employers and employees will have little alternative but to seek training and retraining opportunities. This will have great impact on the Government's role and response in training and retraining and the role must increase in importance in the areas of skills development and manpower planning.

Sir, Macroeconomic Advisers, a St Louis-based economic consultancy, in September last year, reported evidence of technology's impact on productivity. A new analysis shows that about half of the growth in non-farm businesses in US can be explained by the benefits of computer-related advances and investments. The study found that productivity growth has recently been more than double the average since 1973 and will remain over 2% for the next decade if current technology-investment trends continue. In the study by University of Texas, Internet firms are impressively productive. The average revenue per Internet economy worker is US$250,000, or 65%, higher than employees in the industrial economy. The automotive industry, for example, in the US earns US$160,000 in revenue per employee versus US$250,000 for an Internet employee. The US Department of Commerce forecasted last year that almost half of the American workforce will be employed by information technology-related companies by the year 2006. It also reported that from 1990 to 1997, digital economy companies achieved a "robust" 10.4% average growth rate in value added each year per worker. And these IT workers earned more than non-IT workers. Finally, just last month, the US Labour Department said worker productivity rose at a 5% annual rate during the fourth quarter of 1999, pushing the average growth in productivity for all of 1999 to 2.9%, the best the US has seen since 1992. Internet and technology play a vital role in wealth creation and productivity in the US, as confirmed by these figures. This must have a significant impact on Singapore as well. I think the Government should take this into account in our economic modelling, especially in the area of forecasting. Are we working on too conservative a basis if the United States example is anything to go by and whether our budgeting process needs some form of an overhaul?

The second important issue is the impact of the new economy on Government revenues. This new economy where the transactions in the provision of goods and services are carried out between faceless individuals and faceless corporations domiciled in any corner of the world will pose the biggest challenge in the collection of Government revenue. In the area of direct taxation, it makes perfect good sense for a corporation to locate the source of the supply of goods in a tax haven just to get themselves out of the reach of the tax man. This is one potential large drain on Government coffers.

The other relates to indirect taxation. How does the Government intend to tax every little parcel or packet that goes into a consumer home? What about non-physical goods? Another one of the key e-commerce tax policy issues is the increasing conversion of tangible goods into intangible goods. At issue are products like computer software, music, movies, videos and even books that can be turned into digital code and downloaded by customers anywhere in the world. For example, currently if a British-based firm downloads a book into a customer's computer, this will be considered a service and will be taxed at the United Kingdom's rate of 17.5%. But if this same company is based in the British Channel Islands or outside the EU, it will avoid this 17.5% tax completely. In Europe, tax officials have proposed that products sold in digital form will be taxed on the rate in the customer's country. For example, companies operating in the United States would have to collect taxes on all sales to European customers. In other words, there has to be a reciprocal agreement between nations for the collection and remittance of tax on out-of-state basis. Sir, my question to the Minister is: where does Singapore, a relatively small country and small economy, fit into this global scheme?

Traditional retailers have gone on-line in droves. "Click and mortar", denoting a combination of on-line sales and traditional retailing, went from an unknown phrase in the beginning of 1999 to a New Yorker headline - making event by the end of last year. There is barely a traditional retailer left that does not now accept the Internet as a critical weapon in its retail arsenal. A recent report in the United States estimated that current tax revenue losses are less than 1% of total tax revenue collected. However, losses in the immediate future could grow to 2% to 4%. State and local governments also fear growth in Internet commerce will drain sales in shopping malls and traditional retailers, causing a drop in sales tax. In Singapore, the impact is no less profound. The Gartner Group has projected that by the year 2003, as I mentioned earlier, transactions through the Internet will total some US$11 billion. Translated at 3% is a total loss in GST collection of no less than US$330 million.

The United States government has a headstart in this area but has yet to arrive at Internet rules that will curb tax losses as a result of sales transactions over the Internet. It is important for other nations to speed up the process of setting Internet rules especially when e-commerce is still small enough and tax distortions are modest. On the home front in Singapore, it is pertinent to ask the Government or the Minister on how it intends to address this critical issue.

The new economy will pose tremendous challenges for Government as its working is not well-understood and, yet at the same time, has immediate impact. We have to grapple with lots of unknowns which are affecting our lives in a profound manner. My question is: can the Government face up to the challenge?

Mr Ahmad Mohd Magad (Pasir Ris): Mr Deputy Speaker, Sir, thank you for permitting me to join in the debate.

Sir, since many Members before me have spoken on the details of the Budget, allow me to touch on two topics which I feel passionately about as they concern the future well-being of Singapore and then comment on some specific areas of taxation which I would like the Finance Minister to give attention to.

The first is on foreign talent. I recall how I listened in awe last year when Senior Minister, Mr Lee Kuan Yew, spoke during the Singapore 21 debate about the criticality of bringing in top talent into Singapore because we are now on a global stage, whether we like it or not. It really drove home to me that as a pre-requisite for us to play in the global arena, we must have talents, whether local or foreign, who are of global standard. I am convinced more than ever now as I too, in my experience in working for a multi-national corporation, am compelled to look for talent beyond the shores of Singapore to carry out higher value-added activities where locals do not have the expertise.

The proverb "time and tide waits for no man" is more relevant now than ever. Technology has enabled many things never thought possible in the past and is changing at lightning speed with each passing day. It is therefore highly essential that we intensify the inflow of talent which could help us narrow the gap and catch up with those at the leading edge of technology.

The analogy used by Senior Minister of how ATMs had dramatically affected traditional banking services in the recent past and how this is about to change again with the advent of the smartcard, is a clear demonstration of how technology is driving and forcing change in the banking industry, and how it will make many of the services offered by banks currently irrelevant in the not-too-distant future. It is this "change or risk becoming irrelevant" phenomenon that has forced the restructuring of our banks and banking system and the pursuit of top talents like John Olds and Alex Au.

Sir, I am encouraged to note that the Trade and Industry Minister, BG George Yeo gave a convincing perspective of what foreign talent had done for Singapore in the Sunday Times yesterday and why we need them. I think it is important that this subject be raised periodically. Although by and large, Singaporeans generally accept foreign talent, many still feel that foreign talents deprive them of some of the good jobs which should have been theirs.

But to accelerate our KBE positioning and ensure Singapore's successful transition to a full-fledged knowledge-based economy, we must be able to bring in the top high-end talent. Evidently, the competition for such talent is also intense as we are meeting head-on with Silicon Valley and the other top places in the world - the Himalayan peaks, as Minister George Yeo puts it.

Sir, in addition to offering tip-top infrastructure and an increasingly intellectual environment, I believe incentives matter a lot to this group of people. I know of many cases where attractive stock options made the difference between losing or winning a top candidate.

If pioneer status or tax holiday has been a successful tool to lure MNCs to invest in Singapore, we must look at such top individuals as intellectual capital, especially in the context of KBE positioning. It is therefore imperative that we find ways and means to incentivise higher level intellectual capital to attract them to Singapore and stay here for a period of time.

Apart from the corporations doing their part to retain talent, the Government should consider making the tax environment for such people more attractive. As an example, we could consider a progressive tax rebate system, say, a 30% rebate on their tax paid in the first year is given in their fourth year of residence in Singapore, 40% in the fifth year and so on, subject to a maximum cap.

If necessary, such incentives could be confined to high-level talents who truly contribute and make a difference for Singapore, just as pioneer status is not extended to every MNC putting in their money here. The criteria for qualification must be stringent.

Sir, for talent attraction in general, I know much has already been done to position Singapore as a hub for international talent. The setting up of the Kowloon Club for Hongkongers, for example, provides a sense of comfort and relief for new arrivals from Hong Kong to turn to and help them quickly integrate into Singapore society. The same should also quickly be done for others, such as Chinese nationals and Indian foreign talents, if this is not already in place.

One of the frequent complaints I often hear from foreigners living here is the lack of space and recreational facilities. Hence, the NTUC's recent initiative in building a $22 million theme park in Pasir Ris and the repositioning of Sentosa as a day and night tourist and recreational destination are encouraging. I know for a fact that Caucasians enjoy weekend getaways. Hence, it would also help to freely disseminate information about weekend packages such as escapades to the Riau Islands or Tioman, these places being just a couple of hours away.

I applaud the exemption of the 90% granted to royalties for innovations and inventions in a bid to attract and encourage foreign talent to create new products in Singapore. The new tax deductible Special Retirement Scheme for foreigners is an initiative in the right direction to enable them to reduce their tax burdens.

Sir, I feel there is no better way though to attract top talent here than to create an abundance of success stories as evidenced by Silicon Valley and the Hshinchu's Science-based park in Taiwan. We all must be familiar with the saying, "success breeds success." Doing all this and more will help to accelerate the creation of success stories which will in turn help bring in the talent we need.

The second topic is my concern about our youth's world readiness. I can still vividly recall the headline of a Straits Times report less than two weeks ago which states "A wake-up call for Singapore youths." In spite of the financial crisis afflicting Singapore recently, it is apparent that our youths are shielded by their parents and, as the report noted, are stuck in a comfort zone where they saw no necessity to keep themselves abreast of the impact of globalisation and the borderless economy. Our young people saw not much of a need to seize opportunities in an open economy where information, products and people move freely across national borders. They seem to be obsessed with the feeling that just because Singapore is tops in many areas, there was little scope for them to learn from others.

I see this, Sir, as a dangerous trend which needs to be given urgent attention. Such negative attitude and narrow-mindedness among our youths can only spell disaster for Singapore's future, if not quickly corrected and given the right perspective to them.

Although the idea of a Ministry of Youth has been suggested as unnecessary by Deputy Prime Minister, BG Lee Hsien Loong, it is imperative that the Government focuses attention to this looming problem by setting up a body within an appropriate Ministry to tackle the issue. Perhaps, the Singapore International Foundation could also be charged with the responsibility to design overseas attachment and internship programmes for a wider cross-section of our youths to make them understand that there is much more to just material success and help equip them with a more balanced perspective of how they see the world.

I come now to the specific tax areas. I would like to first draw attention to the Finance Minister's segment of his speech on the new economy where he cited the important need to "adopt a global mindset, innovate and advance with global trends, or risk being rendered redundant". He went on to say that "unless we are among the world's best, we will be relegated to playing a peripheral role in the global economy."

While I am glad that some enhancements were announced to support the technopreneurship drive, such as the estate duty exemption on residential properties used for business activities, it is my hope to see the Employee Stock Option Scheme (ESOP) creatively enhanced when it is announced in May this year, which, hopefully, will trigger many more high-tech start-ups. Apart from motivating local investors to be more adventurous to put in their money in start-up ventures, it will also help to bring us closer to a Silicon Valley atmosphere where talent from every nook and corner of the world flock, hoping to strike it rich through stock options.

Technopreneurial ventures involve high risks. As such, it would augur well for the Government to send a strong signal that it is prepared to participate through incentives which would promote and motivate such ventures.

Next, I would like to take issue on group taxation, which has been raised by several Members today and in the past. This is where I feel we continue to fall short in comparison to the advanced economies in the world.

Mr Heng Chiang Meng, the Member for Cheng San GRC, and Dr Wang Kai Yuen, the Member for Bukit Timah, have argued convincingly in last year's budget statement debate of the important need for us to seriously consider this move in the context of our rapid shift to a modern and knowledge-based economy. This, coupled with the effect of globalisation and more liberalised measures initiated by the international community aimed at converting the world into one monstrous marketplace, and with many of our companies now plugged to this marketplace, is making our territorial principle of taxation more and more irrelevant, and the absence of group taxation felt stronger than ever. I sincerely hope that the Minister for Finance will review this in the interest of keeping pace with global trends and maintaining our relevance in the business world.

While it is heartening to note a half percentage point reduction on corporate tax, the gap for taxes on individuals is widening to 21/2%. To prevent a trend of more individuals corporatising themselves to reap the benefit of lower corporate tax rate, I would urge the Finance Minister to also look into this.

Another area which I think is in need of review is tax relief for children. With our declining total fertility rate, which currently stands at less than 1.5, we have to find ways to increase birth rates and incentivise couples to have more children and bigger nuclear families. In spite of the special tax rebates of $20,000 extended for two to four-child families to set off against income tax, this has proven to be an insufficient motivator for married couples to bear more children. Singaporean couples want to give the best for every child they bear and because of this high expectation they have set for themselves, it pushes up the cost of bringing up children.

In the interest of increasing the number of Singaporeans and arresting our declining fertility rate, I would urge the Minister to consider increasing the tax relief for children as a motivator for Singaporeans to have more children.

In conclusion, our challenge is for Singapore to continually differentiate ourselves from the rest of the world by finding ways and means to creatively harness and add value to both our hard and soft infrastructures that we have painstakingly built. The secret of Singapore's success has not been that we were just responsive to the ever changing economic and political landscapes but always anticipating the changes ahead. We need to always keep it this way.

With that, Sir, I support the motion.

Mr Ong Ah Heng (Nee Soon Central): (In Mandarin): Mr Deputy Speaker, Sir, I rise to speak in support of the latest Government Budget. I am particularly pleased with the $250 top-up of workers' CPF ordinary accounts and the rebates for rentals and HDB conservancy and service charges. These benefit workers and their families directly and will be especially useful for those in the low income group. Other Singaporeans and those in the low income group have also accepted the 10% cut from the employer's CPF contribution and wage cuts last year to pull Singapore out of the recession. It is painful for those earning low salaries to accept the cuts, but their sacrifices have not been in vain. It helped companies to cut cost and saved many jobs.

Last year, the number of retrenched workers fell to 14,600, about half the figure of the previous year. But we must not forget that less than half of Singaporeans above the age of 40 have secondary and higher education. They were born before 1960. At that time, we were living under the colonial rule. We grew up in poverty. There was no opportunity for us to learn English or to go to the secondary school. Therefore, this group of people did not receive good education. If this group of more than 800,000 people, or 42% of our total workforce, could not upgrade their skills because of linguistic problems, they are likely to lose their jobs. Many do not have computers at home or at work and are practically IT-illiterate. They can easily be replaced by younger and more computer-savvy employees who are cheaper to hire and are more trainable. If these older folks lose their jobs, they will have no income to support themselves and their families. They will also lose medical and other benefits provided by their previous employers.

The $250 CPF top-up in the new Budget is a good way for the Government to tell these Singaporean workers that this is good news for them. It is a good way for the Government to tell them that it cares for them and appreciate their sacrifices during the recent recession. It is also a good idea for the Government to make these top-ups whenever there is a surplus in the annual Budget. Because of their low income, many workers do not pay income tax and therefore do not enjoy tax reliefs. With all these kind gestures on the part of the Government, it will be easier for the Government to convince them to accept wage cuts if there is another recession in future.

Sir, there are other ways to reach out to the hearts and minds of the rank and file workers. Many of them would want to know when they can get back the full 10% cut in CPF contributions by employers. The first restoration of 2% will be made on 1st April this year. Will the next instalment be made next year if the economy grows by 4.5%-6.5% this year, as expected by the Government? If the growth is sustained in this way, how long will it take for the Government to restore the full 10% that was cut?

The Government can also provide more funds to step up skills upgrading for those with low education and skills. Perhaps in the years to come, when there is a budget surplus, the Government could explore the idea of having a similar $250 CPF top-up but in a skills upgrading account instead, to encourage our workers to use this fund to upgrade their skills. The Government can also consider giving more funds to Community Development Councils and town councils to help retrenched workers and their families.

Sir, I would also urge the Government to revise certain labour laws to allow trade unions to represent casual, contract or part-time workers who are paid by the companies on a project-by-project basis. Tougher economic competition will force companies to downsize their workers to cut cost. This trend will grow in future and those without the skills needed in the labour market may be forced to become casual or part-time workers. They will move from one project to another without getting CPF contributions paid by the employers. When they retire, they will have no CPF or medical savings to take care of their old age requirements.

Singapore is marching into the 21st century. It will be a different Singapore from that in the past century. With technology advances and the Internet revolution, many existing jobs and skills will become redundant. But, at the same time, new jobs requiring new knowledge and skills will be created. As such, it will be unavoidable that the wage gap between the IT literates and those with lower education and skills will widen. Besides urging workers to change their mindsets to one of life-long learning in order to surf on the wave of changes, I wonder whether there are any other plans to help those lower skilled workers adapt to these changes. I think it is timely for the Government to study these implications and to make extra effort to help these lower income earners keep pace with the change. In short, this is to help them increase their incomes so that they can enjoy a better standard of living. Simply put, the Government should think of ways to help the low income workers so that they will also be able to ride on the trend and to enjoy a higher standard of living. 6.30 pm

Dr Teo Ho Pin (Sembawang): Mr Deputy Speaker, Sir, I rise in support of the motion as proposed by the Finance Minister. The Budget for Financial Year 2000 is indeed prudent and cautious. Despite the difficult year in 1999, the Singapore economy has made a quick recovery to achieve a 5.4% growth and have a budget surplus of about $3.2 billion. As highlighted by the Finance Minister, the financial crisis is largely behind us.

The $3.2 billion budget surplus has raised expectations. As a result, both the individuals and business community are disappointed when not much rebates and tax incentives are proposed in the Year 2000 Budget. Many had expected the Finance Minister to continue last year's rebates and tax incentives for one more year. This would have helped more firms to recover and more individuals to ride out of the crisis faster.

Sir, to address the concerns of individuals and the business community, I would like to make the following suggestions for the Finance Minister to consider.

Special CPF Top-up grant

As highlighted by the Finance Minister, the 10-percentage point cut in employer's CPF contribution and wage restraint in 1999 have made a significant difference in increasing our cost competitiveness. Thus, the sacrifices made by workers have indeed helped firms to turn around and contributed to the growth of our economy. In view of this, I feel that more rebates should be accorded to our workers to recognise their efforts in helping to revive the economy.

The proposed special CPF top-up grant of $250 in the Ordinary Account is a token sum as compared to the total amount of CPF contribution loss suffered by the workers. Let me illustrate the computation of this CPF loss. Based on the Department of Statistics' household survey conducted in 1995, the median monthly household income is $3,135. A 10% employer's CPF cut will result in the loss of CPF contribution of $3,762. Thus, the $250 special CPF top-up grant only accounts for 6.6% of this loss.

As we have a budget surplus of $3.2 billion, I would urge the Finance Minister to be more generous and grant a higher CPF top-up grant of $1,000 for individuals. To further ensure that this top-up grant will benefit individuals more effectively, we should allow CPF holders to decide which account they would like to top up in the CPF such as Ordinary, Special, Medisave or the Supplementary Retirement Scheme account.

Individual tax rebate

Sir, the Finance Minister has highlighted that not all industries are out of the woods yet. In particular, the construction business and financial sectors are still under performing. Similarly, not all Singaporeans are out of the woods from the financial crisis. There are some who still face difficulty in finding jobs, servicing their mortgages and paying for their living expenses. Although the Government has implemented various measures to assist these Singaporeans, there are some who still need financial assistance to overcome the financial crisis.

Those who have lost jobs experienced a drastic drop in their household income and may need time to retrain and find other suitable jobs. During this transition period, their families undergo a difficult period of financial hardship. In many cases, their children's studies and welfare are badly affected.

I would propose that more incentives or subsidies be given to those who make efforts to retrain and upgrade their skills. Besides training grant, incentives such as CPF top-up, or service and conservancy or utilities rebates can be used to alleviate the financial burden of these workers and facilitate their upgrading efforts. Without strong support from the Government, these workers will find it difficult to prioritise between family survival and skills upgrading. In addition, more grants should be given to the CDCs or the CCCs to provide a safety net for these affected individuals.

Development expenditure

The construction sector is an industry that is closely related to many other industries due to its range of products and services. Its downturn has affected many industries and the jobs of many Singaporeans. I welcome the increase in development expenditure by 21.1% to $12.9 billion. This will provide a boost to the construction industry. But, a significant proportion of this expenditure is on physical infrastructure development such as Jurong island development, reclamation of Changi East, 5-year sewerage programme, MRT and LRT system.

Many of these projects are complex and large in contract value. The scope and nature of these projects is also limited to very few building trades such as excavation, concrete and steel works. As such, these projects may not provide much impetus to boost the construction industry. Local contractors and suppliers may not benefit from such development expenditure.

Therefore, I would urge the Finance Minister to consider increasing the budget for more building projects such as MUP, IUP, upgrading of existing schools, construction of new schools and upgrading of sports complexes. As stated in the Budget, only $188 million and $80 million are allocated for MUP and IUP respectively this year. 6,420 flats are projected to undergo MUP while 13,026 flats will start IUP.

Since the implementation of MUP and IUP, many HDB residents have enjoyed the benefits of having a better living environment. As these programmes are funded when there is a budget surplus, we should expedite these programmes so that more residents living in older estates can have their living environment improved earlier. Similarly, the Selective En-Bloc Redevelopment Scheme should be expedited so as to maximise land use and rejuvenate older housing estates. We should also consider upgrading the public infrastructure and amenities in private estates.

The proposed Ministry of Community Development and Sports has plans to make Singapore a sporting nation. To achieve this goal, we should also invest in the sports infrastructure in our living environment. Many old sports complexes and swimming pools must be rejuvenated to provide a wider range of facilities. New sports facilities must be developed to encourage Singaporeans to take up sports and maintain healthy lifestyles. Therefore, it is necessary for the Government to develop an upgrading programme for sports complexes and swimming pools.

IT infrastructure upgrading grant

The impact of IT on businesses has surfaced new concerns on the suitability of building design of existing buildings. Many commercial and industrial buildings are not designed to incorporate IT technologies. As a result, companies may incur high cost or loss in efficiency when they implement IT in their existing business premises. Productive time of workers may be wasted due to the incompatibility of building design and IT infrastructure of the company.

As reported in the Straits Times today, some buildings can have as much as two tonnes of unclaimed copper in the buildings due to the change of tenants and frequent rewiring of communication lines. This will not only increase the cost of maintenance but also the efficiency of the communications system in the buildings. Therefore, in order to maximise the potential of IT, companies must be encouraged to upgrade their business premises to house IT technologies appropriately. Proper facilities planning must be incorporated to ensure that building design can facilitate business processes or workflows in an IT working environment. This will not only improve the morale of the workers but also increase the productivity of our workforce.

Thus, I would urge the Finance Minister to consider providing an IT infrastructure upgrading grant for building owners or companies that invest in IT infrastructure to increase their productivity and competitiveness.

CPF housing grant

I welcome the tax changes to encourage Singaporeans to plan prudently for their retirement needs and encourage greater family cohesiveness. To further encourage families to stay together or close to each other, I propose that we extend our present CPF housing grant for HDB first-timers to include all Singaporeans who choose to purchase flats near their parents in the resale market. Our housing policy can also be revised to allow HDB owners within the requisite 5 years' occupation period to move near their parents. But measures must be taken to ensure that such relocation is bona fide and fair.

Sir, the Home Ownership Policy in Singapore has resulted in the rapid nuclearisation of families over the years. The progressive development of New Towns and our Flat Allocation Policy has also caused many members of families to be located in different parts of Singapore. To address the rapid widespread of family nuclearisation, it is necessary for the Government to relook into its housing policy. More flexibility must be adopted in our housing policy to encourage families to live close to one another within a community. This will provide much impetus in encouraging Singaporeans to age in-situ within the community.

To cope with our fast ageing population, it is also necessary to provide elderly friendly infrastructure within the community. Many existing housing estates are not seamless and not entirely elderly friendly. For example, some external staircases are steep and have no railings, ramps are not provided or are inconveniently located in some areas, not many vehicle drop-off points are available near housing blocks, and there is a general lack of communal spaces and facilities for the elderly.

Although the Town Councils and Citizens' Consultative Committees have been improving the housing estates, limited funding is available to spearhead these initiatives to make the towns more elderly friendly. Thus, I hope the Finance Minister can increase the allocated budget of $51 million for Community Improvement Projects. In this way, the CCCs and the Town Councils can work together to undertake more improvement projects for the benefit of our senior citizens.

World class companies

IT and globalisation have indeed put immense pressure for companies in Singapore to increase their capabilities and competitiveness. To face these challenges, the Committee on Singapore's Competitiveness has recommended that we need to build up a stable of our own world class companies with core competencies, which can compete effectively in the global economy. Unfortunately, this year's budget does not provide any specific boost to nurture our own potential world class companies. Although there are various existing schemes in EDB and PSB to help local companies, more support is needed to expand these schemes so that more local firms can be nurtured to achieve world class standards.

Therefore, it is timely for the Government to re-examine these schemes and set appropriate benchmarks to measure the success of these schemes. The various approving authorities must be given more mandate to take more risks to assist local companies' ventures. In addition, we should provide more flexibility and easier access for such companies to obtain grant or financing to strengthen their core capabilities.

Companies that produce global products should be given special tax incentives to venture into the global market. The Government can also provide more support to help these potential world class companies market and brand their products or services globally.

To further assist these firms to attract and retain talented staff, companies must be given more tax incentives to package their remuneration system. For example, we should allow personal tax exemption for staff benefits such as car, housing, club, etc. To be able to attract world class talent, we must offer world class remuneration packages. I believe the Government can play a significant role to facilitate the recruitment of world class talent in Singapore. This will increase the chances of success in producing world class companies in Singapore. 6.43 pm

Mr Chay Wai Chuen (Tanjong Pagar): Thank you, Mr Deputy Speaker, Sir, for allowing me to speak.

I would like to speak in support of the motion in the name of the Minister for Finance. After a long day where my parliamentary colleagues have given so much of the bird's eye and fish eye view of things in this budget, I would just like to focus on one particular topic, ie, the Supplementary Retirement Scheme (SRS). The Minister intends to initiate some tax changes in order to encourage Singaporeans to save more prudently for their needs after retirement, and to encourage greater family cohesiveness, particularly in view of the Inter-Ministerial Committee on Ageing Population Report.

This "complementary private sector system" is to encourage individuals to contribute to a private fund such as under the "Supplementary Retirement Scheme". It is proposed that the SRS will be accorded tax deductions at the time of contribution, but the tax being payable only when the savings are withdrawn. The Minister said that the percentage cap based on the salary will be determined. In view of this prospective ageing population, and the higher dependency ratio that we are going to face in the next 10 years, I urge the Minister to consider immediately giving some leeway to taxpayers who would also like to save under the SRS for their aged parents who may be either working or retired.

Many Singaporeans retired on very small retirement savings because our country was quite poor in its initial stages of our economic development, and the country went through a very dramatic growth era, from ground zero within one generation. Just now, my parliamentary colleague Mr Ong Ah Heng from the NTUC has just given an example of how we have a huge group, 40% of our labour force, of 800,000 workers without Secondary Four education. This group of people at that time did not have this opportunity, because we were under a colonial administration, as he had aptly put it. And because of this, their earning capacity and income stream all through their life were quite low. So even if we had a CPF scheme during the period when they were working for the last 20 to 30 years, the amount saved is quite small for these workers.

A SRS Scheme for aged parents, with an appropriate tax offset, ought to be incorporated. The Minister may reply that there is already in existence an allowance for aged parents supported by a taxpaying son or daughter. But this tax relief is only limited to one taxpaying son or daughter. He may also say that there is now already a Minimum Sum top-up to the CPF.

First, I support my colleague, Dr Wang Kai Yuen's suggestion to raise this Minimum Sum top-up to $60,000 for all. But I am more concerned also with extending this SRS scheme to aged parents as well. I believe this is quite an urgent task. The sooner we do this the better because it takes time for some reasonable accumulation of savings to be effectively useful. It makes possible a kind of inter-generational transfer of income with some tax incentive by the Government. I hope we do not have to wait for another five or 10 years to discover that the Minimum Sum top-up is not enough.

I hope the Minister will seriously look into the widening of the SRS scheme now to allow taxpayers with income to transfer some savings to their aged parents through such a scheme. They should get full tax offset on this, up to some generous cap, and I mean generous, bearing in mind the longer lifespan of people in the next 10 to 20 years. We need to do this now as soon as possible. Although we have our CPF scheme for many years, the truth is that many Singaporeans will not be fully prepared for their retirement.

The tax relief the Minister offers now will pay off in lessening the burden of a large number of such aged who are inadequately funded for retirement. A positive step now will add to building a cohesive bond between the Government and the family.

Mr Deputy Speaker, Sir, I support the motion.

Assoc. Prof. Low Seow Chay (Chua Chu Kang): (In Mandarin): Mr Deputy Speaker, Sir, many people told me that the Budget this year is not exciting at all. It is not surprising because this Budget was pronounced after the series of supplementary measures announced last year. It is now the time to adjust to new conditions. Some measures which were necessary last year would not be necessary this year. So there should be a period of adjustment.

The measures abolished were not many. The 10% corporate tax rebate has been replaced by 0.5% reduction in corporate tax. The exemption of property tax for properties under development was withdrawn. These two big measures show that the Government is quite optimistic about the recovery of our economy. The Minister also mentioned that the construction industry is still in the doldrums. However, I feel that the reduction of the tax rebate on developments from 55% to 25% happened too soon. The construction industry has a share of 10% in our GDP. The long term negative growth of this industry would affect quite a lot of people. Many people in this industry are facing bankruptcy and becoming insolvent. If the Government does not do anything to help the construction industry, this industry will take a much longer time to revive. To withdraw the property tax exemption for the property under development will have negative impact on the construction industry. We should make use of these measures to stimulate the property sector so that they can be restored to their former prosperity.

The reduction of corporate tax from 26% to 25.5% would imply that there will be some adjustments in personal income tax in future. Right now the 5% rebate in income tax is more preferred. However, I feel that there should be an adjustment in the personal income tax rate so that there should not be too big a difference between corporate tax rate and personal income tax rate.

There are many things which merit our support. In the allocation of funds for MCD, there is an increase of 38% which shows that the Government is concerned about the building up of social cohesiveness as proposed in the President's Address. The proposed Supplementary Retirement Scheme is a good suggestion. The increase in the tax reduction for the aged parents and the top-up for the parents' CPF show that the Government has taken note of the problems of an ageing population in our society. I think families are the best places to look after the aged parents. And the big increase in other social and community funding also shows that the Government pays attention to the personal relationship between the people and the harmonious relationship between the different communities. This will also strengthen other social amenities like homes for the aged, childcare centres and other measures. This will alleviate the problems of working mothers and the problems of aged parents who need people to look after them. Therefore, the increased funding for MCD will help to raise the quality of life and the cohesiveness of the society.

The Budget encourages young people and foster the spirit of entrepreneurship. The measures such as the reduction in estate duties and tax exemption for royalty for intellectual properties are positive measures for encouraging entrepreneurship. However, on the other hand, there is this scheme called the employee stock option scheme. The tax levied on this scheme, I think, is not very appropriate. We should understand that the capital gain from the acquisition of shares is not taxable. Generally, a stock option scheme is aimed at retaining employees so that they have a stake in the company in order to motivate them to work better and longer hours for the company. After they have opted for the shares, there is an appreciation in the share values. Why should they be taxed on the gains of the shares which they are allocated? These shares allocated to the employees will have certain conditions attached. For example, the value of the shares will be based on the market value at the time of announcement. And there is a limit in the period before they can take out the shares. If the gains from these shares are taxable, they will have to sell their shares to pay for their income tax. This will defeat the purpose of the employee stock option scheme, and the employees will suffer certain losses because it may not be the right time to sell their shares.

Many young entrepreneurs have many ways to make money but they are short of funds. Therefore, through this stock option scheme, the young entrepreneurs could acquire a substantial portion of the share in the company where his idea is implemented. The benefits accrued are the same as those shareholders who founded the company. To levy taxes on the shares under the stock option scheme will be contradictory to the aim of the scheme in promoting entrepreneurship. I hope the authorities will take note of this. I personally do not agree to the levying of tax on the stocks under this scheme.

Like the Budget last year, the Budget benefits many Singaporeans, especially those who are in the lower income group. In this tax package, those who are above 21 years old will be given $250 CPF top-up. This is a very good measure to make them feel that the people of Singapore have a stake in our economic prosperity. Through various tax rebates, for example, in the case of 4-roomers, they will get a minimum of $683 as rebates and top-up. For those earning higher income they would be getting as much as $1,138 in the form of rebates and top up. Many Singaporeans benefit from this Budget. I support the motion.

Dr Lily Neo (Kreta Ayer-Tanglin): Mr Deputy Speaker, Sir, I stand to urge the Ministry of Finance help chart the future work of the Ministry of Health in a new direction and for the better of healthcare in Singapore. It is a known fact that the right allocation of funds will determine the advancement of certain desired outcome. Sir, the new direction I would like the Ministry of Health to go in this new millennium calls for a greater integration of the public and private medical sectors in Singapore. This is far removed from the type of integration that we have been stressing on - the vertical integration between primary through to tertiary services and facilities all within the public sector only. What we need to look into is the lateral integration, say, between the polyclinics and the private general practices, between specialists in restructured hospitals and those in private practice and between restructured and private hospitals, etc.

I do contend that there is already a little integration in our health system at the moment. The Health Ministry allows private doctors to come back as visiting consultants to teach and to impart experiences to the younger doctors. A set of scheme under the Ministry of Health has specialists providing services in hospital departments that are short in such expertise. The Health Ministry taps expertise from private sectors with the setting up of specialist centres. Among doctors, collaboration for complicated procedures, such as open heart surgery or liver transplant, is common and fairly routine. There is, however, a distinct and disturbing divide between the private and public medical sectors in Singapore. And, Sir, this divide is and will always be a dilemma for healthcare here. BG George Yeo, when he was Minister for Health, supported the notion for greater integration of the public and private sectors. Integrate these two sectors and we may even achieve global recognition as being one of the best.

Staying on with BG George Yeo, he mentioned that he had visited the Mayo Clinic at Rochester in Minnesota. He noted that Rochester was a small town of less than 100,000 inhabitants, in the middle of nowhere and has beastly cold winter four to five months a year. But it has the most wonderful medical facilities in the whole world. And because it serves the rich and famous from around the world, the people and Rochester enjoy a quality of healthcare not possible for any other prairie town of 100,000 in America or in the world. He said that in the same way, if we were able to establish Singapore as a "Mayo Clinic in South East Asia", then all of us who happen to live in Singapore will enjoy a quality of medical care far surpassing what a population of three million would otherwise deserve. Singapore will be a "Mayo Clinic in South East Asia", Mr Deputy Speaker, Sir, and the way towards achieving this is through the integration of our public and private medical sectors.

There must be a change of direction towards integration rather than maintaining division. Singapore is a small country with a small population; we must derive our strength through unity. We must remove the unnecessary waste of energy on competing and bickering amongst ourselves. Our energy should be used to put all our resources to maximal use. In the past, the Government's policy has been to rely on competition and market forces to keep health cost down. Sir, we need a mindset change now; these are different times. We must look at things globally and we are doing in so many aspects of our forward planning. Our healthcare plans should be included in this overture and I am suggesting that we quickly do away with the divide between the public and private sectors of our healthcare system.

Mr Deputy Speaker, Sir, I would like to give ten reasons to emphasise the importance of integrating the public and private medical sectors in Singapore. I am sorry I have to hold you back, my colleagues.

(1) Singapore is a small country; an integrated system will lead to maximisation of potential in the medical arena.

(2) The public and private sectors should work together to plan facilities more efficiently. Integration will reduce duplication of facilities, in terms of expensive equipment such as the gamma knife, etc, in the two sectors. Sir, there is certainly no necessity for duplication of facilities in certain highly specialised fields of medicine where the patient pool in the country is limited.

(3) It is more sensible to maximise the use of our healthcare personnel. For instance, the experts in the very specialised fields like liver transplants should be allowed to operate in both sectors because there is really not a sufficient pool of patients from our population of three million to support these areas in the divide of the two sectors. Another example is to make the private practitioners look after a portion of the "subsidy patients" and ease the load in the polyclinics and specialist outpatient clinics.

(4) Patients will stand to benefit from integration of the two sectors because there will be more equitable availability of quality care. The costs will be better contained and the wait times will be less lengthy.

(5) Both private and public sectors could work together to develop Singapore into a Regional Medical Hub. Mr Deputy Speaker, Sir, the two sectors should not be in conflict but should be in synergism, or Singapore will lose the leading edge over the neighbouring countries. As it is, many overseas patients are now finding Penang to be a very good alternative place to seek medical treatment in lieu of Singapore.

(6) Integration will restrain the exodus of specialists from the public to the private sectors, especially during good economic times. This will prevent uneven spread of talent. This will also bring earnings of doctors in both sectors more comparable with one another and stem one of the major reasons for the outflow of doctors to the private sector.

(7) Training of young doctors will get a boost from the active participation of private doctors, both general practitioners and specialists. Sir, there are many private practitioners who love teaching and are, indeed, very good at it. Training young doctors should therefore be seen as a national concern, involving doctors from both sectors, as it is a "very specialised, time-consuming and expensive" exercise.

(8) Doctors can learn from each other when more collaborative work becomes possible through integration. They will learn when they work together and get to see and treat more complicated cases that they may not otherwise meet individually. This will further fine-tune the skills of our doctors, and thus get closer towards our aim of being a regional medical hub.

(9) With the healthcare system integrated, both doctors and patients will benefit. Specialists from both sectors can be called in to treat local and foreign patients, especially in areas of super-specialisation. Super-specialists will then get more patients to hone and improve their skills. Patients, whether local or foreign, will benefit because they will get to be treated by the best in each field and from a wider base of doctors and specialists.

(10) Our talent pool is unnecessarily segregated and restricted in their respective positions in the two sectors. Many doctors will have the chance for research work and teaching as well as to have a private practice if their more dispensable roles can be shared out amongst more colleagues. The private practitioners, in the present system, can lighten the workload of Government doctors if allowed to work in the public sector as visiting consultants, treat subsidised patients and impart their skills to the younger doctors.

Mr Deputy Speaker, Sir, we should look at some of the basic steps that must be adopted to bring about integration as follows:

(1) Unless the Government is serious about integration of the public and private sectors and actively promote it, all efforts in this ideology will not come about. The Government, therefore, must be even handed in all aspects of its handling of the private and the public sectors. It should be concerned about the well-being of the private sector also.

(2) Government must be seen to be committed towards bringing about this change. The appropriate funding and incentives provided by the Finance Ministry will be a good start. The correct directives must also come down from the Ministry of Health to all public medical sector and private medical sector.

(3) There must be a paradigm shift of mindset of all doctors in Singapore to work as one in synergism and not in competition, to aim to become a regional medical hub for the good of the country and the people. Without this basic shift in mindset, even all the favourable areas in our present healthcare system will sadly go to waste.

(4) Many schemes must be structured properly by the Ministry of Health. For example, the visiting consultant scheme must be structured by an objective panel so as to optimise the benefits. Prime Minister Goh did suggest previously that this scheme should be enhanced and called on more private specialists to contribute their services to Government hospitals as visiting consultants. At the moment, this scheme cannot be enhanced because it lacks the directive from the Ministry of Health. Private doctors have to depend on friendship and courtesy of their colleagues in public hospitals to be invited as visiting consultants. Some feel redundant and unwelcome even after being offered visiting consultant posts. To succeed, this scheme must be structured, with the appointments made by a panel from the Ministry, and a clear programme drawn up to optimise the visiting consultants' time in public hospitals.

(5) Fuller cooperation by the private sector must be forthcoming, for example, to accredit Government specialists as consultants to private hospitals. Government doctors could be allowed to work in primary healthcare set-ups such as general practice clinics. In other words, let us evolve a system where the cross-borders between public and private sectors are less distinct.

Mr Deputy Speaker, Sir, this new directive, if adopted, will bring medical healthcare in Singapore to even greater heights. This opportunity to maximise our present medical healthcare system should be harnessed quickly and fully. I therefore beseech our Government to proceed immediately for greater integration of the public and private medical sectors in Singapore. 7.15 pm

Mr Chew Heng Ching (East Coast): Sir, like many other citizens, I am very pleased with Singapore's V-shaped economic recovery and proud of the way in which Singaporeans have banded together, accepted cuts in CPF and faced global competition by adjusting to increasing liberalisation of key sectors of our economy. We have taken the Asian economic crisis by its horns and rode the tidal waves in the last three years, coming up stronger, as the sterling economic results presented before us by the Minister have exemplified. I would like first to thank and commend the Minister and the Government for the skilful steering of our economy as we emerge from the wood of the crisis.

Sir, as we enter into the new millennium, the Minister has rightly pointed out that the terms of reference for global economic competition have altered significantly. Globalisation and the onslaught of technological advancement have altered the way markets operate and the nature of doing business altogether. We do indeed need to innovate and advance with global trends or risk being rendered redundant.

Traditional brick and mortar enterprises are being replaced daily by virtual dot.com businesses. Indeed, the first two months of the new millennium saw the Dow Jones falling 17% from its peak in a rather short period of time, while the technology heavy NASDAQ doubling since September 1999 and seems to rise irrespective of whether there is any intervention in the money markets via interest rates by the FED. What this boils down to in essence is that there is a clear diversion of capital to the new technologies, the new methods of doing business or the new era of competition that lies before us.

In this regard, I would like to express my concerns whether the Budget caters enough to enable Singapore to embark on the genesis of this knowledge-based economy of the future. My concern transcends beyond the simple allocation of a budget for IT across the Ministries. It is essentially whether we have provided enough across the entire budgetary system and framework, to incentivise, to motivate and to support a strategy of the new knowledge economy.

The Government has indeed tried to position Singapore for these new challenges. I note that there have been concerted efforts to roll out IT education programmes in our schools and to "wire" Singapore up. The NSTB is also in receipt of development expenditure for financing and administering R&D projects in addition to the various schemes already in place to co-support IT start-ups. Its recent launch of the portal for technopreneurs in Singapore to facilitate and support budding dot.com companies is also a step in the right direction.

Fiscal incentives in the budget for innovation, as well as the estate duty exemption extended to support the Technopreneur Home Office Scheme, are all encouraging signs that the Government is positioning Singapore for the new age. However, this begs the question of whether more can be done in the shortest possible time as we quickly reposition ourselves to face the KBE.

First, at the macro level, through belt tightening and the cost of restructuring, which was felt by many at the individual job loss level, Singapore has been able to run budget surpluses in the last two financial years, to the tune of $4.2 billion and the Government has rightly decided to pass a portion back to Singaporeans via a $250 CPF top-up. I wonder whether part of this surplus could be passed on to Singaporeans to get them to prepare for the knowledge-based economy.

Sir, it may sound radical at this juncture but we may need to be courageous as we enter the brave new world ahead. The Communications and IT Ministry has recently announced a $25 million scheme to finance IT courses. This would, as a start, underline the commitment and the fundamental strategic direction that the Government has for Singapore to compete in the new environment. This programme would be a basic enabler to ensure that the vast majority of our workforce or every single family is IT equipped and can then start to embrace and take full advantage of the KBE. It is indeed a laudable move. However, I believe the $25 million, averaged over a workforce of 1.5 million Singaporeans works out to $16 per person, may not be enough.

As a start, I would like to propose that perhaps a matching amount for the CPF top-up of $250 per person be channelled through the CDC to co-fund IT courses or even basic hardware purchases like PCs by families as part of the life-long learning initiatives. Furthermore, I would propose that the Minister consider a scheme whereby we devote some 10-15% of our annual budget surpluses to be ploughed back into the economy through the CDC to upgrade and to prepare our population for the KBE.

This is more substantial than the mere $25 million earmarked by the Ministry of Communications and IT. This programme would help ensure that the vast majority of our workforce or even every single household is IT equipped and can then start to embrace and take full advantage of the global KBE. This method of involving the CDCs and the community groups is also consistent with our aim of encouraging ownership and self-reliance, in keeping with the objectives of Singapore 21, and would go a significant step to reach out to our families and communities to influence their mindset and culture. This is especially applicable to the middle-aged and older generations, a vast number of whom still have an innate fear of technology and have felt left behind by the fast changing world.

The second area of concern is the comparatively few firm initiatives to support the entrepreneurial or technopreneurial society that we envisage for the future. The Minister has emphasised that the review for the ESOP scheme would be completed in May this year. We recognise the importance of how stock options are essential to start-ups and mature corporations in this new environment to recruit, motivate and retain top talent. Indeed, equity ownership is the key to the development of a vibrant technopreneurial environment in Silicon Valley and other high-tech nodes elsewhere in the world.

Sir, time is of the essence in respect of creating a technopreneurial society. Hence, I would urge the Minister to consider hastening the process as this tax review on the ESOP scheme has been on-going in Singapore for a number of years now, whilst other countries such as the United Kingdom and Japan have gone ahead and revised their policies.

In addition, to improve on our modest first step which was to enhance the tax treatment of ESOP by deferring the tax payable by up to five years announced last year, I would like to suggest a bolder extension. To really make the tax treatment for ESOP scheme more favourable than cash payments, perhaps an easy to administer scheme would be to charge all income derived from share options exercised and sold at a flat rate of 3%. This could be a spur to allow companies to incentivise their employees and partners in enterprise, and is also in line with our attempt to encourage basic wage flexibility as well as a more risk-taking culture.

Similarly on fiscal policies, we note that many younger generation IT savvy potential entrepreneurs are lacking in funds to support their good ideas. While there are various schemes in place at the NSTB, we still have a large number of successful Singapore technopreneurs obtaining funding from angel investors in Singapore. May I further suggest that the Minister consider tax incentives for these angel investors, such as the ability to offset venture investment losses in such hi-tech start-ups against their personal income tax, as a catalyst to encourage more risk-taking by our people and to spur the private sector growth for angel investments.

Sir, as part of the knowledge-based economy of the future, there are employment trends in the United States showing an increasing growth of part-time and contract jobs. These are created as a result of the outsourcing of many aspects of a traditional firm, from project work, supply chain management, IT to human resource management. Firms are becoming more lean and mean and efficient to compete effectively. This trend is not isolated and the model is applicable to the KBE of the future. Indeed, there are already signs in Singapore that our companies are adopting such methods to stay nimble and competitive.

The upshot to this trend is that permanent work or full-time employment is on the decline and that self-employment and part-time work are on the increase. This increased incidence of flexi-work is consistent with a KBE and should be supported especially in the light of increasing deregulation of our services sector.

However, there are implications that we have to cater for. We have to encourage individuals to be more self-reliant and responsible for their own well-being since the era of life-long employment is on the decline. I am glad that the Minister has announced the introduction of a Supplementary Retirement Scheme (SRS) which would allow Singaporeans to contribute voluntarily over and above their CPF savings which would be accorded tax deductions at the time of contribution. However, I would urge the Minister to consider extending the SRS in two areas.

Firstly, the percentage cap for tax deductibility for employees' CPF contributions could be set at a higher level so that employees have greater flexibility to maximise their long-term interest via the CPF. Secondly, to encourage the greater use of CPF accounts and ancillary benefits, I suggest an equivalent scheme be extended to the self-employed and those who are employed on non-CPF schemes, particularly those part-timers and contract workers, to also contribute to the CPF in such like manner. In the KBE that Singapore is transforming itself into, there would be a greater number of self-employed, contract staff as well as home-based entrepreneurs and technopreneurs who would benefit from this measure. This would enable the Government to encourage more personal responsibilities and less reliance on the state as we move forward.

In addition, with the trends in new forms of work and employment, I would suggest that the Government encourage Singaporeans to take up private insurance. The tax deduction for life insurance premiums is currently limited for most individuals who have regular CPF contributions. To encourage greater self-dependency and personal responsibilities, the Government should consider lifting this cap and allow Singaporeans to use their CPF to buy health, education and other forms of life insurance.

Finally, Sir, a critical aspect to the success of Singapore in the new globally competitive IT intensive future is to influence the culture and mindset of Singaporeans. We have to change our traditional expectations of what working life or what a job is like. We have to become less risk-averse, more entrepreneurial and more IT enabled. Some of these aspects are already enshrined in Singapore 21 goals, where we should leverage on the strengths of family and the community and not merely let loose unbridled individualism. I am glad that the Minister has continued to extend fiscal incentives that are supportive of the family. However, in conclusion, I urge the Minister to consider my suggestions to encourage greater contributions to CPF, and to use the channel of the CDCs and other community organisations to distribute some of our budget surpluses to enable Singaporeans and the community at large to benefit and to contribute to the successful KBE of Singapore.

Sir, I support the motion.