ANNUAL BUDGET STATEMENT

Order read for Resumption of Debate on Question [25th February 2000],

"That Parliament approves the financial policy of the Government for the financial year 1st April, 2000 to 31st March, 2001." - [Minister for Finance].

Mr J. B. Jeyaretnam (Non-Constituency Member): Sir, do we have a quorum here?

Mr Speaker: Are you asking for a quorum?

Mr Jeyaretnam: I thought a quorum is 20 Members or something. I am wondering whether we have a quorum.

Mr Speaker: There is a process for finding out. If you are not insisting on that process, I propose to proceed.

Question again proposed.

The Senior Parliamentary Secretary to the Minister for Foreign Affairs (Mr Zainul Abidin Rasheed): Mr Speaker Sir, thank you for allowing me to participate in the debate on the Budget Statement. I rise in support of the motion in the name of the Minister for Finance, Dr Richard Hu.

Sir, much has already been said on how to make our economy strong and competitive. After all, the Budget is about the economics of governing Singapore.

While Mr Inderjit Singh's magic of doing business through the Internet is fascinating, I am glad that Mr Sinnakaruppan has reminded us of the concerns about the digital divide.

It is in this context that I find Dr Hu ending his remarks on the Budget Statement with a sober reminder about the importance of social cohesion as interesting, if not telling. I quote:

"Most important of all, we have to work on preserving our social cohesion, without which we will be much weaker as a nation in weathering a future crisis."

Perhaps a coincidence, or perhaps to buttress the point, the Straits Times released, a day after Budget Day, survey results on ethnic relations which say a lot about our vulnerabilities as a multi-racial and multi-religious society.

No, Sir, I would not bore you with more rhetorics about why we must not get complacent about race relations and multi-racial harmony, but suffice to say that those survey findings should serve as a wake up call for us that all is not well when it comes to our social cohesion.

Yes, Sir, I can see the progress we have made. But there is still a lot of ground to be covered before we can really say that we are truly race and colour blind. The survey results proved this.

Perhaps the survey results could have been more positive if it were carried out in better times, when Singapore-Malaysia relations were warmer. The letter by a Malaysian Malay, Malik Tahir, published in the Straits Times, looking at Malaysia-Singapore relations from the point of view of the so-called abang-adik, or big brother and small brother, and ethnic Malay-Chinese angle, would not help. So with the May 1997 anti-Chinese riots in Indonesia and the off and on Christian-Muslim killings in Maluku.

Thus, all the more we need to continue to work hard at improving race relations in Singapore. Whether it is a question of promoting understanding and even more difficult, to build better trust, something that will take a longer time to achieve, we have to soldier on.

Allow me to share with you a conversation I had with my son, an officer in the army. He was of course appalled at the survey results. He was saddened that about 60% believed that there was a need to check the background of a Malay officer before putting him in an important position in the SAF. He protested pointedly - I quote: "Put yourself in the position where you are putting your best foot forward, you are all hearts and soul to serve the SAF and Singapore, how would you feel about such survey findings?" - when responding to the survey finding about the question of whether to trust the Malays in times of war with a Malay/Muslim country.

He comforted himself by saying that perhaps the survey could be seen academically. "What matters", he said, "are practical situations." He was confident that his men, whom he served NS with, would feel differently. Having trained and served together under NS would have made that difference. He feels that whatever the feelings shown in the survey, primordial or otherwise, we must continue to develop better bonding and better trust.

Sir, I share that sentiment. We have no choice. When we believe in our Singapore, we have to soldier on with better bonding. We must continue to work hard at nurturing better understanding and trust. That may sound rhetorical, but there is no other way. We all know, of course, that slogans and speeches are not enough. Each one of us has got the responsibility and a role to play. Let us spread the gospel of harmonious living as wide as possible.

Mr Speaker, Sir, in developing Singapore, Dr Hu said in his Budget Speech that the challenge is for us "to differentiate ourselves by finding creative ways to add value to our infrastructure."

Dr Hu cited the development of Jurong Island as one example of that creativity. He said, "Amalgamated from seven offshore islands, Jurong Island is to become a world-class integrated chemical hub, the first of its kind in the region." Such is also our challenge for social cohesion. Let us "amalgamate" our different races together, wherever possible, into one main Singapore race. There is definitely more room for better racial and social chemistry.

Dr Hu went on to say that Jurong Island, "Through clustering and sharing of common facilities, it will generate synergistic linkages across a wide spectrum of petrochemical industries." He said, "For example, the provision of centralised logistics and common corridors for material flows will significantly reduce feedstock transportation and handling cost."

We should try to transplant those same concepts in forging multi-racial harmony. We will need to see a greater sharing of common efforts that will not only generate synergy but also open new highways of opportunities for the different ethnic groups to integrate. This way, we will be able to reduce the constant heartaches that every so often show their ugly heads. The political cost of racial discord could also be avoided.

In the same vein of the formation of JurongIsland.com, mentioned by Dr Hu in his Budget Statement, let us build HarmonyIsland.com, either under the Prime Minister's Office or the Ministry of Community Development, to help us open a new corridor to a more harmonious living in our Singapore. Let this HarmonyIsland.com be far more meaningful than the commercial Orchard.com, for it will encompass the spirit of Chinatown.com, Geylang.com, LittleIndia.com and even Katong.com. And, in short, making the true spirit of multi-racial Singapore come to life through the magic of Internet and IT.

We should apply the same zeal and creativity that we often exercise for our economic achievements to our effort at ensuring racial and religious harmony.

The Malay/Muslim community recognises the dangers of a possible digital divide. They have embarked on a KBE movement launched by the Prime Minister last December to help the community equip itself with the right skills, in order to play its part in competitive and global Singapore. Obviously, this is just a beginning, a modest start. More will have to be done.

The Malay/Muslim organisations will have to speed up its momentum in this area, work in tandem with national programmes and Government agencies to keep abreast with the demands of the digital race. Government Ministries and agencies too should help complement and supplement the efforts by the Malay/Muslim community towards this end.

While the community continues to work hard to tackle its lingering problems in education and socio-economic realms, neither the community nor Singapore can afford another divide to emerge from the digital era.

Mr Speaker, Sir, I trust Dr Hu will say "yes" to HarmonyIsland.com, to help promote better racial harmony in Singapore and alleviate the potential divide.

Sir, I support the motion.

Mr Tay Beng Chuan (Nominated Member): (In Mandarin): Mr Speaker, Sir, on behalf of the business community in Singapore, I would like to thank the Government for its able leadership in strongly advocating the tripartism of the labour, management and the Government to adopt the cost-cutting package to deal with the Asian financial crisis, enabling Singapore's economy to recover steadily last year and achieving a 5.4% growth for the whole year.

Sir, after having gone through this financial crisis, I deeply appreciate the spiritual strength of tripartism of labour, management and the Government which is a pre-requisite for Singapore's economy to develop and remain stable in the face of chaos. We must carry forward this spirit of tripartism at all costs. In view of this, I must present for discussion in this House the views of the business community on the way the Government dealt with the cost-cutting package and the huge budget surplus achieved last year, with the hope that the Government would continue to conform to the wishes of the people and adopt appropriate measures to enhance the business community's confidence in the labour-management-Government tripartite strategy.

Sir, because of the economic recovery in FY 1999, we were able to turn deficits into surplus, enabling most workers to retain their jobs and many enterprises to survive. It can be said to be happiness all round. However, many Singaporeans told me that the Government could be said to be the biggest winner in the financial bumper harvest. According to the Finance Minister, last year's revenue from COEs and income tax was much more than predicted. On the other hand, tender prices for the Government's development projects were substantially lower. At the same time, the Government had also shelved some of the less important development plans, thereby saving some hefty sums of expenditure for the Government. As such, not only has the Government not injected the $5.1 billion as promised into the economy, but it received a bumper surplus of $3.2 billion instead.

From the business community's point of view, the surplus obtained by the Government on this occasion could not help but give people the feeling of "robbing Peter to pay Paul". Those in the construction industry are particularly unhappy. Because of the serious impact of the financial crisis, coupled with intense competition, building contractors had to resort to bidding below cost for the limited contracts offered by the Government, in order to survive and to retain their staff and workers, much to the benefit of the Government.

The big and small building contractors in Singapore could be said to be in a sorry plight in the process of dealing with the impact of the financial storm. They had not only to try and save the industry which seemed unable to recover after a setback, through self-sacrifice, but also to try their best to keep the rice-bowls of their employees. This is something that warrants our attention. Moreover, the construction industry has all along been an important link in our economy, and cannot be neglected. As such, I would urge the Government to bring forward as soon as possible the development projects which it had shelved so that the construction industry can restore its vitality earlier and catch up with the other sectors of our economy on the road to recovery.

Sir, in actual fact, the difference between the $3.2 billion FY 1999 budget surplus achieved and the $5.1 billion budget deficit predicted was really tremendous. This is incredible! Many Singaporeans could not help asking: Has the Government been over cautious in formulating and implementing the cost-cutting package introduced by the Government to help the people tide over the financial crisis? Or was it because the Government had been half-hearted in its efforts, resulting in it being unable to produce better and more comprehensive results? Perhaps the Government was not practising what it preached when it advocated the tripartism of labour, management and Government. Furthermore, is the Government planning to conduct a full review on the manner in which it formulates the annual Budget to avoid a repetition of such a huge gap in the estimates which sends the wrong signal to the business community and causes the business community to lose faith in the Government's economic strategies?

Sir, generally, enterprises must have rich financial resources to survive, develop and undertake risks involved with exploiting innovative business. At this time when our economy has just recovered from the recession and the situation of our neighbouring economies is still not certain, most enterprises would need to accumulate more reserves from their operating surpluses for contingency use, just like any government. However, it is regrettable that our Government seems to be in a great hurry to withdraw the 10% rebate on corporate tax from this year's Budget. At the same time, the property tax rebate on industrial properties is reduced from 55% to 25%. Although the Government announced a reduction of 0.5 percentage point in the corporate tax rate to 25.5%, this will not take effect until next year. Generally, the people will find such lack of generosity difficult to accept. No wonder some businessmen are now asking: "Is the Government sincere in wanting to share the happiness and bitterness with the business community? Why is the Government not sharing the fruits of the economic recovery with them in line with the spirit of tripartism?"

Sir, as we are strongly encouraging our businessmen to be adventurous in opening up new markets and developing new products, we should appreciate that these businessmen are in dire need of more surpluses and capital to back them up in order to accept the challenges. As such, I hope that the Government would further reduce more taxes to enable our enterprises to enhance their competitiveness, and strive for more operating surpluses and accumulate enough capital to develop their business. In this respect, I would urge the Government to grant our local enterprises, particularly the newly established SMEs, special tax concessions, such as allowing them reliefs from their taxable income, similar to the personal reliefs in individual income tax. Alternatively, the SMEs could be allowed to pay their income tax on a progressive scale to alleviate their tax burden.

Sir, I commend the Government for allocating funds to the Medifund, the ElderCare Fund, and the top-up of $250 to the ordinary accounts of the CPF members, so that our people would get to share as much as $685 million from the budget surplus of YA1999. However, compared to the $3.2 billion surplus, this amount is still relatively small. Perhaps, the Government would consider allocating some funds from the surplus to finance the various industrial and commercial organisations so that they could conduct various skills upgrading activities and training programmes for workers in the various trades and industries.

Sir, we notice that in the new fiscal year, the Government will be allocating $3.3 billion to the public service for manpower expenditure, an increase of as high as 10.8%. Yet, the Government is forecasting an economic growth of only 4.5% to 6.5% for this year. As we all know, any increase in salaries in the public sector would bring about a vicious cycle in the other sectors of the economy, resulting in an unconstrained escalation in wage cost in Singapore. Now, the private sector is trying to exercise wage restraint to cut down business cost, but the public sector persists in its argument of having to attract talents and keeps on making substantial upward adjustments to wages. Is this not contrary to the cooperative spirit of our tripartism? As such, I would urge the Government to exercise extreme caution whenever it raises the salaries in the public sector, to avoid accelerated escalation in business cost and the burden on the taxpayers.

Sir, the Budget for the new century is of utmost importance to our development. It is the motivating force to move us into the knowledge-based economy. I am very pleased with the Government for all its efforts in this aspect. However, we must always take note that in this globalised economy and era of information technology, we are bound to face some rapidly changing situations. I hope that the Government will continue with its style of adopting appropriately to changes and conforming to the wishes of the people. Whenever necessary, the Government should be resolute in making prompt decisions and adopt suitable measures to lead the people in the spirit of our tripatism to counter the challenges of the new century and move into the knowledge-based economy for our future development.

Dr Ong Chit Chung (Bukit Timah): Mr Speaker, Sir, thank you for allowing me to join in the debate.

First and foremost, Sir, we must thank and congratulate our Government for its outstanding management and leadership in pulling Singapore out of its worst economic crisis that hit this region.

No one, Sir, can deny that the Government has done well indeed for the people and for the country. In comparison with other governments, this Government stands up and stands tall, as one with the vision, the courage and the determination to see us through to the promised land, and to bring us to new heights in the new economy.

Nevertheless, we were surprised the other day to hear from the Minister for Finance that for the last financial year, instead of the projected $5 billion deficit, the Government has turned in an estimated $3.2 billion surplus. Any surplus is good and most welcome. But the question in our mind is: had the Government been overly cautious and extraordinarily conservative in holding back expenditures? Had the Government not held back so much and released more funds into the economy, would there not have been a greater multiplier impact and faster recovery of the economy?

Now the Government has quickly cut and reduced some of the rebates, and increased significantly, for example, the development charges for properties. Are these actions too drastic and too soon? Will they lead to other Government departments and agencies raising their charges quickly?

The pendulum must not swing the other way too quickly, otherwise business costs will rise sharply, and that will hurt the competitiveness of our economy and our own country. We should give more time for companies to restructure and consolidate. Do not forget, ultimately, we have to compete against other regional economies, like Hong Kong, Taiwan and Thailand.

Overall, I am glad that the Government is taking good care of the man-in-the-street, with rental rebates, rebates for S&C charges and utilities rebates, and the CPF top-up scheme. This shows that the Government has a heart for our heartlanders, and appreciates the sacrifices made by the people in taking pay and CPF cuts in difficult times.

Sir, in this budget, we are spending the lion's share on education. This is the right move. People are our precious, and only resources, more so in the knowledge-based economy, the very foundation of our future.

While we invest so much on education, will it not be wise for us to do a strategic review of education, a stock-taking and seeking new directions in the new economy, in the new world of the Internet, wired together in one global village? I ask this as it is clear that the pace of change has quickened, and the momentum may be overwhelming. Old methods and old ways of teaching, for example, may not be relevant any more. It is an IT world, yet many schools, I observe, are still mainly using the blackboard, the duster and chalk. The classroom need not be square, with tables and chairs all facing the same direction towards the blackboard. We should use more IT in the schools and in teaching. This will make learning more fun. And how do we impart good moral values or highlight character development when students and schools are bent and preoccupied with examination grades. Examination grades are important, but not everything.

Are we bogging down our students with too many facts and figures that they do not have the time to think for themselves? Is it stifling initiative and creativity? Are we producing a generation that is averse to risk-taking, that is so kiasu? This is a pertinent question as Singapore enters a new phase of development in the new economy, which beckons us with opportunities and challenges of risk-taking, of entrepreneurship, of going global, and of daring to do. But is our education system preparing our young to take on these challenges in the new economy?

Are they taught the right skills in our schools? Are our young well prepared for life in the outside world? Are they street-wise? Are they equipped and ready to take on or deal with businessmen from China, Hong Kong, Korea or Japan?

Society as a whole should also be more tolerant of those who dared to try but failed. There should be no stigma in failure. Remember, failure is the mother of success. This climate of support will then encourage more to strike out, take risk and be entrepreneurial.

Sir, education should also include the training and retraining of our working adults. It saddens me to see workers in their 40s in my meet-the-people sessions, who are retrenched in the economic restructuring, who could not find new jobs easily, as they have no new or relevant skills. Some are still looking for canteen stalls, security jobs, cleaning jobs, and such like, when the economy has changed radically. Many are fast becoming unemployable.

We should therefore do more for this group of workers, and retrain them for the new economy. We have apprenticeship training scheme for the young, why not more apprenticeship training scheme for the older workers. If necessary, pay them a subsistence allowance when they are under intensive training, as they have families to support. We should therefore allocate more grants from our budget surplus for adult retraining, and make it a people's movement for skills upgrading.

Sir, while we go global, many of our graduates have to go overseas to work, we must remain rooted in Singapore. We must anchor every Singaporean to our own homeland. But how do we cultivate this sense of belonging and bonding, when our schools do not give much emphasis to our own history and culture?

History lessons are downplayed or not given much attention in schools. Whereas in the United States, every child in school knows about George Washington, Abraham Lincoln, John Kennedy, or the American War of Independence. We must therefore give more thought and priority to the teaching of history in our schools.

Sir, on that note, I support the motion standing in the name of the Minister for Finance.

Mr Low Thia Khiang (Hougang): (In Mandarin): Mr Speaker, Sir, in his first Budget Statement for the millennium, the Finance Minister said that we could expect to get back soon to the pre-crisis growth rate. We can expect measures designed to help businesses tide over the crisis will not be extended and Government charges will be increased very soon.

The property tax rebate of 55% is now reduced to 25%. The Ministry of National Development has also announced increases in the development charges. With the increases, will we once again face the pre-crisis situation of asset inflation? Will the rent plus other increases cause the cost of business to rise and our competitiveness to be depleted? We can rejoice that we are out of the economic difficulty and can expect better prospects in the new millennium. But what kind of a reward do those people who have made sacrifices get? The Government announced that it would top up their CPF by $250. Is this meagre amount of $250 the only reward that they are getting? Those who have not contributed to CPF also made sacrifices but they do not even get a single cent.

Mr Speaker, Sir, in 1998 when we faced the regional economic crisis, the Government announced a $10 billion cost-cutting package. But the thrust of cost-cutting was on the workers, through the 10% CPF cut and the 5% pay cut. So through the sacrifices of the workers, the Government was able to cut down the cost by $7 billion. In 1999, the Government announced a budget deficit of $5.1 billion. This was played up in the media as if the Government was also affected very greatly by the crisis in order to justify that requiring workers to cut their pay and to make sacrifices are reasonable.

In the Budget debate in 1999, I said that the deficit was not a true deficit but was a result of large increase in development estimates. The Minister for Finance just announced that there is now a surplus of $3.2 billion instead of a deficit. This was because the development expenditure estimated in the 1999 budget was not used up. The Government has the responsibility to explain to the people whether the 1999 budget was one with a political motive to persuade the people to make sacrifices.

In 1999, many businessmen faced losses, some factories even had to close down. Many Singaporeans had to tighten their purse strings and their belts because of a pay cut, CPF cut, and unemployment. But the Government was not affected. There was no deficit - it was played up at that time. Instead, there is now a surplus. No wonder when the economy was still recovering, the Government could not wait even a moment in taking the opportunity to announce in November 1999 the restoration of the pay cut for civil servants, including the Ministers' pay. Otherwise, the surplus would be more than $3.2 billion. The Government has forgotten that in 1999 they wanted workers to have their pay cut to pull through the economic crisis together. The workers' pay has not been restored to the previous level. The 10% CPF cut in employer's contribution will only be restored by 2%. But the Government took the lead in pay increases for themselves, and enjoyed the fruits of economic recovery, while the people in general were still suffering from the impact of the crisis. The people were hoping that better time would come in the form of bonuses. But the Government has beaten them to it by taking the chunk of the fruit of the economic recovery with the withdrawal of the 10% tax rebate. So when times are bad, the Government's policy is to first require workers to make sacrifices by reducing workers' wages but when times are good, the Government took care of its own pocket. This is the true colour of the PAP Government.

In this Budget, the Government has even announced that the water tariffs will be increased and the water borne fee will be increased by 100%. All the utilities charges will also be increased as a result. It will add to the burden of the people.

Mr Speaker, Sir, looking from the first Budget of the new millennium after the economic crisis, we can see that whether in good or bad times, the Government's fiscal policy is always "win-win" for the Government and "lose-lose" for the people.

Mr Seng Han Thong (Ang Mo Kio): (In Mandarin): Mr Speaker, Sir, in presenting the first Budget for the new millennium, the Minister for Finance laid out the key challenges facing Singaporeans. His message is that if we do not respond well, we will lose our economic competitiveness and social cohesion. This is similar to the very familiar expression in Chinese, ie, you must fight to win.

Just now, the Member for Hougang said that the Government wins but the people lose. What we are doing is to make everyone win - the Government wins; the people win; Mr Low wins, and even the Opposition parties win. Mr Low said that the Government had been acting against the interest of the workers. But we NTUC leaders know very well why we must take a wage cut, and why there had to be a reduction in CPF. There is this Chinese expression which says: "liude qingshan zai, bu chou mei chai shao", meaning as long as the green mountains are there, one need not worry about firewood. So the important thing is to retain the job, retain our rice bowl - that is the most important point. That is why at that point of time, we all agreed that, with the factories facing the financial crisis, many of them had to close down, and the most pragmatic thing to do was to let the factories survive, so that everyone would at least retain their jobs. That is why we were prepared to take a wage cut. We were all fighting for the survival of the factories. All the workers had agreed that we would take a wage cut to retain our jobs. Even if the factories could not survive just with the wage cut, then let us cut some of our working days. Let us take home a little less, but let the factories survive.

We could all see where the crisis was. We were willing to undergo re-training. Over the past few years, many workers, about 40,000 of them, had undergone retraining to upgrade their skills. But there was one thing that I need to point out, that is, in the Budget Statement the Finance Minister mentioned that we needed to have an educated and highly skilled workforce augmented and invigorated by foreign talents, but did not specifically assure the older workers and low-skilled workers that they would not be neglected. In the next few years, the Government will be setting up more funds for the upgrading of skills for the workers. Just now, Dr Ong also said that for the workers, particularly the low-skilled workers, we should have enough funds to help them in their training. Dr Hu only said that we need a team of high-skilled workers supplemented with foreign talent. We should help the older workers to solve their problems.

Mr Speaker, Sir, I would like to point out that the lower skilled workers are not necessarily older workers and the older workers are not necessarily the lower skilled workers. These two groups of workers have become very sensitive to any news about their company's restructuring, merger and acquisition. They know that when any of these processes happens to their company, they are sure to "tio" (in Hokkien) or "kena" (in Malay), ie, they will be "hit". And if the lower skilled workers are also older, they are, like what the Hokkiens say, "tia tio tio" or in Malay "mesti kena", that is, very sure that they would be hit.

Sir, many low-skilled workers and older workers have not been able to find new jobs once they are retrenched. The older workers are worst hit. They are prepared to go for retraining. They are prepared to lower their expectations. But they have great difficulties in finding new jobs. Therefore, I propose that the Government introduce some tax incentives to encourage employers to hire older workers. I will elaborate on this during the Committee of Supply debate.

I believe that under the Manpower 21, we can do more for workers' training and skills certification for them to enjoy lifelong employability. This might be the reason why the Finance Minister did not elaborate on this issue in his speech. However, during our dialogue sessions with union leaders, we learned that older workers were particularly concerned that they were being discriminated against. I hope the Government can address this issue before it becomes a social problem. The older workers can be out of job for a short period as our social safety net is adequate. But prolonged unemployment of a particular group is not desirable to our society. To the family, to the individuals, it will be a problem.

Mr Speaker, Sir, the Finance Minister should be commended for including the grandparents when he grants tax relief for topping-up CPF accounts. Taxpayers who live together with their parents will also enjoy a tax relief of $5,000. Although the increase is only $500, it is a gesture of the Government which the people will appreciate. It also shows a policy change in that the Government now includes grandparents as members of the family for tax purposes. This is in keeping with our oriental tradition, and this will also help foster cohesion and avoid conflicts in the family.

On the Supplementary Retirement Scheme (SRS), may I also urge the Government to give further tax incentives to encourage husbands to contribute to the accounts of their wives who have given up working to stay at home to look after the family, so that their children would score A1s and A2s in their examinations. They do not have any CPF and probably very little savings for their old age. So it is only logical that husbands should be encouraged to contribute towards the wives' accounts in the SRS. I will also touch on the SRS scheme in further detail during the Committee of Supply debate.

Mr Speaker, Sir, although the Member for Hougang is not happy with the top-up of $250, the workers by and large appreciate that this is like a bonus, like winning a starter's prize in a 4-D draw. It is a gesture by the Government to show appreciation for the sacrifice the workers had made during the crisis. Even the self-employed will enjoy the top-up of $250 if they have made contributions to their CPF accounts in the past year. In the past, the Government required the self-employed to produce evidence of contribution to the CPF, particularly the Medisave account, before their business licence could be renewed. There was some unhappiness among the self-employed. But now I think they will appreciate the Government's intention by making them contribute to CPF. Now, they can have a share in this top-up bonus.

We are now facing new challenges in a new knowledge-based economy. We need foreign talents to lay a strong foundation for our transition to a knowledge economy. And we know that in the next 20 years, we will be facing a lot of problems with an ageing population. So we must take whatever measures possible. We must fight hard so that the Government will win and the people will win too.

Mr Low Thia Khiang: Mr Speaker, can I have your permission to seek clarification, please?

Mr Speaker: All right.

Mr Low Thia Khiang: (In Mandarin): Mr Seng has said just now that we have to fight to win. But, after the fighting, it is the Government that wins. He also mentioned that the workers have received some rewards. During the crisis, the workers made sacrifices. The Finance Minister has said that our economy has recovered, and we want to achieve high growth rates as before. Yet, as of now, apart from retaining their jobs and continuing to receive lower wages, they are unable to receive their CPF contribution as in the past ---

Mr Speaker: Order. Mr Low, you rose on a point of clarification. Can I ask you to get to the point and ask Mr Seng what part of his speech that you do not understand? You are embarking on a totally different speech. Can you get to the point?

Mr Low Thia Khiang: I am asking him to clarify ---

Mr Seng Han Thong: (In Mandarin): Mr Speaker, Sir, I think some of the questions have to be answered by the Minister for Finance himself. I am only replying to him from the point of view of the NTUC. He was saying that the Government should allocate a big sum of money to help the workers in their training. In the past few years, the Government spent as much as $120 million to implement the Skills Redevelopment Programme. As I have mentioned just now, about 40,000 workers benefited from the retraining scheme. Funds were indeed granted for the workers to upgrade their skills. If Mr Low wants more details on this, he can come to NTUC. I can give him a good briefing on how these workers have benefited from the scheme. As far as the workers are concerned, so long as they retain their jobs, there is still opportunity for them to go up.

Mr Low asked whether the workers will go back to their previous standard of living after the economy has recovered. Yes, they can, but they must first upgrade their skills as their previous skills may well be useless and obsolete now. In order to enjoy a better standard of living in Singapore, we have to create new jobs. Now in Jurong Island, we have a number of petrochemical factories offering various new job opportunities which require new skills. We have a lot of jobs available but the workers do not have the matching skills to take on these jobs. So they must upgrade themselves, upgrade their skills so that they can take on these new and better-paid jobs. There is a causeway leading to Jurong Island. If Mr Low has not been there, he should make a visit. If he does not know the way, I can take him there. Perhaps, he did not read the newspapers. Now there is an access road leading to Jurong Island. You can drive or walk there. You do not need a permit to go there. Perhaps, he is not familiar with that. It is a public place and is open to everybody. I can make an appointment with him to bring him there so that he can see for himself how the workers have enjoyed a better standard of living. Many workers have also not seized the opportunity to enjoy better pay for the jobs available to them.

Mr Speaker: I must remind both Members that they should not be embarking on long speeches under the guise of seeking clarification.

Dr Tan Boon Wan (Ang Mo Kio): Mr Speaker, Sir, I thank you for this opportunity to join in the debate. I beg the indulgence of the House to hear my views on several issues which have already been discussed by previous speakers. However, the advantage in speaking on the second day is that there is no need to explain the background to these issues.

I listened to the Budget Statement with much satisfaction and pride. The economy did much better than expected. The actual growth was 5.4% to the best expected forecast of 1%. Instead of an expected budget deficit of $5.1 billion, the fiscal year ended with a surplus of $3.2 billion. The performance is even more impressive if we recognise that the economy last year actually performed better by $8.3 billion.

I welcome the additional contribution of $100 million to the Medifund. I welcome the setting up of the ElderCare Fund and the allocation of $200 million to it. As our population ages, medical expenses become more important. These two funds will help our poor and old. This is forward thinking towards the future. We also appreciate the $250 top-up in our CPF accounts. These gestures reinforce the image of a government that appreciates and cares for its people. While the Government called for sacrifices from the people during difficult times, it also willingly shares the bounty harvest during good times. However, pensioners have expressed the hope that they will be especially remembered for their contributions and sacrifices.

The excellent economic performance is the result of the good management by the Government and the support of the people. However, much credit must go to the Finance Minister for his handling of the national purse string.

The Finance Minister sees a stronger economy this year, but not without caveats. The US economy must not suddenly and violently convulse, and the Japanese, European and Asian economies must continue on their paths of recovery. Singapore has yet to fully recover its competitive position. In view of these uncertainties, the business community wonders why the Government was so quick to withdraw the support that it deemed necessary just a few months ago. However, I am certain that our businessmen would prefer to make their money from better business in a growing economy than to merely survive on Government handouts in a slow one. We therefore hope to hear the Finance Minister announce this good news when he presents his next report card to Parliament at the same time next year.

Sir, the introduction of the Supplementary Retirement Scheme (SRS) to complement the existing CPF scheme is most timely. I note that tax is payable only at the time of withdrawal. It will encourage those who can afford to save. Retirement, however, is a time when a person's means to pay taxes is reduced. I hope that the Government will work out guidelines that if the withdrawals take place after retirement, the taxes payable would be low. If this is done, it will encourage even more people to save for their old age. With one out of every four residents to be over 65 years of age by 2030, the SRS will reduce the burden of the Government in the future.

Similarly, by exempting the interest income of CPF savings beyond the Minimum Sum, this will encourage more retirees to keep their money with banks than to expose their funds to risky ventures. I think these are farsighted changes to the CPF scheme. The extensions do not disadvantage anyone, but give everyone more choices where to keep their money for their old age.

The $500 increase in the tax relief per parent for children who have their aged parents live with them is more significant for the message that the Government recognises their filialness than the actual financial impact on the taxpayer's pocket. The extension of tax relief for CPF top-up to grandparents is also to be welcomed as this extends the recognition of the Government to filial grandchildren. I am very certain that, in the long term, the net benefits of such schemes will far outweigh the financial loss of revenue to the Government.

Sir, I agree with the Government that globalisation and increasing competition are realities that we must face. The Singapore economy will technically and technologically structure up. This will create new jobs which will require new and more skills and knowledge. If our workers, especially the older and lower skilled, some 843,000 in number or 42% of our workforce, do not upgrade their skills and knowledge, they will become structurally unemployable and hence unemployed. These older workers must thus be helped to acquire additional skills. Dr Hu did not specify any new initiatives though he said that the Government will press on with the various existing initiatives. Does this mean that the situation now is satisfactory and under control? Would the Minister perhaps share with the House the status of the skills upgrading efforts to-date?

Sir, my above concern with our economy is aggravated by information technology which is driving Singapore towards a knowledge-based economy, also called the New Economy. In the New Economy, knowledge and entrepreneurialship will be key ingredients for survival and growth. Jobs will change to become information and knowledge intensive. Literacy and familiarity with information technology are core skills that all Singaporeans will need. In the globalised arena, salaries and wages will be set globally. IT workers will be paid wages set in the developed countries and the wages of those doing non-IT work will be set by workers in the poor third world. Thus, those who cannot master IT will become the poor of society. This will be the dividing line between the rich and the poor of society in the future. This is often referred to as the digital divide. Is this threat for real? The Americans think so and for good reasons. Our Government has expressed similar concern.

What is the answer? The answer is obvious. Make Singapore into an IT-intensive environment. A national information highway is already in place for the people and business. The PC is now ubiquitous in the workplace, in our offices and shops. Next, make our people IT-literate. A few days ago, IDA announced several new bold initiatives under the Infocomm 21 Masterplan to make three in four workers to be IT-literate by the year 2010 and to ensure that we have enough infocomm manpower. I am assured and encouraged by these efforts. The Government is quick to ensure that the needs of our young are met. Billions of dollars will be allocated for education of our young, as much as the Education Ministry needs. Hence, yesterday I heard with disbelief, when the hon. Opposition Member, Mr Chiam See Tong, accused the Government of being stingy in providing for education and proposed that the Ministry of Education be allocated more money. He is being disingenuous. He knows what will happen if more money is provided than is needed. In the next election, he and the Opposition will accuse the PAP Government of being wasteful, misusing and squandering the hard earned money of the people.

However, I believe, for us, the digital divide, if it takes place, will come not from our young but from our adult population. Young Singaporeans readily accept the high-tech life and this ready acceptance will only quicken the divide. We have to act decisively and quickly to help our older adult population to master IT. In a recent survey, more than four in every 10 people felt that they lagged behind in a high-tech world. I was thus pleased to hear Communications and IT Minister announced that $25 million is available to promote IT among the public. I believe this amount is too modest, but it is a good start. Given the importance of the objective, I am sure more money will be made available when and as long as it is needed. I strongly urge the Finance Minister to support this urgent and worthwhile cause to minimise the threat of a digitally divided society.

On this issue, we must also pro-act. We do not have the luxury to react. By the time the problem is realised, it would be too late. I would urge IDA to work with PA. PA reaches out to the community through its grassroots organisations and centres. One initiative is to develop community-based IT resource centres to allow the people to have an easy access to learn and use IT. If a person understands the PC and its power, and is confident of using it, the family may acquire one for the home. Access to the Internet and its services should also be affordable and readily available. Many new services like e-commerce, e-learning and e-banking would also become available in the future. Technology will make IT increasingly more affordable and accessible, but the problem is how to get people to learn to use IT, to be comfortable with IT and to be confident with using IT.

We must not be stingy in our efforts to create an IT savvy society. This is a necessary investment for the future that will pay handsome dividend. The development of this society would be on-going and continuous. Improvements must be made in big and small steps. Many steps would be needed. We must do more.

Let me conclude this discussion on a perplexing note. We know that in order to meet the economic imperatives of the KBE future, many values held by society would need to change. But these values also underpin our society. Do we understand how the changes would affect our society? Have we paid enough attention to this matter?

On this note, Sir, I end my speech. I congratulate Minister Hu for a well thought-out Budget and express my support for the motion.

Mr Jeyaretnam: Mr Speaker, Sir, reading the Budget, a remark made by Mr Ngiam Tong Dow came to mind. This was an observation made by Mr Ngiam in an interview that he gave to the Economic Journal of the National University of Singapore and when I read it, it struck me because that was what I thought we have been trying to say. And his observation was that, behind every economic decision lies a political goal or motive and, of course, we do not need Mr Ngiam to tell us that. Economic decisions are not made in a vacuum. Economic decisions are made with a purpose and with a goal in mind and if it is the society that we are concerned with, it must have to be a political purpose. So I ask myself, reading this Budget, what are the political imperatives of this Government behind this Budget that it now presents?

I would like to give you what I see to be the political imperatives. But before I do that, may I say a little bit further about the Budget, and that is the question: what does this Budget tell us of our society? Because every Budget must tell something of the society for which the Budget is being prepared and presented. What does it tell us? Does it tell us of a caring society, or does it tell us of a society that is money-minded and is bent on pursuing the accumulation of money and reserves and catering only to those who are able to contribute towards this chase, and leaving out those who, for no reason of their own, are unable to contribute? Those are questions that we should ask about any Budget.

Sir, also a Budget has to address itself to everyone. We heard this afternoon from Mr Zainul Abidin about cohesion. He was talking largely about the cohesion between the different races. But are we not blinding ourselves to something more important and just looking at the relations between the communities? We keep talking about the bonding of our people, not just cohesion between the Indians, Chinese and the Malays, but the cohesion between all our people, regardless of whether they are Chinese, Indians or Malays. There must be a bonding of everyone, the rich and the poor, the haves and the have-nots, those who are not handicapped and those who are handicapped. That is what we should aim at. And if we can aim and get a society like that, where there is a real bond between our people, then we need not worry about harmonious relations between the different communities.

When I was coming to Parliament, the taxi-driver who brought me here said, "Oh, you are going to the Budget." I said, "Yes. Have you read the Budget?" He said, "No, I have not read it." I said, "But you should, you know. You should see what is being provided and then speak." He said, "How can I say? What can I say in this place?" He said, "I have got enough work on my hands, trying to earn my living, trying to get $40 to $50 a day so that I can survive. What am I supposed to say about the Budget?" So clearly, it does not address him.

I said about the political imperatives. Reading the Budget, it appears to me that the political imperatives, as I have said earlier, would be the accumulation of our reserves so that we can always end up with a budget surplus. And by that, impress the world with our figures of growth. Our statistical figures will look impressive and significant. And so with this goal, we turned a budget deficit of $5.1 billion into a surplus of $3.2 billion. That is some achievement. And I see part of it came from a stronger collection of the COEs. That was a strong boost and the Minister for Finance takes pride in this, and he says that "we are thus back in the happy position of being able to add to our reserves. And we need to accumulate budget surplus in goods years." But I did not think 1999 was a good year. I thought 1999 was a bad year but we somehow were able to accumulate a surplus of $3.2 billion even in a bad year, so I expect this year it might be a budget surplus of $10 billion and then we shall be very proud of ourselves.

There is nothing wrong about having a budget surplus and getting Singapore rich. But I am reminded of the study that was made between Singapore and Hong Kong some years ago by a lecturer or professor at the Massachusetts Institute of Technology. His conclusion was that Singapore has got richer, by the Singapore Government digging deeper into the people's pockets. Whereas in Hong Kong, he said, it was the true entrepreneurial skill of the people which has made Hong Kong richer. That is something that we have to ponder about. Are we getting richer and richer because we dig deeper into the people's pockets?

The Minister cites the factors leading to our recovery. He cites two external factors as I see them - upturn in global electronics and the turnaround in the regional economies. These are both external factors that have helped us to recover. But he said that there was an internal significant contribution made in Singapore and that was the acceptance by our workers of the reduction in the employer's contribution to their CPF and wage cuts. So, our economy, it would appear, has turned round largely because of our workers paying the price by accepting cuts in the employer's contribution, foregoing that and further accepting wage cuts and, what is more, accepting being thrown out of employment for months, unable to find any employment. It is to our workers, it would appear, besides external factors, that we owe in a great measure the recovery in our economy. There is not a word about the contribution from the Ministers. I tried to suggest that we could have at least made some show-of contributions and that was turned down as it would not help.

We are now gloating over our recovery because the workers have been able to make that happen. The question that we should ask is: should not some of the surplus have been used to alleviate the suffering of the workers? I proposed this when I suggested the voluntary reduction of the Ministers' salaries. It is not good enough saying in fine words about Government appreciating workers, accepting CPF and wage cuts. What is needed is a little more than words. We need to show the appreciation in terms that would really get to the workers. One Member spoke about the possible use of some of this surplus to further improve the economy by reducing costs. That is a good question. Why are we so anxious to show a surplus, that we perhaps neglect the people who need help and do a bit more towards boosting the economy, instead of leaving it just to our workers?

May I now move on, Mr Speaker, Sir, to the allocation of our monies for this year. Because here again, it shows the kind of society we are and our political imperatives. In the allocation, I see defence takes the largest share. Somebody mentioned about education taking a lion's share, but defence takes $7.4 billion of our monies. Compared to that, we are providing for the general education programme - I am not talking about the entire allocation for the Education Ministry - but the general education programme, ie, educating our children in Government schools, Government-aided schools and other independent schools, we are only spending $3.13 billion for that. Defence takes $7.4 billion. The education of our children takes $3.13 billion, less than half.

Then I looked at the medical services, what is provided for the medical care of our people and what do we find? The medical services are allocated $815.4 million, less than one-seventh of the defence budget. So, what does it tell us of our society? We should ponder as to what is the lesson there for someone looking and reading the Budget. Is it more important that we should raise the level of education of our people? Is it not more important that we should see that our people are in good health, that our people who contribute to the economy are able to provide enough medical care for themselves?

These are political goods, not economic goods, education and healthcare. Our reserves are not the monies that we have stashed away. Our reserves are our people. It is on our people that we depend for the future of Singapore, not on the monies. So that is where we should be spending the money.

I see someone criticised Mr Chiam See Tong. I was not here, but I completely echo what he said. We should be spending far more on education than we are. I will come to the expenditure on defence. I have raised this every year and I shall be missed if I do not touch on that this year. But let me say a little bit about how important it is that we spend more money on education and health, not on a showcase but on our people.

Education and health are the key to the economic progress of a country. We do not need an economist to tell us that. We seem to pay lip service to it. The Minister says that less than half of Singaporeans above 40 have secondary education, and he says steps will be taken to retrain these workers. But should we wait until they are over 40 and unemployed before we begin the process of educating them? Should we not catch them young when they are in the schools? Should our aim not be to see that every child in Singapore has a minimum of secondary education? That is where we should be concentrating our efforts and our money. If we do that and we see that schools turn out every year enough people with secondary education, then we need not have to worry about our workforce. But, obviously, we are not doing that at the moment. We do not want any elitist education. There is no harm in providing elitist education for some. But we want education for all. No one should be left out of this. Let us make that our goal.

And then health. A healthy worker is an economically productive person. If he is unhealthy, he ceases to be economically productive. So, should we not be spending more on healthcare? I hope when we come to discuss the Ministry of Health's estimates, I shall have the time to say something about the cost of medical care in Singapore. But because time is moving on, I will move to the expenditure on defence.

As I said, Mr Speaker, Sir, we are allocating the biggest share of $7.4 billion of our monies to defence. We have a faithful press in Singapore. I see BG Yeo has suddenly said, "No let up in our control of the local press." I am sure the press will say, "Oh, Jeyaretnam doesn't want a strong Singapore." "Jeyaretnam wants a weak Singapore." At one time, it was said that I would rather have the Russians come in. That was when I was here in Parliament in 1981 to 1986.

But it is time, Mr Speaker, Sir, that Singaporeans were told in plain language why we have to spend such a large chunk of our monies on defence. Why do we have to put a ceiling of 6% of GDP on our defence expenditure, so that we can go on increasing until we reach that? Is that the goal, that we should spend 6% of our GDP on defence? I see that it has gone up every year. From 1995, when it was $5 billion in the chart given, it is now $7.4 billion in 2000. So, what are we going up to next year?

In previous years, I quoted the spending in other countries. I have not got the time to do that this year. I pointed out that Singapore was very high in the spending on defence. The only country that exceeded our defence spending were those countries which were in trouble spots. I see that India has suddenly increased its defence spending. I do not know whether expressed in terms of GDP percentage it has exceeded Singapore's. But India is in a totally different position. They have some trouble on their borders. Do we have trouble?

I think it is time, Mr Speaker, Sir, that Singaporeans were told where do we expect the threat. Where is the trouble coming for Singapore and why is it necessary for us to spend the money that we are proposing to spend to meet this trouble? We do not want just remarks like, "Oh, the security of Singapore is important or paramount." No one questions it. The Workers' Party does not question it. The Workers' Party is second to none in asserting that the security of Singapore is very important.

I suggested, even in the 80s when I was here, that we set up a committee to study the effective cost of defending Singapore. Why do we not do that, so that the public can see? I suggested that perhaps we should consider reducing the period of national service. I see that carries quite a bit of chunk of the operating cost. Do we need to keep our boys for 2-21/2 years in the army to give them the training that they need? Could we not speed it up and cut the cost? Or are we just happy to go on and show that we are spending all this money on our defence? The trouble is that it may be sending the wrong signals to our neighbours to see that Singapore keeps increasing its defence expenditure. So I ask that we explain to the people. If we explain to them, they will accept it. But I am asked by several people, believe me, why is it necessary for us to spend this amount of money in our defence when, as I have said before, the world would appear to be getting a safer place, particularly this region?

May I say a little about the provision for the ageing population. I see that the Government plans to provide what it calls a Supplementary Retirement Scheme. That, as the Minister explains, is to be purely voluntary. If you are able to put aside, yes, come and put it aside. What if you are not able to put it aside? If you need all the money that you are earning to keep your body and soul together and you are unable to save, so you are not going to be looked after when you are 65 and over. Instead of all these schemes, when will this Government move on to study a proper pension scheme for all our citizens above the age of 65 so that the cost of this pension is met across the board, everyone contributing towards this national social security? What is wrong with that? What is wrong with a national health service? Why do we not set up a committee to study this? Or are we not interested? What are our political imperatives?

Finally, Mr Speaker, Sir, may I make a plea for greater transparency in information provided in the management of our finances. Not too long ago I tabled a Question for Written Answer of the Minister for Finance asking whether we could be told about all the losses that have been suffered by wholly-owned Government linked companies from 1965. I got a reply, a long one, but in essence, it does not make sense.

Mr Speaker: Order. Mr Jeyaretnam, the time allotted for your speech has expired. 2.02 pm

Mr Lew Syn Pau (Kreta Ayer-Tanglin): Mr Speaker, Sir, I rise to support the motion standing in the name of the Minister for Finance.

This recession that we have just emerged from reminds me in many ways of the recession we had between 1986 and 1987. Firstly, it was short and we seemed to have recovered even before the full impact was felt. Secondly, the Government was quick to take measures to cut costs, improve productivity and help businesses look for new markets further from the region affected by the downturn. Thirdly, the cost cutting measures, especially the reduction in CPF contributions by the employers, were fully supported by the trade unions again. The speed with which we have recovered ahead of our neighbouring countries reflects several inherent strengths that have often been taken for granted. These are:

Firstly, an honest, stable, decisive and competent Government.

Secondly, an enlightened trade union body with bold leaders and supportive members and workers.

Thirdly, a sound banking and financial system.

Fourthly, many years of conservative budgeting resulting in healthy cumulative financial reserves that are able to tide us over periods of recessions; and,

Fifthly, business people with the drive and tenacity to innovate and think of new ways of doing business.

It is remarkable that even in a recession year in 1999, we were able to accumulate reserves of about $3.2 billion. The Minister has given the reasons for it but I do not think we are surprised any more because in the last 12 years since I have been in Parliament, the actual surplus has always been a few billion dollars more than budgeted, whether in a recession or periods of economic growth.

This year's budget reflects the unexpected economic recovery last year, with a growth rate of 5.4% and forecasted growth of between 4.5% and 6.5% for this year. It is a balanced budget in that it attempts to retain certain tax concessions given away during the recession, reduce some in sectors that have not fully recovered and remove others totally in sectors that are deemed to be growing. This budget has also addressed the need to be competitive globally, especially in the financial sector and the promotion of technopreneurship in Singapore. At the same time, the budget also addresses the need to look after our elderly relatives.

Although the economy has recovered, achieving a respectable 5.4% last year, the growth is not even across all the industries. There is concern in sectors that are lagging behind, mainly construction, business services and small and medium-sized enterprises. They fear that the stock markets may have moved ahead of fundamentals and misled the Government into removing or restoring tax rebates and concessions a little bit too early. Let me say that my feedback on this is based on anecdotal evidence through informal conversations with business people from SMEs, and not from any formal surveys or studies conducted.

Let me now move to the specifics of the budget.

In Part II, page 5 of the Budget Statement, it is stated that the Development Expenditure includes a provision of almost $1 billion for new priority projects that may materialise in the course of FY 2000. I would like to ask the Finance Minister whether we always make such provisions, which is a large amount. What are some of the priority projects that may arise, or have arisen in the past, that require the use of such provisions? Are these provisions responsible for some of the actual budget surpluses over forecast that we get at the end of every fiscal year?

The Minister has said that the construction and business services sectors have not recovered from the recession. Can we not do more in terms of tax concessions for these two sectors to help speed up their recovery?

I support the Supplementary Retirement Scheme to encourage Singaporeans to supplement their CPF savings by contributing voluntarily to private funds over and above their CPF savings. Since there is already a percentage cap based on the employee's salary, I would like to ask the Minister to make the contributions totally tax exempt. As it stands, the SRS only defers the payment of tax to the time the savings are withdrawn. The system may be inequitable depending on the marginal tax rate of the contributor at the time of contribution, and again, at the time of withdrawal. Those who are successful and continue to work way past the age of withdrawal of the funds may end up paying more taxes in the end than if they were to save the money on their own. I hope the Minister will take this point into consideration in formulating the details of the scheme.

I laud the Government for bringing down the corporate tax rate by 0.5% to 25.5%. However, I am a bit puzzled why the maximum personal income tax rate for the individual is not brought down in tandem. There is now a gap of 2.5 percentage points between the top personal income tax rate and the corporate tax rate. Will this not encourage the very wealthy and financially savvy to exploit the difference? At 25.5%, we are also still about 9.5% higher than Hong Kong. I know that many high net worth individuals and even companies park most of their funds in lower tax regimes like Hong Kong. Can the Minister give us some indication on how much funds of Singaporeans are parked overseas and the estimated tax loss to us as a result? Is there any measure the Minister plans to take to encourage Singaporeans to repatriate some of these funds home?

The property tax rebate on commercial and industrial properties of 55% will be extended for one more year at a reduced rebate of 25% only. Given the weak state of the rental market, I urge the Minister to consider extending the rebate at 55% as before for one more year. This will be one way to help the construction sector recover more quickly. Similarly, the tax exemption on property tax for land under development could have been extended for another year or so to encourage construction.

I am heartened by the Government's initiative to give tax concessions to inventors and innovators and to extend such incentives to cover the non-manufacturing sector. To encourage entrepreneurship, the Government should consider giving some tax incentives to start-up companies per se, whether they have inventions or innovations that are protectable. Perhaps, all start-up companies should be given a reduced corporate tax rate of three years to help them to reinvest and grow the business faster.

Currently, the Government is giving estate duty exemption for residential properties up to $9 million and only $600,000 for all other dutiable assets. I have spoken up on this before and I still find that this law encourages over consumption in residential properties that are not productive assets. I still maintain that other assets such as stocks and shares should be given the same exemption, especially now that we are encouraging more Singaporeans to be entrepreneurs, so they would be owning shares rather than residential properties. I urge the Minister to consider putting all assets together for the purpose of estate duty exemption.

I also support the plan to introduce enhanced tax treatment for stock options. While the study on the details is still underway, I would like to ask that tax concessions be considered for companies providing supporting services to such start-up companies and who are paid in shares rather than in cash. This is getting increasingly common as lawyers, accountants, auditors, consultants and financial advisers provide services for such start-up companies and accept shares in lieu of cash payment. The shares are of value only if the start-up succeeds and goes for IPO, otherwise these professionals end up working for free. The tax treatment should take the risks of such professionals into consideration.

With these comments, I support the motion.

Mr Gerald Ee (Nominated Member): Mr Speaker, Sir, every year we all anxiously await the announcement of the Budget and most of us would have a long wish list. We would want more to be done for businesses, community, and the individuals. Inevitably, based on the average wish list, one would always be disappointed.

As an individual, I would like to have great reduction in tax rates, greater reliefs, more rebates, etc. After all, the effective corporate tax rate has been increased from 23.4% last year to 26% and then to 25.5% only in the following year. It seems that most of us share the concern that many corporations are feeling the aftershock of the economic crisis, and could do with continuing support. Personal tax rebates have also been reduced. I am concerned because there is much less to save for my post retirement era. I am sure that all who have celebrated their 50th birthday will feel this.

I welcome the forthcoming introduction of the Supplementary Retirement Scheme. We have to wait for the details but for those of us who are treated as self-employed and do not contribute to the CPF scheme, we await with bated breath to see if the scheme could be extended to beyond just employees. I assume that contributions will be tax deductible and I hope that the ceiling on such contributions will be set high. In the final analysis, either we are able to take care of ourselves or we become a burden to society. With a generous scheme, more people would be included to save a greater part of their income. Not every one is savvy enough to mind their own savings through investments or even to discern and identify the better managed funds. For a majority of citizens there would be a preference in favour of a secured scheme that pays a decent return. There are enough horror stories of CPF savings being whittled away through poor investment decisions. Whatever the rationale for suggesting that this scheme is for employees only, I hope that the Minister will consider including self-employed persons for the scheme. Growingly, the numbers of self-employed should increase. There will be more home-based businesses set up by individuals, people with creative ideas and who wish to remain independent.

The setting up of the ElderCare Fund is most timely. Whilst being surrounded by loving family members would be the ideal environment for rehabilitative care, the reality is that most homes are unsuitable for such care. Everyone is out working or schooling. At best the patient is left to the care of a house-help, an additional live-in that crams the home environment and often causes tension. With the ElderCare Fund, there should be available more affordable nursing home care where the patient can be properly attended to for rehabilitation.

People I have discussed the Budget with initially wondered why I am satisfied with the Budget. For me, it is the realisation that we are moving from direct taxes to indirect taxes through the GST. I recall that the Minister, when he introduced the GST, said that he would retain the GST rate at 3% for five years. That was in 1994. Well, it is still at 3%. I hope that it will be kept at this rate for another 10 years at least, or dare I wish for it to be permanently so. With an indirect tax regime, I feel more in control. By controlling my expenses I am saving on taxes and really there is no limit to how much I can save if I keep my life simple. Incentives and schemes would have qualifying factors and I might not benefit from any or all of them.

In spite of my satisfaction with the Budget, I would like to request for higher basic personal and family reliefs. Such higher reliefs should not be conditional such as those benefiting only graduate mothers, or those who opt for separate assessment, etc. The basic reliefs such as for the self, wife, children should be increased. It certainly costs much more than $2,000 per annum to maintain a wife or a child.

There is scope for considering a two-tier corporate tax system. Small enterprises, including the start-ups, should be taxed at a much lower rate. The greatest problem encountered by start-ups is cash flow management. They need to plough every single cent back into the business. Very often the key personnel in a start-up draws very little or no salary. Those who are lucky enough to generate a profit in the first couple of years will feel the pain of having to reduce their precious cash flow through the payment of taxes. A scheme for start-ups could be based on turnover and restricted to the first three years of the business. During this three-year period, they could be granted a tax rebate of, say, 50%. I believe that such a scheme would encourage more people to become entrepreneurs. We should not set our sights on just the glamour business. In any successful community there must be a variety of providers. We will not have a healthy manufacturing base if there are no support industries. We see such problems cropping up in the emerging economies. We must retain and encourage the establishment of more support industries. This time it will include the e-commerce sector and there will be many creative individuals who can remain independent and provide first-class support services such as creative work, including the designing and coding of web pages.

With a rapidly ageing society, it is imperative that people are engaged in active ageing. It does not matter if they are really financially independent. Everyone should remain active, continuously setting and achieving goals - having something important to wake up to, to live for. Active ageing could be in the field of voluntary services but in a small nation like ours and with the belief that every Singaporean matters, everyone should try to remain in the workforce - employed or self-employed. With lower taxes or special tax rebates for older people, they would have the incentive to provide services, using their accumulated experiences and providing them at competitive rates, or even start a small business that they have always dreamt about.

Sir, more can and should be done for the individuals and small enterprises. We should not focus only on big businesses. Big businesses are important for our economic development. However, our society will be the richer when individuals are fired-up to explore and try their hands at new things. We will be creating a home with a variety of interests being fulfilled. There will be greater scope for every Singaporean to matter.

Sir, I support the motion. 2.23 pm

Mrs Lim Hwee Hua (Marine Parade): Mr Speaker, Sir, even as I rise in support of the financial policy for the short term, as outlined by the Minister for Finance, I am mindful of the multiple challenges that we in Singapore are currently facing for the longer term:

Firstly, ensuring that we stay in play on the global front, even after emerging from the Asian crisis;

Secondly, crafting the appropriate response to the onslaught of technology in traditional businesses, especially for sectors which are important to our survival and for which hitherto we have a competitive edge, whilst;

Thirdly, putting in place measures to address potential social issues, such as an ageing population or a digital divide.

Sir, given the confluence of the above challenges, maintaining the status quo will not do. Let me elaborate.

In response to the economic crisis, we have implemented cost-cutting measures and made the necessary adjustments. By most accounts, we have weathered the crisis well. We need now to balance carefully the intention to restore the CPF cuts with staying competitive. Already, manifestations of our tight labour market, such as rising staff turnover, are emerging again. This is beginning to affect the smaller companies.

Shift in Business Focus

Sir, the global economy is transforming so quickly that old logic and management tools are no longer relevant. At the same time, the consumer's position has been strengthened substantially by the application of technology. He now has infinite choices at increasingly efficient prices.

Market offerings will in tandem reflect more customisation for the individual consumer. For example, buying a customised motor vehicle, with gadgets and fittings reflecting one's preferences, will soon be commonplace in many countries. Really, the shift in focus is towards creating digital value.

The private sector has the greatest impetus to change as their focus on profit and loss or P&L is a strong driver. They have already taken all these challenges on board. We are constantly bombarded with news of yet another merger of, sometimes seemingly unrelated, businesses. There is a school of thought which seeks to explain the Dow's gravity-defying act - that technology has inspired consolidation and enabled businesses to record real productivity gains, hype notwithstanding.

In this regard, for our economy, gaps may soon be evident and even widened on two fronts, firstly, the public sector and, secondly, the individual contributor.

Role of the Public Sector

The transformation brought about by technology is economy-wide, system- wide and "the excellence of every government is its adaptation to the state of those to be governed by it". The public sector is not immune to these dramatic forces of change. Just as businesses must transform themselves to survive and compete in the digital marketplace, so must governments. Our public sector, or parts of our public sector, may not be exposed directly to these same market pressures but for it to be a more efficient and effective service provider, it must remain relevant to the changing economy that it operates in.

Sir, I am by no means expressing dissatisfaction over our public sector. On the contrary, I am very proud of the achievements thus far. In fact, I believe we have a relatively nimble and adaptable public sector which has made giant strides in supporting our economic growth.

However, the evolution of the new economy may dictate a pace and an extent of change within the public sector far greater than expected or planned. Very soon, it would not be enough for Ministries to just focus on total costs, as outlined in the Minister's Budget Statement.

Sir, a private business is organised specifically to manipulate resources so that it can provide acceptable shareholder returns. Increasingly, the public sector must be organised in a similar fashion, so that it reaps economic and social returns for its shareholders, who are the owners of the Singapore economy.

I would like to suggest two broad philosophies for the public sector to consider adopting:

(a) Privatisation

The Government should accelerate the privatisation process. As many public service agencies as possible should be corporatised or even privatised so as to emulate the private industry's more efficient way of managing resources.

Where liberalisation or removal of anti-competition barriers will render a more level playing field for all interested participants, this should be undertaken purposefully, and as soon as it is economically viable to do so.

I note that we have already made substantial headway in financial services, and recently in telecommunications. The Minister for Trade and Industry has also announced plans to deregulate power generation and supply. However, several segments are still outstanding, for example, sea port services, airport services, land transportation and eventually even broadcasting. These are all integral to the infrastructure necessary to support the digital marketplace and any inefficient link will be a weak link in the entire supply chain.

(b) Focus on Performance

Many public agencies have mandates which are not tangibly or directly related to the running of the economy, whether the old or the new, for example, the Ministry of Community Development and Sports. However, as they utilise resources and play an important social role, there must be a shift in focus away from traditional budgetary mandates, such as cost-containment, to a semblance of P&L accountability or consumer satisfaction.

The Government should consider setting benchmarks from the users' perspectives, which can be a modification of the stated Desired Outcomes and Productivity Measures. More importantly, public sector employees should be assessed and motivated at the individual level.

As is already obvious, technology will continue to enable many Government agencies to better serve consumers of public services, including businesses. Yet, even though technology is fast becoming the most important input or resource, it is still widely viewed as a cost and not a means to exploiting distribution and existing infrastructure better.

Mindset Changes

Sir, as many of my colleagues have alluded to, it is no longer enough to maintain the status quo, even if it were possible. Neither is it about creating barriers to entry. The incumbent can frequently use its dominant position to build a competitive advantage but this cannot be achieved by imposing barriers.

Neither is it about cutting costs to maintain a marginal price advantage, as the edge will not be sustainable. It is really about coming up with new ideas, about thinking creatively.

If I may quote from Douglas Aldrich, it is about innovative actions that take nothing for granted, not existing monopoly, neither regulatory barriers nor market position.

Remember how our fresh food needs used to be met only during the early morning hours at the wet market. With more dual career families, supermarkets offering fresh food like NTUC Fairprice and Cold Storage, soon became popular. Now, with a global marketplace and irregular working patterns, many consumers would simply want to be able to order their food needs online and have them delivered at some appointed time. So, e-tailing is fast evolving. And we can see from this example that the solution is not about opening supermarkets round-the-clock but really providing the avenues for customers to have their needs met.

Sir, we all have certain mindsets that have evolved over time such as career and job aspirations, desiring after a known pattern to work and retirement. But many of these mindsets are not under scrutiny and they will need to be changed the sooner the better.

Sir, many of my colleagues have suggested how we should change mindsets. So I will not belabour the point, except to say a 9-to-5 job for all of our working lives till we retire, with a stable employer such as the Government or a multi-national company, will no longer do. Instead, a good bet will be to contribute towards a 24-by-7 (24 hours by 7 days) solution that evolves with changing needs.

That will require us to constantly think out-of-the-box, acquire knowledge and have an appetite for uncertainty without the comfort of safety nets. An assumption of risk and an open mind would have to be the working mantra. Contrary to throwing out old models, I believe that the risk-reward relationship will continue to hold true and that the rewards can be handsome for the innovative, diligent and adventurous contributor.

On that note, Sir, I support the Budget as presented by the Minister.

Mr S. Iswaran (West Coast): Thank you, Mr Speaker, Sir, for allowing me to join in the debate.

Sir, the Budget has generally been welcomed on the ground. In particular, its focus on the family, on retirement planning and also the high-tech sectors has been commended. The man-in-the-street of course feels that there are slim pickings, but of course the optimists will argue that slim pickings are better than no pickings.

Sir, I would like to comment on the Budget from the perspective of three tenets of fiscal policy. First, data reliability; second, distortionary effects of some of the policies; and, third, allocative efficiency.

Sir, the motion seeks this House's support for the Government's financial policy. Public policy must be predicated on reliable data, and that is especially so for financial policy. Robust forecasts of GDP growth rates, revenue and expenditure engender confidence in the Government's financial programme. It also reassures Singaporeans that the choices implicit in the Government's taxation and spending programme are indeed necessary.

Sir, in this light, the $8 billion turnaround Budget has raised many eyebrows. Many have already commented in this House on the sheer magnitude of this change. Allow me, Sir, to focus instead on the contributory factors and the nature of this change which, I believe, paints a revealing picture. The key question is whether this could have been anticipated, if not to the full extent, then at least partially. Firstly, expenditure was lower by 10%, or $3.4 billion, compared to the forecast of $29.4 billion, and it was attributed to two factors - lower cost and the rescheduling of some development expenditure.

Sir, could the relevant agencies who forecast this development expenditure, in the first place, have anticipated this delay? More importantly, should there be safeguards against such needless reservation of scarce resources, particularly in a year when there were other compelling needs? Otherwise, departments will continue to over-budget with impunity, secure in the knowledge that any residual that is unutilised can be rolled over to the next financial year.

On the revenue side, Sir, there has been a 20% increase, or $4.8 billion from the forecast of $24.1 billion. The V-shaped recovery has been assigned responsibility. Sir, in February 1999, the Government's forecast for growth was between -1% and 1%. The final figure was 5.4% and there were regular updates along the year. The question I have is whether we have sufficient instruments in our forecasting methods to anticipate some of these changes. For example, the Minister has mentioned in his speech the composite of leading indicators which is supposed to lead economic growth by up to nine months. That would mean that, in February, we should have a reasonable indication of what the economic scenario should be towards the end of the year. Similarly, we also use other proxies like the non-oil retained imports. One reason often given for variability in forecast, especially in Singapore's context, is that we are an open economy and that there are several exogenous factors beyond our control. So the question then is whether we can in fact separate out what the impact of those exogenous uncontrollable factors are as opposed to what is within our control.

Sir, these are not mere academic questions. The Government's budget and the premises on which it is built are of great political and economic consequence. The business sector sees it as a bellwether of economic health and for the country as a whole, it is an important tool for shaping expectations and behaviour. Sir, the greater the divergence between our forecast and the actuals, the weaker this instrument will be as a tool of economic policy, or social and national policy. I therefore urge the Minister to review this process in order to ensure that these divergences are minimised in future Budgets.

Sir, the second aspect is on distortionary effects. As far as possible, we would like fiscal policy to leave market forces untrammelled in order to pursue their self-interest, except where the desired effect is to change such market behaviour. In this Budget, one example where I feel, or fear, that a distortionary effect is likely is in the tax treatment of ESOPs. I welcome the Minister's announcement that more will be done. But I ask why the focus on the high-tech start-ups in particular. I raise this question for two reasons. Firstly, the principles underlying ESOPs are applicable to all aspects of business endeavour and not confined to the high-tech sector. The knowledge-based economy, as the Minister himself has said, emphasises comparative advantage through the use of knowledge. That is applicable whether a company is in the high-tech sector or in the traditional sector.

Secondly, this favourable treatment of ESOPs for the high-tech sector will distort market forces and lead to a further diversion of talent to the high-tech start-ups. The problem is already pronounced on the ground with many traditional companies and SMEs struggling to keep their talent, let alone attract new talent. If we have this asymmetric arrangement, then I think we will accentuate the problem on the ground. I therefore urge the Minister that, when making the announcement in May, he extends the enhanced tax treatment to all sectors of the economy.

Finally, Sir, allocative efficiency. Sir, we would like to think that, when Government earmarks expenditure to benefit particular segments of our population, it indeed reaches that segment of the population. In this regard, I have raised this question before and wish to put it to the Minister again, whether the use of HDB flat size as a proxy to distribute HDB service and conservancy charges and rental rebates, GST offsets and rebates, and a whole slew of other rebates - I did a quick back-of-the-envelope calculation and it is about $73 million this year - is an appropriate proxy. Would we be channelling these resources to individuals who need not receive such largesse? And would we be depriving others who would benefit more from the additional dollar?

Sir, individually, these amounts are very small per household, and it is likely to be like manna from heaven for many of them. It is just another thing and makes little impact on them. If we can aggregate some of these and give it to particular households judged to be needy, I think the impact would be far greater, psychologically, and also in terms of the social impact on their lives.

I would ask the Minister to consider a two-tier system, if not for this year, then in the forthcoming financial year. One, where we can adhere to this HDB proxy-based allocative system. But the second tier can be channelled through Town Councils and Community Development Councils. They are closer to the ground. They are in a better position to judge which households need this form of assistance and which do not, and they would be able to administer the funds entrusted to them. I urge the Minister to consider this change.

Mr Kenneth Chen Koon Lap (Hong Kah): Sir, yesterday, many MPs have already expressed their disappointment on the withdrawal of some of the rebates and concessions in this year's budget and the negative effect it has, especially on businesses which have been badly affected by the economic crisis. They need time and resources to recuperate despite the more than optimistic economic outlook. I therefore do not intend to elaborate except to reflect on how those who are affected must be feeling. It is like someone who is drowning and the lifeline is extended to him, but after he has been pulled out to the surface of the water, the lifeline is withdrawn and he has to struggle to swim ashore, that is provided he still has the strength to do so.

The Government's reluctance to extend its assistance all the way to ensure the complete recovery runs contrary to the Government's pro-business stand and also not consistent with the Finance Minister's assertion that the manufacturing and service industries should remain the twin pillars of our growth engine. If confidence is the main thrust of business success, the latest cut in the rebates and concessions must have dealt a severe blow to the confidence that is so badly needed at this critical time of recovery.

Sir, again, construction is the worst performer last year. While I am not overly concerned with the negative growth in the construction sector (they may be cyclical and with the economic recovery, I am sure robust growth will soon return) I am more concerned with the total lack of progress in the standard, quality and professionalism in our construction industry.

Yesterday, many MPs have expressed that we must all operate business at Internet speed. Unfortunately, the progress of the construction industry is still moving at a snail's pace. While other industries make progress by leaps and bounds, the construction industry stays stagnant and is persistently plagued with numerous seemingly unsolvable problems. It is sad to see that, in Singapore, our building cost remains one of the highest compared to other developed countries, such as the US, Europe and Australia, and the time taken for completion of a project, one of the longest and, in terms of productivity, the lowest. These create a serious problem to our national economy as it is an industry that is considered a pillar to our domestic economy and contributes over 9% to our GDP in the year 1998.

Therefore, I am greatly encouraged by the report submitted by the Construction 21 Steering Committee. The report is thorough and comprehensive. While I hope that this would lead to a new era in our construction industry, I remain cautiously optimistic. Through the years, many studies and proposed measures have been made to improve the industry but, sad to say, with very little success. Till today, the same problems faced by the industry throughout the years remain, and perhaps become more serious because of the rapid pace of development and the chronic manpower shortage.

By going through the Construction 21 Report, I have no doubt the Committee has identified most of the problems arising from our construction industry and the 39 recommendations have just about covered all, if not most, of the problems that have been the cause of putting this industry in its present sorry state. But the most comprehensive recommendation on paper may not produce the desired result in practice.

Let me tell you a story which has been told to me by some contractors. Some years ago, when the quality of our finishing was so deplorable, the authority recommended that contractors who have obtained a project of a certain size must employ a certain number of skilled craftsmen, otherwise, they would have to pay a levy or fine for every shortfall in the number required. If I remember correctly, it was about $5,000 for each skilled craftsman. So the contractors went to source from Hong Kong the necessary skilled craftsmen. But when they came, after working for a few months, they practically refused to work and just laze around. When queried by the project manager, they calmly retorted, saying that the manager should not complain for even though they did not do any work by just sitting around, the contractors still saved a sum of $3,000 because their wages were only $2,000. This is the Hongkonger's street-smartness for you. No wonder we lost the SingTel deal!

This little story illustrates the complexity and the intricacies of the industry and to implement successfully the recommendations by the Construction 21 Committee is no simple task. It will need constant review and monitoring and close supervision and, above all, manpower and financial resources. The responsibility to ensure the successful implementation of all these recommendations is under the charge of the Building and Construction Authority in the Ministry of National Development which I notice has been allocated a sum of $18.9 million for the fiscal year 2000. To execute this task of transforming our construction industry from the worst economic performer to a highly competitive global industry, this amount looks grossly inadequate, given the magnitude of the work involved and the importance of the building industry to our overall national economy. I hope the Minister can find some ways to allocate more funds to ensure that the work of the Construction 21 Committee will not be another White Paper that will turn into an academic study, gathering dust in some storage space in the Ministry.

Many MPs have also brought up the importance of keeping up with the IT, Internet age and that we have to allocate more resources to develop an IT industry which can make us into a global player in the information age. While I completely agree that IT and Internet development would have a greater impact on our lives than the industrial revolution and that we ignore it at our own peril, I want to sound a word of caution on our policy to nurture a new breed of entrepreneurs who dare to venture into the IT industry. Measures such as the opening up of the stock market for listing start-up IT companies, as well as the various measures and incentives given to encourage venture capital to support IT start-up technopreneurs are most welcome, but we must highlight, at the same time, that this IT business is a very volatile undertaking, one whose future is highly unpredictable and full of swift changes. I have come across a documentary on Silicon Valley in the United States. It is said to be a place where some of the richest people are found but, at the same time, it is also a place where many of the poorest congregate. The soup kitchens where down and out people in the United States get a free meal are well patronised in the Valley, and in the interview, many down and out aspirants stated that they have lost everything within months of their arrival in the Valley.

I have highlighted this because in Singapore, we have enjoyed steady economic progress throughout the last 30-40 years. Our younger generation has not experienced very severe setbacks. Now they are being presented with a rosy picture on how one can become a success overnight and bombarded with the constant vast exposure of how much opportunities are open to everyone who dares to venture into the Internet business. They may be misled into unrealistic expectation that success comes easily to those who try. The reality is far from that, for every successful IT technopreneur, thousands fall by the roadside. While there is no doubt that the future lies in IT and Internet business, we must prepare our younger generation for the likelihood of failure so that if they encounter failure, their lives would not be shattered but they will have perseverance and courage to stand up and fight again. More importantly, the Government has the duty to give the necessary balanced information to remind these adventurous young entrepreneurs on the shortfall of such undertakings.

I remember years ago when the Government encouraged Singaporeans to have a second wing by investing overseas, many responded. Some succeeded, but many failed and ended up blaming the Government's vigorous drive in encouraging them to go overseas. Perhaps at that time, we have painted too rosy a picture of opportunities lying beyond our shores and without, at the same time, pointing out the high-risk factor involved in such ventures. Therefore, many have found out about failure in a very painful way.

There are already signs that the euphoria of the spectacular result achieved by some of the IT listed companies are fading and consequently, many investors will be hurt very badly. It does not mean that all IT dot.com companies are in danger of falling apart but the ability to sort out the genuine ones from the purely speculative ones is important for those who intend to venture into this business, both as entrepreneurs and investors.

This new millennium will bring about some very exciting time for Singapore and I congratulate the Government and the people of Singapore for so successfully turning the economic crisis around. It says a lot for our Government's pragmatic policy and the will of our people to be united when a crisis confronts us. But I would wish that at times, the Government can be a bit more generous and understanding and ensure that whenever they extend a lifeline to those who needed it, they should go all the way to ensure a safe landing.

Assoc. Prof. Chin Tet Yung (Sembawang): Sir, before I begin, may I have your permission to address the House on an article in today's Straits Times by Ms Chua Lee Hoong entitled, "Do we really need 10 days to debate Budget?"

Sir, the short answer to Ms Chua is yes, and it is not enough. But let me first address some of Ms Chua's points which I am sure are well-intentioned, if somewhat mistaken at times. Ms Chua is an experienced reporter of Parliamentary proceedings, but she displays, in this instance, a misunderstanding of what Parliament is about. She must be aware that Parliament is the public face of democracy and that the executive is constitutionally accountable to Parliament. Such accountability, like justice, must not only be there but seen to be there. The Budget each year involves billions of dollars of public expenditure. This is the only occasion when Parliament has the opportunity to examine closely the programmes of each Ministry and how it proposes to use the funds allocated to it. Members of this House take their job very seriously and file many cuts in order to probe and query how Ministers intend to use public funds.

It is therefore not just about feedback to Ministers. Ms Chua will, I am sure, be gratified to know that everyone, including Ministers, is on e-mail and that we do send messages to Ministers. But she must also know that there must be public debate on such an important matter as the Budget, unless she and the public are satisfied with government behind closed doors.

As for a full-blown debate, I think it depends on what that means. We have never been very inclined to full passionate exchanges, except occasionally. But it does not mean that there was no debate on the other occasions as a sedate debate is still a debate.

Finally, let me come to the main point of Ms Chua's commentary whether 10 days are necessary. Let me put it this way. If Ms Chua was a Member down here with us in this Chamber, and if her cuts were the last in line, as mine are in one case, she would wish the debate was longer than 10 days when the guillotine comes down. I hope that Ms Chua would take the opportunity to state that she does value the importance of public debate in Parliament and an essential element of parliamentary democracy in Singapore. I hope her comments are not intended to belittle the efforts of Members of this House, the effort that we have put into this annual Budget debate.

Now, Mr Speaker, may I return somewhat nervously to my speech on the Budget debate. Sir, I support the motion standing in the name of the Minister for Finance.

As the new century dawns, we in Singapore are fortunate enough to find the economy turning around for the better. Indeed, as the Minister has pointed out, it is a V-shaped recovery, not an U-shaped one. Many who have heard the good news expected the Budget to contain more good news for the individuals as well as for corporations. In the Minister's own words, 1999 was a year of remarkable economic turnaround and the Asian crisis is largely behind us. More importantly, more than half of those retrenched in 1998 went back to the workforce. Asset prices rebounded strongly, stock markets saw strong rallies, consumer spending increased significantly, prospects are bright, the expected budget surplus is $3.2 billion in financial year 1999. It may not yet be the best of times, but is certainly far from the worst of times. Singaporeans can say that they have entered the new century with hope, at least with regard to our economic well-being.

There is no question that the economic well-being or the prosperity of a country is an important goal for any country. But there are other goals that any first world country will aim for. One would be a high quality of life, in terms of good housing, pleasant neighbourhood and environment, vibrant cultural life, arts, music literature and other forms of entertainment, and a good variety of quality sporting activities. Then there is the goal of human security, by which I mean protection, not just against crime, but also against being abandoned or destitute in old age, against poverty, against ill-health and of course protection not just for the workers against accidents at work, but also for families of those disabled workers. We may add the goal of inter-generational protection, that is, ensuring our children must also have a good education, opportunities for advancement when they reach working age. Finally, there is the all-important goal of national security, which is the defence against external threats.

The pursuit of all these goals is revealed in the way in which expenditure is allocated. The Budget signals a relative importance of these goals as reflected in the Budget outlays allocated to each Ministry. Currently, the expenditure summary has four sectors: security, social and community services, economic and infrastructural development and general services. Security includes Defence, Home Affairs and Civil Defence. It takes up 5.79% of GDP. Next, social and community services include Education, Health, Community Development and Sports, Information and the Arts, Environment and Public Housing. This takes up 6.93% of GDP. The economic and infrastructural development includes National Development, Communications and Information Technology, Trade and Industry, Manpower, Research and Development. This takes up 3.54% of GDP. General Services take up 1.26% of GDP.

If one were to look at this table, one would say that social and community services rank the highest in terms of expenditure. But on closer examination, we find that Defence takes up the highest percentage of GDP, followed by Education, Public Housing, Communications and Information Technology, Trade and Industry and Home Affairs. All these Ministries have expenditure budgets ranging from 1.09% of GDP to 4.48% of GDP. The budgets for Community Development and Sports, Information and the Arts and Environment together constitute no more than 1.19% of GDP, and Health takes up only 0.73% of GDP. If we say that the quality of life is determined by living conditions, the environment and encouraging the arts, we find that the expenditure budget for this amounts to only around 3.34% of GDP. This includes Health, Community Development and Sports, Information and the Arts, Environment and Public Housing, not an insubstantial amount, but one feels may be legitimately increased, given the economic prosperity of the nation.

But what is the reason in pursuing economic prosperity if not to improve the quality of life for one's people? Crude though this comparison might be, it coincides, I think, with the public perception that more can be done with respect to the goals relating to the quality of life as compared, say, with the economic well-being or the national security of the country. Many Members in this House have already spoken of the ways and means whereby we in Singapore can improve the quality of life of those who live here. But I wish to echo the calls of many Members that more funds should be allocated to the Ministries that are involved in quality of life development - Ministries such as Community Development and Sports, Information and the Arts, as well as Health and Environment.

The general point that I would like to emphasise here is that we probably should expect more to be spent on improving the quality of life in Singapore and, in particular, to ensure that no segment of our society be left out of this so-called fast, speedy Internet world. In our preoccupation with the need to pursue a knowledge-based economy, whatever that is, with Internet speed, whatever that is, is, of course, desirable. Government initiatives for technopreneurship to flourish in Singapore is laudable. The demands of globalisation and the knowledge-based economy however do not just exact a change in mindset among our population or training, but indeed require also a change in perspective for both young and old. It is very fundamental that this happens. The dangers of disconnection, instead of interconnection, are very high, when it comes to those who are near retirement age or those who did not do well perhaps in the pursuit of their studies.

There is talk of a digital divide, but I find the phrase rather clinical. It pertains more to the virtual world than the real. The danger is actually very real, in that those who do not have the drive or ability to engage in the digital world to participate in the knowledge-based economy may become the new poor. That is why I hope that more funds can be allocated to the Ministries dealing with the quality of life, so that they will take special pains to target this group of the potentially disconnected, and provide them with the means to at least understand better the demands of the Internet age as well as its benefits.

Sir, moving more directly to the knowledge-based economy and to the tax changes to encourage innovation, creativity and enterprise, I would like to ask the Minister whether the changes to the tax system are sufficient to stimulate the e-commerce sector, amongst other things. One of the major changes which he mentioned, for example, relates to the income tax concession for royalty payments. The exemption from tax of 90% of gross royalties received, of course, is a very significant concession. It applies to authors and composers who get royalties from publishers, but now extended to royalties received from recording, film or drama companies in Singapore. As for inventors and innovators, the income derived from approved inventions, etc, would now be extended to non-manufacturing sectors and to foreigners. Being taxed at only 10% of gross royalties is indeed a most stimulating consideration.

However, I have one problem relating to product innovation. As defined, it does not include a computer program, unless it is in the nature of a new computer operating system, or new language used in a computer program. Sir, I find this limitation to section 10(10) of the current Income Tax Act far too restrictive. It means, for example, that Bill Gates with his Windows 2000 or Linus Torvalds with his rival operating system, Linux, could profit from such a provision, but no one else in the software programming sector, not the ones who write programs to improve security for e-commerce transactions, not the ones who write programs for search engines to improve speed, not the ones who write new browsers, not the ones who write anti-virus programs. My question is: why not? For e-commerce to flourish, one should not only be thinking of companies such as Amazon.com, but about the many shareware writers, for example, who contribute to the vibrancy of the Internet, and provide the interest for many of us to see what programs these creative individuals can come up with. Anyone going to Downlot.com can only marvel at the true technopreneurs in action through a host of shareware packages available. I hope that there will be similar tax concessions made in the software programming industry and those who are about to embark on their first entrepreneurial project.

Sir, the Budget this year seems to have attracted some good comments but also some disappointments, but then that is to be expected. Even on items such as the 5% rebate for individuals, some have commented that with the alphabet, the "u" comes before the "v", ie, the u-turn, in terms of cutting the rebate by 5%, comes before the full recovery of the economy. This can be hard on those who are just within the tax net, who might have had to borrow during the crisis years. I hope the Minster would take into account the fact that recovery for individuals may not have been as quick or as fast as the general economy on the whole.

Sir, with that comment, I support the motion.

Mr Hawazi Daipi (Sembawang): Mr Speaker, Sir, I rise in support of the motion in the name of the Minister for Finance.

The almost 40 Members who spoke before me have given many suggestions and requests to the Finance Minister. Some focused on the need for more support for families, some asked for more support for workers, and not a few for firms. Indeed, our economy has recovered in an uneven way that while some firms are doing well, some others are still struggling. While fewer workers were retrenched last year compared to the number in 1998, there are still many areas where we need to improve support for our workers in facing the challenges of the knowledge-based economy.

In my view, the Budget presented by the Finance Minister attempts to respond to a number of long-term challenges facing us:

(1) The problems of an aging population, and aging

workforce;

(2) The keener competition for investments, jobs and markets in the face of a globalised economic system; and

(3) The speedier changes of technology and the effects on our economy and our workforce.

I think the Budget is a prudent and farsighted one. It is not a Budget to encourage entrepreneurship with one-off measures in order to develop a stronger domestic economy. Neither is it one to just to give away goodies after we have overcome the recession. No, it is not just an e-commerce budget. Thankfully, the budgets presented in this House have been consistently addressing long-term issues. There have been measures to build and strengthen our small State with no natural resources to rely on. Yes, our costs of doing business must remain competitive and we must have the skilled manpower to operate world-class infrastructure and man our industries. But, more importantly, and here I agree wholeheartedly with Dr Richard Hu, that we have to use our resources in preserving our social cohesion so that we can overcome future crises and make our economy more prosperous for our people.

Let me begin by stating the concern that I have over the challenges to the cohesion among the races in Singapore. We have a nation state that is multi-racial and because of this, it is delicately balanced; a society existing in peace and harmony because all the races recognise the stakes and the risks involved if we cannot co-exist, live together, work together and play together. Occasionally, we find the lines distinguishing the differences between the races drawn more clearly, lines that we ourselves have blurred through pulling together through hard times and celebrating through good times.

We have to be on guard against actions and even policies that could cause frictions among the races. However, there are also forces outside our jurisdiction that, with perhaps malice or with ill conceived ideas, may have caused problems within our own society. When a term like "Malay Malaysians" is used in expressing unhappiness with Singapore, for example, as has happened in recent times, it automatically infers a reference to Chinese Singaporeans. Immediately, we have the racial lines drawn and, immediately, it is no longer a relationship between Malaysians and Singaporeans, but between Malays and Chinese.

Whatever the reason behind it, it is not the main factor why I have brought up this issue. I am concerned with my multi-racial country and would not like to see a dent in our cohesion as a result of external factors. What I am trying to drive at is that we have to be on guard against events, developments, statements, from external sources that could affect our multi-racial cohesion.

But social cohesion is not just about race relations. It is also about the bond between the people and the Government, and a good Government at that. As demonstrated during the two economic recessions that we have experienced, people unite when they face common challenges, have a common goal, and a common hope.

Far from facing the social and political upheaval seen in neighbouring countries during the economic turmoil in the region, Singaporeans rallied behind the Government and were willing to chip in to hold costs down and by agreeing to wage cuts. They bear the fruits of their sacrifices now.

But as we all have heard, the problems are far from over. As the economy develops into one that is based mainly on knowledge and higher skills, a section of our workforce may be in danger of being dislocated. These are the almost 850,000 older workers who are in their 40s and who do not have secondary and higher education. These are the workers who will be vulnerable to technological changes at the company level and structural changes in the economy. The programmes of skills training, which among others include the Skills Redevelopment Programme coordinated by NTUC, are implemented to help older workers acquire new skills so that they remain employable and able to secure jobs.

It is indeed very difficult to guarantee jobs for workers. But it would also not be acceptable if our workers still find much difficulties in getting suitable jobs even after completing skills upgrading courses. I am afraid this is happening and we should be addressing this problem. The feedback we have been getting from some of these workers who have lost their jobs is that employers still prefer younger workers and discriminate against the older ones. This may not be seen as a big problem now as we see more jobs being created and more people are able to hold full-time jobs. But if we want to maintain social cohesion at this level, between the people and the Government, we have to ensure that discrimination on the count of age or any other form of discrimination at workplaces does not exist. If necessary, we should look at the possibility of amending the guidelines on the employment of foreign workers vis-a-vis older local workers. I am raising this issue as it is foreseen that subsequent batches of retrenched workers who take up skills training are likely to be older and probably would have more problems getting full-time jobs. And I am raising this because having jobs is the first line of our social safety net.

As our economy becomes even more knowledge-based and companies want to be more nimble and competitive, it is also possible that more workers will be involved in part-time and contract work. Most employers engaging such workers now do not contribute to their workers' CPF accounts. I hope this can be reviewed so that our workers' social safety net coverage would be further enhanced.

Circumstances change in societies and especially when the society becomes more sophisticated, through technological changes and advancement of information technology, we tend to see some sections of our society left behind. These sectors are usually those who are less prepared, less adaptable, and many times, less skilled. In a technologically competitive economy, it is mainly our older workers who have difficulty in learning new skills and finding new jobs. Yet we cannot leave this group to flounder because they will become the tinderbox that can split our society asunder.

In many ways, it is the measure of a developed society that is able to care for its weaker members. I hope some of the suggestions offered by Members during these two days of debate can be taken into consideration by our Minister for Finance. 3.16 pm

Mr Ong Kian Min (Pasir Ris): Mr Speaker, Sir, thank you for allowing me to join in this debate.

The Government is strongly encouraging innovation, creativity and enterprise. Over the last few months, there has been a general call for Singaporeans to be less risk averse so as to compete in the big league in this globalising world.

It is therefore no surprise that for this year's budget, Finance Minister Richard Hu reiterated the Government's clear intention of pursuing this change of attitude among Singaporeans and announced specific measures to encourage potential entrepreneurs to hazard more risks.

Many are seriously considering venturing into the new e-businesses, principally because of the huge financial rewards that await those who succeed. Stories about millionaires being made every day in Silicon Valley stir our imagination and fuel our dreams of creating the same wealth. With technology convergence and emergence of a new economy, there is now a better chance of making it big than ever before in our history.

But what is required to succeed in the new economy? As reflected in the front page of the Straits Times today, many Members of this House who spoke before me have asked whether we are ready for the new economy. Sir, at this juncture of the debate, I would like to touch on the related issue of whether we, both as a society and as individuals, are prepared for entrepreneurship and its consequences.

Many of the recent success stories we hear come from the United States. We cannot deny that our young are very much influenced by American culture and the American style of wealth creation. Throughout its history, America has produced more entrepreneurs than any other society. This is in part because no other culture is as dedicated to making each individual's dream come true. American culture encourages the individual to decide for himself, chart his own destiny and do his own thing. It constantly reminds the individual to be all he can be even to the extent of rejecting the influence of other people and opposing the external flow of events.

To many of us, this idea can be disturbing as it conjures images of rebellious anti-establishment disenfranchised spoilt brats who go around spraying graffiti and vandalising cars. That is one aspect, the negative side. To derive full benefits from our entrepreneurship drive, we must manage the negative and tap on the positive aspects.

A common story line in American movies is about the individuals who cannot quite fit into his environment, is rejected by his peers but yet comes back to save the world. Hence, in Star Wars Episode I, the individualistic Obi-Wan-Kenobi goes against the Jedi council to take on Skywalker as an apprentice. Tom Cruise, the Maverick in Top Gun, is defiant towards authority but comes back to save his fellow men. Bruce Willis in Die Hard, Sylvester Stallone in Rambo, Clint Eastwood in Dirty Harry and the list goes on.

These are stories of self-determined individuals who have the tenacity to pursue personal dreams but who also think of their fellow men. Taken together, these are very powerful attributes of entrepreneurship. I hope in parenting, and in our schools, we will not only emphasize the creative individual in our young but also the social responsibilities that come with it.

Another concern is that for every successful person who comes into the spotlight, there are probably hundreds, if not thousands, who did not quite make it. For every successful actor like Tom Cruise, there are hundreds of aspiring actors and actresses who sit day in and day out in audition queues and never got selected for a major part. For every great golfer, like Tiger Woods, or tennis star, like Pete Sampras, there are hundreds of unknowns who grind away but never quite make it to the big league.

This is one strong point of the American system that it is able to support and sustain a large group of aspiring talents to produce the few truly excellent ones.

For a small country like Singapore, can we afford letting our scarce human resources choose to do what they want with the risk that some, if not many, would never quite make it? This would be a major shift from our, I mean as parents, paternalistic approach of directing our children to undertake particular fields of study that will stand them in good stead to be gainfully employed with his or her skills used to the fullest.

Can we balance the need to plan, organise and not waste human talent, with the need for people to be entrepreneurial and hence to choose for themselves? The danger is that many may end up floating around, experimenting and not succeeding anywhere.

To us Asians, the desire to strike it out on our own, and be our own bosses, is not new. And when we fuel it with words of encouragement, financial incentives and especially the promise of the pot of gold that awaits the successful, I am sure that there would be some who would naively take the plunge into the world of technopreneurs even though they are ill-equipped and ill-prepared to do so.

Senior Minister Lee sounded a note of caution at the recent NTU forum when he said that one should not go blindly into the gold rush of dot.com start-ups. Risk must go hand in hand with research, with sound thinking. In other words, the risk cannot be for risk's sake, but must be calculated.

Those intending to venture out must consider carefully their business plans, revenue models, and competitive advantages in starting their new business in the new economy. In this new and untested world of e-commerce, some ventures succeed spectacularly, but many will simply fall along the wayside.

I believe we can minimise the waste of human talents not merely by hanging out monetary incentives and financial assistance but, more importantly, by proper guidance and assistance. To develop successful ventures, we need sound innovative ideas, good management, supportive partners, right timing, and a certain amount of providence for the many things that lie beyond our control.

The Government can assist with some of these concerns. In the world of e-commerce, alliances can be formed to create a buzz among technopreneurs to share their experiences and mistakes. An Internet association could be set up where people can meet and exchange ideas and information. Through such a forum, would-be entrepreneurs can find out what is new in the market, what has succeeded and what has failed. For those who are thinking of taking the plunge, this would be a good place to seek professional advice and tap on the finances of angels and venture capitalists, and on the experiences of industry gurus. This can improve the chances of success.

Sir, my fear is that, if left on its own without proper guidance and assistance, our new economy may go down the same path as our traditional retail industry. In the old economy, I know of some people who left well-paid jobs to start retail outlets. It is a business that appears simple enough. Some mistakenly thought that all they had to do was to rent some shop space, take some goods from the distributors, display them on the shelves and hope for the best. But it is not so simple. Many retailers are hardly able to make ends meet. Others are profitable mainly due to good location which brings with it good human traffic.

From time to time, our Ministers have lamented the low level of productivity in our retail sector. Likewise, if we are not careful and do not learn from our past mistakes, our new economy may be littered with run-of-the-mill cybershops floating on the Web suffering from poor Internet traffic, where the cyber equivalent of a good location is a catchy dot.com name.

Nonetheless, even with the best programmes, incentives and assistance, e-commerce and whatever other enterprises, always carry a certain element of risk. Our Prime Minister said at the last National Day Rally that we must "accept the inevitable failures and rejoice with winners who collect the pot of gold". Both these limbs - accepting the failures and rejoicing with the winners - are challenging.

On the first, what does it mean for our technopreneurs to accept failure should they choose to take risk with the hope of reaping the potential reward?

I certainly hope they do not blame the Government for having encouraged them to take the risk. I am reminded of our drive some years ago to go regional and develop our external wing. Many companies heeded the Government's call and expanded their businesses into countries like the People's Republic of China, Vietnam and Indonesia. When their investments did not bear fruit, and especially when things took a turn for the worse as a result of the economic crisis, we heard all sorts of complaints and grumbling from business people that the Government was somehow to blame.

Surely, this is not the spirit of a true entrepreneur. We have heard again and again the term "caveat emptor", buyers beware, being mentioned in this House. We must learn to be less reliant on the Government and be more independent to watch out for ourselves. I am not saying that society should not support those who have failed. I am just reminding ourselves that we should assume some healthy responsibilities in whatever venture we embark. The true spirit of an enterpreneur is to take risks and to bear them bravely.

As Finance Minister Richard Hu said, many talented people are prepared to accept low or even no salaries in return for equity stakes. These stakes can be worth a lot of money but only if the company is viable, goes for an IPO or is acquired by another company. What if a risk-taker cannot support his family while waiting for his shares to increase ten or a hundred fold? What if the company fails and his shares are worthless? In such a situation, we may end up with a group of people who may not have received any income for months or who have lost their life savings and are facing financial hardship.

As a society, we must support those who do not make it. Having gone through the last economic crisis, such cases are not new to us. During the crisis, there were some people who lost their jobs and their source of income. The Government stepped in to help. The HDB was asked to reschedule their housing loan repayments. The Ministry of Education was asked to waive school fees for their children. We pulled together as a community to help those who were less fortunate.

But there is a difference in that when people lose their jobs, we empathise with them because often it is something beyond the worker's control. On the other hand, for the risk-taker, he is consciously leaving a secure source of income to take risks that may pay off or may not pay off. Nevertheless, I believe if we are committed to encouraging enterprise we, as a society, should also be prepared for the consequences of failure. As a society, we must be committed to help, nurture, and support these risk-takers to sustain them and their families in difficult times. This is the huge undertaking, the long term benefits of which depend on the risk-takers themselves. Why do I say this?

This question leads to the second limb of what our Prime Minister said at the last National Day Rally. How do we rejoice with the winners who collect the pot of gold? Or, put it the other way round, for our entrepreneurs who have collected their pot of gold, what should their response be?

After the support and sustenance that society has given entrepreneurs to bring about their success, it will be very sad if, when they have made it, when their company is listed on SGX or NASDAQ, and they are worth a few hundred million dollars, that they should pack up and leave Singapore.

I am reminded of the great entrepreneurs of the industrial revolution. Men like Carnegie, Mellon, Ford and Rockefeller. These entrepreneurs defied the values of landed gentility and inherited privilege, had the courage and the determination to strike out on their own and transformed the world. These men became great through massive corporate acquisitions and empire building, and great again through massive charity. We should follow the good example set by these great individuals of capitalism.

In conclusion, Sir, I would like to go back to the heroes of American popular culture whom I mentioned in the beginning of my speech. Robert Bellah has pointed out the American myth's hero "again and again saves a society he can never completely fit into". The value of American heroes to their society is that they "stand alone, not needing others, not depending on their judgment, and not submitting to their wishes". But this brand of individualism is not selfishness. It is to be regarded as a kind of heroic selflessness where one accepts the necessity of being alone, of being different from the rest and of going against the system in order to serve the values of the community one comes from.

For us to succeed as a society in the long run and to make sense of all these incentives and assistance given by the Government, entrepreneurs who made it must feel the need to, and do in fact, return something to the community. Whether by serving the community, by creating job opportunities for other Singaporeans, by giving to the community and charities, or by keeping some of their businesses in Singapore and paying their taxes, I hope they will continue to contribute in some significant way.

Sir, I support the Budget Statement.