MAIN AND DEVELOPMENT ESTIMATES OF EXPENDITURE FOR THE FINANCIAL YEAR, 1ST APRIL, 2000 TO 31ST MARCH, 2001

Order read for consideration in Committee of Supply [1st Allotted Day].

[Mr Speaker in the Chair]

The Chairman: Main and Development Estimates of Expenditure of Singapore for the financial year, 1st April, 2000 to 31st March, 2001 contained in Paper Cmd No. 2 of 2000.

For convenience, I shall take the totals for each head of expenditure in the Main and Development Estimates as they appear in the last columns of the schedules of estimated expenditure under the Main and Development Estimates Outlays for FY 2000/2001 on pages 37 and 38 respectively of the Command Paper.

Besides the "guillotine" times for heads of expenditure, which I have fixed under Standing Order 89(7)(a), I have also allotted the time for discussion of each amendment in the Estimates. The time allotted for discussion includes the replies from the front bench. I shall announce these times as we go along.

Members have submitted a record number of 529 notices of amendments. Perhaps, Members have decided to subject me to a more vigorous test of my patience this year. But indeed, it shows the seriousness in which we, as legislators, treat this annual debate on the budgets for the different Ministries. However, time is a constraining factor, and Members will therefore not necessarily be given the amount of time they have requested. Members are cognizant of the fact that the time allotted for the debate is not enough, and have readily agreed a while ago to extend the daily sitting hours to 7.00 pm and to an additional sitting day this Saturday till 5.00 pm.

Nevertheless, we will still be hard-pressed for time and I once again urge Members to keep their speeches to the point so that we can conduct our business at an efficient pace. If not, I must warn Members they risk being "guillotined".

Members who have not submitted cuts but would like to join in the debate on a particular amendment will be allowed to do so only if there is sufficient time left on the amendment.

I shall deal first with the heads of expenditure in respect of which amendments stand on the Order Paper Supplement.

Head V -

The Chairman: Head V - Prime Minister's Office. Amendment No. (1), Mrs Lim Hwee Hua.

Mrs Lim Hwee Hua (Marine Parade): Sir, I beg to move,

That the total sum to be allocated for Head V of the Main Estimates be reduced by $100.

Sir, in moving this cut, I would like to highlight a difference in motivating staff between the public and the private sectors. The private sector is driven by the bottomline, be it profit and loss or value-added. This philosophy is usually embraced by the entire organisation, literally through thick and thin, through mergers and acquisitions or through industry restructuring.

Consistent with this, performance targets are in place for the majority of private enterprises. Employees contribute accordingly and generally cannot but feel the pulse of the underlying industry. This is most evident during the recession and the restructuring of the electronics sector. Retrenchment, as we all know, was a painful experience for those affected. The reality was that the profitability of their companies had a direct impact on them.

By the same token and to complement a fast changing and technology-driven economy, the public sector will increasingly be expected to deliver acceptable value-added. This is particularly so as technology will force more transparency on the entire supply chain, including the delivery of public services.

Thus, every public sector employee will soon be forced to focus on customer satisfaction at each level, and to be more innovative and entrepreneurial in his approach.

Sir, our limited manpower resources would be another reason for narrowing any disparity in the terms of employment between the public and private sectors. If nothing else, a disparity makes for difficult deployment of capable civil servants to for-profit Government-linked companies or even the private sector.

It is perhaps inevitable that a performance-based variable may eventually dominate the overall compensation of a typical worker in Singapore. In the private sector, this already takes the form of actual bonuses paid out or stock options. An appropriate equivalent would have to be worked out for civil servants in the long run and, in fact, for all public sector employees. Otherwise, the call for them to be more entrepreneurial would ring hollow.

I would therefore like to ask the Prime Minister on how the vision of a more entrepreneurial public sector will be realised.

Mr Simon Tay: Sir, I wish to speak on the need to integrate communication and response to the public as part of the assessment of civil servants, especially among its elite. In this sense, my remarks follow on what the MP for Marine Parade GRC has spoken.

Sir, Singaporeans have come to expect greater consultation and participation in public life. In the 1980s, the then Deputy Prime Minister, Mr Goh Chok Tong, made greater consultation one of the central aspects of the second generation government. Institutions for feedback were created, consultation increased, town councils were used to devolve more authority and participation to the local level.

In the decade since Prime Minister Goh has come into office, further steps have been taken. CDCs now try to bring Government even closer to the people. The Singapore 21 initiative set up by Prime Minister Goh aims for the ideal of "active citizens". This vision is not of a strong people and a weak Government. Nor is it a vision of people opposing Government. Singapore 21 envisions the ideal of a society which people and Government work together, and both are strong.

When future generations look back on these 10 years, history may well judge that greater consultation and greater participation are part of the legacy left by Prime Minister Goh and his team.

On the other hand, Sir, there are some who believe that what we have experienced is more of a function of the present Prime Minister's personal style. Some may point out that Singapore 21 is not explicitly the vision of a third generation of leaders. Many hope that they will come to embrace this vision, but there is no guarantee at present, and this is why I turn to the question of the civil service and institutionalising their ability and willingness to communicate and respond to the public.

There was a recent debate in the public press which I shall not touch on. However, it is clear that the questions raised were not simply about the National Library or the Bras Basah Park, but broader issues, such as whether there should be benchmarks for the civil service in dealing with public consultation or whether the examples touched upon in this debate can and should be improved in the future.

Sir, I personally remain optimistic. Promises made are genuinely meant and the change and improvements will come. But I would urge the processes that promote change should be institutionalised. They should be made part of a permanent way of how we do things and how we assess the performance of our civil servants. One very important step in this direction would be to integrate this aspect of communication and response to the public in the assessment of civil servants, especially the elite.

If we do this, we are setting the right signal that consultation is vital. By including communication and response to the public, we will be moving beyond exhortation. The process of consultation will increasingly be part of the criteria for success. It will no longer be sufficient to ask, "Is the job done, and how well?" It will also be asked, "How was it done?"

Of course, not all decisions can be consulted. Some are market sensitive. Others may touch on security secrets. Exceptions can be justified. Nor of course does consultation mean that public suggestions will always be adopted. In this regard, we must accept that consultation is a complex quality to measure. But the effort must be made.

A partial analogy can be drawn to the efforts already undertaken by the Government in improving service quality. This has focused on over-the-counter services such as reducing queues in various departments. Such services are important, and improvements are relatively easy to measure. While consultation engagements are more complex to measure, they are no less important qualities. In fact, I believe that they will be increasingly demanded by an increasingly educated and cosmopolitan Singapore.

Because public consultation is more complex, and because it would be increasingly demanded, the process should therefore begin now. Let greater public consultation and participation go from a promise to a basic premise of Government in Singapore. Let public consultation and participation be institutionalised for the future. I hope in this way, the present Government will lay a foundation stone upon which succeeding governments and generations of citizens can build their home.

Mr Yeo Guat Kwang (Cheng San): Sir, for the past decade, companies in the United States have been continually restructuring their operations to make themselves leaner and more profitable. Now other countries, including Japan, are doing the same things. In Singapore, we have seen companies restructuring not because of economic difficulties, but to become more competitive.

Globalisation and the rapid change in technology are altering the way companies operate and the way we work. Are we ready for such drastic changes to our working life? We could try to dig in our heels in an attempt to stop these changes. But this would not serve any good. If we insist to resist change, we will do ourselves more harm than good. Instead, we need to react fast and prepare our workers early to face the challenge.

Work has to be redesigned to successfully meet the new demands of the knowledge-based economy and sustain competitiveness. For example, companies have to redesign their work process to be more responsive to customers. Staff have to be empowered with more knowledge and technology to create more value.

While work redesign is not a new concept, it has taken on a new dimension brought about by our ageing society and higher retirement age. Presently, retirement age is set at 62 but, in due course, it will be raised to 67.

Besides creating greater efficiency in work processes, work redesign can help workers stay employable for life, through customising work processes for this specific purpose. Work redesign will also remove the stigma attached to some low-level jobs. Moreover, the higher the productivity gain, the better chances there are of our workers to receive better earnings and able to enhance their quality of life.

The public sector should also consider ways to streamline different schemes of service, better deploy staff, and respond to the higher expectations of a more educated workforce and sustain high productivity gain.

Now let me cite the example of PSB. From 1996, clerical officers were transformed into administrative executives. With 80% of school leavers going for higher education, PSB found it difficult to recruit clerical grades.

It was not just a change in title. PSB redesigned the work process, in consultation with the union. The job content was expanded to incorporate higher end administrative duties. The salary scales were also adjusted. A comprehensive training programme was put in place to help existing staff to acquire the new skills for the enriched role and more responsible tasks they have to perform. This project enables PSB employees to pursue more development programmes to enhance their employability. They are now enjoying better career progression path and a more rewarding work life. 1.00 pm

I hope the Public Service Division will also consider such work design initiative for applicable job areas in the public sector to increase the value of the existing jobs and provide structured training for employees to develop new competencies. As our civil servants upgrade their skills to take up these high value added jobs, they will be more employable and be paid more. The work redesign programme should be widely considered in the public sector, not only to create greater efficiency but also to better deploy manpower to areas where there is staff shortage, such as school's office to help ease teachers' administrative workload.

Mr Inderjit Singh (Ang Mo Kio): Sir, our model of governance has been one of a stable and strong central government and civil service, and it was an excellent model for the building of Singapore in the past 34 years. As we now compete in the world with the world's best countries and on a global playing field, the challenges of nation building and economic development are completely different from before. As such, there is a serious need for us to review how our Government is organised.

Certain sectors of governance need to have strong and central control, but others can be more open and flexible. And I feel that the governance of Singapore should be outsourced as much as possible with the people and the private sectors taking on more responsibilities than before. There is no necessity for the Government to have a strong hand in every aspect of economic development and of our society.

In the USA and Taiwan, there are fine examples of how the private sector is the key driver of economic development and there is very little central control exerted in many areas of the countries' management. Secondly, the transparency of policies and practices will do good for everyone. At the moment, those outside the Government service have very little visibility and do not have a good understanding of public policies. Any attempt to get more information typically results in a bureaucratic form of obstacles. In my opinion, the more the people in the private sector know and understand our policies, the more efficient the whole system will be. Things will move even faster. So I urge the Government to be more transparent and share more information with Singaporeans when they require.

We have excellent and brilliant people in the civil service. My experience with them in the last three years has allowed me to understand them more, and conclude that we have good and committed people in the civil service. However, the private and people sectors assume that the civil service know all the issues facing the world outside the civil service. And the civil servants assume that citizens know all the policies of the Government well. The lesson that I have learned is that this is not true at all. This therefore means that there is an important need for greater interaction and exchanges, including the hiring of more people from the private sector into the key civil service positions. We need to create a true partnership relationship between the people/private and the public sectors.

Sir, the concept that the private sector individuals be involved in the governance of Singapore should be seriously considered. I suggest that we have two or three people who can be involved in Cabinet style discussions to discuss policies, who are from outside the central government. My reason for suggesting this is because our system is very central leadership focused and key issues are discussed at Cabinet or by a core group of people in leadership positions, and decisions are made by the same people. Similarly, such outsiders can also be mirroring the Permanent Secretaries and senior civil servants in some policy discussions. A more rounded discussion will lead to more polished policies. In fact, in any Government position, it is valuable to have people from outside the circle who can be a source of valuable input and, at the same time, be responsible for their suggestions, quite different from using them just as input tools as we do today.

Sir, the civil service reward system also needs to be looked into, and I feel that they must not be left out in the booming knowledge-based economy. Policy makers must feel motivated that they should benefit from the booming economy, just as everyone else in Singapore. I suggest a share ownership scheme and also a more flexible compensation package to allow them to participate in the economy. For example, a unit trust could be set up for investments in start-up companies in Singapore, and this can be part of a civil servant's compensation package.

We also need a more aggressive approach of policy making and be willing to take more risks. My impression is that many key civil servants rather not rock the boat and they rather implement safe policies so that their careers are not affected as a result of a wrong or failed policy. In fact, they should be rewarded for daring to be different and proposing radical changes, even if the policies are not the best and stable of all the policies implemented.

Finally, Sir, I suggest that the Government's spin off value-added components of the statutory boards of Government and of GLCs into companies, then fund these new companies and let the founders and initiators who may be civil servants to leave the civil service and run these businesses backed by funds from the Government.

Sir, I would like to conclude by saying that we have an excellent civil service in place, staffed by many good people. What I am suggesting is a change in our system and not the people, and it is not intended to point at any particular group of Singaporeans. Collectively, all of us have a very important role to play and I think if we work together, we can make a big difference.

Mr Yeo Guat Kwang: Sir, with an aging population and rapid business reorganisation and restructuring, more companies will retrain workers in order to stay competitive and profitable. Workers who experience periods of unemployment in between jobs can no longer look forward to life-time employment in a single company. It is therefore in the workers' interest to make benefits provided for them portable, so that they have adequate protection as they move from job to job.

Employee medical benefits are prime examples. Currently, these are not portable in the private sector. It makes it harder for older workers to change jobs or find new jobs after retrenchment, especially if they have some medical condition. New employers would be reluctant to take these older workers and will take them as a burden of the older workers with the medical expenses.

I am glad that the Government has adopted a portable medical benefit scheme for the civil servants since 1994. With this portable Medisave-cum-Subsidised Outpatient (MSO) scheme, our civil servants are given an additional Medisave contribution of 1% in lieu of the traditional hospitalisation benefits. The officers can use the money to pay for his or his dependant's inpatient bill or for a more comprehensive medical insurance such as IncomeShield. In addition, there is another subsidy for outpatient expenses for the officer and his eligible dependants capped at $350 per year. This scheme is portable as the officer can keep the additional contribution in his Medisave account. I would like to suggest that PSD also consider making the $350 subsidy for outpatient treatment portable. Instead of keeping the sum that is not used, the balance should also go into an employee's Medisave account.

Sir, the MSO scheme has been in place for six years. I think it is timely for the PSD to review the percentage of additional Medisave contribution and the $350 annual cap for outpatient subsidy for our civil servants under the MSO scheme. I would also like to urge the PSD to work a mechanism to ensure that such provision will be adjusted as medical costs increase with time.

Sir, with the cost cutting measure, our civil servants had their wages cut by 6.2% through the annual variable and monthly variable components. Now that we have "V-shape" recovery, the Government, as an employer, should recognise the public sector employees' sacrifices. As the recovery is an uneven one, their pay cut has not been fully restored. I hope the Government, as an employer, could consider recognising the sacrifices of the civil servants by giving them a one-off special Medisave contribution.

Mr Thomas Thomas (Nominated Member): Sir, I want to thank the Member for Cheng San GRC for explaining the background, as it makes my presentation more easier.

I want to say that the civil service medical benefit is one of the prime selling points for civil servants all the while. In 1994, the civil service actually introduced changes, and these changes were what Mr Yeo had touched upon. One of the key components of the civil service change was the aspect of co-payment in medical benefits. We also know that the private sector is looking to the civil service and the public sector to set the tone, and sees the Government as a role model for staff and welfare benefits. At the same time, we are encouraging the private sector to get on to this co-payment scheme and yet it is not picking up. One of the reasons why it is not picking up is because the civil service had introduced this scheme in 1994 and up to now had made no revision. People see it as a stagnation of benefits when pay and wages go up, cost of medical benefit goes up. But when the two aspects of it had not changed, it looks as if the scheme has gone down.

I would like to ask the Government to review these quantums regularly, and now is the time for change. Changes can be in two aspects. One is the 1% which goes into the Medisave account under the MSO scheme, and the cap of $7,000 salary a month, which is equivalent to $350 a year. The other one is a subsidy for outpatient medical treatment for an employee's family which is placed at a maximum of $350.

While I ask the civil service and the Prime Minister to look at the review, I also want to say that we should do revisions periodically. It is very difficult to get the private sector to accept change when there are no changes. We should not only have changes periodically. We should also set in place the basis of those changes, what is it linked to, and how it will go up. In that way, nobody will feel disadvantaged in moving to a co-payment scheme which is supposed to benefit everyone.

Dr Jennifer Lee (Nominated Member): Sir, today, I have a proposition for the Prime Minister on making babies, speaking on behalf of Singaporean couples, of course. The package I am asking the Prime Minister to consider is just but one small piece of the jigsaw puzzle that we must put together if we are to be serious about encouraging more Singaporeans to start families, to grow bigger families and to keep those families strong and sound. Government is the largest employer in Singapore. If it will take the lead in doing as much as it can to create a working environment that is family friendly, this will go a long way, both in the direct impact on the tens of thousands of civil servants as well as in setting the example for other organisations and companies to follow.

The civil service already offers some very good benefits in terms of sick child leave for mothers, part-time employment and no-pay leave for mothers after child birth for child minding, and on-site childcare centres in many of the Ministries. These are wonderful benefits to have, but I would like to suggest some enhancements.

Firstly, sick child leave is currently only for children up to six years of age. I believe this must have been chosen in relation to the age that he starts going to school. But the kiddie going to primary school is still not old or independent enough to go to the doctor by himself if he should fall ill. I would therefore suggest raising the cut-off age to, say, 12 years, when the child is of secondary school level and more independent. I do not believe that parents will abuse the privilege. The benefit should also be made available to either parent. I am not asking for more days per child, just that the five days per child per annum may be taken by either one of the parents. In the not too distant future, I think we may have to consider similar leave for sick elderly members of the family as well, as the population ages.

Secondly, while I know that a number of civil servants have used the part-time employment and no-pay leave benefit to take time off to look after young children, it is also a fact that the ease or otherwise of organising this varies from department to department, and is often a function of how supportive individual supervisors are. We all know how responsive civil servants are to major campaigns if they are pushed with enough conviction from the top. So if the message to be supportive of and, in fact, to do their best to facilitate parents who wish to avail themselves of these benefits can be driven as hard as, for example, the PS 21 effort, this would be most helpful. Again, availing these benefits to either parent would send a great message on breaking down the rigidities of stereotyped roles. It does not matter if it is years before many or, in fact, any fathers take up the offer, but the important thing is to start making change to mindsets. 1.15 pm

Next, the issue of maternity leave for the third and later children. Our usual position on this issue has been that the generous tax rebates given to mothers for their third, fourth and more children, more than compensate for the loss of maternity leave. But we know that this benefits only women who are in the higher income groups.

At the time when these tax incentives were put in place we were very clear that we were specifically targetting this group. But I believe that by now, we are looking to encourage a much broader population of women, couples, to have more children. I really think it is time for us to reconsider this.

Let me just touch on the subject of paternity leave. Let me say upfront that I do not think that a man's decision to have a child is influenced one iota by whether he has a few days of paternity leave or not. However, it is part of the overall culture and environment of whether we truly want to celebrate the fathering of a child. Especially, when on the other side of the equation, how many man-days would the civil service lose by offering such a benefit?

And finally, one old request is revived - a five-day work week. Having two days off in the week would make all the difference in the world to a harried couple. It would allow time to get chores done, and it would leave time left over to relax with the family. I am not asking for less hours in the work week, only that the hours worked be arranged in a five-day rotation. It is also possible to do this and still have Government services available six days a week. All it takes is a willingness to be flexible about scheduling.

Sir, it will be wonderful if the Prime Minister says yes to these small requests, but I suspect that the answer may more likely to be no. And so, before he actually does, I am going to ask that he does not say no outright, but will agree to consider putting these items, together with others that I will be proposing over the next week and a half, on a list to be put before, and added to by, a central review and coordinating body, an Inter-Ministerial Committee on the Family, to take a holistic approach in a national effort to draw up a comprehensive blueprint to build more, strong and sound Singaporean families.

Mr J. B. Jeyaretnam (Non-Constituency Member): Mr Speaker, Sir, Mrs Lim, in moving the debate on the examination of the estimates for the Prime Minister's Office, focuses on the performance of civil servants. I would now like to focus a little bit on the Ministers.

I know I have been asking this every year, but I am afraid I have not got any satisfactory answers. I see the provision for political appointments for next year has gone up by something like $3,159,500. May I ask what is this increase for? May I be told where is this money going to? Secondly, something which I have already raised is, do we really need seven Ministers in the Prime Minister's Office for the tasks of the Prime Minister and his colleagues? We have five Ministers and two Ministers of State, besides the Parliamentary Secretary and two Political Secretaries. I have asked time and time again about a greater clarification of the duties of these various Ministers, and I have never been given a proper answer.

I see that under the Constitution notification of the responsibilities of Ministers, the responsibility of the Senior Minister is that he is charged with the responsibility for advising Ministers on any of the subjects. When he was the Prime Minister and Mr Rajaratnam was the Senior Minister, I asked the Prime Minister what exactly was Mr Rajaratnam doing, and his answer was, "He advises me whenever I need his advice." I thought then he was paid an unduly heavy sum for that duty. May we know what exactly is the duty performed by the Senior Minister in the office? The notification says he is charged with the responsibility. Does he advise the Ministers when he is called upon for advice? Does he give directives every day to the Ministries as to how they should conduct their affairs and how they should run their Ministry? May I know whether the Prime Minister has any responsibility for advising the Ministers, or it is left solely to the Senior Minister? I think we need more clarification as to why it is necessary for the Prime Minister's Office to have seven Ministers. What exactly are they doing and why is it necessary to pay them what they are being paid at the moment?

Mr Inderjit Singh: Mr Speaker, Sir, last year we had a very lively debate in this House during the debate on the Singapore 21 Vision. During the debate, the Prime Minister introduced the concept of the Singapore tribe, a unique group of people making a nation. Sir, the key issue is whether we, as a country, are doing enough to build emotional bonds among Singaporeans. Are we serious about building a Singapore Tribe? The recent Singapore Press Holdings' survey on race relations is an important reminder that we still have some way to go.

Sir, legislation has been used as a key approach to ensure inter-racial ties are maintained, but this may not lead to greater emotional bonding. A strong Government able to keep peace by creating rules that require its citizens to live with one another and the fear of breaking the rules may give the false impression that things are all right. They may instead lead to superficial bonds and we may have the false comfort that everything is all right.

Sir, I feel that the mistrust and historical problems need to be addressed urgently and the recent survey on race relations revealed that while things have improved, this is still a lingering problem among Singaporeans. I feel that not enough has been done to build a Singapore identity to maximise the common overlapping areas of all the races, as Prime Minister Goh puts it in the S21 speech.

Practices like the ethnic based self-help groups tell our people that we should only help our own kind and that only our own kind will help us. This is a very divisive approach, in my opinion, while it may have other benefits in all of us helping one another. Sir, my generation did not grow up in such an environment. We treated different races more as one than today's younger generation and this is my fear that it might lead to greater alienation of the various races if we continue this practice.

Similarly, practices in some schools to segregate children into different classes based on the mother tongue they speak, for operational efficiency, are bad. In fact, there are many cases where students group together and speak their mother tongue at the expense of their friends who do not understand the language. This may lead to racial enclaves in school. In fact, some of this is already happening now and we need to address this issue urgently.

We really need to do more to develop an integrated society and focus more on increasing our overlapping common traits so that in the long term a unique Singapore Tribe model of diversity and similarity can develop. Emotional bonding cannot be left to legislation but requires a "heartware" approach. We need to ensure that the Singapore

21 Vision becomes a reality for all.

Mr Zulkifli Bin Baharudin (Nominated Member): Sir, one positive result of the recent Straits Times' survey on race relations said most Singaporeans feel that, compared to 10 years ago, relations between different races in Singapore are better now. They do not foresee a racial riot happening in Singapore in the next 10 years. This is extremely significant because the survey was carried out in the midst of racial problems in our neighbouring countries. This shows great progress we have made in ensuring racial harmony and the freedom Singaporeans have in the system of law and order.

As to the result that half of the respondents do not think that friends of a different race would protect them should a race riot break out in Singapore, a friend of mine remarked that it is almost like asking someone whether he would drink water from the tap should a cholera outbreak break out in Singapore. There are therefore reasons not to be too pessimistic about it. However, what is disturbing to me personally is the revelation that Singaporeans generally have about only five friends of a different race. I think this is far too small. Either we really have very few friends or we are such unfriendly people. As we look closely at the various activities where different races come together, a large number of them have meals together and frequently speak to someone of a different race. But when it comes to more personal activities, like shopping, going to the movies, and sports, many tend to do so with only people of the same race. I find this worrying. Clearly, we need to do more to forge greater inter-racial harmony and one way is really, we have no other choice, to seize all available opportunities for greater inter-racial collaboration. Because only by doing things together, especially things that typically have nothing to do with race, will people succeed in breaking down racial barriers. Because shared activities build bonds and trust among groups and create a foundation on which people can have more personal and deeper understanding of relationship.

With this in mind, I have a few suggestions for consideration. Perhaps it is time for us to consider setting up a multi-cultural agency, a statutory board under the Prime Minister's Office, to promote multi-culturalism. This may be a lofty idea, or a very vague idea at the moment, but the achievement of this idea is so important that it leaves us with no other choice but to try.

The other thing is that the Community Development Councils must be developed to be the focal points for all inter-racial activities within a municipal area. However, to achieve this, we may have to review policies that allow ethnic and religious based organisations to continue to provide an ever increasing array of services that, in my view, may potentially retard racial integration. What cultural values do we expect our young to have if they spend their entire pre-school years mixing around with people of their own race and religion? Perhaps, we now have to define the limits on which ethnic based groups can organise their activities. CDCs can provide better incentives to draw social and ethnic based organisations to locate their services in CDCs and to carry out activities there. As most have problems securing funds, I think CDCs can offer a lot more help.

Thirdly, I think sport games, festivals and celebrations are powerful vehicles for social integration. For example, if left on its own, only Malays will play sepak takraw, Chinese will play basketball and perhaps only Indians play hockey. I think we should look at some of these activities and organise sports, perhaps purely for this purpose alone.

Today, Sir, we have become a society which is tolerant and respectful of other races and cultures, but we must go beyond to become a society that can celebrate our diversity and differences. We have festivals and celebrations, but have we really taken full advantage to use these festivals as a means for social cohesion and racial understanding? Christmas and New Year parties may become common celebrations in offices because of the predominantly Chinese population in work places, but it is precisely this that, unless we take an effort to understand and appreciate the special festivals of minority groups, we cannot fully become a multi-racial society. Unfortunately, Sir, in Singapore, on matters like this, sometimes it takes Government, itself the biggest employer, to make a start and to be a catalyst of change. So too with foreign talents and immigrants. We need to take this extra effort to make them feel recognised and valued, that we respect their culture and tradition despite being in the minority, have a place in Singapore and, better still, can be celebrated by all Singaporeans because precisely we value their differences and the diversity that they bring to Singapore. 1.30 pm

Finally, we must keep the conversation going and have an open and honest discussion which, I think, can lead to better examination of attitudes, behaviour and wisdom that will allow us to find new and useful strategies. We should not forget that only recently, amidst growing job retrenchments, issues of race and discrimination in job advertisements surface. It is only because we have an open and honest discussion here that many of the perceived sensitivities are better understood. And I hope this conversation can continue even at the highest level in this House so that we continue to give our people the hope and confidence that, come what may, multi-culturalism is a value that all Singaporeans will cherish and protect.

Mr R. Sinnakaruppan (Kreta Ayer-Tanglin): Sir, Singapore's success in the last 40 years has been largely economic, to some extent, social. In the 60s and 70s, we used labour capital, we created jobs, we attracted MNCs. In the 80s, we used our financial capital to grow, and in 1986 we faced the recession, and we came out of it. The Economic Committee headed by BG Lee and the Cabinet did very well. In the 90s, we were moving towards KBE and when we faced the last recession, the young generation of leaders took us out of it pretty quickly. Socially, we have done well to some extent; meritocracy and social harmony have been key pillars, but we have some way to go. We have set up CDCs and so on, but our social habits still cannot make us a developed nation yet.

Sir, the Internet economy is opening up tremendous opportunity for the people of the world - the young and enterprising can move from rags to riches pretty quickly in what people call at Internet speed or Internet year. In my definition, the effort is 100 days. It is moving very fast and many people can become rich. But having said that, there are many others who would be left behind in what is called digital divide and become digital outcast.

Sir, I am talking about the larger portion of Singaporeans. Many of us have spoken about why Government should do a lot more on the economic front for businesses in this Internet economy. I am confident, given the Government's track record, that we will do very well and do all that is needed to make Singapore Inc succeed in the Internet world. But I think more of us need to speak here in this Chamber about the number of constituents that we represent who would not make it from rags to riches, but who may become digital outcast in the coming years.

Sir, I am talking about the 45, 50, 60, and the 70-year olds who, to them, touching a computer gives them a fear, apprehension, a certain psyche that even with the $25 million that MCIT has started to put forward, which is a very good first step, but I think a lot more needs to be done. We cannot leave this to a statutory board to just provide the facilities and hope that the 70-year olds will pick up computers. Mr Lee Kuan Yew, our Senior Minister, picked up computer at the age of 72. He is not the norm but an exception, a leader that we hope many other older citizens will follow his fine example.

But, Sir, to ensure that we give sufficient attention to this bigger problem, which is not just purely economic but much more social and, to a larger extent, political, we need to set up a unit under perhaps the PMO to address this problem. And we have done this before. Pollution control in the 70s or 80s was under the PMO. The SDU was under the PMO before. All these got relegated to the various Ministries once the strategies took off to an operational level.

Sir, I call for the setting up of this unit, a multi-agency unit, under the PMO, which could be driven by IDA and perhaps the People's Association. Ultimately, perhaps a Ministerial committee should be set up to address this problem of digital divide because the larger portion of our population deserves attention.

Today, if you look at Singapore, about 20% will be called relatively poor. Our fear is that this 20% will accentuate in terms of percentage and number as our population grows. And I think it is timely that the Prime Minister himself paid significant attention, because we want to remain as one people, one nation, one Singapore.

The Deputy Prime Minister (BG Lee Hsien Loong): Sir, let me take all the cuts in turn.

Mrs Lim Hwee Hua wanted to bring the civil service up to date in terms of motivation, remuneration, and even organisation. I completely agree with her that while there are differences between the public and the private sectors, because one has more bottomline focus than the other, in fact there are many similarities too. Because even in the private sector, you are not just talking about the bottomline, you are also talking about service quality, performance, innovation. While in the public sector, we are not just talking about administering our long-term goals, although these are important, but also about efficiency and saving costs. So there is much which the public sector can learn from the personnel practices of the private sector, the way they reward, train, motivate, organise their people, which we should take on board and also use in the public sector.

Specifically in terms of remuneration, we have already started having performance bonuses for our more senior civil servants. We had announced last year that we wanted to move towards a scheme where all civil servants would have performance bonus as one component of their salary, from the top all the way down to the bottom. We will progressively introduce this over the next two or three years with the NWC awards. We will put aside some of the NWC awards to build up a significant component of a performance bonus, so that each civil servant will feel that how he does will impact what he earns. It does make a difference. And at the very top, where presently the senior civil servants have a performance bonus, maximum of six months, we are reviewing this now, and we should substantially increase that certainly to at least 12 months, and maybe more. Because if you look at the private sector, for the senior persons, yes, they are paid more. But maybe only one-third of their earnings goes into salaries, and the other two-thirds of their earnings are variable, depending on their own performance, depending on their company's performance, depending on the overall achievement of their section of the company, and so on. So we should move, approximate private sector practice, and keep track. As the private sector improves, so do we.

Next, Mr Simon Tay asked about communication and response to the public and wanting to establish it in our staff appraisal system. I think his question is not so much about the staff appraisal system. It is whether or not communications involving the public and consultation are really core to the way the civil service operates and the Government operates. And I think the answer is yes. It is not a question of the second or third generation. It is a question of what is the best way in which to set policies, to establish the direction, to bring people on board and to work together to improve Singapore, and to move forward. We have decided that in many areas, in many circumstances, the best way to do that is to be more open and inclusive, involving more people outside of the organisation, talking, sharing information, taking on board suggestions, views and finally reaching a decision which is better than what an individual department, or even an individual civil servant or Minister, is able to do.

As Mr Inderjit Singh said just now, the civil service really does not completely know the way the private sector is thinking, and the private sector often also does not know what the civil service constraints and considerations are. So the more we can get this interchange and flow, I think the more effective it will be. It is not just a matter of establishing specific mechanisms for doing this. It is also a matter of setting the overall tone for the civil service and making sure that when we launch something, particularly something major, this is always at the back of our minds, the way to proceed. So when we assess a civil servant, we do not give brownie points for the number of times he called in the private sector to discuss things with them, or the number of times he went and gave an explanation, or the number of letters he wrote to the press, or even the friendliness with which he wrote the letters to the press, but, was he able to demonstrate political sensitivity and certain openness of approach? And, finally, the bottomline is: was he able to get the job done and the mission accomplished? If he can do that, then he is promoted and rewarded. If he cannot do that, he can be the most affable person in the world, but he is ineffective, he has to be moved out.

Sometimes our idea of what is a reasonable way to consult and take views may not agree with the public's idea of how much we should consult and take views, in particular on the question of National Library and a few other things recently in the press. But that is in the nature of the process that different parties will have different perspectives. Gradually, I think a more realistic expectation and understanding would evolve of what is possible, what is necessary, and what we can achieve from this consultation process.

I do not believe that the civil service did mishandle the issues which have recently been in dispute. There will always be matters which will become hotter than others and which need to be managed, and we have to do so in a calm, rational and understanding way, and go on, as I think Mr Mah Bow Tan did in Parliament a few days ago explaining how, as an SJI boy, he also had been to the bakery and waited at the bus stop. So there are many ways, but our commitment to involve people and to make this a participatory process is quite clear.

On redesigning work in the public sector, Mr Yeo Guat Kwang asked what we are doing. We agree with him that this is something which needs to be done because we want to upgrade our workers, our staff and we want to restructure their jobs so that they have the opportunity for upgrading. In fact, we have already been doing job restructuring. For example, last year in April, we restructured and streamlined the majority of the Division IV schemes into broader based service groups, each with its own broad-based job characteristics which help to enlarge the jobs and help people to be placed in jobs, and to make progression if they are committed to upgrade themselves. So we have done some, but it is not a static situation because as the population changes, as job requirements change, we will have to continue to restructure and, I am sure, we will do our best to keep up.

Mr Inderjit Singh talked about the need for the civil service to be open, flexible and transparent. We fully agree with him. We have introduced all sorts of schemes to do this. But this is a big organisation and it is a continual effort to make sure that it stays open, it stays vibrant, that it does not settle down, that there is a certain innate energy, so that new ideas are always coming up and new people with fresh approaches have the opportunity to come through the system, and not be held down and stifled by people who have arrived earlier and who may have been active and energetic in earlier years but have decided, well, now we are in charge, let us stay in charge for a little while longer. It is a continuing effort, but I think if we compare our civil service with any other civil service in the world, we are not doing badly.

On medical benefits, Mr Yeo and also Mr Thomas Thomas asked whether we can review our co-payment and also we can fold in the $350 outpatient subsidy to be paid into Medisave Account for the individuals if it is not spent. First, on the question of revising the medical benefits. There are two components to this co-payment scheme: (1) $350 outpatient subsidy cap, and (2) 1% extra contribution to Medisave. The extra contribution to Medisave is 1% of salary. So as your salary goes up, it will automatically go up together with your salary. Because we have not seen medical expenses increase much faster than salary in Singapore in recent years, there is no need for us to reconsider.

On the $350 outpatient subsidy, I have asked for the data and have been told that, in fact, most civil servants have not been using a lot of this. In fact, three-quarters of the civil servants use only $100 or less of the $350 which they are entitled to. On average, the expenditure per civil servant was only $74 out of $350. So there is no immediate need to revise the amount upwards. That is the first point. 1.45 pm

The second point is the question of philosophy. Our approach in the public service has been to pay as far as possible a clean wage. In other words, instead of having housing benefits and significant medical benefits or child benefits or transport benefits, we give you a clean salary and you decide how you want to allocate your resources. And we make sure that the overall salary, the whole package is competitive with other employers in Singapore and attracts the people we want for the job. If we have that approach, then to the maximum extent possible, we should cap medical benefits in the public service rather than expand them, because really I can have a choice when I expand them. I can give you the extra salary and you decide whether you want to use it for medical or other purposes, or I can just give you the medical benefits and you have no choice. Our philosophy has been that it is better to give the civil servants a choice. So I would not say that we would never adjust this. But I think that is a consideration when we decide whether we need to adjust this.

As for taking the unused part of the $350 and paying it into individual civil servant's Medisave, as I pointed out, the average civil servant is only now using $74 of this. So if I take it and put it into civil servants' Medisave, in effect, we are giving the civil servant another $270-plus additional allowance of pay per year into the Medisave. So it is not something which we can lightly do because there is a financial implication. However, I do understand why Mr Yeo wants to do this. It is because the private sector has been slow to implement an alternative medical benefits scheme. Unions have had difficulties persuading workers to go this way and to take personal responsibility and to co-pay. For the private sector to have this sort of subsidy, perhaps with a cap, and then to have the amount paid into the Medisave if at the end of the year it is not consumed, is a reasonable way forward. So from that point of view, it is perhaps useful for the civil service to set the example. We will study this to see if there is an opportunity for us to move in this direction. But never forget, we are talking about real money, $276 per person, or nearly $9 million per year.

Dr Jennifer Lee asked about female civil servants and benefits. We will not say no. We will consider the matter. I would say, firstly, that to go from female officers to male and female officers is psychologically a big step, and it is a signal to the whole of the society that we have become a different kind of society. We have been encouraging parents to take their share of the burden of looking after kids. But we are not sure yet whether we should give them paternity leave to celebrate with the mother when the child is born.

But on the five-day week, we have sought to be flexible in the civil service to follow what the private sector is doing, but not to set the pace for what the private sector is doing. Because for us to change ceremonially from a 5 1/2-day week to 5-day week is suddenly to send a signal to the whole economy that we are working fewer days, whether it is fewer hours or not, and it will be a change of tone for the society. Some people say there will be no slowdown. In fact, we will work better. We are not sure. We would prefer not to send such a signal. But where we can exercise some flexibility and allow civil servants some time off, alternate weekend, or some time off even during the week if they need time during the week, but maintaining 5 1/2 days as a system so that the organisations are all open on Saturday mornings - that we have been progressively doing and, particularly, in the statutory boards and semi-Government agencies where it is easier to have flexibility. We will gradually move. We have not issued any instruction because once we issue an instruction, everybody will straightaway take it that tomorrow we are in the new world, which we are not. But we have been practical and pragmatic because we need to employ people too, and particularly young people and women. They tell us that working hours and the flexibility with which they can adjust their working hours is an important consideration.

Mr Jeyaretnam asked why we need so many Ministers in the Prime Minister's Office. He asked this question last year. I gave him an answer. I think the answer is the same. There are seven Ministers in the Prime Minister's Office. It is really because the Prime Minister's Office encompasses several different things. There is the Civil Service, which could be a different Ministry, but is in the PMO, and I happen to be looking after it. There is the NTUC which is really a separate outfit altogether and is paying for the salaries of the people who are working there, namely, Mr Lim Boon Heng, Mr Matthias Yao and Mr Zulkifli.

The Chairman: Order. We have reached the "guillotine" time. Mrs Lim.

Mrs Lim Hwee Hua: Sir, I would like to thank the Deputy Prime Minister for his comprehensive reply and beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

The sum of $152,943,930 for Head V ordered to stand part of the Main Estimates.

The sum of $42,911,600 for Head V ordered to stand part of the Development Estimates.

Head S -

The Chairman: Head S - Ministry of Law. Amendment No. (1), Mr Chng Hee Kok.

Mr Chng Hee Kok (East Coast): Sir, I beg to move,

That the total sum to be allocated for Head S of the Main Estimates be reduced by $100.

Sir, in the last two days, Members have discussed the fast changing pace of the new economy. The lightning changes in technology and the exponential growth in the new economy present both great opportunities and at the same time frightening prospects for us. Government must grapple with many unknowns. If you take too conservative an approach, we will miss out the opportunities. If we move too fast, we may ride on the wrong bandwagon. Whatever directions we take, one thing is certain, and that is, we have even more difficulties in updating our legal framework to help us to plug into the global network.

As the paradigm shift is so dramatic, and boundaries between countries and economies virtually disappear overnight, it is pertinent to us whether and how we are keeping our legal framework up to date. For example, in the fast changing world of the Internet, are we still grappling with trade mark and copyright issues relating to domain names and addresses and such like? How are we coping with so-called piracy in cyberspace in which well-known brand names, or otherwise, are registered on a first-come-first-served basis and then offered for sale? We have read of well-known personalities having their names registered by such pirates and then offered for sale to the rightful owners. I was searching for names for dot.com business in the planning stage and I was amazed and surprised at the kind of names that have been registered on the Internet. And I am quite convinced that the whole dictionary has been registered for domain names. And I found sites which do trading of names. An interesting example I came across is stocks.com, which is offered for sale for US$7.5 million. So people are just registering names that do not belong to them and just selling on the Internet.

Sir, there is no question that a legal framework which is up to date and able to cover the issues of the day will give us a competitive edge in attracting investments and businesses done through our logistics and financial system. I am asking the Minister if he will highlight to the House some of the legislation and measures which we are reviewing in the light of these rapid changes, and our capability and ability to cope with the voluminous changes which are taking place.

Sir, I have another cut on conveyancing fees. Presently, property transactions involve a transfer of title and they have to be transacted through lawyers. Hence, buyers and sellers of properties have no choice. In other words, they have to use the legal services, unlike selling of cars. Since consumers have no choice, they have to pay conveyancing fees on the transactions. Presently, in our system, there is a statutory scale and this increases with the value of the property.

Sir, as we are liberalising the fee structure in most other areas of businesses, from stock broking to architecture professional fees, for example, it is timely to review why there should be a fixed scale for conveyancing fees. I am asking the Minister if he will move to liberalise conveyancing fees and leave such fees to be negotiated between the lawyer and his clients.

Mrs Lim Hwee Hua: Sir, the Trustees' Act which was modelled after its British counterpart, the Trustee Investments Act, was put in place to provide guidelines for the management of public money and money under trust. Since then, those placed with the responsibility for investing such money are required to comply with the various limits for the different asset classes, purportedly to minimise risk.

Even though the Act has served us well, we now need to examine its raison d'etre. It is interesting to note that the United Kingdom will be dispensing with the Trustee Investments Act this year, as it is outmoded and will no longer serve a meaningful purpose. The widening of the investible horizon, both in terms of instruments and geographical diversity, has rendered the Act restrictive, if not counter-productive, to what was originally intended. There is a shift in focus from a rule-based system to prudence.

Sir, we are facing a similar situation here, in the form of an increasing variety of instruments, beyond pure time deposits and primary equities. Although modifications have been made to accommodate some of these developments, the Act is still restrictive from the perspective of trying to manage risk through diversification.

Furthermore, the Trustees Act is still largely Singapore-centric, something which will check geographical diversification. The recent crisis has shown that a bias towards either certain asset classes or certain economy, in this case Singapore, does not make for satisfactory risk management.

Ultimately, the ideal scenario is for investors to diversify their portfolios to maximise risk-adjusted returns instead of clinging on to the Trustees Act for a false sense of comfort and security.

I would like the Minister to explain whether the Trustees Act is still relevant, given the circumstances so described.

Mr R. Ravindran (Bukit Timah): Sir, it is the pillar of our Government that honesty and integrity is maintained at all levels of Government. To this, the Government has set several systems of checks and balances. It is also good financial policy and prudence that there is transparency in financial matters. Transparency involves an open and visible manner of making decisions so that the public organisation that one serves can benefit from the best deal that the organisation can get.

Sir, I have perused many legislation that have been passed by this House in the past. I am happy to note that many of these legislation contain adequate provisions requiring individual members of the responsible agencies to declare their interest in any matter considered by them. For example, members of the Boards of HDB, EDB and JTC, among other Government organisations, are required to declare their interest and not participate in any decision that may conflict with their personal or professional business. This is one of the symbols and cornerstones of our transparent system of governance.

Sir, in those legislation that one finds the provision requiring declaration of interest, it is usually found in the main Act itself, or in the Schedule to the Act. Perhaps, the agencies that I have highlighted above deal with big money and hence the legislative safeguards to protect public funds.

Sir, I have also noted that there are other legislation where there is no requirement for declaration of interest in the main Act, or in the Schedule to the Act, for example, in the Administration of Muslim Law Act, the Hindu Endowments Board Act, the Nanyang Polytechnic Act and the Nanyang University Act, among others.

Sir, I am raising the concern as some of these bodies that are created by a statute of Parliament are not audited by the Auditor-General. They are in some cases audited by private auditors. In the absence of clear law stating a requirement that persons serving in these bodies declare their personal or professional interest, one can participate in a decision that involves such interest and get away with it. When caught, some may even argue that there is no such requirement in law or that they were unaware of this requirement.

Sir, many of these organisations have large funds and, in many cases, funds are raised from the public. It will be prudent to place safeguards before a serious incident arises. I would like to urge the Minister to review all existing legislation and see whether there are Acts which need to be strengthened with the addition of the disclosure of interest clause.

Lastly, Sir, I would like to compliment the Minister and the Attorney-General's Chambers for introducing such clauses in all new legislation that have come before this House. 2.00 pm

Let me move on to the next topic, Sir, which is the management of State land.

The Land Office is the custodian of State land. By virtue of their special position, they have become the biggest landlord in Singapore. I understand that the Land Office releases its land to the market according to the Government sales programme and the needs of the Government. The buildings of the Land Office are managed by a private real estate firm. This is good and prudent management of state assets.

Sir, in land scarce Singapore, we have to ensure that land that is owned by the State is well-managed and used to its maximum. Being a sportsman, I know that there are many sportsmen who find it difficult to book football or hockey fields, particularly at weekends. It saddens me to see young boys playing at void decks and even at linked buildings just because they have nowhere else to play football. In some instances, many of our youths end up playing football or sepak takraw in basketball courts or in carparks. In some private estates, boys even play football on the roads. There is definitely a big shortage of land in Singapore for open-air sports, particularly in the HDB heartland and in Singapore in general.

I recall an incident in my division where there was a large plot of land waiting to be developed as a park. Noticing the absence of good football fields, I arranged for two football goal-posts to be placed on the field. Soon thereafter, I noticed that the field became a hive for football activities in the evenings and on weekends. Then suddenly, one day, the goal-posts were torn down and left there. On enquiry, I discovered that the land owner, who is a statutory board, not the Land Office, had removed it as no written permission was obtained from them. Fortunately, subsequently, written permission was obtained and my residents are back to playing football on the same field but with a new set of goal-posts. I am highlighting this incident to show that it requires an MP to get this field for his residents.

Sir, there are many parcels of State land which are sitting idle and waiting to be sold later at Government sales programme. Some may not even be considered for sale for many years to come. The public is afraid of using such land. It is not unusual to see signboards being put up stating that it is State land and that there can be no trespassing. At times, there are even signs stating that no games can be played on such land.

I would like to appeal to the Minister to see how we can make better use of public vacant land. I would like to urge the Minister to consider ways to make them available for public use, be they for sports or other social activities. The Land Office can be pro-active by putting up signboards stating that games can be played or concerts organised on such land. The Land Office can also take the lead in ensuring that idle land is well-used for public purposes.

As for other landowners like Ministries, statutory boards and GLCs, they can also take the lead in ensuring that their idle land can be used for public purposes by the public. Such action may even motivate large private landowners to open up their land for public use pending future development. Such action will certainly be welcomed by the public and help minimise the lost opportunity cost of not fully utilising such vacant land.

Mr Goh Choon Kang (Marine Parade): Sir, the freehold apartments of two groups of my constituents were acquired towards the end of 1998 for road widening purpose. One of them was the Elling Court at the junction of Bartley Road and Paya Lebar Road, and the other was along Upper Paya Lebar Road. The property market was in a slump due to the financial crisis at that time. The owners were paid compensation at market rate at that point of time as assessed by the Chief Assessor of the Land Office. For a freehold apartment, they were given statutory awards, ranging from $240,000 to $300,000 which was not even enough for some of them to purchase an alternative 4-room resale HDB flat in the open market. Some appealed for direct purchase of HDB flats from HDB but their appeals were turned down.

In 1999, the property market rebounded and property prices recovered much of their lost ground. Some affected owner occupiers were subsequently given ex-gratia payment to top up the statutory awards to make the total compensation marginally better. Those who had a second property were not qualified for ex-gratia.

Affected owners compared their fate with those affected by the Selective En-bloc Redevelopment Scheme. They felt strongly that they were unfairly treated. Some who bought their properties at the height of the market had seen their CPF savings diminished and have difficulties repaying their bank loans.

I feel that the Government could have been more generous in making ex-gratia payments for the affected residents, considering the fact that those citizens affected by SERS are so well-treated, where they are not only given a brand new flat of equivalent size, but also a good sum of disturbance allowance. In the case of private property owners, some of them who are retirees are not even allowed to purchase a flat direct from HDB.

Sir, I feel that there could be a more equitable way of compensation. Currently, the compensation is based on the assessed market value of the properties at the date of acquisition or 1st January 1995, whichever is lower. In this particular case, instead of taking the lowest point, is it more equitable to take the average from the year 1995 when the compensation rate was last revised to the time of acquisition?

Dr Teo Ho Pin (Sembawang): Sir, the Government is the single largest land owner in Singapore and has many land parcels reserved for future developments. Although the Ministry has made efforts to allow temporary usage of vacant reserve land, more can be done to maximise the use of vacant reserve land for community and commercial purposes. I wish to seek the following clarifications from the Ministry.

Firstly, what is the percentage of vacant reserve land being let out on TOL over the last five years? Secondly, can the Ministry consider allowing grassroots organisations to build temporary communal facilities or use these vacant land parcels at a preferential rate? Thirdly, what are the measures taken by the Ministry to maximise the temporary usage of vacant reserve land? Fourthly, what is the maintenance policy and cost of maintaining the vacant reserve land?

Dr Lily Neo (Kreta Ayer-Tanglin): Sir, I would like to highlight an aspect of legal aid in Singapore today and urge the Minister for Law to look into it.

The Legal Aid and Advice Act is essentially an Act which seeks to render aid to Singaporeans and permanent residents in financial need. Applicants for legal aid have to qualify under a means test which, in my opinion, is stringent and does not truly reflect cost of living and salary scales in this present time.

Under section 8 of the Act, legal aid may be granted where the Director is satisfied that the criteria, as set out in the Second Schedule, are met. The applicant must not have a disposable income of $7,000 per year and disposable capital of $7,000. "Disposable income" for the purposes of the Act includes that of the applicant's spouse. Thus, an applicant must not earn more than $583 a month and this excludes the spouse's income. Sir, this is totally unrealistic, as even certain lowly jobs easily pay more than that. It is too stringent a means test because a family with two children and a combined income of, say, $1,000 will not be able to cope financially when even a simple case in the Magistrate's court can easily cost $10,000 in terms of legal fees. In fact, the Director has an unfettered discretion to refuse legal aid even if the applicant qualifies under the means test. This is reflected in section 8(3) of the Legal Aid and Advice Act.

Section 14(3) enables the Court to direct the applicant to pay the costs of the Director, the solicitor and the other party's solicitor if the Court feels that the aided person has acted improperly in bringing or defending any legal proceedings or in the conduct of them. My view is that this is unfair and punitive. Before the Legal Aid Bureau takes on a case, the Director will assess the facts to see whether such a case is worth defending or litigating in. It does not appear equitable to punish the aided person who relies on the legal advice and judgement of the Director and Legal Aid Bureau's solicitors.

There are many people who are unable to afford lawyers and who are not qualified for legal aid. Sir, this is unfortunate and the situation can be redressed if the means test is made less stringent. In countries like the United States, people are not prejudiced because the legal mechanism works on a contingency-based system. In other words, the lawyers get a percentage of the "winnings" and expect nothing if they lose. We do not have such a system here or it is illegal.

Sir, I hope the Minister for Law will address this issue.

Mr Ravindran: Sir, our judiciary has been proclaimed as one of the best judicial systems in the world. People are by and large happy that the legal process is expeditious and fair. However, it has become clear that increasingly, people are complaining that legal costs are rising in Singapore. I am not sure whether this is due to the cost of our court fees or lawyers' fees.

I have seen a number of my residents during my meet-the-people sessions who have come to see me both on criminal and civil matters affecting them. A number of them have highlighted that they cannot afford to engage private lawyers due to their fees. I have referred some to the Legal Aid Bureau and some others to the Criminal Legal Aid Scheme run by the Law Society of Singapore. The two bodies that I have highlighted have done an excellent job in providing legal services for free or for a nominal fee.

Sir, I have learnt of cases where some of these residents come outside the means test set by the Legal Aid Bureau and, as such, were not granted legal aid. I understand that the present means test is set at $7,000 per annum. In divorce cases, I am told that only the income of the individual who is coming for legal aid is looked at. In any other case, the income of the whole family is looked at, that is, if it exceeds $7,000 per annum, they do not qualify. I think that the amount that is laid down for the means test is low and I share the concern expressed by my hon. colleague, Dr Lily Neo, and I hope and urge the Minister to consider raising the means test level that has been set in the Act itself and see how that amount can be raised so that more Singapore residents, particularly those who come from the lower income bracket, can be helped.

Similarly, the Law Society of Singapore has done an excellent community service in providing criminal legal aid to needy Singaporeans. The scheme has been in place for many years, in fact, since 1985. Unlike many other countries, our State does not provide criminal legal aid to Singaporeans. The provision which was there in the Legal Aid and Advice Act to provide for criminal legal aid has been removed. The number clearly shows that the Criminal Legal Aid Scheme has benefited many Singaporeans. The scheme that is run by the Law Society has 403 volunteers and for the period 1985 to 1999, 5,752 applicants applied for legal aid under the Criminal Legal Aid Scheme and 1,318 were granted criminal legal aid. Some of these people who received criminal legal aid were acquitted. Some have had their charges withdrawn or reduced. This clearly establishes the necessity of providing for criminal legal aid to needy Singaporeans.

I do not think it is fruitful to pursue the argument that the State should provide and administer the Criminal Legal Aid Scheme. What I would like to urge the Minister is whether he could consider granting an annual grant to the Criminal Legal Aid Scheme (CLAS) run by the Law Society, so as to enable them to expand their system to more needy Singaporeans. I personally know that the Minister has, in his personal capacity, put in great efforts to raise funds for the Law Society's Criminal Legal Aid Scheme and that is something commendable. But it equally shows that the cause is a good cause. I am not asking for a 100% grant for the CLAS scheme. Perhaps, the Minister could consider approving an annual grant to cover at least 50% of the cost of the CLAS scheme so as to enable criminal legal aid to be extended to more needy Singaporeans. 2.15 pm

Dr Teo Ho Pin: Sir, over the last five years, this House has passed a total of 191 Bills. This works out to be about

40 Bills per year. In a fast-changing world, we have no choice but to constantly update and introduce new legislation to govern the country. But we need to understand the impact of the speed of introducing this legislation on the general public and the business community. Although the conventional methods of gazetting, publication of the Hansard and newspaper reporting are utilised to disseminate amended and new legislation, the level of awareness and understanding by the general public and business community may not be high. As a result, Singaporeans may be penalised for being ignorant of these new legislation or failing to understand the technicality of these new legislation.

In view of this, I wish to seek the following clarifications from the Ministry.

(1) What are the measures taken by the Ministry to keep the public informed of any amended or new legislation?

(2) Is there a mechanism to monitor the effectiveness of the above measures to determine the level of public awareness and understanding of amended or new legislation?

(3) Will the Ministry consider using IT as a tool to disseminate future legislation?

Assoc. Prof. Chin Tet Yung (Sembawang): Sir, may I take my two cuts together?

The Chairman: Yes.

Assoc. Prof. Chin Tet Yung: Sir, we enter an age when we see high global integration based on science, trade and industry, and the transformation of national industrial societies into a transnational science-based civilisation. Many of our lawyers who are used to High Street practice, doing things like conveyancing and personal injury claims, will have to refocus not only to so-called city practice but also to international or regional practice. A failure to upgrade one's knowledge or skills will lead to irrelevance in the new setting. The legal practitioner of yesteryear is no longer relevant today, nor will today's lawyer be relevant to the practice of tomorrow if he or she does not make an effort to upgrade.

New technologies generate new problems that require legal expertise to resolve. New regional trading regimes require adaptation to and familiarity with legal systems and laws that are not the same as ours. There is also a need to know foreign languages and cultures. The liberalisation of services is also a push factor for our lawyers to consider.

Legal education in Singapore can no longer be seen as a discrete responsibility of several institutions - the Faculty of Law, Board of Legal Education, Law Society or the Academy of Law. It must be seen as a holistic enterprise with the first primary or formal stage being the degree stage, followed by a system of coordinated, continuous and even compulsory legal education throughout the working life of a lawyer. Only in this way, can a lawyer of today prepare for the practice of tomorrow.

How should we train the global lawyer? It is easy to state that the lawyer of tomorrow must not only have the necessary thinking skills, he must also be vocationally relevant and professionally functional. But the vocational training of a lawyer is best done after he or she has had several years of practice. It involves acquiring good street sense and business acumen, as much as specialised legal knowledge in foreign tax laws or international commercial codes. I would therefore like to ask the Minister whether his Ministry would, first, support a review of legal education as a whole and, second, to examine seriously the need for continuing legal education in the profession, perhaps as a condition to practise. Second, even as the demands of the transnational scientific civilisation exert themselves on lawyers, there is an even greater need for our young lawyers to value not just a career that they will pursue but also the community that they operate in. In this context, one of the best ways to impart knowledge and understanding of the community and its problems to law students is through instituting a clinical legal education programme.

Such a programme can achieve a number of objectives. First, it would provide law students with an appreciation of real life problems and an opportunity for them to practise what they have learnt in law school. Second, it would heighten their understanding of society. And, third, it provides them with a sense of realism. Finally, it would hopefully instill in them a sense of civic duty, so that before they begin to practise law, before they begin to earn their millions, they would be conscious of the need to provide legal services to all who come to seek their help, not only to those who can afford to pay.

Sir, I would like to ask whether the Minister would support such a scheme.

The Minister for Law (Prof. S. Jayakumar): Sir, my colleague, Minister of State Ho Peng Kee, and I will answer the points raised by Members within the time allotted to us. And I hope if any points are cut off by the guillotine, Members will file questions at subsequent sittings.

First, Mr Chng Hee Kok asked about our ability to cope with the legal framework in order to keep abreast of competitiveness and changes in the business world. First, as to the procedure, let me say that we have established a Law Reform Coordinating Committee chaired by the Attorney-General, representatives from the Faculty of Law, Academy of Law, Law Society and representatives of various Government agencies. The task of this Law Reform Coordinating Committee is precisely to ensure that our legal system and our laws are up to date, and whatever reforms are needed, they will be undertaken. The Committee itself will not be the agency doing the reforms but it is, in fact, the coordinating agency to ensure that what needs to be done will be done.

In addition, the Attorney-General's Chambers has set up a dedicated Law Reform and Revision Division this year. It will fulfil a long-felt need for a full time dedicated law reform outfit in Singapore. The Attorney-General, in fact, will be sending two officers from his Chambers to the Australian Law Reform Commission to pick up some of the procedures and methods which are used in other countries.

He asked for examples of how we have kept abreast. The Member would know that we have in fact passed some important legislation. For example, the legislation amending the Legal Profession Act had very much to do with fundamental changes to our legal system and legal framework so that it would be able to keep in tune with the challenges ahead of us, particularly the provisions on incorporation of companies as well as allowing foreign law firms to form joint ventures and formal alliances with local firms. These are very important steps taken recently.

He would also note that we have made important amendments to our bankruptcy legislation, precisely to support the Technopreneurship 21 initiative. These amendments have increased the threshold for bankruptcy, raised the debt level for discharge by the Official Assignee and made it easier for bankrupts to do business and expedited payments to creditors. I think this reform to the bankruptcy legislation is a very good example.

He referred to the challenges posed by cyberspace crimes and challenges which they pose for copyrights and patents. Here again, we have made progress because we amended the Copyright Act to meet these challenges posed by the development of new technology and the increasing popularity of electronic commerce. We improved copyright protection and enforcement of measures for copyright owners in cyberspace, to promote the use of Internet by businesses, and we also provided greater legal certainty for both copyright owners and users of copyright works, not to mention the intermediaries such as network service providers. We had a full debate on this not long ago.

We have also restructured the Registry of Trade Marks and Patents into the Intellectual Property Office of Singapore (IPOS). This is important to maintain Singapore's competitive edge, and IPOS will move away from just a regulatory body. It will ensure a sound infrastructure for the development of intellectual property and the administration of protection of intellectual property rights.

So we have done a fair bit, but with the establishment of the Law Reform Coordinating Committee, I expect that there will be a more coordinated and focused approach to ensuring that these needs and challenges posed by fast-changing local as well as international environment will be met.

He asked about conveyancing fees and whether it is timely to review. Members will recall that we last reviewed the conveyancing scale fees in 1995, when the Committee chaired by Mr Justice Chao Hick Tin made his recommendations. At that time, the Committee had considered whether to abolish scale fees altogether, but had concluded that it was in the public interest to retain a mandatory fixed scale fees but we had changes made to the scale fees. I said that we would review the matter in about 4-5 years' time. My Ministry has not made a decision yet on the precise changes to be made, but the Attorney-General and I agreed that it is timely to review this matter now, and we shall in due course set up a committee to look into this.

As to which direction the review will take, I would prefer to let the committee look into this and make its recommendation. But Mr Chng Hee Kok knows that I have said several times, and so has the Attorney-General, that the legal profession should prepare themselves for the eventuality that sooner or later the scale fees will have to be abolished.

Mrs Lim Hwee Hua talked about the Trustees Act and the changes made in England and her criticisms on what she thought were outmoded approaches of the Trustees Act and whether we would review it. Let me say that we have referred precisely these issues to the Law Reform Committee of the Singapore Academy of Law. They have made several recommendations which we are studying with a view to amending the Act. Although the changes have not been finalised, let me say that, broadly, the recommendations do contemplate allowing a trustee to invest in any form of investment, provided he exercises prudence in relation to the investments, probable income, the capital safety and the suitability for the trust, which is commonly known as a prudent man rule. I think she referred to this. They do not recommend a complete abolition of the list of investments currently found in the First Schedule. It is proposed that this list should be retained to serve as a guidance to the trustees, particularly non-professional trustees of small and family trusts who could benefit from such guidance.

As for the need for diversification of investments and for the adoption of an investment strategy, the recommendation is that this be considered as part and parcel of the prudent man rule. I will take her suggestions into account when we look at these recommendations with a view to amending the Act.

Mr Ravindran referred to the fact that some legislation have requirements for declarations of interest and some legislation do not. We can look into this. His point really is that there should be avoidance of conflict of interest, with which we cannot disagree. Why is it that some legislation do not contain these provisions? I am not sure. I guess that those legislation generally are Acts of a non-operational statutory board such as institutions of higher learning where they might have thought that the danger of acting in conflict of interest is not that real. Nevertheless, I take his point into account and we will ask the parent Ministries to have a look at it. However, I am not sure I agree with him that where the legislation is silent, a member of a statutory board could profess ignorance and profit from a conflict of interest. This is because even if there is no specific provision in the Act, I believe the general law places fiduciary duty on members of statutory boards so that if they were to abuse their fiduciary position and make secret profits, they will be obliged under the law to cough out those profits. 2.30 pm

Dr Lily Neo and Mr Ravindran talk about the Legal Aid and Advice Act and the stringency of the means test. The means test was last reviewed in 1995 and the threshold was increased. We not only increased the income ceiling but we also allowed more deductions. I am prepared to look at it again. But let me say that the Members ought not to misunderstand the provisions in the Act. The requirement for disposable income of less than $7,000 does not mean that legal aid will never be provided to applicants who earn more than $583 a month because in computing the disposable income, various deductions are allowed, including deductions for CPF, rental, personal deductions and deductions for dependants. Also, in practice, the income of a spouse is disregarded in certain cases, such as where the parties are separated and if it is reasonable to do so to relieve hardship. In fact, under the means test, a sole breadwinner with two children who is earning $1,200 a month ought not to have problems in qualifying for legal aid. In fact, on the average, about 80% who applied for legal aid in 1996 and 1997 qualified for it. There was a dip in 1998 and 1999 when this figure dipped to about 65%, but we think that was because of the sudden large number of applicants as a result of the hardship during the slowdown in the economic growth.

Questions were asked by Dr Lily Neo about discretion to refuse legal aid. Let me say first that this is not an unfettered discretion because under the Act the Director can refuse only if it is unreasonable to grant aid. In practice, the Bureau will take instructions from every applicant who qualifies to determine if there are merits for granting legal aid. Decisions are not arbitrary and they are based on careful evaluation of the facts and circumstances. Obviously, even if a person qualifies, the Board would have to consider the merits of the case, for example, whether the costs involved in pursuing the case would be much more than the amount claimed for. If the amount claimed for is $200, but the whole process will cost much more, that will be one of the considerations that we take into account.

She also asked about the seemingly unfair punitive provision in ordering costs against aided persons. Here again, there may be a misunderstanding. This is not a provision applied often and frequently across the board. This is to take care of a very narrow situation where it may be found out later that the person who obtained legal advice or legal aid actually had acted improperly or even dishonestly. He might have even told lies. In that kind of situation, it is not equitable that a person be seen to have got off scot-free. So this is the narrow situation where costs may be awarded against that person. In fact, as far as I could find out from the Legal Aid Bureau, they can recall only about two or so instances when an aided person has been asked to pay cost under this provision.

She mentioned contingency fee. I am not sure whether she was seriously proposing that the Government consider contingency fee like the United States. That will be a fundamental change where it will change the nature of client-solicitor relationship. Often it has been criticised that a lawyer may become personally and emotionally involved in a case where his fees are dependent on whether he succeeds or not.

Mr Ravindran asked about the Criminal Legal Aid System. I think I do not have to repeat the reasons given when I amended the Legal Aid and Advice Act. I then spelt out the reasons as to why Government will confine itself to the provision of civil legal aid. But I assured the House, and I have assured the Law Society, that my Ministry will work closely with them to support their Criminal Legal Aid System. In fact, if you ask the President of the Law Society he will confirm that the Ministry and myself have worked with them to raise funds to meet their requirements for the Criminal Legal Aid System, including a grant from the Academy of Law. I myself have given them ideas and fund-raising projects were organised where I was involved, and I believe that their financial situation has been met, and I will continue to support their activity in that regard.

Dr Teo Ho Pin raised the question of public education for legislation. Basically, he asked two questions: One is making legislation and policies of the legislation known to the public. His point is where legislation breaks new grounds, important policies, people should be made aware of them. I think we cannot dispute that. It goes without saying. But I would say this has to be left to the respective Ministries which are most knowledgeable about the policies which they are enunciating or promulgating through legislation in this House. Most Ministries are aware of the need to do so. If Dr Teo Ho Pin feels that the publicity or public education from any particular Ministry on any particular legislation has been inadequate he could take up the cudgels with the respective Minister. But, as a general principle, I support what he says. It is part of the process of preparing the public and explaining the rationale of legislation.

His second point was whether we can use IT to disseminate legislation. Indeed, we have been doing this. The Attorney-General's Chambers has informed me that the LawNet Management Committee has agreed to allow free access by members of the public to the LawNet statutes database from terminals located in the National Library and its branches and it is working on the details with the National Library Board. The LawNet statutes database will also be made available for free to members of the public at the information kiosks in the Supreme Court when these are upgraded to be Web kiosks in a few months' time. In addition, the Member should know that the Subordinate Courts together with the Law Society and the Ministry of Law are working on a website on the provision of legal information to the layman. This website will act as a portal from which a member of the public can be directed to the different websites containing legal information about Singapore, such as the Law Awareness page or the Law Society's website and the information leaflets page of the Subordinate Courts as well as the information page on the websites of various departments of the law.

I have two minutes to deal with Prof. Chin's points. First, I agree completely with him on the need for the legal profession to upgrade themselves to stay abreast of new changes and techniques in law. In fact, the President of the Law Society, I believe, in the Opening of the Legal Year address, said that there should be mandatory legal education and that the Law Society will proceed robustly in pursuing this. It is a point which I would support and we would be happy to work with him to ensure that that becomes a feature of our legal profession.

I cannot also disagree with his idea that our legal education is such that potential graduates, before they graduate as law students, should be exposed to the real world aspect of their practice of law. How do we do this? I think the Ministry of Law and the Attorney-General's Chambers should discuss with the Law Faculty. One aspect is, of course, attachment to various law firms and institutions. Some countries go beyond this and allow the law students to engage in clinical law practice under the supervision of a practitioner. To do that is a little complicated because they have to make sure that it does not run foul of the Legal Profession Act and it raises questions of professional liability and responsibility. Will the student, before he graduates, be actually signing documents and giving advice which he acted on, or will it be the responsibility of the lawyer under whom he works and under whom he supervises? These are some technical questions which have some far-reaching implications.

I believe I have touched most of the points raised by colleagues. I will now ask my colleague, Prof. Ho, to deal with the remaining issues.

The Minister of State for Law (Assoc. Prof. Ho Peng Kee): Sir, I will deal with Mr Goh Choon Kang's amendment first.

Sir, Mr Goh Choon Kang suggests an alternative method of calculating land acquisition compensation. First, let me state, at the outset, that the Government only acquires private lands when absolutely necessary. It is committed to paying a reasonable compensation to landowners.

The Land Acquisition Act is amended from time to time to ensure that the compensation rates keep up with the market, especially when prices rise. The current date is 1st January 1995, which in fact is higher than the 1998 and 1999 property prices of most sectors.

To alleviate individual owners' financial hardship, Government initiated an ex-gratia payment scheme in 1982, the scope of which has been widened progressively over the past 18 years. Let me illustrate how the scheme works under both good and poor market conditions. When a property is acquired at a time when property prices are high, the statutory compensation, though pegged at 1st January 1995 prices, can be topped up to current market value through ex-gratia payments, if owners meet eligibility criteria, such as the property being owner-occupied. Indeed, we have widened this to even include owners who own more than one property. When a property is acquired under poor market conditions, the compensation, though correspondingly lower, would generally be sufficient to cover the costs of an alternative comparable property, as property prices will be depressed. Even then, in such a situation, if the owners suffer hardship after receiving compensation, ex-gratia payments are extended to them on a case-by-case basis. Indeed, many landowners, some of whom were Mr Goh's constituents, have benefitted from this ex-gratia scheme which was widened to include the situation, as has happened to his constituents, where the compensation amount was pegged at the actual market rate. So this is an extension of the original concept of ex-gratia.

This approach of combining statutory compensation and ex-gratia payment has worked well in the overwhelming majority of cases. There is no compelling reason to change it to the scheme proposed by Mr Goh. The Member's proposal which involves averaging out property values over the five years preceding the acquisition, and paying that amount without regard to the market value at the date of Gazette, does not give certainty to the compensation quantum, and indeed may result in either windfall gains for some owners or financial hardship for others.

This is because if the average value results in a compensation that is lower than prevailing market values, the affected landowners will be priced out in their purchase of an alternative comparable property in the open market. On the other hand, if the average value results in a compensation that is higher than prevailing market values, affected landowners will enjoy unwarranted windfall gains at the expense of the State.

Hence, all things considered, the current approach, which is a tested one, has worked well, and should remain. But, of course, Government will continue to review the statutory date for compensation under the Land Acquisition Act, and certainly give ex-gratia payments where applicable to hardship cases.

Sir, the other two cuts are by Mr Ravindran and Dr Teo. Let me take their points. First, let me assure the Members that it has always been Land Office's policy and practice to optimise the use of our scarce land resource. Hence, whenever and wherever State lands are available, and if supported by the Chief Planner, for interim uses, Land Office allocates them to both private and public organisations, including community organisations, for their use. For example, in 1998, Land Office allocated four sites to various Citizens' Consultative Committees (CCCs) for interim uses such as street soccer court, basketball and sepak takraw courts and a hardcourt.

As for measures taken to maximise the interim use of state land and maintaining them, Land Office set up a Planning and Development Unit in 1998 to take stock of the state land available and systematically plan for the interim uses with the relevant authorities, if the state lands are not immediately required for development. 2.45 pm

The Chairman: Prof. Ho, we have reached "guillotine" time.

Mr Chng Hee Kok: Sir, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

The sum of $179,887,400 for Head S ordered to stand part of the Main Estimates.

The sum of $451,117,300 for Head S ordered to stand part of the Development Estimates.

Head E - 2.45 pm

The Chairman: Head E - Judicature. Mr Jeyaretnam.

Mr Jeyaretnam: Sir, I beg to move,

That the total sum to be allocated for Head E of the Main Estimates be reduced by $100.

Sir, this is a subject which I have brought up several times in this House. At the moment, in Singapore, for all purposes, there is only a single right of appeal from a conviction sustained in the Subordinate Court. It is a single-tier appeal. And similarly, when a conviction is sustained in the High Court, there is a single tier appeal to the Court of Criminal Appeal. I have said that this is not very satisfactory. There have been instances in the past, and of course there was my case, where they have been refused right of appeal. Somehow I was able to take it up in another related appeal to the Privy Council where they said all the convictions were wrong. But it is not to complain about my matter that I have raised.

I am very concerned about the situation where an accused person has been acquitted by the trial court in the Subordinate Courts and the Public Prosecutor appeals against that acquittal. The High Court decides in its wisdom to set aside the acquittal and substitute a conviction of the man or woman. In that instance, unless the Appellate Court, hearing the appeal by the Public Prosecutor, agrees to state questions of law to the Court of Criminal Appeal, the unfortunate man or woman is left with no right of appeal at all. He is convicted after he has been acquitted, after a full trial on the merits by a Judge of the court and then he is convicted, and he is left with no redress. This has happened at least in two cases or more that I can remember, and it is a most unsatisfactory system. It denies the basic right of an individual to have his conviction tested by an Appellate Court. I have said that in a number of other countries, particularly the Commonwealth countries, the prevailing norm is a two-tier appeal. In our country, it is just one-tier, but there are these situations where even this one appeal is denied. In other countries, the Public Prosecutor has no right of appeal where the acquittal is on merit but in Singapore, the Public Prosecutor can appeal where the acquittal goes simply on the merits and not on any question of law.

I think it is time we looked at this right of appeal. I personally would like a review of the whole appellate system in Singapore, even in the civil cases. We passed a Bill quite recently denying appeals in civil cases where the amount of the claim is $50,000 or less, but providing that the person who is aggrieved may apply to the Judge who heard the case to grant leave. May I say from personal experience that it is extremely difficult to get leave from the Judge who has heard the case on the merits and who is satisfied that the decision is right. It would seem to be going against the grain to later say, yes, I think the decision may be wrong, I will give you leave to appeal.

The Chairman: Mr Jeyaretnam, do you want to allow time for a reply?

Mr Jeyaretnam: All right, Sir.

Assoc. Prof. Ho Peng Kee: Sir, as Mr Jeyaretnam himself says, he has made this point many times before and I have replied to him many times before. All these are in the Hansard. The situation has not changed. The losing party, whether the Public Prosecutor or the accused person, indeed has a right of appeal. Regardless of which party is appealing, there is only one level of appeal, because there must be finality and the process stops there.

Mr Jeyaretnam rose ---

Assoc. Prof. Ho Peng Kee: Let me continue, Sir.

The Chairman: Order, order.

Mr Jeyaretnam: May I clarify the point that I am worried about?

The Chairman: Assoc. Prof. Ho, are you giving way?

Assoc. Prof. Ho Peng Kee: No, Sir.

The Chairman: Resume your seat, Mr Jeyaretnam. Please continue.

Mr Jeyaretnam resumed his seat.

Assoc. Prof. Ho Peng Kee: So for a magistrate's appeal, if the High Court overturns an acquittal on appeal and convicts the accused person, there is no reason to let him have another bite of the cherry before the Court of Appeal, because arguments would already have been fully canvassed before the Appeal Judge, which, in Singapore, is the Chief Justice who hears all magistrates' appeals. So we take all appeals seriously. And because CJ hears all these appeals, there is a tone that is set - that appeals will be taken seriously, with consistency in sentencing and also in the judgments.

On the appeals process under section 60, Mr Jeyaretnam is wont to raise this all the time. Section 60 is a process whereby if the Public Prosecutor considers that there is a point of law of public interest which he wants to clarify for future guidance, he will ask the High Court to set a reference to the Court of Appeal to decide the point of law. But even if he wins the reference or the reference is decided in his favour, the acquittal of the accused person will not be overturned. So that is an important point. Otherwise, he will think that ---

Mr Jeyaretnam: The accused person is taking it up, not the Public Prosecutor.

Assoc. Prof. Ho Peng Kee: If the accused person takes it up, then the law is quite clear what he has to satisfy. He has to convince the Court that there is a point of law of public interest, the resolution of which has affected the outcome of the appeal, and the High Court has to consider the application. Even though it is the court that decided the case - I think we must give it to our Judges - Mr Jeyaretnam will not be fair if he says that because a particular Judge decided the case, he will not want that point to go up on reference to the Court of Appeal, because he must justify it. It is all in the records. So people can look at it, read it, other Judges can look at it, academics can write on it. So he will be exposed to ridicule if he does not comply with the requirements set out in section 60 which incidentally is well-illustrated in our cases.

The Chairman: Order. It is "guillotine" time. Mr Jeyaretnam.

Mr Jeyaretnam: I am not satisfied at all. But, nevertheless, I will withdraw my amendment.

Amendment, by leave, withdrawn.

The sum of $62,764,240 for Head E ordered to stand part of the Main Estimates.

The sum of $53,554,500 for Head E ordered to stand part of the Development Estimates.

Head B -

The Chairman: Head B - Attorney-General's Chambers. Mr Shanmugam is not here. Mr Jeyaretnam.

Mr Jeyaretnam: Sir, I beg to move,

That the total sum to be allocated for Head B of the Main Estimates be reduced by $100.

My question in this House is the propriety of the Attorney-General's Chambers in withholding from an accused person statements taken from him in the course of police investigation. The law is quite clear. The law is that any statement taken from any person, whether it be an accused or a witness, by a police officer above the rank of Sergeant is admissible at the trial. Of course, if the accused or the person making the statement says that it was obtained against his will, it was an involuntary statement, then the court has to consider whether it should be admitted or not. But the law is that it is admissible.

Despite what the law is, the AG's Chambers has consistently denied lawyers acting for the accused the right to look at statements made by their clients during police investigation, particularly statements under section 121 of the Criminal Procedure Code. This is where the Police spend hours questioning the man and then taking his long statement, as they call it. The prosecution keeps that statement. If they wish to use it, then they make it available to the accused just before the trial. But if they do not wish to use it because that statement does not help them, but it may help the accused, they refuse to release it to the accused. That seems to me, without any doubt, to offend the rule of natural justice. It denies to the accused evidence that is in his favour which he can use. Of course, I shall be told by the Minister of State - I see he is going to reply - that yes, we do release it, but it is only released after the accused has given his evidence. And they make no secret of it. They say they want it because they want to see whether they can trip him up when he gives his evidence, to see whether he has said something differently in the statement to the police. That seems to me to be taking a very unfair, unjust advantage over an accused person, and that is coming from the prosecution chambers in this country. 3.00 pm

May I say to this House, which I have said to the court several times, that it is no duty, no part of the prosecution to win its cases. This has been said over and over again. The prosecution owes to the accused to be fair and just. It has the duty to see that the accused gets the fairest trial, not trying to obtain a conviction by means of withholding statements which might be able to assist him. May I quote to this House what a very learned prosecutor in England, Mr Christmas Humphreys, a devout Buddhist, said in one of his public lectures that one of the first things he did when he was assigned a case to prosecute was to ring up the defence counsel, counsel for the accused and say, "Is there anything I can do to assist you? You want any information, you want to know anything?" That is how prosecution should be conducted. Prosecution should not be conducted by withholding information and evidence that might be useful to the accused and then springing it on him. That is simply not being fair to an accused person. So I would ask that the Attorney-General be told that they should consider this practice because the law is that it is admissible.

We have asked the courts over and over again to rule, but the courts have said, "We cannot, because it is for the Attorney-General's Chambers. We wouldn't rule against that." There was an observation by Justice Rajendran some time ago when he took the prosecution to task for not releasing the statement made by an accused when the defence asked for it. His words were, "Do you realise that you are suppressing evidence?" So that is the position. May I ask that the Attorney-General's Chambers be asked to give this real consideration and see that they do not try and obtain convictions by any unfair means.

Assoc. Prof. Ho Peng Kee: Sir, in his usual grain, Mr Jeyaretnam wants to shift the balance more in favour of the accused. That is his enduring theme all these years. Sir, first, let me say that, in Singapore, accused persons do not have a right to copies of statements made to the police apart from the first information report and the cautioned statements they themselves have made to the police. That is a matter of practice which has been done.

It is quite different from the question of admissibility. Admissibility goes to whether a statement can be admitted in court. Here, we are talking about whether an accused person is entitled to have a certain statement that he has made. So that is the first point. Indeed, there is no provision in the Criminal Procedure Code (CPC) for the automatic disclosure by the accused persons of documents in the possession of the prosecution. There is clause 58(1) of the CPC. But this is only where the accused is able to satisfy the court that the document is necessary or desirable for the conduct of his trial that he may be able to obtain a copy of the statement.

Sir, let me also remind Mr Jeyaretnam that, in prosecuting a case, the Attorney-General's Chambers, first and foremost, seeks to protect the public interest, not just to win cases. There is a much wider stake that is at issue. Also, let me remind him that every society must find its own balance between how to protect this public interest and ensuring that the accused has a fair trial. And the system that we have in Singapore is a system that is open for all to see, for all to critique. The legal system and all the processes in the system are part of the criminal justice system that has received high praise, not from Singaporeans alone, not from PAP backbenchers, but from objective ---

Mr Jeyaretnam: From business enterprise.

Assoc. Prof. Ho Peng Kee: Not true, because the latest poll by the Subordinate Courts polled not just business people, but Singaporeans. 1,500 Singaporeans were polled and they expressed full confidence in the fair administration of justice. Other polls were also conducted. The legal administration in Singapore has also come for high mention.

Indeed, in some countries, the pendulum has swung too much the other way. We do not want that to happen in Singapore. For example, in UK, the Criminal Procedure Investigating Act was enacted in 1996 in part to address the imbalance that existed before then, ie, too much in favour of the prosecution. Therefore, remedial steps were taken. So let us not go down that path.

Mr Jeyaretnam knows that, in a criminal trial, in order to succeed, the prosecution has to prove its case beyond reasonable doubt. And this is already a high burden, which is placed on the prosecution. Like I said just now, any trial is to uncover the truth, not to trip anyone up. So even if the prosecution does tender the long statement of the accused during trial, it is not to trip the accused up. But it is to uncover the truth, that is, the prosecution must impeach the witness' credibility because he has said something which does not match with the statement he has given to the police. I think it is beholden on the Public Prosecutor who seeks the truth and justice to tender that statement.

Sir, the current practice on the furnishing of police statements to the accused person is already a balanced one. In fact, it is evolving over time. For example, I understand the pre-trial conferences (PTC) have introduced greater openness to the process. So during the PTC, the court will generally attempt to identify the disputed issues for trial and this would include the disclosure of the accused statements if the prosecution indicates that it intends ---

Mr Jeyaretnam: May I seek clarification?

Assoc. Prof. Ho Peng Kee: I want to finish my speech. He has taken his full 10 minutes.

Mr Jeyaretnam: The Minister is making statements without having attended any trial conferences.

The Chairman: Order. Mr Jeyaretnam, can you return to your seat?

Mr Jeyaretnam resumed his seat.

The Chairman: Prof. Ho, please continue.

Assoc. Prof. Ho Peng Kee: Sir, this will include the disclosure of the accused's statements if the prosecution indicates that he intends to rely on those statements. But of course, the PTC judge cannot compel the prosecution to disclose statements in its possession unless the defence is able to show the legal right to it. So that process in fact helps also to balance the picture between the prosecution and the accused person.

The other point is that the courts are also developing jurisprudence in this area. I am sure Mr Jeyaretnam, as a practitioner, must know the case of Ronnie Tay v Public Prosecutor where the Chief Justice said, in allowing an accused person's appeal, that an accused person's police statement, even if not used in the trial, should be made available to the defence once all defence witnesses have finished giving evidence.

Sir, in a criminal trial, the prosecution will make available certain documents to the accused. These are the charge, the initial police report concerning the offence, the accused person's cautioned statement under section 122(6) and indeed, even medical reports, and such other reports which the prosecution would be seeking to adduce under section 369(2) of the Criminal Procedure Code. All this includes scientific reports and other reports. These documents will give the accused person a clear idea of the case which the prosecution has against him. I think this is an important point because, justice dictates that a person who has to answer a charge must know what he is charged for. Hence, these facts which are stated in these various reports will enable him and the defence counsel, like Mr Jeyaretnam, to prepare the defence. They are sufficient for the accused to prepare his defence.

As for other statements or documents made by the accused that the prosecution intends to make use of during the trial, copies of these will be served on the defence. That again is fair because I understand that it is usually served at the pre-trial conference stage. These are documents which the prosecution intends to make use of during the trial. We are not talking about situations where, as I said just now, in the course of the trial, the prosecution adduces evidence by producing the accused's long statement. That is different because that is a situation where the prosecution did not intend to make use of the statement during the trial. But in the course of the trial, because of what the accused person said, which shows him up, that he is not telling the truth, the prosecution, in order to impeach the accused's credibility, will then furnish the statement in court and adduce it in evidence. By having these other documents which are given to him, the accused person knows what evidence will be adduced against him.

The next point is that if the prosecution does not intend to make use of the long statements, yes, these are not furnished to the accused. This is to avoid the risks that a guilty person would be given the means to tailor his defence to deceive the court and to do it in a way that is consistent with the statements he made to the police, thus avoiding detection. The point which is important to note is that the withholding of a long statement would not adversely affect an innocent accused person who consistently tells the truth at every stage of the process. In other words, if you are innocent, there is nothing to fear because you are telling the truth. When police is investigating you, you will tell your account, you will tell the truth. So when you are preparing for the trial with the defence lawyer, you will tell the truth. And at trial, whether under examination-in-chief or cross-examination, you will tell the truth. But if a guilty accused has sight of his long statement, in preparing for his defence, I am not saying the defence counsel will go along with that, the accused may decide to tailor his defence, or tailor his story for the defence counsel --

Mr Jeyaretnam: Defend the truth.

Assoc. Prof. Ho Peng Kee: If that is the truth, then he does not need to look at what he has written because that is the truth. The truth cannot vary. The truth is the truth. So the law evolves. If there is no risk of the accused tailoring his defence according to the statements he has previously given to the police, and this is the case of Ronnie Tay, then the High Court says that there is no objection to disclosing the police statements to the accused.

Sir, the bottomline is this. The interest of justice is served by ensuring that the truth emerges during the trial, not by enabling a guilty person to escape punishment by looking at his long statement and having the time in the comfort of his office, or elsewhere, to think of a defence that is consistent with the long statement so that he has an advantage. So long as an accused person, as I have said just now, tells the truth at every stage to the police, to the courts, he has no need to fear about not being able to see his own police statements before he gives evidence. 3.15 pm

The Chairman: Order, it is "guillotine" time. Mr Jeyaretnam, are you withdrawing your amendment?

Mr Jeyaretnam: Sir, again, I am, more than in the previous case, not satisfied. May I state that and could it be put on record. But I will withdraw the amendment.

Amendment, by leave, withdrawn.

The sum of $34,432,080 for Head B ordered to stand part of the Main Estimates.

The sum of $12,079,400 for Head B ordered to stand part of the Development Estimates.

Head N -

The Chairman: Head N, Ministry of Finance. Amendment No. (1), Mr Leong Horn Kee.

Mr Leong Horn Kee (Bishan-Toa Payoh): Sir, I beg to move,

That the total sum to be allocated for Head N of the Main Estimates be reduced by $100.

Sir, in moving this cut, I wish to ask for an update from the Deputy Prime Minister on the status of the Government's plan to encourage the merger of local banks. The Government has announced that eventually there should be only two large banks in Singapore.

The question I would like to ask is that currently, there is no evidence of any deliberate move by local banks to work towards some form of merger. Banks have appointed their Nominating Committees, but nothing much else seems to be done. I would also like to take this opportunity to better understand what are the benefits of having fewer, though larger local banks. I would like to know why the conclusion that Singapore can only support two local banks. The question on people's mind is which two, and why only two. Why not three, why not more? Is there a target time-frame? Is the pace of change going at a rate that the Government is satisfied with?

The other question I wish to pose is that if there are eventually to be only two local banks, would there be adequate service and attention given to the small companies and the small individuals. Large banks tend to favour and service large customers. Who is there to service the local customers and the small man-in-the street?

Another point I would like to pose on the banking system is that, with the advent of e-banking that is, banking on the Internet, how would Government regulate this sector? Would the usual rules of MAS be applicable for banks, some of which may not even be necessarily regulated by our Singapore authorities operating through the Internet? Can such banking practices and transactions be adequately controlled by the authorities? How can e-banks be regulated so as to preserve the integrity of our banking system?

Sir, I move on to my next cut on mergers and acquisitions (M&As). In his Budget speech, the Minister has mentioned that previously, if an M&A involves the transfer of less than 90% of a company's shares, or if the consideration is made in cash, the exercise would not qualify for stamp duty relief under section 15 of the Stamp Duties Act. To encourage more M&As, the Minister has decided that these two conditions be lifted and the qualifying limit for the main holding company be reduced to 75%.

I would like to laud the Minister for initiating this move to encourage more M&As in Singapore. However, I would like to suggest that the qualifying limit can be lowered further to, say, even as low as 51%. Here, I wish to declare that I am a Director of a company and I am making such suggestions for the general public interest.

Sir, there are many local companies, especially SMEs, where it would be extremely beneficial to encourage more M&As amongst these local companies. This will enable the smaller SMEs to merge and create more bulk. In the process, they can achieve better economies of scale, streamline operations, and attain cost savings. As companies merge, it would become increasingly difficult for the main acquiror company to hold 75% or more of the combined entity. There is also the deterrent that the owners of the shares or assets of the company being acquired may be subject to heavy taxes on profits deemed to be realised. In some of these cases, there are no actual cash transactions, but just an exchange of shares. Therefore, paying the tax on the gain will become a great deterrent to the entire transaction, especially when there is no cash involved but only just paper gain.

Generally, since there is a very beneficial effect to encourage more M&As of local companies, I would like to suggest to the Finance Minister that the local tax regime, ie, the Stamp Duties Act and the financial regulations, should be reviewed to ensure that there will be more M&As in Singapore.

Mrs Lim Hwee Hua: Sir, recently, there was anecdotal evidence of excessive consumer spending arising from easy credit, which led to bankruptcy for those who could not curtail their credit card spending.

Whilst the credit card has long been around, and the dangers of easy access to credit known to issuing banks, the advent of electronic finance has added yet more convenience to securing consumer credit on two fronts. Firstly, electronic retailing or e-tailing through the Internet provides even more choices for the consumer, and correspondingly, more temptation for excessive spending. Every transaction is only a mouse-click away. Secondly, Internet banking is likely to lead to an increase in demand for consumer credit on-line. Unless credit information is shared readily between banks, the consumer may soon find more credit at his disposal than desirable.

This highlights the challenge of curbing excessive consumer credit via electronic access. I would like to ask what is the Government's philosophy and approach towards this potentially tricky problem.

At the same time, intensifying competition in cyberspace may mean a more timely extension of other types of credit, beyond the more straightforward security-backed mortgages. Correspondingly, credit risk management by banks and financial institutions may eventually lag approvals or credit extension.

The extent is obviously an issue, for should there be a severe economic downturn, there would be a huge multiplier effect stemming from an unwitting over-assumption of risk. Can the Minister explain what measures would be in place to build up overall credit risk management capabilities in tandem with rising demand for timely, on-line credit?

The Chairman: Order. I propose to take the suspension now.

Thereupon, Mr Speaker left the Chair of the Committee and took the Chair of the House.

Mr Speaker: Order. I suspend the Sitting and will take the Chair again at 3.45 pm.

Sitting accordingly suspended at 3.23 pm until 3.45 pm. Sitting resumed at 3.45 pm

[Mr Speaker in the Chair]

Debate in Committee of Supply resumed.

[Mr Speaker in the Chair]

Head N (cont.) -

Mr Ong Kian Min (Pasir Ris): Sir, from the economic statistics, we saw that, though the rest of the business sectors improved in the fourth quarter of last year, performance by small firms actually deteriorated. A sub-index of sales by small companies was minus 52%, as compared with the plus 35% reported by larger firms.

Other Members of this House have brought up the difficulties faced by small and medium enterprises (SMEs). I will not labour on these points except to say that Government grants and tax incentives would not be of much use unless the SMEs can increase their business revenue.

SMEs have been told time and again that with the Internet, the whole world is their global marketplace, and they can sell their products to customers in every part of the world. But, in practice, how does one actually achieve that? It is always difficult to draw interested customers to visit your website. A search engine may throw up tens of thousands of related websites. And after that, there is the question of follow-up and delivery.

To increase their marketing reach and business revenue, SMEs would probably do well to form alliances, either among themselves or with larger firms. At first glance, one would assume that Government-linked companies (GLCs) are obvious alliance partners for our SMEs. But, when I mentioned GLC as a likely partner to some of the private sector companies I came across, I was perturbed by their reaction. More and more, I received the retort, "The GLCs will swallow you up." And this was said not only by local companies but by some foreign companies as well. This is not healthy.

I do not have statistical evidence to prove whether this is warranted or not. It is based on what private sector businessmen tell me, and on one particular example. One of my grassroots leaders narrated to me his personal experience. He came across a new product in Italy that was superior and would prove to be an advantage in bidding for a certain Government tender. Being a small-time businessman, he approached a GLC to jointly pursue this Italian contact. He thought he could trust the GLC without signing a binding joint venture contract or non-circumvention agreement. Was he wrong? When he brought the Italian principals to Singapore, the GLC partner ferried them away, bought them an expensive dinner and proposed to deal directly. With the GLC's immaculate credentials, it is no surprise that the Italian company was convinced to deal with the GLC directly, and the small guy was excluded from the arrangements.

When I raised this with some prominent people, the response was that the business world is a dirty shark-infested one, especially in doing business with some of our neighbouring countries. Our GLCs could not be expected to adopt one set of cut-throat business practices for their regional deals and another set of more accommodative and friendlier practices in dealing with Singaporeans.

Sir, I cannot agree with this. We must encourage our GLCs to adopt a sense of business decorum, especially in dealing with our own that will lead to a win-win situation. We should create a more helpful coexistence between GLCs and smaller players.

Another private sector complaint about GLCs is that they are deep in pockets but shallow on ideas. There is a perception that if you propose a good business idea to GLCs, they will take it and exploit it on their own with their strong financial resources. This is not healthy.

CEOs around the world lament the lack of quality management and human resources. People with good ideas are venturing out to set up their own. I will be surprised if our GLCs do not suffer the same brain drain. In this scenario, the small guy will have the brilliant ideas, the know-how and the expertise, but may not have the resources to execute those ideas. Therefore, it is in the interest of the big players to work with them.

It is a mistake for big corporations to think that once an idea has been proposed and a prototype has been constructed, that the inventor who initiated those ideas is no longer needed. That person has valuable insights and an in-depth understanding of his invention. Big corporations must nurture the development of ideas both internally within their own organisations, and externally, and benefit from these ideas by continuing a healthy relationship with the one who came up with the idea in the first place.

What is at stake is not confined to that particular transaction alone. It is wider than that. It is more important for our GLCs to improve their image as a good business partner.

Why are some companies more sought after than others as alliance partners? For example, why do technology start-ups seek to get Softbank to invest in them? I believe management vision, corporate culture and business decorum are very important attributes. It will be very sad if people shun GLCs as an alliance partner for the lack of these qualities.

We have numerous plans for the 21st century - Singapore 21, T21, Manpower 21. Perhaps it is timely to come up with a GLC 21 to spell out the role and desired outcomes of our GLCs.

Mr Ravindran: Sir, our Government-linked companies were formed in the 1960s and 1970s to spearhead business undertakings in spheres where business investments were large or where ordinary businessmen would not dare to venture due to many reasons, and also certain industries were set up for security purposes. But in the 1980s and 1990s, some of these GLCs had decided that, in order to boost their profit level, they should go into businesses which are actually the domain of the small and medium size industries. Some of our GLCs have gone into business like freight forwarding, small property development, even when it is not their core businesses, and even own croissant businesses.

Sir, this is something that we should avoid, and it is perhaps timely, and I endorse the call made by my learned friend, Mr Ong Kian Min, that we should re-examine what exactly should be the role of our GLCs. Perhaps the Minister has to establish a committee to identify what is the new role of GLCs in the 21st century. I think they should become trail-blazers in the new economy. They should go on into new businesses and bring Singapore's economy into new areas where they become leaders, and also show example to the other companies which are local as to where the opportunities lie. They should become global players, play among the whales, and not play in our backyard ponds where smaller fish exist.

On this note, Sir, I hope that the Minister will ensure that our GLCs do not compete with local businesses and go downstream. There are many players locally and try not to take over their business but encourage them to venture abroad or venture into new businesses where there is no competition.

Mr Inderjit Singh: Sir, many Members have spoken about our tax system during the Budget debate in the last few days. As I mentioned in my speech on Monday, I feel that we can develop a differentiated tax system for different economic activities and go away from a "one size fits all" tax system. I will talk a bit about this later on when I talk on tax for technopreneurs.

I would like to suggest a few things about our tax system, and this will encourage more start-ups and to accelerate the regionalisation drive. We should therefore review some of our tax practices to create a more conducive environment for this to happen.

First of all, group offsetting of local and overseas subsidiaries. I know that this has been brought up many times. I will not describe the details of how it should be done. My colleague, Mr Leong Horn Kee, also talked about this during the debate earlier this week. I suggest that we do not worry too much about the tax leakage that may occur because I believe that only a small proportion of individuals or companies will have the intention to do so. Most of the other companies will do it for the true and legal purposes. The resultant benefit for businesses will be tremendous. So we should not punish the majority to avoid the bad practices of a small minority of companies that may go about doing this thing.

Sir, cross-year offsetting of losses should be allowed for companies including start-ups. This will lessen the burden on investors and shareholders and we should allow greater flexibility on how this can happen. I believe many businesses still do not understand and do not fully comprehend the current requirements that allow some amount of offsetting of cross-year losses.

I would also like to suggest that we introduce negative gearing for individuals. For example, investment in property should be allowed to be negatively geared for individuals in Singapore. I believe this is currently practised in a few countries, including Australia.

We should also provide incentive for SMEs to merge by allowing the offsetting of losses and by removing restrictive legislation like ownership requirements set by the Government. I believe Mr Leong talked about this earlier.

Sir, the other area that has also been talked about in the last few days is the taxation of e-commerce transactions, as part of our overall tax system. We need to clarify how we are going to participate in this e-commerce arena. We need to put in place a tax system that is well integrated with the rest of the world and, at the same time, facilitate the growth of this sector of our economy.

Finally, Sir, while we worry about becoming a tax haven if we lower corporate taxes to below 25%, can we avoid this being labelled as a tax haven by highlighting the other many taxes that we pay? For example, we have GST, property tax, fuel tax, utilities tax, ERP, COE and so on. And I am sure if we add all these taxes, our total tax is greater than 25%. So if we can highlight all these taxes, then we can lower our corporate tax to below 25%, and we can avoid labelling ourselves as a tax haven.

Finally, Sir, I hope that we will be prepared to put in place a differentiated tax system to allow greater flexibility and to encourage certain economic activities that will be beneficial to our economy.

Mr Leong Horn Kee: Sir, I agree with what Mr Inderjit Singh has just proposed on the need to do a complete review of the tax system and, in particular, to look at specific target areas that can be changed. I have spoken on this subject of group offsetting of taxes during the Budget debate. In response to this suggestion of allowing group offsetting of taxes made by several of our parliamentary colleagues here, the Finance Minister has given his views in his response at the end of yesterday's Budget debate. However, I would like to continue to plug at this issue which I feel is a very worthwhile cause and, hopefully, in the process can crack the nut with the Finance Minister. Raising this issue here will also give him a chance to explain to us in more detail, if he does not agree.

Sir, I would like to repeat my suggestion, which is that the Government should have taken the line that although it does not want to allow group offsetting of taxes for a variety of reasons, we should not look at it on blanket basis, but more on a specific case by case basis. Therefore, I wish to repeat that for specific cases, such as for sectors where the Government wishes to promote more investments to be made, say, in the area of infotechnology and other high-tech areas, the Government could actually consider allowing losses of such new ventures to be offset against the profits in other parts of the principal business of a company. Companies will therefore be more ready to invest in new ventures and in high-tech areas. In the process, Singapore will gain.

Sir, my next cut is on taxation of e-commerce. Internet companies operate in a virtual world where there are no sovereign boundaries. Hence, these Internet companies have customers located anywhere in the world, and the companies themselves may not be registered or based in Singapore. However, their operations and products may be targeted at Singaporeans or can reach customers in Singapore. My question is: how could the Singapore Government, or any government for that matter regulate and control these virtual companies on the Internet? In particular, if these companies turn out to be very profitable, how do we measure the amount of profits that they derive from doing business in Singapore, and therefore the Singapore Government can be eligible to tax such companies? 4.00 pm

On the other hand, to promote more Singaporeans venturing into new start-ups, especially into e-commerce start-ups, I would like to ask the Minister whether he could consider incentives to encourage these start-up companies to be formed. For example, in the early years of their formation, can the Government give them preferential tax status or more R&D grants so that they can quickly complete their product development and commercialise their products?

Mr Inderjit Singh: Sir, more could have been done to encourage and accelerate our technopreneurship drive during this year's budget. Nonetheless, I hope more will be done as we progress to the new economy.

To encourage entrepreneurs, they should be given more incentives to own a larger portion of the company that they started up without having to worry about tax. The entrepreneur who brings in $1 million worth of ideas and an investor who brings in similarly $1 million worth of money to the business are currently in our tax system treated differently. The investor will not pay for capital gains tax while the entrepreneur who brought the idea but has a share in the company has to pay the full tax for the capital gains that he may have got as a result of the gain in the share value. I would like to suggest that as part of the review and part of the announcement that is going to come in May this year regarding employee stock options, we should review the taxation of stock options into three categories.

The first category of stocks is typically for those new start-up companies where technopreneurs are given free shares in lieu of their expertise and experience that they brought to the table. Such entrepreneurs should not be taxed for these shares at all. In the beginning, the value of the shares cannot be clearly determined because if the company collapses, then the shares are worth nothing at all. But if the technopreneur is able to make it a success, he will generate wealth for the company and for the country and therefore more jobs would be created and he would have contributed tremendously to the economy. For these benefits that they bring to the company and to the country, the tax the Government charges on him, the tax loss as a result of the implementation of no-tax on the employee options on these shares, would be all worth it for the country.

The second category of shares is the stock options given to founder-employees. If these are given to the employees in the first six months of a new start-up, then I suggest that these too should be tax exempt or minimally taxed for the same reasons I gave earlier. These are quite different from the free shares that are given at the start of the company.

The third category of stock options is given by successful or listed companies and these can be treated differently from start-ups, but I still feel that they should be treated differently from income tax as they are being treated currently. The reason for this is that in the case of income, there is a certainty of income for the employee, but in the case of a given stock option, there is some element of uncertainty because if the stock value does not appreciate, then the employee does not gain very much from it. For this difference, I believe they should not be subject to the normal tax system. This is one example of how a differentiated tax system can work in Singapore.

Secondly, I would like to suggest that we should encourage angel investors by allowing them to write-off losses from their income tax when companies they invested in fail. I believe that the current practice allows for write-offs of losses when shares are sold at a lower price. This is not attractive enough because when a company collapses, there is no opportunity to sell the shares. In fact, the shares are then worth nothing.

Thirdly, I would like to suggest that entrepreneurs be allowed to carry forward the losses in their investments in their future income tax computations.

Fourthly, and these are for companies that are required to raise capital for capital intensive type of companies, I would like to suggest that pre-production expenses should be tax deductible because a lot of preparation is needed for such high-tech companies before they can go into production. For the capital intensive companies, you cannot wait for the time of production to collect the money from your investors. All of the equity is raised very much earlier so that you are ready to invest once you are ready to run production. The current practice discourages the early raising of equity capital because the interest earned for the capital that you have raised and has not been expanded on, the capital that is kept in the bank, is taxed even if a company were to have made huge losses in the whole process.

Fifthly, I would like to suggest that we grant pioneer status type incentives for individuals and local start-ups. Just as we value foreign investment capital by granting companies pioneer status in the past, we should similarly value the intellectual capital brought by these people and the local companies.

Sir, I am encouraged that the Minister has said that he would be looking out for suggestions on how we can further improve the system. I hope that he will take into account all the suggestions put forward by the Members in the next few hours.

The Chairman: Can I just ask Members to bear in mind when making their speeches that we have a total of 28 cuts on this head and we are actually falling behind schedule. Mrs Lim.

Mrs Lim Hwee Hua: Sir, in the debate so far on entrepreneurship, much has been said and argued in favour of preferential tax treatment for individual holders of stock options issued by the companies that employ them. The recent concession to allow tax deferral for up to five years, upon assumption of the stock options, is indeed laudable.

Sir, I would like to focus instead on the tax treatment for companies issuing such options. Increasingly, especially with hi-tech start-ups, ESOPs will figure significantly as part of staff compensation. Actual cash components would correspondingly reduce in proportion. This has tax implications for companies, depending on the scale of implementing ESOPs.

I would like to ask the Minister whether he would allow companies to tax-expense the value of options granted, subject to acceptable option valuation methods? And if so, whether he would impose any limits.

Sir, can I go on to the next cut?

The Chairman: Yes.

Mrs Lim Hwee Hua: Sir, much has been said about the competing demands and dilemmas faced by working women, which may conspire to incline couples towards not having children.

Some women may choose or would like the flexibility of being able to take time off work for a period of time, following child-birth. Currently, this involves giving up a source of income. For those who plod on, they can claim the usual child relief and enhanced child relief of up to 5%, 15%, 20% and 25% respectively of earned income for each child order. There is no in-between compromise, ie, tax reliefs for the family whilst taking time off.

I would therefore like to ask the Minister whether tax incentives can be extended to husbands instead, of women who choose to stop work following child birth?

I would also like to echo several Members' call to raise the current level of tax relief of only $2,000 per child.

Dr Jennifer Lee: Sir, Mrs Lim Hwee Hua has just very much covered the ground that I wish to also expound on. So I shall not take up more of the House's time, but just to add my voice to support her position.

Dr Tan Boon Wan: Sir, I urge the Finance Minister to allow widows the same access to the foreign maid levy relief as available now to married women. At present, widows with young dependent children enjoy the relief but they lose this right if their children are grown up. If their married sisters continue to enjoy this privilege with grown up children, they wonder why they are treated differently. Like their working married sisters, they have a home. Like their married sisters, they have to work outside their homes to enjoy this relief. If the relief is meant to be pro-marriage, they have also fulfilled this role. This is not negated by the death of their husbands. If the requirement is that the claimant should work by choice, as married women are deemed to do so, as they have their husbands to maintain them, and the relief is to entice them back to the workforce, then it follows that a married woman who works out of necessity should be disqualified and widows who have the means to maintain themselves without having to work, but chose to work, should qualify. Surely, this cannot be a condition. Although children have been advanced as the rationale for this relief, this does not appear to be a necessary condition. According to the notes that accompany the income tax return form, as long as the woman is married to her husband and opts to be taxed separately, she can claim the relief whether she has children or not. However, if having a husband is a necessary condition to enjoy the relief without dependent children, then I suppose a widow will just have to find and marry a new husband to enjoy it. This, I am sure, is not one of the purposes of the relief.

Sir, in conclusion, if the relief is intended to be pro-marriage, and to encourage our womenfolk to be economically active, then I urge the Minister to give to both married women and widows equal access to the foreign maid levy relief. A widow who depends on one income to maintain a family has as much, if not, more need for the relief. If the Minister does not think that widows should enjoy the relief, I wonder if the Minister could in his reply afterwards, or at some future opportunity, enlighten the House as to the number of widows not allowed access to the relief and the potential loss of relief to the Government if these widows were given the relief.

Mr Leong Horn Kee: Sir, I am trying to cut short my speeches, as you have requested us earlier. Sir, the Finance Minister currently allows any individual to claim a very small personal relief as his income tax relief when he attends certain professional courses. This relief is to allow an individual to deduct up to $2,500 of course fees for courses leading to a professional or academic qualification or vocational qualification relating to a person's existing trade, business or employment. I would like to propose that this relief be increased perhaps to $5,000. The reason is that nowadays course fees are very high. Professional or vocational course fees can cost $10,000 or more. Hence, to encourage more Singaporeans to improve themselves, a higher course fee relief will encourage them to enroll into more self-improvement education.

In addition, I would also like to propose that these course fees be extended to not just professional or academic qualifications or for other self-improvement educational courses. Such self-improvement courses will not necessarily be related to a person's trade or vocation. For example, there may be many people who want to attend a new skills course or new vocation course so as to get a new job in a different trade. Also, there may be people who want to attend IT or computer training courses but they themselves are not necessarily IT professionals.

This proposed relaxation of course fee relief benefit would be useful to ensure that more and more Singaporeans attend retraining or self-training programmes of all kinds.

In addition, as I have proposed in my speech during the Budget debate, I would like to propose that a grant be given to local grassroots organisations, such as the Citizens' Consultative Committees (CCCs), so that they can also conduct more self-improvement or IT training courses at the community clubs at subsidised rates. This will be beneficial to a pool of lower income or senior citizens who wish to be trained or who want to receive more self-education.

Finally, I would also like to propose, as I have said in my Budget speech, that a grant or income tax relief be given to individuals to purchase PCs. This proposal would encourage more and more Singaporeans to embrace IT technology. As a result, this will speedily create an environment in Singapore where an increasingly large percentage of our adult population would understand and appreciate the fast moving Internet and e-commerce society.

For my second cut, I would like to join my colleagues in speaking on the employee stock option scheme. Here, like my colleagues, Mr Inderjit Singh and Mrs Lim Hwee Hua, I would like to urge the Government to consider more enhanced benefits for employee stock option schemes. Many companies, especially new start-up companies, do not have the funds to employ and attract key employees who are important to the companies. Therefore, they use ESOPs as a main carrot. So I would propose that the Government consider allowing such ESOP schemes to be given to high-tech companies to be declared tax free, say, in the first five years when they exercise such options. Currently, when they exercise such options in the first five years they are deemed liable to pay income tax. For such companies, perhaps to attract them and as a form of encouragement, maybe it will be useful to consider tax free status for the first five years.

Dr Tan Cheng Bock (Ayer Rajah): Sir, I move this amendment to highlight some of the problems associated with estate duties. Many Singaporeans have built up assets in terms of housing, CPF savings and fixed deposits, stocks and shares, unit trusts, etc. Many will die with some assets for the family, and some will have to pay estate duties. I am not asking for the removal of estate duties. In fact, the estate duties imposed are not onerous. But the process of the IRAS' assessements is lengthy and causes hardship to the deceased family. At my meet-the-people-sessions, I have complaints relating to this. All assets are frozen immediately at the time of death, especially when the deceased is the main sole breadwinner, and this causes financial hardship. Adding to the distress, the family has to pay up in advance an estimated amount of tax and an interest charge is imposed if the amount is unpaid, all this at a time when they have no access to the estate. Obtaining valuations of assets to submit to IRAS is difficult and lengthy. Much work has to be done to obtain valuations on properties, cars, unit trusts, contents of safe deposit boxes, etc. IRAS also requires information on transactions in bank accounts for the past several years, I think up to five years. It is not possible and impractical for family members to trace transaction details of the deceased unless he had kept an impeccable record. The frustrations are immense, especially if the family members are not well versed in managing financial matters. 4.15 pm

Assets are frozen until IRAS is satisfied with the assessment and this can take a long time. Nowadays, stock markets are volatile and to a certain extent the property cycle. Perhaps IRAS can consider allowing assets to be sold first and held in a trust account. This will let beneficiaries take advantage of any upturn in prices or get out of a falling market.

It is not unusual for estate assessment to take one to two years to settle. Beneficiaries should not be penalised unnecessarily because of the lengthy process.

Mr Seng Han Thong (Ang Mo Kio): Sir, the Supplementary Retirement Scheme (SRS) will be implemented by next year. The Finance Minister has indicated that views from the private sector would be sought on the implementation aspects. I would urge the Government to carry out extensive public consultation among the people sector, especially the trade unions, so that the SRS, when implemented, will gain wide support from the workers.

It is important that workers of all ages are encouraged to contribute to it. Thus, before implementation, the concern and misconception, if any, among the workers must be addressed. To save for old age from young, is in line with Singapore 21's recommendations that each of us should take individual responsibility. Thus, the concept of the scheme needs to be explained clearly to the ordinary Singaporeans. It should be an easy to join, easy to quit scheme so that ordinary workers will have the confidence in it. One of the worries is whether the scheme is designed in such a way that it is very easy to go in but very cumbersome to come out, as the Hokkein says, "a jip, buay tzu".

Under SRS, Singaporeans will be contributing to private funds. It is a fact that in terms of packaging and marketing, the private sector is more creative than the public sector. However, in terms of confidence, as far as money is concerned, Singaporeans trust the public sector, the Government, more than the private sector. Thus, sufficient safeguards against any form of default to protect the people's hard earned savings must be in place. I hope the Government can bear in mind this point when formulating the policy.

Sir, according to the Labour Force Survey 1999, the economically active female accounts for 50.1% of the female population. These include those who are working or unemployed but looking for a job. And those who are not working and not looking for a job accounts for 49.9% or 463,000. So many of this group of women are married housewives, the homemakers. Thus, I hope the Government will encourage husbands to contribute for their wives who are not working, but looking after the home. As homemakers, they have no CPF savings or little savings. It is thus logical that husbands should be encouraged to contribute to SRS for the wife. In this respect, a fixed sum of money contributed by the husband for this purpose can be tax-free or it should enjoy a lower tax rate. This is to acknowledge the contribution of the homemakers who have in no small way helped their husbands. It is also to solve some of the future problems of married women who have been playing the role of homemakers but are divorced, widowed and have not enough savings for their old age.

Sir, as we are encouraging workers to save from young, it is also proposed that the scheme be renamed as Supplementary Saving Scheme (SSS) rather than retirement scheme.

Mr Inderjit Singh: Yesterday, Mr Kenneth Chen talked about allowing new start-ups, especially dot.com companies, to list on our stock exchanges, and he felt that there was a need for the Government to point out the risks of high tech/IT industries before Singaporeans invest in such companies. He also highlighted how the public will blame the Government in case they make losses when such companies fail.

The solution is not to tighten the entry requirements for such companies to be listed nor for the Government to go to the public with a warning each time a new company lists on the stock exchange. I do believe, however, that we can achieve the dual objectives of allowing easier capital raising by entrepreneurs and start-up companies and at the same time, the public will have an automatic signal that investments in such start-ups could be risky, but could also yield very high returns.

Sir, the current practice of allowing such company to list on the main board and on Sesdaq is a good first step, but the issues are:

Firstly, we still have a number of stringent requirements that are still not easy to meet for many viable companies, because we are allowing companies of all types to list on the two boards.

Secondly, this has created confusion among investors, especially among retail investors in Singapore, who are not sure whether such companies are the high risk/return type, because listed on these stock exchanges are both traditional industries measured by traditional measures as well as the high risk start-ups which may yield higher returns should they be successful.

Therefore, I feel that we need to implement a new board in Singapore for emerging technologies and for young companies who may have good potential but do carry a higher risk which allow easier capital raising and at the same time allow investors to make a conscious decision that they are investing in risky businesses. This will resolve the dilemma that we are facing as a result of the current practice. So whenever a company is listed on this new risky exchange, the investors will know that the potential returns could be high, at the same time they will make losses and they cannot blame the Government for not pointing things out to them very early.

This should be a global board, having a different set of entry criteria. I hope that it could be Internet tradable and trading in world currencies, 24 hours around the day, so that we can have participation in capital raising from around the world. And I believe that Hong Kong recently implemented the GEM to serve the same purpose.

Dr Wang Kai Yuen (Bukit Timah): Sir, on this cut, I am referring to listing of companies without a track record of profit. I am not referring to the listing of companies that the speaker before me, Mr Inderjit Singh, refers to. He is talking about new companies, companies built on hope and potential without any measurable financial returns. I am referring to companies that have been in business for a few years but yet to show a profit. For companies in the new economy, these companies would have passed through the venture capital stage and are now looking to expand their businesses.

With the relaxation of SGX, companies without proven profits, track record, could be admitted to the main board. Several companies have already done so. I have touched on this briefly in my adjournment motion at the last sitting. If I run the risk of incurring your ire for repeating myself, I believe I am in good company this afternoon. Traditionally, where possible, most companies would want to be listed on the main board. It is a sign of recognition, a sign of success. Of course, there are also tangible results such as better market recognition, getting a P/E ratio and many companies are indeed, therefore, reluctant to be listed on the secondary board. However, with the advent of the new economy, the situation is different today.

Let us look at the stock exchange in US - the New York Stock Exchange and Nasdaq. While the New York Stock Exchange has been dropping across the board, in the recent days Nasdaq has been breaking new record, heading for higher grounds, despite the repeated hint of interest rate hike proposed by the Federal Reserves. This reflects the enthusiasm of the investors for companies in the new economy, because they are looking for multiple time increase in capital gains. The decline in the Dow Jones and the increase in Nasdaq indexes simply reflect the trend that many fund managers have been transferring funds from the old economy to the new economy. In fact, today, Nasdaq is the market where a company preferring to be listed would like to be, that is, to ride the wave of the new economy.

Sir, therefore, I think the link between listing on the main board and the ability to raise money has been broken. Yet, I think it is still useful to maintain the segregation of the established companies and emerging companies. Therefore, I would like the Minister to reconsider how we allow companies to be listed on our two exchanges.

Mr Low Thia Khiang (Hougang): (In Mandarin): Sir, in last year's Budget debate, I raised the question of CLOB in this House. I pointed out that the Government should not shirk its responsibility. I also wanted to know what action the self-claimed capable, farsighted and efficient PAP Government would take to protect the interest of CLOB investors. Unfortunately, a year has passed, yet all we have are only two schemes recommended by SGX and KLSE. In my view, the Government is selling out the interest of the CLOB investors through these two schemes in an attempt to resolve this knotty problem.

The first scheme by Effective Capital proposes to commence the slow release of shares from July this year. But it would take as long as 13 months for all the shares to be released. On top of that, the investors will have to pay an administrative fee equivalent to 1.5% of the closing prices of the shares as at the 15th of this month. To me, this kind of administrative fee is no different from the "protection money" demanded by the gangsters. The agreement between SGX and SCANS of KLSE on share migration cannot be enforced. Migration of shares has to be done through a private company, and then they slap an administrative fee on the investors. This is indeed daylight robbery!

There are areas of concern in this scheme. First, how do SGX and KLSE ensure the effectiveness of Effective Capital? What happens, if after taking over the CLOB shares and collecting the so-called administrative fee, the company collapses and goes out of business within 13 months and before the shares are fully released? Who is going to be liable? Can SGX and KLSE provide a guarantee to the investors against the risk? Secondly, apart from the 1.5% protection money, can the investors be assured of real protection? Will the KLSE suddenly introduce some new regulations and seek to collect some more money under certain pretext? Thirdly, how are shares to be released, on what criteria and what principle? What amount of shares will be released each time?

Sir, let me now deal with the second scheme. For this, you would have to wait until January 2003 for the shares to be released, and it will take a period of nine months. I think this is a big joke. The CLOB market was closed for trading in 1998. It would mean a long five years since the closure. Yet, the SGX finds it fit to accept this kind of scheme. Furthermore, how would SGX and KLSE ensure that there would be no more change of mind? As the Chinese saying goes, "yechang mengduo", (a long night is fraught with nightmares) meaning, "a long delay means many hitches".

I would like to know whether these schemes are the only things the Government could do for the CLOB investors. Are they the best and most favourable schemes? When answering questions on the CLOB issues, the Government has reiterated that the CLOB investors have their legal rights, and the Government can take the matter up to the WTO.

On 23rd January 1999, Deputy Prime Minister Lee Hsien Loong said in Parliament, and I quote:

"The Singapore Government has taken advice on possible proceedings at the World Trade Organisation forum from leading legal counsel that specialises in WTO issues. The counsel has advised that the `CLOB' issue is within WTO's jurisdiction and Singapore has valid grounds for seeking redress at WTO on the matter."

But right now we have not seen Government taking any effective action to protect the interests of CLOB investors. Then, SGX suddenly agreed to this proposed scheme. What on earth is the Government doing? You say one thing, and you do another thing. Perhaps the Government rather "kow-tow" to the Malaysian side and sacrifice the interest of the CLOB investors.

The Government should not forget that in 1989 when the CLOB market was set up, it was to offset the pressure resulting from the separation of the Singapore and the Malaysian stock exchanges.

On 29th November 1989, the Minister for Finance, in answering questions on the separation of stock exchanges between Singapore and Malaysia, pointed out, and I quote:

"At the moment, there are 182 Malaysian companies out of the 329 companies listed on the Singapore Stock Exchange. In the short term, the immediate impact of the de-listing of Malaysian stocks from the SES is likely to be a decline in the turnover of the SES."

He then went on to say:

"Plans are being finalised to trade Hong Kong, Thai and Australian stocks in the over-the-counter (OTC) market to the SES electronic trading or CLOB system."

So our investors jumped into the crocodile pit and the members of the Stock Exchange of Singapore earned a lot of commissions and the financial service sector grew steadily. Both the Exchange and the Government benefited.

Now Malaysia has crushed the crocodile pit into an abyss and the Government just sits on the fence and allows the capital of the investors to fall into a bottomless pit. It even acquiesces in these two schemes which are definitely not in the interest of the investors. My conclusion here is that the PAP Government really has no conscience. 4.30 pm

Mr Sin Boon Ann (Tampines): At the recent sitting of Parliament, my colleague, Dr Wang Kai Yuen, moved an adjournment motion wherein he was concerned that the bubble created by the Internet fever may result in the ordinary investors getting seriously hurt if the market should nosedive with a serious correction. Our DPM Lee replied by saying that not all dot.com companies would be successful. In the market which is run by a regulatory philosophy that is based on disclosure rather than merit, what is obvious is that the responsibility for the choice of share purchase must surely rest with the investor. Our DPM advised that when one invests in the market, one has to do it prudently.

Sir, what concerns me is the extent to which the public has been so overwhelmed by the excitement over investing in dot.com companies that they have almost thrown caution to the wind. Right now, in Hong Kong, the dot.com fever has moved to frenzy. Following the successful launch of Tom.com, Hong Kongers are now caught on by the Internet fever. At this moment, investors in Hong Kong are hoping to be able to make a punt on IT shares in the hope that, when allotted, they can sell these shares for a handsome gain. Never mind if these investors have not read the prospectus. Never mind if there are enough disclosures of risk factors to scare any prudent investors away from the offer. As long as there is money to be made, the investors would be there no matter what the risk.

Sir, the truth is that there are concerns over the present euphoria in the Internet stocks. Many will concede that the Internet stocks today are over-valued. One magazine reported that nearly three quarters of the Internet-related initial public offerings in America since mid-1995 now trade below the issued price. We know that the cardinal principle in any investment is caveat emptor. However, the question which we must ask ourselves is whether the Government's duty is merely to provide a broad market framework and to leave investors to make their own better judgement. At the moment, the regulatory philosophy has shifted from a merit-based regime to one that is based on disclosure. In other words, in its present approach, so long as the company meets the listing requirements, chances are that the company's application to be admitted to the official list will be approved.

Sir, I believe that the disclosure-based regulatory regime is more appropriate for markets where the investing public is sophisticated. The same, however, may not apply where the investors are not as savvy. If this is so, I believe that there is a greater duty on the Government to play a greater role in helping to protect the interest of investors. The balance between a merit-based and a disclosure-based regulatory regime lies closer to the former than the latter. At the end of the day, the Government cannot just rely on the fact that the investors have been warned. If the market crashed in a catastrophic manner, some amount of backlash will follow. I mean, just look at CLOB. As Mr Low has said earlier, there are many who still believe the Government is responsible for the problems of having the CLOB shares today.

So there is this feeling that there is a certain amount of residual responsibility that the people will expect of the Government on the matter. Therefore, I beg to differ from my colleague, Mr Inderjit Singh. In some ways, I would therefore urge the Minister to examine the present policy to see if greater protection can be afforded to members of the public.

Mrs Lim Hwee Hua: Sir, the wide ranging financial sector reforms will pave the way for Singapore to play a bigger role as a financial services hub, at least for the Asian time zones.

To complement the existing offering of primarily equity-linked instruments for both capital raising and investment, the Monetary Authority of Singapore should seriously consider the setting up of an exchange for bonds, particularly an electronic trading platform. This would facilitate bond-trading for both institutions and retail investors alike, the latter of whom have typically been forced to hold bonds till maturity.

Complemented by the current equity capabilities of the merged Singapore Exchange, setting up a bond exchange should hopefully attract more infrastructural or telecommunications-related issues to Singapore. Hitherto, bonds have been traded on an over-the-counter (OTC) basis in most countries. However, technology has facilitated electronic trading to a large extent. The US market is replete with examples, such as BrokerTec, which aims to disintermediate interbank brokers, and Bloomberg Bond Trader which is developed with major US banks to focus on government securities.

Notwithstanding some inherent problems with creating sufficient liquidity, especially at the initial stage, electronic trading promises ultimately lower issuance costs. An added bonus would be the opportunity to realise the potential of the untapped retail segment not just in Singapore but within the region.

I would therefore like to urge the MAS to explore the possibility and feasibility of the SGX taking on a more active role in the debt market, beyond just listing bond issues. There are synergies to be reaped, especially in terms of marketing more variety to the same groups of financial investors.

Sir, I move on to the next cut on statutory boards - tapping the open market for funds. As part of our efforts at establishing a meaningful and vibrant debt market in Singapore, statutory boards, such as the Jurong Town Corporation and the Housing and Development Board had begun to issue bonds, each to the tune of several hundred million Singapore dollars.

These issues not only help to create sufficient critical mass by complementing the regular issuance of Government papers, but also allow some benchmarking and corporate debt rating exercises to take place. This exercise interestingly raises the question of whether selling bonds on the open market has indirectly pushed funding costs higher for these statutory boards, thereby leading to an inflation of cost of services to be provided by them. For example, the HDB may pay close to 5% on the open market for its longer tenure bonds whereas it typically borrows from the Central Provident Fund via the MAS, at a rate which is pegged to fixed deposit rates. The disparity could be quite marked.

My point and question here is, aside from the intricate relationships between pools of funds at the different Government agencies, will tapping the open market for funds change certain aspects of public finance? Will this have implications, for example, for the way housing subsidies are and should be structured, including the need to link the interest rates of CPF to HDB?

I move on to my last cut on investor public education. Sir, earlier on the Inter-Ministerial Committee on the Ageing Population Workgroup on Financial Security was trying to ascertain the degree of investor awareness and sophistication among Singaporeans.

The consensus was that public education was crucial for several reasons: Firstly, as part of personal financial planning, not just for old age but also throughout one's life, to meet changing needs such as family and home establishment in earlier years to retirement provisioning in later years. Secondly, to enable Singaporeans to partake of the increasing variety of investible instruments, such as direct stock market investments, unit trusts or the slightly more esoteric derivatives, such as index futures. Thirdly, to enable Singaporeans to assume greater control and responsibility over their individual financial well-being by having the requisite awareness of the different risks involved and skills to make prudent investment decisions. Hopefully, this will minimise investments in financial 'lemons' through a discipline of understanding the underlying businesses. In this regard, the current dot.com fever is slightly worrying.

I would like to ask the Minister what is the Government's philosophy with regard to investor public education. Whilst it is quite clearly in the interests of financial institutions to educate potential customers as part of marketing their products, would the MAS drive or play a coordinating role in the public education process? Also, would the MAS help ensure that related agencies, such as the Central Provident Fund Board and the Singapore Exchange, embark on a wider scale the raising of such awareness?

Mr Leong Horn Kee: Sir, I would like to raise a point with the Minister on the need for his Ministry and related bodies, such as the SGX, to devise new rules, laws and regulations to regulate Internet companies which are able and effective to control and police the virtual Internet world. These Internet companies could well be promoting vice, such as pornography, gambling, or other unsavoury products and services on the Net. Moreover, they will have a strong impact on the minds of our younger population, especially the students who have easy access to the Internet, thanks to the very effective IT education they receive in the schools. Our young children from ages between 8 and 9 years old, are now quite Net-savvy. I would like to ask the Minister what can the Government do to control Internet companies and the type of products and services they offer.

Mr Sin Boon Ann: Sir, the Finance Minister announced last year that the Government intends to pursue company law reform and this is in line with the efforts to make us more competitive. Towards this end, several committees have been set up to look into various issues covering various areas, such as the legislative framework, corporate governance and accounting practices.

Sir, I support the Government's initiative in this regard as a reform to our Companies Act is timely. I have raised the issue of the reform before several times in this House. While we do not want to pre-empt the deliberations of the various committees, of which I am a member of one, I would like to urge the Government and the Minister, in particular, to consider company law reform in its wider context. In particular, I hope the Ministry will consider the question of the role of company legislation. Should company law be designed merely to enhance shareholders' value, or should it be seen as a stakeholder in our society and, together with it, carry certain responsibilities and obligations towards its employees, members of the public, or even the environment. If we accept that the company is a stakeholder in our society, then consequential considerations follow. For instance, there could be obligations placed on the directors to consider the interest of the environment. Additionally, if it is decided that companies have obligations towards its employees, then provisions could be made to have employees represented on the board.

Sir, this reform allows us the opportunity to look at such issues comprehensively and I certainly do hope that the Government will make full use of this opportunity.

Mr Low Thia Khiang: Sir, I refer to the Auditor-General's Report, pages 58 to 60, on the irregular and non-compliance with the procurement procedures by the Board of Commissioners of Currency Singapore (BCCS). Sir, due to time constraint, I will only highlight two interesting cases. Case one. BCCS engaged an employee of one of the tenderers as consultant to review tender specifications and the tender was subsequently awarded to the consultant employer. When Audit questioned the practice, BCCS replied that the consultant's who is the employee of the tenderer, acted professionally and declared that he kept his consultancy role separate.

Case two. A senior officer of the BCCS approached one supplier and offered himself as a partner to a BCCS project for a fee and he also subsequently advised the supplier to lower his fees for the project to a level that is acceptable to BCCS. When BCCS was questioned by Audit, the best part of his response to Audit was that and I quote:

"It knew of no rule that prohibits an in-house expert from partnering an external party."

Sir, I would like to ask the Minister for Finance what is his views on the above replies to Audit by BCCS. Does he agree with the stand taken by BCCS?

The Chairman: Do you want to continue with your last topic, Mr Low? 4.45 pm

Mr Low Thia Khiang: Sir, it is important that the Budget Book should show at least a clear guide of where the monies are going. I see that the head of expenditure on Social Transfer and Subvention has no clear details. Although some Ministries, such as the Ministry of Education and Ministry of Health did explain them, other Ministries, such as the Ministry of Finance itself did not. I wonder why is it not possible to provide the details of transfers like development expenditure by projects on every Ministry's expenditure, or provide an annex, like capital grant in Annex F, to show the expenditure or where the money goes to.

BG Lee Hsien Loong: Sir, many cuts have been made. I propose to answer the cut from Mr Low Thia Khiang on CLOB first and then let Dr Hu reply on the Ministry of Finance matters and, if there is time, I will come back to respond to the other MAS' concerns.

Mr Low made a spirited speech on the subject of CLOB. I last updated Parliament on this issue in January this year and I have briefed Parliament on the legal obligations of the parties involved and provided Members with copies of the agreement between the CDP and SCANS.

I also informed Parliament then that the Minister for Finance Dr Hu had written to his Malaysian counterpart, Tun Daim Zainuddin on 13th January 2000. Tun Daim replied on 17th January 2000, and after a further exchange of letters, the KLSE met SGX to discuss a mutually acceptable resolution to the CLOB issue.

The ensuing negotiations were fruitful and resulted in the SGX-KLSE agreement on 25th February 2000. The agreement is legally binding and provides two schemes for the migration and staggered release of CLOB securities into individual investors' securities accounts. The two exchanges undertake to implement the migration of CLOB securities for trading on the KLSE under these schemes, fully and unconditionally.

SGX and KLSE have jointly presented the two schemes of their agreement as a comprehensive solution to the CLOB issue. This is a major and timely development after the 17-month impasse in September 1998, during which some 1.5 billion CLOB shares owned by more than 172,000 investors of different nationalities were frozen at the Malaysian Central Depository (MCD).

In negotiating the agreement, the SGX insisted that it met SGX's and also CLOB investors' key concerns. In particular, both alternatives have to be legally binding on the relevant Malaysian authorities, which should acknowledge their legal obligations to carry out any agreement. In addition, the solution had to be comprehensive, with a reasonable alternative for CLOB investors who did not wish to accept the private sector offer.

These two key points - firstly, it has to be legally binding. secondly, it has to be comprehensive - which the Malaysian authorities had consistently refused to agree to, are now embodied in the SGX-KLSE agreement. The agreement also confirms that the two migration schemes allow KLSE to meet its duty to maintain an orderly market for the trading of securities in Malaysia.

The first scheme, Scheme A, is an amended proposal by Effective Capital Sdn Bhd (ECSD), which is the only private sector offer that has won KLSE's approval and endorsement. KLSE has made clear that ECSB's proposal was the only private sector scheme that had complied with all of KLSE's and MCD's rules to date.

Investors who opt for this scheme will pay ECSB a 1.5% transfer fee based on the closing prices in the KLSE on 15th February this year. There will be a three-month set-up period (for the opening of individual securities accounts with MCD) commencing from 31st March 2000, followed by a 13-month staggered release of the CLOB securities for trading on the KLSE.

Scheme B, the second scheme, is effected by a supplemental agreement between CDP and SCANS. Investors will have their securities migrated into individual accounts and released for trading on the KLSE after 33 months from 31st March 2000, ie, the migration will begin on 1st January 2003. The release will be staggered over 9 months from 1st January 2003 to 1st October 2003. A 1% administrative fee is payable to SCANS. In this case, the fee will be based on the average of securities prices on the KLSE over the last five trading days of October 2002.

After SGX and KLSE had signed their agreement, the following day, on 26th February, Dr Richard Hu wrote again to Tun Daim Zainuddin. Tun Daim replied on 2nd March 2000 and I am circulating copies of this exchange of letters to Members. [Copies of letters circulated to hon. Members.]

As Members can see from Dr Hu's letter, Dr Hu informed Tun Daim in paragraph 3 that "the Singapore Government fully supports the KLSE-SGX agreement, which meets SGX's desire for a comprehensive, legally binding solution, and KLSE's aim of ensuring an orderly market. The Singapore Government had undertaken to ensure that SGX will abide by the agreement reached. I would deeply appreciate Your Excellency's confirmation, by reply to this letter, that the Malaysian Government likewise supports the agreement reached by the two exchanges, and has undertaken to ensure that KLSE will abide by it".

Tun Daim replied, and in his reply, he reiterated the Malaysian Government's stand. I read from his third paragraph, "I have mentioned in my letter to Your Excellency dated 14th February 2000 that it is the stand of the Government of Malaysia that CLOB is a wholly private sector issue. As Your Excellency is aware, KLSE is a private sector organisation owned by its members. The agreements reached between KLSE and SGS confirmed this stand." But he went on, "As this is a comprehensive solution and the agreements are legally binding, I am confident KLSE will ensure that the obligations under the agreements are fully discharged. The Government of Malaysia looks forward to the smooth implementation of this comprehensive settlement." In other words, the KLSE-SGX agreement has the full support of both the Singapore and the Malaysian Governments.

Some CLOB investors have written to the local press expressing disappointment with the solution reached and Mr Low has expressed some of their views just now. They feel that SGX and CDP should have insisted on CLOB investors' strict legal rights and taken a firm stand with the Malaysian authorities, particularly as Singapore was on sound legal ground. A few went further to suggest that by agreeing to the resolution, SGX has conceded that CLOB International was illegal and had merely been "talking tough" in the past months.

SGX has not conceded any such thing. CLOB International was never illegal, and SGX's confidence in its legal position was based on informed legal advice. The Singapore authorities had also taken legal advice from leading experts on WTO matters. Our position was strong, both under Malaysian law and at the WTO. But legal action would have involved further delay, probably as long as several years, particularly in the case of our action in Malaysian courts. Meanwhile the prospect of delay and uncertainty would have caused many CLOB investors to feel compelled to accept private sector offers which were less favourable and had no legal assurance of being carried out by the KLSE. This included, in particular, Effective Capital's earlier staggered release proposal, which would have involved a 4 plus 18 months delay, starting in February this year.

The fact that there were clear and unambiguous legal rights involving more than 172,000 investors of different nationalities, and that we were prepared to enforce these rights as a last resort, were clearly significant in helping SGX to reach a comprehensive and legally binding solution with the KLSE to serve the needs of CLOB investors. Although we did not eventually have to go to Court or go to the WTO, the legal position was important in establishing that we had a case and that therefore we were able to deal with KLSE and reach this agreement.

In getting KLSE to finally negotiate and enter into a legally binding agreement spelling out specific terms of the staggered release of CLOB securities, SGX was acting in the best interests of investors. The terms of the schemes presented to CLOB investors are significantly improved from those previously offered. Each CLOB investor is in a different situation and has different interests, especially with regard to how long he is able to wait before being able to trade his shares. No resolution, whether through legal action or negotiation, could have met the needs of all investors equally. But the final negotiated settlement is a pragmatic one in the circumstances.

The Securities Industries Investors Association of Singapore (SIAS) has, throughout this episode, provided independent representation of a substantial group of investors. It made clear its members' preferences, and took a resolute stand against earlier private sector offers that were to the disadvantage of investors.

SIAS has on 26th February 2000 stated its view that the two schemes address the needs of most CLOB investors. It noted that its concerns had been addressed with the reduction of the ECSB proposal's staggered release period from 18 to 13 months, and with KLSE's legal undertaking to fully and unconditionally implement the migration. SIAS has further explained on 6th March that although it was not involved in the negotiations, it was providing in-principle support to the two exchanges' agreement because Scheme A had come very close to what SIAS itself had proposed to the KLSE, namely, a 12-month staggered release and a 1% migration fee and what we have negotiated is a 3 plus 13 months release and 1 1/2% migration fee. SIAS noted that "many investors have been anxious for an early settlement and been pressing CDP and SIAS for it."

By holding firm on its stance over the last year, SIAS has demonstrated its effectiveness, and contributed significantly to the eventual solution to settle the CLOB issue fairly in keeping with the interest of all parties. This is a positive example of civil society.

It is conceivable that some investors may decide not to accept either option. They are entitled to do so, as under law, neither SGX nor CDP can waive the rights of beneficial owners to decide for themselves whether to accept any offer.

The agreement commits KLSE, SCANS and their related companies to implement fully the two alternative schemes. So long as the implementation proceeds as agreed, neither SGX nor CDP will have cause to take legal action against KLSE or its group of companies. However, should there be any failure on the part of KLSE or its related corporations to implement either of the two schemes, SGX and CDP will naturally have to take action to enforce the migration and release, if necessary, through legal means.

Individual investors who still wish to commence legal proceedings on their own behalf are entitled to do so. They should seek professional advice and decide according to their individual circumstances.

It is quite clear that SGX and the Singapore Government have done their part to help to resolve this problem and have not left investors in a black hole. SGX and CDP negotiated the agreement to the best of their ability. It believes that the outcome is in the interests of the majority of CLOB shareholders. Investors must assess the situation for themselves to determine the best course of action, and decide if they wish to opt for either scheme.

Some investors have written to request that SGX go further and pay the 1 1/2% and 1% fees under the two schemes on behalf of CLOB investors. SGX is not able to do so. It is beyond the scope of SGX's legal duties to defray the costs to investors of the migration and staggered release plans. Furthermore, for SGX to do so would raise a serious issue of moral hazard, because fundamentally the risk of investing in securities on CLOB or other markets provided by SGX, has to be borne by investors themselves, and not by the exchange or the Government. We have provided the facility, it is for investors to decide. This is true of CLOB. This is true of Singapore shares or any other shares which you may buy in Singapore or out of Singapore. The person who buys has to take the responsibility for it. Nobody can be sure that it would prosper. Nobody can be sure that something will not go wrong. If something goes wrong in Singapore which is against the law, or against the rules or monkey business, we will put it right. When it is overseas shares, nobody can give any guarantee. These are sovereign risks because sovereign governments are entitled to do anything they like under their own laws. If they have not followed their own laws, then, of course, it is possible for us to seek legal remedy in their courts, and this is what we could have done had we not reached a reasonable solution to the CLOB issue. But, fortunately, it has not been necessary, and we have been able to arrive at a negotiated settlement.

Singapore has taken a constructive approach in trying to resolve the issue. We have consistently maintained that an expeditious and just resolution to the matter is in the interest of both countries, as well as in the interest of CLOB investors. After almost one and a half years, legally binding and comprehensive solution, that has the support of both Singapore and Malaysian governments, is in place to resolve the CLOB issue once and for all.

Mr Low Thia Khiang: Sir, may I have your permission to seek a clarification?

The Chairman: All right.

Mr Low Thia Khiang: Sir, is the Deputy Prime Minister sure that the KLSE will not change its mind again? SGX had a legally binding agreement with SCANS, but what has happened?

BG Lee Hsien Loong: Mr Speaker, Sir, that is a legitimate question. We have to take it that we are negotiating with a serious entity, and they have given their solemn word and their Minister of Finance has exchanged letters with our Minister for Finance. So investors have to assess and decide. If a problem arises in the implementation, as I have explained, we will have to act in order to enforce a migration and transfer, and that will have to include legal rights. But I think we will wait and see. It is premature for us to say that this will not be carried out.

Mr Leong Horn Kee: Sir, may I ask a quick clarification? I would like to ask the Deputy Prime Minister whether he feels that this 1 1/2% charge by Effective Capital is fair and reasonable? And after getting the fee upfront, if they renege on the whole agreement and they do not release the shares, what will happen?

BG Lee Hsien Loong: Mr Speaker, Sir, it is not for me to decide whether 1 1/2% is enough or not. That there should be some fee for a transfer is not surprising, because there are some expenses incurred. As far as the investors are concerned, it is only the fee which matters and not to whom the fee is paid. In this case, the arrangement is with Effective Capital. We accepted it as so, because that is the preference of the Malaysian side.

What if, after having paid the fee, the shares are not transferred? The fee is being paid into Standard Chartered Bank and held by a stakeholder, which means that it is not going to be transferred to ECSB until the shares are transferred and released. And if the shares are not transferred and released, then you can have your 11/2% back.

Mr Inderjit Singh: Sir, looking at the reply from the Malaysian Finance Minister, I do not see any guarantee on his part that KLSE will keep to its obligation, as opposed to Dr Richard Hu's response that he will ensure that SGX will abide by the agreement. The Malaysian Finance Minister responded that he is confident that KLSE will ensure the obligation. Also, in his letter, he mentioned that KLSE is a private sector organisation. In effect, he has not guaranteed anything in his response.

BG Lee Hsien Loong: Mr Speaker, Sir, I have released the letters in order that the actual exchange of correspondence be on the record. I have read out the words in the letters and so has Mr Inderjit Singh, and I leave it to each MP to make his own assessment and conclusions.

Mr Goh Choon Kang (Marine Parade): (In Mandarin): Sir, I would like to ask the Deputy Prime Minister why is it that we have not taken this case to the WTO. Secondly, I would like to know whether the DPM would agree with my following view. Just now, Mr Low Thia Khiang's conclusion was a very emotional conclusion. I think we should have a more logical conclusion, ie, from now onwards, we should not buy any more Malaysian shares.

[Mr Deputy Speaker in the Chair]

5.00 pm

BG Lee Hsien Loong: (In Mandarin): Sir, Mr Goh Choon Kang is also very emotional. Let me give Members a simple explanation. Why is it that eventually we have not taken the matter to the WTO? Legally speaking, whether it is Malaysian law or international law, our position is very strong. We have engaged Queen's Counsel. We have also consulted the experts on WTO issues, and they advised us that it is a very clear-cut case in our favour. However, if we were to take legal proceedings, there will be some difficulties, because the law cannot settle matters overnight. It will take some time.

If we go to the WTO, it may take more than a year. Furthermore, the WTO is not an international court. It is only a trade organisation. The WTO can rule that this is against the WTO's rules or against something which the Malaysian has already subscribed to. But the WTO cannot force the Malaysian government to transfer the shares to the accounts of the individuals. So the WTO can only give us the right to retaliate against them, but not more than that. But if we are successful, then, of course, legally or morally, we are on the right side. But then if we go to court, it will take 2-3 years. And after the trial, it may go on appeal and it would take a very long time. The Member was saying, "A long night is fraught with nightmares." So, to the shareholders in Singapore, they will be very worried on what the consequences may be. Now, there is this company that is prepared to step in, show you a short cut and says, "I'll buy over the shares."

Your losses may not be just 1.5%. Look at it this way. If we can avoid going to court and we can try and resolve the matter directly with the other side, it is a win-win situation. We are able to settle this matter because, legally, we are in a very strong position. That is why we could do it. But if the legal position is not strong, then do you think friendly negotiations will lead us to an amicable settlement? I do not think so.

Mr Heng Chiang Meng (Cheng San): Sir, the Deputy Prime Minister earlier talked about sovereign risk. He said that the Government would be more unequivocal about telling the people of Singapore that whenever they invest in foreign assets, they must take on the sovereign risk of the foreign countries in which these assets are based. And whether they invest in Malaysian shares in CLOB or in Kuala Lumpur, the shares are nothing but pieces of paper, representing assets that are basically based in Malaysia, or at least controlled in Malaysia, because these are shares of Malaysian companies.

In this respect, perhaps the Government should also be very clear that it is going on to a disclosure-based type of investment regulations for the people, rather than merit based, because whenever the Government tries to be too paternalistic about this, it is always the case of the investors saying that if they make money, it is through their own diligence and smartness. And whenever they lose money, it is the Government's fault, and I do not think any government can be in that position.

Mr Simon Tay: Sir, I can understand the reasoning behind the settlement. You pay 1 1/2% to them or you pay more to the lawyer anyway. I say that as a lawyer. But I think that the point DPM made about moral wrong must be emphasised. The satisfaction of going to court sometimes is to say to the other side that you have done wrong. And even if we do not go to court, I think that point must be made clear, from the people of Singapore to the authorities in Malaysia. We may pay 1 1/2% to get rid of a thug, just as I, in a New York park, gave my wallet to a mugger, but I have been mugged.

BG Lee Hsien Loong: Sir, Mr Tay may have been mugged, but we made a deal.

The Minister for Finance (Dr Richard Hu Tsu Tau): Sir, it leaves me with very little time before the guillotine.

Mr Leong Horn Kee has asked whether the 75% ownership limit for transfer of assets between associated companies can be lowered to 51%, and whether the Government can free up tax regulations to encourage mergers and acquisitions. Mr Inderjit Singh has also expressed similar views. I have already discussed some of these points in my Budget Statement, in which I said that there will be relief on the transfer of assets between associated companies at the 75% level. We have granted this in recognition that there are legitimate merger and acquisition transactions and therefore we need to make this concession. However, moving it down from 75% to 51% is going a bit too far at this stage, but that we will take it into consideration.

MOF policies are motivated by different considerations. Whilst it is generally true that we would like our smaller companies to bulk up and become large in order to compete, there are other commercial reasons why companies merge. So we cannot go overboard and make too many concessions.

For all mergers and acquisitions, trading stock can be transferred at cost, as long as it becomes part of the trading stock of the transferee company. The transferred company is not required to transfer the trading stock at the open market price. For other assets, any gains from the transfer of such assets are usually regarded as capital gains and are thus not taxable.

Mr Ong Kian Min has criticised the role of GLCs and made some rather startling comments about GLCs being generally predatory, have deep pockets but shallow ideas. I have heard something to this effect, but not quite in such stark terms. Perhaps he could give me more details so that I can follow them up. Because if it were true, it would be most unfortunate.

Mr Ravindran is also concerned that many GLCs have in the past gone into downstream non-core businesses in competition with our SMEs. This, unfortunately, was true in the past. But Temasek Holdings has now come down quite strongly against GLCs which strayed from their core businesses and I think, in future, GLCs will be scrutinised carefully to ensure that they do not venture into areas where their presence is not necessary and their competition is unhelpful. Basically, we would like our GLCs, particularly the larger ones, to seek their fortunes overseas where the markets are much larger, and they are better placed to do so because of their assets and their capacity to expand.

The subject of group relief was raised by both Mr Inderjit Singh and Mr Leong Horn Kee. This is a very old subject which has been raised many times. Mr Inderjit Singh also made many recommendations for the reform of our tax system which I will take into consideration. But at this point of time, I have to say that I am still not in favour of general group relief, although in specific instances, we have allowed it, particularly when we recognise that the applicants have legitimate reasons for doing so. Members will be interested to know that group relief is not allowed in many countries in the region. Hong Kong, Malaysia, Korea and Taiwan do not allow it. It is only allowed in UK and US. In countries where it is allowed, very tough regulations have been introduced to ensure that tax leakage does not take place. So I am not sure that group relief is something which we want to introduce at this point of time. 5.15 pm

Mr Leong Horn Kee and Mr Inderjit Singh asked about the implications of e-commerce on our tax structure. This is indeed a very serious problem which is not just of concern to us but to many countries in the world, including the US, UK, Australia, Canada and the European Union. It is being studied by all tax authorities because the possibility of tax leakage is huge and no one, unfortunately, knows the answer. For the time being, the volume of cross-border e-commerce area is not very large. Where e-commerce takes place within the confines of a country, then tax is not a problem. It is when transactions take place across borders that problems arise. I can assure Members that MOF is monitoring the situation very carefully. As far as Singapore is concerned, we believe that tax leakage through e-commerce is not yet significant.

Mr Inderjit Singh has suggested that we allow angel investors to write off losses incurred when their investments fail against their personal income tax. Mr Singh's concern is already addressed under the Technopreneur Investment Initiative (TII), which was introduced in September 1999. The TII aims to alleviate difficulties faced by high-tech style companies in raising funds at the start-up stage. Under the TII, an eligible investor, which can be either a company or an individual, will enjoy tax deduction for any loss arising from the sale of qualified shares held in approved start-ups within a qualifying disposal period, or from the liquidation of the start-up. The investor can offset the losses incurred against his taxable income in the current year of loss. In the event the investor's income at current year is not sufficient to absorb the total loss, the unabsorbed loss can be carried forward indefinitely to offset his taxable income in future years.

Our current tax system draws a distinction between payments which are capital in nature against those which are revenue. Expenses incurred in start-up phase are unfortunately considered to be capital in nature and are therefore not allowable for tax claims.

Employee stock options (ESOPs) were raised by Mr Inderjit Singh and Mr Leong Horn Kee. They have suggested that we should be much more generous in allowing tax relief for ESOPs. I have indicated in my earlier speech that we will be examining this issue in detail and an announcement will be made by end May this year. We welcome any suggestions put forward and all will be taken into consideration very seriously.

Pro-family and procreation tax incentives were raised by Dr Jennifer Lee and Mrs Lim Hwee Hua. Mrs Lim suggested allowing procreation tax incentives to be extended to husbands of women who choose to stop work temporarily following child birth. She has also suggested that child relief be increased and Dr Jennifer Lee has supported these proposals. I should point out that there are already several tax reliefs and rebates to encourage family support and family formation. Tax relief serves as a form of recognition and is not intended to fully compensate for the taxpayer's expenses incurred.

The Chairman: Order. It is "guillotine" time. Mr Leong.

Mr Leong Horn Kee: I would like to express the disappointment of my fellow MPs who have not got their answers from the Finance Minister and that the time for the debate has been robbed by CLOB. May I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

The sum of $823,716,630 for Head N ordered to stand part of the Main Estimates.

The sum of $354,665,400 for Head N ordered to stand part of the Development Estimates.

Head O -

The Chairman: Head O - Ministry of Foreign Affairs. Amendment No. (1), Dr Ong.

Dr Ong Chit Chung (Bukit Timah): Sir, I beg to move,

That the total sum to be allocated for Head O of the Main Estimates be reduced by $100.

Sir, the Asia-Pacific region has been through a series of political upheavals and economic meltdown. Old leaders like Suharto have been swept away. Old icons are gone. Old paradigms are no longer valid or relevant.

It is indeed a new millennium. A new year. The strategic parameters have changed. At the same time, the situation has somewhat stabilised, after the election of Gus Dur as the President of Indonesia. The sense of crisis is not so pronounced, though not all issues have been resolved.

What then can we make of this new scenario? Where are the new fault lines? How has the balance of power shifted? What are the interests and agendas of the big powers like the United States, China and Japan?

These are some of the questions and issues I wish to pose to the Minister. What is the Minister's reading of the current strategic situation?

As the Chinese words for crisis wei chi show, where there are dangers, there are also ample opportunities. I believe that Singapore has done well and is in a much stronger position after the crisis. By comparison, Singapore has emerged stronger economically, remained politically cohesive and has the resources to continue to upgrade our own defence capabilities.

Singapore, though small, is like the mouse deer: nimble, agile and strong, able to deal with any tricky situation, and able to fight back too, if necessary.

Remember Dr Habibie liked to call Singapore the "tiny red dot". I think he is mistaken. It is the mighty beacon of light, shining across the seas for all to see. But we have to be vigilant. Today's friends may be tomorrow's enemies. Nations have no permanent friends or enemies, only permanent interests. And, if I may add, interests may change over time. May I therefore ask the Minister what useful roles can Singapore, as a small country, play to promote peace, stability and economic development in our own region while at the same time remain vigilant and watchful.

The Minister for Foreign Affairs (Prof. S. Jayakumar): Sir, it might be useful for me to respond to his question on the strategic situation before Members speak on specific country-related topics. As to his request for my reading on the strategic situation, I would like to start off by saying that the backdrop for our assessment of the strategic situation is the state of the triangular relationship between United States, China and Japan. As I have said in this House before, this relationship is critical for the external environment in South East Asia. Fortunately, this relationship is stable for now, but there are stresses and strains which could pose a challenge to security and stability in the Asia-Pacific and it may be useful for me to briefly touch on the various aspects of this triangular relationship.

If we take United States and China relations, which is the key aspect of the triangle, I would say that last year, as a result of the rough patch which US-China relationship went through, this was a worrisome aspect, particularly as a result of the bombing of the Chinese Embassy in Belgrade as well as the failure to conclude the United States-China WTO agreement when Premier Zhu Rongji visited the United States in May of 1999. However, with the conclusion of the US-China negotiations on the WTO more recently, I think we can say the relations are generally back on track but there are two issues which potentially can seriously affect the US-China relationship.

First, the Taiwan issue and, second, the granting of Permanent Normal Trade Relations (PNTR) for China by the United States. The Taiwan issue is the most sensitive issue which could derail US-China relations. The stakes are high. And we must remember that this is a year of political transitions - with the Presidential elections in Taiwan as well as in the United States and, therefore, it is important for all parties - China, Taiwan and the United States - to make even greater effort to keep temperatures low, and to keep relations on an even keel.

We therefore hope that all parties will avoid words and deeds that could potentially lead to an explosive outcome which will not be in the interest of all of us, not in Taiwan's interest, not in China's interest, not in America's interest or the region's interest.

We believe that the Clinton Administration is aware of the importance of granting PNTR to China. It is making tremendous efforts to get Congressional approval for PNTR for China. We hope that the Administration will succeed in persuading Congress because the conclusion of the WTO agreement with China was a very important milestone. China's decision to join WTO is significant. It represents a political and strategic decision to integrate itself into the globalised world economy. It also demonstrated a high-level commitment to continue necessary but painful domestic reforms. By concluding the agreement, the US has shown that it understands the importance of integrating China into the world economy, and the benefits to US business.

The next aspect of the triangle of course is the US-Japan relationship which, I would say, remains strong. The US-Japan alliance still serves the interests of both parties. However, its future orientation will be affected by the domestic mood in Japan as well as regional geopolitical environment. We believe that Japan has a key role to play in the region because of its economic strength. Japan was active in helping countries in Asia during the financial crisis. Over the longer term, Japan can play a greater role in the region, within the context of a strong US-Japan security alliance.

On the third side of the triangle, the Japan-China relations, they are also an important part. There are signs that they are trying to move their relations forward. They made significant progress during Prime Minister Obuchi's visit to China in 1999. Both countries wish to set their relations on the path of joint cooperation which is good for the region.

I thought we should also mention an interesting development that there are signs of warming ties among the Northeast Asian powers - China, Japan and the Republic of Korea. The leaders of these three countries, in fact, had a historic meeting at the fringes of the ASEAN+3 Summit in Manila in November last year, and this was followed up by other meetings. For example, their Environment Ministers met twice in Seoul and Beijing to discuss cooperation in environmental protection. I think this is a positive development, if the drawing together of the Northeast Asian powers results in rapprochement, the reduction of tensions in Asia, and the reinforcement of the US-China-Japan triangular relationship.

The strengthening of this triangular relationship between the United States, China and Japan will help to ensure a peaceful and stable balance of power in the region. The US' role is the key to the regional balance. As you know, Singapore has continued to reiterate the importance of a continued US presence in the region. It is the pre-eminent power in the region, and in the world, and only it can ensure that the triangular relationship remains stable.

The US, in our view, has historically played an important role in Asia. It was so in the years after World War II. After the Cold War, the role remains important. A stable strategic environment in Asia is a pre-requisite for a prosperous Asia but which is buttressed by open markets and competition. 5.30 pm

Having given this backdrop of the strategic situation, let me also say that there are potential flash points which we need to manage very carefully. I have mentioned this previously, but to update Members, first, there is the potential flash point of the South China Sea. The South China Sea remains a potential flash point because there are so many claimant states of various islands, atolls and reefs, and we saw during the past year some incidents involving some of the claimant states, not only between Philippines and China, but also between ASEAN claimant states, namely, the Philippines, Vietnam and Malaysia. I do not think there is any immediate danger of outbreak of hostilities. But there is always a concern that accidents can happen, and it is important therefore that claimant states continue to act with restraint to settle their differences peacefully without resort to use of force and, more importantly, from the viewpoint of non-claimant states like us, to respect international laws concerning navigational routes and freedom of passage. The ASEAN Regional Forum, I might add, is trying to work out a code of conduct for the South China Sea.

Another flash point is South Asia. Relations between India and Pakistan took a downward turn in the past year over the Kargil conflict in May 1999, Pakistan's Chief Executive Musharraf's assumption of power in November 1999 and the hijack of the Indian Airline's plane in December. Since both countries have nuclear weapons, events in the region clearly could have reverberations for the rest of Asia, if not the world, at large.

The Korean Peninsula also is a potential flash point and remains unpredictable. Any tension can quickly escalate and can affect the rest of Asia, as was evident by the naval skirmishes in the Yellow Sea last year between North Korea and Japan, and between North Korea and South Korea.

On the other hand, efforts to improve the situation have continued. Most notably, US-North Korea dialogues which started in September 1999 have been yielding some positive results, such as the de facto freeze in North Korea's missile testing programme and the plans for North Korean Vice-Foreign Minister to make the first high level visit from North Korea to the United States. South Korea on its part remains committed to President Kim's 1998 Sunshine policy. Japan is also looking to normalise relations with North Korea.

Another flash point, of course, is the cross-strait tensions. This is another area of uncertainty. Beijing has, in the recently released White Paper on Taiwan, formally made it known that it will resort to the use of force if Taipei delays negotiations on reunification. The situation is likely to be aggravated by election politics in the US. However, since the release of the White Paper, Beijing, Taipei and Washington appear to have exercised restraint and not escalated tensions further. The role and approach taken by the United States towards both Beijing and Taipei will continue to be crucial.

If I were to sum up the strategic situation, I think we can say that there are signs that Asia is recovering from the financial crisis. The triangular relationship among US and China remains relatively stable but there continues to be several potential flash points which we need to watch and manage carefully.

As to Dr Ong Chit Chung's question on the role of Singapore in this regard, I would say, first, that for Singapore, a small country, to be able to develop and progress in the future, as we have done in the past, a benign, favourable, stable external environment in the region is critical. Therefore, we have an interest in ensuring the engagement of all the key players in as many forums as possible. Thus, Singapore's role should continue to be helpful in ASEAN plus three forums as well as in ASEAN Regional Forum (ARF) to try to engage these critical players (United States, Japan and Korea) as well as others like Russia, Australia, New Zealand which are dialogue partners, to sit together at the table and discuss common security issues. I notice that there is a cut further down on the ASEAN Regional Forum, and we can discuss further on this.

Equally important is the ability of Singapore to be alert to changing trends, shifting currents, new alignments, so that we will not be caught by surprise - a point made by Dr Ong Chit Chung himself. This is absolutely important. International events, alliances and trends are never static. They keep changing. Singapore must be alert. We must note changing trends, be able to adjust way ahead of time. If we can do that, then I think we will be more prepared for new situations. And as I have described, the strategic situation this year is quite different from what I described in last year's Committee of Supply.

Dr Ong Chit Chung: Sir, with your permission, could I seek clarification from the Minister before we proceed to the next cut?

Sir, I want to thank the Minister for his very comprehensive answer. But mainly about the United States' role, many are worried that the US may not be so committed to the region or may not put all their attention and resources, distracted by domestic matters or by Euro or Mexico, or so many other places that they can engage itself in. Recently, there was this Williamsburg Conference in Singapore last week when the Foreign Minister and DPM also participated in the Conference. Is there any conclusion from this Conference and what would be Singapore's stand on this particular issue?

Prof. Jayakumar: The Williamsburg Conference discussed many things, including the continued engagement, presence and role of the United States in Asia. I was asked for my views on this matter. DPM gave an important keynote address exhorting the United States that they should continue to play a key role in the region.

Let me just sum up the gist of the views we and I expressed.

First, in my discussions with other Ministers in the region as well as analysts, I think there is a clear expectation and consensus that the United States will continue to remain engaged in the region. I do not think anyone seriously doubts that. The question really is the nature of the United States' future role in Asia, whether it will be based on consultation, working together with the countries in the region and partnership, or as some doubt from time to time, whether it will be unilateral imposition of views. If it is going to be on a partnership, working together with the countries, then the question is: what is going to be the basis and foundation of that partnership? During the Cold War when the United States was engaged in the region, there was a clear basis for that partnership. There were clearly shared strategic interests due to the Cold War with the Soviet Union. But post-Cold War, it is very clear as to what the other shared interests are. Singapore's view and the views of many other countries in the region are that there are fundamental interests for the United States to continue to be involved here, both economic interests as well as leadership and globalisation, as well as political and security issues.

I believe that the United States and the Clinton administration understand the importance of their engagement in Asia. The question is whether the American public and the Congress have the same interest and the same view. So there is a real challenge, I think, for the US policymakers to build a domestic consensus to support US' strategic interests in Asia.

If you ask me about the future of United States' military presence in the region which we and many other countries feel is critical for the maintenance of stability in the region, it is difficult to gaze into the crystal ball. I think they will continue to be here for some time. What are the kinds of factors that might have impact on this? Looking at long term, I guess we can point to three factors. One would be the domestic mood in the United States. I do not think that there will be a push for isolationism. But if there is a mood for retrenchment or cut-back, then that could affect the extent to which United States' military troops can be abroad in various parts of the world. The second factor could be, if tensions are eased on the Korean peninsula in a significant way, remote though that may seem to be at the moment, then this could have an impact on the United States' presence in Japan, and that in turn can affect the United States' involvement in the region. Thirdly, of course, is the US-Japan Alliance which is critical. The alliance, as I have said, is a strong one, but over time, some have wondered whether development in both US and Japan could lead to a questioning of this alliance. Would a new generation of leaders in Japan look at things in a different way? These are very long-term considerations. But taking matters as of now, I think the consensus and expectation of the United States' presence will continue in the region and most countries in the region clearly consider the United States' presence in the past has been a critical factor for stability and security in the region, and it will continue to be so.

Dr Ong Chit Chung: Thank you, Minister.

Sir, Malaysia is our closest neighbour in a geographical sense. However, we may not necessarily be the closest emotionally or politically. It has been a love-hate relationship over a period of years. In the web of circumstances, we must therefore expect ups and downs.

With the general elections behind them, we hope that the Malaysian leaders would be better able to focus on improving bilateral ties. There is some light at the end of the tunnel on the CLOB issue. We have just heard this in this Chamber, though some doubt it. But no solution is yet in sight on water, the Malaysian Railway land, airspace and Pedra Branca.

Relations between Singapore and Malaysia appear to be on the mend. We can hope for the best, but we must always not be taken by surprise by any downturn at any time. We have to live with it. I hope that Singapore will not again become the scapegoat or whipping boy in the forthcoming UMNO Assembly and party elections round the corner.

I wish to ask, in this context, the Minister on the Government's approach and strategy on how to handle these thorny issues in Singapore-Malaysia relationship, and on how problems of a bilateral kind could be resolved. 5.45 pm

Mr Chiam See Tong (Potong Pasir): "So near, yet so far." This saying perhaps sums up the Singapore-Malaysia relationship. Singapore and Malaysia are next door neighbours. In fact, we are like Siamese twins linked together physically by a causeway and a bridge. Yet, our two countries' relationship in recent times has been drifting further and further apart. I sincerely hope that the relationship between Singapore and Malaysia shall not drift even further apart. We have drifted apart far enough. It is time for the two nations to sincerely seek ways and means to come closer together for the mutual benefit of both countries. Politicians on both sides of the Causeway must come out openly and declare that they want the two countries to cooperate and be friends. The leaders of both countries have talked enough. It is time for both sides generally to show that they want to cooperate and be friends. For this, both countries must commit themselves on something concrete.

I have, at one of the Budget debates, suggested that an economic union be established between Singapore and Malaysia. The Sun, a newspaper published in Petaling Jaya, Selangor, picked up my suggestion and ran two articles. The Sun's report showed that, while university lecturers, academics and businessmen in Malaysia favoured the idea of an economic union, the Malaysian politicians were strongly against the idea. I do not know if the Malaysian politicians may have wrongly mistaken an economic union for a political union. An economic union does not involve the independent sovereignty of each state. Each state maintains its sovereignty. The economic union envisages a lowering or doing away with tariffs. There shall be a free movement of goods, services and people within the territories of the union. In this way, more economic activities shall be generated with more economic growth for both countries. Both sides shall benefit economically.

If an economic union, at this point of time, is too big a step for the Malaysian leaders to take, then I would suggest that the formation of an economic union be put aside for the time being and both sides agree on something smaller. I would suggest that the Singapore and Malaysian governments embark on a joint project, something like the Suzhou Industrial Park in China. I would suggest that the project be sited in Johor because of its close proximity to Singapore and its availability of land. Both sides, I hope, are agreeable in principle and the details can surely be worked out.

Another idea which Singapore can cooperate with Malaysia is to extend the MRT line all the way from Woodlands to Senai in Johor, where the Senai Airport is situated. The linking of the Singapore MRT to Johor would certainly boost movements of people from both sides of the Causeway. Increased communication means more business activities. More business activities mean more trade which can be beneficial to both sides.

The above suggestions must never, for a moment, be given the wrong impression that Singapore intends to exploit the resources of Malaysia to enrich itself. Genuine cooperation cannot be for one-sided gain. It must be for mutual benefit. I hope both the Malaysian and Singaporean leaders are big hearted and go for something big to build a genuine cooperation and friendship between the two countries. The present outstanding issues like the water agreements and the CLOB issue shall then look insignificant. They may not even surface as issues when real cooperation has been established between the two countries. I believe that Singapore must use as much of its resources as possible to help Malaysia improve its economy and standard of living. As long as there is a wide disparity of standards of living between the two countries, it is difficult for the two neighbours to live in harmony. Therefore, it is to the interest of Singapore to see that the Malaysian economy improves as fast as that of Singapore's economy.

Mr Charles Chong (Pasir Ris): Sir, since last year, various leading indicators reported by Malaysia clearly suggested that our neighbour was on the way to robust economic recovery. This heartening news was boosted by the latest impressive growth figure of 5.4% which further confirmed that the Malaysian economy did well in 1999 and the positive trend is expected to continue.

Sir, such good news certainly puts all of us in an optimistic mood, including Mr Chiam. But will Singaporeans be overly optimistic to look forward to improvement in bilateral relations with our neighbour now that the Malaysian economy is looking bouyant?

In the last couple of years, we have been at the receiving end of too many incredulous accusations and allegations thrown at us from across the Causeway. We were blamed for Malaysia's economic woes, blamed for economic sabotage, blamed for the CIQ issue, blamed for the CLOB issue, blamed for giving too much publicity to the Anwar case. The list simply goes on and on. In fact, Singapore has become such a regular bogeyman in the Malaysian political landscape that I am not surprised if Singaporeans have actually come to expect Singapore bashing to be in the nature of bilateral relationships between the two countries.

Sir, I would very much like to take a more optimistic approach in Singapore-Malaysia relations. I would like to think, as the Malaysian economy improves, our neighbour would see benefit in establishing a win-win relationship with us, based on mutual cooperation and mutual respect.

I was therefore greatly disappointed to find my optimism misplaced. The recent spate of strongly worded letters from Mr Malik Tahir of Malaysia was a rude shock and a timely reminder that some Malaysians still view Singapore with deep acrimony. Worse, Mr Malik's letters give the impression that Singapore-Malaysia relations are perceived by Malay-Malaysians in racial terms. His use of emotive words and phrases like khianat (treason), high animosity, high level of hatred by many Malay-Malaysians towards Singapore and his pointed emphasis that Singapore would always be a younger brother to Malaysia and his undisguised threat that Malaysia should terminate the water agreement and any other contract that are good for Singapore, certainly make it difficult for Singaporeans to respond in any other way to his letters except in annoyance and anger.

Sir, I was and am still disturbed by Mr Malik Tahir's letter. Because of the depth of the emotions expressed, I cannot help but wonder if Mr Malik's letter typifies the general feelings of Malay-Malaysians towards Singapore. Perhaps, the Minister for Foreign Affairs might be able to give this House his Ministry's assessment of this question. If Mr Malik Tahir's letter did typify the general feelings of Malay-Malaysians towards Singapore, surely, this must have implications on the way Singapore deals with Malaysia.

In addition, I would like the Minister to keep this House current on the present state of Singapore-Malaysia relations, particularly with respect to the latest development on the CIQ issue and also on the Singapore-Johor bridge that the Malaysians propose to construct. I understand from press reports that the Prime Minister has been briefed by the Malaysians during his recent visit to Johor. Perhaps, the Minister could give us some details on the proposed Johor-Singapore bridge as well as to give us an idea whether Singapore can expect any improvement in the bilateral relations with Malaysia in the foreseeable future.

Mr Sin Boon Ann: Sir, like my colleague before me, I am equally disturbed by Mr Malik Tahir's letter to the Business Times recently and his commentary on the state of relations with Malaysia. In his letter, Mr Tahir sought to explain why there is, according to him, a high level of hatred among Malay-Malaysians towards Singapore. I find the explanation given by Mr Tahir somewhat amusing, if not bizarre. His explanations, simply stated, are based on perception of wrongdoing on the part of Singapore and its relationship. What are some of these reasons?

First, he said we published pictures of Anwar in our newspapers and this seemed like an unfriendly act, as if these pictures were not published in their local newspapers. Secondly, Mr Tahir said that we sabotaged Malaysian economy by short-selling, as if he did not realise that this is an endemic problem with many stock exchanges around the world. Thirdly, he said that our failure to control high interest rates resulted in a flight of capital from the country. Mr Tahir does not seem to know that our MAS does not control interest rates here.

Sir, Mr Tahir's tone in his letter is somewhat for the belligerent. He made at least two references to war in his letter. There was also a cavalier attitude about this message, and I quote:

"Singapore has chosen through this route of subtle annoyance of Malay Malaysians (regardless of whether it is in response to Malaysia's initial acts) and we Malay Malaysian panglimas accept the challenge." In a subsequent letter, Mr Tahir actually thought that Singapore-Malaysian relations should be premised on the principle of abang-adik relationship, that is, Malaysia is the abang and Singapore is the adik. This relationship suggests that Singapore must always play the part of the humble supplicant seeking approval for its conduct from the elder brother at all times.

Sir, despite our repeated explanations, I am saddened that we still have people like Mr Tahir expressing such perverse views about our intentions. Such opinions unfortunately arise at least from a lack of balanced information going to the masses. I certainly hope indeed that the perception and attitude of Mr Tahir is not shared by his fellow Malaysians. Mr Tahir must recognise and accept that Singapore is an independent sovereign country. We are not beholden to anyone, neither do we have to be servile to anyone in our dealings. If that is the expectation of Mr Tahir, I am sad to say he will be disappointed indeed.

My question, Sir, is whether the Ministry of Foreign Affairs is doing more to put clearly across to the Malaysians so that we will be better understood.

Mr Hawazi Daipi (Sembawang): Sir, Singapore-Malaysia relations have been described as close neighbours living in semi-detached houses. What one neighbour does may affect the other. There seems to be some truth there judging by the occasional bickerings and disputes between the two countries. It is a fact of life that even in a close-knit relationship there would be differences as long as both parties agree to advance areas of mutual benefits and interests while promoting individual national interests. We can still see progress in our bilateral relations. But one thing must be stressed, that is, our bilateral relations must be based on mutual respect and equality, not one of "big brother-small brother" relationship.

Sir, I share the indignation of our two colleagues, Mr Charles Chong and Mr Sin Boon Ann, over the letters and views expressed by Mr Malik Tahir, a Malay-Malaysian in our newspapers. I do not think that is the kind of statement we would like to see from our neighbours and definitely, we look forward to a more stable, respectful relationship between our two countries. And what we would like to see least is the souring of relationship of the ordinary people of Malaysia and Singapore. We have seen some progress in our bilateral relations with Malaysia with the settlement of the CLOB issue.

I would like to ask the Minister for an update on the outstanding issues between Singapore and Malaysia which the two Prime Ministers have agreed to settle as a package. How much progress have we made in settling the issues of continued water supply for Singapore, the CIQ, joint development of the Tanjong Pagar Railway Station and the Malayan Railway Land, claims over Pedra Branca, withdrawal of CPF savings of West Malaysian workers and the use and management of air space?

Mr Zulkifli Bin Baharudin: Sir, I would like to think and hope that Mr Malik Tahir does not represent a large majority of Malaysians. Neither am I as optimistic as Mr Chiam about our state of bilateral relations with Malaysia.

For the past one year, relations between Singapore and Malaysia, in my view, have been both difficult and problematic. I think it will continue to be difficult and unpredictable. Yet, when I look at the Budget Statement, under the operating expenditure budget, while it is made specifically clear that there will be higher operating contributions to international organisations and foreign technical assistance programme, there is no mention of any specific programme or funding, especially on one of our most problematic areas, relations with our immediate neighbour. I am asking for special attention to be given to this matter because I think more can and should be done to develop a more sustainable people-to-people relationship. While relations at the political level are important, it is at best unpredictable as it will be determined largely by domestic agenda. Singapore can and has become a convenient political scapegoat. 6.00 pm

While we have a common history with Malaysia, it does not mean that we will continue to see things the same way or from a similar perspective as we become more and more a product of our own distinctly different environment, that even the same family with members in Malaysia and Singapore will find that they differ in outlook, attitude, social and political values. In my view, the inability to appreciate these differences has been and will continue to be a source of difficult problems between Singapore and Malaysia.

Therefore, I think people-to-people relationship can be better enhanced. I suppose we have no other choice because one thing we cannot change is our geography. I am also requesting for more and generous funding to institutions like the Singapore International Foundation and the Singapore Institute of International Affairs and other civic societies so as to allow them to develop programmes that would help bilateral relations. New technologies allow civil societies to be better connected and the growth of civil societies in our neighbouring countries makes this a potentially effective vehicle to develop better relations between our people.

Unfortunately, Sir, sometimes you need money to make friends, especially in this instance. For example, members of civil society can tell you how embarrassing it can sometimes be when they are unable to reciprocate visiting groups from neighbouring countries with the same generosity and hospitality. Ironically, for civil societies, it is usually easier to obtain funds from foreign institutions than from local donors. Besides, there are other uncomfortable implications for civil societies to obtain foreign funding. With more money, civil societies can help enhance cultural, educational and sports exchange because it is only through people that we are able to let others have a better perception of us. Because what others think of us is important, although ultimately, it is who we really are that matters.

Unfortunately, a lot of the perceptions of who we are depend on what our neighbours hear from their leaders and what they read in the media. Very often, this is less than complimentary. For example, when we meet, say, for a business meeting, for someone who does not have the benefit of a personal relationship, he is more likely to be influenced by the political stance adopted by political leaders. People are going to look for signs, signals and gestures as an indication of their attention and commitment to this issue and I therefore urge the Minister to allocate the required resources through civil societies to enable a larger group of Singaporeans to be effectively and actively involved in this process of developing better relations with our neighbours.

Dr Ong Chit Chung: Sir, Singapore's relations with Indonesia have improved significantly after Dr Habibe was replaced by President Abdul Wahid. We want to be a good neighbour of Indonesia, another close neighbour. We wish Indonesia all the best, and hope Indonesia, under the leadership of President Abdul Wahid will have a new beginning in the new millennium.

In the recent crisis, Singapore has willingly given support and economic assistance to Indonesia. May I ask how and to what extent has the economic package of loans been utilised?

The whole Indonesian situation has changed radically. President Abdul Wahid is asserting his leadership vigorously, while the military is in retreat politically. There are religious riots and local independence movements in many parts of Indonesia. One wonders who would ultimately call the shots.

Some analysts have speculated that Indonesia might break up, with various regions competing for power, for example, Aceh and Irian Jaya. I hope not. We want a stable and prosperous Indonesia.

May I ask the Minister for his assessment of the Indonesian situation and its impact on bilateral relations and, furthermore, very recently, very close to our shores, we have demonstrations and riots in Bintan and Batam. Can I know how that would affect our investments in the nearby islands?

Mr Chiam See Tong: Sir, there is no problem in the Indonesia-Singapore relationship. It was just going on fine until we read in the papers that trouble has erupted in Bintan Island where Singaporeans have investments there. Apparently, the problem was the compensation paid to the villagers for their land was not enough. The villagers want more compensation. They rioted and staged sit-ins and threatened that if their demands were not met, some drastic action shall be taken by them. Student leaders from Jakarta took up their cause and helped them organise the sit-ins and their demands for compensation for their land. That incident highlights the serious problem of investing in Bintan and the other islands in the Riau Archipelago. The incident alone highlights the seething problems in Bintan and the other Riau islands. When people's stomachs are empty, there shall always be problems. Future would-be investors may not want to put their money in those islands if the situation in those islands does not improve.

It would appear that the situation in the Riau islands shall not improve since the central Government has enough problems in its hands. We have read of the break-away problems in Aceh and other parts of Indonesia. Indonesians appear to have been angry at the Timorese for claiming independence for themselves. But at heart, they may be happier for not having to continue to subsidise that country anymore. It is a great strain on their already scarce financial resources to do so.

If such are the circumstances in Indonesia, the Indonesians may be amicable to a suggestion by Singapore to lease to Singapore one of the Riau islands nearest to Singapore. I know this is a very sensitive issue. If wrongly handled, it could cause a lot of problems in Singapore's dealings with Indonesia. Singapore must make it clear to Indonesia that it does not want to annex the Riau islands or any of the nearby islands to Singapore. The suggestion is purely a business suggestion which can benefit both parties. The suggestion is as follows:

(1) One of the main islands, either Bintan or Batam be leased to Singapore for, say, 99 years or longer at a price to be negotiated or based on a valuation by a firm of land valuers of international repute;

(2) Upon leasing the island to Singapore, Singapore shall have the full charge and control over it which includes all security matters; and

(3) Indonesian citizens shall be allowed to travel freely in and out of the island so that they shall not be deprived of working there or start business in that island, subject to the right by Singapore to stop criminals or trouble-makers and bad elements from entering the island.

I think if such an arrangement can be made, the economic benefits accruing to that island and the ripple effects to the neighbours shall be tremendous. Singapore is a small island and needs more land for its population growth and Indonesia is cash-strapped. The leasing of one island to Singapore is beneficial to both countries and it can be nothing but a win-win situation. The Indonesians must not take the move as Singapore wanting to colonise the Riau Archipelago, or to win concessions from them. But it is a purely business view between two countries and they should take it in that light.

Mr Sin Boon Ann: Sir, let me touch on the recent situation in Bintan in respect of Singapore-Indonesia relationship.

The recent riots in Bintan is a setback for Indonesia in its bid to attract more foreign investors into the country to play its part in economic recovery. It is unfortunate that foreign parties with investment in that island got caught up in what appears to be a domestic issue, that is, the people's unhappiness with the compensation given by a local party for the loss of their land. Some quarters have pointed to the shady outside hands being involved as part of the overall plan to destabilise President Abdurrahman Wahid's regime. The truth may, however, never be known.

The riots raised serious concerns over the ability of the Government to provide safety and security for the foreign investors. The Indonesian Government has asked us for assistance in procuring foreign investments for the country. Unfortunately, the recent riots in Bintan have failed to inspire much confidence in investors. If our Government intends to promote Singaporeans' investment in Indonesia in general, and in Riau in particular, there is a corresponding duty, I believe, on the part of our Government to seek more solid assurance from the Indonesian Government that law and safety to both life and property will not be placed at risk through riots and mayhem.

Sir, I believe that our policy has always been one of non-interference with the way others govern and manage their internal problems. However, in this instance, I believe there is some expectation from foreign investors on the part of the Indonesian Government to do more to protect investors. Unlike Mr Chiam, and I do not think the solution is to lease the island from the Indonesian Government because, apart from leasing the island, you have to deal with the long-term problem of people inhabiting the island for long periods of time. And what to do when the island finally reverts to the Indonesian authorities.

I would like to ask the Minister whether the Indonesian government has given our Government better assurance of protection of life and property and, if so, what details have been decided upon.

Mr Zulkifli Bin Baharudin: Sir, in the case of Singapore-Malaysia relations, I asked the Minister for Foreign Affairs for time, money and effort to assist civil society to bridge people-to-people relationship. In the case of Indonesia, the situation is such that I can only ask the Minister for more time, more money and more help to civil society to do exactly the same. I think civil society has a large capacity, will and enthusiasm to help. But I think money in the pocket will really help. We have seen how civil society groups, like UNIFEM, that is a group of local doctors, have helped, on their own initiative to meet the chronic needs of medicine and food in places like Bintan. So I can only repeat my call for the Minister to give his special attention to civil society groups.

Mr Hawazi Daipi: It is widely believed that the political situation in Indonesia, one of our closest neighbours, has improved since the Presidential election was held at the end of 1999. The fear of a military coup has subsided the racial and religious strife in the different areas in Indonesia has reduced somewhat and the economy has shown signs of recovery. But Singaporeans have reasons to continue to be concerned about the political development there as political and economic instability in Indonesia will have implications on the stability and economic development of our region, and indeed Singapore.

I know that similar questions have been asked before but considering the importance of the issue to Singapore, would the Minister give his assessment of the political and security situation in Indonesia?

Let me move to the situation in Batam and Bintan, where much of the investments from Singapore is located. With the substantial Singaporean investments in Bintan and Batam, it was with concern that I read the press reports on the threatening situation in Bintan just a little more than a month ago, and I listened to questions raised and answered on the issue in our last Parliamentary debate in February. I agree with the Minister for Trade and Industry that much of the solution to what happened in Bintan and, I would add Batam too, depends on the Indonesian government. I am in admiration of the strength of President Abdurrahman Wahid in facing the herculean task of forging a new path for Indonesia in the aftermath of not only the economic crisis, but also the adjustment to a new political era. I have no doubt that he would prevail given time and the support of his people.

My concern is that, even when the President succeeds to stabilise this situation, we will face the situation that whatever changes that occur in the political landscape of Indonesia may impact, in varying degrees, on the two islands and on Singapore investors there. In seeking protection for our investors, perhaps, we could look at ways whereby the Government could assist in some way to limit the impact of political ripples in Indonesia on investments from Singapore.

Could the two governments work out an arrangement that could help our investors operate in a condition of sustained peace and stability where investments are given an added protection? This arrangement, I believe, should benefit both Singapore and Indonesia, and the workers on the two islands. Needless to say, for Singaporeans, there is added protection and an assurance that these problems will not recur. 6.15 pm

Dr Ong Chit Chung: Sir, before I proceed, can I seek your permission to seek some clarification from Mr Chiam who has made two very interesting proposals today? Mr Chiam has talked about having an economic union with Malaysia, in the first instance, and then proposed that we lease a whole island from Indonesia. May I ask whether he proposes to lease the island first or to have an economic union with Malaysia first? And does he realise that it is so difficult just to operate an industrial park, whether it is in Bintan, Batam or Suzhou? How then does he propose to lease a whole island from an independent and sovereign country like Indonesia which has tremendous pride in its own country and sovereignty?

Earlier on, when he spoke about an economic union with Malaysia, he seems to blame Singapore for having a gap between Singapore's standard of living and Malaysia's standard of living. Are we to be blamed if the Malaysia's standard of living is lower than that of Singapore? Is he proposing that we Singaporeans lower our standard of living, so that we are on the same common denominator as Malaysia's standard of living so that there will not be any problem of any kind?

The Chairman: Mr Chiam, do you wish to reply?

Mr Chiam See Tong: Sir, I am thinking of the long-term effects of our relations with our neighbours. As I have said, if there is always a disparity of standard of living, there can never be real harmony between neighbours. One neighbour would look at the other with great jealousy and somehow or other, trouble will be caused to us. As regards our present relationship with Malaysia, we have found no solution at all to any of the outstanding issues. Not one issue has been resolved. Why is that so? It would appear to be more politically motivated than really wanting to settle the matter and be good neighbours. I think that is our problem. We must find ways and means of having a long-term stable and good relationship with our neighbours. Maybe Dr Ong can make better suggestions than I, but I think if we look into this matter, maybe in one, two or a few years' time something successful may come up.

The Chairman: Dr Ong, please proceed with your topics.

Dr Ong Chit Chung: Sir, Singapore has sent a peace-keeping and support contingent to East Timor. We were among the first wave which arrived at the shores of East Timor. Our logistics support was excellent. We are indeed proud of the Singaporean officers and men who have performed very well in a very difficult situation and at such short notice too.

I wish to ask the Minister if this mission suggests that there will be more such missions or involvement by Singapore in other parts of the world. Do we have the manpower and resources to mount and sustain such operations?

On East Timor, Singapore can help in the reconstruction and development of the country through technical cooperation and assistance, eg, in providing expert advice and programmes on training of the civil service, infrastructure development and the management of airports and seaports.

Sir, now that the UN is in place in East Timor and the situation has stabilised somewhat, will East Timor become independent soon and apply to join ASEAN? What would be the stand of Singapore and ASEAN if East Timor applies to join the ASEAN body? How long will it take the East Timorese to set up their infrastructure and services and reorganise themselves?

Mr Ravindran: Sir, East Timor has embarked on its route to recovery. The visual pictures on television, however, clearly show that there is not much of an infrastructure left in the country.

The United Nations transitional administration on East Timor faces an uphill task in rebuilding the software and hardware for a new East Timor. I am happy that Singapore has contributed significantly to-date to East Timor. Singapore has shown its support to the United Nations by participating in both the UNAMET and the present UNTAET.

Sir, MINDEF's logistics and medical supplies were well utilised for the benefit of the people of East Timor. We have been through the same process. We had been a young nation before and we had undergone a similar traumatic experience when we left the bigger federation. We have also faced similar economic and security uncertainty when the British pulled out. Sir, we should empathise with the needs of the East Timorese. In fact, whether by coincidence or not, both Singapore and East Timor share similar nine alphabets in their names, and I do not know whether we have to undergo this painful process in life.

Sir, I would like to urge the Minister to study the needs of the East Timorese and consider extending as much assistance to the East Timorese, because East Timor is within the region and I think they will appreciate and remember who are their friends who have helped them when they were in need. I would like to ask the Minister whether we have received any specific request or assistance from the East Timorese and what is our response and whether we have independently offered any other form of assistance to the East Timorese.

Mr Hawazi Daipi: Sir, I would like to ask similar questions as my two colleagues have done. Singapore has helped East Timor through our participation in international peace keeping forces and through the UN. How would Singapore help East Timor in its preparation for independence and after it becomes a sovereign state? Like Dr Ong, I would like to know whether Singapore would support East Timor when it becomes independent and wants to join ASEAN.

Dr Ong Chit Chung: Sir, Singapore-Philippines relations have improved tremendously in recent years, culminating in the visit to Singapore recently of the Philippines Foreign Secretary, Mr Domingo Siazon. All parties appeared to have buried their hatchet after the Flor Contemplacion's case.

Trade and investments have increased significantly. Within ASEAN, Singapore and the Philippines share much common interests and there is a congruence of views on many things.

Sir, the Philippines can be a good ally and balance within ASEAN. May I therefore ask the Minister what more can Singapore do in terms of promotion of bilateral trade, investment and cultural exchanges?

Mr Ravindran: Sir, it has been two years since Myanmar joined ASEAN. I would like to ask the Minister to give an update as to what is the benefit and the problems that have arisen as a result of admitting Myanmar into ASEAN and also to give us an update as to what has constructive engagement by ASEAN resulted as far as the internal developments in Myanmar are concerned.

The Chairman: Dr Ong, you can take your two cuts together.

Dr Ong Chit Chung: Sir, Singapore's relations with Japan have been warm and friendly. Japanese investments, trade and technology have been flowing in, and Japan has the biggest expatriate community and largest Japanese school in Singapore. Japanese presence also serves to balance that of the other regional powers.

I know many Japanese businessmen and managers like to be posted to Singapore. They find Singapore comfortable, safe and an interesting city to live in. I am sure, not least of all, many of them like to play golf in our many golf courses, and also to mix with the local population.

In terms of bilateral relations, Singapore and Japan would be examples extraordinaire of free trade in the region. Singapore and Japan could cooperate closely in free trade arrangements, and this would possibly inspire the other neighbours to follow suit.

May I ask the Minister whether there is any progress with regard to the proposal on the free trade arrangements between Singapore and Japan?

Sir, Singapore's relations with the People's Republic of China have always been warm and positive. Singaporeans have extensive investments in China, and the Chinese economy is growing. At the same time, we have good trade and economic relations with Taiwan. Indeed, some of the cross-strait conferences and meetings between the PRC and Taiwan were held in Singapore. We are friends to all.

However, the situation over the Strait of Taiwan is not very comforting. China has issued a White Paper on Taiwan, which is undergoing a presidential election. One wonders what would happen to cross-strait relations. Is it sabre-rattling or will there be an exchange of blows and missiles across the Strait? Many in Asia are alarmed by the prospects of hostilities in the narrow strait, and the spillover effect on us politically and economically.

Sir, we hope that wise counsel will prevail and the issues can be resolved amicably. I wish to ask the Minister on Singapore's stand on the cross-strait relationships and what impact it has on trade and development, and whether we can play a role in this relationship.

Mr Ravindran: Sir, the East Asia Latin America Forum (EALAF) was the brainchild of our Prime Minister. East Asia is a region of significant economic, political and security importance. It will also grow in greater importance and, as such, it is critical that East Asia maintains links with all parts of the globe, with both individual countries and other regions. Similarly, Latin America and South America are fast growing regions. They are also equally important in the economic, political and security arena. Sir, it is important that the links between the two blocs be enhanced and strengthened. I would like the Minister to outline the developments on EALAF and the future plans for EALAF.

Dr Ong Chit Chung: Sir, ASEAN, since its establishment, has provided Singapore and other South East Asian nations with a good regional platform for internal consensus as well as a springboard for dialogues with other regional bodies and big powers. We are all indeed very proud and fond of ASEAN. We say ASEAN this and ASEAN that, but times have changed. Mr Suharto was the anchor for ASEAN unity and stability for many years, but he has stepped down, and it signalled the end of an era for ASEAN.

ASEAN has indeed served us well. ASEAN has grown. It is still growing, growing and growing. But it is now somewhat tattered and in disarray. The question is: has ASEAN outgrown itself? Does it still have a vital role to play?

Singapore was the Chairman of the ASEAN Standing Committee in the most difficult of times in the region. May I ask the Minister on how Singapore helped steer ASEAN through such troubled waters?

In terms of trade and investments, are there any progress with the ASEAN investment roadshows? As an organisation and with the benefit of recent experience, is ASEAN better equipped and organised now to deal with future outbreak of financial crises or any other political issues that might crop up?

Mr Charles Chong: Sir, I share the concerns of Dr Ong Chit Chung on the future of ASEAN. I had recently browsed through several news databases to read up on recent developments concerning ASEAN. And what surprised me was the number of articles written in the past year which questioned the credibility of the organisation and its continued cohesiveness and relevance. These articles have appeared in various newspapers in Hong Kong, Japan, Australia, France, among others, and many were blunt in their analyses, highlighting the so-called serious weaknesses in ASEAN and casting doubts on ASEAN's potential to act positively to meet future challenges. ASEAN's credibility had been dented as a result of its failure to respond to the economic turmoil in 1997-1998 and was an issue our own Prime Minister and Foreign Affairs Minister had publicly alluded to at ASEAN meetings. It is essential and urgent that all 10 ASEAN members address the problem head on to restore confidence in the organisation and the region. This will reassure investors who are beginning to return to the region to take a longer term view of their presence here.

Sir, I would like the Minister for Foreign Affairs to update the House on the steps ASEAN had adopted in the past year to rebuild its credibility and salvage its international image. What are some of the problems and obstacles that ASEAN faces in its effort to restore and strengthen the grouping's reputation. At the same time, will the Minister also give an assessment of the success of the measures implemented by ASEAN thus far?

Mr Ravindran: Sir, ASEAN has undergone severe stress over the last two years. The regional economic crisis has seriously dented its reputation. New tensions between ASEAN countries have appeared under the stress of the crisis and many have complained that ASEAN is seen as lacking a clear vision and a common strategy of overcoming a common enemy in the economic crisis. Sir, further questions have arisen as to whether ASEAN's expansion with new members who are at different levels of economic and political developments has made decision-making in ASEAN clumsier and slower. 6.30 pm

Sir, a serious question has arisen among other critics as to whether ASEAN continues to remain as a useful organisation and as a beneficial forum for regional issues.

Sir, our Minister served as the Chairman of the ASEAN Standing Committee during the last year and presided over key ASEAN meetings. I would like to ask the Minister whether this perception of ASEAN as an organisation in disarray is justified. Was the economic crisis the main cause of ASEAN's problems and whether ASEAN can overcome these problems? Also, whether there are existing mechanisms within ASEAN where even bilateral problems can be resolved.

Mr Hawazi Daipi: The recent economic crisis affected each ASEAN country differently and there were internal developments that gave rise to frictions in relations between certain ASEAN countries, notably in relations between Singapore and Malaysia, and to a certain extent, between Singapore and Indonesia. Sir, each ASEAN country also responded to their crisis with different solutions. More importantly, it appeared as if ASEAN, as a regional body, either did not or could not react fast enough to aid its member nations.

There was a sense that each country acted independently and all thoughts for regionalism were put in cold storage, only to be taken out at a more convenient time. In contrast, just prior to the crisis, ASEAN regionalism appeared at its strongest and this was coupled with ASEAN's expansion from six to nine, and then 10 members. Despite the different economic levels of development of the new members from that of the original six, it seems that ASEAN was strong enough to adapt to these circumstances.

With these recent events in mind, ASEAN states are poised for steady growth. What lessons have ASEAN drawn from the economic crisis and what are the prospects of ASEAN as a regional body in the 21st century. In addition, Sir, what were the highlights of achievements of ASEAN during Singapore's tenure as ASEAN Standing Committee Chairman in 1999?

With reference to Myanmar, with its admission into ASEAN, despite strong objections from the US and Europe, ASEAN states went ahead with the policy of constructive engagements believing that an international solution of Myanmar would have the opposite effect on any hope for political change in the country. In the last three years since Myanmar joined ASEAN, has ASEAN been able to successfully engage Myanmar? What are the changes that have taken place in Myanmar that are in line with the objective of ASEAN in admitting Myanmar into ASEAN?

Dr Ong Chit Chung: Sir, the ASEAN Regional Forum (ARF) is an important security architecture for multi-lateral security cooperation and dialogue. ARF has firmly established the mechanism for security dialogue and confidence-building measures within the region.

ARF also plays a pivotal role in relation with the external powers, like the United States, China and Japan. Indeed, some of these external powers use the ARF sessions to meet each other and to float ideas.

Prof. Desmond Ball of the Australian National University wrote recently that the ARF has emerged as the centrepiece of security architecture in the region. So far, so good. But ARF should move beyond security dialogue and confidence-building measures to the next stage of conflict prevention and preventive diplomacy, whereby incipient problems are nipped in the bud. May I ask if the Minister would actively encourage ARF to take on new directions and new roles.

Mr Ravindran: Sir, the ARF has evolved as an informal, consultative and consensus building forum. Its biggest contribution has been enhancing confidence among its members and its dialogue partners. The ARF has also played a pivotal role in keeping the large powers engaged in a consultative mood. I was happy to hear from the Minister earlier that partners who would not on their own accord meet and discuss problems have met during the meetings at the ARF. So what I would want to ask the Minister is: can the ARF progress and take on the role of preventive diplomacy and conflict resolution? Could the Minister also give us an update on the ARF held last year and the future direction of the ARF?

Mr Simon Tay: Sir, I wish to focus on the progress in developing the ASEAN Regional Forum (ARF) and the practice of preventive diplomacy, suggestions which I hope the Minister will consider.

The Minister has already said how important it is for Singapore to have a peaceful region. When there was peace there were long uninterrupted years of rapid growth. In the crisis, there was greater instability and uncertainty. Economics and security go together.

As a small state, there are limits to what we can do on our own. Multilateralism is therefore very important, and so is the ARF. It complements but does not replace bilateral security arrangements. Nor is the ARF a military alliance like NATO in Europe. It uses discussion and dialogue instead. The aim is to deepen understanding and ties between the nations, and to reinforce the habit of settling disputes peaceably, and of managing disputes so they do not in the first place erupt into violence. Others have already asked about the ARF last year. I hope the Minister will share his thoughts. I want to propose something to the Minister and consider the practice of preventive diplomacy and how Singapore can play its role in pushing this forward.

Preventive diplomacy is a set of diplomatic measures that, without the use of force, seeks to prevent conflicts from turning violent, or incidents of violence from escalating further. The practices of preventive diplomacy include early detection and warning of rising conflict and tensions, the use of fact-finding missions and the offer of good offices and mediation by third parties.

Sir, I believe the Minister will agree these are laudable aims. If the ARF can take up the practice of preventive diplomacy, it would be a great step forward to a new stage in this young institution. It would be an important step forward generally in our favour, as a small state in a world of much bigger states.

I would ask the Minister, therefore, to commit our country to making progress on this issue. We should support preventive diplomacy in principle, and more can and should be done. We should support the development of preventive diplomacy by helping initiate the necessary institutions. There are two of these that deserve early attention. First, would be an effort to build systems and programmes that examine the roots of conflict and look out into the future for flash points, like a satellite looking out over the earth below. Second, is a system of consulting fellow ARF members in between annual meeting, as and when danger signs rise. Together, early warning and consultation would help us look forward ahead and try to gain consensus on what can and should be done.

To do this, Sir, will take considerable effort and some funding. But they are, I believe, worth doing.

Additionally, Sir, I hope the Minister will consider that Singapore should set an example. It should show a willingness to undertake the practice of preventive diplomacy when appropriate. We cannot in this regard stand by the sidelines when problems arise. We should show commitment to helping within the constraints of our human resources and numbers. Our commitment should be exemplary.

The Minister may recall that in 1998, on a previous occasion in this House, I debated on the issue of Cambodia with him. I called on the Minister to send a larger contingent to observe and help ensure the safe and fair conduct of the Cambodian elections. Singapore met with the minimum number suggested by the UN. But the Minister declined my suggestion to do more in that case.

More recently, I was glad to observe our support, much more fulsome support, for our multilateral force in East Timor. I would encourage the Minister to do more. Together with our ASEAN partners, though we are mainly small and medium sized states, we can take positive and proactive steps to prevent the outbreak of violence and to police the peace.

We are not a great power, Sir. There are things that we can do in concert with others. Indeed, in many cases, small and medium sized states are able to do better in prevention because, by our nature, when such smaller states offer to mediate or undertake fact-finding missions, we are hard to accuse of having ulterior motives or to try to exercise undue pressures on other states. Preventive diplomacy, as such, is suitable for the small and the neutral, and we should take up this role where we can in the ARF, be willing to prepare and provide support for institutions and practices and do what we can for our region, and therefore ourselves.

Dr Ong Chit Chung: Sir, ASEAN-EU relations have gone through a rough patch. ASEAN wishes to be close friends of the Europeans. However, meetings are always held up or bogged down by the Europeans' stand on Myanmar. Very often, double standards are applied. ASEAN, on the other hand, has been consistent and operated on the basis of unity and consensus.

May I ask the Minister whether he could persuade the Europeans to come to our point of view. The message is that multilateral relations should not be held hostage by some bureaucratic or misguided conception, and we should let long term interests prevail.

Mr Charles Chong: Sir, as mentioned by Dr Ong, I understand the ASEAN-EU relations have been complicated by Myanmar's membership in ASEAN since 1997. The EU has objected to Myanmar's presence in any ASEAN delegation in its dealings with the EU. Could the Minister brief the House on the state of ASEAN-EU relations and tell us when and where would the next ASEAN-EU meeting take place?

Does the Minister foresee further complications in the relations as a result of Austria's Freedom Party being a coalition member of the Austrian Government, and Austria being an EU member, would ASEAN member countries have difficulty granting visas to an EU delegation comprising members of Austria's Freedom Party?

The Chairman: Mr Ravindran is not speaking. Mr Simon Tay.

Mr Simon Tay: Sir, in talking about the United Nations, it is well known that we are attempting to secure a non-Permanent seat in the Security Council for the year 2000/2001. In previous sittings, the Minister has reported and updated us on the progress in achieving the necessary political support for the achievement of this voted seat. It will be the first time if we succeed that we are on the Security Council. The Security Council is, of course, a very important body in the United Nations. At this point, I would like the Minister to go beyond politically forecasting whether we will or will not get the seat.

I want to draw the Minister out on what it is that Singapore can contribute, if and when it becomes a member of the Security Council. I ask this particularly because the importance of the Security Council relates chiefly to the ability of the states to contribute towards the maintenance of international peace and security, as the name "Security Council" implies. In this context, does a small state like Singapore have a role to play? I myself think we can do so. We have a role in peace-keeping, we have standby arrangements. I would like the Minister to spend some time telling us how it is that a small state like Singapore can play in such an important role.

The second issue relates to the role of the Security Council in making law. Decisions of the Security Council under Chapter 7 of the UN Charter can be binding on all nations. Sir, in the thaw after the Cold War, the Security Council has actually produced many more resolutions than in the past. These resolutions have been criticised often for being partial, selective and sometimes not thought out enough and given enough resources to be actually effective on the ground. Will Singapore take on these resolutions? Will we take the principle, the moral stand, or will we tend to go along with the bigger powers, because they are after all the bigger powers with the veto?

Dr Ong Chit Chung: Sir, I join Mr Simon Tay in discussing Singapore's bid for a seat on the UN Security Council for the year 2001. Can the Minister assure us that we have a good chance of clinching the seat? 6.45 pm

Sir, I believe that a seat on the UN Security Council will give us important mileage, better access to various countries, and more importantly, insights on how the Security Council functions.

This experience will stand us in good stead when there is a crisis in the region or when we run into some problem or the other. And also I would like to ask the Minister, if he could take this opportunity to give training for younger Foreign Service Officers to be involved in this, and in particular when we have a seat in the UN Security Council.

The Chairman: Mr Sin is not here. Mr Simon Tay.

Mr Simon Tay: Sir, I wish to speak on the need to review Singapore's policy in providing technical and development assistance to other countries.

Sir, many of us are aware that as Singapore's income has increased, so have calls to increase our donations to multilateral financial institutions and development agencies. Our Government has generally not done so. We have taken a different approach.

Instead of money, Singapore has in recent years increased our efforts to make greater contributions to the community through training and capacity building. In particular, our programme to provide technical cooperation and assistance to other countries has grown. I understand some 1,200 foreigners or so have come to Singapore under this scheme of late. This scheme should continue and grow.

I do, however, urge the Ministry to consider other and additional ways of providing technical and development assistance. There are several reasons for this. Let me just touch on two.

The first is that our training programmes are very labour intensive. Quite typically, we attach these trainees to a Government department, such as the HDB or the port authorities, in order for them to observe. This is, of course, an important approach. It is practical but very labour intensive. The effort made is considerable and can sometimes distract the operations of these very important agencies. As such, there are limits on how many we can train in this way.

The second reason we should do things differently is that our present policy is open to misunderstanding. This is because the training tends to happen here in Singapore. Thus, the funds that we do provide are largely spent here in Singapore for lodging, and for other costs. This is open to criticism by others as "tied aid", that is to say, we are helping our own economy when we help others. This is, of course, not our intention, I believe. It is the nature of training, but it can be misunderstood.

There are good reasons for us to consider new and additional ways of providing assistance. In making this call, I am, of course, mindful of the interdependencies between our country and others, as certainly it was featured in the Finance Minister's Budget Statement. From the crisis, all Singaporeans understand that when Indonesia or others in the region do poorly, we will also be affected. We can also see that positive steps are taken forward, such as the ASEAN Free Trade Area (AFTA) and ASEAN Investment Area (AIA) agreement, and we should also benefit. When we recognise interdependencies, we would stand to gain more by doing more to help others.

I do not mean we should throw money at these problems, Sir. The world has come a long way in rethinking the way richer countries help. But we should not think in terms of bandage or charity. We should do more so that we serve as true partners to our neighbours. There is much for our good in the longer term, as for theirs. In this partnership, we have to ask our partners to see the need to help themselves, even as we do what we can to help them.

Targeting assistance to specific areas is important. Trade and investment too are important. Private capital flows today are much larger than government to government assistance. So we should encourage the right economic policies and put them in place. But in the shorter term, I hope the Minister will see that some of these countries will lose revenues when they try to put the right policy in place. Therefore, there is resistance to these policies which will benefit them in the longer run. So Singapore should do what we can to encourage and enable our neighbours to undertake the right policy reforms.

There are many innovations that other countries are reviewing. Sweden, for example, has only recently gone through this process, to develop new policies for their assistance overseas. Our own country has been encouraging assistance to the less developed countries, both in ASEAN as well as in the WTO. Sir, a bit like NMP Dr Jennifer Lee earlier, I am not asking the Minister to say yes or no at this point in time. What I am asking is for a study and that we re-look at this policy. This is particularly so because it has been about a decade since we stepped up our programme for technical cooperation and establish a directorate in his Ministry for this purpose. Much has changed in the world in the last 10 years. Among these are new initiatives such as AFTA and AIA, as well as the enlargement of ASEAN itself to include newer and much less developed members. Singapore too has taken on a new profile, a higher profile in the UN and the WTO. I hope for these reasons the Minister will consider undertaking a fuller review of our existing policy.

Dr Ong Chit Chung: Sir, the final item of debate on the Ministry of Foreign Affairs' budget will bring some cheer to our Foreign Service staff and officers. It is not really a budget cut as such, but really a boost.

Sir, the Foreign Service Officers constitute the core of our diplomatic representation overseas. There are now many alternative careers for bright, young graduates coming into the market. The Foreign Service's terms and conditions must therefore be attractive enough to enable the Foreign Ministry to recruit and retain the best graduates to serve in its ranks.

We must also make it easier for our diplomats to educate their children when they are posted overseas. Upon return to Singapore, they should not be disadvantaged in finding places for their children in Singapore schools. Also particularly important, the children must be prepared for second languages as they have to come back to Singapore eventually.

Our Foreign Service Officers should also be given extensive training in foreign languages, so that they can be effective when they are posted overseas. I would like to ask the Minister what are the schemes or incentives for such foreign language training in Singapore for our staff.

The Senior Parliamentary Secretary to the Minister for Foreign Affairs (Mr Zainul Abidin Rasheed): Sir, on behalf of my Minister, allow me to answer the questions raised on Singapore-Philippines relations.

Singapore-Philippines relations today are excellent and warm. Bilateral interaction, exchanges, visits and economic cooperation have intensified to surpass the pre-Contemplacion level. Political relations have also improved. This is manifested in the good rapport and high comfort level that exist between key leaders of the two countries. PM Goh has been to the Philippines three times in the last four years, most recently to attend the third ASEAN Informal Summit last November, and President Estrada paid a state visit to Singapore in October 1998.

Sir, my Minister has a good working relationship with Philippines Foreign Secretary Mr Domingo Siazon who came here on an official visit in late January/February. Last but not least, a major milestone was the decision of both countries to launch a Philippine-Singapore Action Plan (PSAP) to put the bilateral relationship on a more solid footing.

The Philippine-Singapore Action Plan, if I may elaborate on that, having strong and broad-based linkages, will reduce the susceptibility of relationship as a whole being wrought by any single bilateral issue. The idea of the PSAP to provide a comprehensive framework of bilateral cooperation under which we could work together to diversify, intensify and institutionalise bilateral linkages arose during PM Goh's official visit to the Philippines in June 1997. The PSAP proposal was elaborated upon and formally endorsed on 14th December 1998 at the sideline of the sixth ASEAN Summit in Hanoi.

The PSAP covers cooperation in the areas of trade and investment, information technology, education, culture, defence and people-to-people exchanges. Much has been achieved in bilateral cooperation under the PSAP. For example, the Singapore TDB mounted seven trade and investment promotion missions to the Philippines while Singapore also hosted several visits by business delegations from the Philippines Economic Zone Authority and various Filipino chambers of commerce and business clubs.

A Memorandum of Understanding on IT Cooperation was also signed in July 1999 during the visit of Minister for Trade and Industry BG George Yeo to the Philippines. New mechanisms have been set up between agencies from both sides, for example, between MTI and the Philippine Board of Investments, or between the NCB (which is now renamed IDA) and the Philippine's Department of Science and Technology, to better consider and coordinate bilateral cooperation in targeted areas.

To enhance educational exchanges, Singapore's Ministry of Education has made a visit to the Philippines last August to explore new initiatives, and MOE has also awarded 20 Secondary Three scholarships under the PSAP. As part of the people-to-people exchanges to improve understanding of each other's way of life, there has been exchange of visits by senior pathologists from both countries, while a number of journalists from the Philippines have also visited Singapore last year.

Lastly, Sir, both countries are also working on a proposal, which President Estrada had raised during his state visit to Singapore, to set up a centre in Singapore to cater for the recreational and vocational training needs of Filipino workers in Singapore. Singapore has since identified a site that could be used to set up such a centre, and we are now discussing with the Philippines authorities on the steps it may take to operationalise the use of the site.

The Chairman: There are about two or three minutes left. I think we can stop here. Do I have the general assent of Members to stop here?

Hon. Members indicated assent.

Thereupon, Mr Deputy Speaker left the Chair of the Committee and took the Chair of the House.

Prof. Jayakumar: Mr Deputy Speaker, I beg to report that the Committee of Supply has made progress on the Estimates of Expenditure for the financial year 2000/2001, and ask leave to sit again tomorrow.

Mr Deputy Speaker: So be it.