ESTIMATES OF EXPENDITURE FOR THE FINANCIAL YEAR 1ST APRIL, 2001 TO 31ST MARCH, 2002

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, 2001 to 31st March, 2002, contained in Paper Cmd. 3 of 2001.

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 2001/2002 on pages 24 and 25 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 a discussion includes the replies from the front bench. I shall announce these times as we go along.

I have noted that in previous years, several Members who have asked to raise matters pertaining to details of expenditure did not get the opportunity to speak. I have therefore allotted more time this year to Members who have filed $10 'cuts'. This of course comes at the expense of the time allotted to the $100 'cuts'. Hon. Members who have therefore not heeded my appeal and insisted that their query on details of expenditure is a major policy issue may well find that they are unable to raise their matter because of the shortage of time.

Hopefully this will endear Hon. Members to raise their matters in the appropriate category in future.

In spite of the sitting time of the Committee of Supply for each day of sitting being extended to 6.45 pm, time is unfortunately not a luxury we have to pander to long discourses. With 484 amendments to deal with this year, Members will once again not have the time they have requested for. Other Members who 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 an amendment.

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

Head W -

The Chairman: Head W - Ministry of Trade and Industry. Amendment No. (1), we have a total of 135 minutes. Mr Leong Horn Kee.

Mr Leong Horn Kee (Bishan-Toa Payoh): Sir, I shall take your point that we should make our speeches short and sharp. Sir, I beg to move,

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

Sir, before I go into speaking on my cut on the impact of regional developments, I am compelled to actually make some remarks on some reports made in the press today. In particular, I would like to refer you, Sir, to the commentary by a certain reporter that yesterday there was so much time but so few questions. In fact, the reporter went on to say that with the Budget debate on, there had been only two queries for oral answers each day and not by elected MPs. That did not sound very fair. She went on to say that we had extended Question Time by half an hour purposely to give more time for Q&A and why the MPs, especially elected MPs, did not use the time to ask questions. And she said that rather than elected MPs, Nominated MPs and NCMP had used the time.

Sir, I must say that this is unfair because it shows she has no clear understanding of our parliamentary process. I am also disappointed that this particular reporter actually had spent many years in the Gallery, looking at us making speeches, and should know the procedures of the Government and parliamentary process here. In fact, Question Time is only used during normal Parliament sittings. During the Committee of Supply, MPs actually spend their time asking many detailed questions. The fact that we have extended the sittings to 61/4 hours every day is testimony that we actually spend a lot of time asking questions. As you have said, Sir, there are a total of 484 amendments being filed, and each amendment can be a multiplicity of many other questions in those topics. So we could easily have asked thousands of questions within these few days of sittings.

The reporter also asked why the number of speakers also went down and it seems to be a very important fact, from 25 to 13 yesterday. This again shows that she has no clear understanding of our process. MPs speak according to the time that they feel they should make clear and good points, not by the length of time they speak. On the final day, we need to give the Minister time for him to give a very detailed reply. Therefore, more time is spent and given on the first day for MPs to speak.

Sir, as a final remark. In a sense, I am disappointed that somehow the recent press coverage of our parliamentary process seems to be taking a line on focusing on the MPs themselves, instead of the issues and topics for discussion. It seems to also lack, in my own words, in-depth analysis of our process. We should actually look at issues being raised and how the Minister answers them, rather than say which MP asks which particular question, how many times he has been featured in the coverage, and, in their points, counting the number of times the MP has been mentioned. These are not very fair assessments of an MP's performance because he has worked on the ground. Even if the MP spends little time, he makes quality comments in the debate. I think, on the other hand, the press should also take note of what they are doing, and not focus on MPs themselves, but on the topics we are discussing.

Sir, may I go on the topic of the first cut which is the impact of regional developments. Sir, the Economic Survey of Singapore 2000 reported that Singapore's trade with Malaysia surged by 37% in Year 2000. For the first time, Malaysia overtook the USA as the top trading partner of Singapore. Our trade with Malaysia amounted to S$82.6 billion, nearly 9% higher than the total trade of S$75.9 billion with USA. Similarly, although we do not publish our trade figures with Indonesia, it is understood that our trade with Indonesia used to be very substantial. I do not know whether the trade volume with Indonesia has dropped since the political and financial turmoil in that country, but I would think that the trade volume should remain significant.

In this context, we have to accept that any adverse political or economic developments in these neighbouring countries will have an impact on Singapore. In fact, DPM BG Lee Hsien Loong has recently said that this is one of the most difficult and uncertain times in this region.

The sharp rise in the bilateral trade with Malaysia was due to a few factors. One was the increase in Singapore's Foreign Direct Investment (FDI) to Malaysia. The second was the upturn in the global electronics market which led to a more re-export of electronic parts and components between Singapore and Malaysia; and the third reason was the increase in oil exports. This growth of bilateral trade between Singapore and Malaysia clearly demonstrates the close intertwining of the two economies.

Before the regional crisis, Singapore was pushing for the Growth Triangle and for the promotion of the location of manufacturing facilities by Singapore based companies and MNCs to the neighbouring countries and regions, like Batam and Bintan. Therefore, similarly, we also have close ties with our other neighbour, Indonesia. Hence, I am concerned about the economic and political events in Indonesia and Malaysia. The Minister for Trade and Industry recently visited Indonesia, and he also must have been in close touch with the developments in Malaysia. Therefore, I would very much appreciate to hear from the Minister what are his views on the possible scenarios unfolding in Indonesia and Malaysia. If there were to be adverse developments, how could Singapore cushion ourselves against the negative impact?

Sir, can I move on to my second cut? On Free Trade Agreements, while maintaining close ties with our neighbours, Singapore has embarked on a bold initiative to leapfrog the region by establishing closer trade and investment linkages with the stable developed economies further away. This is achieved by signing Free Trade Agreements with other countries outside ASEAN. 12.45 pm

Singapore has inked an FTA with New Zealand, and is in discussion with USA, Australia, Canada, Mexico, Japan and Chile on FTAs.

These FTAs will bring about substantial benefits. For example, if we can sign an FTA with the USA, it would attract more foreign investments from MNCs eyeing the US market. This benefit is clearly seen in Mexico, which has a North American Free Trade Area (NAFTA) with the USA and Canada. It was reported in the Business Week magazine, in its 5th March issue, that with the widened horizons, Singapore's FTAs could bring the following advantages:

1. Reduce the nation's reliance on its neighbours.

2. Lower tariffs and attract foreign manufacturers to Singapore.

3. Spur our neighbours to get back on the free-trade track.

4. Help boost global confidence in the rest of the region in Southeast Asia.

Given these meaningful and real benefits, I was indeed surprised to read in recent press reports that top leaders from both Malaysia and Indonesia were concerned about Singapore's unilateral free trade agreements with non-ASEAN members. For example, Indonesian President, Abdurrahman Wahid, was reported to have said that he wanted Singapore to help first restore Indonesia's economy, and not search for new trade partners far afield. The Malaysian Prime Minister, Dr Mahathir, was reported to have remarked that such FTAs were a "worrisome" development affecting the ASEAN Free Trade Area (AFTA). He was bothered by the non-ASEAN countries that may use the FTAs as a "backdoor" to enter AFTA, by shipping partly completed products into Singapore and complete them here so that these products can be regarded as Singapore-made.

Sir, I am rather baffled by these contrasting comments of the Business Week magazine, analysing the benefits of Singapore's FTAs with the surrounding countries in the other parts of the world, against the resentments expressed by the two closest neighbours. Perhaps, the Minister for Trade and Industry could enlighten this House.

Mr Hawazi Daipi (Sembawang): Sir, we have been informed by the Minister for Trade and Industry that Singapore is negotiating free trade agreements with Australia, Japan, Mexico and the United States, with the aim of concluding them by the end of the year. We have also been informed that we are also in exploratory talks with Canada and the European Free Trade Area. Our first bilateral FTA was signed with New Zealand in 1999. These are important developments.

Speaking as Chairman of the Government Parliamentary Committee for Manpower, and a union official, I support the Government's move to establish free trade with like-minded countries, because the FTAs can help expand bilateral trade with and two-way investments in these countries. This means there could potentially be more economic activities and more jobs in our country, as well as in our partner countries. There may not be equal benefits for two countries involved in the bilateral FTAs, but there could be overall benefits for the ordinary people, as well as for businesses, as there would be more and, hopefully, better jobs and more businesses. We must make sure that the agreements would have sufficient safeguards for the workers, businesses, as well as for the states.

Although FTAs should not be an alternative to multilateral trade agreements, they could prove to be decisive in fostering moves towards global trade liberalisation under the WTO. So, the FTA is a useful measure to take before there is a multilateral trade agreement later on.

Free trade agreements will not only serve to better economic conditions for workers and businesses in Singapore, but also bring greater international interest into the markets in Southeast Asia. Being a business hub, I am sure Singapore would be able to attract investments and companies to come to Singapore and look at the business opportunities in Southeast Asia. To give an example, without clear benefits to itself and to the region in which it is located, I am sure Mexico would have little interest to negotiate the FTA with us. In fact, Mexico, which is already a part of the North American Free Trade Agreement (NAFTA), would not have concluded or negotiated FTAs with so many Latin and South American countries like Brazil, Uruguay and Peru, as well as with the European Union and Israel. In fact, Mexico has already started discussions with Japan, which is another country with whom we are negotiating an FTA.

There are those within our own region which fear that our pursuit of bilateral free trade agreements could lead to massive inflows, into ASEAN, of non-ASEAN products, thus abusing the terms and conditions of AFTA, and diluting the benefits that ASEAN will gain from the full implementation of AFTA. Ironically, we have similar voices outside ASEAN that are full of concern that competitively-priced ASEAN goods will flood their domestic markets through Singapore, jeopardising their own local industries. We have heard this argument from some quarters in New Zealand before we signed a bilateral trade agreement with Wellington.

Sir, there seems to be a need for us to explain to our ASEAN neighbours about our pursuit of bilateral FTAs, particularly to Malaysia and Indonesia, which have expressed concern over the possibility of Singapore being used as a backdoor to gain entry into the AFTA region. In my view, this is a very short-term view of the issues at hand. In the long term, bilateral free trade agreements could act as a stimulus for an increase of trade and investment in the region. Moreover, it can also accelerate and strengthen multilateral trade agreements.

Mr Simon S C Tay (Nominated Member): Sir, I rise to talk about the same issue - the bilateral free trade initiatives taken by Singapore - and as to how we should look at the picture in toto and encourage our neighbours to do so.

I would encourage the Minister to consistently promote the idea that these bilateral free trade initiatives really are a response to the stall in the World Trade Organisation negotiations, and a kind of competitive reinsurance against the free trade initiatives happening in the Americas and in Europe.

Clearly, there have been limits to what the ASEAN Free Trade Area has done, and these have not been on Singapore's part, but those of our neighbours. But our goal must be to reassure our neighbours and bring them along, and, in this sense, I would actually disagree with the hon. Member, Mr Leong Horn Kee, that we should not be leapfrogging the region. Rather, we might want to bring the region along with us; we are not leaving any one behind.

Sir, in this sense, I am encouraging the Minister's policy to be one of reconfirming our priority to the multilateral framework, even as we pursue our bilateral initiatives. We should help our neighbours to understand how we see these connections, the links, from the bilateral level to the regional level, to the international level, and, therefore, pay due attention to both the levels below and above us.

In this sense, I would like to ask the Minister to reassure this House and our neighbours that we would be WTO-consistent in our approach, paying heed to Article 24 of the GATT, and that we will try to be inventive in seeking out new areas which WTO, as yet, does not encompass, and that we will also try to egg on a faster pace of liberalisation, to build up momentum for the WTO round.

I, too, was disturbed by reactions by our neighbours regarding the possibility of a backdoor, but my understanding is that we will negotiate rules of origin. In the ASEAN Free Trade Agreement (AFTA), it is 40% of local manufacture. In this sense, I would ask the Minister to confirm that this is the agreed front door. There is no backdoor entrance in this sense, to AFTA. We should not let any possible envy slow us down, Sir. But we should pause to help clear up any genuine doubts or misunderstandings and, if our neighbours need our help, we should increase our assistance to them, to help them adjust to AFTA and to the WTO. For those who are not members, such as Vietnam, we should encourage them to understand and cooperate with them, to help them prepare for WTO accession.

In this sense, Sir, I am asking our policy to be one of training and dialogue, not just among governments, but also the academics and think-tanks, so that our neighbours can take part with us in moving the region and, indeed, the world, forward for more free trade.

Mr Leong Horn Kee: Sir, can I make a point of clarification?

The Chairman: Yes.

Mr Leong Horn Kee: Sir, with your indulgence, I need to explain the point that, perhaps, Mr Simon Tay has been mistaken as to what I have said.

I did not mean to say that Singapore should ignore the surrounding region and reach out to the countries further afield. If he heard my speech more carefully, I actually said that we should maintain close ties with our neighbours. Of course, I used the word "leapfrog", to reach out to the other countries further away. In the process, it will actually also bring benefits back to this region. I did mention that it would spur our neighbours to be back on the free trade track and also help to boost global confidence in this region.

Mrs Lim Hwee Hua (Marine Parade): Sir, hitherto, the role of each business and trade body has been a logical and useful extension of businesses or companies belonging to the same industry. Many such interest groups have been instrumental in furthering the collective goals, frequently along industry lines, such as organising trade delegations or representation of needs to the Government. For example, the Singapore Hotel Association or the Retailers' Association will facilitate networking amongst members, conduct research and surveys, and facilitate the implementation of Government schemes to help players better position themselves. Not too dissimilar in intent is the Association of Small and Medium Enterprises or ASME, which looks after the needs of member companies across different industries.

This network and clustering of interests has generally worked well but will increasingly prove inadequate for the globalised nature of the marketplace and, hence, competition that Singapore-based businesses now face.

The focus of all market players should no longer be a Singapore-centric, but a global marketplace instead, and be where market forces are pulling.

Essentially, in making the transition to a knowledge-based economy, the interests of most, if not all, industries are likely to revolve around the theme of exporting brainpower and software-type services of a Singapore origin.

Moreover, for related industries, for which there is increasingly more overlap or convergence, a pooling of interests will make a lot of sense, eg, between logistics and transportation.

The initiative to integrate and pool these interests under an umbrella body is, therefore, fitting. However, care must be taken to ensure that the right leadership and vision must be in place to balance the wide range of interests.

I would like to ask the Minister, within this framework, what role would the Government play and how would the Government help ensure that both Singapore's larger macro goals and the needs of member companies are met. For example, what sort of role can such an umbrella body play in the pursuit of free trade agreements with the various countries?

Mr Leong Horn Kee: Sir, on the formation of the Singapore Business Federation, early this year, it was reported that the Minister for Trade and Industry, BG George Yeo, said that he would be moving a Bill to recognise the Singapore Business Federation as the new apex business federation in Singapore.

The idea was that the local business sector needed a strong apex organisation, like the Keidanren of Japan, to improve its representative prowess, both locally and overseas. The Singapore Federation of Chambers of Commerce is reorganising itself into the SBF, and a search for a suitable CEO for this new body is ongoing.

I would like to ask the Minister for an update on the status of this proposed SBF. When would the Bill be ready for tabling in Parliament? Could the Minister give us a preview of the main elements of the Bill? What are the features that would ensure that the SBF would have the image, clout and means to be developed as an equivalent to the Japanese Keidanren. One way is to ensure that our top businessmen can be persuaded to serve on the board of this SBF, and another is to ensure that we can identify a very capable and well-respected person to be the CEO. 1.00 pm

However, I do have a concern with the SBF, which is that if the concept is to have a law that empowers the SBF to require all companies operating in Singapore with paid-up capital of more than $0.5 million to be members, then this may create a lot of resentment by the smaller companies, especially if they have to pay subscription by law. Among the 18,800 Singapore registered companies which will be forced to join, the majority will be small and medium enterprises. They may not want to join because they may feel that the SBF will speak only for the large firms and their interests will not be represented. Hence, to be successful, I feel that the framework of the SBF has to create avenues whereby the different firms from different groupings and of different sizes can find their views and interests voiced adequately through this apex body. The Minister may wish to comment on these concerns.

I move on to my next cut on entrepreneurship. Singapore has been ranked the world's most globalised country in a recent survey done by the respected US magazine called "Foreign Policy" of 50 countries around the world. This Globalisation Index was created by the Foreign Policy magazine and renowned US consulting firm, AT Kearney. The report said that "Tiny Singapore clearly stands out as the world's most global country and it far out-distances its nearest rivals, which are the Netherlands, Sweden, Switzerland and Finland which are in the second, third, fourth and fifth places respectively."

I am actually very intrigued by this celebrated ranking of Singapore as the world's most globalised country by a very respectable agency. No doubt, the assessment is correct based on the criteria like cross border flows of goods and services, capital, people and communications. If we are a top globalised country, then where are our top global companies? In sharp contrast with the hugely successful and well regarded global companies like Shell, Ericsson, Swiss Bank Corporation and Nokia, which are companies and products of the lesser ranked companies, then where are the world-class companies home-grown from Singapore which can match our exalted status as a globalised economy? Save for Singapore Airlines, I cannot think of any other local companies that can truly be said to have a global business presence equal to that of Shell or Nokia.

I do feel that enough has been done by the Government in recent years in terms of creating a pro-enterprise environment, such as a low tax regime, stock option schemes, access to venture capital funds and a conducive business climate. However, what is still lacking is the insufficiency of the main ingredient, which is the people or the entrepreneurs. Having done so much by the Government, I actually wonder why we constantly lament at the dearth of entrepreneurs in Singapore. Some people rationalise that the reason could be that Singapore is a small economy. But I feel that this excuse of small size is not a good excuse to make. Let us take the example of Nokia. Nokia is from Finland which has an economy and population similar to Singapore. Yet Nokia is a world-class company that grew by seizing the opportunity of the world telecommunication boom in recent years.

Sir, I would suggest that the Minister may consider seriously two other factors that may affect the growth of our entrepreneurship environment in Singapore and the number of entrepreneurs that we can nurture.

First is the effect of the crowding out of the private sector by the Government-linked companies (GLCs). Second is the deprivation of a pool of the brighter and talented young people to join the private enterprises, as the Government and the GLCs and the statutory boards have been giving out large numbers of scholarships to capture our brightest young students and bond them to work in the Government service or in GLCs.

If these are valid reasons, I would like to ask the Minister whether the Government should consider hastening the process of divestment of the GLCs and liberalise the concept of imposition of bonds on our students. Perhaps, it is time for us to take a more enlightened approach on bonds. I would like to suggest that for some of these bonds, we should require our scholarship students to return to Singapore to work as the only requirement for bondage, rather than to be bonded to a particular company in Singapore.

Does the Minister concur with this evaluation? Let us hear his comments. However, not having enough world-class companies now does not mean that we should not start to cultivate and nurture promising local companies to grow into world-class ones. The process would take time and substantial effort. For a start, we need to create a larger pool of entrepreneurs running sizeable companies. They must be prepared to take risks and venture out. They must be tolerant to failures and we must create an environment of enterprise, with ample rewards for those who succeed. Local companies should be encouraged to merge so as to create bulk and compete more effectively against foreign enterprises.

Mr Inderjit Singh (Ang Mo Kio): Sir, in the Budget debate a few days ago, I spoke about the need to strengthen the entrepreneurship drive in Singapore because of the drop of confidence among entrepreneurs and investors. While the many companies started by many young entrepreneurs have failed in the past one year or so, there are many more who are willing to try, but the environment has changed quite drastically to one of conservatism and, therefore, to one that is quite detrimental towards our efforts to promoting entrepreneurship. The trend that I have seen recently is that this time, we are seeing not just the young Singaporeans who are trying their hand at being entrepreneurs, but also many more experienced and older Singaporeans who have many years of working experience and domain knowledge who are leading the charge in the next wave of start-ups. These "gray-haired" entrepreneurs, as I call them, in my opinion, have a much higher chance to succeed as they partner with the younger people who bring technology to the table. It is a very encouraging sign and we should support it. I have the following issues to raise.

Firstly, when NSTB launched the US$1 billion fund which was used to co-invest mainly with foreign VCs, there was a requirement that only about 30% of the fund was required to be invested locally. Many foreign VCs therefore took the advantage of this scheme and used the funds for foreign projects and investments. I therefore suggest that, first of all, we should tighten the 30% requirement so that more of the funds must be invested locally. We should require the VCs which benefited from the funding to invest the majority of their funds in Singapore projects. Secondly, allow the funds to be invested not just in high-tech, but also low-tech projects, as long as we promote entrepreneurship. What we really want is to develop the entrepreneurship culture and it does not matter what the content is. Thirdly, there is talk about the next $1 billion that the Government is willing to put aside and I suggest that we should do it differently this time by giving the fund to local entrepreneurs and businessmen to manage the funds directly as a national service. I am confident we have many capable people in Singapore who will be willing to do this service.

Sir, during the Budget debate, I also spoke about the sudden tightening of the funding situation. While we cannot force banks or VCs to fund start-ups, we should set up a Lifeline Fund to help promising companies that are in trouble because of the over conservatism environment after the dot.com bust. We risk losing good companies and people because they lack funding. The Technopreneurship 21 Private Sector Committee suggested this sometime last year and I hope the Minister will seriously consider this request. The proposal is as follows:

Firstly, to set aside $20-$30 million to fund 50 to 60 companies.

Secondly, this fund can be jointly administered with a private sector entity, for example, the T21 Private Sector Committee or any other private entity, that Government wants to identify.

Thirdly, use this money to co-invest with private sector funds or individuals so that we can lighten the burden of those who try to save these companies.

Fourthly, this needs to be administered quickly and speed is very important because there are still many companies at the brink of collapse and therefore the criteria requirements for investment need to be simple.

Fifthly, the Lifeline Fund can take a reasonable equity in lieu of the life-saving investment. Even if only a handful of companies make it, I am confident that the $20-$30 million will be multiplied many more times and ensure a generous return for the Government.

However, the goodwill created by the Government will go a long way in improving the environment and in encouraging others to do so.

I recently heard about the Prince Charles Fund in the United Kingdom, where the prince set aside a certain fund to invest in projects and start-ups which failed to find any interested investors or VCs. The main criterion for this fund is that the person or persons seeking the fund from the Prince Charles Fund must truly have exhausted all channels of funding before the fund is disbursed to them. We might think that this is a kind of charity and is doomed to go bankrupt. But from what I understand, the fund is actually growing and has an annual Internal Rate of Return of about 15%. The principle is the same for the Lifeline Fund. All we need are some winners for handsome returns.

Sir, we should aggressively privatise the NSTB, EDB and PSB roles that duplicate the private sector type of activities. In fact, all of these agencies, over the years, have taken on activities that just duplicate many private sector activities, for example, funding, consulting, training and so on. We should consider forming consortiums consisting of private sector players who can manage such activities rather than just corporatise these entities which I think is the current Government's immediate plan.

One way to resolve the serious problems seen by the neighbourhood HDB businesses is to allow the HDB shophouses to be used for technology start-ups in the info-communications, light and non-polluting type of industries. This will make the neighbourhood more vibrant. It will allow good use of the HDB shophouses and for the current shophouse owners to exit their businesses by leasing or selling the shop to start-up companies. It immediately increases the availability of commercial and industrial space and, therefore, this will reduce costs.

The fifth point I want to make on entrepreneurship is the Buona Vista Science Hub. From what I understand, there are plans for JTC to create the Silicon Valley type of environment. I do not see how JTC can manage two systems under the same management. I therefore suggest that JTC leases the Hub to a truly private sector organisation to manage it and leave them to create that kind of environment that we want to create.

Sir, there have also been problems seen by many talented people that we want to bring into Singapore, in bringing their families down here. The current immigration regulations are still restrictive especially for family members and I hope that the Minister can work with the Ministry of Manpower to make this easier.

The final point on entrepreneurship is the 60-plus incentive schemes that the Minister for Finance talked about recently. The current issue is that these are just too many and too confusing, especially for start-ups as well as for the smaller companies to comprehend and to get around to apply this incentive successfully. Many of them just give up applying and are therefore unable to benefit from this scheme. I suggest that we take the opportunity to rationalise this to just a few schemes that are easily manageable, easily understandable by everyone and that can be more effective in trying to promote entrepreneurship and start-ups in Singapore.

Mr Leong Horn Kee: Sir, with the collapse of the dot-com phenomenon in the US, we are seeing more and more dot-com or e-commerce companies collapsing and falling by the way-side.

Singapore is equally affected by this dot-com downturn. However, from my contacts with the e-commerce or Internet community, I feel that there are some fairly good start-up companies with good management and sound product ideas which would be worthwhile to rescue. However, due to a lack of funding which dried up suddenly, these potentially sound companies can be starved of funding and could therefore finally collapse.

Like my GPC colleague, Mr Inderjit Singh, I feel that the Government can establish a Start-up Lifeline Fund to assist these companies. The idea can be based on a co-funding manner where the Government can work together with some selected experienced and capable venture capital and management companies to seek out and support promising local companies to get through the current difficult market. The general concept can be that of a Lifeline Fund that can co-invest into local companies on a dollar for dollar basis with the private sector funding. This way, some promising local start-up companies can be assisted to pull through the present difficult period.

The details of the scheme can be worked out with some of these industry professionals and need not be discussed here, provided that the Government can agree and support this idea through a pledge of a certain sum of money, say, to create a fund of $50 million which is to be matched by another $50 million from the private sector, making a total of $100 million. This $100 million fund can therefore be a very important lifeline for many of our smaller start-up companies.

1.15 pm

Mr Inderjit Singh: Sir, I have spoken about the Lifeline Fund. I will move on to the next cut on the retail sector.

Sir, the retail sector of the economy has had prolonged structured problems which, up to now, have not been effectively resolved. There are many people engaged in this sector, employing a significant proportion of our workforce. Data show that this sector is the most unproductive in terms of value added per worker, as compared to the other industries in Singapore. For example, the value added per worker for the manufacturing sector in 1998 was $84,000, as compared to $26,500 for the retail sector. The retail sector was therefore the worst among all sectors, even worse than the construction sector in terms of productivity per worker. In fact, if we compare the productivity and value added per worker of Singapore retailers with many other developed countries, we are performing quite badly, worse than most European and western countries.

I am glad that the Productivity and Standards Board commissioned a study called Retail 21, of which I was a member, in an attempt to define strategies for the industry in this new millennium, and this was launched yesterday.

In support of their findings, I would like to highlight a few critical areas that should be looked into. Firstly, with regional shopping centres and neighbourhood malls, HDB shophouses are losing substantial business to the point that they are no longer viable as businesses. This, coupled with changing lifestyle of Singaporeans who prefer to go to large supermarkets and shopping centres, signals a time for us to make decisive changes to the retail sector. The Government should devise a scheme for such HDB shopowners to exit easily from their trade without a major financial impact.

Secondly, we should allow a greater flexibility of use of such shophouse space, including allowance for such spaces to be used for the type of infocomm industries that I mentioned earlier. We should no longer prolong the pain of the people stuck in these trades, especially the HDB shophouse owner.

Thirdly, we have not been successful in promoting retail on the Internet due to a number of reasons, including payment security, efficiency of our logistics system and the lack of domain knowledge for those who have started doing e-tailing. We need the following:

(a) a proper strategy including bringing in international expertise to jump start the process;

(b) we need to put in place a better on-line payment service system that is trusted by everyone;

(c) we should take the opportunity to promote Singapore as a regional or Asian e-shopping hub, taking advantage of our expertise in handling logistics in the region.

Sir, fourthly, professionalism in the retail industry needs to be stepped up so that the value added per worker can keep pace with other industries, and this can then free up workers for other industries which constantly face a shortage of manpower.

Fifthly, regionalisation of the retail sector can be given another boost. I believe some of our retailers did attempt to go to the region and they basically lost a lot of money because of the Asian financial crisis. However, we should not give up the opportunities to take advantage of future boom in the region or around the world. We need a few home-grown Isetans or Wall Marts which can successfully compete in the region or in the world. Can the Government devise proper incentives and support for this to happen fast?

Finally, while we try to help the industry through incentive schemes, I feel that these schemes should be market driven rather than subsidies that may solve a short-term problem while creating long-term inefficiencies. We need to move away from the subsidy mentality that I spoke about at the Budget debate. I believe that such an approach just hides fundamental weaknesses of companies. And we have seen whenever many companies run into problems, they actually come to the Government for subsidies or handouts, and I think this is not healthy because we will be competing with companies around the world, which basically operate based on market forces. If we continue to hand out subsidies, I think we will just weaken them, and not strengthen them.

Mr Leong Horn Kee: Sir, the retail sector has been experiencing poor business for several years now. Although there was a 7.8% increase in the total sales volume, after excluding unusually high motor vehicle sales in the year 2000, most retailers are still finding business difficulties. This has prompted the Government to draw up the Retail 21 Plan, which was announced yesterday.

Sir, I notice that the retail business in HDB estates has been poor in the last few years. This is aggravated by the fact that some years ago, under the HDB's Sale of Shops programme, many shopkeepers had bought their shops from the HDB at market prices then. Even though the prices were discounted from market rates, some are finding difficulties in servicing their bank loans. In the face of continuing poor business, I would like to ask the Minister to work with his colleague, the Minister for National Development, in devising methods for assisting the retailers, hawkers and stallholders. Both Ministers may wish to consider the following suggestions:

(i) In HDB wet markets and food courts where the business is poor and the stallholders are finding difficulties to sustain their business, the relevant authority should consider reducing the rentals. Such downward adjustment of rentals should be undertaken speedily, rather than after numerous appeals. This will also ensure that the stallholders will have a chance to survive with a lower rental cost. A case in point I have is in the new Shunfu Mart, a wet market-cum-food court in my constituency. Business has been poor from day one since this new centre was opened last year, but the HDB has not yet agreed to any rental reductions despite many appeals.

(ii) Sir, I wish to ask the two Ministers to be flexible in the applications of change of use of premises in the case of privately owned shops or retail outlets. Another example I have in my constituency is the private old shophouses along Upper Thomson Road. Business has been bad for some of these shophouses for several years. Commercial activities, like shops and restaurants, have been allowed on the first storey, but the authorities have not allowed commercial activities on the second storey but insisted on its use as residential. Repeated appeals to the authorities to allow the second storey for commercial purposes, such as restaurants and offices, like what Mr Inderjit Singh brought up, for dot.com companies have been turned down.

The stated reason given was that the proposed commercial uses would "likely aggravate the traffic and illegal parking problems in the area." Sir, the stated reason given is not reasonable. The shopkeepers feel that certain alternative uses of the premises would help to bring in new businesses. Why would the authorities reject the applications on the basis of concern of traffic? Having higher traffic is a good sign. It means that the intended use is viable and will generate more economic activity. As there are other means to resolve the traffic problem, we should not curtail a sound and viable business idea just because of the fear of traffic congestions.

Sir, a good example where freedom to operate and choice has worked very well is the popular Holland Village. It has a very vibrant and lively eating and shopping locality. I notice that new shops or outlets constantly sprout out in this area. When the business is not sustainable, it is quickly replaced by another. It is this ability to constantly adjust and change that enables the locality to remain so vibrant. Hence, in both the HDB and private shopping and retail areas, I would like to suggest that the Government should actually let the shopkeepers decide what is best suited for the area.

Sir, could the Minister give us his views?

Mr Inderjit Singh: Sir, last year, the Minister talked about creating many more world-class companies in the next few years. I have the following questions. Have we identified the right strategies and put in place workable criteria in selecting and grooming such companies? I would like to ask the Minister what is the progress so far for the target which we set last year, namely, to create a hundred world-class companies in a five-year time frame.

The second point I have on world-class companies is that too many of our research institutes (RIs) are Government controlled and Government driven. We should consider outsourcing this to the private sector. The private sector industry players can form permanent groupings according to their industries and get some Government funding to manage this. The pace at which these RIs can then progress will be much faster and much in line with what is happening in other parts of the world.

The third point is that we need a new Government agency to do the reverse role, if we really want to focus on developing Singapore-based multi-nationals. While EDB has done an excellent job in bringing in foreign companies into Singapore, and while NSTB and the PSB have helped many new companies to start up and grow to a reasonable size within Singapore, we do not have any agency that focuses and facilitates the globalisation of our companies. The Trade Development Board has done an excellent job in internationalising our trading activities and in linking our companies with businesses from around the world. They, however, are not chartered to groom and support home-grown multi-nationals, especially in the areas of manufacturing, engineering, construction and others.

Sir, one very useful role for the GLCs to play is to basically act as big brothers in bringing our SMEs with them when the GLCs globalise or do international projects. This is the reverse of the Local Industry Upgrading Programme (LIUP) where we give incentives to multi-nationals and large companies based in Singapore to help groom and upgrade SMEs in their Singapore operations. This practice of large national companies bringing along smaller companies for international projects is prevalent in Japan and in France. So, if we can do something that is the reverse of the LIUP to allow our Singapore large companies to bring SMEs with them, I think this will be very useful in trying to groom some of the world-class companies.

We also know that many of our SMEs are not going to be viable in the long run, even if they are surviving in the short term. For such companies, it may be necessary to consider giving them incentives to encourage them to merge and consolidate among themselves. Collectively, such companies may have a better chance of becoming world-class companies, while on their own many may not even survive.

We need to encourage value creation activities for companies based in Singapore. The Government may want to consider giving incentives to companies to facilitate them to break up their value chains and move the less productive activities of the companies to outside Singapore, to the region, where these activities can be done more productively. I spoke about this in the Budget debate. I hope the Minister can give an answer to this. In this way, we will be able to ensure that companies will continuously climb in the value chain of activities in line with what our economy needs, and can support in the long run.

Finally, I also talked about incentives to promote productivity improvements within our manufacturing companies. I hope that the Minister will consider schemes, not just tax incentives, that directly promote productivity improvements and in this way, we can continue to keep Singapore as a manufacturing hub for a long time to come.

Mr Ahmad Mohd Magad (Pasir Ris): Sir, can I take all my three cuts?

The Chairman: Yes.

Mr Ahmad Mohd Magad: First, on widening SME criteria. It is an acknowledged fact that SMEs are critical pillars of the Singapore economy. Nine out of 10 establishments in Singapore today are SMEs. They employ half of our workforce and generate one-third of our total value added.

It is heartening to note that the Senior Minister of State for Trade and Industry, Mr Peter Chen's reiteration of the Government's commitment to SME 21, during the launch of the SME March earlier this week. However, an important factor, which I feel was not adequately addressed in the SME 21 blueprint launched in January last year, is the widening of the SME criteria. SMEs, under the existing criteria, are defined as companies with at least 30% local equity, have less than $15 million in productive asset investment for manufacturing companies and, additionally, have a staff strength of not more than 200, if they are in commerce or in the service sector.

These criteria, I believe, have been in force since 1988 under the 1988 SME Master Plan, and therefore may no longer be relevant in the context of our current transition into a knowledge-based economy. The business landscape has changed quite dramatically since 1998 and now includes a wider spectrum of SMEs, such as dot-coms and biotechnology companies which are knowledge and skill intensive.

Traditional brick and mortar companies are also restructuring and incorporating new economy features, such as e-commerce into their operations. Such companies may slightly fall outside the current eligibility criteria for assistance, but yet they are in need of help during this period of transition. Also, as a consequence of the Government's policy to attract technology intensive and knowledge companies into Singapore, more small foreign SMEs are coming to Singapore to set up operations here. Such companies also deserve assistance, but are denied such because of the present criteria. As such, I would like to ask the Minister to consider redefining and broadening the definition of SMEs to accommodate the changes over the last decade or so and, particularly, take into account SMEs' needs in the knowledge-based economy.

The new definition should also include factors such as sales volume, paid up capital, ownership and other desirable factors, as done in other developed countries. This will enable a broader range of SMEs, including small foreign-owned ones, to take advantage of Government assistance schemes to help propel the growth of SMEs operating in Singapore.

My next cut is research on SMEs. While I applaud the Government's rigorous and sincere effort to nurture and strengthen the SME sector with massive plans and programmes, as outlined in the SME 21 document, I am concerned that there are very few formal studies being done about our SMEs. I must declare that I have a vested interest here in that I am personally doing research on SMEs. In my endeavour to look up past studies done on our SMEs, I have found very little information, particularly academic material, available about them. 1.30 pm

In view of the increasing importance attached to our SMEs, I would like to urge the Minister to consider the setting up of a formal division within MTI, or through PSB, to study our SMEs. I suggest that key issues afflicting them, such as their changing needs in our transitory state of evolving into a knowledge-based economy, challenges and difficulties facing them, effectiveness of Government assistance programmes rendered to SMEs and their performance should be studied.

The studies should be broken down into key SME sectors, so as to understand the different needs of and impact on our SMEs in a constantly changing business environment.

Similarly, the relevant faculties of our universities and other institutes of higher learning should also be encouraged to undertake in-depth academic research on various issues concerning Singapore SMEs, while drawing references and comparisons to SMEs from other NIEs and developed countries.

Each year the Government sets aside hundreds of millions of dollars to help our SMEs. It is imperative that we understand the extent of how much of these funds have benefited our SMEs and also their corresponding contribution to the overall economy.

Data from such studies will also enable the Ministry to formulate more meaningful policies, reformulate Government assistance programmes and schemes so that they remain relevant to SMEs' needs and, more importantly, that such schemes are effective in propelling them to greater heights of achievement.

Sir, on my cut on human resource development expertise in SMEs. It is a fact that in a KBE, human capital to any organisation becomes the key resource as it holds the knowledge and skills required, not only for growth but also in many cases for organisational survival. Management guru Peter Drucker predicted that in many developed societies, knowledge workers would be the largest single population and workforce group. Organisations in developed nations have no choice but to manage workers effectively to harness their full potential, retain them or risk becoming obsolete.

The knowledge base and skills complexity requirements of our SMEs are increasing by the day to maintain their relevance in an increasingly sophisticated business environment. However, I am concerned, Sir, that our SMEs, especially the smaller ones, generally lack human resource development and human resource management expertise to manage and properly motivate their workforce. As a result, high turnover of staffing and absence of structured HRD and HRM programmes translates into loss of valuable talent and expertise when their trained personnel leave or lower productivity due to low staff morale.

Smaller companies also lack the ability to attract high quality staff due to their limited resources and also absence of human resource expertise.

Although I am well aware that the Government has already a wide range of assistance schemes available to help SMEs, I would like to propose that either a new special assistance scheme be devised to specifically assist SMEs to beef up their HRD and HRM capabilities or a current scheme, such as the PSB's People Developer Scheme, be expanded to incorporate a structured approach to linking HRD and HRM to business objectives.

The Chairman: Can I just remind hon. Members that we are falling behind schedule on this amendment.

Mr Lew Syn Pau (Kreta Ayer-Tanglin): Sir, before I begin, I would like to say that I am already aware that the Government is providing a lot of assistance schemes and programmes to help the SMEs, through the PSB, EDB and many other Government agencies. But they are given more in the form of technical assistance schemes such as training, consultancy and so on, to help the companies modernise their management, adopt technology and help them to become more productive and efficient.

I believe that we have come to a stage today where the SMEs need more than just these. And I am talking about support today by the Government in the form of equity to help them to capitalise better and to grow more aggressively so that they can go into the region. I know that the Government does this already through Temasek Holdings, NSTB, EDBI, and so on. But these are more investments in large companies, large projects, and when they have already succeeded, they start looking at you and putting money into you. At the very start-up stage, we have got Vertex and some start-up funds, venture capital funds, to look at start-up phases. But SMEs are somewhere in-between where they seem to lack financial support from the Government.

So this is a gap which I hope the Government would address and try to close. I am not talking about big stakes, I am talking about token stakes of 5% to 10%, and they should leave the management of these companies to the founding entrepreneurs and to professionals employed, so that they will not become a GLC. When they go into the region, they should also not be perceived as a GLC. But, I think when the market knows that there is financial support from the Government in the form of a shareholder, this would help them when they regionalise.

If you take a look at the Enterprise 50 companies, Sir, a lot of them have gotten to where they are today without financial support from the Government, and it has taken them a long time, many years. Some of them have been in operation for more than 10 years. If they were to become big in the region without financial support from the Government, imagine how long more it will take for them to become a regional company and even a world-class company. I do not think we have this kind of time to wait. So I am suggesting that perhaps the Government should lend them a hand so that they can actually become a world-class company a lot quicker.

Mr Zulkifli Bin Baharudin (Nominated Member): Sir, I rise to ask the Minister to do more to help SMEs to improve their R&D activities. Companies must innovate in order to thrive. R&D is not only a luxury of Government, huge corporations or large MNCs, but a necessary survival tool for most companies. In the face of increasing competition brought about by a more open economy, R&D is a vital competitive edge, one that determines whether a company wins or loses a contract, between making or breaking the company.

In the last couple of days I was involved in a major tender, one where the incumbent is a local SME, but it was unable to retain the business because it was unable to help the client grow the business in the region and has a lack of business process. This really typifies the kind of challenges that SMEs face as they try to grow their business in the region. R&D is crucial to creating, innovating productivity and process improvement which are prerequisites for SMEs in preparing for the challenges ahead, ie, (1) facing an unfamiliar country and market condition; (2) adapting its products and services to consumers of different backgrounds, tastes and preferences; (3) confronting a very complex business practice overseas that is more likely to be very protective of the domestic market and interests, and more often than not we are seen as very suspicious aliens.

Yet, despite all these, SMEs are spending too little time and perhaps effort on R&D. According to the National Survey of R&D 1999, although some SMEs spend an average of 3.5% of their total expenditure on R&D, compared to, say, 2.7% in large corporations and 1.2% in MNCs, it does not seem to bring about the desired result, if you consider the number of patents being awarded arising from these R&Ds compared to research conducted by higher institutions, Government and public research institutions.

If one looks at the criteria for applying these grants for R&D, it is clear that it is targetted to assist companies that will conduct research to create and discover new knowledge that will perhaps revolutionise the industry. However, the fact is that R&D in SMEs is not about these things that would revolutionise the industry. It is a lot more basic. It is about process improvement, finding and making that little improvement and differences that would allow the company to go one step forward and for many, to survive another day, to fight another challenge and to win the next contract. It is not likely to emerge a new patent, which is one of the three criteria in allocating R&D funds. Therefore, R&D funds should be made more easily available to SMEs to conduct basic research which, I believe, in any case forms a small but an important part of a larger research network that would create a healthy R&D environment of knowledge creation.

I have a number of suggestions for the Minister:

(1) To make these funds more accessible for such basic research, because the aim is to encourage research activities within the company and hopefully to spur bigger attempts in the future;

(2) We should be realistic about the goals. Not all will succeed, except the fact that the ideal and necessary pre-conditions for research may not be there in many SMEs which are usually under-staffed and may not have the specialist talents one would find in MNCs;

(3) Expertise from local tertiary institutions, especially from the polytechnics, are a potential source of research expertise. Make them available to these enterprises. Allow and encourage them to take up secondary appointments in SMEs;

(4) Government research institutions should allocate part of their research for the specific benefit of SMEs, especially on the softer aspect of research, like marketing intelligence and development, helping companies to enter new markets, cutting costs and developing right marketing strategies which are certainly more urgent and important to these SMEs than hard research.

I therefore encourage that the Minister review some of these criteria in allocating R&D grants for SMEs.

Mr Inderjit Singh: Sir, we have taken the right approach by focusing on life sciences as the long term driver of our economic growth. If we do not start now, Singapore risks becoming the receiver of technology instead of an innovator. This was the pattern of our economic development during the last industrial revolution in the last 30 years where our success as a developing economy was a result of Singapore getting the lower value chain of activities of the electronics industry while the innovation of technologies occurred in USA, Europe and Japan. In the last 10 years we have changed that trend but in the beginning, that was how our economic development happened. This time we must take a lead or at least be among the leaders if we want real economic prosperity as a result of a successful life sciences industry. I have the following three questions for the Minister:

(1) What is the target in terms of contribution to GDP by the life sciences industry in the next 10 to 20 years?

(2) Has the current effort been too Government driven? Do we want to go the route of GLCs again for the life sciences industry? Can we invite and incentivise the private sector to play a leading role in this case?

(3) Can the Government set aside a high-risk fund, managed by the private sector to stimulate the industry? This would be helpful for two reasons. First, we need many to try, of which many will also fail, but we will need the critical mass to be involved in order to develop just a few good companies capable of competing in a global economy. Second, when we started the IT revolution a few years ago, funds were difficult to come by. A number of our budding entrepreneurs faced tremendous difficulties in the early stages and some even left for the Silicon Valley or other parts of the world. It was only in the last two years or so when funds availability improved. This time round we will need to repeat the same boom we saw for the IT-type companies some years ago, before the life sciences industry. So funds will be very critical in trying to stimulate the growth of such industries in Singapore.

Mrs Lim Hwee Hua: Sir, it was recently reported that the Changi Airport hotel site had no takers. Presumably, the economics did not support that particular investment. Is this merely a function of the cyclical downturn or is it a reflection of the underlying difficulty with deriving an acceptable return on investments in hotels in Singapore? Taken together with the bumper 10.5% growth to a record 7.7 million tourist arrivals in year 2000, this must be slightly puzzling.

In this regard, I would like to ask the Minister to revisit the value-added potential of the hospitality business in Singapore, with a view to modifying the existing industry structure and Government support where necessary. 1.45 pm

Sir, in measuring the effectiveness of our efforts, the Singapore Tourism Board has inclined towards throughput measures, such as tourist arrivals, average length of stay, hotel occupancy rates. However, our preoccupation with clocking in arrivals must be accompanied by a focus on yields or, simply, profitability. For example, when we look at the spending per tourist-day or similar measures, the picture may be less pretty.

According to the Singapore Hotel Association, total operating costs averaged 78% of revenues, excluding fixed charges of typically another 10%. Thus, operating margins are razor thin at best, making investments generally difficult. Neither is there a meaningful capital gain to be realised as transactions of pure hotel assets are few and far between. I would therefore like to ask the Minister to describe what he would regard as value-drivers for the hotel industry and whether the existing industry structure, in terms of supply of rooms and mix of hotels, would require modification. I would also like to know what his considerations are when designing incentives for the hospitality industry. Specifically, how would the Strategic Thrust of the Tourism 21 plan relating to the enhancement of the existing operating environment via attractive tax and other incentives be fleshed out?

Mr Leong Horn Kee: Sir, Sentosa Island is one of the main attractions for tourists and a favourite recreational playground of Singaporeans. In land scarce Singapore, it is indeed a very valuable piece of real estate. One of the regular grouses of Sentosa is the hassle of getting there. When you get there, the difficulty is getting around due to the very inefficient monorail system. This problem will be solved when eventually there will be MRT links to the island.

To maximise the potential of Sentosa, I would like to suggest to the Minister to give further thought in improving the local transportation in Sentosa. Perhaps, an efficient network of LRT and a large fleet of small buses will enhance the speed and convenience for visitors to get around in Sentosa. Secondly, money spent on future new and bold attractions, eg, theme parks, fun rides, museums and theatres, will be money worth spending as tourists will be attracted to stay longer in Singapore.

Hence, I sincerely feel that if we could give bold and imaginative ideas and attractions to be developed in Sentosa, it will have a tremendous impact on the tourism income for Singapore.

I would like to take this opportunity to ask about the status of the Sentosa Cove project. Bringing residents to Sentosa is a very good move. It will add life there. Sentosa Cove will provide a very pleasant resort living environment. However, it was reported that this Sentosa Cove project will be deferred. What are the reasons? What are the problems causing the deferment? Also would the MRT links be provided to Sentosa Cove to enhance its attraction as a prime residential area in future?

The Minister for Trade and Industry (BG George Yong-Boon Yeo): Sir, first, allow me to thank Members of this House who have spoken on MTI's budget.

From MTI's perspective, this year's budget is a very good budget because it is pro-enterprise. The Singapore economy is completely open and highly dependent on external demand. We are like a ship sailing in the ocean, we are in control only of the ship. We have to take the ocean for what it is. Of course, if we have good radars and good weather forecasts, that is very good. But, otherwise, we adjust ourselves to external conditions. What is important is that we should stay competitive whatever the situation, keep costs down, upgrade our capabilities, facilitate restructuring, help those who are badly affected, stay united. By cutting taxes, and cutting them the most for SMEs, the budget strengthens us on the supply side, and avoids the idea that it should be subsidies that will keep industries moving forward, a point which Mr Inderjit Singh made.

Although investments into Southeast Asia slowed down during the financial crisis, EDB was able to keep up the flow of investments into Singapore in the last three years. Last year, manufacturing investment commitments exceeded a historical high of S$9 billion. It is this inflow of investments that keeps the entire economy going. When we discuss SMEs, it is important not to forget the main picture, which is the total investment flow into Singapore. If that is maintained, then the game is on. If that shrinks and shrivels, then the SME game itself is very much more difficult to play.

In this regard, we have not done badly. The investments that we have been able to attract of late are also of better quality. Take two recent examples. UMC of Taiwan, in a joint venture with Infineon of Germany, will build a US$3.6 billion 12-inch wafer fab plant in Singapore. That is our biggest investment by one company. And it will attract other industry players to come to Singapore and it will benefit our SMEs. Another project recently announced last month is the $1 billion investment by Toshiba and Matsushita to build a plant to manufacture Thin Film Transistor Liquid Crystal Displays. Eventually, these flat wide screen displays will replace the cathode ray tubes that we see in most television sets today. This is the first such plant outside Japan and it is a coup for Singapore.

Both these successes will create many new opportunities for SMEs. Credit must go to Mr Philip Yeo and the officers of EDB and JTC who worked tirelessly during the economic crisis to make sure that new investments continued to come in. Mr Yeo has since handed EDB over to Mr Teo Ming Kian to lead the development of the Biomedical Sciences at NSTB, which is another area of long-term importance to Singapore.

I would like to take this opportunity to place on record in this House MTI's deep appreciation to the leaders of NTUC and the labour movement for their support of the Government's pro-growth policies. Without the labour movement's support of the CPF cut during the Asian financial crisis, EDB could not have succeeded. I listened carefully to Mr Thomas when he reminded Government on Monday to restore the remaining 4% as quickly as possible. That is part of the fair bargain. Our collective resolve to reduce costs when necessary and maintain competitiveness sends a strong signal to global investors and give them confidence to invest big bucks in Singapore, and we need these big bucks to keep the economy humming. I thank Mr Hawazi for speaking in favour of our FTA negotiations on behalf of the trade unions.

Now, let me talk about SMEs in greater detail. As many MPs have pointed out, despite the strong growth last year, many SMEs, especially those in the retail sector, did not do well. But not all SMEs did badly. In particular, SMEs in the wholesale and services sector enjoyed growth comparable to the large firms. However, with slow economic growth expected this year, more SMEs would be affected. As MPs, we can already feel this slowdown on the ground. And several MPs, including Mr Leong Horn Kee, Mr Ahmad Magad, Mr Lew Syn Pau and Mr Zulkifli Baharudin have stressed the need to help SMEs cope with the changes, and many good ideas have been proposed in this House. Let me reiterate what Dr Richard Hu said, that the Government is fully committed to helping local enterprises meet the challenges of this economic slowdown and the challenges of the New Economy.

We have a wide array of assistance schemes and programmes and, no doubt, we will need more. But the point is any SME which wants to upgrade will receive assistance. Yes, there may be ignorance and we will try our best to reach out to them. But in the end, they must meet us half way. We cannot shield SMEs from competition, but we will help them to compete better. For those whose trades are no longer competitive or do not wish to carry on, we will help them to exit and to move on.

As Mr Lew Syn Pau and Mr Inderjit Singh pointed out, among our SMEs, there are a few with the potential to make it big in the world. With ingenuity, courage and good luck, they too can become like Creative Technology. And the Government will support them under our PLC scheme and PSME scheme. To answer Mr Inderjit Singh's point, we have fallen short on our PLC scheme target, but that is to be expected because of the economic crisis. The point is, yes, we have this wish to create Creatives and Nokias. But it is not easy if you look at other small countries like New Zealand and Denmark. They have not been all that successful. Yes, from time to time, there will be a huge success which should bring us all pride, and such successes should serve as an inspiration for all of us. Government cannot make these bets. The global market will have to do it. But what Government can do is to provide a nurturing environment, improve the odds, but let the market settle who are the winners and who are the losers.

And we are seeing a new breed of entrepreneurs and companies. Some are led by second-generation family owners, others are professionals who have less secure jobs in MNCs. And more than 80 such companies are listed on the local Stock Exchange.

Our GLCs should be helpful, but I do not think our GLCs should play a big brother role. In fact, the criticism against them is that they have too dominant a role which is in fact not true. As I mentioned in this House, their share of GDP is only 12.9%, counting all companies in which the Government has 20 or more percent controlling interest. And many local companies have received support from PSB and EDB. Like our barbecued pork retailer, Bee Cheng Hiang, which has done quite well by franchising its outlets overseas and now has 28 outlets from Manila to Mauritius. Or Informatics Holdings, an IT training school, which now operates over 300 schools in 30 countries in Asia, Europe, Middle East and Africa. That is not bad. Or Biosensors International, which has received grants and support from our research institutions, which invented the S-Stent, a device used for coronary diseases. Because it is more flexible, it is more suitable for Asian sizes, and it hopes to become the first high-tech Asian medical device manufacturer.

And as our companies grow, TDB will help them globalise through trade investment. With e-commerce and market liberalisation, the opportunities for globalisation are much greater. We will rejig our incentives to see what we can do to help them, and feedback from Members in this House is very useful to us.

Our assistance schemes are broadbased. Last year, the Government committed $1.2 billion to assist SMEs, up 50% from the previous year. A total of 108,000 applications were approved, as compared to 88,000 in the previous year. Mr Inderjit Singh asked if we have too many schemes because there are 60-plus, mentioned by Dr Richard Hu, causing confusion. We have been rationalising and we will continue to do so. But because SMEs cover such a wide area, 100,000 in Singapore, so many different sectors, we have got to customise our schemes. It is not possible to have a few sizes-fit-all, because then there will be no good fit for most cases.

Mr Ahmad Magad suggested that we tailor-make some assistance schemes for human resource development. This is indeed an important area of emphasis. SMEs can make use of LETAS for this purpose which defrays up to 50% of the fees paid to consultants who help them. But we will look at how we can widen the people developer scheme to take into account the points made by Mr Ahmad Magad.

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Mr Zulkifli suggested encouraging SMEs to do more R&D, and for PSB to widen the criteria so that more of them can qualify for such grants. It is not easy, because, for SMEs, R&D is not too different from normal operations. And we do not want the grants given by PSB to lead to moral hazards. But we will look at Mr Zulkifli's proposals and see how we can accommodate the genuine cases.

Mr Lew Syn Pau asked whether the Government can provide more equity support to SMEs, and Mr Inderjit Singh asked whether the TIF fund can be relaxed to include low-tech companies. It is not easy. For high-tech, yes, we can define clear criteria, but, for low-tech, who is to be helped? And it is politically invidious for us to help some, and not the others. So, what we have done is, we have created the Promising Local Enterprises Scheme and the Promising SME schemes, with definite criteria, and, if you meet these criteria, then you are given particular assistance. I think that is what we can do. If we need to widen the criteria, we will do so. But if we have too many such case-by-case assistance packages, I think it will open us to a lot of criticisms and also to possible abuse.

To open up more opportunities for local SMEs overseas, we will try to make Singapore an international hub for SMEs. SMEs in other countries are keen to hub in Singapore in order to use Singapore as a base to operate in the wider region, and we have good information sources here. So, to try and achieve this, PSB and JTC are cooperating to develop an International SME Business Hub in Jurong East by the end of this year. It will house both local and foreign SMEs, and also overseas SME agencies. The Singapore Confederation of Industries (SCI) will be the anchor tenant, and we hope that, by providing affordable office spaces, more foreign SMEs and start-ups will set up shop here, and this will help our own local SMEs to regionalise.

To promote sector-level restructuring, PSB will continue to incentivise the formation of franchises, economic groupings and shared services. This is in line with Mr Leong Horn Kee's suggestion to help group SMEs together.

We agree with Mr Leong Horn Kee and Mr Inderjit Singh that the retail sector requires particular attention. There are a number of structural problems: an excess supply of retail space, low productivity and poor service levels. And given the changing shopping patterns of Singaporeans and strong competition from supermarkets, departmental stores, and Johor Bahru, our SMEs are going through a difficult time and they would have to readjust themselves and reposition themselves, given the fact of these changes. We cannot just stay put.

Because of this, PSB has got industry players to get together, and the result is the Retail 21 plan announced by Mr Lim Boon Heng, Chairman of PSB, yesterday. Many good recommendations have been made under the rubric of Retail 21. The Government supports Retail 21, and a $16 million Retail

21 Fund has been announced. We will follow up and address many of the specific points which several MPs have raised in this House today. In addition, because many of our shops are in the HDB estates, we need a special package to help those who are in the trade, either to re-optimise the spaces they have, to upgrade their productivity, and to help those who wish to exit, to do so, more easily. Mr Mah Bow Tan, Minister for National Development, will announce the details of the package for HDB shops during his Ministry's budget.

Internally within MTI, we have set up a Task Force to review our current efforts and programmes on the development of local enterprises. We are relooking the functions and responsibilities of JTC, NSTB, TDB and PSB, in this regard. We will restructure PSB to give more focus to local entrepreneurship. Over the years, PSB has taken on more and more responsibilities and we intend to, as Mr Inderjit Singh recommended, privatise and corporatise some of these responsibilities. And we will do so not only for PSB, but also for JTC and NSTB as well. We want the statutory boards to be trim and light, with clear missions.

PSB will devote more attention to the monitoring of SMEs, as suggested by Mr Ahmad Magad. It will do surveys and research on SMEs in greater detail, if necessary, with the help of the universities. I welcome Mr Ahmad Magad's suggestion that the criteria for SMEs be widened, to take into account new realities. And we do revise our criteria from time to time. For example, the criterion for fixed assets was raised from $8 million to $15 million in 1995 to qualify more SMEs for Government assistance. And, during the Asian crisis, the criteria for SMEs were adjusted further so that larger companies could make use of the facilities.

Let me now move on to the topic of science and technology. Last year, we announced a $7 billion Science and Technology 2005 Plan for the next five years, much of which will fund research. Mr Inderjit Singh has suggested that there should be greater private sector participation, that the Government should outsource public sector research to the private sector, and provide grants to support joint industry research projects. This is indeed our intent. A key thrust of the S&T plan is to support industry R&D. And for every dollar spent by the Government on R&D, we attracted $3 from industry.

Going forward, our target is for private sector research to account for two-thirds of Singapore's gross expenditure on R&D by the year 2005. This is an important market discipline, that we are putting public monies in R&D to good use.

We are pushing on with life sciences as a long-term undertaking. But, for the life sciences, we cannot expect quick returns. This is something for the longer-term. Our goal is to attract world-class companies, and become a regional hub for clinical trials and drug development, and we need to establish, layer by layer, a good infrastructure for the biomedical sciences. It involves many Ministries and many institutions. But to answer Mr Inderjit Singh's question, we hope to double the output of the biomedical sciences industry to $12 billion in five years.

The key to all this, to a lot of what we do, is talent. We can succeed in the life sciences if we can get global talent to help us. Last year, I mentioned the assistance of Dr Sydney Brenner of Cambridge, Dr Alice Huang and Dr David Baltimore of Caltech. Since then, we have got many more scientists, from Japan, Europe, America and Australia, to help us. And they are helping us pro bono. And they are helping us because they are convinced that we are dead serious, are eager students and are likely to make progress. So, that is a good signal. We have also been recruiting outstanding individuals who are prepared to leave prestigious international institutions to join us, like Professor Edison Liu from the National Cancer Institute of the US. Born in Hong Kong, he has become one of the top scientists in America and, when he decided to come to Singapore to head the Singapore Genomic Programme, many of his colleagues were shocked. Now he is helping us to recruit talent.

Or, like Dr Gunaretnam Rajagopal from Cavendish Laboratory of Cambridge, Tamil, Malaysian origin, a physicist, expert in biophysics and mathematical modelling, he has agreed to help us set up a Bioinformatics Institute and, as you know, for a lot of the follow up on the genomic work and on the work of proteins, we need computational capabilities and high mathematics, and this Institute is an essential part of our total effort to build up the infrastructure for the biomedical sciences in Singapore.

Recently, the EDB International Advisory Council, under Dr Tony Tan's chairmanship, met in Singapore. It reviewed all that we have done, took stock, and asked us to look at how we should move forward. They felt very strongly, and I think they agree with MPs here, that we should do more to encourage innovation and risk-taking, in Singapore.

Their advice was published in the newspapers. Under Technopreneurship 21, we have reviewed many of our laws and regulations, like our bankruptcy provisions, to make it easier for people to fail and try again, a point Mr Leong Horn Kee raised.

Mr Inderjit Singh would like to see venture capitalists channel more of their funds into Singapore investments. He suggested that we increase the 30% quota for local investments so that more monies would be available to Singapore companies, especially to those which are in trouble. We are reluctant to do this because it is easy to waste money, or to burn money, in this area. Yes, companies which show promise and are starved of cash, we should help, and we will help them. But we cannot just loosen the spigot like that, because we have a fiduciary responsibility to Singaporeans for the public funds which we are in charge of. And we still do not have the mass of start-ups and ideas in Singapore to raise the percentage further. But, having said that, despite the crash in high-tech stocks, we should persist in our efforts to build Singapore as a major centre for the global VC industry. In fact, we should see these crashes as an opportunity for us to move even further ahead.

During the Budget debate last year, I remember Prof. Toh See Kiat and other MPs cautioning us on the danger of the dot.com mania becoming a dot.con disaster, and NASDAQ started crashing shortly after in April. Mr Inderjit Singh knows this sector well, and I agree with his assessment that we should see this as a healthy correction.

On extending a life-line to cash-strapped start-ups which are worth saving, I have asked EDB to consider co-investing part of the existing Venture Investment Support for Start-ups Fund for this purpose. Yes, we should speed up the process, but we cannot avoid due diligence. Let me just emphasise that this cannot be a bail-out for non-viable businesses.

Technopreneurship development is a long-term undertaking. The Government is committed to building an enterprise ecosystem and will push on with our T21 efforts. And, if we need a greater supply of money to encourage global VC companies to have connections here and to operate here, then we should be prepared to do so. In this regard, we are studying whether we need a TIF II to supplement and build on the momentum of TIF I.

An important part of the enterprise ecosystem is the proposed Buona Vista Science Hub being developed by JTC. Let me assure Mr Inderjit Singh that this will not become another ordinary industrial estate or business park. We will use the Buona Vista Science Hub to experiment with new ideas, including radical changes to our regulatory environment. It would not be easy. We will need many ministries and economic agencies to work together. To facilitate the coordination, I have asked Minister Lim Swee Say to chair a multi-ministry steering committee to get the Buona Vista Science Hub off the ground quickly. It cannot be done by the private sector, because our existing rules and regulations, which were perfected for the old economy, will kill many of our efforts in the new economy, if we do not first change them. So, this has got to be a publicly-driven initiative. Later on, yes. As we are confident with what we have done, then we can divest the investments to the private sector.

Another key recommendation of the EDB Advisory Council was that Singapore should expand its regionalisation efforts and develop stronger global links for market technology and talent. The Council recommended that Singapore should exploit the potential of a regional market of 2.8 billion people by extending our region to a 7-hour flight radius within which there will be rapidly-growing middle classes numbering in the hundreds of millions in the future. I have circulated a map to Members showing what this extended region would look like. Basically, what this means is, increasingly, in all our policies, we should see our geographical hinterland to include China, India, Japan and Australia.

This important recommendation by the international advisers fits in with our various efforts to negotiate FTAs and strengthen regional groupings. But we can only regionalise if our own base in ASEAN is solid. As Mr Leong Horn Kee and Mr Simon Tay pointed out, Singapore's economic well-being must be rooted in the region. And we follow events in Indonesia and Malaysia closely because they affect us directly. With Indonesia, despite different administrations, on the whole, we enjoy very good relations. After the economic crisis, Prime Minister Goh Chok Tong extended to the Indonesians an economic assistance package and we recently concluded two gas deals, each worth US$8 billion over a 20-year period. Within 5 to 10 years, all households in Singapore will be using Indonesian gas for cooking and we will soon be having gas coming out of our ears. 2.15 pm

For Malaysia, our relations with them at the economic level are very excellent. Last Saturday, when I was up there for a conference, the Johor MB and I had a very good discussion, and Malaysia and Singapore are really one economic space for global manufacturing.

For Indonesia, we must take into account the fact that Jakarta will give greater autonomy to the provinces and regencies in the coming years and we must begin to widen our links to the various provinces around us. The Growth Triangle Agreement already allows for this. It allows the provinces of Indonesia and the states of Malaysia which are included within this Growth Triangle to have direct links with Ministries in Singapore and it is our intention to follow up on these provisions in the Growth Triangle Agreement.

Let me now move on to the wider region. China will loom larger in the coming years and Northeast Asia is fast leaving Southeast Asia behind. I have circulated a recent article by the Asian Wall Street Journal highlighting in very stark terms how much Northeast Asia is leaving Southeast Asia behind and these are long-term trends. This is the reason why we are working very hard to move ASEAN along, to integrate our economies further, to move into services, to remove non-tariff barriers to trade, so that we can be an alternative manufacturing base to China. China is a free trade area of 1.3 billion people. We have 500 million people, still divided and compartmentalised into 10 national markets. So, this remains a very important objective of Singapore in ASEAN. We are, of course, without saying, one of the greatest supporters of the WTO in the world and let there be no mistaking on support of the WTO, even though we are moving on FTAs. As Mr Simon Tay, Mr Leong Horn Kee and Mr Hawazi pointed out, the regional FTA initiatives, far from weakening the WTO, are already creating very interesting competitive dynamics in the region, in the world, for the launch of a new round. It is good because what we are proposing is not only WTO-consistent but also WTO plus.

Yes, there have been some murmurs from the region, but I believe this is because of a lack of understanding and because of discomfort that the status quo would inevitably change. As Mr Simon Tay said, there is only the front door. There is no back door to AFTA because the Rules of Origin are very clear on this issue - 40% within ASEAN, you are in. If you are not in, you are out, whether or not you have an FTA with Singapore. This is in writing and all the Ministers understand this. But what is interesting is that many of our neighbours are thinking along the same lines as us. The former Deputy Prime Minister, Supachai from Thailand, supported Singapore fully in our efforts and the new Deputy Prime Minister has indicated his support for Thailand having FTAs with Australia and New Zealand. Even Malaysia, I have heard from Japanese officials that they have been approached for an FTA between the two countries. I believe by what we have done, the dynamics have altered for the better and it is clearly our objective to keep ASEAN strong and vital and use ASEAN as our own base to move into the extended region.

On the Singapore Business Federation, Mr Leong Horn Kee and Mrs Lim Hwee Hua asked about its progress. I have earlier announced that the Government will enact legislation requiring companies and businesses with a paid-up capital of $0.5 million or more to be members of the SBF. These companies can either join directly or via a chamber or an association. A Protem Committee is being formed to establish and run the SBF until the first council is elected. Amongst other things, it will propose a constitution for the SBF and help MTI to draft legislation and we will expose the draft to the business community so that all views are incorporated. The Committee will be chaired by Mr Stephen Lee, Chairman of SNEF, and would include representatives from local and foreign chambers. I will release the list of members later this afternoon.

We will need a Board of Trustees to own the properties of the SBF and ensure that the key appointments of the SBF council are not filled by unfit candidates. The Protem Committee will ensure that the SBF represents the collective interest of businesses in Singapore, not just the big boys, but also the small players. And all the three ethnic chambers must be included. As foreign companies based in Singapore contribute significantly to our economy, they should also be adequately represented. I hope that the SBF can be established by 1st September, assuming that Parliament agrees with the legislation.

On tourism promotion, I fully agree with Mrs Lim Hwee Hua that value-added measures are a better gauge of our tourism performance. I will just give an example to support Mrs Lim's point. Although visitor arrivals have been increasing annually by 4%, from 1989 to 1999, visitor expenditure, narrowly defined, remained flat during this period because the average length of stay in Singapore has gone down. We have become so efficient, and also per diem expenditure has come down. But if we look at overall tourism receipts and spin-offs to the larger economy, then the benefits are greater. But I agree with Mrs Lim Hwee Hua that we should look at how we collect the indicators and present them to members of the public. As to her remarks about specific proposals under Tourism 21, this will be released shortly to the public.

On GLCs, Mr Leong Horn Kee talked about the dangers of GLC dominance in Singapore. This is a subject which I have given a response to, which I should not repeat here. Is there a danger that GLCs are absorbing too many of our bright "A" level students through scholarships and bonds? I am not sure, because parents now have more means and our best and brightest now have more alternatives open to them. If they join the Government, the Armed Forces, the GLCs, non-GLCs or if they decide to work overseas, it is really their decision. Even for bonds, there is no compulsion. There is a market operating for bonds. And it is like financial instruments. In the end, you have different packages, students decide which one they are interested in and they make their own decisions and all agencies, including Government agencies, will have to compete for their fair share of talent. But I do not see, in the next phase of our economic development, the public sector cornering as large a proportion of the best and brightest, which we had to do in the last lap when we had to build up the basic institutions of state. On GLCs, I understand that a Parliamentary Question has been filed and next week, the Minister responsible will give a full reply on how we intend to divest our GLCs.

On Sentosa, Mr Leong Horn Kee asked about its development. You have read in the papers that Mr Philip Ng has taken over from Mr Alan Choe as Chairman. Mr Alan Choe gave his life to Sentosa. He was there when it was still Pulau Blakang Mati. He was there at the conception. He was the one who heard from Winsemius that we should not turn it into a fuel farm but conserve it as a tourism resort. He created the corporation, he chaired it. He knows the island like the back of his hand. If today Sentosa has such an international reputation, it is because of Mr Alan Choe. I would like today to record MTI's deep appreciation to him for his tremendous contribution. I thank him also for agreeing to stay on to remain as Chairman of the exciting Sentosa Cove development. We are ready to launch but because the property market has suffered significantly, we decided to hold back for six months to reassess the situation before deciding whether or not we should launch. For those of you who play golf on Sentosa island, you could have seen it from a vintage point and seen how beautiful the site is.

As to the People Mover System on Sentosa, we are reviewing it because we have been reviewing the long-term plans in Sentosa. We have got to be mindful of the cost. Whether or not such a mover system should be extended to Sentosa Cove depends on whether the economics justify it and whether additional investment is more than made up for by the increase in property values. These are issues being reviewed and it is premature for me to give you details right now.

Dr Teo Ho Pin (Sembawang): Sir, can I take the two cuts together?

The Chairman: Yes.

Dr Teo Ho Pin: The need for a Fair Trading Act in Singapore in today's context cannot be understated as it has been pursued by at least two of my predecessors in CASE.

The need to consider such an Act began with the need to address the problems faced particularly by HDB dwellers in their quest to rid themselves of the persistent vacuum cleaner salesman who would not leave their premises even at midnight until a deal was closed. The salesman would exert high pressure sales tactics, mislead the consumers on product functionalities, cajole the consumers and if all things fail, I understand that in the dead of the night, play the sympathy card of losing their job, having mouths to feed and so on. Regrettably, at the end of the day, consumers then in the 80s had no protection of the law as there was no cooling-off period and high-pressure sales were not easy to prove.

In any event, such was not actionable in court due to the subtle difference between misleading and deceptive conduct which the law would catch and that which it could not. For example, as long as an armchair was top leather and the bottom could be PVC, there was no remedy to the consumer who thought he was buying a full leather armchair or represented that that was leather.

This situation evolved to the more sophisticated time-share companies in the 90s, and which still persist today and where consumers are "losing" millions of dollars in high-pressure sales. For example, young couples are identified on the streets and then told of lucky draw winnings. A visit to the company's premises, however, is necessary to collect the prize. Both couples suitably enticed find that the trip to the time-share company can be the beginning of the most trying part of their marriage.

CASE has been told of couples being led from room to room once inside the time-share company's premises, bombarded by sales person after sales person. Even more horror stories of drinks being spiked, and other unconscionable conduct being practised by these companies. The problem is very real as bouncers are sent in some cases to collect dues, and after the deal is closed.

Some even engaged lawyers to chase an airtight deal where consumers had been made to sign away all their rights. CASE has seen contracts where the consumer signs every possible right away. CASE has seen women and men of all ages including professionals in a dilemma as to what to do. As the sums are large, CASE has to deal with the trauma and emotion, and even threats of suicide.

All the above illustrations show that, notwithstanding the laws we have in Singapore, there are still loopholes that we have to plug. More businesses have joined our call for a Fair Trading Act as such an Act will rid their respective industries of rogue traders who give them a bad name and also will mean that businesses can then compete on a level playing field and hence reduce business costs.

I hope that the Minister can consider implementing a Fair Trading Act to further enhance Singapore as a fair trading business hub and shopping hub.

Sir, I move on to my next cut on trustmark. In an open market like Singapore, where goods and services can flow into the country freely, we must protect both consumers and good traders. To achieve this, we need to instill trust and confidence among consumers and traders. Although a Fair Trading Act will provide the necessary legislative framework to attain a fair trading marketplace, consumer and trader education also plays an important part to ensure that fair trading business transactions take place.

To facilitate the development of Singapore into a global trusted business hub, CASE has embarked on two key initiatives, namely, CASETRUST, an accreditation scheme for good business practices, and Consumer and Trader Education - a long-term programme for educating consumers and traders to enhance consumer protection in Singapore.

As for trustmark, CASE has announced its CASETRUST award in December last year. It is preparing grounds to enable businesses to adopt good business practices and achieve business excellence. I hope that the Ministry can provide funding to spearhead this scheme to be a national and international trustmark for Singapore. Consumer education has always been a key thrust in enhancing consumer protection . To-date, CASE has launched a series of intensive education drives aimed at the grassroots, consumers and businesses. Such drives involve rotating around the constituencies with seminars, speeches at both macro as well as micro levels.

I hope the Ministry can consider setting up a consumer education fund where like-minded organisations like CASE can tap on this fund to provide education to consumers on a sustained basis. In countries like New Zealand and Australia, government support has enabled many organisations to provide useful consumer education materials, such as leaflets and information booklets, to consumers. Educating consumers will help to avoid and thereby reduce disputes, and will be good for businesses overall. 2.30 pm

Dr Lily Neo (Kreta Ayer-Tanglin): Sir, we should control and regulate suppliers through legislation to protect Singapore consumers better. As my parliamentary colleague, Dr Teo Ho Pin, has said much of what I wanted to speak on, I will only repeat his call and urge the Ministry of Trade and Industry to consider introducing a Fair Trading Act. I will only add that such a Fair Trading Act should contain provisions that make it an offence for suppliers to:

(1) make false or misleading representations in relation to the nature, characteristics, suitability or quantity of the products or services;

(2) engage in conduct that is unconscionable; some examples are where the supplier unduly influences, exerts pressure or uses unfair tactics on consumers;

(3) engage in misleading and deceptive conduct in relation to the goods or services; and

(4) use bait advertising to lure customers, eg, a supplier cannot advertise a service at a particular price with no expectation of honouring it.

Sir, I hope the Minister for Trade and Industry would consider introducing such an Act.

Mr Leong Horn Kee: Sir, on electricity, there have been several reports and statements made by the Government about the intention to privatise the generation of electricity and allow more players into this sector. This move is supported and welcomed by the people, because it is hoped that with more private sector players, the service delivery of electricity will improve, and electricity rates will be kept low.

The recent sharp increase in electricity charges has created much concern to the common people and the business sector. This has added to living and business costs. Hence, Sir, I raise this cut so that I could ask the Minister what is the status with regard to attracting new operators into this sector. How soon or how much faster can the privatisation effort be pushed along?

In addition, I wish to ask whether the Government will allow private operators to buy electricity from neighbouring countries, like Malaysia, for sale to Singapore-based users. It may be possible that there are occasions for excess electricity generated by Malaysia which they are prepared to sell to us at competitive rates. Unlike water, electricity is a less emotive and critical utility. We should favourably consider sourcing electricity from Malaysia if they have excess to sell and we can use this source to supplement and cover for the peak electricity demand periods.

Mr Inderjit Singh: Sir, my issue on electricity is the power disruptions that we have faced in the past few years. In the year 2000 alone, my company experienced 10 disruptions of electricity. So the whole industrial estate down there was affected. This is too many, especially for the high-tech wafer fab, petro-chemical and semi-conductor industries. I therefore have the following issues:

First, there is a need for more accountability and penalties for the electricity distribution agency to compensate affected companies. In this case, PUB should be responsible to compensate companies affected by the power trips.

Secondly, in liberalising the electricity industry, what safeguards will be put in place to improve and not worsen the standards of electricity supply? How can we be sure that we will be able to avoid a similar disaster like the one that recently occurred in California? Our high-tech industries cannot afford such type of power disruptions. It will just create problems to our reputation for bringing in high-tech industries.

Mr Low Thia Khiang (Hougang): (In Mandarin): Sir, electricity is an indispensable basic need in modern life for all families. The increase in the tariff rates will exert great pressure on all families, especially the lower income group.

From 1999, tariff rates have increased from 11.7 cents per kilowatt hour to 19.87 cents per kilowatt hour, an increase of 70% in one year, putting the man-in-the-street in fear of more increases and feeling the pinch of the high cost of living. The Minister has explained that it is because of the increase in fuel oil prices, but this is unconvincing and the problems of fuel price increase and the mounting pressure on people's livelihood cannot be resolved.

Sir, I would like to ask how does an energy supplier work out the tariffs. How much is their profit? What sort of formula do they use? And what is the cost per kilowatt hour? Currently, we also use the heat from rubbish incineration to generate electricity, this is not affected by fuel price increases. I would like to ask the Minister whether any alternative means to generate electricity, such as solar energy, natural gas and nuclear energy have been considered. How would the Government ensure that after privatisation, electricity tariffs will not become a huge burden on the people?

Mr Chiam See Tong (Potong Pasir): Sir, my cut is on water. Without adequate water supplies, Singapore cannot survive. Water is the key to Singapore's survival. Therefore, the importance of sufficient water supply cannot be over emphasised. The bulk of our water supply is from another jurisdiction - Johor. Singapore has invested large sums of money to build the Linggui catchment area in Johor, which has sufficient water and a water processing plant, to give a constant supply of processed water to Singapore. From time to time, we hear of disturbing news from across the Causeway. Threats are made by political groups over there calling on their government to cut off water supply to Singapore.

Last year, the Johor government announced that they shall be requiring much of the water supplied to Singapore for their own use, and that they shall be building water processing plants themselves. All those news make Singaporeans very uneasy. The older generation Singaporeans can still remember that when the Japanese Imperial Army early in 1942 reached Johor Bahru, they cut off the water supply to Singapore, and quickened the surrender of Singapore to the Japanese Imperial Army on 15th February 1942.

There are two water treaties with Johor. One expires in about 2011 and the other sometime in 2062. Singaporeans know very little of the contents of these two agreements. Can the Minister give the salient points in respect of these two water agreements? Is it possible for the Malaysian Government, under these two agreements, to restrict or even stop the supply of water to Singapore? There seems to be a lot of uncertainties regarding the supply of water to Singapore from Malaysia. In the light of what is happening so far, including the threatening remarks made by Abdurrahman Wahid, the Indonesian President, after his recent visit to Kuala Lumpur, the Government has announced that the long-term solution to Singapore's water problem is to make use of recycled water, which also includes recycled sewage water. I would like to ask whether such recycled water is only for industrial use, and that only water obtained from the desalination plant is for human consumption.

Mr Simon S C Tay (Nominated Member): Sir, I made the cut on the same point as Mr Chiam's, to try to reduce our dependency on Malaysia for water. My tack, however, is quite different. I believe it should not be a trump card for Malaysia or any other country to hold over our heads. Moreover, in the future, studies suggest that Malaysia and indeed the whole region will be facing shortages of water of sufficient quantity and quality. As such, I would urge the Ministry to look more closely at desalination, recycling and efficiency. These should be our watchwords and should be on stream earlier. Possible measures should include water use audits, incentives for households and the design of facilities. Tapping rainwater should also be improved in Singapore.

With these improvements, we should develop more security in meeting our water needs. Consequently, I would urge the Ministry that we can and should be more realistic in our negotiations with Malaysia on this issue. The agreements last until 2062. We need not and cannot expect guarantees of water that extend well beyond the lifetimes of most Singaporeans. It may not be possible and may not be realistic, given the future contingencies for Malaysia's own needs.

The Senior Minister of State for Trade and Industry (Mr Peter Chen): Sir, let me deal first with the Fair Trading Act. I can understand Dr Teo Ho Pin's concern about consumer protection but, truly, the best advice anyone can give to the buyer is still the legal maxim caveat emptor or "let the buyer beware". We should do well to remember the meaning of the cliche "There's no free lunch." Ultimately, if a buyer is not careful or succumbs to a moment of greed, it is very difficult to save him from being cheated or overcharged. And therefore consumer education must continue to be the main pillar or our policy on consumer protection. In this particular area of consumer education, I want to place on record MTI's appreciation of the good work that has been done by CASE.

Moving forward, I would encourage CASE to take on an even more influential role. As the natural focal point for consumers to raise their concerns, CASE would be able to sift through all the complaints, and help deserving cases to seek redress through the Small Claims Tribunal and the courts. CASE could then, in fact, be the de facto fair trading office, but separate from Government, so that the work is not politicised. But it would allow CASE to perform many of the watchdog functions of safeguarding and protecting the consumers. These are two important points which Dr Teo and Dr Lily Neo are proposing.

I agree that CASE would need more teeth, and sharper teeth, in order to carry out its work. CASE, as well as several Members of the House, has for some time already, sought MTI's support for a Fair Trading Act. The purpose is to prohibit deceptive and unconscionable sales tactics like bait advertising, misrepresentation, as described by Dr Lily Neo, or hard selling, which seems not uncommon among time-share marketeers. However, we should always be mindful that consumer protection legislation that is too onerous would increase business costs for both retailers and consumers. And if CASE is agreeable, I would suggest that MTI and CASE jointly lead a task force to discuss ways to strengthen our consumer protection laws, including the possibility of enacting a Fair Trading Act and the means to empower CASE to carry out its role more effectively. Representatives of the task force can come from the Government, CASE and the private sector.

Dr Teo has also suggested setting up a new consumer education fund. In 1996, we actually started a funding mechanism where the Government contributed dollar-for-dollar donations made to the CASE Endowment Fund. And I would encourage CASE to seek greater contributions from the community, so as to ensure that CASE continues to remain relevant to the people it serves.

On electricity, Mr Leong Horn Kee has asked about the liberalisation of our energy market. This is progressing well. The energy sector is an important component of our economy. Within the broader framework of keeping our business costs competitive, we have to keep our energy market internationally competitive.

On 1st April, Singapore Power will divest its two generation companies - Power Senoko and Power Seraya - to Temasek Holdings and reposition itself as the owner of the transmission and distribution system, which is a natural monopoly. Singapore Power will be regulated and will not be allowed to participate in the competitive parts of the electricity business. Temasek, in turn, will divest all its three generation companies - Power Senoko, Power Seraya and Tuas Power - with no limit on foreign ownership. This will take place in the second half of the year, after the new electricity market begins operating. Work on the new electricity market is in progress and should be ready in the second half of this year. The Energy Market Authority of Singapore to be set up in April will take over the system and market operations of the electricity system from Singapore Power. It will be responsible for the security and reliability of the energy supply. 2.45 pm

We will allow consumers to buy electricity from competing retailers in stages, starting with the big customers. Initially, some 11,000 customers who take up 70% of our total electricity demand will be able to do this. By the year 2003, households will also be able to buy electricity from competing retailers. Since the announcement of the liberalisation last year, five new retailers have been licensed and are preparing to enter the market.

Mr Leong asked about the import of electricity from our neighbours. This is already allowed, but so far it has only been used for emergencies. However, for system security reasons, the import of electricity from overseas is limited to a maximum of 600 megawatts. We are prepared to allow more import under our new market structure, if these are economic. However, it must not affect our system security and reliability.

Mr Inderjit Singh commented on power dips and the need to ensure a reliable supply of electricity. I agree with him that this is an area where more improvements can still be done. Last year, there were a total of 34 dips, two fewer than in 1999. Recent dips have been due to recurrent faults in cable joints in two types of cables. PowerGrid will take all these faulty cables out of service by the end of the year.

We have also introduced several measures to control companies that cause power dips. Construction contractors face stiff penalties should they damage electrical cables. Licences for both the customers' electrical installations and their licensed electrical engineers will be suspended should they repeatedly cause voltage dips. Generation companies and the grid owner will also be fined if they cause dips. These series of measures emphasise that we will not tolerate acts that would undermine the reliability of our electricity supply.

Mr Low Thia Khiang referred to the high cost of electricity. Electricity tariffs are set to reflect the economic cost of power generation. Fuel oil makes up about half the cost of producing electricity. We are totally dependent on imported fuel to generate electricity. When world fuel oil prices increase, electricity prices have to follow. However, Singapore Power has tried to moderate the impact by spreading the tariff increase over a longer period. We cannot subsidise the consumption of electricity as this would lead to over-consumption and mask the real cost. The best way to assist low-income families is to provide some income support through rebates and the Utilities Save Scheme which the Government has just announced.

Mr Simon Tay and Mr Chiam spoke on the need to secure our water supply through a combination of sources. This is indeed the strategy that we are taking. We ensure that our water strategy is robust by diversifying our sources. First, we will continue to maximise local supply. Already 50% of our land is used for water catchment, and we have implemented stringent pollution control measures to protect these catchments. Secondly, we will try to expand our regional supply. We have a long-term agreement with Malaysia. Thirdly, we are also exploring the development of water resources in Bintan. We are also exploring development of water resources by harnessing technology to augment these supplies. We will build sea water desalination plants. We are putting in place infrastructure to recycle used water into ultra-clean water, which we have called NEWater, for supply to those industries which require large quantities of high-grade water, such as wafer fabrication plants. For new sources of water, we will encourage private sector's participation by leaving the choice of technology to the market and for the companies to supply water to PUB on commercial terms. Together, this three-pronged strategy will ensure that Singapore's water needs will be adequately and securely met in the 21st century.

Mr Low Thia Khiang: Sir, may I seek a clarification. The Senior Minister of State has not answered the two questions I raised. One, is whether the Government is considering using other sources for electricity generation, for instance, solar power or even nuclear power. The second question is: how does the Government ensure that the cost of electricity will not be a heavy burden to the people after the power supply company is privatised?

Mr Peter Chen: On the question of other sources of energy for the generation of electricity, it is not the Government's policy to use nuclear power, and solar power is not something that is commercially feasible on a large scale at the moment. There are other sources such as coal, which seems to be too pollutive. We do not have any hydroelectric power. So, at the moment, fossil fuel remains to be the only viable source as far as electricity is concerned.

With regard to what measures do we have to ensure that the cost of electricity will be kept low, it is hard to say as that depends on fuel cost. But we want to create an environment where there is competition, and in the new structure, which you will hear later, we want to ensure that there is contestability; in other words, on the supply side and even on the retailing side. At both ends of the whole supply chain, there will be competition where there will be several players. The only thing we could do would be to ensure that there is an environment of competition.

Mr Low Thia Khiang: Sir, with your permission, may I seek another clarification. Would the Senior Minister of State agree to release the formula in which Power Supply uses to calculate the tariffs of electricity? Because I think it is important that people understand how much is the cost of electricity generation and what is the benefit or the profit that is imputed into the tariff.

Mr Peter Chen: I think the cost of electricity generation has been explained here several times; something like half the cost is the fuel cost.

Mr Low Thia Khiang: What is the formula? What are the details?

Mr Peter Chen: If he will file a separate Question, that will be answered.

Mr Leong Horn Kee: Sir, with the benefit of not having Questions for Oral Answer session of one-and-a-half hours, we actually have the benefit of a full two-and-a-half hours to answer 29 cuts, which also provide time for the Members to speak fully on their questions and the Minister, as well as the Senior Minister of State, to give very comprehensive and detailed answers. On that note, I wish to withdraw my amendment.

Amendment, by leave, withdrawn.

The Chairman: Amendment No. (2), Mr Chng Hee Kok.

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

That the sum to be allocated for Head W of the Main Estimates be reduced by $10 in respect of Code WA 1500.

Sir, presently an owner of a JTC industrial property needs the approval of JTC to sell or transfer to another party such a property, both are of course business organisations. In granting the sale, JTC gives its approval on condition that the subject property must be reinstated to its original condition. I am aware of one such sale. At this juncture, I wish to declare my interest as an independent director of a company that has sold such a property.

Sir, the reinstatements will include such things as to repair damaged fencing and driveway along the common boundary, to paint the factory buildings, prune and cut overgrown vegetation and overhanging tree branches, to tidy up and clear up premises and remove debris from drains, and so on. I understand that even in HDB's case where the buyer and seller are both individuals, the rules on reinstatement are much simpler now. As long as the buyer is prepared to accept the property as it is, HDB usually waives the need to reinstate the property.

The sale of the property in question, which apparently was delayed by the reinstatement and approval process, took some five months. In this present day of business where business is conducted at Internet speed, I think we all can agree that five months to be allowed to transfer a property seems like forever.

Mr Sin Boon Ann (Tampines): Sir, I shall be brief, taking into account the time that we have left.

Sir, I know that we had discussed in this House at a sitting in January this year the issue of electricity charges. At that time my colleague, Mr Leong Horn Kee, in response to the reply from the Minister, raised a supplementary question which touched on the issue of price volatility and how we could overcome it. I believe the issue of fluctuation in prices of electricity charges has been a cause of concern to consumers. In his reply, the Minister agreed that we do not want day-to-day fluctuation in prices of electricity charges as this may cause disturbance in the market. The Minister had also agreed that, in theory, Singapore Power can go into the futures market to hedge against price fluctuation. Sir, I think this is an idea worth pursuing as the futures market is a mechanism aims precisely at preventing extremities in price fluctuation. In a futures market, forward contracts can be fixed at a certain price and the contract will be honoured irrespective of the changes in the oil prices. Consumers, on the other hand, must be educated in understanding that they cannot expect Singapore Power to supply power at low tariffs all the time. What they can expect, however, is the stability of electricity prices. Of course, the prices of oil may come down after it has been hedged, such is the way of the market, if consumers want stability in electricity charges.

I would therefore urge the Minister to kindly consider looking seriously at oil price hedging as a means of stabilising the price of electricity.

The Senior Parliamentary Secretary to the Minister for Trade and Industry (Mr Tang Guan Seng): Sir, Mr Chng Hee Kok raised the issue of reinstatement of industrial property to the original condition upon its sale. Reinstatement of industrial property to the original condition is not a requirement for the transfer of JTC's industrial properties. However, where there are breaches to these terms, for example, when unauthorised structures are erected in the premises, the buyer or seller must regularise the breach prior to the completion of transfer. Otherwise, JTC will withhold consent. JTC only requires companies to reinstate their premises upon returning them to JTC. This applies to both tenancies and leases.

Mr Chng also mentioned that HDB's policy is more liberalised. From what I understand, HDB's policy on reinstatement of industrial property is similar to JTC's. It means that if there is a breach of lease terms, they have to reinstate the property in its original condition. 3.00 pm

Mr Sin Boon Ann commented about the utilities charges. Due to rising fuel oil prices, we had to raise our electricity tariffs three times last year. Fortunately, fuel oil price has since eased. Last month, tariffs for non-domestic consumers were lowered. However, we still had to raise the tariffs for residential and small non-domestic consumers because Power Supply has not fully recovered its under-collected revenue from this group of customers. If fuel oil price does not increase beyond its current level, we can expect electricity tariff for residential and small non-domestic consumers to come down slightly within the next few months. Fuel oil futures predict a decline in prices in the coming months.

Mr Sin also raised the issue whether it is possible to hedge against price fluctuation. As the Minister replied in January to a parliamentary question that the players may also guess wrong, then consumers would also face problems.

Mr Chng Hee Kok: Sir, it is hard to imagine the breach includes things like painting of factory buildings, pruning and cutting overgrown vegetation, overhanging tree branches, tidying up the premises. Sir, I can understand when a breach involves an unauthorised structure. That has to be corrected. But I cannot imagine that overgrowing trees are part of a breach. That is very hard to understand, Sir. When I mentioned HDB, I was referring to the sale of HDB flats and not industrial property.

Mr Tang Guan Seng: As I said just now, it is the policy of JTC to require the owner of the property to reinstate to its original condition, if there is a breach of the lease terms. In this particular case mentioned by the hon. Member, if he can give me the details, we will follow up on this.

Mr Sin Boon Ann: Sir, I do not deny that, with hedging, we can get it wrong. But I suppose the issue really is one of price stability. What the consumers do not want are high tariffs all the time, but whether or not they can expect a certain stability in electricity tariffs, instead of having it subjected to changes every now and then.

Mr Tang Guan Seng: Power and electricity tariffs are reviewed quarterly based on fuel oil prices at the time of review. Changes in fuel oil prices are passed on to the consumers, which is fair. Fuel oil makes up, as my Senior Minister of State said, about half of the cost of producing electricity. If oil prices increase after the review, Power Supply would have under collected its revenue. But, on the other hand, if oil prices decrease, Power Supply would then have over collected. Power Supply is allowed to recover its under-collected revenue or, alternatively, is required to return over-collected revenue to consumers in subsequent quarters. Because this is done quarterly, it allows us to respond to the changes in oil prices quickly. We think that this is a very efficient way of responding to the changes in oil prices. But, where appropriate, we also try to moderate the price increases by staggering the increase over a longer period of, say, more than three months.

Mr Chng Hee Kok: Time is catching up with us. I beg leave to withdraw my amendment, Sir.

Amendment, by leave, withdrawn.

The Chairman: Amendment No. (3). Dr Wan has withdrawn his amendment.

The sum of $432,636,550 for Head W ordered to stand part of the Main Estimates.

The sum of $3,917,080,000 for Head W ordered to stand part of the Development Estimates.

Head K -

The Chairman: Head K - Ministry of Defence. Amendment No. (1), Dr Ong Chit Chung.

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

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

Sir, recently we have wave upon wave of earthquakes, from India to El Salvador. Besides physical earthquakes, the Southeast Asian region is also vulnerable and prone to social and political earthquakes and upheavals. These political earthquakes open up fault lines of race, religion and political struggles of power.

In the wake of the Asian financial crisis, the strategic landscape in Southeast Asia has not changed for the better. Indeed, it has turned for the worst. Southeast Asia is now at the crossroads, buffeted by storms and whirlpools. Many of the countries in the region are in the throes of transition. In the Philippines, we have another round of people's power which ousted President Estrada. In Thailand, we have a change of government, and the new Prime Minister, Mr Thaksin, narrowly escaped a bomb blast recently at the Bangkok airport. In Malaysia, there are also political uncertainties.

Indonesia, Sir, is not the same after Surharto. President Abdurrahman Wahid is facing increasing pressures from inside and outside of Parliament, and some regions, like Aceh, are seeking secession. In Kalimantan, we have horrific reports of Dayaks head hunting the Madurese. No one, Sir, knows for certain what is in store for Indonesia. In the midst of the upheavals and uncertainties in the region, it is foolhardy to neglect defence. Remember, when we separated from Malaysia and became independent in 1965, we had only two infantry battalions; no artillery, no armour, no Air Force and no navy.

Today, Singapore can stand tall and confident because we have a strong SAF. No one can bully us. No one can just walk in and walk over us. Any fund allocated to the SAF is without doubt money well spent. It is an investment in our security: an insurance. If there is no SAF, there would not be an independent and free Singapore.

Sir, Mr J. B. Jeyaretnam claims yesterday that we are spending too much money on defence and that we are giving too much priority to defence. He is mistaken. He should read Sun Tzu, the famous strategist who wrote the classic 'Art of War' in the 4th Century BC. Sun Tzu tells us that states can be undermined, subdued or conquered. The only guarantee is wise leadership, good strategy, robust defence and a resilient economy which can fund the defence expenditures.

Sun Tzu proclaims that defence is a deadly serious business, that ultimately decides the fate of states, and the fate of the people. In the very first paragraph of his 'Art of War', Sun Tzu says, "Defence is a matter of utmost importance to the state; it determines the life or death of the state; the road to survival or ruin."

Sir, the key to victory is, as Sun Tzu puts it, the use of the right strategies. And the ultimate aim of strategies is to overcome an opponent with the minimum of force, conquering an enemy already defeated psychologically, dislocated or out manoeuvred.

Sir, we should therefore learn from Sun Tzu and never let our guard down. We must stand by and be ready for any scenario. We must monitor the events and developments closely, scan the horizon, or the radar screens, and take the necessary precautions and steps. We pursue peace, with goodwill to all men. But peace can only be attained, and maintained, if we are able, ready, and has the will to defend our homeland and our interests. To have peace, we must be ready for war. It is a matter of deterrence. As President Theodore Roosevelt once said, "speak softly, but carry the big stick."

Sir, defence is everyone's business. It is the business of every Singaporean. It is total defence. Let us all support defence and endorse the Defence budget. It has always been the cornerstone of Singapore's policy that there should be a balance of power in the Asian region. We welcome in this context the presence of major powers, as their presence will help to balance the forces in the region, and thereby maintain peace and security for all of us.

Sir, we now have a Republican in the White House. We hope Singapore will enhance the good economic and defence ties with the United States, and President George W. Bush will keep the United States engaged in the region. So far, analysts are not very clear about the position of the new US Administration, and the new steps or initiatives President George W. Bush will take. In this context, therefore, I would like to ask the Minister on his assessment of the security situation in Southeast Asia and the role of the major powers in our region.

Sir, since 1989, Singapore has participated in a number of peacekeeping operations. In 1999, Singapore sent a medical and logistical support team to East Timor, as part of the UN peace-keeping mission. I am sure such participation in the UN peace-keeping is much appreciated by all parties concerned, and the SAF officers and men have learned valuable lessons from such peace-keeping operations.

As the situation arises, I hope MINDEF will consider other requests for UN peace-keeping missions, within the limits of our resources.

The Chairman: I propose to take the tea break 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 3.35 pm.

Sitting accordingly suspended at 3.13 pm until 3.35 pm. Sitting resumed at 3.35 pm

[Mr Speaker in the Chair]

Debate in Committee of Supply resumed.

[Mr Speaker in the Chair]

Head K (cont.) -

Mr Sin Boon Ann: Sir, the past year has seen an increase in unrest in the region. Certainly, in some countries, we have seen a rise in the level of turmoil and uncertainty within the population. Not only have we seen the unusual replacement of a president by popular means, we have also witnessed the senseless ethnic violence in rioting that has led to a needless loss of lives.

What is taking place in these countries is, obviously, of concern to us here because of the possibility of the knock-on effects. These effects may be as diverse as providing humanitarian assistance or a weakening of defence ties because of a change of regime at the top.

Further afield, I note with great interest that China has decided to increase its defence spending quite dramatically. It seems that the decision to increase its defence spending was motivated by its relations with Taiwan. The Allied bombing of Kosovo last year, it seems, precipitated such a decision to increase its defence spending. In that campaign, the US was able to pound the Yugoslav government into submission, without having to pour in massive troops on the ground. It dawned upon the Chinese then that they were behind the West in leveraging on technology to fight a modern war. Since the US is willing to sell advanced weapons to Taiwan, the Chinese were quite rightly concerned with the strategic implications of such military assistance. Hence the build-up of arms.

Sir, any build-up of arms is always a challenge to peace and stability, particularly when it is set in a region where the parties have made it clear, in no uncertain terms, that they would resort to arms conflict, if necessary, to resolve their differences.

In Singapore, it is our stated policy that we welcome the US to maintain a balance of power in the region. However, not everyone welcomes the US presence. The Chinese, I believe, are deeply suspicious of the assistance that the US would provide in the event that the two Chinas do battle to settle their long-standing differences. Having a strong US presence at their doorstep, and being in a position to intervene at short notice, would not give the Chinese government any comfort.

Sir, against the limited scenario that I have painted, I have a number of questions to ask. These are: Is the Government ready to deal with the whole spectrum of issues that may arise from the instability in the region? Secondly, is our defence relations with our neighbours affected by these uncertainties? Thirdly, will our continued strong ties with the US affect our neutrality as a country and put us in a difficult position with mainland China?

Dr Ong Chit Chung: Sir, Singapore is strategically located at the heart or hub of Southeast Asia, with sea lines and lanes of communication radiating outwards from Singapore.

Singapore straddles the access to the Straits of Malacca, the Indian Ocean and the South China Sea, as well as the Indonesian archipelago. East-West trade from Europe and the Suez Canal passes through India to Southeast Asia, and onward to China and Japan in East Asia.

These very sea lanes are not only our trade links, but also our lifelines for food and essential items that are imported wholesale to sustain our population. For the sake of security, trade and essential supplies, we must keep these vital sea lanes open and accessible to shipping and passage at all times.

Sir, from time to time, there are reports of piracy in the seas, as well as attempts by illegal immigrants to land on our shores. I would like to ask whether the SAF and, in particular, the Air Force and the Navy, have been beefed up to meet this challenge of keeping the sea lanes of communication open. And whether, in view of the sea change in Southeast Asia and the resulting uncertainties, that such vital sea lanes would continue to be kept open.

In view of our limited resources, we cannot patrol the vast seas and the sea lanes entirely on our own. Indeed, the cooperation of the major powers would be necessary. May I ask what is the current Singapore position on cooperation with the major powers in keeping these vital seas lanes of communication open to all of us?

Mr R. Ravindran (Bukit Timah): Sir, the events over the last few months highlight that the regional situation continues to be an uncertain one.

Big power rivalry continues in the Asia Pacific. The recent increase in China's defence budget cannot go unnoticed, and raises questions as to its long-term policies and ambitions in the region. The recent visit by President Putin to Vietnam seeks to reinforce the view that Russia is not completely out of the race in Asia. The change in the US administration again raises the question as to the new policy orientation of the US towards the Asia Pacific region. Will the new Bush administration continue US involvement in the region and maintain its military presence in Asia?

Both North and South Korea have shown good improvements in their bilateral relationship. But uncertainty in the relationship continues. The China-Taiwan issue remains unresolved and sabre-rattling can be expected from China when the US arms sales to Taiwan is reviewed in April 2001. Sir, numerous claims of sovereignty over disputed territories in the South China Sea still continue to plague the region.

Besides these, political manoeuvering, greater regional autonomy, independence movements and ethnic clashes continue in Indonesia. The threat of refugee outflow from Indonesia is there, as was recently seen in Kalimantan. That the threat is near can be seen in the recent troubles in the Riau Islands when riots broke out. People power and democratic change have changed the political scene in the Philippines and Thailand. In Malaysia, the political situation is tense, and analysts are wondering how the government will respond to the many challenges facing the country.

I would like to ask the Minister for Defence to share with us how MINDEF sees the regional security situation, and as to how Singapore and the SAF are prepared, and positioned, to ride the tide in the midst of this turmoil.

Mr Hawazi Daipi (Sembawang): Sir, I would like to join my colleagues in the GPC for Defence and Foreign Affairs in highlighting the security outlook in Southeast Asia and East Asia.

Southeast Asia has seen disturbing developments, if not upheavals, in recent times. Even as they are smarting from the recession and the political turmoil in some countries, we can see continued problems that are cause for worry. In the past one and a half years, there have been political leadership changes in Indonesia, the Philippines and Thailand. There have also been leadership changes in major countries further in the East - in the United States of America and in Taiwan.

China continues to threaten to use armed force if Taiwan pursues independence. The mood for unification of the two Koreas has excited a lot of people although, in reality, it is not likely to happen in the near future and tension in the peninsula could continue. Then, there is also the question of whether the new US administration would continue to be engaged, or more engaged, in Southeast Asia and East Asia.

With all these in the background, there are possible uncertainties in terms of security in Southeast Asia and East Asia. I would like to ask the DPM and Defence Minister to share with us his views on this matter and, in particular, the US defence policy in the region. 3.45 pm

More directly, in our own neighbourhood, I am concerned with the political turmoil in Indonesia. The racial strife in different parts of Indonesia and the continued call for independence in at least two provinces could result in massive outflows of people to neighbouring countries, including Singapore, bringing with it the potential security threat to our people. The breakdown of law and order in neighbouring countries could also lead to the increased threat of piracy, terrorism and kidnapping, which will turn away tourists and investors.

These issues pose a security threat to the whole of Southeast Asia and in East Asia in general, not just Singapore. In many instances, we have worked, and continued to work, with several countries to combat the rise of illegal immigrants, piracy, kidnapping and terrorism. Has regional cooperation to combat this kind of security issues been successful? Could the Minister elaborate on the strategies and measures that Singapore has taken, and will take, to counter these threats? What is the Ministry's strategy to remind Singaporeans of the need to be alert and vigilant to these possible non-conventional threats?

Dr Ong Chit Chung: Sir, in this modern world, we must not only build up our armed forces and train them to be operational and ready, but we should also pursue defence diplomacy and build up a good defence relationship with the armed forces of the neighbouring countries.

Good relations with neighbouring armed forces could open up opportunities for cooperation in defence matters. Such cooperation, through bilateral and multilateral exercises, dialogues, the ASEAN Regional Forum and visits would enhance confidence building amongst the countries concerned.

Sir, in difficult times when political relations are strained, such good ties amongst the armed forces could help to serve as a buffer and bridge for understanding. May I ask the Minister for an update on the SAF relations with the neighbouring armed forces and whether such relations have improved or declined in the wake of the Asian financial crisis?

Sir, in terms of multilateral defence arrangements, we have the Five Power Defence Arrangement (FPDA) which comprises Singapore, Malaysia, the United Kingdom, Australia and New Zealand. FPDA has been in existence for 30 years. I believe FPDA is still relevant today. However, I would like to ask the Minister whether there are any plans to strengthen FPDA and enhance the quality of FPDA exercises.

Mr Hawazi Daipi: Sir, I would like to make three related points on the issue of our defence relations with our neighbours in ASEAN. The first is whether the recent fluctuations in our relations with neighbouring countries have affected our bilateral defence relations with them. Relations with neighbouring countries seem to be coloured by the personality of leaders. In the past few months, Singapore has been sharply but wrongly criticised by the Indonesian President, Mr Abdurrahman Wahid. Has his outburst against us affected defence relations between our two countries?

The SAF has enjoyed close and warm relationship with the former Indonesian Armed Forces (ABRI). Considering the fact that the armed forces in Indonesia has reduced influence in the past one or two years, do we still enjoy warm relationships with the TNI, which is the successor of ABRI? Would recent developments in bilateral relations affect our air training facilities in Indonesia? In the case of defence relations with Malaysia, would the Minister also share the progress that we have made in our relations with Malaysia?

My second point relates to the multilateral defence relations, the Five Power Defence Arrangement (FPDA) involving Malaysia, Australia, New Zealand and the United Kingdom and, of course, Singapore. Could the Minister inform the House if the member countries will continue to be committed to the FPDA, considering the fact that some of them have been facing budget constraints?

My third point relates to defence diplomacy in general. We would like to engage more countries in defence relations so that we can have enhanced relationship and defence network with them. There has been a report in the Jane's Defence Weekly last December about the interest of Vietnam to establish closer defence relations with Singapore. Would we be able to take up the offer of closer relations with Vietnam?

Mr Sin Boon Ann: Sir, it has been our stated policy to maintain multilateral and bilateral defence ties as an integral part of our defence architecture. To this end, we maintain bilateral defence ties with our neighbours and friends and also multilateral ties with several other countries. These ties have essentially served us well. We have been able to leverage on them to procure training grounds for the SAF and also to help deepen relationship to promote peace and stability in the region.

With the sizeable number of defence ties which we have been able to maintain, perhaps, none is quite as prominent and well-established as the Five Power Defence Arrangement (FPDA) which was started in 1971 with UK, Australia, New Zealand and Malaysia. Even after 30 years, the FPDA has become one of the main pillars for defence arrangements. As recently as a couple of weeks ago, Britain reiterated that it would honour the FPDA and would defend Singapore should the need arise. It is indeed reassuring to note the words of the Defence Secretary, Mr Geoffrey Hoon when he said, "I cannot see circumstances arising where if Singapore is attacked, the Republic could not look to the United Kingdom for support or circumstances where we would not want to give that support."

Against the backdrop of the importance of the FPDA, we were naturally concerned when Malaysia decided to reduce its level of support some years ago, ostensibly on the grounds that it is facing constraints in the budget arising from the financial crisis. There were also some problems I believe that were technical in nature and that hindered the extent of cooperation among the member countries of the FPDA.

I understand, Sir, that Malaysia has since started participating again in FPDA exercises. The continuing participation of Malaysians in the FPDA arrangements is indeed encouraging to all of us. I would like to ask the Minister whether the problems that we have with Malaysia in respect of the FPDA have been resolved and, whether going forward, we can expect the same level of commitment from Malaysia with the rest of the other FPDA members.

Mr Hawazi Daipi: Sir, we have, since our independence, been very supportive and involved with the United Nations. We have continued to contribute whatever support we could to the continuance and strengthening of the United Nations. In becoming a member of the United Nations Security Council, Singapore seeks once again to contribute to the United Nations to serve in a capacity which is equal to its ability. Indeed, on the United Nations Security Council, Singapore has been given the difficult task of investigating and instituting sanctions against Liberia. The trouble spots are increasing around the world as civil wars occur for various geographic, ethnic and religious reasons. We see the United Nations sorely stretched in terms of cash and manpower to cope with increasing demands for peace-keeping troops around the world. Because of its small size, Singapore has given what it can in the past and, most recently, in the United Nations Peace-keeping Force in East Timor in the form of medical and transport services.

With its current role in the UN Security Council, a responsibility which Singapore will hold for the next two years, will there be greater demands on us contributing on peace-keeping duties through the United Nations? If expectations rise due to Singapore's membership on the Security Council, will the contributions asked, in terms of cash and manpower or both, be entertained or be responded to by Singapore? Would the Minister give some light to this?

Mr Simon Tay: I rise on the same point on Singapore's participation in UN peace operations.

We have participated in a number of these operations including those in East Timor and, where we have served, our personnel have received high marks for their preparation and professionalism. On Singapore's part, those who have served do us proud and also gained valuable experience. I believe that we should build on the experiences to do more for UN peace operations. We cannot contribute much in absolute numbers compared to larger armies like those in India and Pakistan. I believe, however, we could add values in three ways and I encourage the Minister to consider these.

First, it is the speed of our response. The United Nations sometimes experiences long delays in getting firm commitments from countries and further delays in getting people to the ground. Singapore can be a small but rapid and effective force in peace-keeping. Second, in our training. We should work with others to share in training military, police and other uniformed personnel for UN peace operations. Africa has a regional institute for training in peace-keeping. Asians should consider starting one too. Singapore's ASEAN neighbours, like Malaysia, the Philippines and Thailand, have also served in UN peace operations. We should train together with them and others still further away, like Australia, New Zealand and Japan. Sir, I want to emphasise here that I am not talking about military exercises but training and exercises for peace-keeping.

The third point I would like the Minister to consider is in our ability to integrate civilian participation. In addition to uniformed personnel, UN peace operations increasingly require civilian participants. This is because of the complex nature of peace operations that often involve reconstruction and administration, as we see in East Timor. Additionally, they can benefit from preventive actions. In these cases, civilian administrators, special envoys, election monitors and others play important roles. Singapore has a good Administrative Service and a large civilian reservist population. It is well-suited therefore to help provide such participants from the civilian side for UN peace operations.

Sir, there would always be a limit as to how much we can help but I hope in terms of speed, preparation and training and civilian integration, we can help make a quality contribution to UN efforts.

Mr Sin Boon Ann: I rise to share the similar concerns of my colleagues, Mr Hawazi Daipi and Mr Simon Tay.

Singapore became a non-permanent member of the United Nations Security Council in October last year for a three-year term. As a non-permanent member of the Council, Singapore shoulders the expectations of one who occupies the centre stage in the international scene. Singapore is therefore expected to conduct itself in a manner that befits itself as a member of the Council. One such expectation, whether rightly or wrongly perceived, is that Singapore should also play a bigger role in peace-keeping. This expectation is in keeping with the increasing numbers of peacekeeping missions that the United Nations has been undertaking.

In the last ten years, the United Nations has never been busier. From Balkans to Cambodia and East Timor, UN forces have been asked to monitor and maintain the fragile peace that was brokered under its auspices. In this regard, Singapore has played its part as a member of the international community in contributing to the peace-keeping efforts of the UN. We participated in peace-keeping efforts in such places as Kuwait, Cambodia and, most recently, in East Timor. In all these places, our people on duty have done us proud. This has enabled us to fly our flags high.

Each peace-keeping mission is different and missions vary in form and content. In some cases, UN Forces are constantly caught up in a cross-fire in the front line. In others, they are kept in the rear to maintain law and order. Singapore's participation in international peace-keeping efforts has to date been confined largely to relatively low-risk operations. However, I do envisage that there would be a time when we may be involved in operations that are high-risk in nature.

I would like to ask the Minister the following question: what is the experience that we have learnt from our participation in peacekeeping efforts overseas and whether we are ready to participate in high-risk peacekeeping operations should the need arise?

The Minister for Defence (Dr Tony Tan Keng Yam): Sir, first, I would like to thank the Members of Parliament for their valuable and pertinent comments on our defence policy.

We have enjoyed another year of peace and stability. We have gone through the economic crisis and emerged stronger. We can take pride that as a nation we remained cohesive, helped each other and took the bitter medicine that was necessary to enable us to recover quickly.

Our experience in the last three years, 1997-1999, will help us in the coming years. It will not be smooth sailing ahead. The economic situation in the region has generally improved. But it is not yet clear what will happen to the US economy and the impact this will have on the regional economies, including Singapore's.

One of the most important lessons we learnt from the Asian financial crisis was how quickly and unexpectedly things can take a turn for the worse. We should also not forget how the economic crisis quickly developed into political crisis in some countries. There was an immediate and devastating impact on political stability and social order and these effects continue to be felt in many parts of the region. None of us can help but feel concerned about the recent destabilising events which we read in our newspapers or watch on television. 4.00 pm

Sir, as Dr Ong Chit Chung has said, as a small country in the middle of a rather turbulent region, Singapore would be wise not to take our peace and security for granted. We weathered the economic crisis well because our policies were built on a strong foundation. And we will need this same strong foundation to see us smoothly through the uncertainties that lie ahead.

The most important element in our defence policy is our people - their will and cohesiveness, and their willingness to face reality, make tough decisions and implement difficult measures. Another key element of this strong foundation is a strong defence capability. Without a credible defence force, we will not have the political space or peace of mind to focus on economic growth. We will not be able to secure our future. Nor will we be able to do our part to contribute to regional peace and stability.

Dr Ong Chit Chung, Mr Sin Boon Ann and Mr Ravindran have asked me to comment on the security environment in the region. Sir, last year, I told this House that there was greater uncertainty in the regional security environment, and the developments of the past year have not allayed our concerns. How relations between the new US Administration and Beijing work out will determine the climate for the whole Asia-Pacific. A stable Sino-US relationship is vital for regional peace and stability.

Relations between Japan and the US, and between Japan and China, will also have a bearing on regional stability. Singapore wants to see the triangular US-China-Japan relationship remain stable. And we continue to affirm the importance of a US military presence for regional stability and security.

Nearer home, there are political transitions in several regional countries. Some of these transitions and leadership changes have been accompanied by considerable socio-economic dislocations and instability, and sometimes even by a breakdown of law and order and bloodshed. The political forces that have been unleashed will take a long time to settle down. The unstable political and security situation will make economic recovery even more difficult for some countries, as it has severely undermined investor confidence in this region.

Some of these developments could have a more direct impact on us. The violence in the Malukus and Kalimantan, for example, triggered off an exodus of tens of thousands of people fleeing from the violence. Similar outflows from areas nearer Singapore would have a direct impact on us and on our neighbour, Malaysia.

Economic hardships have also led to a significant increase in the number of illegal immigrants and a rise in piracy. Fortunately the SAF, working closely with the Home Team, has done well to keep these problems from affecting Singapore. The spate of illegal immigrants in 1998 was quickly brought under control after we stepped up surveillance and took tough action against those we caught.

Piracy has risen in regional waters. But in the area in the Singapore Straits, where our Navy and Police Coast Guard conduct coordinated patrols with their Indonesian counterparts, there has been no report of piracy or sea robbery since April 1999.

As Members are aware, the political developments in regional countries have had an impact on their relations with Singapore. We have been subjected to some criticisms, even some intemperate words have been used. These are perturbations in our relations with our neighbours which we have to manage with a combination of diplomacy and firmness.

Mr Hawazi Daipi has asked whether the more negative attitude of some quarters has had an impact on our defence relations. Sir, the SAF's relations with the Indonesian Armed Forces remain robust. There is a substantial volume of cooperation and interactions - some of which have carried on uninterrupted for 20 to 30 years. Both armed forces find these interactions to be of great benefit for professional development as well as for building friendship and understanding, and both sides have said they want these interactions to continue and be strengthened.

Some Members have expressed concern about whether the SAF is prepared to deal with low intensity security problems and what measures the SAF will take. Sir, I informed the House in last year's Budget debate that MINDEF and the SAF will be working more closely with other Ministries and agencies, in particular the Home Team, to prepare contingency plans to deal with such problems. I am happy to inform the House that we have made good progress in developing many of the concepts, frameworks and operational plans to tackle issues involving low intensity conflict.

However, it is not enough just to work out Singapore's own responses and contingency plans. There also has to be a stable environment. This means working to achieve peace and stability around the world, and in our region in particular. When regional peace and stability is threatened by problems in one country, recent history teaches us that international effort is sometimes necessary. The involvement of the international community in East Timor is one example. This means that we must work with other countries to develop the strength and vitality of the international system, both on the security and economic fronts, with the aim of promoting peace and stability. And we must be prepared to act in support of this aim.

The United Nations has a vital role to play in bringing about a stable security situation in the region. The UN is an important component of the international system which helps enhance our security, because the UN plays a critical role in promoting peace and stability around the world. We therefore strongly support the UN. Here, our membership of the UN Security Council will give us more opportunities to contribute to international security. There will be higher expectations of us to do more. Where we can contribute, and in a way that is useful, we will.

Sir, a total of some 800 SAF personnel have been involved in 12 UN peace-keeping missions over the past decade. Currently, the SAF is participating in three such missions - UNIKOM at the Iraq-Kuwait border, UNTAET in East Timor, and UNMEE in Ethiopia and Eritrea.

I would like to inform Mr Simon Tay that we are also contributing to the peace-keeping work of the UN in other ways. SAF officers share our training practices and establish networks for UN peace-keeping operations through peace-keeping seminars and training programmes. And in this spirit, Singapore would welcome a regional institute for peace-keeping training.

Singapore has also subscribed to the UN Standby Arrangements since 1997. These Arrangements enhance the responsiveness and effectiveness of UN peace-keeping efforts, and we have committed planning officers, military observers, medical personnel and police officers, as well as helicopters and transport aircraft on standby for UN peace-keeping missions. We will continue to explore what other ways we can help to make the world and especially our region more peaceful, stable and secure.

Besides playing our role as a responsible member of the international community, our security is also strengthened through defence diplomacy. Over the years, MINDEF and the SAF have developed a good network of bilateral and multi-lateral defence relationships. Some of these are long-standing, such as the Five Power Defence Arrangements which celebrates its 30th anniversary this year and is still going strong. Some are more informal in nature but nevertheless very useful, such as the conferences and military exercises we have organised to bring together many regional countries. And, of course, there is a very large number of bilateral interactions and exercises which MINDEF and the SAF have with countries, not just in the Asia-Pacific but also in other regions, notably Europe.

Our overseas training also helps us develop friendships and strong links. Today, the SAF trains regularly in about a dozen countries all over the world.

Having a peaceful and stable strategic environment is best assured by several layers of security: firstly, by having a strong international system under the United Nations to deal with threats to peace and stability; secondly, by developing the regional security architecture through bilateral and multi-lateral arrangements like the ASEAN Regional Forum and the FPDA; thirdly, by promoting defence diplomacy and friendly ties with all countries, including Vietnam; and finally, at the core, by building a strong SAF as the cornerstone of our strategy of deterrence.

Sir, we have no control over what happens in other countries, and this is all the more reason for constant vigilance and a strong SAF. There is a wide range of contingencies that we may have to deal with, and they may hit us, as we have evidence in the last few years, with little or no warning.

Developing expertise and capabilities to deal with new situations and demands takes time and effort. The vision, planning and prudent investment that we put in over the last 30-odd years have served us well.

The SAF is a professional and capable force that is well regarded and respected by others. To tackle the challenges ahead, we must continue to invest in the best people, technology and equipment. Defence technology remains a key component of our efforts to strengthen the SAF. We will continue to invest in R&D to maintain our technological edge, both by our own efforts as well as in collaboration with partners in our universities and overseas. 4.15 pm

The SAF will also continue to invest in effective equipment and weaponry that can best fulfil its missions - whether this is by upgrading existing equipment and weapon systems or developing our own products to meet our unique defence requirements, or procuring new equipment from foreign manufacturers when these best meet our needs. However, we must remember that what determines a successful operation and victory on the battlefield is not so much technology or equipment but the men and women who serve in the SAF.

MINDEF firmly believes in investing in people, and we have always made it a priority to attract the best and the brightest by offering a career that is challenging and rewarding. Over the past three years, we have developed the New Partnership schemes for the SAF officer corps, the warrant officer and specialist corps, and MINDEF's non-uniformed personnel. These enhanced career schemes aim to provide first class careers to attract first class people to work in MINDEF and the SAF.

As we work hard to develop the SAF's capabilities, we must never forget that the SAF is a citizens' army, and the bulk of our strength comes from our NSmen and NSFs. They are your average Singaporean, although what they do in the SAF certainly puts them above the average Singaporean - both in terms of the capabilities they have developed and in the commitment and effort we expect of them. MINDEF, and indeed all Singaporeans, recognise their contributions to the defence of our nation. MINDEF therefore convened RECORD III, chaired by Minister of State David Lim, to address many of the issues of concern to our national servicemen.

To conclude, Sir, Singaporeans have since the earliest days of our independence, recognised the critical importance of having a strong defence capability. Dr Ong Chit Chung in his speech has said that a strong defence is a necessary investment to secure our future. And I am sure that all Singaporeans will share his sentiment.

Building a strong defence capability is an investment which requires not only money but also the hard work and sacrifice of all Singaporeans - not only those who serve national service but also their families and loved ones. Building a strong defence force involves sacrifice. But it is a necessary sacrifice. Because, Sir, without the SAF to secure our peace and stability, Singapore has no future.

Sir, I have responded to many of the major points which have been made by Members of Parliament. My colleagues, the Second Minister for Defence and the Minister of State for Defence, will deal with the remaining points.

Mr Simon Tay: Sir, I rise to encourage the Ministry to increase transparency in defence policies as a confidence-building measure. I do so because some mistakenly believe that defence policies should be shrouded in absolute secrecy. I believe history shows that to the contrary. Conflict often resulted because one side did not know or understand what the other side was doing or intended to do, and therefore the lack of understanding and transparency could lead to conflict. Knowledge, understanding and exchange can therefore help to lessen the chances of conflict.

The ASEAN Regional Forum (ARF) to which the Minister has referred is now the leading multilateral security dialogue for our region. The ARF has suggested that defence White Papers and security outlooks be published and exchanged. In this way, I hope that we will play our part in developing defence diplomacy and its regional institutions a step further.

The Singapore Armed Forces has already taken a commendable step in this direction - a publication last year. More, however, can and should be done. No state secrets of course need to be given away. However, reliable international reports and publications that are openly available, such as Jane's, already give more than the MINDEF publication has done. I would ask MINDEF to participate fully and enthusiastically in these initiatives and to help set the highest possible benchmarks for defence White Papers as well as other confidence-building measures.

The Second Minister for Defence (RAdm Teo Chee Hean): Sir, Singapore actively participates in efforts to promote transparency and confidence-building. Indeed, we have organised activities and participated in initiatives by the ARF and various regional countries that help promote dialogue, understanding and cooperation among regional armed forces and defence establishments.

Just last year, as Mr Tay has said, we published "Defending Singapore in the 21st Century" which sets out our defence policy in some detail. There are also initiatives under ARF auspices to exchange information among member countries as a form of confidence-building. Besides this, we also take the opportunity to explain our defence policy at various bilateral conferences and seminars.

However, transparency is not only about what is published, what we say, but, more importantly, what we do. The most effective way to promote transparency is to encourage more interactions among regional armed forces. MINDEF and the SAF hosted about 120 visits by senior military and defence officials of a large number of foreign countries last year, that is more than two visits a week. So at any one time, somebody is visiting us and we brief them and also find out more about them. Many of these were visits to SAF units and bases by armed forces and service chiefs. We participated in about 80 bilateral and multilateral military exercises, that is about one-and-a-half a week on average. So we are always participating and working with armed forces of different countries all the time. For instance, we hosted Exercise Pacific Reach 2000, a submarine rescue exercise that brought together more than 600 participants and observers and several navies in the Asia-Pacific region. Singapore also organised many conferences and forums, some of them under ARF auspices, such as the Combined Humanitarian Assistance Response Training course which was attended by defence, civil affairs and foreign affairs officials from 17 ARF countries. Then, there were events such as the Millennium Air Power Conference, which was attended by air force chiefs from countries all over the world. Those defence interactions help participating armed forces to learn more about one another, thereby contributing to mutual understanding.

In short, MINDEF and the SAF have taken practical steps to promote transparency and confidence-building in the region. The success of such efforts depends on the contributions of all regional countries and not just Singapore alone. And we will continue to do our part at a pace that others are also comfortable with.

Dr Ong Chit Chung: Sir, I must applaud MINDEF for building nice and well-designed training camps, for example, the new basic military training camps at Pulau Tekong. Visitors are indeed very impressed by the new and upgraded facilities there. Even the food, I dare say, is delicious.

However, I hear lament from some old soldiers, the `Lau Ping', that the training is not what it used to be and that the training has gone soft. The old soldiers talk about the times when they had to run up and down Peng Kang hill with full packs.

In this context, I hope the Minister will assure us that the training is no less rigorous and vigorous, despite the very nice setting there, and our soldiers are as fit as fiddle, and have the fighting spirit or warrior spirit.

Sir, I know that most operationally ready National Servicemen take their in-camp training very seriously. They are prepared to make the sacrifices and take the disruptions to their careers in their strides when they go for such training.

All that they ask is that their time in training be used productively. What they hate most is to wait around for their slot for shooting at the range for a long time, or wait for their transport, or hang around for the next phase of the exercise.

I wish to ask MINDEF if it can cut down such `idling' time, and make in-camp training even more productive, and perhaps some in-camp training could even be shortened, without forgoing quality or operational readiness.

Sir, in line with the advances in technology and changes in the political landscape, military threats have changed and evolved over time. Besides full frontal attacks, we have to prepare for chemical attacks, terrorist attacks, hijacks and electronic warfare, for example.

I wish to ask the Minister if MINDEF and SAF have developed new capabilities to deal with such threats, and whether the SAF is ready operationally on D-day, whenever it happens, or when the chips are down.

RAdm Teo Chee Hean: Sir, the SAF we have today is the outcome of years of investment in people and equipment. The SAF is a modern and well-integrated fighting force with sound doctrines. It puts much effort and resources into training and it is operationally ready to deal with any contingency that involves our national security.

While we may be a conscript armed forces, the Singaporeans who serve national service know that they are as important a part of the SAF's capabilities as regulars. So they take their training very seriously and they are always heartened when they benchmark themselves against the seasoned armed forces that they exercise with and come out well. And we have exercises with armed forces like the US Armed Forces at the National Readiness Centre and have come out quite well compared to regular US forces. As the House is aware, the SAF also conducts regular mobilisation exercises to ensure that we maintain our high state of operational readiness. And I am happy to say that the turnout rate in the past few years has almost always surpassed 95% for the mobilisation exercises.

While the SAF is basically made up of urban Singaporeans living in a relatively small island, we do give our soldiers exposure to a wide variety of training because of the extensive training facilities or opportunities that are provided to us by various friendly countries in the region and beyond. So our soldiers - our Air Force, Navy, and Army - are in fact training all over the world, in the United States, Australia, Thailand, Brunei, and elsewhere. And they get a lot of operational experience both by rubbing shoulders with their counterparts of other countries as well as in operating in various types of climates and terrains, and this prepares them for a wide variety of contingencies.

Singaporeans have in recent years seen how the SAF successfully executed a number of missions when called upon to do so at short notice. This was possible only because of our operational readiness. The more recent missions which the SAF executed with distinction, and which all Singaporeans are familiar with, include the evacuation of Singaporeans from Phnom Penh and the recovery operations following the SilkAir crash in Palembang, and our participation in UN missions, INTERFET and UNTAET in East Timor.

The SAF is geared to fight any external aggressor who may threaten Singapore's security and territorial integrity. But there are other sorts of security challenges that Singapore may have to deal with, apart from these - what Dr Ong has mentioned, chemical, biological, electronic warfare, and so on, which our defence research institutes, together with the SAF, conduct research and equipping on contingency basis for our soldiers, so that we are prepared and we know what to do should such a threat arise. But we are also preparing the SAF to deal with other forms of low intensity threats which DPM Tan referred to earlier. But such threats cannot be dealt with by the Ministry alone. An effective response requires coordinated efforts of all the relevant Government agencies, and the SAF will continue to work closely with these agencies to expand our spectrum of capabilities to deal with these security challenges. We will also continue to work with the international community to ensure that such potential threats do not undermine our security.

While our camps may look comfortable and our food may be good, though not as good as the home-cooked food of Dr Ong, which I had the opportunity to sample after his invitation last year, I must say that the standard of operational training and discipline is maintained. So while the camps are comfortable, they are designed for the soldiers to rest when they need to rest, so that they will be ready to train vigorously with full intensity and with full concentration when they need to do so.

4.30 pm

Dr Ong Chit Chung: Sir, I want to thank the Minister for his assurance that the SAF is fighting fit.

Sir, I believe that all National Servicemen would thank MINDEF for convening Record III, the Third Committee to Recognise the Contributions of Operationally Ready NSmen to Total Defence. The recommendations of Record III are far-reaching indeed. Here, I wish to highlight two areas which I believe have practical significance.

Top on my list is the exit permit control. Previously, NSmen have to apply for Exit Permits whenever they travel overseas. Now, with Record III's recommendations, NSmen need only apply if they travel overseas for more than three months. Moreover, a standardised multi-trip Exit Permit has been introduced to cut down red-tape, and applications can be done online via Internet. This would save us time and eliminate all the hassle.

Sir, I know, as my sons now do not have to queue up every so often when they travel overseas for studies or holiday, and I do not have to follow them to CMPB. It is quite a great relief to us.

The other recommendation of significant value to NSmen is the award of bonus points for entry to institutes of higher learning. Such bonus points are part of the point system for co-curricular activities (or CCA) and is in recognition of NS contributions and performance. May I ask the Minister to elaborate on how the bonus points will be awarded and when will the scheme be launched. Further, will such a scheme place the ladies who do not do National Service at a distinct disadvantage?

With regard to allowances for full-time National Servicemen, we know that allowances are deliberately kept low and are not meant to be full-pay, but as part of the sacrifice, as part of their service. But I wish to ask the Minister if he would consider revising the NS allowance, to keep pace with inflation, and to help families who are hard hit by the economic downturn.

Mr Charles Chong (Pasir Ris): Sir, thank you for allowing me to join in this debate. I would also like to thank Dr Ong Chit Chung for saying half of the things which I wanted to say in this topic.

Sir, I support most of the recommendations of Record III, but would like to seek the Minister's response to a few of the recommendations. It was stated in the Report that the Committee was mindful that golf courses take up land in land scarce Singapore. Nonetheless, it went on to recommend that a new golf course be developed at a suitable site. It is my hope that this will not be done at the expense of more pressing needs for the land.

Sir, the other recommendation, already mentioned by Dr Ong, was the need for clarification pertaining to the award of bonus points to deserving NSmen for admission into institutions of higher learning. While this proposal will provide some benefits and recognition to those who have performed well during National Service, will it place Singaporeans who are not eligible to serve NS, such as women, at a slight disadvantage?

Finally, Sir, in-camp training for NSmen studying in local institutions of higher learning is currently conducted during vacation periods to minimise disruptions to their studies. With the education system now emphasising more project works and industrial attachments during the vacation periods, the current training cycle may need to be changed to accommodate this new situation. Now, Record III has recognised this problem and has recommended a review of the NS training cycle for NSmen in local institutions of higher learning so that they will not be caught between the demands of academic studies and NS training.

Sir, I would be grateful to hear the Minister's comments on these points and also to ask whether the Government has accepted all the other recommendations of Record III.

Mr Gerard Ee (Nominated Member): Sir, as we have heard from the Minister, defence is placed high on the priority list. The Ministry of Defence has ensured that equipping our forces with modern and high-tech weaponry enhances the capabilities of our soldiers. It no longer requires just brawn but intelligence to be an efficient fighting man. The Minister also stressed on the important contributions our NSmen made. I would like to propose a scheme whereby the efficiency of our NSmen can be maintained, yet the period spent under NS is shortened.

Most schools offer their students a chance of joining the uniformed group as the National Cadet Corps. In the NCC, students are trained in the basics of military skills, including weapon handling. It does not take much to upgrade NCC training to cover the scope for basic military training. If this is done, enlisted men who have spent at least two years in the NCC could be considered for much shorter or revamped basic military training. It may be possible to shave off a few months from their overall NS commitment. Training under National Service should be intensive and less time consuming. To a great extent, men can be prepared for National Service by having them to join the NCC and being provided with pre-NS training.

In addition to needing less time under NS, our men would treat military training as just a normal process since they started training while still schooling. Such a scheme could start from Secondary 3. Those who continue into JC level could be provided with a wider scope of training to prepare and test them as potentials for accelerated promotion to the ranks of non-commissioned officers.

The time spent under NS can be maximised with such a scheme. Enlisted men would already be familiar with military training and the terminology used. Having the basics under their belt, they can go straight into a higher level of training. They would thus require less time to be fully trained soldiers and can be released sooner to complete their tertiary education. A shorter NS commitment would also reduce the disadvantage men face, in terms of time loss, as compared to their female contemporaries. I hope that the Ministry could give some consideration to this proposal.

Mr Ravindran: First, I would like to thank the Deputy Prime Minister for paying tribute to the contributions of National Servicemen to the defence of Singapore.

Sir, our full-time National Servicemen are the frontline soldiers ever ready to defend Singapore. The small allowance that MINDEF pays to National Service full-time men is often inadequate and the family usually supplements the allowance to allow the young men to have a quality of life that their station in life requires. However, not all National Service full-time young men are as fortunate to be supported by their family members. There are many who struggle on the meagre NSF allowance. I have known cases where the young man had gone on AWOL as he could not support the family on the NSF allowance and he had to go and seek employment to support his family.

Sir, the allowance NSF are paid is a matter that must be reviewed regularly as the allowance is often inadequate. The last review was done some years ago. I am sure that inflation and the cost of living have gone up for these allowances to be reconsidered. I would ask the Minister for Defence when MINDEF intends to review the NSF allowance. I also like to call upon the Minister to increase the allowance substantially so as to allow the young men, who sacrifice their youth for their country, to enjoy a decent standard of living.

Dr Jennifer Lee (Nominated Member): Sir, I am rising also to speak about allowance for NSF men. The subject has been brought up, I think, with some regularity during Budget debates and, in 1996, I remember Dr Wang Kai Yuen detailed the proposal for the payment of an amount equivalent to the employer's and employee's CPF contribution, at that time, amounting to 40% on an approximation of an office worker's starting salary of $1,000 into CPF account for our full-time NSmen. The fees were reviewed and increases in the allowance had been very much on the basis of financial hardship, particularly, for those NSF men who have to support family members.

I am bringing up the matter again this time in view of an additional consideration which surfaced during the recent intensive discussions that we have been having on the subject of the family, specifically encouraging our young people to get married and settle down earlier. Surveys conducted have consistently indicated that, among the top reasons, our young men and women delay getting married is to say that until they can afford to have a home of their own. A scheme, such as that proposed by Dr Wang, that starts building up CPF balances for the young men as they discharge their full-time NS obligation would make a significant difference and how soon young couples are able to afford that downpayment towards the home of their own that would start them off on a lifetime together.

From previous responses from the respective Defence Ministers, each time has been largely to remind us that NS is a responsibility and an obligation of all male Singaporean citizens and that the philosophy is that some element of sacrifice is expected. The men are not considered salaried employees and their allowance is meant only to cover some of their basic daily expenses since their accommodation and food are already provided in camp. I am not at all arguing against the principle that NS is indeed a national responsibility and obligation. I would submit, however, that in our current very fast paced environment, the commitment of 21/2 years in service to the nation with the consequent delay in completion of studies or of starting up in a career is in itself already a significant sacrifice.

May I therefore ask the Minister once again if he will review the allowance for NSmen, in particular, with a view to making some payment into CPF accounts for the men, regardless of the fact that it will be on an allowance, and not in the usual manner, on a salary?

Mr Thomas Thomas (Nominated Member): Sir, I would also join my colleagues, Dr Ong Chit Chung, Mr Ravindran and Dr Jennifer Lee, in asking the Minister to review NS allowance as well as make CPF contributions. I agree with them that it will not just help families. It will also help in our pro-family and procreation policies. The fundamental thing is that people have already sacrificed and made a contribution and I think we should not make them lose out, in terms of opportunities. The other arguments which I have have already been put forward quite eloquently by my colleagues.

[Mr Deputy Speaker in the Chair]

4.44 pm

The Minister of State for Defence (Mr David T. E. Lim): Sir, we have heard this afternoon arguments reiterated as to the importance of the SAF, in particular, given the uncertainty facing us in the security outlook in the region, and we have also heard that National Servicemen are an important backbone of the SAF.

Our National Servicemen are not reserves. They are frontline soldiers. They are trained in a spectrum of operations and, if called upon, they must be able to undertake whatever missions or tasks that are given to them. It is for this reason that we convened, once again, the committee to look at how we can recognise and enhance the contribution of National Servicemen to defence.

RECORD III was convened last year. It comprised members of the public from grassroots organisations, NSmen themselves, as well as their spouses, and some hon. Members of this House. We took a consultative approach, we even had people email ideas and suggestions to us, and we had focus groups talking to National Servicemen to seek their inputs.

This process culminated in a set of recommendations, which were announced last month. I would like to put on record, as Chairman of the Committee, my thanks to all who participated in this process. MINDEF, together with the relevant ministries and organisations, is now studying RECORD III's proposals, and announcements will be made as and when details have been worked out. We hope to implement as many of the recommendations as possible.

However, let me take the opportunity this afternoon to deal with a number of issues that Members have raised.

On exit control measures, RECORD III has recommended the relaxation of exit control measures to make it convenient for NSmen and their families to travel overseas for work and leisure. Some of the recommendations are that:

1. The passports of Singaporean males who are between 11 and 161/2 years old be extended by two years, or up to the age of 161/2, whichever is earlier. These are for pre-registrants.

2. The passports of Singaporean males who are above 161/2 years old, up until the time when they are enlisted, be extended by one year. These are the registrants.

3. The passports of full-time national servicemen be extended by up to 10 years.

4. A standardised multiple-trip exit permit be introduced to replace the various types of exit permits.

5. Singaporean males who are 11 years old and above, and have yet to enlist for full-time National Service, be bonded by deed, rather than monetary bond, when they accompany their parents on overseas employment.

MINDEF recognises that, with increased travel, both for work and leisure, these are practical measures, and we agree in principle to these recommendations. The implementation agencies, including Singapore Immigration, CMPB and MHA, are now working out the implementation details and we hope to be able to put these measures into effect within a month or two.

Sir, Mr Charles Chong has also raised the issue of the NS training cycle for NSmen who are in universities. It is true that we had tried to schedule NS training, in-camp call-ups, during the university vacations. But with changes in the educational system, more and more project work being introduced during vacation period, NSmen often write in for deferments so that they can do their projects or take on special tasks and assignments. This is disruptive, especially when we try to keep our NSmen together in the same unit as they progress through their 13 years of in-camp training cycle so that we build up the bond and camaraderie amongst the men.

RECORD III has recommended that the NS training cycle for NSmen studying in institutes of higher learning (IHL) be reviewed, to help them manage both their academic studies and NS responsibilities. NS call-ups could be synchronised with specific vacation periods, when no academic programmes would be conducted, so that NSmen can go for NS training without affecting their studies. In addition, the longer NS call-ups could be confined to the vacation period during the second year of studies, so as not to clash with the more intensive third and fourth years.

So the idea is that we would agree with the three universities, to take a time slot in the second year, so that NSmen can all go for their training during this period of time. MINDEF is now working with these universities to implement this recommendation, and we target to introduce this new arrangement by next year.

Sir, a number of comments have also been raised concerning the award of NS points for university admission. RECORD III has recommended awarding NS points for university admission, in recognitiion that NS contributes to the development of desirable qualities, eg, leadership and teamwork, in the same way that co-curricular activities (CCAs) in the school do. This is in line with MOE's new university admission system, in which university admission bonus points will be awarded for students' participation in CCAs.

Mr Charles Chong and Dr Ong asked whether the awarding of such points would be unfair to the females. Let me say that we are now working closely with the Ministry of Education and the local universities to evaluate this recommendation. It will not be unfair to the females, but it would be fair to the males.

Sir, National Service is an important period in a person's life. During the two and half years of his service, there are many opportunities for a person to demonstrate qualities that will help indicate whether he can successfully undertake and benefit from a university education.

What RECORD III is proposing is that if a person has performed well in National Service, and has displayed such qualities, then this is one of the factors that the universities should take into account in deciding on his suitability for admission. This should help the universities obtain a more holistic appreciation of the applicant's abilities. The bonus points awarded for NS will be given in proportion to how well they do and how much they contribute during National Service. Of course, the universities would have to balance the various factors.

Thus, MINDEF will consider RECORD III's recommendations for bonus points, but on the basis that such points should be subject to the overall cap that the student could earn from CCA in school. With this, Members can be assured that the recommendation seeks to recognise good performance in National Service, and it will not disadvantage the others. Both, those who may not do National Service or girls, have the opportunity to participate actively in the schools in the CCAs and, where they show the qualities of leadership and teamwork and the other qualities that the CCAs attempt to measure, they will also be eligible to get the maximum number of bonus points so that it would not be unfair to them.

But, for males who serve full-time National Service, they enter the job market later than their female counterparts. Awarding NS bonus points to them is a way to recognise their contribution and sacrifice. It also recognises that NS develops desirable qualities, just as those that the CCAs try to promote in the schools.

MINDEF, MOE and the local universities will announce details of this soon, once they have completed their study.

Finally, Mr Charles Chong has asked about the new golf course and why this is necessary. RECORD III made this recommendation because it recognises that the existing SAFRA Resort and Country Club is very well utilised. SAFRA Resort and Country Club was opened in 1994 to recognise the contribution of NSmen to Total Defence. Today, it has 10,000 members, which, compared to private clubs, is several times the order of membership that a club normally has, given the number of holes in the golf course. Furthermore, the utilisation rate of this course has increased from 79% in 1994 to 91% in 1999. So, golfing facilities today are heavily utilised and there is often a very long waiting queue for people who want to play. It is in this context that RECORD III recommended that another golf course be built for NSmen.

Sir, if land is going to be allocated for golf courses, then NSmen should be given priority in recognition of the important role they play in Total Defence. The new golf course could be developed at a suitable location where land use would be optimised. MINDEF will examine this proposal in greater detail before announcing its decision.

Sir, once again, I would like to thank Members for their interest and support for RECORD III's recommendations, and to note that MINDEF would continually strive to improve NS management and administration, as well as the NS training system, to better recognise and enhance the contribution of our NSmen.

Sir, if I may now turn to the issue raised by Mr Gerard Ee and also touched on by Dr Ong Chit Chung on NS training periods.

Mr Gerard Ee has suggested that participation in certain uniformed groups, in particular, the NCC and the PCC, could help to shorten the training period during National Service, full-time. MINDEF recognises that participation of school students in uniformed groups prepares them for the rigours and discipline of military training. It creates a certain mindset in them; once they wear a uniform, and they are subject to discipline. But we do not think that we can shorten the period of NS because of such participation, as military training deals with substantially different skills. Even for the NCC or PCC, the kind of training that they undergo is quite different from the military training during NS, which is at a standard and level much more demanding than that expected or possible within these uniformed groups.

During Basic Military Training, recruits are taught a wide range of basic military skills, apart from handling a rifle and shooting, field-craft, drills, manoeuvres at platoon, company and battalion levels. Beyond BMT, they are assigned to operational units, where they learn to fight as a team. Development of esprit de corps amongst themselves is also part of the unit training.

But we recognise that, wherever possible, we want to keep as short as possible the time in National Service. So MINDEF has a scheme where we reduce by two months the National Service duration of males who have attained a certain level of physical fitness, and this be set at the silver standard for the NAFA test. This scheme encourages students to keep fit through various means, including participation in CCAs, such as sports, athletics or uniformed groups. Those who fail to meet the fitness standards are brought in, as per schedule, and are put through a rigorous Physical Training Phase before they join their fitter counterparts in Basic Military Training. Those who pass do not have to undergo this Physical Training Phase, and they then have their NS period reduced by two months.

In conclusion, may I reiterate that the 2 to 21/2 years of National Service brings a fresh recruit to the required level of military proficiency to be a part of an effective fighting force and is necessary for the operational effectiveness of the SAF.

Sir, I now turn to the matter of allowances raised by Mr Ravindran, Dr Jennifer Lee, Mr Thomas Thomas and Dr Ong Chit Chung. They have asked whether a review will be done for the allowances that we pay to full-time National Servicemen. The short answer is yes, but, before I go into the longer answer, let me restate the principles.

The fundamental principle is that National Service is a duty to be performed by all male Singaporeans. It is a duty that is necessary, as Dr Jennifer Lee has pointed out, to safeguard our country, our home and our families. As a service rendered to the nation, it cannot be equated with a regular salaried job. But it is their commitment and sacrifice that ensure our continued peace and stability.

So, because National Servicemen are not salaried employees, they are not paid market wages. They are given an allowance for personal upkeep. Most of them stay in-camp, they are given a comfortable bed, as Dr Ong has pointed out, and rather good food now. In fact, the food has improved so much that some of the canteens have started to complain because their business has gone down. So their basic needs are taken care of. The allowance, therefore, covers things like transport and some incidental expenses. 5.00 pm

MINDEF reviews this NS allowance regularly, taking into account inflation and cost of living. Their allowances were last adjusted in 1996 by between $40 and $60. A review was conducted again in 1999 but no adjustment was made then because cost had not gone up significantly since the 1996 review owing to the economic downturn. MINDEF, however, will review the NS allowance again this year and on an annual basis to keep pace with changes in the cost of living. The current review will be completed and its outcome known by the third quarter of this year. So I hope we will have some news for you then.

Mr Thomas Thomas and Dr Jennifer Lee also asked whether we could make CPF contributions, even if they were allowances. This crosses the line on the principle that CPF contributions are really made only for salaries and not for allowances. Nevertheless, full-time national servicemen can still benefit from CPF top-ups. And indeed, during the Share Ownership Top-up exercises and the recent CPF top-up exercise, MINDEF has assisted full-time national servicemen who might not have enough money to open CPF accounts and offered interest-free loans to those who are eligible, so that they could make their own contribution to CPF in order to receive the CPF top-up.

As to the issue raised by Dr Jennifer Lee about the impact of national service on marriages and starting families, this does take two to two and a half years away from more time socialising and finding partners. But these are two separate issues. National service is for our national security. Strong families are also for our long-term development as a society. Both are important, but we should not mix the two up. Increasing NS allowances to facilitate earlier marriages is not appropriate, as it goes against the principle of national service being a duty. A full-time national serviceman should not be compensated for this reason. But the Government does help young couples in other ways. For example, there is a CPF Housing Grant Scheme to help young couples who are first-time applicants purchasing HDB flats and I think we should leave it at that.

Finally, let me touch on the general point about families that may face financial hardship because sons or spouses are called up to do national service. MINDEF is mindful of this and we have a number of schemes to help NS men whose families face particularly difficult financial hardships. We offer both grants as well as loans and there are a number of such cases every year. If any Member of this House knows of such a case, please refer it to MINDEF and we will look into the matter.

Dr Ong Chit Chung: Sir, I want to thank the Minister of State for his reply. But just as a matter of clarification, under the law, allowances are CPF payable unless they are exempted. But I take the Minister's point that national service allowance is actually part of our service and duty, and that we should have an element of sacrifice. I do not agree with the Nominated Member that we use this to build up the CPF reserve of our national servicemen or to help start a family. I think they are quite different things altogether. The element of sacrifice should still remain. What we are asking is revision of the allowance to keep pace with inflation.

Sir, in the 1999 and 2000 Budget debates, my GPC raised the issue of compliance with financial regulations and the Audit report by the Auditor-General on the Ministry of Defence. I am afraid this year we have to raise again the observations of the Auditor-General on MINDEF's financial procedures for FY1999/2000.

Sir, according to the Auditor-General, there was inadequate control on advance payments to MINDEF's suppliers, resulting in a total of $1.1 billion advance payment not being reported to the Auditor-General's office. The Auditor-General states that he has no assurance that MINDEF has accurate information on the total amount of advances standing to its credit at any point of time. The Auditor-General states that MINDEF's accounting officer submitted a listing of 405 accounts in May 2000, but later changed it to a total listing of 411 accounts. Further, the Auditor-General points out that the opening fund balances of 70 accounts did not tally with the closing balances, with one account having a difference of $139,783. The Auditor-General highlighted that there were serious irregularities in advances given to a company and that between June 1998 and June 1999, the advance of $2.13 million exceeded requirements by $645,000 to $1.13 million.

Sir, the Auditor-General reports that Audit test checks at three camps on records of meals supplied, revealed many discrepancies between the camps' records and the suppliers' invoices of the number of meals consumed. The Auditor-General further observes that there were many alterations to the camps' documents which were not properly endorsed. There was also over-payment for food supplied as a result of payment made on higher prices and not on tendered prices. There was also misappropriation for the sub-imprest at a SAF camp and misappropriation from a unit fund of a SAF camp.

Sir, it is in the public interest to seek clarification from MINDEF on the report of the Auditor-General. Again, I urge MINDEF to take all the necessary actions and put in place preventive measures to ensure that all procedures comply with the financial regulations of the Government.

Mr Ravindran: Sir, the Auditor-General, in its Report for the year 1999/2000, has once again highlighted certain financial lapses and irregularities in the accounts of the SAF. Last year, as a Member of this House, I raised the point that MINDEF needs to pay greater attention as to how financial matters are handled within the SAF and as to what MINDEF will be taking in terms of steps in ensuring that such financial lapses and irregularities do not occur. The fact that the SAF has once again been picked up in the Auditor-General's Report causes concern to me as a Member of this House.

Once again, I would like to seek the assurance of the Minister for Defence on the measures or steps that the Ministry of Defence will be taking to ensure that such lapses and irregularities do not occur again, particularly when some of the sums of money which have been highlighted as being the matter in question involve substantial amounts of money.

Mr Charles Chong: Sir, I have very little to add to what has already been said by the Chairman and Deputy Chairman of the GPC for Defence. I would just like to ask the Minister if any of the discrepancies cited in the Auditor-General's Report are similar or repeat discrepancies that had been picked by the Auditor-General in previous years?

Mr David Lim: May I, first of all, thank Dr Ong Chit Chung for pointing out that allowances may attract CPF contributions. I had spoken too quickly. Indeed, what I should have said was that treating NS allowances like an employment salary and introducing CPF contributions would involve a major change in the philosophy and principles of the NS allowance which, as you have agreed, is an allowance and not a salary, and that is the principle that we defend.

I thank the Members for the questions on the Auditor-General's Report and the opportunity to clarify the issues and the steps taken to deal with them. The Auditor-General's Report for FY1999/2000 contains seven observations on administrative lapses, and two cases of fraud committed by one serviceman. The two cases of fraud are the more serious and let me deal with that first.

Sir, these two cases involve two accounts. One is a petty cash account and the other is the unit welfare account. The supervising officer of these accounts had failed to check all payments of proper documentation and invalidated all the supporting documents after payment in accordance with MINDEF's procedures. As a result, the account holder was able to misappropriate about $93,400 from the two accounts through fictitious claims and recycling of invoices and receipts. The investigations also revealed that another $44,000 was unaccounted for due to improper documentation. MINDEF intends to take the account holder and other officers responsible for these losses to task.

Sir, it is important that we note that these two cases were not the result of systemic failure in the internal system of checks and controls. These were in place. Rather, they were due to negligence and fraud. The account holder has been charged and was sentenced to 15 months' detention and fined $3,000. He also returned a sum of $84,000 to MINDEF and MINDEF will recover the balance of $9,400 from him. The supervising officer has also been charged for negligence in discharging his responsibilities and fined $1,500. These two cases would be widely publicised internally as a deterrent measure and also as a lesson for all staff, especially supervisory officers, to take their responsibilities seriously.

In their audit on contracts with advance payments, the Auditor-General had reported that MINDEF did not inform his office of 90 contracts with advance payments totalling $1.1 billion. The Auditor-General had therefore stated that it had no assurance that MINDEF had accurate information on the total amount of advance standing to its credit at any point in time. Let me assure the House that the $1.1 billion was fully accounted for at all times by MINDEF. All contracts are individually monitored and tracked by procurement officers who keep a record of the outstanding advance payments. The errors in the report to the Auditor-General occurred because the data on advance payments had to be complied within the two-week deadline set by the Auditor-General at the onset of the audit. As a result, a number of contracts were inadvertently omitted during the compilation process. So this was a compilation error. We have since adopted the Auditor-General's recommendation that quarterly consolidated reports on outstanding advance payments be submitted to the Permanent Secretary.

The other irregularities observed in the Auditor-General's Report were due to administrative lapses. MINDEF has taken actions to rectify them. Let me again assure the House that in none of these other cases were there any moneys lost or any moneys unaccounted for. But let me just touch on one other case that Dr Ong has raised about our cook houses.

I would like to make mention of this because of the particular wordings in the Auditor-General's Report that may mislead some Members as to the severity of the discrepancies. In the Auditor-General's Report, words to the effect that some of the mistakes had been "covered up" had been used. This really referred to two discrepancies in the cook house records. One was that in keying in the data into the system, a clerical error had been made by referring to the wrong list of items. This resulted in an overpayment of $3,478 out of a total contract value of $434 million. In context, this is a relatively small amount but, nonetheless, it was an error.

The second concerned human errors in keeping records in the cook house. When Audit queries were raised, some personnel made the corrections on the records with correction fluid instead of following the standard practice of cancelling the errors and initialling against the amendments. Therefore, they literally covered up their mistakes.

It is a very serious criminal offence to cover up. MINDEF investigated the cases cited by Audit and is satisfied that there was no evidence of cover up or falsification of any documents. It was a case of inappropriate response to the errors or omissions pointed out by Audit. In any case, it does not make sense for anyone to attempt to cover up an error after it has already been detected by the Auditor-General. 5.15 pm

Sir, let me say also that since last year, MINDEF has embarked on a comprehensive review of the major administrative processes involving finance, procurement and logistics. This review is chaired by a Permanent Secretary. We will continue to improve our controls and educate our staff to be more careful and vigilant in discharging their responsibilities. We will also continue to inculcate in our staff the importance of striving for zero defects.

In conclusion, let me thank the Members for their concerns raised, and ensure them that MINDEF will continue to be vigilant and prudent in its financial management.

Dr Ong Chit Chung: Sir, I want to thank the Ministers for their very comprehensive answers and also the Minister of State for his assurances on the audit. And I hope that we need not raise it again next year and let the case rest. Thank you very much. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Chairman: Amendment No. (2), Mr Charles Chong.

Mr Charles Chong: I am not speaking, Sir.

The Chairman: Mr Ravindran.

Mr Ravindran: Sir, I beg to move,

That the sum to be allocated for Head K of the Main Estimates be reduced by $10 in respect of Code KA 1500.

Sir, the RSAF is a vital component of the Singapore Armed Forces. The Singapore Armed Forces enjoys tremendous support from the public, as it is both a credible organisation with a credible deterrent capability, and it enjoys tremendous support on the ground.

However, I would like the RSAF to address the issue of RSAF aircraft's loud noise over residential parts of Singapore. The affected areas include parts of Jurong West and Sengkang. Many of the residents living in these areas had purchased their homes, hoping to return to a home for a peaceful rest or to study. However, the regular aircraft training schedules of the RSAF have become a serious nuisance to residents in these two estates. Many residents have complained that they are unable to tolerate the extremely loud noise levels emitted as aircraft fly at low altitude to land at the nearby airbases. Some residents have stated that they can even see the pilots' faces as they fly by. I sympathise with these residents, as I have personally witnessed the loud noise generated during these RSAF training stints.

Sir, in my speeches to my residents, I usually highlight to them that they should show the thumbs up to the pilots. But I fear that when they are irritated by a noise, they may show the thumbs down to the pilots, and that may not motivate the pilots. I would like to ask the Minister whether there is regular consultation between the Ministry of National Development and MINDEF prior to the development of new HDB estates. If yes, then why were new HDB estates built on the approach path of these RSAF aircraft? If not, whether there are plans to coordinate such future developments, so as to prevent the recurrence of such a problem again.

Sir, I would also like to ask the Minister how MINDEF could immediately help alleviate this serious problem and suffering of these unlucky residents, and whether there are any long-term plans to solve this aircraft noise problem.

Mr David Lim: Sir, first of all, may I empathise and sympathise with the Member for Bukit Timah. MINDEF is aware of the problem of aircraft noise, as I am sure is the Ministry of National Development and I am also sure that they do take this into account when planning new housing estates.

The RSAF has done what it can to reduce aircraft noise over the years. It has taken many concrete steps. A significant reduction in the noise problem has been achieved when the RSAF relocated some of its flying activities overseas. However, the RSAF still needs to conduct day and night flying to familiarise our pilots with the local airspace environment and to maintain operational readiness. Due to our country's limited airspace, it is inevitable that RSAF aircraft has to fly over some residential areas. In particular, night training is important because it gives our pilots an important edge and it gives the RSAF combat options that it otherwise would not have. I know that night flying contributes particularly to noise disturbances, because at night the ambient noises are low, and the RSAF aircraft noises are therefore accentuated.

The RSAF has introduced other measures to reduce aircraft noise. Where possible, flight simulators are used for training. A hush house was built in 1984 for the conduct of engine runs by RSAF and ST Engineering Aircraft. To further reduce noise pollution, the aircraft departure and recovery procedures and routes have been amended, and minimum height requirement has also been imposed on all RSAF aircraft over built up areas. So if the Member's residents can still see the faces of the pilots, please let me know.

There are also strict regulations prohibiting night flying after 2300 hours, unless there are valid operational reasons to do so. And, finally, being mindful of examinations, RSAF scales down its local flying activities during the end of the year school examination period, and coordinates closely with the Ministry of Education to make sure that when students are doing their oral examinations, aircraft is not flying overhead.

Mr Ravindran: Sir, I certainly hope that MINDEF can do much more than that, and I look forward to measures along those lines.

Sir, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

The sum of $7,090,000,000 for Head K ordered to stand part of the Main Estimates.

The sum of $730,000,000 for Head K ordered to stand part of the Development Estimates.

Head I -

Mr Chay Wai Chuen (Tanjong Pagar): Sir, I beg to move,

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

The Government compensated the telecommunication companies about $2 billion for accelerating the pace of liberalisation of the industry. After almost a year of earlier compensation, can the Minister provide us with a balance sheet of cost benefits of the spending? Can the Minister give us an update of the liberalisation process? Has it been able to attract new entrants in providing service to customers, and at what level of investment? In general, have the consumers seen the benefit of lower cost or more value for the dollar?

Sir, my next cut is on 3G auction. The Government has come up with a proposal of setting a reserve price for the auctioning of the four new third generation telecommunication licences. Will the Minister enlighten the House on the state of the preliminary evaluation and the justification for still sticking to the announced reserve price to the participants? Bearing in mind that the level of investment the successful bidder will have to fork out to abide by the rules, which can run into tens, if not hundreds, of millions of dollars, and the speed at which the technology in this field can get obsolete very fast, will the Minister not consider going for a lower reserve price plus a royalty percentage on turnover to lower the risk for the participants? This can also lower the restrictive development of the industry in the future, because of high capital cost and minimise the risk of any disruptive technological change for the industry players. It can also lead to more participation in the auction with the likely promise of more customer-oriented service and, possibly, more competitive business which it is intended to serve.

Mr Low Thia Khiang: (In Mandarin): Sir, 3G technology forms an important bridge to the future wireless telecommunication service. In my view, the speed with which 3G service is developed and how pervasive it becomes would determine whether Singapore will become the hub of the digital economy.

The Government has announced that it has decided to award 3G licences by auction. Awarding 3G licences by auction is like the award of COEs. The Government will rake in huge sums of money. Perhaps the Government is envious of the bonanza that the British and French governments have obtained for their auctions of 3G licences. The rationale for the Government to award 3G licences through auction is that the prices could be determined by market forces. But the more important reason is that the Government would like to make a big profit.

Market competition is not entirely rational. The end result will be that through auctioning the licences, the Government amasses a big sum of money, but the companies that successfully bidded for the licences are saddled with high cost thereby delaying the development of such technology, as they are too expensive and was beyond the reach of people.

Apart from the auction, has the Government considered how it will make use of the 3G technology and its application to attract new investments to Singapore? Apart from auctioning and the "beauty contest" method, as suggested by some players in the market, has the Government considered the possibility of cooperating with the telecommunication companies to jointly develop the 3G technology and popularize the related markets?

The Minister for Communications and Information Technology (Mr Yeo Cheow Tong): Sir, Mr Chay Wai Chuen has asked about the process of telecommunications liberalisation, and has asked for an update on the new entrants who have entered into the market, what sort of investments and how have the consumers benefitted from the process.

Sir, as Members will recall, we want to transform Singapore into a competitive telecommunications hub with a multi-player, multi-network environment that can offer innovative, high quality and cost effective telecommunication services. In the process, both business and individuals should benefit.

In the one year since the liberalisation took place, I think we have realised much of the desired benefits. Let me give Members some update. We have awarded licences to over 200 telecommunication companies in the last one year. There are now a total of 16 new and existing Facilities Based Operators (FBOs) and 195 new Services Based Operators. The new companies include world-class players like MCI Worldcom, GlobalOne, UUNet and Asia Global Crossing. All these companies together will help to improve the variety and the richness of the telecommunications services and quality in Singapore.

In terms of investment, I think the telecommunication liberalisation will definitely result in significant new investments and jobs for Singaporeans. We expect that the capital investment over the next 5-6 years will exceed S$3 billion, of which about S$2.2 billion will be realised within the next 2-3 years. The new licensees will create about 4,500 jobs by end of this year. So the results and the benefits are going to be quite immediate.

Sir, the new telecommunication players will boost our international connectivity by 400 times by the end of this year, to over 20 Tb per second. Our Internet data centres are projected to increase by 750% to 1.5 million sq ft by the end of this year alone, compared to March 2000. Within a period of nine months, we are going to see a huge increase. With such rapid and vast developments, Singapore is definitely fast becoming a leading hub for telecommunications traffic. 5.30 pm

How has this benefited us? All sectors of the economy in Singapore have benefited from our increased connectivity and enhanced telecommunications facilities. Companies now have a wide choice of telecommunications service providers to choose from in order to meet their global telecommunications needs. The competitive telecommunications environment has therefore made Singapore also a more competitive business hub.

The very high voice and data traffic is helping us to become a strong and vibrant info-communications hub. As a result, we are now able to attract a vibrant cluster of infocomm players across the entire digital value chain and many of them are hubbing their operations in Singapore, to serve not just the Singapore market but also the regional market. These new companies include content creators, aggregators and hosters, portals, application services companies, systems integrators, e-business solution providers, web enablers, server farms and Internet data centres.

At the consumer level too, the benefits are quite evident. IDD rates have fallen by 60% on average, and in some cases, as much as 80%. There is also a greater variety of IDD call services, including voice over Internet Protocol (VoIP), and IDD aggregators, who help consumers find the best price and quality plan at any particular point in time. Consequently, IDD calls have increased by over 20%, to over 100 million minutes every month.

Sir, I will conclude by saying that our telecommunications liberalisation has clearly been effective. It has accelerated the development of our national information infrastructure, and our regional and global connectivity. I will expect our economy and our people to continue benefiting from the opening up of our telecommunications sector in the years ahead.

Sir, let me move on to the two cuts on the 3G auction.

Mr Chay has asked for a preliminary evaluation as to why we are sticking to the old reserve price and whether we should instead lower the reserve price but include in it a royalty element, and that this will help to lower the risk for the investors, and in the process you may get also more bidders.

Our assessment as to whether we should stick to a reserve price or go with a mix of a lower reserve price plus a royalty component is that whatever upfront charges you impose, plus royalty or without royalty, the operators will typically charge the consumers based on what the market can bear, because the competition in the 3G market is going to be very, very tense. And not only that, the 3G operators will also have to compete with the present 2G operators in terms of voice, in terms of some of the data traffic. As such, I think whether we charge only an upfront fee or a combination of both, it will not likely influence the charges to the consumers when the 3G service is launched.

However, it is true that if we are able to lower the upfront charges, it will help to lower the risk element for the operators. But, on the other hand too, by lowering the risk element for the operators, it may also lead to a lesser outcome for the consumers. You may ask why. The reason is that when they pay totally upfront, I think operators are incentivised to roll out their systems as quickly as possible and to also roll out as many services as possible, in order to be able to recoup their upfront investments as quickly as possible. So there are pros and cons. These are elements which the other countries, which have auctioned out their 3G licences, have been considering. And I think in the end, most of the countries have opted for an upfront fee.

In terms of whether we should stick to the announced reserve price of $150 million, IDA has definitely been making a review of this issue. We recognise that much of the global telecommunications environment, the international telecommunications environment, has changed over the last six to nine months. The market sentiment has definitely weakened and there is also a greater uncertainty over the business case for 3G. In Europe, because of the high 3G prices, I think the telecommunications companies have also suffered a downgrading of their investment ratings. As a result, they are also finding some difficulty in getting funding for their project.

So we have taken all that into consideration and we have also consulted our economic consultants who have done another study for us as well, in order to confirm our own findings.

Sir, the assessment is that the market value of 3G licences has dropped considerably. As a result, IDA has decided to lower the reserve price to bring it in line with the current international levels. The new reserve price is now going to be $100 million per licence, instead of $150 million. The auction will proceed as scheduled in late April this year.

Mr Low Thia Khiang has accused the Government of going by the auction route in order to rake in money and that we are envious of the high auction bids in Europe. Sir, this is far from what the Government's intention is. In fact, when I announced the decision to award 3G licences, I think that was done in probably September last year or so, I had stated very clearly that it is not the Government's intention to use the 3G licences and the auction process as a means of maximising revenue for the Government. What we are looking for is a mechanism that will allow us to award 3G licences to companies which value it most. If Mr Low can propose a better system than the auction system in order to award the licences, we would be very happy to hear about it. And I am sure consultants all over the world will be very happy too, because this is an exercise which has occupied the minds of many consultants and even professors.

The consensus so far has been that the auction process is the most efficient mechanism for a few reasons. One is that the 3G technology is still unproven, no 3G system is operational yet, and therefore the true potential is not known to regulators. Even operators, I think, are not fully aware of what the 3G potential is going to be, because the technology is changing so fast, that what is possible next year may be obsolete the year after. Therefore, it is very difficult for the regulators to try to put a value on what a 3G licence should be, and therefore we should leave it to the market.

Our intent is to make sure that we have viable and vibrant 3G operators in Singapore. Therefore, we should make sure that we do not cripple them by having a high licence fee, and that is why we went through a very deliberate and careful process of trying to determine what the reserve price should be. As I have stated just now, we have reviewed it and recognising that the market has changed, we have now reduced the reserve price to $100 million.

Mr Low has also asked whether we should not cooperate with the telecommunications companies to develop the 3G technology. Sir, indeed, that is what we are going to do. In my announcement on the decision to proceed with the 3G auction last year, I had also mentioned that we are going to set aside a development fund for IDA to work with companies, those telecommunications companies who are the 3G licensed holders, as well as the service providers, to help them develop services, technology application that will give our companies a good headstart in this very new technology. So we are definitely going along the line that Mr Low has mentioned.

Mr Chay Wai Chuen: Sir, on broadband development, Singapore is the first country in the world to have installed a nationwide interactive broadband multimedia network in 1997. Since then, I have wondered what is the state of affairs of this nationwide network. Has it been put to good and effective use?

There is no doubt that broadband network with big capacity and fast speed is good. But everything has a cost, as the Minister for Finance will tell you. Has the Ministry of Finance's allocation for the broadband project been successfully implemented with an equitable social rate of return? Being such a big-scale project, naturally we do not expect immediate returns. But is the Minister satisfied that we are there? How many customers are there using the Singapore One network in business or at home? Does the network suffer from a lack of content or usage?

Cost is one important factor in attracting usage as consumers may be quite satisfied with accessing Internet at a slower speed if broadband access costs are high compared to narrow band Internet access. Given the price elasticity of such demand, especially at our population's income level, many of the people may consider this a luxury. How does the Minister intend to extend usage to attain a certain market size which can then lower cost of content?

Assoc. Prof. Toh See Kiat (Aljunied): Sir, we have a dream. We dream that one day every household in Singapore will have a computer, or two - just as they have TVs and telephones today. We dream that these computers will help them do their work, exchange ideas with colleagues around the world, and send off the work product to the boss - whether this product is a document, a book, a film or new software, and whether the boss is here in Singapore or on an orbiting space station. We dream that the same computers can keep them informed of what is happening around them, educate them and allow others (such as the Government or their town council) to communicate and interact with them. We dream, too, that these computers will entertain them; pushing them movies, news programmes, talk shows, music - all at their own time, in their own space. The one computer will be work manager, communicator, entertainer, book-newspaper-telephone-fax-TV all rolled into one. And it will come to pass when broadband rules this land.

But, Sir, before that dream is realised, we have to go through a nightmare. The modems into computers jam up the massive amounts of data that are being pumped into them. The technology to clear that jam is called "broadband". The Information Superhighway must be a 20-lane road and not the 2-lane road it is today. Building the roads costs money, and after that the users have to pay an arm and a leg (and maybe more) for the private investors to recoup their investments. Worse still, the roads lead to nowhere. There is nothing to do or see, nothing to engage us and nowhere to go when we finally gain access to the valuable Superhighway. In the geek world, we call these the problems of "cost" and "content". 5.45 pm

Roads have to be built for a country to be developed. This initial infrastructure is usually provided for by governments. If private sector developers are employed, the cost of use is often subsidised - unless the country has developed to a point where this new road is but one of many other cheaper alternatives. The costs of these roads are high, but no government worth its salt passes the full cost to the user. We built our physical roads in Singapore on that model.

Yet when it comes to the critical age of the Internet, we have farmed out infrastructure development to the private sector, to the highest bidder there is. And the winner invariably has to pass the final cost to the consumer, on top of his margin of profit (which will of course be high also if he has few real competitors).

Sir, it is commendable that the Government has broken SingTel's monopoly on broadband infrastructure, and we are fortunate that the technology itself has improved sufficiently for there to be more than one non-telco competitor. You see, Sir, duopolies and cartels can be as harmful as monopolies. And yet in our first days on the Superhighway, we had two monopolies in SingTel and SCV. It was one or the other: ADSL or cable. Mutually exclusive. And until we have alternative copper wire networks owned not by SingTel, there is still a chokehold on the supply. Whether it is Pacific Internet or Superpromises Internet - they all have to buy space from SingTel, whose access costs can kill off the budding competitor, or whose business practices will ensure that the budding competitor cannot survive one day beyond the deadline for paying up his phone bill, or whose control of the lines and the technology could ensure that subscribers of cable, for example, would not be able to interface with certain services and content hosted on SingTel servers. Result: you have to get both ADSL and cable.

As for content, Sir, it would seem very much a private sector problem. After all, when the roads are built, it is the private sector which puts up the cinemas, shopping malls, petrol stations, bowling alleys and whatnot. While this is largely true, I would like to remind Members that what the EDB has done is to make Singapore a thriving manufacturing centre by giving grants, tax breaks and various other incentives to bring investors to Singapore, and not just building industrial estates and science parks. We formed the EDB to help them also to smooth over the rough passages so that they will not trip over the carpet in some bureaucrat's office.

The Government has given itself a target of 400,000 users of broadband by end 2001. The thinking of course is that a critical mass of this size is important so that broadband providers would find a sufficiently large market base to roll out pilot projects. Again, this is a commendable move. But with broadband charges going up, how is the Government going to achieve that target?

Sir, may I take the liberty to suggest some possibilities for the Minister to consider? (1) We should, if we cannot reduce charges, continue to give subsidies to people who sign up for broadband access. The current subsidies end on 1st April. The scheme should be extended, and better still, the subsidy rates increased.

(2) Free broadband access should be given to all Community Children's Libraries (CCLs), Residents Committees (RCs), community centres (CCs) and clubs in Singapore. And when the access is easy and the presence of the broadband services ubiquitous, people will grow familiar with broadband. Familiarity drives out fear and the biggest barrier to growth will be gone. Soon everybody will be using broadband as comfortably as they do with the ATM or the fax machine today. The Government can pay the full costs of, say, two accounts per RC or CCL and, perhaps, up to five accounts per CC.

(3) EDB-type incentive programmes and tax breaks should be given to content providers to provide content on our broadband network. The IDA should go on a roadshow round the world to attract talents and investors here to develop the content industry. Venture capital and seed funding should be freely and liberally available to start-ups to enable them to try out risky innovations and experimental ventures. Tax deductions and exemptions should be available to those who risk their capital this way. Not every cent we have should go willy-nilly into the still-nebulous one basket called "life sciences".

(4) The Government should seriously consider pumping in more resources to develop the movie industry, the graphics and animation industry, the music industry and the software industry. We should not only devote monetary resources to build up our local giants but also liberalise immigration policies to attract talents to come to Singapore to dig for gold in these here streets of Singapore. Our schools and institutes of higher learning should initiate courses to train such of our youths who are inclined that way. We should put the stars in their eyes and take away all the barriers in our educational system (or in their parents' expectations) so that they will venture out to work in such unconventional, untraditional jobs and industries. Perhaps, MediaCorp or MediaWorks can give out scholarships and guaranteed jobs - the way our GLCs did when they developed our fledgling airline and shipping line so many years ago.

(5) There should be a tougher stance on anti-competitive practices. The regulator is too congenial. Hence, there is inadequate incentive for self-regulation. Without some painful elbowing in the sides of the industry players, nothing will move. Perhaps, the winners of the 3G licences could be given a 30% discount if they can devote resources to building up a credible industry association, or watchdog body, to assist the IDA in its regulatory activities.

Finally, Sir, would it be possible to give tax breaks to companies which come up with innovative uses of broadband in their business? It should not matter in this case for the tax break whether they have devised new content or a new way to provide value-added services or simply to do their own work and business better.

We need every hand at the helm as we steer our ship into the murky waters of the broadband future. I hope the Minister agrees with me.

Mr Chng Hee Kok: Sir, the successful development and implementation of broadband network is a must if the country is to compete with the rest of the world. A broadband network used by the greatest number of Singaporeans will not only improve our lives, but necessary for business and the running of e-Government. I can safely say that this will determine and sharpen our long-term competitiveness as a nation. In the business environment of tomorrow, a good communication system is no more than just a telephone system that works. It is the ability to transmit and receive high volume of digital information that defines the competitive edge of nations. Therefore, when other countries in the developing world are floundering, we must take every opportunity to move ahead.

But, Sir, not all countries are floundering though. South Korea, not a country strong in the English Language, has taken to broadband and the Internet like fish to water, despite not quite coming out of the Asian financial crisis. Today, there are no less than 3.4 million subscribers of broadband service. When I visited Seoul in November last year for a trade show, scores of Korean companies were on display developing software for Internet. Look right and left and one cannot help but see the URLs instead of company names on most commercial buildings. We do not see that in Singapore.

Today, in Singapore, we have no more than 300,000 subscribers. We read of slow service complaints in the Forum pages of our dailies. I understand that the speed of the SCV service drops to as low as 26 kbps. A dial-up modem now can get you something like 56 kbps. Is it due to the fact that SCV is buying insufficient bandwidth from SingTel, a point which was made earlier by Prof. Toh See Kiat?

Sir, besides slow service, there are also complaints that it is expensive. Effective from next month, we all know, it is going to be even more expensive when the subsidy from the IDA is removed. This will be a bigger impediment to the growth of broadband. Is the Government not concerned about this? Is it not the Government's duty to fund its further development? If broadband is so crucial to our long-term well-being, the question that comes to mind is whether the Government is doing enough. Maybe not. Broadband infrastructure is akin to the building of roads and rolling stock of our MRT. One can imagine where we will be today if we charge the full cost of the roads and rolling stock to the consumers.

Sir, since 3G is also a piece of the broadband jigsaw, we have to develop this with the concept of road building in mind. Instead, we can readily see where the Government is heading. The Government is trying to squeeze as much out of the consumers on the front end by setting a high reserve price for the coming auction, despite what the Minister said that the price has now dropped to $100 million. He has argued that, just only a month ago, it was going to be $150 million. In other words, this technology moves so fast and prices have moved just as fast. But having said that, Sir, even if we reduced the reserve price to $100 million, industry sources say the minimum bid price, if based on $100 million, works out to some US$60 for each Singaporean. This compares to Switzerland, where the bids tumbled to US$17 per citizen, a point which I raised at Question Time few weeks ago. The Minister was arguing why that is economically correct. I think by the time the tender comes out and maybe give another month, hopefully, we will see something like $50 million if we agree to adopt the road building model. In other words, we have to create the broadband, both wireless and non-wireless. And if the development of broadband is really necessary for the long-term viability and success, then I think we have to adopt a different business model. In this case, the road building model is really best suited for our needs because the country does not really need the money. What we need is a system in place and worry about getting the money later on, not getting the money upfront.

The Minister of State for Communications and Information Technology (Mr Lim Swee Say): Sir, I thank the Members for their interest and comments on the broadband development in Singapore. Basically, Mr Chay Wai Chuen, Prof. Toh See Kiat and Mr Chng Hee Kok asked about where are we today, in terms of take-up rate, content, application development, cost of access, subsidy, quality of service, and so on. They would also like to know what are we doing to sustain the future development of broadband in Singapore.

Sir, if I may respond broadly from two aspects. Firstly, where are we today, and secondly, where do we go from here. Firstly, where are we today? Are we in the nightmare scenario, as painted by Prof. Toh See Kiat? Sir, I do not think so. As pointed out by Mr Chay Wai Chuen and Mr Chng Hee Kok, we are among the first countries in the world to embark on broadband development way back in 1997/1998.

Today, our efforts in promoting the use of broadband are bearing fruits. For example, the number of broadband users in Singapore has more than doubled from 100,000 in December 1999 to over 270,000 by the end of last year. Mr Chng Hee Kok mentioned the fast growth in South Korea. He is right. South Korea is making tremendous progress in the adoption of broadband. But if you look at Singapore's statistics, we have not performed any worse either. In fact, 270,000 broadband users work out to about one in six Internet users, meaning that out of six Internet users in Singapore today, one is a broadband Internet adopter. This penetration rate places Singapore among one of the highest in the world.

Prof. Toh See Kiat commented that S-One today is a road to nowhere. Sir, I am happy to report that this is indeed not the case. Initially, the main attraction of broadband Internet was to provide a fast access to narrowband Internet. This was how broadband Internet was positioned in 1999 and 2000.

6.00 pm

But, today, the situation has changed tremendously. Take, for example, the case of Singapore. We now have more than 300 applications developed in Singapore on broadband Internet. This is an increase of 50% from a year ago. If we were to go to Singapore ONE today, we can see very interesting applications and contents relating to, for example, online newspapers. And these are not just the narrowband newspapers. These are multimedia, rich content and rich media newspapers.

If we look at e-learning applications, again, these are broadband-based multimedia. For lifestyle entertainment, we can look at e-magazines. Again, they come in all kinds of content - video, music and so on. Cyber shopping, it can now be conducted in 3D; video and KTV - Chinese, English, Malay and so on - they are now available. Lately, companies are using S-One to do product marketing through the use of streaming video. On the whole, I would say that S-One is certainly not a road to nowhere. Can it be better? Of course, it can be better.

On the comments that subscription to S-One broadband costs an arm and a leg, I do not think this is the case. Sir, in the last one year alone, we have seen the cost of broadband access coming down very rapidly. As an illustration, the cost of unlimited broadband access on cable TV, through SCV, has now fallen to $66 for those who are cable TV subscribers, and $76 for those who are non-subscribers. If we go to SingNet, for example, we can now get 25 hours of broadband access for about $45 - cheaper than Hong Kong and comparable to the price in Taiwan. So, on the whole, the cost of broadband access in Singapore is as cost-competitive as any other country we can find.

Of course, I note that some Members are concerned that the cost of broadband access may go up on 1st April 2001, with the reduction in Government subsidies. Sir, let me just take a few minutes to explain why the subsidy was there in the first instance. In 1998/1999, when we wanted to promote the use of Singapore ONE and broadband in Singapore, the take-up rate was slow because, exactly as Prof. Toh See Kiat mentioned, it was a road to nowhere. There was no content, no application. So there was no reason for subscribers to go on broadband Internet. But, if we are not able to grow the user base, the application and service providers are not going to develop their applications. In order to break this cycle, we decided to jumpstart the user base in Singapore.

The Government, therefore, decided to subsidise, firstly, the cost of the modem. We subsidised 70% of the cost of broadband modem to the users. Secondly, we provided subsidies on the cost of International Leased Circuits (ILC) because, in the case of Singapore, many users access contents that are hosted in the USA. ILC is therefore a high-cost item. Before we liberalised the telecommunications market, ILC cost in Singapore indeed was higher, compared to Hong Kong and other countries. So we decided to break the chain by subsidising cable and ADSL modems, as well as the cost of ILC. Because of the subsidies, we were able to expand the base of the broadband users to where we are today - 270,000. Having achieved this 270,000 base, our assessment is that we have done enough in terms of creating a critical mass of users and, therefore, we decided that it is now time for the market forces to take full effect. That is why, effective from December last year, we removed the subsidy on broadband modem and, on 1st October this year, we will remove the subsidies for ILC so that competition can take over.

Does this mean that the cost of broadband Internet will now increase to beyond the affordability of the users? Again, Sir, we do not think so. Firstly, for the early adopters, we will continue to subsidise the cost of access to broadband Internet. For example, we are now working with the Ministry of Education on a programme called FastTrack@School, where we are experimenting with broadband Internet and multimedia content in the schools. Sir, about 27 schools are now on this programme. And we will continue to provide subsidies and incentives to these users under this programme.

For the mass market on the whole, we expect the charges for broadband Internet in time to come to become even more attractive and, at the same time, the quality of service to improve for at least two reasons.

Firstly, the liberalisation of the telecommunications market has led to, and will continue to lead to, further reductions in the cost of International Leased Circuit. This means that with the lower cost of ILC, the cost of broadband access should come down.

Secondly, we have put in place an open access framework to ensure that the broadband infrastructure will not be monopolised by any particular broadband access service provider. For example, since October last year, we have enforced open access on ADSL, the telephone line owned by SingTel. So there are now four broadband access service providers providing ADSL services, and they are: SingNet, Pacific Century Cyberworks and Pacific Internet, in addition to SingTel Magix. In time to come, we believe that, with open access, there will be more broadband access service providers in the marketplace. Through this more intense competition among them, cost will come down and the quality of service will go up. We think this is a more sustainable way of growing the broadband market in Singapore, instead of relying on Government subsidies all the time.

Sir, looking ahead, where do we go from here? I share the point by Prof. Toh See Kiat that we do have a dream. Our dream is very much like the dream that he has described, but maybe with one difference. That is, it will not necessarily be centred around computers alone. We believe that in the world of the future, computers would be one device, but there will be many other broadband appliances. In fact, with broadband Internet, 3G, and Internet appliances, the day will come when Singaporeans will be able to have access to broadband Internet, multimedia content any time, any place, using almost any device, to access almost any form of media.

In that regard, we fully agree with Mr Chay Wai Chuen and Mr Chng Hee Kok that broadband development will have a positive impact on the long-term competitiveness of Singapore. This is why we do look at the future development of broadband Internet with a lot of priority and emphasis.

I would just like to highlight three areas where we will continue to intervene, facilitate and develop.

The first area of priority is in content development. We intend to continue to speed up the development of innovative contents and pioneering broadband applications in areas such as e-Learning, edutainment and e-Home. Under the incentives programme that we provide, we have, for example, programmes for new media and contents enrichment. We will continue to incentivise the industry and the user organisations to move in this area.

The second area of priority is in content hosting and application development. We will continue to attract more regional as well as the global players to come to Singapore to host their broadband contents out of Singapore, not just for the Singapore market, but also for the regional and the Asia Pacific market. In fact, we have already in place a programme known as the International Contents Hosting Scheme whereby we provide very strong incentives for all these broadband contents owners to bring their contents to Singapore for the Asia-Pacific markets.

Our third priority is in the area of content delivery. We are going to continue to facilitate and encourage the telecommunications operators and building owners to bring broadband infrastructure to more buildings, hotels and commercial buildings, so that, in time to come, all businesses would have easy access to broadband contents from their workplaces.

Sir, in conclusion, we are committed to continue to build on our broadband foundation which we have developed over the last three to four years and will continue to embrace new broadband technology, such as the 3G and so on. At the end of the day, it is our objective and priority to make sure that Singapore will remain a leading nation in broadband development as we pursue the vision of the new economy and an information society.

Mr Chay Wai Chuen: Sir, on the programmes to bridge the digital divide, the Government has committed to spend about $25 million over three years to help our community outside the schools to bridge this so-called digital divide, and various languages, as media, are also used in order to facilitate this access to the world of Internet.

The 2-roomers and 3-roomers in the HDB estates should be given access to this use of Internet readily. Access to the world of Internet may mean many things. Definitely, we can start by having a PC and get connected. Poorer families may have no such access in having a PC, and paying for the subscription can be quite costly.

Access can also mean proximity to community centres or such programmes as currently run by IDA or funded by IDA, CDCs, CCMCs and so on. Will the Minister consider extending this project to Residents' Committees and PAP Community Foundation Centres, with co-funding of such projects? I feel that extending to the RCs and the PCF centres is a good way of reaching out at the grassroots level and provides a useful medium for grassroots to keep close to the people. Also, RCs and PAP Community Foundation Centres, being in the heart of the HDB estates, are nearer and give convenience to the children in the nearby flats.

Mrs Lim Hwee Hua (Marine Parade): Sir, the Infocomm Development Authority or IDA calls it work in progress: society being hooked up. Infocomm technology has powered up all aspects of life in Singapore, from playing to learning, to paying bills. By the same token, technology has also invaded all aspects of our lives, regardless of our degree of preparedness or understanding. The ability to employ technology or, better still, to master the use, is of course desirable, but the inability to use or being intimidated by the very pervasiveness of technology can be daunting. This is the reality today for Singaporeans, where the pace of life has been blistering and, the ability to embrace, achieved to varying degrees.

Indeed, as what the Minister has opined, whether we succeed or not will depend on the active, committed and civic-minded Singaporeans who make a difference. As we are aware, the Government has dedicated $25 million over the next three years to "dot.com" Singaporeans. But the bulk of these efforts, like the current e-Celebrations event, would still rely on an awareness and a willingness on the part of Singaporeans to participate.

Having said that, I cannot fault the IDA in terms of programmes to reach out to the various people across a wide spectrum. In fact, I would like to urge the IDA to continue to actively engage in efforts with the grassroots and community organisations. However, I believe the Government itself should go beyond the mere provision of funds and schemes by extending more widely, through public education through the media.

Sir, I recall when Hong Kong was trying to promote the use of electronic point-of-sale transactions back in the 1980s, they ran carefully-scripted TV campaigns, subtly addressing potential concerns and complete with a Cantonese jingle that even the most conservative of housewives would hum. I would like to urge the Minister to consider doing something similar for new developments which will change the way we live and work, for example, what 3G is all about, or what broadband access means. And this should not be merely discussed over a programme over ChannelNews Asia, but extensively carried over TCS 5, 8 and Suria, and the local papers. Some degree of understanding will, I believe, go a long way towards helping those who are less tech-savvy not feel so alienated.

Mr Yeo Guat Kwang: Sir, to enable Singaporeans to rise up to the challenges in the new economy, they must be computer literate and Internet savvy. However, there is this digital divide between the high and low-income households, and the well-educated versus those who are not. Our HDB heartlanders, older workers and housewives are the group of people who may not have access to computers and, thus, lag behind in embracing an e-lifestyle.

The NTUC realises this importance and has pledged to train 10,000 union leaders in basic IT and Internet skills. To date, a few thousand workers have completed their training. NTUC has even tied up with PeoplePC to adminster a programme to give union members access to computers with all the support network for less than $1 a day.

However, union members comprise less than 30% of the total workforce in Singapore. I would like to inquire about the plan of the Government to bridge this digital divide for our HDB heartlanders, particularly the older workers and housewives. Is the Government planning to have concrete and structured IT public education programmes to benefit our HDB heartlanders, older workers and housewives? This would definitely speed up the process of the Government's initiative to bring infocomm to all Singaporeans.

I am encouraged by the efforts made by some of the grassroots organisations, VWOs and churches to contribute, in their own individual ways, to educate the public on IT. However, there is a limitation to their outreach. I would like to suggest the Government develop a national programme on IT public education, riding on the CDC, PA or PCF network, so that all Singaporeans can have an opportunity to embrace the e-lifestyle. 6.15 pm

Mr Chng Hee Kok: Sir, I must first compliment the Ministry and, in particular, IDA for their efforts in promoting IT and e-lifestyle amongst Singaporeans.

The e-Celebrations, which were just inaugurated in March last year and now held for a second time this year, have and will, I believe, create a greater awareness of IT and adoption of e-lifestyle amongst Singaporeans.

I fully support campaigns such as e-Celebrations in promoting IT through events and mass media. However, such events as e-Celebrations here and e-Exhibition there, while creating general awareness, may not by themselves produce substantial permanent change in the people's ability to master or sit in front of the computer. After creating awareness, what we need is a more sustained effort at the grassroots level to reach out to the housewives, retirees and those who are not so well-educated. I suspect that these groups of people may not be reached by the mass events such as e-Celebrations. They are probably even afraid to go to such an exhibition. There is an inherent fear among these people to anything that is high-tech, more so, if the events are held in town centres, and launched in Suntec City, and not in an HDB heartland or HDB neighbourhood.

Sir, on Monday, I highlighted in this House our experience in setting up the Marine Parade CDC Fengshan IT centres. Sir, if you will recall, you are one very strong supporter of the particular setting up of these IT centres as Mayor of Marine Parade CDC and for that, we all can jointly celebrate what we have done. The success we have in reaching out to some 25,000 persons going through a training programme in the last three years and equipping them with basic IT skills, in my view, is grassroots action at work and is most encouraging. I have also related some real life success stories of housewives and retirees to show that the grassroots approach is perhaps the best way to reach out to this group of people. When we talk about digital divide, those on the wrong side of the divide can be brought up to the main stream and this can be done.

Therefore, we must bring IT education to the HDB heartlanders. We have very successful IT programmes. Perhaps, if the Minister would like to see our report on what we have done, I would be more than pleased to furnish him with the report on what has been done in Fengshan. It is my pleasure to give him such a report.

I am therefore calling on the Government to consider more funding for grassroots organisations such as the CDCs, the CCCs and RCs to promote IT to our residents. The funds can be used to set up centres in the neighbourhood to provide IT literacy courses. We will bring IT to their doorsteps. The funds can also be used to promote computer ownership. For instance, at Fengshan, we have refurbished and given away 200 old computers. Part of these funds can be used to upgrade some of the old computers which would be given away or sell them at a much lower cost to residents and, in this way, we can help low-income families to own computers.

I believe such initiatives at the grassroots level will go a long way to help heartlanders to overcome their fear of IT and bring them on board. This is one way which we can conquer the digital divide.

Mr Yeo Cheow Tong: Sir, I would like to thank the four Members of Parliament who have spoken on the digital divide and the importance for the Government to act strongly to narrow the digital divide.

Sir, the MPs have all identified the key groups that need to be addressed, ie, low-income earners, older workers, housewives and senior citizens, and that we need to bring the training programmes closer to them by bringing them into the HDB heartland in order to make it convenient for them to gain access to the training facilities.

Sir, they have also pointed out that we should not just take single approaches or use single events like the e-Celebrations as a means of reaching out to them. I totally agree with the remarks made by the four MPs. What they have talked about reflects the complexities of the issue, and that is, this is a multi-faceted challenge and we cannot use a "one size fits all" approach. The challenge is how to design programmes that can enable us to reach out to the four groups that we are talking about. And here, I think the "Many Helping Hands'' approach is the correct one.

Let me first give Members an idea of what is being done so far and what do we see for the future. One key programme for helping the low-income families is something which Mr Chng Hee Kok had also mentioned, and that is, giving free PCs to low-income families, PCs that are bundled together with free Internet access as well as free training. We have been working with the various self-help groups and the grassroots organisations like Mendaki, CDAC, SINDA and also with a few CDCs. I am happy to inform Members that so far, we have given out a total of 2,000 PCs free to the families concerned and we would be happy to work with Members here, through their CDCs, to further expand this programme in their constituencies. NTUC is also helping, as mentioned by Mr Yeo Guat Kwang, to bridge the digital divide by making ownership of PCs affordable. The NTUC EasyPC Scheme is a very commendable one. The union members can buy the PCs by paying only a dollar a day and the response so far has been quite encouraging. I hope NTUC will continue to push this Scheme.

On the Government side, the Ministry of Manpower and IDA, together with the NTUC, are also spearheading certain training schemes and these schemes are all heavily subsidised by the Skills Development Fund, Skills Redevelopment Programme, and by the NTUC Education and Training Fund. As a result, on the part of NTUC alone, they have managed to train over 70,000 workers over the last three years.

For homemakers and senior citizens, we have the One Learning Place in the Toa Payoh Community Library. This offers infocommunications training courses which are tailored to meet the individual needs and capabilities of the trainees. I think the homemakers and senior citizens have found that the training programmes are very useful because they can take those training programmes in the language that they are comfortable with. To-date, the One Learning Place has already trained 20,000 housewives and senior citizens. I am also happy to say that the People's Association, on its part, also conducts basic IT training programmes for the elderly as well.

Sir, we also have quite a few other programmes. I do not know whether Members have heard of the IT coach. The IT coach goes around to the CCs, schools and shopping malls. The IT coach is a coach that is equipped with Internet access facilities and PCs, and it visits the shopping malls or the CCs and the participants are given a very short training programme that lasts between half an hour to one hour on the use of the PC and access to the Internet. It is a very quick awareness building programme. So far, the IT coach has already serviced over 60,000 people.

All these are part of what we call the "Many Helping Hands" approach. Where do we go forward from here? I agree with Members that we have to bring the programmes to the heartlanders and we are going to work very closely with the CDCs to identify centres that can be set up and for the funding support to be given. Because some of these programmes can be quite expensive, it will be difficult for the MPs on their own to drive the programmes. So, by working with the CDCs and the IDA, I think we can provide the support to bring those programmes down to the CCs and later on to the RC level. I will encourage those Members who are keen to encourage their CDCs to begin the dialogue with IDA. I can assure you that we will be giving you the full support.

Sir, another programme that we are looking at, which is in line with what Mr Yeo Guat Kwang has mentioned, is a national IT training programme. Here, we are talking of a national IT literacy programme which would be a 10-hour programme, very well-structured and drawn-up, and we expect this programme to train 350,000 people over the next three years. The key drivers of this programme will be the National Library Board because the National Library has a very good network of community libraries and will be leveraging on their facilities and their locations. The other members who will be driving this programme will be the People's Association, NTUC, the self-help groups like CDAC, SINDA and Mendaki. With all these multiple approaches, we should be able to further narrow the digital divide.

Dr Tan Boon Wan (Ang Mo Kio): Sir, the dot-com frenzy has ended abruptly and in the process dashed many hopeful dreams but regardless, communication and information technologies will relentlessly move on to change our lives and our organisations and institutions. This, we must remember. We must therefore continue with our efforts to adopt information technology to transform for the new economy. The dot-com saga must not distract us.

But I have this nagging feeling that the national impetus towards adoption of information technology has somewhat lost steam. Have we really lost the drive? For example, are we satisfied with the penetration of usage of broadband? My fellow parliamentary colleagues have spoken much on this issue and the Minister of State, Mr Lim Swee Say, has replied as much. But I believe that there is much more that we can do, and we must do. I therefore want to add my voice to the appeal to the Government to seek even lower costs of broadband access and to raise the quality of service. I still feel that the broadband access charges are high, even though the Minister of State has said that the prices are internationally competitive. The cost of ADSL and cable broadband access remains outside the means of the average household.

What progress have we made with e-commerce? The Government has used itself to spearhead this drive. How many Government services are now available on-line? How much of the transactions have really gone on-line? My gut feel is that we have made some headway in the public sector, but not much in the private sector. In the private sector, how many transactions are available on-line? How much has actually gone on-line? I know that some supermarkets have website ordering capabilities. How many other companies have emulated them? What else can the people expect from our companies? Do we have a secure and user-friendly on-line payment system which users can trust and use? More broadly, what progress have we made in e-banking? Again, personally, I feel it is not much. Do their own experience and those of foreign banks which have found the journey into e-banking rough disillusioned our banks? I have read that foreign banks have encountered great difficulties. Some have scaled down their on-line operations and others have even folded. 6.30 pm

Sir, it is my fervent belief that, at least for us, the new economy is inevitable. The questions asked earlier may not be easy to answer but thereupon the outcome of our efforts to become an information society. Besides the need to build an information infrastructure, we need our people, organisations and institutions to be information oriented. I am glad to hear the Minister explain the effort made to make our people computer literate. This necessitates mindset change among all parties - people, workers and captains of our industries and institutions. Much work needs to be done by the nation, by everyone, to move into the information age. I urge that we do not relent on this task, and especially in the discouraged atmosphere of the mauling of the dot-com companies and of shattered dreams, that the Government takes the lead in maintaining the momentum of this drive towards the information society in the new economy.

Assoc. Prof. Chin Tet Yung (Sembawang): Sir, rumours that e-commerce is dying or has died are, as usual, greatly exaggerated. I think e-commerce is going through a bad patch, and several dot-com companies have disappeared. But Singapore is positioning itself as an e-commerce hub, and many of us who have used e-commerce, including e-banking, have found it to be somewhat akin to an addiction. Like opium, you take a bit, you want to have more. But, like opium, you always have this nagging feeling that you are doing something not quite right.

Where is this sense of insecurity coming from? I think it comes from the fact that there is a genuine fear that whatever you disclose to a dot-com company for your purchases and so on, whatever personal information may one day be compromised. And this fear is actually a very real one. Anyone who has used e-banking or e-commerce will always be looking at his credit card numbers and saying, "Where will this reappear next time?", whether it be in Japan or in other parts of the world. So, one of the reasons that is fairly well documented why consumers are diffident towards e-commerce is their fear that their personal information may be disclosed, and that if we want e-commerce to move ahead, we will need to come out with a clear policy on consumer security and privacy.

Sir, this issue should be tackled sooner rather than later. There is a view that we should allow the industry to regulate itself, but it is likely to be a recipe for inertia or long-term wrangling as to what the proper procedures should be. In the US, they have virtually given up on that, and there are currently eight Internet privacy Bills to be considered by the new Congress. And I would like now to ask the Minister to take action to determine the policies of consumer privacy as a means of encouraging the growth of Internet commerce.

Sir, let me just provide a familiar example of the need for privacy. Many Singaporeans here, including Members of this House, must have used Amazon.com to order books, and sometimes other products. In the early days, Amazon.com would just take your order and send you the articles you ordered, and that would be the end of the transaction. But, gradually, the company developed ways and means to allow you, first, to keep track of your order. At the same time, it kept track of what you ordered. So, the next time you log on, they will say, "Hello, welcome again. Here are our recommendations for you." And there will be a new list of books which they have tracked, which they will then suggest that you look at. Now, they have gone one step further. They kept track of everyone as a group, so that they can recommend to you books which others of similar taste have ordered, so that you too can be advised as to what else you can order. In this way, they have, of course, increased their commercial appeal.

Sir, this type of matching of personal data and so on suggests privacy risks, and it also suggests that companies of this type will build up huge databases which one day could be sold for profit. Of course, I thought that since I was ordering from Amazon.com, I have no worries of this happening. Until recently, I heard from a report that Amazon.com was about to be acquired and that if it were to be acquired, it was going to sell its customer database. Now, they come in for some very severe criticism, and they have decided not to do that. But this actually suggests that there is a very serious problem and that if we want e-commerce to grow, we must also have the legal infrastructure in place to make sure that individuals, consumers who use e-commerce, should have the confidence to do so. And this is particularly so in the case of e-banking. But it is also the case where you buy health products, for example, on the Internet. If you make an order for viagra through the Internet, you might be worried what people might think if this information were to get into the public domain, and you would like to see some privacy provisions in place for this sort of thing.

Sir, what I would like to propose, as an initial step, is that all companies which are involved in e-commerce transactions should be required to state clearly and simply their privacy policy, ie, what they will do with the private information that they collect from each customer. The customer can then opt in or out, depending on whether he sees the company's policy is good or bad. We should encourage companies, particularly those thinking of going into e-commerce, to develop a best practices approach to Internet trading, one aspect of which is clearly a good privacy policy. But I certainly hope that the Ministry will study and quickly bring before this House a Bill to give a statutory basis to privacy on the Internet. I am sure that e-commerce will benefit as a result.

Mr Inderjit Singh: Sir, the Prime Minister recently talked about the Asian IT Belt. Could the Minister elaborate on what the plans are to make this IT Belt a reality, and how Singapore will benefit from it?

Mr Yeo Cheow Tong: Sir, with your indulgence, just now in my reply, I missed giving a reply to Mrs Lim Hwee Hua's remarks. I want to thank her for her support and for her suggestion that we should go beyond just all those events, in terms of creating awareness, but to also use the media - TV, radio, newspapers. Sir, I am happy to inform her that last year, in line with the inaugural e-celebrations event, IDA had also utilised TV commercials to widen the level of awareness amongst people. Five TV commercials were used, and they were telecast over Channels 5 and 8, and touched on the benefits of e-shopping, e-banking, e-communications, e-learning and e-entertainment.

The post campaign survey showed that the level of awareness of the commercials was very high, and that there was a 72% penetration amongst our target groups. So, I totally agree with her that the use of the media is very important. And for this year's e-celebrations, we are doing the same thing. We are having a 5-week 6 TV commercial programme, and this time it will be broadcast in the English, Chinese, Malay and Tamil channels. This year, the outreach will be even greater. And we will definitely review the success of this programme and, if need be, we will have it more often.

Mr Lim Swee Say: Sir, Dr Tan Boon Wan is concerned that with the recent burst of the dot-com bubble, our national impetus in IT may lose its steam. Not too long ago, people left their jobs to rush into dot-com. Today, I was told that "dot-com" is known as dot-gone, B-to-B means back to banking, and B-to-C means back to consulting.

However, I want to assure Dr Tan Boon Wan that as far as the Government is concerned, we look at the evolution of dot-com development as a structural change. It is not something that will come and go away, because we believe that the change will continue for a long, long time to come. Over the last 20 years, we have had this national impetus to keep Singapore up to date with IT, and we intend to continue to do so. In fact, under Infocomm 21, we are pursuing the vision of an e-economy, e-society as well as e-Government. We do intend to reinvent the economy, the society and the Government and public sector, so that the 3P sectors will be able to progress together and we can all live a better life in the infocomm age of the future.

Dr Tan Boon Wan asked how do we make sure that consumers would trust and use e-commerce. This is also the same point raised by Prof. Chin Tet Yung. As far as e-commerce is concerned, again, we take it very seriously. In 1998, we announced the e-commerce master plan. Subsequent to that, we formed a multi-agency committee on e-commerce action plan. The whole idea is to turn the master plan into real action. I am happy to say that over the last 1-2 years, all the Government agencies were able to work together in a concerted manner. We also work very closely with the industry as well as the people sector under a 3P partnership programme to pursue our vision in e-commerce.

As Prof. Chin mentioned, and also pointed out by Dr Tan Boon Wan, it is very important that we create trust and confidence in the consumer in e-commerce. Privacy is a real concern. It was once said that to convey personal information over the Internet, whether it is your credit card number and so on, is like undressing in front of the window with the lights on. You never know who is looking at you from the other side.

Sir, having said that, what do we do? There are basically three models in regulating privacy. The US believed in self-regulation. Europe believed in government legislation. And I think, over time, both have realised that the two models will not work. In the case of US, the pace of self-regulation is too slow. In the case of Europe, to go for government legislation is too inflexible. In fact, the world is converging towards the concept known as co-regulation, meaning that it is a combination of self-regulation and government legislation.

Sir, in this regard, I am pleased to share with this House that the Ministry of Communications and Information Technology has decided to pursue this concept of co-regulation. On the part of the business community, just a few days ago, my Minister announced the formation of an industry-led National Trust Council. They are in the process of formulating a privacy code for the private sector to adopt. And I will convey to them Prof. Chin's suggestions, eg, for all companies to state clearly their privacy policy.

On the part of Government, we have taken steps to study further into this privacy issue. My Minister has initiated a task force within the Ministry. This is an inter-agency task force chaired by our Permanent Secretary. The task force will study the impact of the Internet and e-commerce on data protection and privacy. It will take into account international developments in this area and will come out with a recommendation regarding self-regulation through the privacy code of the industry, as well as to examine the need for the introduction of a privacy legislation.

The Chairman: Order. It is 6.45 pm.

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

Mr Yeo Cheow Tong: Sir, I beg to report that the Committee of Supply has made progress on the Estimates of Expenditure for the financial year 2001/2002, and ask leave to sit again tomorrow.

Mr Deputy Speaker: So be it.