ESTIMATES OF EXPENDITURE FOR THE FINANCIAL YEAR 1ST APRIL, 2001 TO 31ST MARCH, 2002 (Paper Cmd. 3 of 2001)

Order read for consideration in Committee of Supply [4th Allotted day].

[Mr Speaker in the Chair]

Head V -

The Chairman: Head V - Prime Minister's Office. Amendment No. (1). Mr Inderjit Singh.

Mr Inderjit Singh (Ang Mo Kio): Sir, I beg to move,

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

Sir, the Singapore 21 vision which we established two years ago would be an excellent guide for us to promote racial harmony, among other objectives, in our attempt to build a better Singapore for the future. Many Singaporeans were involved in the one and a half years' effort to define our vision for the future and the House also spent two days debating and accepting the principles of the S21 vision. Perhaps, many of us had high expectations of how the S21 vision would be implemented in an attempt to get to the ideals that we define. To many of us, the S21 vision has today been relegated to something like an on-going courtesy or keep Singapore clean campaign. We need to revive the implementation of the many actions identified within the S21 vision that was developed.

While we have done many things to achieve physical integration of the various ethnic groups in Singapore through policies like the Housing and Development Board housing policies, more could be done in trying to achieve true emotional integration or bonding amongst all races. We need to urgently build this bonding and trust among the various races through concrete programmes focused on emotional integration. This is even more important in our schools where children have the greatest opportunity to interact and learn about each other. Practices in some schools to segregate students into classes according to the mother tongue option they study are very detrimental to our efforts to integrate Singaporeans. Some schools do it for administrative convenience, but the convenience is causing tremendous damage with respect to building a cohesive multi-racial Singapore.

Sir, the ethnic-based self-help groups have achieved limited success, but much needs to be done. While improvements have been made in primary schools, in the secondary schools, problems still exist. A higher proportion of Indians and Malays go to the Normal and Normal (Technical) streams, as compared to the national average. Performance of Indian and Malay students at the "O" and "A" levels also did not significantly improve if we compare to the progress made by the Chinese community.

The second issue with the ethnic-based self-help groups is that we intentionally segregate and differentiate our children according to the races when it comes to helping them to improve themselves. We give our children the impression that people of their own kind are the only ones who care and will help them. For the smaller ethnic groups like the Indians and the Eurasians, such an approach immediately puts them at a disadvantage simply because they have less resources to mobilise, especially in fund-raising, to support their activities. While each of them do go to people of other races for funds, the proportion of funds that come from other races is very small, compared to the total sums that they collect. Because of the lack of appropriate resources, there is a limitation as to what they can do and to the quality of programmes that they can execute. This, perhaps, can explain why the Indians and Malays still have a long way to go to catch up with the national average of performance at the landmark examinations. This is a very dangerous trend, especially in the practice of meritocracy.

I fully believe in and support the meritocratic practice in Singapore, but when such a practice is based on academic performance and when the ethnic minorities are the ones that perform worse than the majority ethnic group, the result may lead to a feeling of discrimination among the minorities when they are not selected for key Government positions in the civil service or in the uniformed service. I therefore urge the Prime Minister to seriously consider restructuring the ethnic-based self-help group concept to one that more effectively gives equal opportunities for improvement to all races.

It is about time that we merged the various ethnic-based self-help groups into one, or to create an umbrella body which oversees all the ethnic-based self-help groups. One possibility is to consolidate certain activities, like fund-raising, administration and others that make sense from each of these groups, while keeping the operational arms of each discrete. I concede that there will be more success in reaching out to people if this is done via the ethnic grouping route, but perhaps, it is only this portion of reaching out that should be kept separate while we consolidate the rest of the functions for the various groups.

Finally, I feel that the younger generation of leaders needs to do more to have frank and open discussions with Singaporeans of all races, especially among the leaders and the minorities in Singapore, to understand the feelings, frustrations and aspirations of each community so that they can be better understood and explained. I attended the dialogue session that the Senior Minister held with the Malay community about two weeks ago and could not help but notice the trust and respect those who were present had for the Senior Minister and his views. It was years of interaction and understanding and emotional bonding that made this happen and possible. Such things do not get developed overnight. It takes many years and constant interaction to develop such a relationship. I look forward to this happening with the current and future generations of leadership so that the trust among the leaders and the members of the various ethnic groups and races can be built and strengthened upon.

Mr S. Iswaran (West Coast): Sir, multi-racialism is the cornerstone of Singapore society. We have expressed this credo by striving to forge a common national identity, yet allowing each community the space to maintain and evolve its own identity. But this is certainly a delicate task, especially as some may feel that the two are incompatible. But I think that in an ethnically diverse society like Singapore, it perhaps represents a pragmatic response to the challenge of nation-building.

Sir, one of the hallmarks of this Government has been its candid and forthrightness, both in its discussion of and approach to managing ethnic issues. It does not shrink away from saying it as it is, nor does it seek a politically correct veneer. So we publish educational and socio-economic data by ethnic groups, have GRCs and the like, and some find this candour inconvenient, if not a source of discomfort. But putting it out in the open offers our best chance of maintaining a balanced and objective dialogue.

Sir, self-help groups are another example of this forthright approach. They have been in existence for 10-20 years and are an essential part of Singapore's landscape. They perform an important function in seeking to raise the educational and socio-economic status of the disadvantaged within their respective communities. It is easy to take them for granted and to overlook the fact however, that they are ethnic in their focus and therefore are an anomaly of sorts within multi-racial Singapore. I was therefore glad that our Prime Minister recently sounded a note of caution lest Singaporeans misconstrue the Government's support for self-help groups as an endorsement for them to retreat into ethnic enclaves. However, I was concerned by subsequent reactions from the media that self-help groups should be merged and my colleague, Mr Inderjit Singh, has expressed similar views.

Sir, Singaporeans and the media are right to be concerned about the possible adverse impact of self-help groups on Singapore's multi-racial character. But I think they are wrong to conclude that therefore self-help groups should be abolished. Self-help groups tap into a certain sense of mutual help within the community to help the disadvantaged. CDAC, Mendaki and SINDA have shown that this can be a positive force for community upliftment and if we look at the statistics carefully, we will find that in all levels, there has been an improvement, even relatively speaking, over the last 10 years or so.

However, there is always the risk that it can easily degenerate into an ugly form of parochialism and segmented thinking. In essence, self-help groups operate in the penumbra between perfect integration on the one hand and ethnic segregation on the other. But does that mean we abolish them? I think not. Merging self-help groups will not guarantee a multi-racial utopia, yet, we would deny ourselves an effective vehicle to help the disadvantaged. Besides, there are hundreds of other clans, religious and community groups that will continue to exist that we cannot and we should not remove by Government fiat. However, I do believe Singaporeans are justified in wanting to know whether there are measures in place to curb the possibility that self-help group activities might be inconsistent with our national objectives. This is especially so given that self-help groups receive substantial support from Government in the form of financial and other resources. And it is important to know that these are applied in a manner consistent with our overarching national objective.

Sir, in that regard, I would like to ask whether there is a case for an oversight or coordinating body for self-help groups under the Prime Minister's Office, not a wholesale integration, but a body that can receive reports, be well-apprised of the activities of the self-help groups and use moral suasion on occasions when necessary. I think this would go a long way in reassuring Singaporeans that we have these entities which serve a useful social purpose, we recognise that they might, on occasions, go off from a tangent but that we have the measures in place to curb those instincts. Apart from this audit function, I think the self-help groups themselves might welcome such an oversight or coordinating body as it would serve as an important point of liaison between them and the various Government Ministries and agencies in order to launch coordinated efforts targeted at specific issues within the communities.

I would like the Prime Minister's Office to comment on this and the Prime Minister to comment whether he feels that such a coordinating body is necessary and whether such a body can then be set up.

Mr Zulkifli bin Baharudin (Nominated Member): Sir, there are Singaporeans who still wonder today why after more than 35 years of harmonious co-existence amongst the various races, the recent public discussions, especially on the recent Malay-Muslim issues, seem to suggest that we are having a more fragile state of race relations in Singapore.

Many, I think, have been lulled into thinking these issues are mainly related to our past, the historical baggage that our older generation carries. Younger Singaporeans, however, must be aware that they also need to better understand and manage the diversity of race, language and religion, not only in terms of our past experience, but how they will handle newer issues that will have ethnic implications and how evolving geo-political realities will affect us in ways different from our past. Younger Singaporeans will have to find their own personal relevance and experience and the meaning of racial harmony in their effort towards greater social integration. I fear that many young Singaporeans do not understand that the new and emerging issues can be far more divisive and serious than past threats and challenges.

People and groups are now better connected. Minority groups and racial and religious extremists can find comfort and safety with groups elsewhere outside Singapore. Already, we have seen how some domestic issues like education brought about reaction from people outside Singapore. What about issues that are potentially more divisive? For example, what if the digital divide that we talk about would also divide us along racial and ethnic lines? What if a particular ethnic community continues to feel left behind, in terms of education and other opportunities? There have been concerns about stereotyping of minority groups on radio and TV.

We have heard how and certainly felt very uneasy during recent talks of marginalisation of the Malay-Muslim community. There were concerns of discrimination in the past faced by job-seekers, or of older Malay-Muslims who feel especially vulnerable as they face future structural change in employment. These are extremely explosive issues which can be manipulated. Some countries like UK have race relations Acts to deal with such discrimination on racial grounds. It provides for avenues where people who feel aggrieved or discriminated by employers, for example, can get the necessary protection. It provides for a Code of Practice to ensure equality of opportunities in employment and education. It gives powers to investigate and provide for enforcement and prosecution of offenders. Other than the legal framework, it deals with how, for example, newspapers and magazines can reflect the diversity of arts, culture, even in promotional advertising. But, Sir, I am not suggesting that we have a Race Relations Act in Singapore, because I think nothing can be more damaging than to have such emotive issues being contested in court. So far, we have existing mechanisms to deal with such issues, and mainly through the goodwill of our community and political leaders. However, the essence of these provisions found in the UK Race Relations Act, I think, is useful to us, because we need to find new mechanisms to handle this in a more transparent way. And I repeat the call for setting up of a multi-racial agency, perhaps under the Prime Minister's Office, to deal with issues like this. Or it can be through the Presidential Councils for Religious Harmony and Minority Rights, which can be enlarged and strengthened to take a more proactive stand towards racial integration. 12.45 pm

So far, it is good to hear the various community organisations responding, saying that they will do more to enhance racial and ethnic activities. But it is one thing to have an agency like this to monitor and ensure that the state of race relations in Singapore continues to remain very healthy, very much like what the People's Association is doing to ensure that community centres do actually organise such activities, and perhaps penalise those who do not.

To such organisations, we can ensure that channels for racial integration are always there and adequately protected. We can have national education programmes in our neighbourhoods - in schools and in workplaces - to mobilise participation of all Singaporeans. The multi-racial agency can also be a body to manage the various accommodation and compromises that are necessary as we proceed towards racial integration. It is necessary to deal with such issues, because people who promote culture, tradition and sometimes religion have a missionary evangelical zeal towards their own culture and tradition, and makes accommodation and compromise very difficult.

Finally, Sir, our cultural diversities, including the role of ethnic and minority groups, are factors which, I believe, have and will continue to enrich and strengthen our society, both in culture, politics and economic prosperity. But there is no doubt that this very diversity can also become a very weak factor, and become a threat to social stability in Singapore. And it is for these reasons, Sir, I thought that greater attention should be given to this matter.

Mr Simon S. C. Tay (Nominated Member): Sir, I want to join those who have raised concerns that race-based self-help groups may inadvertently lead to segregation. Prime Minister Goh has recently encouraged them to work together. I think we all stand, in that sense, between these two extremes of segregation on the one hand, and merger on the other. And we are seeking ways, like the speakers before me, of how to help these separate entities become more cooperative, so that they have the conviction about their own ethnicity, but also the willingness and understanding to compromise when need be. So I want to focus on how we can offer incentives rather than merely exhortations.

The first suggestion I have for the Prime Minister's Office is that the Government should give funding. Government already funds dollar-for-dollar schemes for most of the self-help groups. To encourage multi-racial cooperation, Government should establish a new and additional fund. And where two or more self-help groups work together for programmes and events, this new fund would give them an extra dollar to match the expenses. In this sense, we should create financial incentives to help them work together. Exhortation works by moral suasion, but I think, additionally, practical measures to work together are important, because cooperation does take more time. It sometimes is more costly to cooperate because there are meetings, more administration, etc.

The second suggestion is to encourage people outside of a racial group to help. They can already give funds to that group, ie, if I am Chinese, there is nothing to stop me from pledging part of my CPF, etc, to another racial group - Indian, Eurasian or Malay. I think more should be done to encourage this and perhaps Government should give a tax benefit to encourage this.

The third suggestion I have is one of oversight. Some have suggested that oversight be from outside, from the Prime Minister's Office. My suggestion is that oversight should be from the inside. Government should encourage self-help groups to appoint more members of other races to their boards of directors and advisors. These people, of course, should have an understanding and empathy of the particular ethnic group, but they will be also able to bring in some other perspectives.

For the longer term, Sir, some would urge Government to consider setting a sunset clause to the self-help groups. I think there is some sense to think about this, because while there will always be people in Singapore who need our help, if our multi-racial efforts succeed over time, all of us as Singaporeans will be able to help them. Perhaps that is the view for the longer term, but I think it is important to prepare for that by step-by-step efforts.

Sir, I hope the Government will consider these suggestions.

Mr Ong Ah Heng (Nee Soon Central): (In Mandarin): Sir, we have been successful over the years in raising the standard of living of most Singaporeans. In fact, it has become the envy of many nations around us. However, in our relentless pursuit, like many developed nations, we will have to grapple with issues such as widening income gap between the higher income group, the rich, and the lower income group, the poor. This phenomenon will be further accelerated by our open door policy to investments, inflow of foreign talents and today's Internet-driven economy. They call it the great digital divide. This digital divide is a serious problem. Those who can capitalise on the growth of the Internet economy will benefit immensely, whilst those still lagging behind in the old economy will suffer the fate of dwindling income or stagnation.

Unlike developed nations with vast resources, our prized asset is our human resource as our capital. We are only a red dot on the map. We know that we cannot and are not capable of reversing this international trend. As a small country, we cannot afford social disorder and a collapse within our social fabric. Therefore, we place a high premium in ensuring our social cohesion, racial harmony and integration among the various races, and unity among our people. Like our world-class infrastructure, social cohesion can be ranked as one of our key pillars supporting our continued competitiveness and survival in today's globalised economy. As such, the great digital and income divide issue has to be addressed with great care and sensitivity.

While we continue our drive to attract the best investments and talents to Singapore, those who are unable to keep pace with this drive should not be left behind to fend for themselves, or made to feel severely handicapped. Of course, I am not suggesting in any way that we should give hand-outs and welfare to those who are unable to make the leap. We must acknowledge that despite all our efforts to motivate and encourage fellow Singaporeans to upgrade, there will always be a group who will find it difficult or unable to cope. This group of people will continue to earn low wages, while the rest will ride the Internet wave and earn good wages.

Our meritocratic system has served us well. The good and the able will be rewarded handsomely, whilst the less able will be treated fairly. It is precisely in this area that our Government should continue to play a proactive role. While we cannot and should not arbitrarily manage and bridge the widening income gap, we can offer other means to level up. Over the years, the Government has been generous by offering periodic CPF top-ups for the lower income groups and the aged, and asset enhancement through shares, Edusave scholarships, etc, all in an attempt to ensure that the less privileged and the lower income family will feel and enjoy also the fruits of our success. These are good schemes and should be encouraged, continued, and more should be introduced.

Nevertheless, I must stress that ensuring our social cohesion goes beyond just providing occasional CPF top-ups or, in simple terms, material benefits. These are not enough. Lower income and the less privileged groups, which may grow in numbers, should not be left to feel that they have been deprived or, worse still, unable to gain access to certain basic amenities due to their inability to afford the cost.

It is in this respect that our Government has a pivotal role to play. The provision of basic amenities, such as medical healthcare services, housing, education, public facilities like parks, playgrounds, etc, should serve as a means in bridging the income gap. We should continue to leverage on providing such basic facilities at an affordable rate and make it accessible to every Singaporean regardless of their status in our society. Ensuring that every Singaporean has ready access to each of these services regardless of race, religion and their position in society is the only way to create a level playing field for all Singaporeans.

Sir, my next cut is on the identity crisis - my role as a Singaporean. Our Government has always been mindful and sensitive in devising our policies and approaches. Many good programmes and schemes, such as making funds available for skills training, asset enhancement, CPF top-up, rebates on utilities charges, etc, have been initiated over the years by the Government in an effort to "level up" our society and to share the fruits of success. While such schemes should be encouraged, should we not be mindful of the ill effect they may impose on Singaporeans, especially on items such as rebates and CPF top-up? In fact, many have taken these for granted and that they no longer consider them as a privilege. What if our economy turns bad? What will happen? Will Singaporeans still expect to receive their privileges? What happens if they do not receive?

A recent survey on younger Singaporeans revealed that their pragmatism and lack of passion for Singapore will make them leave Singapore for greener pastures without any hesitation. Despite our efforts over the years to build a cohesive and unified society through various schemes and programmes, there are still pockets of Singaporeans who feel otherwise, in particular, the younger group. Not only have they become materialistic, they have come to expect what Singapore should offer them, rather than how they could contribute to the growth of the society and country. Are they wrong? We cannot really say so. One of the key points to note is the sense that they have nothing to do with the achievements of Singapore. They felt that they could do very little or they have no role to play. This is a real concern because many perhaps have taken the good and high standard of living that they enjoy now as their right and entitlement, instead of a privilege. Their better education and our open economy have enabled the younger generation unlimited access to information of the world. This has perhaps shaped their thinking and created high aspiration and expectation. 1.00 pm

Singapore 21 has set out a grand vision for every Singaporean in which everyone of us has a role to play in sustaining and ensuring our success and survival. It is a pity that after its grand introduction, somehow the vision has been forgotten. While it is important to emphasise economic success, we should also not forget the very fundamental values of society and family. It is these values that will bind our people together in a crisis and to carry our nation through thick and thin.

Occasionally, we can see such feelings and emotions of togetherness and closing of ranks among Singaporeans when we deal with issues such as the SQ 006 crash and the occasional bashing from Malaysia. We can see such feelings and passion for Singapore. However, for us to continue to achieve economic success, such value system of togetherness and bonding must be deeply ingrained in every Singaporean, so that we can ride out the challenges ahead.

Mr Chiam See Tong (Potong Pasir): Sir, I have a cut which I have just missed. Can I go ahead with my first cut on the progress of the Malays?

The Chairman: You have missed your turn. But, all right, make your points very quickly.

Mr Chiam See Tong: Yes, I will be as fast as I can.

The Chairman: I would let you make your points, but briefly, please.

Mr Chiam See Tong: Sir, the Prime Minister on 21st January this year made a speech in which he cited vast amounts of statistics to show that the Singapore Malays have made marked progress in education, occupation, income, and the quality of life. The statistics cited by the Prime Minister showed that Malay children not only make improvements in both the Primary School Leaving Examinations but also the secondary school examinations, and also more Malays are getting admitted to both secondary schools, institutions and the universities. As for occupations, the Malays are also getting more managerial and professional jobs. The percentage increase in those jobs is from 12% to 23% over the period of 1990 to 2000. Incomes of the Malays have also shown an equal increase. For the median resident Malay household incomes, the increase from 1990 to 2000 was $1,800 to about $2,700.

After PM Goh's speech, the Malay MPs in Parliament were quick to point out that the Malays in Singapore are not marginalised and the meritocracy system does not work against the Malay community. I agree with the Malay Members of Parliament. While we laud the progress made by the Malays in Singapore in the areas mentioned above, there are other areas in which the Malays are not particularly happy and they want them changed. The Malays in Singapore want to be integrated with the other communities. They do not want to be isolated, like in the self-help groups. Also, they want to be treated like other Singaporeans. They say that they are loyal Singaporeans and want to be accepted in the Singapore Air Force.

Malay youths today have to do national service, just like any other Singaporean youths. But they can only do national service in the Army, Navy and Police Force, but not in the Singapore Air Force. If this is true, I would like to know why. I would think that members of the Malay community should be allowed to do their NS in the Singapore Air Force as well as the other branches of the armed services.

The existence of Special Assistance Plan Schools is something which also causes discomfort to the Malays in Singapore. I think that the Government should take note of that and have another look at the SAP schools. When our Malay brethrens say that they want to be integrated into the other communities, I believe that they do not want to be branded as an ethnic group or a minority group. While it is true that they comprise only 15% to 18% of our population, I believe they do not want to be treated as a separate and distinct ethnic group. Each Malay wants to be treated as just another Singaporean. Each Malay today wants only to be known as a Singaporean and not as a Malay Singaporean. I think that the Government should take note of what they want.

If Singapore is to become a truly multi-racial country, then we should at least listen to our Malay brothers in respect of their problems concerning their integration into the other communities and their other problems, and their plea for acceptance in the Singapore Air Force. I should also add that the formation of the GRC is an identity problem to both the Malays and the Indians where they are forever branded as ethnic races. The Malays have come a long way since Singapore's independence in 1965 and I believe they want to move along together with the mainstream Singaporeans as Singaporeans.

Sir, may I take my next cut?

The Chairman: Yes.

Mr Chiam See Tong: Singapore is basically a good place for business. The Government has put in place all the necessary infrastructure - the hardware, so to say. We have buildings for offices, buildings for factories, buildings for schools and hospitals, and a good network of road system and other facilities. All these things are necessary to foreigners to come to invest their money here and to do business and give Singapore economic growth every year. All the things are of course necessary in nation building. Without food, clothing, housing, hospitals, schools, there is nothing to talk about nation building. Singapore has achieved much in terms of physical infrastructure, in nation building, but rather lacking in the software part - the emotions that Singaporeans can identify with Singapore. Many of the young people recently interviewed find it hard to say that they can be proud to be a Singaporean. They appear to have no emotional attachments to Singapore. Emotionally, they cannot relate to Singapore.

Sir, from my own experience, when I came back from overseas, I felt a strong emotion for Singapore, and of course also to see my parents, and I longed to see the places which were very familiar to me during my childhood days. I was saddened to see that my old house, which I had lived for many years as a child, had been sold and pulled down by the developers, and it was no longer there. I had lived in the Orchard Road area as a boy. The old wet market there which was so familiar had been torn down. As a boy I also cycled with other friends to eat ice kachang at the shop behind the wet market. That shop and all the rows of shophouses along Orchard Road had been demolished to give way to high-rise shopping centres. The picture of Singapore I knew as a boy had all disappeared. I think this must be the experiences of many other Singaporeans. So, emotionally, if this is not the picture that I had in my mind as a child, it is certainly hard to relate to that place. It is just like any other place in the world.

If Singapore is to have democracy, I think more people should be allowed to take part in politics. I say this because of the youngsters interviewed, one said that he could not relate to the beautiful airport that was built at Changi, because he said that he did not have a say in the building of that airport or had nothing to do with the building of the airport. My point is that Singaporeans should be given a chance to take part in politics. As it is, even if they want to take part in politics, it is becoming more and more difficult. We have very high deposits and we also have the GRCs which make it almost impossible for Singaporeans to take part in politics and have a say in what is going on in the country.

As for the landscape, Singapore is developing so rapidly that now we cannot use the landscape to create emotional ties with the country. The old buildings that we know so well have all been torn down and made way for so-called progress.

The Chairman: Order, Mr Chiam. The time allocated to you has expired. General Lee.

The Deputy Prime Minister (BG Lee Hsien Loong): Sir, may I first take all the points made on racial harmony, multiracialism and self-help groups, and then address later the issues about Singapore identity, which was raised especially by Mr Ong Ah Heng and Mr Chiam See Tong.

I would like to thank the MPs for sharing their concerns about the need for self-help groups to look beyond their own communities and to collaborate more with one another. And I also thank them for the suggestions they have given us on how this can be achieved.

I think we should see this problem in our basic context and begin with our basic ideal, namely, that we are seeking to build an integrated, multi-racial, multi-religious society. That is what we set out to do in nation building and self-help groups fit into this context. When we talk about nation building, we try to do it by many ways - integrated HDB housing estates, so all the races live together; national schools, common curriculum; national education in schools so that people know Singapore's history and our strategic circumstances; the pledge said every day, the flag-raising, and so on. And the schools organise programmes to teach pupils how to appreciate and live in harmony with each other through actual participation and experience. Pupils from different schools do activities jointly together. Pupils take part in community involvement programmes, and so they mix with others of different races, and in mixing, get to know one another and get to appreciate one another.

But, at the same time, as we talk about bringing the ethnic groups together, we also want the young to grow up with a sense of their cultural heritage and their mother tongues, and every ethnic group wants to keep something which is of itself. When Mr Chiam says Malay Singaporeans prefer to be known as Singaporeans rather than as Malay Singaporeans, I saw Mr Zulkifli smiling at that. I do not think Mr Chiam's reading of the ground is accurate. Every Singaporean wants to be both - to keep something of himself and his ethnic group, at the same time to have something which is shared with all the communities.

So, in schools, in order to help people keep some of their own cultural identity, we focus on teaching the mother tongue. We cannot teach the mother tongue in integrated classes. But that does not mean we have to segregate pupils by race into different classes for all subjects, just for the convenience of teaching the mother tongue. Mr Inderjit Singh raised this concern, but it is an old administrative issue, and the Ministry of Education has actually resolved the problem. And they have told all the principals who know that they must not, out of administrative expediency, segregate the pupils based on the mother tongue classes. In other words, all the Malay pupils in one class because you study Malay, all the Chinese group also in another class, and so on. Once in a while, there is a case which comes to the Ministry's notice, then the principal is reminded of this and is asked to put the situation right. So that is a not serious problem. In general, the schools try to arrange common mother tongue periods, where possible, so the mother tongue periods will all coincide and, at that point, the pupils attend their various mother tongue lessons in different classes at the same time. And this reduces the need for segregating pupils.

1.15 pm

But while we pursue the ideal of an integrated society, we must also acknowledge that we are not yet fully integrated. If we want to seriously tackle certain social problems, for example, broken families, drugs, teenage delinquency, or school under performance, then an ethnic-based community self-help approach is really a practical and effective way for several reasons:

(1) The motivation to help members of one's own community is a very strong and natural one, which we should harness.

(2) It is important for the self pride of the communities. It is important that they feel they are making progress through their own efforts, and not passively receiving aid from others.

(3) There is sensitivity doing social work across racial lines. It is not so difficult to motivate volunteers from one race to tutor children from another race. We can persuade them. There will be some who are idealistic, who will come forward and they will do that, and some are doing that. Much more delicate is to have, say, an Indian social worker exhorting and pressuring Chinese or Malay men to take responsibility for their families. Families have problems, parents not carrying out their duties, or head of household not carrying out his duties. You need encouragement, you need support, you need counselling, and sometimes, you need firm words from somebody whom he respects and identifies with. And if you cross racial lines in doing such sensitive work, we can easily cause offence and misunderstanding.

That is why we set up the self-help groups, like SINDA, CDAC, Mendaki and AMP. As long as these groups focus on social and community work, they are making a valuable contribution. But if they stray beyond that to assert themselves politically, on a racial basis, that threatens the basic foundation of our social compact and it must be checked. And MPs are quite right to point out that this is a danger which we should guard against. This was one of the reasons why the Government took a strong stand to oppose the AMP's collective leadership proposal recently. Because we felt it strayed beyond social and community work to venture into the political arena, and not just politics, but multi-racial politics, going for racial politics dividing Singapore along ethnic lines.

While the self-help groups do their own activities, we also encourage them to come together and reach out to other communities. In fact, they are already doing this. They have got donors and volunteers from other racial groups. For example, 14% of Mendaki's donations come from non-Malays. And we have got volunteers in Mendaki, 11%; SINDA, 10%; CDAC, 9%; AMP, 14%, volunteers from other races.

Secondly, the self-help groups organise joint programmes which they open to members of other groups, and they open their own programmes to members of other groups. These include tuition programmes and joint training programmes for tutors. They run an annual Camp Teen for youths from all ethnic communities. Camp Teen is spearheaded by each group on a rotation basis to promote cross-cultural interaction, enhance understanding of each other and instill values like teamwork. And the self-help groups also participate in a larger network of community organisations, including the CDCs and voluntary welfare organisations. For example, the five of them get together and they run the Joint Social Service Centre, five of them plus the Central Singapore Community Development Council, I think it is in Toa Payoh, which was formed in 1997 and has been providing family and student services since December last year.

We have to continue to encourage these outreach activities which will go some way to prevent individual self-help groups from becoming inward-looking, racist groups, as Mr Iswaran puts it. But we should not forget the rationale for setting up these groups in the first place, which remains valid and which we should not inadvertently undermine.

I am not sure that an umbrella body for all these self-help groups, which Mr Inderjit Singh suggested, would help, because all the self-help groups are already overseen by MCDS in a broad way, and in fact PMO also keeps a watchful eye over them to make sure that they are fulfilling their proper purpose. PMO and MCDS will check them in case they go astray. The Executive Directors of these groups meet quarterly to coordinate programmes and exchange experiences (in fact, I understand they are scheduled to meet the day after tomorrow for this quarter). They communicate regularly with one another and with e-mail, telephone, fax, it is hardly a problem. They do keep in touch. They do work together. So to add another umbrella body will only add unnecessary bureaucracy and overhead.

I do not think that the self-help groups are the reasons for differences in performance between the different communities. These differences are the reasons why we have created the self-help groups. They are deep-seated. They reflect partly cultural trends, partly other factors. We can work to make each group improve progressively. I think to eliminate the gaps would take a long time.

Mr Simon Tay dwelt at length on funding for self-help groups and suggested that we introduce higher matching grants, tax incentives to promote greater inter-group activities and mutual support. I do not think this is necessary because money is not really the issue. It is the will, it is a sense of doing something useful. And there are many multi-racial groups which already exist, like the PA and the CDAC and others which are already pursuing activities on a multiracial basis. So the self-help groups fit in and complement that. If we do not think that the self-help groups have a valid mission on their own, I think we should disband them rather than have them exist and then go counter to that and try and pull them to launch joint projects through tax incentives.

As for a sunset clause for the self-help groups in the longer term, we have to take the matter in a proper sequence and have the self-help groups as long as they are fulfilling a purpose. We cannot say when our society will be fully integrated. We cannot say when these specific problems which the ethnic communities have will be resolved. As long as they exist, there will be a mission for these self-help groups. If they do not, well, then we all enjoy a glorious sunset. But I think that will be some time to come.

The Race Relations Act was raised by Mr Zulkifli. He suggested that we take some of the points from there. This is something which we can consider in terms of awareness of the issue involved in discrimination and inter-ethnic relations. But I do not think that a legislative approach is a good one. The British have the Race Relations Act. It has not really solved their problems. They still have discrimination between the whites and the blacks. When there was a black man who was murdered in South London a couple of years ago, they had been unable to solve the crime, and part of the problem is, as the British themselves have acknowledged, that the police are predominantly white and have found it very difficult to get through and empathise with the black community. And even within the black community in Britain, they have difficulties because the black community are of different groups. Recently, there was a case of Damilola, a young boy from Nigeria, who went to Britain and was killed by other school children who were not from Nigeria, black, but from other parts of the world. So I do not think that the legislative approach is going to be the solution.

The key is for us to establish trust and understanding among the races and proceed at a pace that all the communities are comfortable with. It is encouraging that all the communities and their leaders have supported this objective and even AMP has made their position clear, and now on the record. So long as we make progress in widening the common ground between the communities, however slowly, we can continue to build better lives for Singaporeans.

Mr Chiam raised the question of Malay progress and of integration of Malays and also whether Malays serve National Service in the RSAF. These are issues which have been extensively discussed recently. In terms of the progress which has been made, the Prime Minister has put up what he called a report card of the progress. As for comparing the progress of the Malays with other communities, if you look at the Advance Data Releases based on the census, in fact a lot of the information is there, including information with highest educational qualification, literacy, language, occupation or distribution, household size, dwelling type and household income. And if you go to the Department of Statistics' website, which is www.singstat.gov.sg, all these reports are available on the Internet.

As for the SAF and whether Malays feel that they are Malay Singaporeans or not, and how integration can proceed, I would recommend Mr Chiam to read what transpired in the dialogue two weeks ago and was published in the Sunday Times last week and, again, this week, of what the Senior Minister said and of his exchanges with the Malay community leaders to get an appreciation of a very deep issue which is going to be with us for a long time, but which we have to understand and empathise with. So it is both a rational matter, understanding it, and also an emotional matter, to be able to bridge that gap and gradually to narrow it.

As for the Singapore identity which Mr Ong Ah Heng and Mr Chiam See Tong raised, this too is a matter of hearts as well as heads - long term, instinct-building, about the obligations and the roles of Singaporeans. It is a healthy sign that younger Singaporeans are asking who we are, what it means to be a Singaporean, what is our role in society. Because like most young people, they are going through a phase of questioning, search and discovery.

Our young people are the future of our society. So an integral part of the education is to imbue them with a sense of belonging and responsibility to the nation, and to appreciate the fact that our security and economic well-being is not a natural state of affairs. Our collective and continued survival depends on our joint effort, on the collective will of all those who call Singapore home.

It is not easy. If you are a Chinese from China, you would know who you are, 1,100 million of us. If you were a Japanese from Japan, you know who you are, one race, one language, one country and descended from the Sun Goddess of Amaterasu. If you are an American, I think you also know who you are, the greatest nation on earth, a light unto nations, a city upon the hill, a certain history, idealism, a certain collective myth which defines your place in the world. Who are we? Perhaps, we are a little red dot. That is something to be proud of. Because we have achieved much together to get here. An earlier generation fought long odds to build this Singapore and our generation continues to face major challenges as a nation, challenges which call for a strong and unified response. And I think we can all feel that Singapore belongs to all of us and it is a result of all our efforts. Now that we are almost a First World country, not quite but almost, that does not mean our challenge is over. 1.30 pm

We have to show that this success was not just a transient fluke but a solid achievement that we will sustain and build upon year after year. And if we accept and believe that, then I think we know who we are and what we need to do. At the same time, of course, we will have to feel it at the personal level because this is a globalised world, people can travel anywhere, work anywhere, feel comfortable almost anywhere and float with the waves. But we need to anchor ourselves here and remember the places where we grew up, the friends we went to school with, our National Service comrades, the places we settled down and raised our own families. The Orchard Road wet market is gone - those of Mr Chiam's generation and even my generation will remember it. The younger ones will remember other places in Singapore because I think Singapore is different from many other countries. There are many developed countries and we are almost one of them, but there is a certain atmosphere and spirit to the place which we will remember and associate with. It is partly familiar landmarks and favourite local foods, but it is also memories and associations that link us to Singapore which make us call this place home, no matter where we are.

We have to get Singaporeans to see this. It is a generation which has grown up in material affluence, as Mr Ong Ah Heng pointed out. So their experience and focus are on material issues, not matters of life and death or national survival. Naturally, their perspectives and priorities are different. But I think a Singapore identity is developing: whether it is the pride with which we celebrate National Day, the way we stand up when confronted with prickly situations around us in the region - as has happened more than once in the last few years even at a time of peace and relative stability - or the way we group together and reach out to fellow Singaporeans when we are working and living abroad. Whether we go to Sydney, New York, London, Beijing or Mumbai, we will find there are Singaporeans there who have formed an informal network. They celebrate our festivals together, they share common traditions and jokes, they speak the same language (sometimes, even Singlish helps to bring them together) and certain cultural affinities, and they are maintaining their links together with each other and with Singapore. And provided we can do that, gradually, we can strengthen this identity and say, "We are Singaporeans first, and Singapore Chinese, Malays or Indians second." That is what we are aiming for.

Mr Davinder Singh (Bishan-Toa Payoh): Sir, Singapore's only resource is its people. Their quantity and quality determine whether we can compete effectively. Both are under threat. We are not replacing ourselves, some of our best brains are being lured by the bright lights and greener pastures in other countries. The trend is not encouraging. As our resources are depleted, so our edge is dulled. We need skills across the spectrum, from construction workers to corporate leaders, from maids to managers. Some perform jobs which are shunned, others provide skills in short supply.

The arguments for embracing foreign talent are compelling. Foreigners compensate for our numbers, quality and disinclination. They inject fresh perspectives at a time when we badly need to challenge and change tried and tested paradigms. They give us a profile which comforts investors. The Government is determined that its policy on foreign talent succeeds. It has introduced a slew of legal, fiscal and infrastructural measures to make the environment talent-friendly. The private sector is beginning to respond, but there is still work to be done to overcome insecurities. But this policy does not appear to have been targeted, certainly not with equal vigour, at the public sector. Is it our position that sensitive issues are best dealt with by those with a stake in the country, and that therefore, that justifies a special immunity for our public institutions?

There are two dimensions to the issue of sensitivity. One, where the vital interests of the state are concerned and two, the protection of confidential information. But both can be addressed. Highly sensitive portfolios can continue to be manned by Singaporeans. There is force in the argument that only those who understand our vulnerabilities and have a vested stake in the country can effectively deal with and thwart threats, external and internal. But that argument cannot be made with the same degree of conviction for all branches of the public service. Why will there be a security risk if a foreigner is employed, say, as a Deputy Secretary in the Ministry of Education or the Ministry of Manpower? After all, foreigners occupy sensitive financial positions in the Hong Kong administration. To be sure, non-Singaporeans in Government will have access to highly confidential information, but the safeguard is implicit in the policy. The people we want operate in the international arena. Their marketability depends on their integrity. They of all people, understand that their standing would be irreparably harmed if they act dishonourably.

In any event, the private sector faces the same risks. Confidential information is at a premium, particularly in the areas of technology and the life sciences. Leaks can make the difference between success and failure. In the international market where we compete, indiscretion can be highly inimical to the interests of Singapore Inc. But that has not stopped our GLCs and major private sector companies from engaging the services of foreigners. The fact of the matter is that these people, whose track records determine their fate in this global employment market, are the least likely to behave badly. If all else fails, there is the Official Secrets Act, no one who knows Singapore is under any illusion about this Government's resolve to use it to punish and to make a point.

But what of the argument that issues which affect the country are best dealt with by those with a stake in it? Take the case of the judiciary. It is, on any view, a vital public institution. In applying and fashioning the law, judges have to be acutely aware of and sensitive to, local customs and circumstances. The judiciary is constantly confronted with, and has to address, questions which affect our national interests. Instinctively, we are driven to the conclusion that therefore only Singaporeans should be judges. Yet, in 1981, the then Prime Minister told this House that if he was not able to get men of quality to be judges, he would, after consultation, advise the President to appoint non-Singaporeans to the High Court Bench.

That statement effectively put paid to the notion that Singapore's interests can only be advanced by Singaporeans or that we will necessarily be prejudiced if foreigners hold sensitive posts. Fidelity is not the preserve of Singaporeans. In any case, the risks, if any, can be minimised by retaining key positions for our citizens. Ultimately, it is a balancing exercise. How heavily should these concerns weigh in the scale of relative merits? Should foreigners be enlisted to help run our country? The answer is that we really have little choice.

Our private sector is already being sapped of some of its pep by emigration and overseas employment. Foreign talent is no longer available on tap. It is becoming increasingly difficult to fish in the resource rich international waters. Other countries have joined the game. They are offering all manner of incentives to retain and attract talent.

The solution is two-pronged: Continue to encourage talented foreigners to spend some time in Singapore and, in the meantime, optimise the use of talent in the local pool. We are doing the first, but are we doing enough of the second? Today, the best and brightest are drawn into public service by the scholarship system. That means that the private sector is deprived of this valuable home-grown resource. Some do enter the private sector after serving out their bonds. But they emerge as different people, with an armoury of mindsets and instincts which may not necessarily equip them for the rigours of the marketplace. Our top students match and sometimes beat the best in the US and Japan. But they lose that shine in the real world. Has it anything to do with what we do to our top graduates? Other countries have the numbers, so there is always enough to go around. In Singapore, we do not have that luxury and are forced to allocate what is a scarce resource. The priority has always been to deploy our best in the public service, that policy has served us well. But now that our institutions are in place, and it has become imperative to energise the private sector, we should not continue to divert the flow of quality away from the market.

The advantages of having foreigners as public servants are real and substantial. They can replace some of our best brains who can be released to add fizz to the private sector. The foreigners who step into their shoes will bring a different perspective to public policy issues. Not having been brought up in the system, they may not feel shackled by political correctness. Paradoxically, the fact that they will have less of a stake may work to our advantage. They will feel less inhibited about being frank and open in their discussions with policymakers, and candour cannot hurt policy formulation. Any misperception that our bureaucracy is a closed and cozy club will be eroded by an infusion of outsiders. That in turn will generate greater confidence in the accountability of our institutions. It is surely an objective worth striving for.

Mr Thomas Thomas (Nominated Member): Sir, the employer in the civil service is the Government. At the same time, the Government has a political face and a political role in making rules. And in that political role in making rules, the Government claims that it has a symbiotic relationship with the unions. And because of this peculiar situation of the Government in the civil service, how people are managed in the civil service is also the model that is looked upon by the rest of society. So it is important that the Government has the right model and sets the right examples in managing people in the civil service.

Recently, the Government has made some changes to the management of people in the civil service. Ministries have been decentralised with powers to manage their own personnel matters. These are good moves because they will enable Ministries to respond quickly to changes and make them more effective to recruit, retain and develop people.

If we look at the measures that the civil service has introduced, such as changes in medical and other benefits, it has done it fairly responsibly. If we look at the overall report book, if we have to state, I think it will pass - not very well, but pass - because if we look at protection for employees, etc, they have done well. Is there social dialogue? Yes, there is. Are people having a part in the industrial relations structure? Yes, they do, but more could be done.

I think one area of deficiency is in the implementation of the Industrial Relations Act. This Act is meant to provide for the regulation of relations between employers and employees, and the prevention and settlement of trade disputes by collective bargaining, conciliation and arbitration. In the civil service, a civil servant has to be classified as an employee under this Act if he wants to enjoy the benefits of the Industrial Relations Act, and it has to be declared by the President for the purposes of this Act. If a civil servant is not classified as an employee for the purposes of the Industrial Relations Act, this employee does not have access to collective bargaining, conciliation or arbitration. I am aware that the President has declared Division IV and daily-rated employees, clerks, nurses and a lot of others in Divisions I, II and III as employees. But some of their job titles have not been updated. I am also aware that many a time, when the civil service reaches an agreement with the unions, they have points of agreement and exchanges of letters. However, whenever there are disagreements on these exchanges of letters or points, these are not enforceable because the aggrieved party cannot bring it up for conciliation or arbitration. So there is a weakness.

Sir, what I am asking the Government to reconsider is: on the one hand, it has a symbiotic relationship with the unions and recognises their contributions, and we all say positive things and there is a lot of support at national level, on the other hand, there is also a need to promote bipartite relations in the civil service. If that can be done, it would also help the civil service to be more attuned like the private sector and respond quickly to changes. This can only be good for the civil service. I ask the Government to review this practice of classifying employees, for the purpose of the Industrial Relations Act, and to set standards which are equivalent to that of a private and statutory board, since for all things, you want to set the benchmark. Be a leader in industrial relations.

Can I proceed to my next cut, Sir?

1.45 pm

The Chairman: Can I urge hon. Members to be concise as it appears that we may not be able to cover all the topics under this amendment. All right, Mr Thomas.

Mr Thomas Thomas: I will be very brief and cut down on what I have to say. On pensioners, during the debate on the Budget Statement, four Members of this House spoke on the need for the Government to be more generous to pensioners. The Minister's response was that the adjustments more than cover the increase in cost of living and there were other perks for pensioners. I would like to say that pensioners are people who worked hard in the past to contribute to our present prosperity. In the past, we were told to tighten our belts, make sacrifices and pensioners who were in that period made those sacrifices. Those were the days when the budgets were not generous, not so painless, but they made sacrifices. Today's impressive reserves that we have, the prosperity we have, all the good things that we have, were built up by the past.

I also want to say that when you make pension adjustments, do not just make adjustments on cost of living. We also have to take into account the standard of living. Our standard of living changes, the things that were not relevant then may still be applicable today. And this must also be covered. I am just saying that the 12,100 pensioners deserve more, and I hope the Government would have put in place a mechanism which we can make periodic adjustments to pensions, not just once in many years, but more frequently and in more substantial and significant quantums.

Dr Jennifer Lee (Nominated Member): Sir, there has been some renewed interest of late in the possibility of more women being fielded in the next general elections. So it seems like a good time to bring up the subject of better representation for women. May I state upfront that this is not engineered as a means of hinting to the Prime Minister on my availability. In fact, I would like to talk mainly about better representation of women in non-political office.

More women in Parliament is actually the far end of the spectrum of better representation of women in senior positions in all areas of public service and the public sector and, in fact, in the private sector. The Government has little to say in private sector companies' management and governance appointments. But it is fully in charge of its own recruitment, selection and appointment processes to senior positions in its Ministries, National Advisory Committees, statutory boards and GLC boards. We have, to date, one woman Permanent Secretary, one woman CEO of a statutory board and 8% representation of women on both the statutory boards and the GLC boards. I think in Singapore, in this IT day and age, we can do considerably better. Let me say that I am, by no means, asking for quotas to forcibly inject women into positions they are not competent to fill, or to ask for any deviation from our policies of meritocracy. There are enough competent women in Singapore out there to more than adequately fill significantly more than those 8% of board positions.

The problem is that, firstly, many of our good women out there keep a very low public profile. Secondly, current senior management, being largely filled by men, the names that first come to their minds, when vacancies open up at senior levels, are those of people they associate with, went to school with, did NS with, played golf with, and are generally comfortable with. All men, of course. There is no malice in this. This is just the natural consequence of historical circumstance. But what is needed, therefore, is a much more deliberate effort to search for women candidates for every vacancy and conscious effort to look out for, recognise and overcome traditional biases in the selection process.

Certainly, as the Senior Parliamentary Secretary for MCDS, Mrs Yu-Foo Yee Shoon observed at an International Women's Day event last week, women must also play their part and be willing to step forward to grasp opportunities that do present themselves. But in this instance, talking about board positions and not about political office, I expect that they would not be averse to respond positively to such opportunities. Australia has some interesting experiences to share. Australia has 24% of women in their Parliament, and 30% women on Government boards and bodies. It has achieved this through a concerted effort to put more women in senior positions, including an early warning system which identifies high calibre women candidates early in board vacancy processes, and in an executive search programme for women participation on these boards. Their experience also indicates that simply having a register or a list of names of suitable women is not enough to make a difference. It requires a conscious push from the Minister in charge of the respective agencies to result in significant increased female appointments. Indeed, in the past, some women groups and individuals have submitted lists of names but they have had little subsequent feedback on whether they were put to any use. Indeed, the Business Times published a list of some 200 names on International Women's Day in 1998, but we do not know if anyone, with decision-making authority, gave it more than a cursory glance. In our current environment, when we are constantly reminded of the need for diversity of ideas, views and perspectives, and of the need for talent, to the extent that we scour the world for it, surely it is worthwhile to expend some additional effort to ensure that we are fully mining the human resource and potential that resides in a whole half of our own population.

Finally, before I end, some quick short words on women in politics. I have just two quick suggestions to make on increasing the participation of women in Parliament. Firstly, to avoid the triple whammy for women of family, career and politics, besides the extended search now to include single women, who presumably would have to deal largely with career and politics, why not homemakers who would have only family and politics on their plate? There are many able women who have opted to be homemakers and they should not be dismissed in considering candidates. In fact, I believe Dr Aline Wong, in her capacity as Chair of the PAP Women Wing, had already made the suggestion a couple of years ago.

Secondly, more efforts should be directed to persuading women to participate through the NMP scheme. The commitment is for two years only, in the first instance, and there are no constituency responsibilities. If the difficulty for women is in the juggling of responsibilities, it will surely be less difficult to persuade them to make that commitment in this case. Possibly not more effort has been made to recruit more women NMPs because of the ambivalence that even Members of the ruling party have with regard to the scheme. But since the scheme exists and has been found to be useful in the past 10 years, why not use it to even better effect to bring more women into the political arena? Look for women architects, women accountants, businesswomen, women unionist who will not only represent their professions or sectors, but would also bring diversity of more women's views into the discussions in this Chamber. I hope the Prime Minister will give consideration to my suggestions.

Mr Simon Tay: Sir, I rise to speak on entrenching the Elected Presidency. This is an important issue, but as you have instructed, I shall try to keep it very brief.

Sir, Singaporeans have voted for the Elected Presidency and more now understand the scheme. Yet, the Elected President is not entrenched in our Constitution. Article 5(2A) would potentially make the Elected President's office powers subject to a public referendum, if it is to be removed or reduced, unless the Elected President agrees. But this provision is still not in force. It has been suspended and at present, Parliament could remove the Elected Presidency by simply amending the Constitution by two-thirds majority, which is quite easily obtainable by the Government.

My second point, Sir, is that we have fine-tuned the Elected Presidency in this last year. We have come to agreement on a White Paper on the reserves. We have also now come to an understanding about the Net Investment Income (NII). As all this has been done, it is not clear to me what else would need to be done to complete the fine-tuning of the Elected Presidency. It is now some 10 years and we are now having the second Elected President in that office.

My third point is, with the coming of general elections in the next year or so, this would be a timely moment to consider entrenching the Elected Presidency and I hope that the Prime Minister's Office will study the issue fully and consider it before the general elections.

Mr J. B. Jeyaretnam (Non-Constituency Member): Sir, I have two amendments. May I take them together?

The Chairman: No, you will proceed with this one on Altered Designation of President's Wife, because Mr Chiam comes after you.

Mr Jeyaretnam: As you please. This cut is prompted by the announcement some time ago that the President's wife should not be referred to as the First Lady, but simply as, what is her name, Mrs Nathan. I was puzzled by this sudden change in this designation. Then, there was, accompanying this announcement, an explanation, I believe, by the Ministry of Law that it was not right for her to be styled as the First Lady because we do not have an Executive President. So I asked myself: what were we doing - was it two years ago or more - when we amended the Constitution to give the President certain executive powers? Were we just playing a game? And he is now to be told that he is no longer an Executive President but simply a ceremonial President holding office as a ceremonial figure?

May we know why this change in the designation has been announced? May I know, is it the intention that the President will no longer exercise any executive powers, and all executive powers which were given to him have now been de facto taken away from him? May we have an answer to that? Were not the spouses of the previous Presidents before we made this change, addressed to as the First Lady? I would like to be told that I am wrong that they were not. Could we have some rational explanation for this sudden change in the designation of the President's wife?

BG Lee Hsien Loong: Sir, I fully agree with Mr Davinder Singh that the public sector, as well as the private sector, ought to make full use of foreign talent. I am not as sanguine as he is that we have foreign talent then we can do with fewer scholars and they can go forth and do great deeds in the private sector. I think we should bring in as many talented people as we can into the public sector as possible and that includes foreign talent in all suitable professions.

We can do more to attract them and they can contribute to our public sector organisations without compromising our vital interest. There are certain areas which we have to keep as a responsibility of citizens. Defence and foreign policies are obviously two of them. Some other areas of social and economic policies are politically sensitive. Take, for example, education. It is a professional and technical matter, but it is also a political issue, and to make those recommendations for decisions which affect tens or hundreds of thousands of pupils, I think you have to have a feel for Singapore which mostly Singaporeans only will have. But beyond these areas, the public sector adopts an open attitude towards foreign talent. So we can find foreigners teaching in our schools and universities, working as policemen and prison officers, and in the civil defence. We also have architects and technical officers in HDB, nursing officers in our hospitals, and IT specialists in IDA. In fact, IDA has a very multi-national team. They have gone out to recruit, because we do not have enough qualified Singaporeans to staff IDA. And without foreign professionals, we would not be able to set up the outfit. 2.00 pm

Similarly, with other statutory boards too. GIC, for example, which manages our reserves. We have found ways to bring in substantial numbers of foreign people - analysts, traders, managers of the particular funds - who can fit in and strengthen our team. And even our policy-related statutory boards, like MAS, EDB and NSTB, are recruiting from outside Singapore, and some of them have substantial numbers of foreign non-Singaporeans. EDB, for example, has a significant number of non-Singaporeans, but they work as an EDB team, and they promote Singapore as fervently and as vigorously as the Singaporeans. In fact, they give us a run for our money.

So too with NSTB, which has people from Malaysia, the US and the UK. And in the case of MAS, recently, we recruited somebody - I think she is an Australian. So if you see a Caucasian face when you visit MAS, please do not be surprised. It is still the Monetary Authority of Singapore.

But for the longer term, when we bring in people, we would like to induct them and make them citizens, and then, eventually, they become part of our team. And so if they rise up and reach the top, at the core, as Permanent Secretaries, as Judges, as the Attorney-General, we have them as Singaporeans, but actually we know they had foreign origins. So our Chief Statistician, Paul Cheung, is from Hong Kong. The Permanent Secretary in MTI, Khaw Boon Wan, is from Malaysia. Many of our Judges are from overseas, including the Chief Justice as well as the Attorney-General. But they have become Singaporeans and they are part of our team. I think that is the approach we should take - bring them in, integrate them, as part of our team. And for the best of them, most committed, encourage them to be citizens, and then they rise up in our core group.

Mr Thomas Thomas asked about the Government as an employer and about bringing public officers under the ambit of the Industrial Relations Act for their benefit. Civil servants covered under collective agreements include Division IV officers and daily-rated employees. As I told Parliament in 1997, although officers in the other grades of appointments are not covered under the Industrial Relations Act for the purposes of collective bargaining, the civil service has allowed all officers, including those in Division I, to join unions, unless they are in the uniformed services, or if they are members of personnel boards with personnel responsibilities.

The civil service aims to be a model employer. It is not for us to grade ourselves, and I am grateful that Mr Thomas has given us a pass, albeit not a very good one. We will work harder to try and merit a higher grade next year. Regardless of whether officers are covered under any collective agreements, the civil service has been fair in settling their terms of employment - salaries, progression, benefits, etc. And we regularly review terms and conditions of service against the private sector. Had the civil service not done so, it could not have retained and attracted people to join the service in a full employment economy.

The civil service has also tried to be responsible in dealing with other labour management issues. The Public Service Division takes seriously requests to review policy rulings that have adversely affected individuals or groups of staff. PSD adopts a consultative approach when working with unions to address their concerns. And besides regular meetings between the Ministries and the unions, PSD and NTUC have held several joint management and union gatherings over the past few years. PSD also meets the Amalgamated Union of Public Employees (AUPE) regularly to discuss issues of concern to both sides. And I am happy to say that their relations are good.

I can understand the NMP's perspective, because collective bargaining is one of the traditional roles of trade unions, and that is what unions exist for - to push for a better deal from your employer. But today's employment environment has changed. Union members are better educated, the labour market is tight, and for both businesses and Government, flexibility is crucial, to enable them to reorganise and adapt to rapidly changing business conditions. Trade unions still play a crucial role in organising workers and looking after their welfare, but collective bargaining is often no longer their main priority. Collective bargaining will remain the best way to look after the interests of the less skilled, but not so of the better educated. As the current arrangements in the civil service are working well, I think we should not change them without careful study. But we will look at it from time to time.

As for pensions, Mr Thomas Thomas knows the position. We calculate pensions based on an officer's last drawn salary. Our philosophy has been, first, that pension is not indexed to cost of living. It is what you retired with in fixed dollar sums, and the Government will try to keep the inflation rate low. Secondly, it is pegged to what you earned when you were in service - last three years' average of drawn pay, rather than continuing to rise either with the salaries in the general economy or with civil service salaries. Had we not done that, I think we would have imposed a heavy burden on future governments, and it would have become a burden, which would have become increasingly difficult to bear, as the population grows older, and as the population of pensioners increases.

Therefore, we chose this. It is not indexed. It is not pegged to the cost of living, still less is it pegged to the standard of living. In fact, I think there are very few countries in the world which peg pensions to the standard of living. And those which have done so have found it quite a problem.

What we have done has been to revise salaries so that officers in service are paid properly, including full CPF in most cases now, and it is for them with their CPF to provide for their post-retirement pension needs. For those who retired early, we have, from time to time, made ex gratia payments to them, as the Singapore economy has prospered and as our surpluses have accumulated. We did so in 1996 when the Government awarded ex gratia payments of between 6-13 1/2 months of pension to those who retired before 1st January 1982, which was before salaries were substantially revised. And we did the same again last year, in August, when the Prime Minister, in his National Day Rally Speech, declared another ex gratia pay of about $16 million to retired MPs, office holders and pensioners. Sir, I think they have been looked after.

Now, can I take the question from Mr Jeyaretnam on the First Lady, because it is important to clear the matter? The First Lady is not a position enshrined in the Singapore Constitution. It is a courtesy term that has been customarily used for the wife of the President, including previous Presidents, before the Elected Presidency was created.

When President Nathan assumed office, he indicated that his wife would prefer to be addressed as Mrs Nathan, so as not to create the impression that she is holding an official position. However, since the term has been in customary usage, President Nathan said that she was also comfortable to be informally addressed as the First Lady by those who prefer to do so.

Even though the Constitution does not provide for the position of the First Lady, and the President's wife holds no official appointment, she should continue to enjoy, and be accorded, the courtesies, decorum and respect befitting the spouse of the person occupying the highest Office of the land.

As for the Elected Presidency, the constitutional position is quite clear. We do not have an Executive Presidency. We never had. We have an Elected President with custodial powers. And if the Member will read the Hansard, he will know exactly what the position is. Even if he reads the Constitution, the President does not have executive powers. He has custodial powers.

Sir, Mr Simon Tay asked when we will entrench Article 5(2A) of the Constitution, and entrench the Elected Presidency. It is something which we have not forgotten. We have not done it yet, because, although 10 years have passed, we are still refining the precise provisions of the Elected Presidency. We settled the White Paper in 1999. Last year, we made amendments on the definition of "NII", which is a major amendment. So I think we have to let some time pass to see how these work out. We are now on the second Elected President, the third if you count Mr Wee Kim Wee. I think that if in five or 10 years' time, we have not made any further major changes to the structure, we will be ready to entrench it. But having just made the changes last year, let us see how the NII provisions work out.

When we first went into this and first brought the provisions into effect, we did not understand all of the implications. It took us many years to work out the White Paper. We now have the White Paper. We have worked out the NII. Therefore, the White Paper will need some revisions, which are presently being done. Let us see how these work out. Hopefully, they will work out well, and we will look at the problem again in about a term's time.

As for women MPs and women statutory board members, I agree with Dr Jennifer Lee that we should have many more, if we can, on statutory boards and in Parliament. It is not easy, because we go on merit, and we have to look for the people and we have to look for individuals. If we went for a quota, of course, we can just fill the numbers. But if we can find more, we will gladly do so. And if the Member has some names, let us have them, and I promise her that they will receive more than cursory attention.

As for NMPs being housewives or home-makers, there is no ambivalence about the NMP scheme. It is in the Constitution. We believe they have made valuable contributions. We have had NMPs, men and women, who have done good work and really outshone many of the Opposition MPs. And if we can find some more, capable men and women, we would like to do so. Under the Constitution, the nominees must be "persons who have rendered distinguished public service, or who have brought honour to the Republic, or who have distinguished themselves in the field of arts and letters, culture, the sciences, business, industry, the professions, social or community service, or the labour movement". It is a wide range of fields where you can distinguish yourself. It does not mean that you have to be presently working. If anybody knows of women who happen not to be working but who meet these criteria, I hope they will put them up the next time Parliament invites nominations for NMPs, and the Special Select Committee will consider them seriously.

But I should, overall, point out that this is a problem which is very unlikely to be easily solved. Even the European countries, which have tried very hard, have not succeeded in equalising the sex balance in Parliament. The British, which have a record 120 women in Parliament, who came in with the Labour Party this time, and some call them the "Blair babes", are worried that in the next Parliament, the number will go down again. Because if they look at the candidates who are coming up to stand for the next Parliament, less than a quarter of the candidates are women. So you already know from the candidates that you are not going to get enough. And they have studied other European countries - this is the British Equal Opportunities Commission - and they have found that quotas finally were the most effective way to get the numbers in. And now they are proposing to change the law to ensure that more women are represented in Parliament. In other words, to change the law to institute quotas, so that you make sure you have the women. And the Chairwoman of the Equal Opportunities Commission - I do not know why it is not the Chairman, but it is the Chairwoman - Julie Mellor said, "This new study backs up the Equal Opportunities Commission's view that the law must be changed so that political parties are in no doubt that they can use special measures to boost the number of women they select." This was from BBC News, Saturday, 10th March 2001, on the website. I am sure the Member would not recommend us to use special measures. But short of special measures, we will do everything we can.

2.15 pm

Mr Chiam See Tong: Sir, there was a call for more women MPs in Parliament, but I hope that there should be an equally strong call for more Opposition MPs in Parliament.

Sir, there are no Queensberry rules in our elections, neither is there a level playing field. The Opposition's greatest fear is the practice of gerrymandering. The Opposition may work hard between the elections. All their efforts come to nought if at the last minute, the constituency they have been concentrating all their effort on is suddenly taken away. An example in point is the single-seat constituency of Braddell Heights. In the general elections of 1991, the Opposition obtained about 48% of the valid votes cast in that constituency. Suddenly, in the 1997 general elections, Braddell Heights' boundary was redrawn to make it part of Marine Parade GRC, which has no common boundary with Braddell Heights. So that is how gerrymandering works.

Sir, if we want to have a fair and democratic election, the present rules should be either altered or changed. I want to suggest that should the Government intend to change the boundary lines of any constituency, they should give at least one year's notice, so as to give time for the Opposition to organise themselves.

Sir, broadcasting time should also be given to every political party that takes part in an election, rather than by number. I believe currently it is half-a-minute for every eight candidates. But many of the Opposition parties do not even have that number and are deprived of broadcast time. So I think every party that takes part in an election should be given maybe half a minute of broadcast time.

Sir, the election date also should be announced at least two months before the elections, rather than to keep everybody guessing. I think announcing the election date is nothing new. This has been announced in almost all other countries, and I think the Americans have fixed the date of 4th November as the election date.

On the deposit, I think it should be reduced by one-half. I believe at the moment, it is $8,000. It should be reduced to $4,000. There is no reason to fix or peg the election deposit so high as to keep a lot of people away from taking part in a democratic process.

Lastly, Sir, I think this GRC is definitely incongruous as far as elections are concerned. You are having four, five or six candidates all at one go, and a voter will have to vote six candidates. He might like only two of them and he is forced to cast his vote for the other four. This is very undemocratic, because he does not want the other four to represent him and yet he is forced to vote them in. Also, GRCs are very communal in nature. I think it should not be continued. At every election, the ethnic candidate will have to go and declare himself before an Election Committee whether he is an Indian or a Malay. This is very demeaning to our Singaporeans. If he is a Singaporean, why should he declare himself a Malay or an Indian before he can take part in an election? He should just simply say, "I am a Singaporean. I have a right to take part." But he has got no such rights in a GRC.

Sir, the element of surprise on the Opposition should be removed. If the Government has done its work properly, as it claims it has, then it should be confident of itself and there is no need to spring surprises on the Opposition. I assume at this election, there should be no surprises sprang on the Opposition.

The Chairman: Mr Jeyaretnam, you did mention earlier that you do not have much to say. So I presume you will make it short.

Mr Jeyaretnam: Sir, I shall be short when it comes to these things.

It is not the first time I have raised this question of a Members' Register, and the answer I have got is, "Oh, the Prime Minister knows. He keeps it locked up in his heart, and that's good enough." Was it in the last National Day Rally speech by the Prime Minister or some other speech, the Prime Minister was saying that entering politics is the highest form of public service. I laughed when I saw that. And I posed a question and we have never had any reply to it.

We keep constantly talking about how transparent Singapore is. Everything is transparent and yet nobody is to know the interests and the possessions of people who enter into politics and become Members of Parliament, and how they are doing. This is something which is observed in almost all countries. Why is it that we who make so much trumpet blowing about how transparent, how accountable we are, cannot have a Members' Register, showing exactly what the Members' interests are or the interests of their spouses are, so that we do know whether they come into politics because of public service or anything else?

The Minister for Home Affairs (Mr Wong Kan Seng): Sir, on behalf of the Prime Minister. Mr Chiam has made several points which I am sure if you have ---

At this juncture -

Mr Jeyaretnam left the Chamber.

Mr Wong Kan Seng: Mr Jeyaretnam is not interested in my answer. He has already heard the answer before. So he just raised it perfunctorily.

Anyway, we come back to Mr Chiam who has raised some very serious points. Mr Chiam made a number of points concerning redrawing of boundaries, new rules being set up, broadcasting time, election deposit, and so on. As he knows, all countries redraw the boundaries from time to time, and I do not believe that we call them gerrymandering. Boundaries are redrawn because population shifts and the pattern of residents moving into new housing estates also shifts. So we have to take that into account and provide for new constituencies or regrouping of constituencies, and that is done quite regularly and there is no surprise about it. Of course, Mr Chiam would like to be told way back in advance, as he says, a year in advance, when boundaries change. But unfortunately the Election Boundaries Delineation Committee does not sit so far ahead, as Mr Chiam would wish. But if the Committee sits and the report is completed, and eventually the report is submitted to Parliament, he can take a look at it, and that is when he can start to prepare the ground. Whether the party has enough time to go to the ground and contest or not, much depends very much on what the party has been doing during the period when there is no election. The party need not wait till election in order to go and find out about the ground, know what is going on the ground, or even cultivate the ground. He needs to have enough people to do that. And if he wants to zero in on a certain number of constituencies, by all means do that. If he looks at the pattern in the past years, some constituencies are contested and some may not be. So I think he has got to work very hard to find the right kind of constituencies to contest.

On election deposit, the deposit is set at 8% of the total MPs' allowance for the year, which, I believe, now works out to between $11,000 and $13,000. And that is not a large sum of money. If a candidate is able to get one-eighth, about 12% of the votes, he can get his deposit back. So in a very unlikely event that a candidate just simply takes the gamble and hopes to be elected and only gets less than the required percentage to reclaim his deposit, then he has taken the gamble and lost.

On the GRC being undemocratic and communal, I do not believe so. This had been fully explained at the time when we had GRCs, and we had gone to the Select Committee. GRCs have been in place since the elections in 1988. I believe Mr Chiam went to talk to some students recently and they raised the same point. And some students asked him, "Mr Chiam, we have heard all this before. Haven't you got something else more or new to say?" Well, I do not know what he said. But I believe that he must have said something.

On broadcasting time, broadcasting times must be proportionate to the number of candidates that the party fields. It is definitely not a level playing field if he says he fields one candidate and he is entitled to the same amount of time as the one that fields 83 candidates. That is not level. That is very unequal indeed. So the policy will remain as far as the broadcasting time is concerned.

Mr Chiam has asked that we do not spring any surprise on him. Let me tell him something in advance so that he would not be surprised.

I would like to take this opportunity to inform the House that from the next general election, a central announcement system would be implemented. There will also be separate assembly centres for candidates and their supporters. This is different from the previous arrangement that candidates and their supporters gather at the counting centres to hear the announcement of results. In past elections, even though the announcement of results was broadcast live over radio and television, large crowds of supporters of contending parties still gathered at the announcement centres to hear the results being announced. The atmosphere of such gathering can be very tense. Some troublemakers appeared and taunted the candidates and the supporters from the opposite camp. Such behaviour can spark off major law and order problems. Although there were no arrests at announcement centres in recent elections, the potential for a situation in such gatherings to escalate and turn ugly is very real.

At the last general election, the crowd atmosphere was particularly tense at the Bishan-ITE where the result for Cheng San GRC was announced. It was thus prudent to designate a central announcement centre and have separate gathering points for different political parties. Let me explain how this central announcement centre works.

For the coming elections, the results will be announced and broadcast live by the Returning Officer over radio and television from a centralised announcement centre, and that is likely to be at the Elections Department. Apart from simplicity, this will avoid the problem arising from having supporters of different political parties congregating at the announcement centre. Centralised announcement of results is already practised in countries such as Thailand, Hong Kong, Australia and Germany. However, in most countries, there are no designated places for contesting parties to congregate. Usually, the contesting parties will gather at the respective headquarters or at a large hotel ballroom. In Australia, for example, the results are transmitted via computers from the ground, and are placed in the National Tally Room in Canberra. The TV network covers the results live from the National Tally Room. Some MPs gather at the National Tally Room while others gather at a large hotel ballroom to await the results. In the United States, the announcement of results is decentralised. However, the main points of congregation for the candidates and the supporters are at the campaign headquarters or at a hotel ballroom or the party HQ.

Members of the public will not be allowed into the central announcement centre. Contesting candidates will also not be allowed into the central announcement centre because their supporters are likely to congregate at the vicinity of the central announcement centre if the candidate is there. However, the media will be allowed to be present to cover the results when they are announced. Before the announcement is made publicly, the candidates would be told of the result. They can then get themselves ready to meet the supporters at the assembly centre and thank them. This is the same practice as in the past. 2.30 pm

Let me explain how the assembly centre works. Separate assembly centres will be allocated to different political parties with the contending groups of the candidates and supporters physically separated from each other. The risk of potential conflict will be reduced. Supporters of the candidate will also have a safer place to gather. Several electoral divisions will be grouped together into a zone. The number of zones will depend on the number of contesting candidates and will be determined after Nomination Day. Within each zone, each contesting independent candidate or party will be allocated one assembly centre, irrespective of the number of electoral divisions in the zone being contested by them. More details will be announced at the general election.

Sir, Mr Jeyaretnam is not here to listen to this. But having made the point, I should reply to his point. Otherwise, the House would be left with no answer to the question raised. This is not the first time Mr Jeyaretnam raised it. I do not think it will be the last time too, if he remains in the House or continues to remain in the House. The reasons why we do not need such a register have been stated before and I will just reiterate very quickly. Firstly, Mr Jeyaretnam's proposal does not necessarily contribute to a clean government and uncorrupt practices. It will not stop corrupt practices if an MP chooses to be corrupt. An MP who is corrupt will not openly list his corrupt things in the declaration. So apart from satisfying the curiosity of some people, this will not help to maintain a clean government. Indeed, Mr Jeyaretnam must have thought of this practice because it was practised in the United Kingdom. The British have such a system in 1974. But we all know by 1994, there was a large number of complaints concerning the sleaze problems of the MP. As a result, the Prime Minister had to set up a committee on standards in public life to oversee the conduct of holders of public office.

In Singapore, our practice has always been that there is a code of conduct for the Ministers and the office-holders and each Minister or office-holder is required to file a declaration of his assets to the Prime Minister at the beginning of each term. And so the Prime Minister knows what each office-holder owns and the Prime Minister does not keep this to his chest, as Mr Jeyaretnam said. The Prime Minister shows that list to the President. So when there is an allegation of misconduct, the declaration would form the basis for an investigation.

Thirdly, all PAP MPs are also required to declare their income to the Prime Minister, even though they are not in charge of any Ministry or policy. This system is instituted by the PAP and I do not know whether the Workers' Party has a similar system to require its MPs to declare their assets to their own leaders. If not, then he should firstly put his own house in order.

Fourthly, if we have such a register, it would only intrude on the personal privacy of members unnecessarily. Already, it is quite difficult for us to get people to contest and, doing so, would simply dissuade such people from coming forward.

Mr Inderjit Singh: Sir, I would like to thank the Deputy Prime Minister and the Minister for Home Affairs for answering our questions. I therefore would like to withdraw my amendment.

Amendment, by leave, withdrawn.

The sum of $179,930,810 for Head V ordered to stand part of the Main Estimates.

The sum of $51,383,200 for Head V ordered to stand part of the Development Estimates.

Head N -

The Chairman: Head N - Ministry of Finance. Amendment No. (1), Mrs Lim Hwee Hua

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

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

Sir, over the past few years, the Government, through the Monetary Authority of Singapore (MAS), has systematically reviewed the scope of financial services that Singapore should be offering against the role and expertise of both existing and potential players, namely, the financial institutions.

Sir, the MAS has not shied away from making bold and sweeping changes, such as the liberalisation of the banking, securities and insurance sectors. To MAS' credit, this has not gone unnoticed by foreign market participants and investors. Not unlike the experiences at other major financial centres, the regulatory changes are usually accompanied by wide scale consolidation of industry players. Examples abound such as the merger of J P Morgan and Chase, or closer to home, the merger of Keppel and TatLee Banks and of DBS Securities and Vickers Ballas.

Sir, in this context, I would like to ask the Minister to redefine the role of finance companies in our overall vision to be a major financial centre.

Back in December 1998, the MAS indicated that it would be reviewing rules to allow better-managed finance companies more leeway in managing their risks, but without compromising prudential standards. This was fleshed out in part as permission for finance companies to install ATMs in May 2000. Subsequently, the better-capitalised ones were allowed to offer financing for IPOs and to extend unsecured loans.

However, the statistics on loans extended by finance companies appear to point to an erosion in market share as a whole, especially of housing loans. The only bright spot has been car loans, which were boosted by the spike in the number of COEs in Year 2000. Given the fewer COEs to be handed out, the demand can be expected to drop in tandem.

Three of our local banks, DBS, OCBC and UOB have already absorbed their finance companies into the parent banks' operations. This is not surprising at all from the perspective of optimising capital resources. As of now, there are 11 finance companies, several of whom are family-owned and very small, having assets of less than $100 million.

I would therefore like to also ask the Minister whether the Government will help facilitate a consolidation of these less well-managed or small capitalised finance companies. If there are shareholders who wish to exit the business but have been unable to find a buyer, can the MAS assist in any way?

BG Lee Hsien Loong: Sir, finance companies have complemented banks as financial intermediaries, servicing small and medium enterprises and small retail customers. They generally offer higher interest rates on fixed deposits than the banks. They offer more personal service to customers, and some older Singaporeans are more comfortable placing their FDs with finance companies.

Finance companies have been active lenders to small and medium enterprises and in the housing loans and hire purchase markets. Their assets grew from $400 million in 1968 to around $22 billion in 1997. But, as Mrs Lim has observed, over the last few years, the finance company industry has been in decline. They face growing competition from commercial banks, both local and foreign. Since 1997, the total assets of finance companies have fallen by 11%. The share of the Singapore Dollar non-bank deposit market has shrunk from 11.3% back in 1997 to 7.4% today. This has prompted mergers among finance companies, and between finance companies and banks. Several finance companies have either given up their licences or gone into voluntary liquidation. In 1998, there were 31 finance companies. Today, there are only 11 and we expect this rationalisation to continue.

Mrs Lim asked if MAS will facilitate the consolidation or exit of the smaller finance companies. Consolidation in industry is not a new development and has been ongoing since the 1980s. MAS has consulted closely with the finance companies to ensure minimum disruption to customers and to the industry. We have allowed the finance companies to be merged with well-run financial institutions that have demonstrated the ability to carry on the business, as the purpose of the merger must be to result in a stronger institution. In practice, this has so far meant mergers with banks and other finance companies.

We should recognise the basic distinction between finance companies and banks. Banks have to meet higher capital requirements and prudential standards. They also have larger and stronger management teams. Because finance companies do not meet these requirements, they are only permitted to undertake a more limited range of activities. For example, they may not provide cheque accounts or establish off-site ATMs, unlike banks. This is why MAS has reservations about allowing finance companies to be absorbed by institutions other than banks or other finance companies, for example, stock-broking firms.

Going forward, I do not expect any fundamental shift in the activities of finance companies. But they must continue to assess the changing environment and upgrade their capabilities in order to stay relevant in Singapore's more open and competitive financial landscape. This will determine whether they consolidate their position and reverse the decline in market share.

Mr Sin Boon Ann (Tampines): Sir, the recent focus on the quality of services of POSBank, both in the press and in this House, once again raised the issue of bank mergers and the provision of post-merger services.

If Members will recall, the merger between DBS Bank and POSBank led to the closure of some POSBank branches. This has resulted in long queues forming in the remaining branches with customers having to wait much longer before they were attended to. Quite understandably, there was much unhappiness all round. And I am sure some comparisons must have been made in the minds of POSBank customers of the quality of service of the bank before and after the merger.

This unhappy episode of course followed the earlier incident that involved the shut-down of DBS' ATMs because of apparently problems involving integration between POSBank and DBS' computer systems. Sir, this is not to mention the general unhappiness and dissatisfaction that Singaporeans felt over the issue of having to keep the accounts if they did not maintain a minimum sum in the account. This has led many Singaporeans into asking whether or not they are better served by the merger.

In moving the POSB Transfer of Undertaking and Dissolution Bill, Minister Richard Hu stated and I quote:

"DBS was a natural choice as the most suitable partner for POSBank. Since the Government is the major shareholder of DBS, it can be more confident that the DBS will preserve the spirit of POSBank's social responsibilities."

Sir, I am glad that the Minister recognises that there are social responsibilities that POSBank will have to continue to assume even after it transforms itself completely into a private sector entity. And the nub of the issue is the exact scope of social or public responsibility that POSBank is expected to shoulder. The man-in-the-street perceives POSBank, Sir, as a public institution. For many who grew up in the 60s, including myself, POSBank was perhaps the first savings bank that he encountered. All through the school years, and even perhaps, his young working adult years, POSBank was the place where his salary was credited into, and the ubiquitous ATM machines served as a convenient means by which banking transactions were carried out. Surely, the services were not exactly sterling compared to privately-run commercial banks but, surely also, they were not worse off than perhaps they are today. 2.45 pm

Sir, I can understand the business imperatives that drive many of the decisions for POSBank today. However, the one question that we must ask ourselves is whether everything must be driven by business imperatives alone. The Minister has assured us that POSBank continues to carry its social responsibility, and that DBS will and, I quote, "Retain all the good features of POSBank in order to add to its attractiveness as a combined bank. Certainly, the ATMs will be maintained, and DBS has assured us that it will continue to provide services for the small depositors and, indeed, for children up to 12 years old and students up to age 21."

What are good services for the small depositor? It would be, I believe, for the man-in-the-street, the ability to continue using ATMs with cards issued by other banks, maintain savings accounts without levies, tax-free savings, shorter queues and convenient checking accounts - in short, most of the services that Singaporeans were used to.

Sir, I accept that we cannot run a commercial institution on the basis that it provides free services. That would be true, if our starting point was that POSBank is purely a commercial institution without any legacy. However, I submit, Sir, POSBank is not such an institution. It has a social responsibility, in particular, a responsibility to the man-in-the-street. That responsibility would mean that there must be a certain amount of cross-subsidy to see to the continuance of certain essential, albeit not so profitable, services. If for some reason POSBank should choose to relegate some of that responsibility, then it should be carried out over a longer period of time and not so soon after the merger. I would say that what DBS has done with POSBank, since merger, has been a disappointment for the man-in-the-street.

The Government is in a position to intervene, either through its substantial shareholding in DBS or through the MAS, by giving it greater clout to regulate the quality of banking service to the customers. I would, therefore, like to urge the Minister to consider a review of, and re-define, the exact scope of the role of POSBank in discharging its social responsibility, as well as a review of the speed with which POSBank may withdraw its services if, at the end of the day, it should decide to continue to withdraw.

Mr Thomas Thomas: Sir, I would first like to thank Mr Sin Boon Ann for covering quite a lot of things that I had wanted to say, and quite eloquently. He has made my job much easier.

Just to add on to what he has said on banking services, one of the points that the Minister told us when selling off POSBank was to satisfy customer demands. I would like to ask the Minister to review whether this objective has been really met, because when we go down to the ground, most people seem to be unhappy with the services they get under DBS than what they got before. DBS seems to be very successful in being driven by the profit motive. I have nothing against it. I know that we need to have a commercially successful bank, but it also has social responsibilities.

In the past, when we tried to encourage workers to go for cashless pay, POSBank was there to render the service. When we tried to encourage savings, POSBank was there. And POSBank made the arrangements to put ATMs near workplaces convenient for workers to withdraw money and go along with cashless pay. But now the whole philosophy has changed.

I know of a place where DBS gave two weeks' notice that the POSB ATM would be withdrawn in two weeks, and a lot of workers were affected. They complained, but before even an appeal could be done, before the two weeks were up, the machine just disappeared. We can say that there is efficiency, but I do not know whether it is efficiency when it gives people two weeks' notice and before the two weeks are up, the machine disappears. But it causes people to feel very unhappy and that they have not been well taken care of or well treated.

When DBS took over POSBank, they had a captive audience, a lot of goodwill. And thanks to the POSBank network, I think DBS is making profits, which is all right. But has DBS met its objective of meeting customers' needs and requirements? I would ask the Minister to review whether DBS has kept faith with the original terms of sale and, if not, for the greater good of all Singaporeans, to review it again and let us take a new look at this.

BG Lee Hsien Loong: Sir, I thank Mr Sin Boon Ann and Mr Thomas Thomas for raising this problem of DBS-POSBank. The issue is in the public eye again because of the recent branch closures and some ATM relocations, and also the introduction of bank charges by DBS. Let me briefly recap why the Government allowed POSBank to be acquired by DBS and then explain the current situation.

For more than 25 years, POSBank was a leader in providing basic retail banking services to the community. 95% of adult Singaporeans had POSBank savings accounts. Mr Sin Boon Ann was one of them, so am I, so are most Members. But POSBank was losing money on its small accounts, and three out of four of its accounts were not commercially viable, and it was trying to cross-subsidise smaller depositors, using margins from the larger accounts. It could not really continue doing this, because the bigger depositors were taking their business to other banks offering higher returns and more sophisticated products. So POSBank was losing market share and, in fact, had to reverse its strategy of paying lower accounts higher interest, and to pay bigger accounts higher interest, in order to try and reverse this tendency. But the strategy of cross-subsidising small accounts was not sustainable, and even if DBS and POSBank had not merged, POSBank could not have continued offering free banking services to all customers indefinitely.

At the same time, the backdrop globally in the industry was of banking mergers, because technology was advancing, regulatory barriers were coming down, consumers were becoming more sophisticated, demanding higher quality integrated financial services. So the banks had to find economies of scale, economies of scope, big enough and broad enough.

So our local banks too needed critical mass to justify heavy but essential investments in new technology, markets and distribution channels. DBS recognised this need and made an offer to acquire POSBank in 1998. The Government accepted DBS' offer instead of putting POSBank up for bids, because it wanted POSBank to continue fulfilling a social function after the merger and DBS was willing to accept this responsibility, and Mr Sin and Mr Thomas have reminded us of this social function.

So what has happened since the merger? DBS has rationalised its branch network, introduced charges for cheque services and savings accounts with balances of less than $500, and it did these because it needed to improve efficiency and recover at least part of the cost of servicing customer transactions. These changes have stirred public concerns over whether DBS is still committed to serving the mass market, and whether basic banking services will remain within the reach of all Singaporeans. We debated the matter in Parliament last year after DBS imposed a $2 charge on small savings accounts. But, recently, their concerns got stirred again because of long queues, delays in integrating POSBank, DBS branches, ATM failures and so on.

DBS has reiterated its commitment to continue providing banking services that are accessible to all at affordable prices. It is rationalising its branch and ATM network, but it has no intention of leaving the mass market unserviced, leaving the small depositors stranded. The present problems are transitional teething problems, and DBS has assured MAS that it is doing everything possible to address them. It is really for DBS itself, rather than the Government, to justify to its customers and the public the bank's actions. DBS has explained publicly some of the steps it is taking, eg, it has imposed a temporary moratorium on further branch closures, it is enhancing the training of counter staff and educating customers on the use of ATMs, it is introducing cash acceptance machines so that customers do not have to queue up at the counter but just need to put the cash into a machine - faster and more convenient. And DBS has also stated that it is not cutting back on its ATM network and, in fact, plans to expand on the total number of ATMs that DBS and POSBank together had at the time of the merger.

I asked DBS, "Frankly, are these queues a reflection of your intention to cut back on your service or is this a problem we have to solve?" They said, no, it is a problem they have to solve, they are not cutting back on their service. They have had to rationalise ATMs and branches, but their service coverage will remain.

So I asked for the number of ATMs. POSBank started off with 654. When POSBank and DBS merged, DBS had 287, so together, they had 941. So, in fact, straightaway, if we are using ATMs, we have got more coverage rather than less. Now it is slightly down because they are in the process of renewing and upgrading the ATMs, so they are down to 878. But they expect by the end of this year to go back up to 920 better deployed, better ATMs. So, if we are looking at ATMs, I think the total coverage, the total number of points-of-presence where we can get service, is more rather than less. It has improved.

In terms of branches, POSBank started with 126, DBS itself had 42 at the point of merger, excluding the head office, so together that was 168. Today, the total number of branches is 72 for POSBank, 37 for DBS, three extra DBS Business Centres with staff, adding up to a total of 112. So the total reduction is from 126 to 112, which is not significant, but the 112 presumably would be better deployed, better spaced out. The problem is that the integration of their branches has not taken place properly, delayed because they had Y2K problems. As a result, although there is a total of 112 branches, we cannot go to any branch and do anything, whereas for the ATMs, we can really go to any of these 800-odd ATMs, whether DBS or POSBank, and do transactions. But DBS has assured us they will have that done by the third quarter of this year and, once that is done, this service will be restored and, I hope, improved.

I asked specifically about Mr Thomas Thomas' ATM problem because he had raised it, I think, last week during the Budget debate. This is at the ferry terminal, I believe, and the answer is that this was one of its less-used ATMs. Its utilisation was below half the average rate and so the ATM had to be closed. The expiry date of the rental was to be 31st January 2001 but, because of Chinese New Year, DBS negotiated with its landlord to hand over the premises one month later, 28th February. But DBS needed a week to take away the ATM, paint, touch up, and make good, so it terminated its services on 19th February, one week before the deadline for getting off the site. It gave notice from 1st February, so customers had 19 days' notice, instead of the usual one-month notice. DBS could have done better, but I do not think this is a sign that ATMs are disappearing all over Singapore.

The $500 fee which both Members raised again was something which we debated extensively last year in this House. As a result of the discussion, DBS introduced a scheme once we liberalised our CPF rules to allow low-income people who are drawing pay, to transfer $500 from their Special Account into DBS to meet this $500 requirement in order that they would not have to pay the $2 fee. So the mechanism is in place. If they really cannot afford the $2 fee, and if they really meet the $500 minimum quantum, they can make an arrangement to transfer from their Special Account, and DBS will waive the fee. The arrangement has been in place. I understand from DBS, in fact, 10,000 people applied, of whom 5,000 met the criteria. It is quite a small number. So the facility is available, but it is really up to people whether they want or do not want to use it. If DBS had been more careful and had done this first before imposing the fee, I think it would have gone down better, but we all learn from our mistakes.

In fulfilling its commitment to offer basic banking services, DBS has to take into account commercial realities. Each ATM withdrawal costs the bank between 30 cents and $2, depending on how much economies of scale the bank has. The ATMs have to be replenished and serviced, and security checks have to be made. Transactions at the branch cost even more because the bank has to pay for rent, staff salaries, electronic facilities and security.

In some countries, banks have introduced basic no-frills bank accounts with limited transaction features, sometimes mandated by the government. But these are typically not free. For example, in New York State in America, a basic account allows eight free withdrawals, but you pay US$3 a month. In Australia, an account permitting eight free withdrawals will cost A$4 a month, if your balance falls below A$1,000. This is higher than the fall-below fee which DBS and the other local banks charge for small savings accounts with unlimited number of transactions. 3.00 pm

On social responsibility, basic banking services must be available but to make them free, I think is not possible and was never promised. It was made quite clear right from the beginning that adjustments would have to be made, but they would go out of their way to make sure that they service this market.

In fact, when introducing the fall-below fees on savings accounts, DBS automatically exempted about one million accounts belonging to Singaporeans, those over the age of 62, those below the age of 21, full-time National Servicemen and those on the public assistance scheme. In fact, if you ask whether DBS has lived up to its bargain, I would say yes, it has. But it cannot be responsible for providing free banking services for all.

What can MAS do to help make banking services affordable and accessible? As I explained last year, Singapore is different from other countries. We do not have a big rural area population and remote villages, unable to be reached by bank branches. We are compact, we are a city. I think we can have a network where there is a comprehensive set of branches, covering the whole of the island, where ATMs are also comprehensively available, perhaps not at every ferry terminal, but all over the island, and it is affordable for everybody.

One of the things that we have done recently was to approve the use of cash-back services. In other words, when you buy something at a shop, if you buy $50 worth, you enter the ATM terminal for $70, you collect your purchases and you collect $20 from the cashier. This gives consumers the convenience and a choice of withdrawing cash at participating retail outlets, which means, instead of depending on 900 or 1,000 ATMs, you will have many, many more ATMs than that. Every shopping outlet becomes potentially an ATM. NETS is planning to launch this service soon, in collaboration with Fairprice and several other major retailers.

Another thing which we propose to approve is to allow banks to set up limited-purpose branches on third party premises. In other words, you do not have to have your own branch, rent premises, have a full shop and have a full branch. You can rent a space, sublet somebody's HDB shop, for example, and put a little counter there, provide basic services. It is cheaper and more accessible. Then the banks can negotiate with third parties, such as post offices and supermarkets, and leverage on their staff and premises to provide basic services, including cheque desposits, cash withdrawals and other payments through existing retail networks. This way, banks can reduce the costs of delivering banking services, resulting in savings for consumers.

Sir, we will do what we can to make banking affordable and accessible, and I think we can do a considerable amount, but in the end, we cannot avoid some changes and we cannot avoid some charges. We will try to space out the adjustments over a period of time, rather than suddenly. DBS, I think, has taken a step back. They are adjusting their programme now. I have confidence that they will overcome their teething problems and provide the service which they promise Singaporeans.

Mr Inderjit Singh: Sir, I have brought up this issue about a third board for listing Singapore companies before. The main issue is the balance of having a third board for listing of new and risky companies versus using the existing main and Sesdaq boards for fund-raising by companies. While Singapore is currently too small a market to justify a third board, we should expect Singapore to grow as a significant financial hub for the region. It is therefore, an opportune time for us to have a third board or as an alternative, an over-the-counter (OTC) board, for ease of fund-raising so that in the long-term, we would have a much more vibrant place for fund-raising and stock market investment.

My complaint is not so much that companies are not able to raise funds, but the problem is the approach that has been taken by the Singapore Exchange (SGX) for the last two years to make it easier for companies without track records to list on both boards in Singapore. It became so easy that so much so there were too many examples of fundamentally weak companies that got listed easily, resulting in the investing public getting hurt, while the promoters of the companies made their money. While I know that the answer is going to be that investors must be more prudent and study such offerings of public listings carefully before making their investments, the fact is that some of them, together with the advisors, do a very good job in marketing their companies, and the prospectuses are so detailed and legalistic that the common man finds it difficult to fully comprehend the contents. When we see too many fundamentally weak companies getting approvals to list on our two boards, the unintended effect is also that the reputation and credibility of our main board and of SGX comes into question. Why were the regulators not able to sieve out the companies that should not have been listed in the first place?

I suggest that we go for the third board for emerging and technology and risky companies to raise funds. By segregating the three boards this way, where we know that the third board is for high-risk companies to get listed, investors would, right from the beginning, know about the risk nature of their investments. We should also take the opportunity to use technology to make it into a global board, if we want to do this, that trading can go on for 24 hours a day, not just to service markets in Singapore, but the global market and, where trading can be done in global currencies.

I feel this is the best way forward to further ease fund-raising issues in Singapore while we avoid tarnishing the image of our two existing boards, as is the current situation, when fundamentally weak companies get listed on them.

BG Lee Hsien Loong: Sir, on Mr Inderjit Singh's idea of a third board, he raised it last year and I explained then why I did not think it was practical. Since then, SGX has had an eventful year. Many companies have had their IPOs. Some were successful, others not. The question is whether in the light of this experience, we now think a third board is a good idea. We have asked SGX and in their view, which MAS agrees with, the answer is still no. Let me explain why.

SGX's basic decision is what criteria to use when allowing a company to be listed and when allowing the public to trade shares in the company, whichever board the company goes on. What are the criteria for letting it be listed and letting the public buy and sell the shares? Mr Singh argues that if we put risky shares on a third board, this would be a signal from SGX to the public that the shares are more risky. There are some examples overseas where they have tried this approach.

But our approach is: the investing public should already know, from the company's prospectus, the nature of their business and the risks which the company is subject to. If a retail investor needs help in interpreting the prospectus, which sometimes he does because it is put in a complicated way, there are analysts and financial journalists who comment publicly on pending issues, and whose considered opinions the retail investor can read in the newspapers. If SGX had to decide which of several boards to allow the company on to, it would have to base its judgement on the same public information that is already in the prospectus because SGX should not have information which is secret to itself.

Furthermore, SGX does not want to pass judgement on the company, beyond deciding that it meets the listing criteria. To do so would be inconsistent with disclosure-based regulation, and would bring SGX back to the pitfalls of merit-based regulation which it used to practise.

The fact that several IPOs were under-subscribed this year and tanked suggest that investors do know a doubtful proposition when they see one. They are not such suckers. They may not have understood all the fine print and legal language, but they knew enough not to part with their money. It is only when investors pursue the shares of a risky company without realising the risks, then we have a problem.

We should also be clear about the motivations for wanting to segregate risky companies onto a third board. Is it to encourage more adventurous investors to buy their shares, or is it to warn off investors who may not be aware of the risks? I do not believe that the present SGX rules prevent any companies from listing who could list on a third board, as Mr Singh acknowledges. Nor do the rules hold back any adventurous investors seeking risky stocks prepared to accept the downside in the hope of high returns.

The experience of other countries confirms that setting up a third board would not, in itself, draw liquidity and interest to the companies listed on it. During the technology stock boom, exchanges in several Asian countries created technology boards along the lines suggested. They have had mixed success. Some attracted significant interest in their initial months, but have been hard hit by the declining interest and valuation of technology companies. Their overall market capitalisation has fallen sharply. Today, technology companies are finding much more difficulty raising funds on these boards. We can look at several examples. Germany has the Neuer market, Korea has KOSDAQ, Hongkong has GEM, Tokyo has the Mothers market, Malaysia has MESDAQ. The experience is mixed. It is not clear that by putting it on a different board, you make the company more successful. Yes, it was hot at the time when the boom and frenzy was on, but now the excitement has ebbed and many of these boards are languishing, their companies and their shares too.

Not all the companies listed on SGX need be, or should be, established, safe, blue chip companies. There is nothing wrong with having risky start-ups being listed on the exchange, alongside established names like SIA or DBS, once these start-ups reach a certain threshold size. As long as the risk is an honest business risk, the company complies with the Exchange's listing rules and disclosure requirements, and their shares are properly traded and not cornered or manipulated, then the Stock Exchange is fulfilling its proper function - providing a well-regulated marketplace for the company to raise equity capital from the public.

The business risk is something which the investors have to judge. If it is a matter of dishonesty, fraud, somebody running away with the bank's money, manipulating their shares, for that kind of risk, we would do something about it. We would chase it up and put it right. But if it is a business risk - I put forward a proposal, full disclosure, you know what I am trying to do, you know the dangers, you put your money up, then I do not think we should stand in the way and require you to be separately listed or to prevent you from listing.

Indeed, in today's business environment, risk is no longer very much a function of size and recent earnings profile, especially for technology firms. Large and profitable firms can also be risky because the conditions can change very rapidly. When SGX liberalised its criteria to allow more firms to list directly on the main board, it was in effect saying that the main board was no longer a low-risk board. Sesdaq then became a small cap board instead of a high-risk board.

I believe that this is the correct approach for SGX to take. But it does raise the question of the need for SGX to have a separate small cap board. Sesdaq was launched to allow less well-established companies that did not qualify for the main board to be listed. Now that SGX has revised its listing criteria, many companies, which in the past would have had no choice but to list on Sesdaq, can now list directly on the main board, although not all of them. SGX is therefore studying the proper role of Sesdaq, to review the merits of continuing with two separate boards. It has not reached any decision on the matter.

Assoc. Prof. Toh See Kiat (Aljunied): Sir, our law of insurance requires the insured to declare what he knows to the insurer if such knowledge has relevance to the insurer's assessment of the risks involved. The impact of this rule extends to the Home Protection Scheme (HPS) run by the CPF Board which, in law, is another insurance policy. Many Singaporeans sign their HPS documents as one of a whole stack of papers they sign when they are allocated their HDB flats. They are not specifically alerted to the nature of the HPS as an insurance policy. Hence, they are totally baffled and deeply aggrieved when a breadwinner dies of a pre-existing medical condition, ie, existing before they signed the HPS and HDB papers, but which they have not disclosed at the time of signing of the papers.

Actually, the same happens even when an insurance agent has properly directed the attention of the insured to the duty of disclosure because of the vagueness of the parameters of this duty.

The only reference in our Insurance Act (Cap 142) to the duty of disclosure is in section 25(5), which attempts to ameliorate the harshness of this common law rule. The section mandates that insurers who wish to rely on this rule ought to display prominently a warning that "if a proposer does not fully and faithfully give the facts as he knows of them or ought to know them, he may receive nothing from this policy". Violation of this section results in a fine but the insured still is not entitled to payment.

And this provision yet does not tell the insured what to say, what part of his store of knowledge is relevant when he "proposes" to enter into a contract of insurance. Worse still, the policy is void even if there is something he ought to know. What ought a poorly educated man or woman "ought to know"? That his "hong sip" (Hokkien for "wind and wet", referring to a whole range of ailments from rheumatism to arthritis) is something that he must declare because it is some kind of preliminary cancer? What ought a well-educated non-medical professional "ought to know", that disclosing his high blood pressure may not be the same thing in medical science as revealing his ischemia or his propensity to myocardiac infarction? 3.15 pm

In legal jargon, leaving aside medical jargon, the standard of disclosure is that of the prudent insurer, ie, the insured must disclose all facts which a prudent insurer will want to know in assessing the risk. How would a layman know what a prudent insurer requires? In Australia and in Malaysia, the legislatures have amended the common law test to one of what a reasonable insured knows to be relevant to the issue of risk. This remains difficult to fulfill, but at least the insured is not tested on his guess on what the insurer wants to know; nor what the insured "ought" to know but nevertheless does not know until a court says he ought to know.

That leads me to this question of insurance policies which an insurance company issues. Our policies are chock-full of obscure and laborious English, not plain conversational English. NTUC Income has done a very good job of simplifying its policies, but they are still hampered by the fact that the law is painfully laden with language from the ancient cases using language and a style of English no longer meaningful in the Third Millennium. If the law of insurance updates and simplifies its language, then the policies will follow suit. Can we look at our neighbours and emulate them?

Finally, Sir, it is a common practice for many life insurers to provide a column for the proposed insured to nominate a beneficiary. Unlike CPF nominations, this nomination is not effective in disposing the proceeds of the policy if there is a will stating otherwise. As for nominations in NTUC Income policies, these are valid because their policies are not governed by the Insurance Act, but by the Cooperative Societies Act (Chapter 62). Nonetheless, such nominations are not revoked by marriage, unlike the case with CPF nominations. Then there is the complication of nominations that take effect under section 73 of the Conveyancing and Law of Property Act (Chapter 61). In the case of Eng Li Cheng Dolly v Lim Yeo Hua, reported in [1995], 3 Singapore Law Reports 363, the High Court held that a divorced wife was entitled to proceeds of her ex-husband's life policy, just because he had named her in the policy, despite the fact that he had divorced her and had intended to remarry before he died. Surely this could not have been his intention? Part XIII of the Insurance Act 1996 of Malaysia has 11 sections dealing with nominations. We have not a single section.

Our convoluted law needs reform and consolidation in one Act now. Are we ready, Sir, for this mammoth task for the New Millennium?

The Chairman: General Lee, would you like to respond?

BG Lee Hsien Loong: Sir, I am not familiar with all the Chapters, sections and cases. But I would say that the Member has raised valid concerns and these are matters which we will look into - all of them.

In the case of the burden of disclosure, the present situation is, as Assoc. Prof. Toh has pointed out, to ensure that they have to display a warning that if the prospective buyer does not fully and faithfully give the facts, as he knows them or ought to know them, he may stand to receive nothing from the policy. There are concerns that insurers might rely on this to be less than fair in their obligations to policyholders. And to make sure that policyholders are not unfairly treated, the Life Insurance Association has issued an internal statement of practice, which requires that proposal forms of all life insurance companies exclude questions whose answers a prospective buyer cannot reasonably be expected to know, and which would not be practicable for him to obtain.

It also provides that the prospective buyer need not answer any questions provided that he states that he does not possess and cannot reasonably be expected to obtain the information necessary to answer the questions. Also, the insurer should not unreasonably reject a claim or invalidate a policy on the grounds of non-disclosure or misrepresentation, unless the fact is material and is within the knowledge of the proposer. And for that, he is reasonably expected to disclose it. However, flawed, deception, reckless or negligent non-disclosure or misrepresentation of a material fact will constitute grounds for rejection of a claim. This is the present position. So there is some safeguard. Whether we need to change the law is something I will look into.

On the use of plain English, MAS supports this initiative, and has suggested to the Life Insurance Association to encourage members to adopt this practice, and several life insurance companies have already begun to do this. And, again, we will see whether we need to change the law itself, to make the law itself use plain English.

As for beneficiaries, this is a problem, as the Member correctly pointed out. NTUC Income does not have this problem, because they are not an insurance company. They are a cooperative and therefore not covered by the insurance law, which is surely not a good way to do things either. Because it should be covered by the insurance law, whether or not it is a cooperative. So, we are looking, together with the Life Insurance Association, the Ministry of Law and the Ministry of Finance, into the issue of providing greater clarity in the nomination of beneficiaries for the proceeds of insurance policies. And when we amend the Insurance Act, we will fix all these matters.

Assoc. Prof. Toh See Kiat: Sir, first, a point of clarification to the Deputy Prime Minister. As I have pointed out in my speech, these insurance laws actually apply to the Home Protection Scheme of the CPF. These papers are signed in the flurry of a whole lot of papers in the HDB office before officials who are not directing their minds specifically to the insurance point. I get a lot of aggrieved residents who come to me and say, "My husband just died. Now I cannot pay for my flat, because the HPS does not pay, even though they said that they were supposed to pay. And that's because my husband did not declare this disease that he had." Would the Deputy Prime Minister also ask the authorities to look into this issue of both the procedure and the law where HDB flats are concerned?

BG Lee Hsien Loong: Sir, we will have to look and see whether the HDB officers, making house buyers sign the HPS forms, would count as insurance agents and need to be properly qualified for that purpose.

Assoc. Prof. Toh See Kiat: Sir, I move on to my next cut on electronic payments. First, I have this point to make, that for electronic payments to take place, we have to make sure that the old habits based on paper have to be removed. All of us know that cheques have become a very important part of the business life, and even the personal lives of a lot of Singaporeans and of people around the world. Cheques are paper payment instruments which, by law, are negotiable. Unfortunately, Sir, I think it has escaped the notice of many people that the cheques that are issued, and I believe the bulk of cheques issued today, are not negotiable. They are crossed and are made payable to "Account Payee Only", and these cheques, essentially, then become non-negotiable payment instruments.

The MAS has talked about the movement to truncate cheques, because moving of paper in such volumes is not good. But in order for the electronic clearance of such paper cheques to be done, in other words, for the procedures to be truncated, the law has to be changed.

Sir, while thinking about changing the law relating to bills of exchange and how to truncate them, could I urge the Government to look at a totally new paradigm, perhaps initially legislating for a payment order? In Australia, I understand that they have done this. They have removed cheques altogether in the form of negotiable cheques and legislated for a payment order. If a payment order is merely an instruction to the bank to pay and it is not negotiable, therefore, all the problems on negotiability and hindrances to electronifying the cheque would be gone. Perhaps we could be even more radical and be like Finland which, in 1996, abolished the cheque totally, and only allowed for electronic payments. Perhaps the MAS could look into how many cheques are actually drawn each day which are still negotiable and provide for those in a different way.

The other point I wish to make is that in the payment infrastructure that we have in place right now for electronic payments, our "killer application", DPM Lee has mentioned himself in this House, is the ERP system. So we developed a card system which is a form of electronic payment system for the ERP. And then we developed a separate system for use on trains and buses. There is a rumour - perhaps rumours are not true - that the ERP itself would change to a chip rather than a card. And then what is not a rumour is that by 2008, we are planning to have electronic legal tender. My concern is that all these piecemeal changes to practice and piecemeal introduction of electronic payment systems should not happen, because they should all be building from one common base, and therefore the killer applications could grow. I hope that we would not have different card systems and different payment systems for Internet, for ERP, transport and perhaps an inter-agency coordinating body would be necessary for such payments, so that by the time we have our electronic legal tender, the infrastructure does not have to be reinvented and recreated.

BG Lee Hsien Loong: Sir, I agree with the Member. On cheques, I do not think we are ready to abolish cheques. We support the initiatives to discourage cheque usage, but we do not think we can abolish cheques, because in many situations, cheques remain the payment instrument that makes the most sense. One day, there may be new payment methods that are cheaper, safe, more accessible. I think we can study how the Australians and the Finns have done, but I do not think we are quite ready for it.

The volume of electronic transactions has been growing rapidly now in terms of number of transactions. E-transactions have exceeded the number of cheques every year. Of course, in terms of total dollar amounts, it is much less, because e-transactions tend to be for little retail purchases. But the number of transactions has been growing rapidly.

We are encouraging e-payment innovations and improving the efficiency of existing payment infrastructure. For example, we are facilitating cheque truncation, scanning the cheque at the starting point and after that dealing just with the digital form, rather than the piece of paper circulating around. And we are also working with all the other agencies to encourage competition and innovation in e-payments - IDA, Ministry of Communications and Information Technology, Ministry of Finance, BCCS and so on, so that we will try to avoid having inconsistent overlapping pieces.

We are supporting the initiative by NETS and its five shareholder banks to restructure its ownership structure and corporate governance in order to take on new and innovative functions, and to make NETS the premier payment service provider within and beyond Singapore. NETS is currently in discussion with potential partners who can bring expertise, technology and global connections. When it finds a strategic partner and new management structures, a revamped NETS will be more effective in promoting electronic payments and proving the efficiency of payment instruments and infrastructure, introducing new payment methods, and so move us towards a cashless society.

As for smart cards, right now, the only multi-purpose stored value card we have in Singapore is the NETS CashCard, which is based on the contact card technology. But LTA is beginning to install infrastructure to support the use of contactless smart card technology for its own stored value card in the transit systems, buses and, in future, retail shops. They are different. One is contact, and the other is contactless. LTA is choosing the contactless technology, because it allows commuters to pass through the transit system quickly, without breaking their stride. They do not have to stop. They just swish their wallet or their handbag over the turnstile and the transaction is completed. It is like driving under the ERP gantry, swift and painless.

I recognise that this will result in people having to carry two different stored value cards. Unfortunately, this cannot be helped for the time being, because the combi-cards, which combines both the contact and non-contact capabilities on a single card, are still new. Their technical performance and commercial viability of the combi-card is not tested and proven on a wide scale. But we are looking ahead, and MCIT and MAS have been encouraging the Land Transport Authority, the transit operators and NETS to work together to prepare for using a single combi-card throughout Singapore once the technology is ready.

As for Prof. Toh's query about the card in the ERP being replaced by a chip, I have not heard about it. But if I do, I would let him know.

The Chairman: Order. 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 3.50 pm.

Sitting accordingly suspended at 3.30 pm until 3.50 pm. Sitting resumed at 3.50 pm

[Mr Speaker in the Chair]

Debate in Committee of Supply resumed.

[Mr Speaker in the Chair]

Head N (cont.) -

Mr Leong Horn Kee (Bishan-Toa Payoh): Sir, this topic of the substantial budget surplus was raised by a few Members during the Budget debate. I feel that there is a need to raise this issue for further discussion because it is an important topic with major impact on the yearly financial plans of the Government.

I have examined the budget surpluses of the Government in the last five years. The figures are as follows: FY 1996, the surplus was $5.6 billion; FY 1997, $6.1 billion; FY 1998, - $0.4 billion (this was a recession year); FY 1999, $0.9 billion; and FY 2000, $3.5 billion. The forecast for FY 2001 budget surplus is $4.4 billion. Based on the above figures, it can be seen that the Government has performed exceedingly well to achieve consistently substantial budget surpluses, except for 1998 which was a recession year. If we take the total of these surpluses in the last five years, the sum is a hefty $15.7 billion, which is nearly 10% of the year 2000 GDP.

With these substantial surpluses, the Government has much flexibility in terms of the actions and policies it can pursue. Therefore, it has the following key advantages:

(1) Flexibility and freedom to pursue Government policies and objectives.

(2) Ability to implement wealth redistribution policies that enable the Government to give help to the poor and needy.

(3) Ability to build up a substantial national reserve that can be used to cushion against uncertainties and the ability to act against external interferences and exigencies.

However, what is more remarkable about our substantial budget surplus is that it is attained after accounting not only for the Government's annual operating expenditure but also inclusive of total annual developmental expenditure. As a result, we have no foreign debt which is the primary reason why we are not adversely affected by the recent Asian financial crisis.

Sir, however, the substantial budget surpluses also pose concerns in some aspects. Allow me to elaborate. The areas of concern are:

(1) Each year, the actual surplus achieved is typically higher than the original forecast of the annual Government budget. It may mean that the various Ministries are unable to plan accurately their annual incomes and expenditures. This tendency is not desirable, as some Ministries or departments could be deprived of funds for their projects and programmes, because other Ministries asked for more money and did not utilize the funds in the end. The affected Ministries could well be the welfare and social services group as they tend to be lower down the priority list compared with the economic agencies. So I would like to ask the Finance Minister whether the Government budget planning process can be tightened. Those Ministries and departments that over-budgeted and did not fully utilize their allocations should be queried and taken to task.

(2) On the Government income side, the budget surplus could well have the adverse impact of over-drawing on the Government taxes, charges, levies and fees. On the Government expenditure side, there could be under-spending of the expenditures, especially in development projects and expenditures.

Both situations are not desirable. On the one hand, over-charging and over-collection of Government income mean that the Government can be over-taxing the people and the businesses. If taxes or levies are lowered further, which the Government could afford to, more money could be left in the hands of the people and the businesses who can then have more money to spend on their needs. This will help to stimulate the economy.

Similarly, if the Government's development expenditures are unintentionally curtailed because of poor budgetary planning, then there will be a contractionary effect on the economy. At least, the economy could have been stimulated further through higher capital expenditures on worthwhile Government projects.

Sir, my comments above are of course predicated on the understanding that I am not advocating mindless and wasteful spending. We value frugality and prudency in our expenditures are virtues. I am also aware that excessive spending can cause the evil of inflation.

Given the complexity of the issues, I would like to ask the Minister for his comments on how he would deal with the substantial surpluses, and whether measures will be taken to improve the Government's budget planning and funds allocation process.

Mr Inderjit Singh: Sir, I would like to make a few suggestions on how we make further improvements to our tax system as we enter into the new economy.

First, I would like to suggest that we allow all new companies to have a 10-year average tax plan so that companies which do not enjoy any of the EDB tax incentives (like pioneer status, business HQ tax status, and others) can enjoy an effectively low tax during that period. We should allow companies to carry forward losses within this 10-year period, and the system can also be flexible to allow different levels of tax rate depending on which year of operation the company is. This will basically allow companies to have a smoother start-up with less burden on their cash flow.

Secondly, the Ministry should allow pre-production expenses to be tax-deductible and allow interest income for the first few years of operations for such companies to be tax exempt or tax deductible. The reason is that many companies, especially the capital intensive companies, may raise substantial funds upfront for use for future years. They have to raise such funds because of the capital intensive nature of their companies. But when they do that the money basically sits in the bank earning interest, but we are taxing them for all this. It is prudent for them to do so and we should not penalise such companies from raising funds early.

I also raised some suggestions on enhancing Singapore's position as a manufacturing hub during the Budget debate. I hope the Minister will study these suggestions and take them into account when he implements changes to any of the future tax system.

To encourage individual enterprise and to create a culture where every Singaporean thinks as an entrepreneur, I suggest the following three schemes:

Firstly, I suggest that we introduce a negative gearing scheme where individuals can write off expenditures related to individual business related activities, like when they rent out their premises or do some part-time business to supplement their income. In this way, when it comes to paying taxes, individuals will behave like businesses, thus developing a sense of enterprise within themselves.

Secondly, we should allow individuals and entrepreneurs to carry forward losses resulting from investments they made in start-up companies so that they can reduce their tax burden in future years. This would eliminate the risk averse nature of Singaporeans.

Thirdly, while I am very happy to see the progressive tax incentives for stock options, I would like to suggest that the individuals and employees be taxed upon realisation of their gains when they encash their shares rather than when they exercise their options. While the current system allows for delay of up to three years of exercise, should they make a paper gain, in fact, the paper gain could actually become a loss depending on the market conditions some years later, and this will create a burden for the individuals when they have to pay tax on the gain that they made when in fact they actually did not gain anything when they sold their shares.

Mr Ong Ah Heng: (In Mandarin): Sir, this year's Budget can be said to have given a double bonus to the individuals because in this year they not only get a personal income tax cut of between 2% and 5%, but also a 10% rebate on the tax payable.

Sir, I would like to point out certain anomalies in the manner our tax reliefs are worked out. In most families today, maids are employed to assist in looking after young children. Under the present provision, a married woman who employs a maid to look after her children is entitled to a tax relief of up to $8,280. This works out to about $690 per month on average. In comparison, someone who cannot afford or is not willing to employ a maid, can only claim a child relief of $2,000 for each of the first three children, which works out to an average of $166 a month per child. I am sure all of you will agree with me that it takes much more than this amount to raise a child. 4.00 pm

Please do not get me wrong. I fully understand the rationale behind why the foreign maid tax was levied, and I am not asking for more tax reliefs. All I am asking for is for the Ministry of Finance to review the child relief and to make it more realistic in a more proportionate way. So in this way, in addition to the "baby bonus", it would also be a strategy to encourage more families to have children

Secondly, at the moment, the foreign maid relief is applicable only to the women. I find it a bit strange because we are always talking about equality of sexes. Moreover, nowadays husbands are expected to perform their fair share of duties at home. So, should we not extend the foreign maid relief to the husbands as well, in the event that they were given custody of the children in a divorce situation or where the spouses have passed away. They need to work too and will definitely require a maid to look after their children. I hope the Minister would consider this.

Thirdly, on the parent relief scheme. The current provision only permits one sibling to claim relief for looking after his or her parents. We know in reality that in Singapore nowadays, the cost of looking after the parents is normally spread among several siblings. As such, should the scheme not be adjusted to reflect the actual scenario by allowing more than one sibling to claim the amount? Perhaps the one with the parents staying in his house could claim higher relief, while the other siblings claim lower reliefs.

Mr Leong Horn Kee: Sir, the Government has announced the reduction of the property tax rate from 12% to 10%. However, at the same time, the 25% property tax rebate was removed. The net effect is that except for the residential sector, the commercial, office and industrial sectors do not have any gain in the property tax reduction.

For a higher benefit to the businesses and property owners, it would have been more appreciated if the Finance Minister could have done both, that is, to lower the property tax rate and, at the same time, give a rebate.

Sir, property tax is originally conceived as a form of wealth tax. However, the function of the property tax as a wealth tax is partially diminished since most Singaporeans own their homes, 93% to be exact; as HDB dwellers are mostly home owners as well. Hence, it may be opportune for the Government to reconsider the use of property tax as a wealth tax. Although the negative effect is mitigated by the reduction of property tax for owner occupied properties, the effect of property tax for non-residential area, that is, for commercial, office and industrial, is that it essentially becomes a cost factor. Property tax has an impact on rental charges as property owners normally on-charge the cost of property tax to the tenants. This cost factor adds to overall business costs.

Sir, my question to the Minister is that if property tax is losing its purpose as a wealth tax, and tends to add towards operating cost, I would like to ask the Minister whether he would review the role of property tax and eventually reduce it to a lower level over time. In the long term, is there a need for property tax, since income tax and GST are serving the main functions of direct and indirect taxes?

Mrs Lim Hwee Hua: Sir, until the dot-com mania, only a small percentage of companies have issued stock options as part of an employee's compensation package, purportedly to align workers' interest with companies.

Over the last few years, the Minister has moved swiftly to make the tax environment here more conducive to the issuance of stock options. The Singapore Exchange has also put in place a framework for listed companies, to operate within.

In the US, many top vacancies at dot-coms now go a begging, despite packages which are heavy on stock options and which used to be the carrot for many a bright candidate.

In structuring our tax incentives, I would like to humbly suggest to the Minister to examine the signalling effect, especially in the light of the emerging equity culture in Singapore. Sir, I recognise that a balance is difficult to strike. I recall the cries of my colleagues urging the Minister to give entrepreneurship a boost in the arm by offering generous tax incentives, especially for start-ups. Offering too much of a tax incentive, on the other hand, might unwittingly signal to employees at large that stock options are superior to wages or even bonuses paid out in cash. The understanding of how the upside or downside to stock options is linked to a company's performance may not have been as complete as what we are hoping for.

Sir, in this regard, I would like to ask the Minister to consider allowing alternatives to implementing the intended extension of tax incentives to companies issuing stock options to at least half of their employees. Whilst the intention may be to spread tax incentives as widely as possible, from the signalling perspective, it would appear that the Government prefers the wide use of stock options to just issuing to top executives. Some preliminary study has indeed indicated that corporations that offer options to the majority, instead of a few, tended to enjoy significantly higher productivity levels and annual growth rates. However, in the context of Singapore, where both companies and individuals may not be prepared for that scale of stock option participation, the Minister may want to allow a modification of the "at least half" requirement.

The Chairman: Mr Sin Boon Ann is not here. Mr Leong Horn Kee.

Mr Leong Horn Kee: Sir, many of my parliamentary colleagues and I have spoken on the need to help the pensioners during the Budget debate. In my speech during the Budget debate, I mentioned that retired pensioners are a pool of past contributors who had toiled hard to help the country achieve economic growth and nation building, at salaries that were generally below market rates.

I mentioned also that the $1.7 million given to pensioners as adjustment of the Singapore Allowance and gross pension ceiling is paltry compared to the budget surpluses of $3.5 billion. The Finance Minister, I am certain, could have and should have been more generous to the pensioners.

Allow me to plead harder again for the plight of the pensioners. Assuming a pensioner retired 10 years ago in 1990 and had a pension of $1,000. In the last 10 years, inflation rate, as represented by the accumulative rise in the Consumer Price Index (CPI), has increased by 17%. In addition, the national average monthly income of Singaporean households has increased by 74%, from $9,670 in 1990 to $16,800 in year 2000. If we combine the two factors, that is, of rising inflation and the increase in household income, we can see that a pensioner with no other sources of income will fall behind other Singaporeans by a good 91%, that is by adding the two figures together. That actually means a $1,000 pension in 1990, would roughly diminish by about 50% in today's value, compared to the other economically active households.

Sir, I am not advocating an indexation scheme to peg pensions with yearly adjustments. This is not right. What I am requesting is that, in good years, when all Singaporeans are rewarded with pay rise and NWC adjustments to salaries, we should not forget the pensioners. At present, there are about 12,000 pensioners. Because of the conversion to full CPF scheme, the number of pensioners will diminish over time.

Hence, I would like to ask the Finance Minister, since this year he has not given very much to the pensioners, in fact a very meagre sum as benefit to them, perhaps next year, he can surely do more for them, and particularly, since next year he is budgeting a higher surplus of $4.4 billion.

Mr Thomas Thomas: Sir, most people are quite happy with this year's budget and with the generosity that was given to them by the Minister for Finance. But our people are very concerned that what the Minister for Finance gives out, will be taken away by other Ministries, statutory boards, shop owners and others, and very soon, they will have a negative, rather than positive reaction. And the tendency to increase fees and prices has already started, whether it is hospitals or other places, they have already started.

So we would like to ask the Ministry to please monitor these price increases and do not just pass every increase on to the consumers, the poor man-in-the-street. There is a budget surplus of $4.4 billion anticipated for this year, and it is expected to be 23% of Government operating expenditure, including running costs and transfers. There is some buffer to absorb some of these unforeseen increases or planned increases. There can also be productivity increases. So in this budget, it is important that the feel good factors should continue to the end of the year, and that we should have it at least carried on to the next Budget.

Sir, my plea again is: let it not be said that what the Minister for Finance gives us is only waiting for other Ministries and statutory boards and companies to take it away. Please do not do that.

The Minister for Finance (Dr Richard Hu Tsu Tau): Sir, on the question raised by Mr Leong Horn Kee on budget surpluses and whether the recent large surpluses might result in a liquidity squeeze on the economy, let me just start by reassuring Members that the budget surpluses were not brought about by higher taxes. I have said this many times in the past and I will repeat it again. We have, in fact, over the years, been reducing taxes to keep them competitive and it is not our intention to create budget surpluses by increasing taxes.

Secondly, I have explained to the House the difficulty of forecasting revenue, and it has become even more difficult nowadays because the world changes very rapidly. I have said that our revenue growth strongly correlates to GDP growth and our ability to forecast revenue is therefore heavily dependent on the accuracy of our forecast of the growth of the economies of our major trading partners and, in turn, on their demand for our export products.

Members should note that the Singapore economy is strongly export oriented with external demand accounting for over 55% of GDP. In the United States, which is a continental economy much less dependent on exports, even Mr Greenspan, Chairman of the Federal Reserve Board, has difficulty in forecasting the growth of the US economy. How much more difficult it is for us to have to forecast not only what the US economy will do, but of all the other trading partners' economic growth.

Given these inherent difficulties, we have been generally conservative in our forecast of GDP growth, as it is important that we do not base our expenditure programmes on income levels which may not be realised. In order to keep Government expenditure under control, we have kept Government's recurrent expenditures at around 10% of GDP. And in recent years, we have been able to live within this cap. However, Government's development expenditures are not subject to any specific cap because they are project-based, and we invest in basic infrastructure as and when they are needed and can be economically justified. In most years, development expenditure has been around 6%-7% of GDP. On this basis, we would normally expect a budget surplus of 1%-2% of GDP. However, if our economy grows much more strongly than forecast because of exceptional external demand, as it did in 1999 and the year 2000, we would end up with much larger budget surpluses. I consider such a development as a bonus of good fortune to be enjoyed, and not to be lamented as a consequence of poor budget forecasting. 4.15 pm

On the issue of whether budget surpluses would have a contractionary effect on the economy, the answer is no, because there are no signs of contractionary pressures on the economy at this time. Our interest rates have remained low and there is no shortage of funds. The economy has recovered sharply from the 1997/98 crisis, with solid performances over the past two years. I would also remind Members that, in addition to domestic liquidity, we also have large inflows of foreign direct investments, which have averaged some S$79 billion over the period 1990-1998. So, liquidity and availability of funds for investment have never been a problem for us.

Mr Inderjit Singh has proposed several innovative tax changes to promote enterprise in the new economy, and we will take his suggestions into consideration when we next review our tax system. His proposals are directed at lightening the financial and tax burdens of companies in their early years so as to promote their development. He has suggested that all new companies which do not enjoy EDB tax incentives should be given a 10-year tax honeymoon, during which losses can be carried forward and companies are taxed at low rates according to their individual income profile. While such a proposal is clearly very helpful to these companies, such a flexible tax system will create problems of equity and tax treatment, and will be administratively very complicated too.

Some of what he has asked for, such as the carrying forward of losses, are already available. Under existing provisions of the Income Tax Act, losses are already allowed to be carried forward without any time limitation, as long as the shareholders, in the year the losses are absorbed, are not substantially different from those in the year the losses were incurred. Also, under the partial tax exemption scheme, which will be effective in the Year of Assessment 2002, start-up companies will enjoy substantially lower tax rates.

On the issue of pre-production expenses and interest income, I should point out that expenses incurred to acquire investments do not qualify for tax deductions, if the investments do not produce income. This is a tax principle provided under the provisions of the Income Tax Act and, where income is produced, the expenses incurred are allowed as a deduction against that income. We will take a look at this again, but I think the principle would be very difficult to change, as there may be a lot of adverse consequences. Consequently, any expense arising before the production day is not allowable and, conversely, any income arising before this day is also not subject to tax, since the company is considered as not having commenced business.

Tax-wise, the most important thing the Government can do to nurture entrepreneurial behaviour is to keep up our personal income taxes at a low level so as not to discourage hard work and enterprise. Our tax rates are already one of the lowest in the world before the latest Budget announcement for individual income tax cuts. There are also tax concessions to make the environment favourable for entrepreneurship, eg, through making employee stock options attractive, allowing individuals doing businesses to treat themselves as businesses when computing their tax liabilities, and allowing individuals to deduct the expenses incurred during the course of their businesses against their income. To change the system to one where we have a multitude of deductibles in personal taxes will, as I said earlier, highly complicate our tax system. Singapore is the envy of many countries because of the simplicity of our tax framework, which results in a high degree of compliance and predictability of tax liabilities. I think it is far better for us to take the approach of reducing the rate of tax overall, rather than vary tax rates depending on how well individuals make out their accounts and argue their cases.

[Mr Deputy Speaker in the Chair]

4.23 pm

The Minister for Finance (Dr Richard Hu Tsu Tau): On share options, I believe that taxing at the point-of-exercise is a fairer method than taxing at the point-of-sale, particularly since we do not have capital gains tax in Singapore. Let me explain. If we tax at the point-of-sale and the share price is higher at sale than at the point-of-exercise, there would be an additional tax equivalent to the difference in price. This, in effect, imposes a capital gains tax. Secondly, taxing at the point-of-exercise is fair, because the employee becomes a legal owner of the shares upon exercise. What the individual chooses to do after that, is a separate decision. Once the employee exercises the option and owns the shares, he is subject to the same risks in price fluctuations as other investors who buy the shares from the open market. Although the employee also faces a tax bill as a result of exercising the options, he could dispose enough of the shares to set aside money to pay the tax. This is a wise move. Many option holders, in fact, exercise and sell at least some portion of the shares at the same time, possibly to raise funds to pay off their future tax liability but, mostly, to reduce their risks should prices go down in future. I think the balance between risk and reward is best left for each individual to decide.

Mr Ong Ah Heng has commented on the tax rebates for individuals, both on maid relief and parent relief. On the issue of maid relief, in most families, maids are employed to look after young children. Under the category of foreign maid relief, a married woman who employs a maid to look after the children is able to claim up to $8,280. This works out to be about $690 per month on average. Compare it with someone who cannot afford or is not willing to employ a maid to look after her children, can only claim a relief of $2,000 for each child. He says this would work out to an average of $166 per month and, therefore, appears to be manifestly unfair. Let me point out that tax reliefs are not meant to compensate taxpayers for any particular expenses incurred. They are only meant as a form of recognition for the individual's expenditures in specific areas. Child relief is recognition for the care of one's child. It should not be compared to maid relief, which is part of a wider package of tax incentives to encourage and facilitate women to have more children but still continue to work if they wish. A husband whose spouse has passed away, can apply to employ a maid to take care of his children. This is different from the purpose of the maid relief, which is to facilitate married women to raise a family and to continue to work at the same time. Hence, maid relief is not extended to their husbands.

On the issue of tax rebates for individuals to look after their parents, it is not clear to me exactly what Mr Ong Ah Heng is asking for when he says that more than one sibling should be allowed to make the same claim. Is he suggesting that each sibling should ask for the same amount, ie, $3,500 multiplied by the number of siblings, or should they be allowed to share this relief, which is $3,500, for someone who does not live with the parents, or $5,000 for someone who lives with the parents? I do not think we can allow multiple claims because it would mean a huge increase in the amount of relief. So I am assuming the question really is: how should the relief be claimed or shared? The existing guideline allows only one sibling to claim this relief. This stipulation is a practical one. It assumes that the siblings would decide amongst themselves who should claim the relief. I do not think the Government would want to interpose itself and make a decision on their behalf.

Mr Leong Horn Kee has raised the question of property tax, in which he says it is manifestly unfair to remove the 25% property tax rebate and replace it with a 2% cut. Arithmetically, he is correct. But the purpose is different. As I have said in the Budget debate, the 25% tax rebate was introduced to help companies during a recession period. That is largely over, and we are now cutting taxes permanently, as I said, by 2%, which gives companies certainty so that they can manage their financial affairs for the future. He also says that since property tax is a wealth tax, which has an impact on business costs, whether they should not be reduced over time and, eventually, removed. We have already started to reduce it. But I have also said that it is not a tax we will remove altogether, because the total tax we collect is a substantial amount, and total removal would mean that the tax lost has to be recovered elsewhere.

Mrs Lim Hwee Hua has raised issues on the question of stock options and the incentives provided. She is concerned that the incentives provided for stock options may signal to companies that stock options are the preferred way of remuneration. I can assure her that is not the intention. The recent measures to make the taxation of employee stock options (ESOPs) more attractive is in response to two emerging trends. One is the more widespread use of equity-based remuneration, and the actions of other countries to make taxation of ESOPs more attractive. As talent is internationally mobile and is increasingly awarded by means of stock options, there is a need for our tax treatment of ESOPs to be internationally attractive, to maintain our competitive edge.

With regard to the company stock options (CSOP) scheme, one important objective of the scheme is to encourage companies to offer options to lower-ranked employees as well. As options are a means of sharing the benefits of a company's success with its employees, the scheme has been structured to encourage options to be more widely distributed rather than confined to a select group of people at the top. However, the Government has no intention to suggest that stock options are superior to wages and bonuses paid out in cash. In fact, the CSOP scheme is structured so that wages and bonuses paid out in cash are likely to remain the primary means of employee remuneration. Stock options should therefore be an additional means for motivating and retaining employees.

Ultimately, it must be up to each company to decide whether it wishes to participate in the scheme and how it wants to structure its scheme to satisfy its individual conditions as well as to meet the needs of its company. It can stay with the stock options just to a select group, without offering options to at least half its employees, in which case, the recipients of the options will simply carry on with their benefits of the stock options, without the additional tax break under the CSOP scheme. 4.30 pm

Mr Leong Horn Kee has also raised questions on the issue on the plight of pensioners. I understand his concern and I am sympathetic, but as I have already addressed this issue in the Budget round-up speech, I do not propose to go through it again in detail. But I would just like to point out that in addition to the Singapore Allowance which has been raised, although not by a very large amount, pensioners have also been given ex-gratia payments of quite significant sums, depending on the dates when they retired. I can assure him that the Singapore Allowance would be adjusted from time to time, depending on the impact of inflation and we would look at it again whenever an increase is warranted.

Mr Thomas Thomas has expressed concern over the seemingly rapid way in which cost increases are passed through, in the form of Government charges, so that whatever we give away, we are taking back in a different form. I can assure him that this is not so. I believe his concerns were about the recent increases in public utilities rates, but this was linked to changes in crude oil and fuel oil prices which we cannot control. I have explained in this House last Wednesday, there has not been a runaway increase in living costs. The CPI has only increased by 1.7% per annum over the past 10 years and this is substantially lower than the average increase in incomes. On balance, most Singaporeans would be better off.

As far as Government fees and charges are concerned, they are increased to recover actual costs increase and no more, and the increases are dependent on increases in the cost of wages. We should not subsidise the labour cost of services, and we generally try to reduce its impact by improvements in productivity. Where increases are necessary, in essential services such as healthcare, education and public housing, the increases are due primarily to wage increases and to improvements in the quality of service provided. Nevertheless, in all these cases, whether it is in public housing, education or healthcare, its costs are heavily subsidised by the Government. I think Mr Thomas knows that the health subsidies are substantial and I would not repeat it again since I have already mentioned it before.

I think I have covered most of the issues raised.

Mr Low Thia Khiang (Hougang): Sir, in this year's budget, the Net Investment Income (NII) in Table 1 of the Budget Book has been moved up to be included as part of operating revenue. The Minister for Finance has explained the reason in his Budget speech. I note that in FY1999, NII was estimated at $3.74 billion, and the revised FY1999 figure was $5.56 billion. In FY2000, the estimated NII was $5.61 billion. In this year's budget, the revised FY2000 NII figure was $1.55 billion. I would like to know what is the original revised NII figure for FY2000, before applying the new method of calculation for contribution to Government operating revenues. The estimated NII contribution for FY2001 was also lowered to $856 million. May I know the reason for the significantly lower estimate?

Sir, all these years in Parliament, I find that the most difficult to track the Government's performance is Government investments. When I try to look for investment income details, either from the budget summary under the Ministry of Finance, or total estimated receipts, the figure can never tally with the total estimated figure. I have also checked the budget control documents. I have also found that it does not contain information on Government investments. Although we are supposed to focus on expenditure during Budget time, with Singapore's unique circumstances, I think it is also important that we should know how Government invests our money and how these investments perform over the years. Moreover, since the Government emphasises so much on the importance of financial reserves, it is only fair that the public should have a clearer picture of the investment performance.

Sir, we always talk that the Government is transparent, but the investments of the Government do not seem to be transparent to me. I therefore urge the Minister for Finance to release more details on how the Net Investment Income is derived. I hope that in next year's Budget book, more details of investment incomes would be shown.

Mr Leong Horn Kee: Sir, it cannot be denied that the Government-linked companies (GLCs) have been a positive influential factor on the economic development of Singapore. Many GLCs were formed in the early 1960s when there was a lack of private sector initiatives to spearhead industrialisation and the Government wanted to spur the growth of certain new sectors, such as banking, shipping, ship repair and the defence industry.

The background, impact and public perception of GLCs is well-covered in a recent article written by a journalist, Mr Yap Chuin Wei and published in the 3rd March issue of the Straits Times. I agree with Mr Yap that the constant refrains of local businessmen about GLCs are that "they are crowding out the private sector; they are stream-rolling the competition and that they are stifling private entrepreneurship." It is a well-researched and well-argued analysis of the impact of the GLCs. I recommend that the Minister read this report.

Local businessmen do not begrudge the existence of GLCs. In fact, everybody recognises the significant role the GLCs have played in our nation's progress. The concerns over GLCs are three-fold:

1. The crowding out effect of the GLCs;

2. The complaint of unlevel playing field; and

3. The stifling effect on private entrepreneurship. Actually the comments about GLCs also apply to other Government affiliated and union associated companies.

On the crowding out effect of the GLCs, the Minister for Trade and Industry has clarified that the GLCs contributed to only 13% of the economy. Another report said that the GLCs and statutory boards collectively take up about 23% of the economy. In my opinion, even at 13% of the economy, the GLCs exert a much larger influence over the market. GLCs are manned by current and past top civil servants, both at the board and management levels. By the fact that GLCs are owned and linked to the authorities, at both shareholding and management levels, they do exert a substantial influence in the market, beyond the numerical percentage of their share of the economy. The main disadvantage of the crowding out by the GLCs is that open market forces may not operate fully.

If you were to read the annual report of Temasek Holdings, we cannot help but to have the impression that we are reading the general economic survey of Singapore. The GLCs, and the Government affiliated and union associated organisations are practically involved in every aspect of the economy. In fact, we cannot get by a day without having some dealings with the GLCs. For example, when we go to the bank, read the newspaper, buy food, use the telephone, or even take a bus, taxi or MRT, the GLC is there. In fact, GLCs are involved in everything that we do. We cannot throw a stone without hitting a GLC. Are they not crowding out the private sector?

The unlevel playing field is the second constant refrain of the private sector. To be fair, I do not believe that the GLCs will get special deals, privileged advance information of Government policies or changes in plans, or even have easy access to Government funds. Every request for fund is properly and thoroughly evaluated before the money is committed. But what is true is that the top civil servants who are directors and managers of GLCs do have a better appreciation of Government policy thinking and trends. They also have close contacts, connections and access to their counterparts in the Government regulatory agencies. These are in fact strong advantages.

Hence, I like to contend that the unlevel playing field of GLCs is more often perceived than real. But even if it is perceived, it does have a significant impact on business dealings.

On stifling private entrepreneurship, I feel this is an area of real concern. The concern is that because GLCs command such a large segment of the economy and influence, they therefore capture an unduly large pool of the business and talent, thereby stifling private entrepreneurship. Private companies are affected as they have a smaller share of the pie, and they find difficulty in attracting talents to join them. In contrast to GLCs, the impression of staff joining GLCs is that they offer better perks and sinecure.

I think this is a concern that is worthwhile studying more in depth. We want to build a strong private sector as an engine of growth. We also constantly lament on the lack of entrepreneurship.

Sir, I wish to clarify that I voice the above concerns not because I am against GLCs per se. I think they play and will continue to play a very important role in the nation-building process. I have many friends who are working in GLCs and have close business dealings with GLCs. In fact, I have worked in a GLC before and served on boards of GLCs previously.

Sir, I understand the Department of Statistics is doing a study on GLCs and the Government has announced that its divestment strategy of GLCs will continue. I would like to know the status and the current plans. Besides raising this issue in the Committee of Supply debate, I also have filed a Parliamentary Question to seek more clarity from the Government.

In the Singapore context, I believe the GLCs are here to stay, even in varying degrees in future. Hence, I strongly feel that it is not realistic to continue to adopt a self-denial approach that the GLCs have no impact on private enterprise. I would propose that a detailed study or review be done by a special committee, with representatives from both the public and private sectors to examine how the positive effects of GLCs can be further developed, and how the negative effects can be mitigated. The private sector and GLCs can work together for their mutual benefit, especially in going regional and seeking business opportunities around the world.

The GLCs have played an important role during the formative days of Singapore's economic development. After 36 years since independence, it is time to do an appraisal to reprise the roles of the GLCs.

Mr Inderjit Singh: Sir, for the reasons that Mr Leong Horn Kee just mentioned about the role of GLCs, I would like to bring up a few issues and suggestions on how we can make Government-linked companies more effective and how they should be managed for them to be more successful in the new economy. And I too feel that GLCs do have a role to play, but it is about time that we reviewed the regulations and roles and the responsibilities that the Government and GLCs have with respect to how they should be managed as we move forward in the new economy.

First of all, the speed of privatisation needs to be picked up because now is a good time for Singapore-based companies to get ahead in the global marketplace. Due to the economic uncertainty around the world, there are and will be many viable companies which will be in distress and which would be in need for strong partners who can bring financial strength through acquisitions or mergers. I feel that it is only when we successfully privatise our GLCs, can they effectively move fast enough to capitalise on such opportunities and expand globally.

Secondly, there is a need for greater transparency on how GLCs are managed, a point brought up by many Members and especially for those that are not listed on the stock market. Some of the things that need to be monitored are the funding and fund-raising from Government coffers, corporate Government issues and related party transactions among GLCs, where GLCs are given preference to each other in conducting business, even when there are, and maybe better and more cost-effective solutions provided by private companies. Transparency will not only make them stronger as this will subject them to more stringent scrutiny than private sector companies are subjected to. I suggest that we put in place a watchdog body which has a mix of private and public sector people and this body should have the responsibility to review and regulate how GLCs operate and are managed. I believe this is being done in some countries like in Hong Kong and New Zealand.

Thirdly, the Government should set a time-frame for each current and future GLCs to be fully privatised and this plan should be publicised so that all Singaporeans will be aware of the privatisation schedules. We should make out a list of such companies and invite private sector investments from around the world, not just from Singapore, so that the Government can divest as much of its holdings in the GLCs as it possibly can. It is about time we monitored the progress of our privatisation plans. We have heard of plans but we just do not know the schedules, and therefore, cannot measure the success rate of privatisation.

I also suggest that we shut down non-viable GLCs by identifying them early in the process. If we do not do this, we will continue to pour public funds into wasteful investments.

4.45 pm

Fourthly, we have seen many examples of GLCs getting into businesses they have no experiences in running. For example, the Singapore Bus Service got into the property business and got its fingers burnt by losing quite a lot of money, and another GLC getting into the food business by buying the fast food chain, Delifrance, which made no sense for the GLC's long-term growth strategy. There are many more examples of failed investments by GLCs, which got into businesses they had no expertise or experience in managing. We should therefore put in place strict rules, disallowing GLCs to venture into non-core-competency activities. This will also avoid such GLCs from crowding out our home-grown private sector companies, a point which Mr Leong brought up earlier on.

Fifth, there should be greater involvement of private sector individuals in the boards and key management positions of GLCs, for the same reasons that Mr Leong brought up. We cannot possibly expect civil servants, who may not have had any business exposure in the past, to effectively manage such companies, which have to operate based on true market discipline.

Sixth, we should set the tone of privatisation and we should therefore plan to outsource the governance of Singapore in areas that make sense, by quickly breaking up statutory boards and Government agencies, and spinning off non-core and non-sensitive Government activities. Can the Government set a target of resource reduction, eg, reduction by a certain number of Government employees or a reduction of a certain percentage of Government expenditure? These targets will help drive the pace of changes that we should be setting for ourselves. We will also ensure that more people will be released to the private sector, which is constantly facing a severe shortage of manpower and talent.

Seventh, for Government-linked companies that are already listed, will the Government consider reducing its stake to become a minority stakeholder? In most cases, the Government still holds a majority stake. This will allow true private sector type governance for such companies and hence, it will further help build up their strengths. I have heard of instances where companies from developed nations prefer not to deal with some of our privatised GLCs, simply because such companies are still viewed as being Government owned or Government controlled, by virtue of the huge majority shareholding held by the Government through the investment arms, like Temasek Holdings and GIC.

I believe we also saw a few failed attempts by both SIA and SingTel when they tried to acquire significant stakes in foreign companies, precisely because both are still viewed as Government linked and Government controlled companies, and therefore negative reactions from the companies that were being acquired. Can the Minister share with us what the Government feels about reducing their stakes in GLCs to become minority shareholders?

The Chairman: Mr Zulkifli, can you make your speech short? Otherwise, you will not get a reply at all.

Mr Zulkifli bin Baharudin: Sir, we have heard in this House how GLCs are being viewed by SMEs as very big, strong, but can be more friendly, because they leave very little room for others to do business and somehow enjoy some special position in securing contracts and Government business. I think the Minister for Trade and Industry has clarified this matter. My own view is that SMEs feel like this about GLCs because they somehow feel uninvolved, uninvited, to take part in the larger process of privatisation, as GLCs go on to expand their business or take part in some very big projects, which is very important to make SMEs feel a sense of ownership, a sense of belonging. They must be the ones to participate in the expansion of the airports and all that. I think the sense of being uninvolved, unattached, uninvited, unappreciated must somehow be changed.

Why should the SMEs not, on the other hand, feel that GLCs are some of the most admired companies, someone that they can become partners with, can do business with, as vital organisations that they can link up with, as strategic partners, who can bring them forward as they expand into the region. I think we should do that.

I sometimes wonder, as an illustration, Phua Chu Kang Private Limited may be number one in Singapore, Johor and Batam, but if the GLCs were to go into home renovation business, whether they would be interested in the likes of Phua Chua Kang. Because they are seen to be completely different types of people, irrelevant, and incompatible. But on the one hand, I think we see that some of the SMEs are very entrepreneurial. They have close relationships in the region. They can help GLCs negotiate the very difficult business practices.

Sir, I am asking the Minister really in privatising some of these GLCs, for the GLCs to take on a role where they can lead, bring along other SMEs together with them, not just a corporate or business mission, but other objectives as well, the larger objective of bringing along the SMEs as they grow, prosper and develop in the region. The GLCs must then take a big brother role and assist the SMEs. Only then their feelings about SMEs and GLCs can be improved.

Dr Richard Hu Tsu Tau: Sir, first, on Mr Low Thia Khiang's question. I will give him the figures that he asks for. He also said the NII figure for the year 2000 was very high. This is because in that year there was a very large payment from Temasek Holdings which will not be repeated this year. This accounts for the big difference.

Also, the published figure for NII in FY2001 is low because it only includes 10% of the NII which is available to Government for use. If you recall, the amendment to the Constitution provides for up to 50%, but we only notionally include a figure as 10%. It is not that we are going to use the 10%. But rather than put a zero there, we have put 10%. That is why it looks small.

As far as Government's return on investment is concerned, Government's investments are divided into three groups. One comes under Temasek Holdings, which is a holding company for GLCs, and its accounts are available to Parliament. The other is MAS which manages quite a substantial proportion of Government reserves. Again, the results are published annually. So you can look at MAS' annual reports to see how they are doing. The final amount, which is a large part of our reserves, is managed by the Government Investment Corporation (GIC). This is not an asset owning company. It is simply a fund management company, which manages the remaining amount of Government reserves. This company does not publish its results. We have explained why we do not publish the results because they contain information which our competitors would love to have. But its accounts are available to the President and to the Auditor-General.

GIC is a very large fund manager and its performance is comparable to the performance of any large international fund management company, which manages a portfolio of funds spread around the world, in a variety of assets and currencies. I can assure Mr Low that the returns of the GIC are more than adequate.

Next year, the reserves figures will not be in the Budget book, for the reasons I have explained.

As regards the problem of GLCs, the complaints are not new. We have given the same answer many times and I do not want to go through it again. I think the problem is one of perception. GLCs are generally large, and they are large because they were started by Government at the time of our independence, when there was a shortage of private sector funds, technical know-how and so forth. They have now become quite successful and large, and they are large compared to SMEs. If it is a problem of size, would you prefer that GLCs did not exist at all and have foreign companies doing the same job? That will be far worse, I would assume. So our GLCs, which compete in various sectors, must be strong enough and as efficient as the foreign companies who are free to come in.

I will give you an example. One of the corporations, NTUC FairPrice has always been the target of a lot of complaints, because it is seen to be competing against the mama and papa shops in HDB housing estates. It has become very efficient and its prices are competitive and, generally, low. It has to compete against a supermarket chain like Cold Storage, which is owned by a Hong Kong company, Dairyfarms, who runs a very large chain of supermarkets. Would you rather that NTUC FairPrice get out of the supermarket business and let our SMEs compete directly with Cold Storage?

Mr Zulkifli is quite right that our objective should be to get our successful GLCs to act as a mother hen, so to speak, and try and help our SMEs to develop, particularly overseas. And this, in fact, is the objective of Temasek Holdings, which is the holding company responsible for monitoring the performance of our GLCs.

Undoubtedly, some of our GLCs have made wrong investments, as pointed out by Mr Inderjit Singh. They have made mistakes and they have taken their punishment, so to speak. But mistakes are bound to happen, hopefully, not very frequently. But because what has happened, Temasek Holdings is now imposing quite a strict policy to ensure that GLCs do not go into areas outside their core competencies. They should focus on expanding overseas and bring our SMEs along. What is past, I think we will have to accept. But from now on, we recognise that the purpose of our GLCs is not to kill our small SMEs, but to help them, and to compete against the big foreign companies which, whether you like it or not, because of the open style of our economy, will want to come here.

I think Temasek Holdings is already doing quite a good job. So I do not think we would want to set up another private sector body to monitor the performance of GLCs. Let Temasek Holdings do its job. We will review the position from time to time. And if we have problems of SMEs facing unfair competition, let us know and we will do everything we can to ensure that SMEs are not disadvantaged.

I can assure you that the GLCs do not receive special preferences from Government. They operate as commercial entities and you can see that quite a few have been quite successful. Companies like SIA, DBS, PSA are top companies in their fields, and they are commercial companies we should be proud of.

Sir, I think I have answered most of the questions raised.

Mr Thomas Thomas: Sir, I just want to say that the Companies Act needs to be reformed to better protect the interests of workers and small-time investors. Small-time investors are also basically workers who have been using their CPF accounts to invest in the stock market. And going by reports, they have not done well.

One of the things that needs to be looked at is the rules on payments to workers of companies under liquidation and judicial management. Section 328 of the Act gives wages and benefits, including retrenchment benefits, preferential treatment in the event of liquidation. However, when there is judicial management, workers are not preferred creditors. I hope this will be addressed, together with the lifting of the maximum of five months' salary of $7,500, whichever is lower. This quantum was fixed in 1993.

The other matter is that the small-time investors need information to make correct investment decisions. So the rules on disclosure, openness and transparency need to be reviewed. I accept that there are mindset obstacles for a prescriptive code on what should be disclosed. I know that even if there is a prescription, the companies will use this as a minimal standard, and stick to it. So I see that there is a role for the SIAS, as a voice for the small-time investors, in monitoring the market and helping the small-time investors to make wise decisions. However, I see that there is a need for legislation to give companies --- 5.00 pm

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

Mrs Lim Hwee Hua: Sir, although we did not quite have enough time to finish the cuts, I would like to thank the Deputy Prime Minister and the Minister for Finance for their answers and would like to beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

The sum of $1,184,921,410 for Head N ordered to stand part of the Main Estimates.

The sum of $181,102,500 for Head N ordered to stand part of the Development Estimates.

Head C -

The Chairman: Head C - Auditor-General's Office. Mrs Lim.

Mrs Lim Hwee Hua: Sir, I beg to move,

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

Sir, in moving this cut, I wish to revisit the auditing function as carried out by the Auditor-General's Office.

To recap, the Auditor-General has a constitutional duty, amongst other things, to audit and report on the accounts of all the departments and offices of the Government and prescribed public authorities and bodies administering public funds.

In addition, the Auditor-General discharges his duties in compliance with sections of the Audit Act, which relate to the conducting of financial statements audits, examining of controls and reviewing the effectiveness and efficiency of selected systems and activities.

Sir, firstly, on the focus of the auditing function. The spirit of auditing the Ministries and public bodies, as embodied in the above legislation, must be to ultimately preserve the integrity of the Government in its fiduciary responsibility. Much has changed in terms of the way and scale on which the Government now operates, especially from the perspective of the extensive use of technology and the attendant risk to our economy at large.

In revisiting the Auditor-General's role, I would like to draw a parallel to the auditing function of a company, for which the Audit Committee is responsible and which is usually accomplished by both the Internal Audit Department and external auditors.

As I understand, not all Ministries have internal audit functions. If true, the Auditor-General would then have to undertake both the internal and external roles. This will lead to a situation where owing to the sheer variety and scale of operations, the audit can at best highlight occasional lapses. Moreover, there would be inevitably a preoccupation with the means rather than the end. Ideally, the focus should be more outcome-oriented than process or compliance-driven. To illustrate with an extreme case, it would be far better to highlight weaknesses in the sharing of a sensitive financial database than to detect an over-payment of $200 to a staff who has resigned.

Secondly, the wide application of technology. Sir, the entire Government machinery is so wired up now that a commensurate amount of auditing resources must be allocated towards ensuring the preservation of integrity. The auditing function must take cognisance of the risk, financial or otherwise, of losing access to, or abuse of, the information within the various Government networks.

In fact, there is even a strong case to argue for a shift towards a more proactive than a purely reactive stance in the longer term. I would therefore like to ask the Minister how he thinks the role of the Auditor-General can stay relevant to the increasing use of technology and whether amendments to the Audit Act are necessary to shift the focus towards a minimisation of risk than financial compliance per se.

Dr Richard Hu Tsu Tau: Sir, the role of the Auditor-General is separate from the Internal Auditor. Currently, about half of the Ministries have internal audit units. Since October last year, the Accountant General's Department has been encouraging all Ministries to set up internal audit units.

Audits by Auditor-General's Office focus on both the process as well as the outcome. However, the Audit Report, which is submitted to the President who in turn tables it in Parliament, tends to focus on the outcome, to demonstrate the effect of some of the control weaknesses. Control weaknesses and recommendations are reported separately to the Ministries in management letters that are sent out after each audit project. In FY1999/2000 audit, more than 700 control weaknesses were reported to Ministries for improvement.

With regard to auditing the highly wired up Government environment, there have not been impediments to the Auditor-General's ability to audit and take into account the risk of losing access to or abuse of information of Government networks. Hence, there are no plans to amend the Audit Act. To deal with the increasing use of technology, the Auditor-General's Office has stepped up training of its auditors in computer-assisted audit techniques. It has also equipped its auditors with notebook computers with sufficient capacity to examine and carry out tests on financial data downloaded from its auditees.

Mrs Lim Hwee Hua: Sir, I thank the Minister for his response and beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

The sum of $16,094,540 for Head C ordered to stand part of the Main Estimates.

The sum of $305,600 for Head C ordered to stand part of the Development Estimates.

Head Z -

The Chairman: Head Z - Financial Transfers. Prof. Toh.

Assoc. Prof. Toh See Kiat: Sir, I beg to move,

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

Sir, I must congratulate the Minister for managing the treasury so well that we have got a lot of assets to be distributed, and I particularly congratulate the Minister for this laudable move of allocating more to be distributed to the lower income.

I understand that in distributing this, there are standards that need to be set to decide who are indeed the lowest level of income earners. I find no problem with the allocation to 3-roomers, even though some of you may point out that some 3-roomers may actually own big cars. However, I do think that perhaps a little room for adjusting the general rule can be thought about, particularly in this issue of dependants of low-income earners, who live in the quarters of their employers or in institutional quarters. I think these are, quite clearly, people deserving of help and I would ask that the Minister amend the general rule so that this can be taken note of. It may be necessary for such people to come forward and identify themselves. But I think there would not be too many people and therefore this rule could be considered.

Dr Richard Hu Tsu Tau: I agree with Prof. Toh's concern. There is this small group of people who are often left out because of our allocation criteria. It is very difficult to produce an allocation system which takes care of all groups. I will look at this problem in detail and see what we can do perhaps next time round, because I recognise that there is some unfairness. Although there is a provision where they can go to their CCCs or the CDCs to ask for help, they may feel reluctant to do so. We will have to look at the problem to see what can be done.

Assoc. Prof. Toh See Kiat: Sir, I thank the Minister for his response and beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

The sum of $12,878,000,000 for Head Z ordered to stand part of the Main Estimates.

Head T -

The Chairman: Head T - Ministry of Manpower. Amendment No. (1), Mr Hawazi Daipi.

Mr Hawazi Daipi (Sembawang): Sir, I beg to move,

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

Sir, people are our only resource. We have to maximise our manpower resources in order to carve a niche in the global competition. We have to ensure that our people have enough jobs, better quality jobs in future, in order to sustain high quality of life in Singapore. But competition is always going to get keener as new entrants into the industrial world offer cheaper manpower, land and other resource cost.

We have been able to stay ahead of our competition because our manpower remains disciplined and well-trained. But we have to watch our competitors. Even as we improve our pre-employment education training, other countries, like the US and the UK, have also come up in recent years, with initiatives to improve the quality of their workforce. We are competing not only with fellow developing countries but also with more developed countries as our economy becomes more mature.

To give an example, Sir, in the United States, a Workforce Investment Act was enacted in 1998 to provide greater support for workforce development and special statutory boards were set up to implement five years' strategic plans for workforce development. In the UK, the British government launched a new National Skills Agenda. I think this was done last year. Its primary objective is to boost workforce skills to support industrial development and, more importantly, to sustain the country's international competitiveness. So we have to watch our competitors as we try to improve the quality of our workforce.

To support new investments and jobs so that we can sustain long-term economic development for Singapore in the next 10 to 15 years, we need a workforce with 65% post-secondary education. I think we are on the way towards that. But at the same time, half a million of our workers do not have secondary qualification. We have set up the Lifelong Learning Endowment Fund to ensure that our workers will be able to take up skills training courses to improve themselves in order to remain relevant. However, we are a long way from the target of helping so many workers to be retrained.

I would like to ask the Manpower Minister for an update on the implementation of Manpower 21, in particular how the six strategies have been implemented since we started Manpower 21. For example, for integrated manpower planning aspect of the Manpower 21, how do we plan for manpower needs of certain industries when technology changes so fast? Is our manpower planning cycle able to catch up with the changes in technology?

On lifelong learning and lifelong employability, I would like to ask the Minister to give us some progress on the retraining programmes under SRP and other training in the programmes, and how we are going to cover training programmes for half a million workers who do not have secondary qualifications.

Lastly, Sir, on augmentation of our talent pool. As we need foreign workers and foreign talent, what is the optimal proportion of foreign workers and foreign talent that we can host in Singapore in the context of the needs of our own local workers?

Mr Loh Meng See (Kampong Glam): Sir, the Ministry of Manpower is classified under the Economic Development Sector in the Government budget. MOM has a total expenditure budget of $184.15 million. This comprises the operating expenditure budget of $121.85 million and development expenditure budget of $62.3 million. MOM's budget constitutes only 0.66%, two-thirds of 1% of the total Government budget. It has the lowest budget provision among all the Government Ministries. I certainly hope that this low budget provision does not reflect the value and importance that the Government has on the only asset and resource we have in Singapore, that is, our people. 5.15 pm

Sir, I am very impressed with the latest Annual Report, called the Millennium Report, of the Ministry of Manpower for the year 1999/2000. I only wish that more Singaporeans have access and read the wealth of information contained in the Millennium Report.

Singaporeans need to know the challenges we face in the New Economy. Very different skills, competencies and capabilities will be required in working in the new commercial and business environment. To remain employable, workers will have to be knowledgeable, skilful and adaptable. With threats, there are also opportunities for us to reap the rewards in the New Economy.

I would like to find out from the Minister how well informed and prepared are Singaporeans for the pace of change taking place in our economy. Do Singaporeans have the right attitude and mindset to cope with the change brought about by globalisation, information and communication technology? Do we have the necessary manpower of the right calibre to meet the needs of the new manufacturing and services sectors in Singapore?

Sir, it is necessary for us to address the needs of the older workers who are less educated, having little or no skills in our society. The Ministry of Manpower and NTUC have done a great deal for them. However, we must not ignore the growing number of executives and middle management personnel who have been displaced by mergers and acquisitions of companies, and business restructuring. Singaporeans have been retrenched in recent years because their companies have suffered losses or have been relocated to other countries in the region. May I ask the Minister to give us his views on the employment outlook in the next few years and into the future, if possible.

MOM is in the enviable position for the abundant manpower data and information that it possesses. It has strong links with companies and knows their employment requirements. It also knows by the issuance of employment passes and work permits, how many expatriate managers, professionals and foreign workers are working in Singapore. The Ministry can be more proactive in sharing the employment information with Singaporeans because they are in the excellent position to provide job-matching services for Singaporeans needing jobs or Singaporeans who want a job change.

At the local level, the CDCs are good links and networks for MOM to tap. They can be one-stop shop for companies and individuals looking for work to connect with one another. MOM can facilitate the process to match and secure the productive resources and energies of Singaporeans through gainful employment.

I hope the Ministry will actively look into providing timely and good job information and job matching services for both the companies and individuals. With better employment market information, we can reduce wastage and better utilisation of our limited manpower resources.

Sir, can I move on to the next cut?

The Chairman: Yes.

Mr Loh Meng See: On lifelong learning, Sir, the Government is very generous in setting up the $100,000 million Lifelong Learning Endowment Fund. The NTUC and self-help groups are also providing retraining and skills redevelopment opportunities for those who need assistance for upgrading.

Sir, my concern is in the area of general attitude and expectations of employers and individuals towards skills upgrading. There are attitudinal and practical barriers that need addressing. Perhaps, the Minister can share with us what incentives are in place to encourage as many individuals as possible to take lifelong learning seriously.

I particularly like the initiative that the Ministry has taken under the Strategic Manpower Conversion Programme. Here, professionals are channelled into strategic growth areas through conversion training. The Information Communication Technology sector was piloted. It has been highly successful in helping many individuals make the switch. I wonder if there are other areas that can be included in the programme. I foresee the life sciences sector as one key growth area where many more professionals will be required in the future. There may be other sectors in the pipeline. Perhaps, the Minister can share with us the steps taken by his Ministry to prepare Singaporeans for lifelong learning for lifelong employability.

Mr Ong Ah Heng: (In Mandarin): Sir, the most valuable asset of Singapore of course is our human resource. Because this is one of our key building blocks in ensuring the continued competitiveness and survival of our economy. This is even more so now in the new Internet-driven economy which is largely determined by the quality and brain power of the human resources. Over the years, the Government has poured in substantial amounts of public funds to set up various training and retraining schemes. The Government has allocated $200 million for the Manpower Development Assistance Scheme (MDAS), $100 million for the Skills Development Fund (SDF), and another $200 million for the Skills Redevelopment Programme (SRP). Recently, the Minister announced that another $500 million will be added to the Lifelong Learning Endowment Fund, making a total of $1 billion. This Fund is set up to train and retrain our workers to upgrade their skills and knowledge. We must also not forget the billions of dollars invested in our school education system to ensure that our new generation of workers are specially trained and possess the relevant skills for the new economy.

Sir, the setting up of the various schemes is a move in the right direction to upgrade the skills and knowledge of our workers. However, I must point out that SDF and SRP schemes are essentially employer-based. In other words, the courses that the workers would like to go to must be relevant to their work only. Only then will the employers be willing to allow them to go for training or retraining. It is precisely for this reason that the NTUC set up the NTUC Education and Training Fund (NETF), with the support of the Government, to train union members on an individual basis. In other words, the workers can apply to the NETF to finance their training on some courses which are not directly related to their work.

The Lifelong Learning Endowment Fund is a laudable project. But the question is: how will the scheme operate and how can workers benefit from such a scheme? I hope that the Ministry of Manpower and the relevant agencies will quickly work out proper guidelines, incentives and operational schemes so that our workers can tap into the fund for their skills upgrading purposes. On this point, I hope that the scheme will be operated in different directions. We should also consider allowing every eligible Singapore citizen to apply directly to this Lifelong Learning Endowment Fund to pursue their skills upgrading courses. While most of our employers are generally supportive of training the workers, it is just not possible for our workers to go for training. At the same time, there may be some workers who may want to attend courses which, in the view of the employers, are not directly relevant or useful to their future career development. As we move towards the new economy, our workers' skills and knowledge will become obsolete very fast and they are constantly put to test. As such, the Lifelong Learning Endowment Fund should be operated in a flexible manner in order that it may enable our workers to be quickly trained and retrained.

Dr Jennifer Lee: Sir, I also read the Ministry of Manpower's Millennium Report and it is indeed a very impressive report. I particularly like the transformation of the idea of Singapore as a little red dot to Singapore as a hot spot for talent.

The Report speaks of the rapid advances in technology and intense global competition that will require our workers to develop new skills throughout their lives. That the Government is committed to encourage and assist our workers to meet this challenge is clear, from the funding it has been willing to put to this cause. For older and lesser educated workers, particularly, hundreds of millions of dollars have been committed to the Skills Redevelopment Programme and the Manpower Development Assistance Scheme. However, as it has been noted by speakers before, and also the Minister of State for Manpower, in response to a Question in the House last year, our biggest challenge now is not so much in finding funds for upgrading, but encouraging both employers and workers to come forward and utilise these incentives.

Indeed, Sir, having made all that money available, have we thoroughly investigated all the obstacles that are holding people back from accessing skills upgrading, and made a concerted effort, including perhaps signing a small portion of the fund to find ways to overcome them? A couple of routes come specifically to mind. Firstly, older workers for whom we may have classified as plain poor attitude may indeed be real psychological barriers and anxiety and who may benefit from better structured encouragement and counselling.

Secondly, workers who are holding down more than one job to make ends meet. How can they be assisted to find the time or get financial assistance to tide them through during the duration of the course? And finally, single parents with child minding responsibilities, mainly women. Can simple baby-sitting arrangements, for example, at the place of instruction be made so that this group who would otherwise not be able to attend, especially for courses held in the evenings, can now have the opportunity? With all the good intentions and efforts that have gone into putting together schemes for skills upgrading, I am sure some additional attention to addressing obstacles to the utilisation by target groups will be well worth the effort.

The Minister for Manpower (Dr Lee Boon Yang): Sir, first, may I thank all the Members who have spoken, especially those who have complimented the Ministry of Manpower on its Millennium Report, or the Annual Report, for the last financial year.

I would like to address the points raised, particularly, by Mr Hawazi and also Mr Loh Meng See in regard to the progress that we are making in implementing the Manpower 21 strategies and in getting Singaporeans prepared for the changes that are coming at a very rapid pace.

Sir, over the last two years, we have certainly made some progress in regard to implementing the Manpower 21 strategies. I would like to highlight a few of the key areas. We have established an integrated manpower planning framework to guide pre-employment training as well as in-employment training under the direction of the National Manpower Council. This Inter-Ministerial Council seeks to identify key growth areas and to channel appropriate resources to meet manpower demands in these growth sectors. It is not going to be an easy task and we may not be able to get it perfectly right all the time.

Through the process of manpower planning, we should be able to better anticipate the rapid changes that are taking place in the wake of globalisation and also develop a workforce with all the right mix of skills so that they can help us to enhance our competitiveness. In our studies of the manpower demand from the various sectors of the economy, it appears that, in the short term, manpower demand is likely to come from industries like computers, information technology, communications and media, financial inter-mediation, and the chemical industry which forms part of the life sciences cluster. In addition, manpower demand in the social, healthcare and education services will also be high in the near future. 5.30 pm

As we transit to the new economy, the demand for higher skill workers in professional, technical and managerial positions will increase, particularly in the growth industries in the service and manufacturing sectors. Sir, this phenomenon is already evident. As of September 2000, vacancies for professionals, managers and technical personnel form 35% of the total available job openings. This is nearly triple the 13% share that this group held in 1991. There is also an increasing need for workers trained in specialised and technical fields like engineering and the sciences. In the new economy, comparative advantages will increasingly hinge on innovations, development of new products, and the ability to apply new technology as soon as they come on-stream. Hence, we need to have a strong base of engineers and technically-trained manpower to provide the backbone for the manufacturing and key service sectors.

In the light of these industries and the employment trend, the universities and polytechnics will increase their intakes for disciplines such as info-communication, engineering and the sciences, including life sciences, as well as education. The ITE will also offer more places for its technical courses.

In the new economy, manpower planning must go beyond a number-counting exercise. Besides trying to anticipate changes in manpower demand, we must provide more information, and more timely information, to employers and workers so that they can respond swiftly to the changes taking place. This was a point raised by Mr Loh Meng See also, about how we are making information available to the workers. Hence, we have established an enhanced National Manpower Information System to provide relevant manpower information to policy-makers, employers, training providers and workers, to help them in decision-making. We have also made available many up-to-date labour market information and statistical releases, manpower publications, and the results of various surveys in the labour market. For instance, Sir, we will be releasing information on employment trends and outlook for the various industries by the end of March in print as well as on the Internet. In order to give it wider circulation, we will put most of these reports on the Internet so that they can be conveniently accessed by anybody with a personal computer. Sir, our manpower planning framework is in place. Of course, it has to be refined and will be refined. It will be tuned, with the benefit of experience. Over time, it should enable us to have a better qualitative and quantitative estimate of our manpower demand.

Next, I turn to life-long learning for life-long employability. This is one of the key strategies under the Manpower 21 plan. The Skills Redevelopment Programme (SRP) is a major initiative in life-long learning. For FY2000, about 23,000 workers participated in the SRP, an increase of about 60% over the 14,000 in FY1999. More than 90% of these trainees have no more than secondary education. They are the ones who will benefit tremendously from the Skills Redevelopment Programme, which has succeeded to raise their skills level and enhance their employability.

A survey of SRP participants, jointly commissioned by my Ministry and the NTUC, showed that about 60% of the trainees reported an increase in their job scope after SRP training. In other words, with SRP training, they were able to take on more responsibilities at their place of work. 40% also enjoyed a pay increase, 70% of the employers reported that their workers were more productive after undergoing Skills Redevelopment Programme training. As for retrenched workers who took part in the training programme, 75% secured re-employment within six months of completion of their training courses. These are encouraging results. They show that training can make a difference. We will continue to work closely with NTUC to further promote the Skills Redevelopment Programme, and to convince even more employers and workers to participate in the programme in the years ahead.

Sir, last year, my Ministry, together with the Productivity and Standards Board, launched a National Skills Recognition System, which is also aimed at helping lower-educated workers. It will provide open entry training courses and skills upgrading for workers. The training is designed to be job-specific and modular, with a nationally recognised skill certificate for each level achieved. As the skills would have to be relevant to actual jobs, the commitment and participation of industry groups and employers are of utmost importance. To date, 35 industries are already in the process of implementing the National Skills Recognition System. Close to 2,000 workers have been assessed. In the coming year, we will develop more skills standards covering more industries in different sectors and increase the number of workers who can be trained, assessed and certified. The National Skills Certificate will certainly help these workers to face the demands of the new economy.

Sir, manpower development has also received an added boost with the creation of the $5 billion Lifelong Learning Endowment Fund. Already, the Government has committed $1 billion to the endowment fund: $500 million last year, and the Minister for Finance, in his Budget speech, promised another $500 million this year. My Ministry is working closely with the Info-Communications Development Authority and other agencies to launch the first major programme under the Lifelong Learning Endowment Fund. This will be the National Information Technology Literacy Programme which aims to reach out and train 350,000 people over the next three years, in basic computer skills and teach them sufficient computer skills so that they can surf the Internet, for instance. It is a programme that will help all Singaporeans to bridge the digital divide, and level up the lower-educated and older Singaporeans to the new economy. Currently, we have spent about $1 million in developing the courseware and to run a pilot project involving 5,000 people at several community clubs, Toa Payoh Community Library and a few other locations.

Sir, as I said earlier on, information is important. Therefore, my Ministry has pioneered the establishment of the first one-stop Career Centre in July last year. The Centre helps individuals in their job search, career management, selection of training courses, and training incentives. It also helps employers in their recruitment and training of workers. The initial results from this one-stop Career Centre have been encouraging. 20% of those who came to the Centre for help in the first six months said that their visit had helped them to secure a job. Another 12% said that their visit had helped them to develop a better career plan. 10% were more aware of the various training opportunities, and another 6% actually signed up for training courses.

To make it convenient for Singaporeans to access these services, we will work with various partners, such as self-help groups and the Community Development Councils to provide similar services at other convenient locations. This reflects the point that Mr Loh Meng See had made earlier on about the CDCs and other community groups playing their role as part of the network to reach out to Singaporeans to come forward to take advantage of our life-long learning investments. We will continue to work with all these community organisations so that we can bring our services closer to the people. We are also working to put our services, in terms of career guidance, job matching, training information over the Internet for those who are Internet-savvy, ie, those who are already capable of using the Internet, both the employers and the individuals. But, more than that, I think community organisations that want to help us to reach out to the people can play a role here, by having some of their service personnel trained to utilise our services provided over the Internet, so that they can help those who are not Internet-enabled to have access to our Internet services with computers that are provided at the various centres.

Sir, the next strategy of the Manpower 21 plan that I want to touch on is the point about foreign talent, which Mr Hawazi mentioned. Manpower 21 clearly recognises the need to supplement our talent pool with foreign talent. Over the last two years, we have embarked on a comprehensive revamp of our work pass framework. We have de-linked the work pass framework from the immigration regulations, introduced new schemes which can facilitate and encourage the entry of entrepreneurs into Singapore, coordinated the integration of talent attraction activities across many economic agencies, and put in place an international talent attraction processing and settling-in service with an expanded chain of Contact Singapore offices around the world. We have expanded the chain from seven offices in 1999 to 11 throughout the world. In the years ahead, we will continue to strengthen our links with Singaporeans living overseas, and also raise awareness among global talent of the opportunities and challenges available in Singapore. We will join in the global war for talent to seek our share of talent and to enhance our capabilities in many different areas.

Manpower 21 also recommended that we take steps to transform our workplace environment. We have already initiated measures and programmes to professionalise certain sectors by encouraging and supporting the efforts of these domestic-based industries, to transform and upgrade the services that they offer and the jobs that they can offer to Singaporeans. The examples include the Construction 21 plan to reinvent the construction industry, the initiative to professionalise the commercial cleaning industry, steps to enhance service standards and productivity in the hotel industry and, most recently, the Productivity and Standards Board's announcement of the Retail 21 plan to upgrade and transform the retail industry. These efforts recognise the critical need to professionalise the jobs and transform the workplace environment.

Sir, we are also utilising funds provided under the Manpower Development Assistance Scheme to set up new training facilities for workers in industries which are moving ahead, to improve their business model and redesign their jobs. Such investments and support for the private sector's initiative will certainly play a part in transforming the workplace environment, and create more attractive and rewarding job opportunities for Singaporeans.

In implementing Manpower 21, my Ministry has also worked closely with the public, private and the people sectors. Over the past year, for instance, we implemented the Singapore Learning Initiative. We held the inaugural Singapore Learning Festival 2000, which is the anchor event to promote life-long learning. This event was held over two weeks, from August to September last year. The festival generated over 300 learning activities by 65 partnering organisations. Nearly 150,000 people participated in the various festival activities. While this is a good start, more has to be done to inculcate a mindset of life-long learning in our people. We will use the lessons learnt from the past year to do more in the coming year, including redefining and improving the Singapore Learning Festival which will be held later this year.

Sir, in summary, we have made progress in implementing Manpower 21, but there is still much to be done. Business environment and manpower demand are changing rapidly. We are still in the early stage of realising Manpower 21's objectives. The effort to develop our human resource is a long and continuing challenge. It will require the full commitment of workers and employers with Government support to achieve our objective of a globally competitive workforce. 5.45 pm

Mr Hawazi also asked what would be the optimal proportion of foreign workers in Singapore, how do we balance the number of foreign workers with the needs of Singaporeans. This is an issue that has come up from time to time, as the number of foreign workers in Singapore increases over the years. In fact, it is an emotive issue, but we cannot react emotionally to this issue. We have to be rational, and be driven by economic principles. The fact is that we do need foreign talents because they help us to be more competitive in a global market. They add to our capability and help us to make up for the small number. Foreign talents, in fact, create opportunities for Singaporeans. If we adopt a closed door approach, it would only reduce our attractiveness as a business hub and force investment to go elsewhere where talents are more welcomed.

Only last Friday, 9th March, I saw in the International Herald Tribunal an opinion piece headlined "The trends: A worker-hungry Europe in need of immigrants". I was a little surprised. I thought Europe still had a high unemployment rate, although I knew that the European unemployment rate has come down over the years, compared to what it was several years ago, a double digit unemployment rate. When I read the article, I realise that the writer had concluded that Europe's declining birth rate, widening skills gap and the growth of the knowledge economy, can only be solved by importing talents, and not just talents in the information technology area, but a whole range of talents with the right mix of skills needed by the growing industries. I believe his observations are quite relevant to our situation.

On the question of what is the optimal number, I think it is a question of how fast is our economy growing. In order to support the economic growth, in order to meet skills needs of the employers and the new industries that we are attracting to Singapore, we have to continue to adopt an open-door policy as far as foreign talents are concerned. The way to cope with rapid globalisation and changes is, in fact, not to keep foreign talents out. If we keep them out, they will just simply go elsewhere to compete against us. The most effective way by which we can help Singaporeans is to give them the tools to compete. Hence, the Government will continue to spend a large proportion of the budget on education for young Singaporeans and our children. For those who are already in the workforce, we will continue to invest, as I have described earlier on, in all our skills upgrading programmes, so that older workers can continue to upgrade their skills and maintain their currency in the skills that are needed by the employers.

Next, I would like to address the point raised by Mr Loh about the plight of the middle aged managers and executives. I recognise the difficulties that this group faces. For many affected managers and executives who are very experienced in their kind of work and with many years of working experience to be retrenched is a tremendous shock and a serious financial setback. But as I said, this is a group that is already skilled and fairly well-trained. However, as a result of economic restructuring, they also face uncertainty and the prospect of retrenchment. Their years of experience may have become irrelevant as industries or businesses undergo radical changes and are completely transformed. Let me give you an example.

Local banks are streamlining their operations. Some of them are closing down branches. We have heard some Members mentioning this problem during the Budget debate. When that happens, not all the branch managers or the executives in the larger branches can be re-deployed. Some branch managers or executives may face retrenchment, including some of those who have many years of experience as the branch manager. It is difficult for this group who are middle-age, facing such a situation, to be retrenched and having to look for an alternative job. Despite the difficulty, I think there are opportunities available for them but they may have to look beyond their immediate working environment. They may have to be prepared to look at allied sectors. If we take the example of the bank manager or the branch manager in the bank who has been retrenched, he may have to look beyond banking into insurance, other financial services or commerce. In other words, he must be prepared to widen his choice of an alternative job and, at the same time, I would like to emphasise that despite his years of working experience, he must also be prepared to make an effort to go out and acquire additional and newer skills that are perhaps more relevant to the needs of the labour market at this moment. And last but not least, when faced with this situation, he may also have to be more realistic and adjust his expectation of what a new job can give him.

Mr Loh supported the Strategic Manpower Conversion Programme (SMCP) which we introduced in May last year. I thank him for his support. I just want to explain that this programme is aimed at facilitating the conversion of professionals to take advantage of job opportunities in high-growth sectors. We started out by looking at the infocommunications because that is one area where there is strong demand for IT professionals. We introduced the scheme initially as an employer-based scheme. In other words, you can only have access to the training and the financial support through your employer. But in October last year, we widened the scheme to an individual-based scheme, so that even an individual can apply for support under the Strategic Manpower Conversion Programme through certain appointed organisations. To-date, we have about 200 trainees and 100 employers participating in the pilot programme. Based on the experience of this small-scale pilot programme, we will expand the scheme to cover more sectors which we have identified to have a growing manpower need, and where there is also a skill mismatch. Managers and executives, who need additional skills to fit into the new jobs, will benefit from this scheme. They can, in future, sign on for such conversion courses which will prepare them for the new jobs in the new economy.

Mr Ong Ah Heng has asked for support for workers to acquire skills upgrading on their own, and whether they could apply to the Lifelong Learning Endowment Fund for some support. The answer is yes. As I have said, even in the case of the Strategic Manpower Conversion Programme, we are allowing individuals to make applications through appointed agents. The Computer Society is one of the appointed agents that will help us to promote this programme. Under the Lifelong Learning Endowment Fund, we will also introduce programmes which are both employer-based and, at the same time, open to the individuals, the workers themselves can take advantage of this programme, completely separate from what their employers would provide in the normal course of their work.

For instance, I mentioned earlier on the National IT Literacy Programme. This is a programme that is entirely community-based. We will work with community organisations. Individuals can apply for training under this programme and they will get support, both from the Lifelong Learning Endowment Fund and also from the community organisations. Even the Skills Redevelopment Programme has got an individual component in it. I mentioned that we have 20,000-odd people trained last year. We also have about 7,000 workers who went through the Skills Redevelopment Programme on their own, without the backing of employers because these were the workers who have been retrenched. They went through the Skills Redevelopment Programme with the support of the self-help groups. So there is an individual element in the Skills Redevelopment Programme. Doors are open for individuals who want to come forward to take advantage of the programme. I agree with Mr Loh that what is most important is for Singaporeans, faced with this situation, to quickly change their mindset and their attitude towards lifelong learning and upgrading their skills.

Dr Jennifer Lee made a very good observation that while we have announced so many training programmes, so much resources are being pumped into skills upgrading and lifelong learning, how many people are coming forward to take advantage of this opportunity. If you look at the Skills Redevelopment Programme, we have made a tremendous effort to promote this programme and over the last three years, about 46,000 people have come forward to sign up and participate in the training places that have been offered to them. Our target is 100,000 in five years. We are a little bit short, but we believe that with extra efforts this year and next year, we should be able to meet the target of 100,000 workers that we set initially when we launched the Skills Redevelopment Programme. But it will require tremendous effort and we need to work closely with the National Trades Union Congress, and the employer organisations to get them to mobilise their workers, to incentivise their workers to go forward for training.

I understand that for older workers, there are barriers. It is very difficult for them, having joined the labour market 25 years ago, and have not been back to the classroom since then, to begin to think about going back into the classroom to learn a new skill. These are issues that we are addressing in the kind of training programmes that we can offer and the environment in which we provide the training. We will continue to improve the training methodology, course materials and also make training much more accessible to the older workers who may be very hard pressed for time, including the group of workers that Dr Lee mentioned who are holding more than one job. That is why we emphasise part-time training. We understand that not many people can afford the luxury of taking time-off from their job completely to go for six months' full-time training course. We, in fact, try to offer as many of our skills upgrading programme on a part-time basis, working closely with the ITEs.

On the question of single parents, these are issues which we will have to address. It is not just single parents, but also housewives who have family duties, who have young children to look after. For instance, if we want them to come and join the National IT Literacy Programme, to learn how to use the computer, we would have to see what are the barriers or difficulties that they face. That is why we want to work closely with community organisations, whether it is the community club or the Community Development Council. By working closely with the community organisations, some of these issues, like having a nearby child care centre that can look after the kids for a couple of hours while the housewife is attending a course, are certainly possibilities that we should examine.

Sir, I think I have addressed the points raised by the Members.

Mr Yeo Guat Kwang (Cheng San): (In Mandarin): Sir, in order to effectively deal with the competition and challenges of the globalised economy, our workers today must undergo many cycles of training and retraining throughout their lifetime in order to remain employable. The Government should try its best to help these workers deal with the challenges. 6.00 pm

I am very happy with the contributions made by the Skills Development Fund (SDF) all these years. In 1999, among those who were trained under the sponsorship of the SDF, the ratio of workers aged 40 years and above has been increased to 1:5. I would like to know whether the SDF levy would be pegged to the median wage. In this way, the SDF will be able to grow and adjust automatically, so as to be more responsive to the training needs of the workers.

Sir, we are lucky to be able to create an average of 45,000 jobs a year for our people. However, we are still unable to avoid the problem of structural unemployment, because the skill levels of some of our workers are unable to match the requirements of the new jobs created. I would like to know whether the Ministry has any measures to deal with this problem, so as to prevent the gap from becoming wider. More importantly, the Government should strive to project more accurately the manpower needs of the various sectors, so that workers will not choose the wrong skills to be trained and face being eliminated at the race. Only accurate projection of market skills requirement can effectively help our workers to take on the relevant skills training and to successfully migrate to the job areas where their potentials could be fully developed. In this way, our workers, particularly the older workers, will remain employable.

Mr Sin Boon Ann: Sir, at the commencement of this Budget debate, I touched on the issue of retraining and employability. If you recall, Sir, I had mentioned that for many of these older workers, the issue is not whether they go for training and retraining, but one of re-employability post training, particularly for the older workers. I suggested that the Government should perhaps consider giving some tax incentives to the employers to help make it easier for these employees to be rehired.

In his reply, the Minister said, and I summarise it in my own words, that we should not interfere with the operations of the market with such incentives, which would distort its efficiency. In other words, what it means is that the Government will not, at this stage, be considering proposals for tax incentives to encourage employers to hire older workers.

Sir, I was hoping to hear that the Government will be considering any tax incentive at this stage. As you know, Sir, a middle-aged employee, who was made redundant and went for retraining, may not be in a position to compete effectively with the younger ones who are similarly qualified. The older employee will probably require higher salary because of his commitment to his family, but may not be in a position to dictate his requirements because of competition from the younger employee who, typically, would not have as onerous a responsibility for family as the older employee has.

Sir, we use tax incentives all the time to induce certain forms of behaviour from the taxpayer or even to address certain market conditions. For instance, we give tax incentives to foreign companies to induce them to set up operations in Singapore, to encourage spending in R&D, and to raise funds in the capital market here. These incentives were given because we thought that such incentives would be beneficial to Singapore in the long run.

Sir, what we are asking for here is to level the playing field, shared between the older and the younger workers. This, as I have argued earlier, is necessary to maintain the long-term cohesiveness of our society here. For this reason, therefore, I would urge the Minister to consider such a scheme of giving tax benefits to companies to make it easier for them to hire older employees.

Mr Hawazi Daipi: Sir, we have increased our mandatory retirement age to 62 years. If we are to follow our own population trends, this will probably need to be increased to 65 years in the near future, as the average life span of all Singaporeans increases. Indeed, many in the old-age bracket enjoy keeping busy by continuing to work, albeit in less stressful capacities, not only because it keeps them physically and mentally healthy, but it is also because there is a psychological need to know that one is still useful and financially independent.

Gone is the extended family system in which the successive younger members of the family look after the parents and the older ones in the same household. Most old parents now live on their own after their children got married and live apart, and thus have their own financial commitments. Our older workers, especially those who have little personal savings due to low income, need to work even beyond the retirement age.

As our economy restructures further, we may face more problems in finding employment for older workers. The situation could be due to shortcomings of both sides, ie, from the older workers as well as the employers. The Ministry will surely look into this matter to ensure that the impediments to employment of older workers would be removed.

On the side of older workers, there are those who could have lost touch with the latest developments, lack the required skills and are reluctant to go for training. Some may not like the prospect of their salary lower than the level they used to enjoy. The Government, employers as well as the NTUC representing workers and other groups have established programmes, subsidised training, partial payment of salaries for workers to acquaint them with the latest developments and acquire new skills.

Many times, the focus has been on older workers. These efforts have been boosted with the enactment of the Lifelong Learning Endowment Fund. This is one important way to help our older workers meaningfully. The task now is to encourage older workers to take up skills upgrading courses. There could still be complacency among our older workers, to take advantage and act on the schemes available for them. But I would like to make a point that employers too have a responsibility to encourage and support their older workers to upgrade their skills.

At the same time, Sir, there needs to be more effort on the part of the employers to start hiring older workers, especially when they have acquired the relevant skills. There needs to be a change in the mindset of some employers with regard to older workers. It is not uncommon to hear that workers above 40 years old, who have lost their jobs, complain that they have been turned away, because they are considered too old.

Some companies tend to generalise about older workers, believing that older workers are likely to get sick more often, and are slow to pick up new skills. These generalisations do not fit many older workers, especially in an ageless on-line environment that operates in an industry like the IT industry. In fact, many retrained older workers combine professional experience with fresh IT skills. Their attitudes are progressive and positive. In the service industry, older workers bring a lot of wisdom and maturity which have been learned on the job. This sense of responsibility is much greater, because of the financial and family commitment they have taken on with age.

Employers have also a lot of preconceived assumptions about older workers. For example, some assume that older workers will be unwilling or unable to work longer hours, which studies in the US have found to be untrue. They assume that older workers will only be willing to accept high salaries without even giving them the opportunity for an interview and, worst of all, they assume that older workers have less commitment and energy, which is untrue, because many older workers are more committed to their careers after spending much time and effort carving out a career.

Sir, I agree with Dr Jennifer Lee that perhaps, in some instances, it is timely that older workers are not only retrained in new skills but also offered counselling, including how to present and approach prospective employers. At the same time, employers need to be more aware that they have discriminatory assumptions which can lead them to a wrong conclusion about older workers. In the face of an ageing population, perhaps employers and employer federations should be looking at ways and means to reduce the preconceptions that some of their members may have. In unionised companies, I am sure we can work out ways to work together between the unions and the management in ensuring that we can encourage more older workers to be retrained and to continue to enjoy employment.

On the part of the Government, I hope the Ministry can assess the implementation of the new retirement age at 62. Although it has been implemented only since 1999, I would like to suggest that discussions among representatives of the labour movement, employers and the Government can be started with a view to phasing the eventual extension of the retirement age to 67. I think they have implemented the new retirement age at 62 long enough to study the problems and opportunities on both sides of workers and employers, and see how we can extend to 65 first, and later to 67.

The Government can also help by encouraging more and more companies to embrace job redesign, so that there will always be jobs that are relevant to older workers, especially for those who have put in many loyal years to the companies. Through job redesigning, companies can reassign functions which are suitable to the physical make up of these older workers without having to bear too much additional cost, especially for workers who have attained relevant skills.

Why should companies resort to employing and be allowed to engage foreign work permit holders when they can employ local workers who can do the same job? I would like to echo the views of some of our colleagues here, especially Mr Sin Boon Ann who spoke before me, of the need to consider fiscal incentives in order to encourage employers to consider employing older workers.

Sir, the question of our older workers is not going away with the recovery of our economy after the economic recession. In fact, I think we are going to face more such problems as our economy continues to restructure. The tripartite partners should work more closely to address the issue of employment and re-employment of older workers, and even facilitate contract work as well as part-time work, so that we can help our older workers to continue to be financially independent.

Mr Low Thia Khiang: (In Mandarin): Sir, recently, the Government talked a lot about the Singapore 21 vision and to affirm that every Singaporean counts. The Manpower Ministry also published a report called Manpower 21, which contains many recommendations on how to meet the needs of manpower resources in the future. But the report does not specify how we should solve the unemployment problem of the elderly and less educated workers. Although the retirement age has been raised to 62 years, many people in the 40s told me that when they went to apply for jobs, they were told by the employers that they were too old to be employed. Those less educated or uneducated workers, particularly in the construction industry, are unable to find alternative jobs once they are retrenched. This state of affairs remains the same ever since the 1998 regional financial crisis. I have, on more than one occasion, raised this matter in Parliament, but I have not seen any concrete measures being adopted by the Government to help those low income workers. Although the Prime Minister has appealed to employers not to discriminate against older workers, such appeal seems to have fallen on deaf ears.

I know the Ministry of Manpower has all sorts of job training programmes. But according to a Straits Times report, a survey conducted by MOM revealed that those who attended the skills upgrading programmes are mostly young educated workers. That being the case, how do such training programmes help the less educated workers?

Sir, I have a few questions. First, what is MOM's attitude towards the plight of those less educated workers? Does it think that these people are beyond redemption, and are better left to fend for themselves? Second, after MOM has identified the causes for the reluctance of these less educated and older workers to go for training, what is MOM's reaction? Third, has MOM formulated a policy specially tailored to address the unemployment problem of this group of lowly paid workers? 6.15 pm

Mr Ong Ah Heng: (In Mandarin): Sir, my main concern is the training of our older workers. All along, our leaders have called on our workers, especially older ones, to upgrade their skills because they are usually the ones with higher risk of losing their jobs. While we fully understand the importance of skills upgrading, we must also be sensitive to the needs of older workers. We must have read many times in the papers how our older workers, despite having taken up advice to upgrade their skills, are still turned away at job interviews. In many cases highlighted, it is not that they do not possess the right skills or mindset, but more often than not, it is their age which prevents them from securing a job. Many employers though will not openly admit this. Although at the height of the recession in 1998, the tripartite partners did come up with some form of guidelines not to discriminate against older workers, it seems this has fallen on deaf ears.

Many older workers now want to know what the Government has done or is planning to do to address the above worrying trends. From my feedback, individual Ministries have also embarked on outsourcing their operations to private contractors, for example, the Ministry of the Environment has farmed out some of its cleaning work to private contractors. Many older workers are definitely affected in such a situation. Will these private companies continue to re-employ these older workers? If these older workers are not re-employed, what happens to them? Does the Ministry show any concern to these workers or help them find alternative re-employment with these new private contractors? If these contractors refuse to employ these older workers, does it mean that these private contractors will go to recruit younger foreign workers? Perhaps the Ministry of Manpower should examine our existing recruitment policy and guidelines on older workers employed in the public service and statutory boards.

Although our leaders have helped these older workers to seek other jobs, very few concrete measures have been formulated to help them. I hope that we will not just talk about it. Therefore, I would urge MOM to take this lead to coordinate with the relevant Ministries and statutory boards to set a good example by taking concrete measures to recruit older workers in their departments.

Mr Thomas Thomas: Sir, I too add my voice to the plight of older workers, many of them may not have sufficient schooling or skills. They are at the greatest risk of retrenchments and once they lose their jobs, it is difficult for them to get another job, even at a lower pay. At the same time, these older workers need a job badly, because they are usually at a phase in their life where their financial commitments are highest. They have a mortgage to settle, children to educate and families to take care. While they need jobs, employers are reluctant to employ older workers.

We therefore need to get these employers to change their attitude and values of these older people. The needs of the older workers are beyond training and retraining. They need counselling and assistance to learn how to learn. If nothing is done and the situation is allowed to continue, we could be making a mockery of our legislation on the extension of retirement age. Older workers may not be forced to retire early, but they could be easily retrenched and not be re-employed on decent and dignified incomes. We should not allow this situation to continue and I would urge the Minister to work on this with some urgency.

Mr Yeo Guat Kwang: Sir, since many Members before me have mentioned about the issue, I would not want to repeat, but would like to ask the Ministry whether it will consider raising the retirement age beyond 62 years in the near future.

Mr Seng Han Thong: Sir, lately, when someone talks about lifelong learning, I observe that they like to quote the Chinese saying of " ." While older workers understand the importance of lifelong learning, they are more concerned about the their lifelong employability. So they ask, can we "

"? In short, they want to be reassured that after they receive the necessary training, they can get a job, and that is crucial.

At many of the dialogue sessions, Singaporeans expressed their concern that as more and more companies restructure and with the development in technology, the older and the less educated workers tend to be retrenched. Despite the retraining they receive, they notice that employers prefer younger workers. Thus, they perceive the age discrimination.

So for those who have a job at the moment, they are also worried about their job security. One union leader said at a session, and I quote, "We need a job. We older workers are concerned that if we are out of job, we have to go back home to face the wife and the wall. That will be very stressful."

Sir, he received big applause from other fellow workers. That shows that they all agreed with him that it was very stressful without work. But I do not know whether they also agreed with him that facing the wife, and especially facing the wall at home, was also stressful. But I can imagine that life without a roof and four walls and without a wife is equally stressful.

"WWW" is the in-thing nowadays, which means world wide web to the youngsters. I was told that the soldiers refer "www" as wine, women and war. But to the workers, especially to the older ones, the "www" means work, wife and walls.

The concern of age discrimination in the employment market should be addressed. Recently, there was a proposal to form a watchdog body similar to the equal opportunity commission found in the US, UK, Hong Kong and Australia. Watchdog body means another "W" which workers can turn to. But, in my view, our unions have been playing an active role in ensuring that older workers are not being discriminated. We may not see eye to eye in some of the things with the employers; however, we should work hand in hand with the management and Government in resolving this concern. And, in fact, this has happened in a smaller way in the petrochemical industry where older workers are being retrained and re-employed after their retraining. And I must admit that we should do more to ensure that workers are not being discriminated.

Thus, I would like to urge the Minister to re-consider if an incentive package could be given to employers who re-employ older workers after they have gone through the retraining. I believe this is one of the more effective ways to get older workers employed. Our National Skills Recognition System has also created opportunities for workers to have their skills certified and made it easier for them to gain recognition by the employers. It is through this concerted effort that the perception of age discrimination can be checked, and I believe that this is a more pragmatic approach towards the issue and to ensure that older workers will get the right type of "www".

Dr Lee Boon Yang: Sir, let me respond to all the hon. Members who spoke so eloquently on behalf of the older workers. The Government shares their concern about the plight of the older workers, but we have to go about tackling this problem in a rational and sound way. Structural unemployment - higher unemployment rate for older, lower-skilled workers - is not a problem that is unique to Singapore. It is a problem that is also being experienced in other countries. You will see this problem emerging in the European countries, as stated in the International Herald Tribune article last Friday which I mentioned earlier on. They also have a problem - ageing workforce, widening skills gap; as a result, older workers are having more difficulty staying employed.

So, let us not fall into a rhetoric trap. Mr Low said, "What has the Government done about these older workers?" He raised several points. What are our policies, what are our plans to help the older workers? He said that there are no concrete measures by the Government. I think that is very far from the truth of what has actually happened in the last three years. Mr Low knows very well that we have taken a very strong interest and deep concern on the plight of the older workers.

Let me give you an example of what we have been doing. We actually promote training for older workers much more aggressively than for any other sector. We work closely with both the Productivity and Standards Board, the NTUC and self-help groups, to market and to package skills upgrading programmes targeted at the older workers. We even give older workers special funding support. In the case of those who are 40 and above, we provide the higher level of funding. For instance, if a person, aged 40 and above, signs up for a SRP training programme, he will receive 100% of the cost fee subsidy. In other words, these people receive free training. And if they are already employed, then their employers will receive 85% absentee payroll subsidy, instead of 70% for the younger workers. In other words, there is already additional incentive given to employers to train their older workers.

So we have introduced measures to specially address the needs of this older group of workers. The first and foremost issue is how do we equip the older workers with the skills that are needed in the workplace. It is no use talking about measures to help them get jobs if the older workers themselves do not have the skills for the jobs. You can give your employers all the tax incentives that they want, you can give them all the benefits that they want, but if the workers cannot do the job because they do not have the skills, then they will not be hired for the job. Today's marketplace is very competitive. If you do not have the workers with the right set of skills, who can deliver the product or the service productively and efficiently, you will go out of business. No amount of tax incentives can help you to stay in business.

So the first and foremost challenge is to equip our older workers with the right skill set, and this is what we are doing. That is why we are providing more incentives for the older workers. That is why we have introduced the National Skills Recognition System, which is aimed at meeting the skills upgrading needs of older workers who lack basic education. That is why we design the system to be open entry. In other words, anybody can walk in and sign on for a course under the National Skills Recognition System. You do not need to have a Secondary Four Leaving Certificate. You do not need to have completed your Secondary Three. You do not even need to have completed your PSLE. All you need to do is to show an interest in upgrading your skills. We will find you an appropriate area where your skills can be upgraded, certified, and we will then help you to find an appropriate job. So I think that is the most important thing, and we should not be distracted by this feeling of hopelessness, that there is nothing we can do about it. That is far from the truth. The truth is that we are making tremendous effort to address the needs of the older workers, and we will continue to do so, but in a coherent and sensible manner that will yield results. 6.30 pm

In fact, I would also like to point out that, of the 40,000 workers who have gone for skills upgrading under the Skills Redevelopment Programme, about 30% of them are in fact the older workers. So older workers are receiving their fair share of support, in terms of skills upgrading and, as I have said earlier on when I reported on the progress of the Manpower 21 Plan, those who have been through the Skills Redevelopment Programme actually saw enhancement in their job capability and 40% had increases in pay. And employers saw them as being more productive workers. So these findings confirm what we believe, that an older worker can be equally, if not, more productive and efficient as a younger worker. And employers should of course give older workers a chance for any job vacancy that is available provided, of course, that the older worker himself has taken the trouble to equip himself with the right skills and right competency to be able to cope with the job.

The Skills Development Fund also supports about 160,000 training places for older workers last year. This is an increase from 130,000 training places that were supported by the Skills Development Fund for older workers. So in many different areas, we are reaching out to the older group of Singaporeans by helping them to upgrade their skills to prepare them for the knowledge-based economy.

Mr Yeo Guat Kwang has asked whether the skills development levy will be linked to the median wage level. We have announced that when we were going to increase the skills development levy. We will also make regular adjustment. The announcement was made last year and what we said was that we would adjust the skills development levy contribution ceiling to $2,000 by the year 2004. The first increase from $1,000 to $1,500 took effect only on 1st July last year and, subsequently, we will raise it in steps, $1,800 in 2002 and then $2,000 in 2004. This we have already announced last year and we have implemented it in July last year. Beyond 2004, we will review whether we need regular updating or review of the ceiling, or peg it to some measures, for instance, such as the median wage level. We will have a look at it again after 2004.

Mr Hawazi and, again, Mr Yeo Guat Kwang also asked whether we would raise the retirement age currently pegged at 62. We introduced this minimum retirement age or statutory retirement age of 62 in 1999. So we have about two years of experience to work with this new retirement age. We will be looking at whether there is a need to review this at this juncture. Of course, in the longer term, Government's intention is to raise the retirement age to 67. The question is whether we should now introduce a higher retirement age of 65, at this juncture, or we should wait till the economic situation becomes more stable before we initiate this review. We would like to wait a little bit longer to see what is going to happen in the light of the possibility that the economy will slow down before we make another move. So we will have to wait till the later part of the year after we have a clearer feel of the economy in the next one or two years before we commence a review.

But let me reassure Members that the intention remains the same. We intend to raise the retirement age at the appropriate time from 62 to 65, and then on to 67.

The rest of the Members have basically raised the same point about what we are going to do to help the older workers. Mr Seng Han Thong spoke about the older workers and asked whether we could reconsider incentives to the employers. My point is that, in response to Mr Seng and Mr Sin Boon Ann's request for tax incentives, we should not go in and micro manage and interfere in the labour market in this fashion to the point where you would say that if you employ an older worker, I would give you a special incentive or subsidy. What we should do is we should ensure that the older workers are fully equipped with the skills that will be needed for the job. But at the same time, we should not make it too easy for employers to substitute our local workers with foreign workers. That is why we will continue, and I will touch on it later on in our discussion on the section on foreign workers, to have restrictive measures in place with regard to the entry of lower skilled foreign workers, ie, work permit holders. This is to ensure that our employers do not become overly dependent on foreign workers at the expense of our Singaporean workers, particularly the older workers.

So if we take that approach, we make every effort to train our older workers to give them the new skills that are in demand and, if the older workers respond positively by coming forward to accept the training, then we would be making some headway in resolving this problem. It was Mr Low who mentioned that the training went only to the better educated workers and that we had ignored the older workers. That is not true. As I said earlier, in my response on the Skills Redevelopment Programme, a lot of efforts have gone to the older workers and older workers have come forward.

What is true is that among those who did not undergo any skills upgrading, many of them are in fact the unemployed. They are in fact the group most in need. They had not gone for the skills upgrading. That is why they still remain unemployed because they have not got the skills that the employers need. So, in effect, what we need to do is to get this group of unemployed, particularly, the older unemployed, to come forward to take advantage of our various upgrading and retraining programmes so that they can acquire new skills and then we can be in a better position to help them to look for new jobs.

Mr Hawazi mentioned about the contract and part-time work, as a measure to help older workers. That is one possible approach. We will look at how part-time work and contract work can be better organised in order to create more job opportunities for older workers. But the flip side of the coin is that some older workers do not want to hold a full-time job, particularly those who are near their retirement age or already past the age of 62. They are fit, they are healthy, they are able bodied and they can work. But they do not want to hold a full-time job. So for this group, maybe a part-time or contract work may be useful for them. So we will be looking at how this can be further improved and made more attractive so that they will remain gainfully employed and, in a way, also contribute to our manpower resources.

Last but not least, I would like to reiterate the point that, as far as the older workers are concerned, some employers may have a misconception that they are less capable, less productive, less efficient. Mr Hawazi also made the point that employers should be more prepared to give older workers an opportunity. As the Government, what we can do is to help employers who are willing to take this step to ensure that the older workers that he recruits would be trained to the skill level that he needs. And this is precisely what we are doing through the various skills upgrading programme that we have already put in place. Any employer who today wants to employ an older worker, but is not quite certain of his capability, can always recruit the worker and then have the worker trained, or skills certified, so that they can be assured that he will be able to do a good job once he is hired.

The other point that Mr Hawazi mentioned is the fact that older workers do not only need the training or skills upgrading, they also need some counselling. I agree with him entirely. This is the same point that Dr Jennifer Lee made earlier on that they need more than just skills upgrading. They need some guidance, they need some counselling. For a start, even in skills upgrading, they need to be guided in what type, which area to go in for and which area of skills upgrading should they embark on because they may not be aware of the changes that have taken place in the labour market, that the demand for skills set has changed. And today, a whole new set of skills is being required by employers. That is why we are pioneering this one-stop career centre and we want to work with the community organisations to expand this network so that workers, particularly older workers, can have easy access to such counselling services where they can approach professionals who are well informed of the labour market trends and demands of the growth sectors where jobs are plentiful, but jobs which require workers with higher skills. So older workers can go to one-stop career centres to seek advice and counselling.

I have indicated earlier on, in my response on the progress of Manpower 21 strategy, that the result that we have got from our one-stop career centre at the Ministry of Manpower has been quite encouraging. People who turn up have found it useful. We would like to multiply this experience. We would like to increase the number of such centres. It is best to have them located conveniently in the housing estates so that older workers, housewives and women who have family duties can all turn up. If they need advice or counselling, it can be made available to them.

Sir, I think I have covered the points that were raised.

Mr Low Thia Khiang: May I seek clarification from the Minister? Sir, I understand there were various programmes, like Skills Redevelopment Programme (SRP). My point is whether these programmes are focused enough to solve the problem of the unemployed older workers. I understand that only about 23% of older workers have participated in the programme. Is the Minister satisfied with the participation rate of the older workers in the training programme? The Minister is correct in saying that the unemployed older workers are the main problem now. I would like to know from the Minister what he has in mind in reaching out to this group of workers specifically, and design programmes for them in order that they can be re-employed. Lastly, I would like to know from the Minister what is the macro level of the problem and what is the magnitude of the problem of this group of workers who are older and less educated. And what is the target, ie, whether the Ministry has set any target to reach them and to resolve the problem?

The Chairman: Order. We have over-run by one minute.

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

Dr Lee Boon Yang: Mr Deputy Speaker, Sir, I beg to report that the Committee of Supply has made further 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.