TACKLING THE ECONOMIC DOWNTURN

[Mr Speaker in the Chair]

Debate resumed.

Mr Lew Syn Pau (Kreta Ayer-Tanglin): Mr Speaker, Sir, thank you for giving me this opportunity to add my comments.

The economic slowdown in the region triggered by the US economic problems took another dive after the 11th September terrorist attacks. Many Singapore companies, especially the SMEs, are hurting badly because this time around, they have lower reserves, having barely recovered from the previous crisis in 1997/1998. Revenues are down as demand for goods and services dries up. The only way for companies out there to survive this severe downturn is to cut costs drastically while waiting for demand to revive. For most companies, the major fixed costs are rental and manpower costs.

The Singapore Confederation of Industries, of which I am a Council Member and also Vice-President, came up with a wish-list three days ago. It contains a list of what we feel would be necessary and helpful to companies to survive this downturn. I am happy to note that many of these requests have been taken into consideration in the package announced today. I would like to thank the Government for such a generous and bold package. It has generally met expectations which are high. It has something for almost everybody, from national servicemen to the elderly, from entrepreneurs to retrenched workers. I am sure it will assist many companies in helping them to contain costs and retain as many workers as possible during this trying time. However, I would like to make the following comments and suggestions that the Government may wish to consider further.

First, on manpower cost cutting. For many companies, wage cost, including CPF contributions by employers, is one of the biggest cost items. I agree with DPM that the CPF should not be used as a tool for adjustment of short-term labour costs. In the longer term, however, the Government should seriously consider reducing the CPF contribution rate from 16% to something lower, say, about 12%. It is a significant saving for employers and will help them to retain more workers and be more competitive in the long term. In the short term, employers of course will take other measures to reduce manpower costs to a level commensurate with the volume of business, such as salary cuts, shorter work week, compulsory no pay leave, and so on. To maintain industrial harmony at the workplace at a time like this, it is important that employers discuss and share their problems and plans with the employees.

Second, rental costs. This item is less flexible to adjust unless landlords are prepared to reduce rentals. I welcome the Government's decision to further increase the quantum of property tax rebates. I urge all landlords to pass this saving to all their tenants.

Next, financing costs. I am glad to note that DBS bank has taken the lead in reducing its prime rate to 4.5%. I urge other banks to follow suit. Interest rates have remained rather high for some time, despite the substantial lowering of interest rates in the USA since the beginning of this year. More importantly, banks should be more flexible and understanding at this time of crisis and be prepared to restructure loans to help companies to ride out this downturn. In this respect, MAS has influence over the banks and finance companies, and I hope that it will exercise its moral suasion accordingly.

For job creation, new companies must mushroom and existing companies must expand. SMEs have difficulty accessing capital at times like this to grow and create jobs. The Government should seriously consider starting a SME bank, or a development bank, which has been raised by the SCI at a press conference a few days ago, and also by some of my colleagues in this House. Without a development bank, like what we had in the 60s and 70s, many of the companies that we know of today will not have flourished and succeeded. I am happy to note that the Government will be establishing a micro-loan programme to help very small companies. I will wait for the details to be announced.

Next, cash-flow management. I thank the Government for the corporate tax rebates that will certainly help to ease cash flows of companies. To help some companies tide over this period, the Government should allow companies that have corporate tax payments from previous years' profits to defer these or restructure and pay in smaller quantums over a longer period of time. The Government should also allow for tax offset on losses incurred in overseas ventures by local companies.

Transport costs. To help companies reduce their transport costs, the Government has reduced petrol excise duty by 5%. This is most welcome. It should also consider removing the ERP charges, except during the peak hours of, say, 8 am to 9 am and 5 pm to 7 pm. I drive into the CBD from time to time during off-peak hours and I do not see any heavy traffic, or traffic jam, at all to justify ERP charges during off-peak hours. With the ERP system in place for some time now, it is also time for the Government to further reduce road taxes, ARF and import duties for cars and other commercial vehicles on a more permanent basis. We are still the most expensive place in the whole world for owning and operating cars and other commercial vehicles, and these all add up to the operating costs of companies.

On GST, I would like to add also here my call for the Government to consider suspending temporarily the 3% GST to reduce cost of transactions and cost to companies.

On the personal side, the Government has been generous in granting an additional 5% rebate for personal income tax for the Year of Assessment 2001. Some individuals are currently encountering difficulties in paying their taxes and I hope the Government will consider allowing these individuals to pay their income taxes from the previous year over a longer period of time as this would help to lessen their cash-flow problem.

On infrastructure projects, I am happy to note that the Government would be injecting $3.5 billion into the economy to speed up infrastructure projects. However, given the open economy of Singapore, how do we ensure that the benefits of this expenditure and its multiplier effects will stay in Singapore and accrue to Singaporeans? The Government may wish to consider schemes for this to be achieved, all other things being equal. If there is too much leakage out of our economic system, our efforts would have been futile.

In the longer term, I would like to suggest some measures. Singapore has become quite an expensive place to do business in, especially for rentals, transport and manpower costs, compared to our neighbouring countries. Moving up the value-added ladder by being more innovative and creative will take some time. In the meantime, the Government should look into more measures to reduce domestic costs within our control so that more of our companies will be able to survive.

Dr Tan Boon Wan (Ang Mo Kio): Mr Speaker, Sir, thank you for this opportunity to speak. The people are hurting. More of my residents are coming to see me about housing loans, utilities bills they cannot pay, increasing utilities bills, loss of jobs, looking for new jobs, worry about their children's education. Therefore, the measures that DPM has announced are very welcome. And those measures are very reassuring to the people in Singapore because it demonstrates that the Government understands and cares about how they are coping with the problems.

I am particularly pleased to note that the Government is freezing the fees for undergraduate and polytechnic tuition. I wish I knew this last night. Because last night, one of my residents came to me and said, "I am very worried about my daughter. She is going to the university next year and the fees are going to increase." And I assured her that the Government will make sure there will be fee loans, and so forth. And if I had known this, I would have told her, "Don't worry, the fees will be frozen for one year, and perhaps longer, and it becomes more affordable." So I think these are very welcome. And as a lecturer in the university, I am quite sure my students will be very pleased to know that the fees will not be increased for one year.

Easing of cash flow of new HDB flat buyers would also be very useful. A lot of residents come to me and ask for help because they cannot pay the 20% downpayment. By staggering the downpayment in two stages of 10% each is very helpful to many of them. The utilities bills, as I have said, have been increasing. The reduction of tariffs and extension of utilities rebates will also go a long way to help them.

Businesses will definitely welcome the improved access to funds by the Government introducing an improved Local Enterprise Finance Scheme. But I like to join my Parliamentary colleagues, Mr Leong Horn Kee and Mr Lew Syn Pau, to call upon our banks to help. The cost of funds is a very important business cost. A lowering of this interest rate will go a long way to help reduce this cost element.

The Government is showing a very good example by cutting the salaries of Ministers, political office holders, senior civil servants and also the MP's allowance. It shows that the Government understands the suffering and pain of the people. However, the real answer to our current crisis and difficulties is a strong economy. I urge the Government therefore, and I know they are doing what they can, to concentrate its full resources to revive the economy and to grow a strong economy that will pull us out from this difficult period.

Meanwhile, I would urge Singaporeans to take the many opportunities which are made available by the Government for retraining and upgrading for a New Economy. Singaporeans will have to be less choosy in selecting the jobs they want, or the location of the job they want, and perhaps take a lower salary and tide through this difficult time. By working together, we will solve the problems that we have today. With proper planning and the Government looking at the strategy, I look forward to a stronger future for Singaporeans of this generation and for our children and their children as well.

Dr Tan Cheng Bock (Ayer Rajah): Mr Speaker, Sir, I support this off-Budget package. We are able to do so because of our prudent management of our finances and resources.

Mr Speaker, Sir, at my meet-the-people sessions, three major areas of concern and request kept recurring:

1. Requests for jobs;

2. Concern about the rising electricity and water bills, SC&C charges and their current mortgage housing loans; and

3. Inability or problems in meeting their hospital bills and education and transport costs and, for the business community, they always complain of no business or very poor business.

I had wanted to see how Deputy Prime Minister would address these issues, and I must say that I am quite comforted by the fact that he has given very good assurances as to how these issues would be tackled.

This time around, I can feel the urgency, the worry and the fear, more so than in the previous 1985 and 1997 downturns. This time, the effect is more widespread, involving white and blue-collar workers and involving many categories of our workforce, from the driver to the manager, young professionals and recent graduates. In the previous downturn, I remember when we offered jobs to some of those people who had no jobs, they turned it down. I can understand at that time why they did that, because there was a lot of family support. Many of the members of the families had jobs. So the family support was there. But this time around, I notice that they are less choosy and they would accept whatever jobs that we offer to them. I can understand that this recession must be quite widespread. Not only the manufacturing sector is involved, but the other sectors are also involved, and this has affected other members of the family. Thus, the family support has shrunk and this created this sense of uncertainty, this fear and this worry.

I see the only way out is job creation and job preservation. To do that, I think the Government has to provide that ambience for the business sector to be able to create jobs and to preserve the jobs. Looking at the package and listening to DPM, I know that there is a genuine effort to achieve these goals. And this package obviously contains a lot of assistance programmes to do this. But the man-in-the-street should not feel that the Government is helping this sector more than them because, if they will go through the package presented, there is a lot for them too. I am, therefore, glad to see many changes made to help businesses to survive.

I remember our earlier assessment of the downturn. We put a lot of emphasis on cyclical cause for this downturn. But when I speak to businessmen, they always tell me, "Doc, there is a structural element there". This afternoon, listening to DPM, he has called for structural changes to be made to our economic health, and I am sure this would be supported very strongly by the business community.

Singaporeans must be prepared for change in our lifestyle. We have to scale down our expectations in terms of expected income, job choices, housing, recreation and spending habits. No longer can we be too choosy about jobs, expect high income. We have to earn every cent, and not expect it. We have to take on jobs now taken up by foreign workers, including construction work. We have to review our maid employment. For example, we should encourage some of our Singaporeans who are unemployed to take up part-time housekeeping jobs. Hourly-paid jobs are also a way out in these difficult times.

There is a fear that the foreign worker is taking away a lot of our Singaporeans' jobs, and this has been addressed by DPM. I agree with him that the tightened criteria are very important, because he said that the profile of the working Singaporean has improved. There are more graduates and there are many Singaporeans who are tertiary-educated, and their expectations are very high. We send the best of our students to Cambridge, Oxford, Stanford, etc, to study. They come back, their expectations are high and, therefore, some of them will feel hurt. Hence, it is timely that we have a better set of criteria to employ our foreign workers. What I am saying is that we must not make Singaporeans feel less valued, and I agree with these stricter criteria now.

A targeted approach to those who have lost their jobs is correct. I think Mr Chiam got it wrong. I do not know what he was saying. But let me say that no amount of rhetoric, no amount of great speeches can make a man happy, especially a breadwinner, when he has got no job. Therefore, our approach must be targeted. We must go straight to his problem, and his problem is that he needs finances to pay his PUB bills, his children's education, his transport bills. That is why we have to target it. So we provide the $200 to them. It is one of the various ways that the community is helping all these people.

In the Bukit Timah CDC, all the Members of Parliament in that CDC are given a package, a certain sum of money, and they disburse this fund accordingly so that there is not too much red tape. If there is too much red tape, the poor fellow will be running all over the place to collect that $200. But that is how we have done it at the constituency level, I am sure not only in my constituency, not only in Bukit Timah, but also in all the other constituencies. So when I heard the hon. new Nominated MP calling the CCC "this new animal", I was a little bit lost. This CCC has been around for years, and the CCC has been the best body to dish out these funds to the people. They know the ground. Well, maybe she is new. Let us forgive her.

But having said that, I think the call for retraining is important, because we must seize this opportunity now. We must really go and entice our workers to go for retraining. The new jobs are going to be different. They are no longer the same. And this special "People for Jobs Traineeship Programme" is very good. We must encourage that and I support it very strongly.

The package, as presented, is more than reasonable, and it will take quite a while for it to sink in. But I am happy that we are able to respond to this current economic downturn with another package so soon after the first package.

We are all in this together. Everyone will have to chip in - the unions, the Government and business. We will accept the pay cuts, we will overcome, because we have the resolve. We have the means, we have the political will and we are a united people.

Finally, Mr Speaker, Sir, Mr Chiam called these off-Budget measures a political ploy. Why should we apologise? If it is a political ploy, so what? I think there is no need to apologise that this package is a political ploy. There is an election coming, but that should not be the reason for us not doing this, which is necessary and right. Moreover, we are using the surpluses saved throughout these five years in office to help Singaporeans ride through this crisis. 6.38 pm

BG Lee Hsien Loong: Mr Speaker, Sir, I thank all the Members who have spoken on this Ministerial Statement and have supported it. As it has been a long day, I shall endeavour to be brief.

I will begin with what Mr Inderjit Singh said, questioning the predictive ability of MTI. I freely admit that MTI's predictive abilities are limited. As the Minister said day before yesterday, we have been high by too much about as often as we have been low by too much. But that is the nature of our economy. It is open, it is very dependent on external conditions. Nobody can be sure which way the world economy will go. Therefore, we cannot tell which way the Singapore economy will go. We can guess, but we cannot be certain.

At the beginning of this year, there was a serious question what would happen to the US economy. It had slowed down. Was it going to be a V, was it going to be a U? Would the recovery come back because it is a cyclical problem, or was there a deeper structural issue? And there was a range of views amongst the best analysts -Morgan Stanley, J P Morgan, Goldman Sachs - all the people who have a vested interest in predicting what is going to happen. They put out their various opinions, arguing persuasively, some that it would recover quickly, others that it would be a deeper longer haul. And we were quite concerned about the matter, to the extent that GIC had a special study done internally, comparing all these different views and analysing them, particularly a view from Stephen Roach of Morgan Stanley who was the most pessimistic of them all, with good reason, and trying to come to some conclusion which of these views was correct. And after reviewing all of them, we came to the conclusion that there was not going to be a quick pick-up, a V, but neither was it going to be an indefinite recession, an L, but it would be a U. A paper was deliberated, discussed, accepted and adopted as the basis on which GIC operated and, indeed, on which the Government also made its assumptions and plans for the economy.

So the best opinions can be wrong. If there are other opinions outside, we will try and pick them up, but this is not something which we can tell for certain, even without 11th September.

Looking forward, it looks gloomy now. We cannot say for sure that it will not pick up within 12 months or 18 months. Things will turn. Nobody can predict when. But we are at this pass. It is a grave situation. We have implemented an $11 billion package to deal with this.

The first bundle of measures we have had are the tax measures. Some hon. Members have asked for additional enhancements. For example, Dr Vasoo asked for waiver of income tax on retrenchment benefits. I am happy to say we agree to that straightaway because, in fact, retrenchment benefits are not subject to income tax.

Dr Vasoo also asked for rebates on maid levy and childcare. We have not done this. The reason is that even now with the maid levy at a constant level - it has not been increased - the number of maids has been going up. In the middle of a recession, the demand is still there and we have just left the levy as it is. We have decided that rather than help people with levy, childcare or maids specifically, it is better for us to reduce income taxes, give you a tax rebate, New Singapore Shares. The money is yours, the assets are yours, the shares are yours, it is up to you to decide what you want to do with them. If you want to save them, that is fine. If you want to invest them, that is fine. If you want to use them to hire a maid and pay the levy, that is fine also. It is your choice. You have the freedom. Let us not decide for you that it is good that you have a maid, or it is good that your child goes to childcare instead of staying at home with your parents and parents-in-law or grandparents-in-law. So we have not gone for maid levy, childcare, specific items. We have gone for broad approaches which leave people the maximum flexibility to decide what they need, what is their most urgent requirement.

Mr Chay Wai Chuen asked for landlords to be compelled to pass on their property tax savings to their tenants. This is an old issue which we have looked at many times because, on previous Budgets, we have also had property tax rebates and we have also wanted it to go through to the tenants. And while we can do it for JTC, HDB and Government tenants, we have not been able to do it for the private sector. We have decided it is not wise to do it for the private sector because the tenancy agreement is a private contract between the landlord and the tenant. They settle the terms, they settle the price. If the terms are not right, either the landlord will kick the tenant out, or the tenant will quit and go somewhere else. And the next tenancy agreement, which is signed, will take into account the newer, lower property tax and the newer, more relaxed property market. So we have not compelled it. Given a soft property market, there will be pressure on the landlord to pass it on anyway because if he did not pass some of it on, the tenants will just go elsewhere.

Finally, the biggest question on tax which many MPs raised - Mr Chay Wai Chuen, Mr Low Thia Khiang, Mr Chandra Mohan and Mr Lew Syn Pau - is why not reduce GST. It is a lot of money. With a stroke of the pen, you can waive and distribute largesse all around. It is precisely the wrong thing to do. We want to achieve a certain objective with a certain budget. The Government still needs money. I cannot just forgive all taxes this year. The tax has to come from somewhere. What is the least bad tax? There is no such thing as a good tax because all taxes are bad. Nobody volunteers to pay tax but, of all the taxes we have, I think the least bad tax is the GST. It is broad-based, it does not weigh heavily on the poor or the rich; it does not weigh heavily on any particular good; it does not weigh heavily on any particular group of companies. It is uniformly spread over the whole economy and its revenues can be used for other worthy purposes.

If we want to achieve a specific objective, I would say, raise money from the GST which is already there and we will use that to achieve our objective, reduce business cost, property tax, incentivise businesses to profit, corporate tax rebate, incentivise individuals and help them have some money in their pockets, personal tax rebates, asset share with Singaporeans, lower income groups, New Singapore Shares - I use the money, I distribute that. It is $11 billion. What should this $11 billion consist of? I think we are better off having it consists of these specific items, each with a particular purpose, rather than reducing the GST which just distributes money all round without solving any problem.

Next, I go on to assistance to local enterprises. There are three points. One, Government should ask banks not to recall loans, not to panic, reduce interest rates, mortgages. Mr Leong Horn Kee said to keep the umbrella open and others also would like, maybe, bigger umbrellas. The very brief answer is that interest rates are already coming down and you can see the banks reducing their prime rates. The more basic answer is that if the Government advises banks not to foreclose on their loans, to forebear, to lend more generously in a downturn, the Government takes moral responsibility, and if something goes wrong with the bank, then the Government has to answer for it. The bank will come to the Government to say, "I did this. Now my loans have turned bad, you have to bail me out." And that is a very serious moral hazard.

Mr Chandra Mohan said that banks have a national duty because they have a precious licence. Firstly, we have introduced competition into the banking sector so these licences are not that scarce. There are many banks which are competing for the business. Secondly, the first national duty of the bank is not to run into trouble and the way not to run into trouble, is to make prudent decisions, long-term decisions, but careful ones, hard-headed decisions, assessing which company is viable and should have its loan extended or rescheduled; which company is not viable, and they better cut losses. And the shrewd banker is the one who knows how to cut his losses with a bad customer, but knows how to extend a line and keep his good customers through an upturn and a downturn. Some of our Singapore bankers are very shrewd bankers. Those of you who are in the business will know which are the shrewdest ones and it shows in their bottom lines. I am not a commercial banker and it is not my business to go and tell them whom to lend money to.

As for the SME bank and SME lending terms, in general, I have a lot of sympathy for the idea that SMEs ought to have access to funds and we should have schemes which will help them where they have specific problems, because they do not have a track record, where they cannot borrow because they do not have ability to prepare the documentation and their justification, but they have good business ideas and they should proceed. But I think setting up a SME bank is not a very viable proposition because in this day and age, to be a bank, you have to be a big bank. Unless you are a very large bank, you are not able to muster that ability and capability to assess customers, to have the economies of scale to lend, even to SMEs.

Some of the biggest SME lenders in Singapore are big banks, including foreign banks, and amongst the local banks which are not small, there are a few who have a reputation for having a SME clientele. I do not think it is the size of the bank which is the problem. It is the orientation of the bank, whether it is focused on lending this sector, and has people who understand how this sector works, and can tell who is a promising entrepreneur and who is just telling a good story; or whether it is not or is unable to have a feel because the staff do not speak Teochew, or maybe they just do not know how the business culture works. I do not think the SME bank is a solution. What we have done with the Local Enterprise Finance Scheme plus the micro loans, plus the loan insurance, I think, will help significantly. The last time we had a problem in 1998, we had expanded these loans. That already made a considerable difference. This time, we are loosening the terms further. Let us see how it works out. If we need to, we can do some more later on.

Lastly, on local enterprises. Dr Jennifer Lee asked about the PWD Corporation moratorium taking away projects from the private sector. I think she does not have to worry because out of $3.5 billion worth of accelerated infrastructure projects, only about $100 million worth of contracts will go to PWD Corporation under the moratorium. But we have to abide by the moratorium because that is a legal obligation. If you break that, then you have to compensate PWD Corporation and apart from the expense of it, it is right that once we have made a commitment, we should stick by that commitment and not lightly change it. There are enough jobs to go around. PWD Corporation is now a private company - $3.5 billion minus $100 million is $3.4 billion - I think there is enough gravy. Anyway, PWD Corporation is not a construction firm. It is only a consultancy firm. Even if PWD Corporation does the consultancy, the actual construction will be done by many other players in the industry.

Next, land-related measures. Mr Inderjit Singh asked about permanent cost reduction for the future, for example, on industrial land because the rebate is temporary and this is a longer term problem. He has a point because, in fact, it is a longer term problem, because our companies in Singapore are competing against companies which are operating in Malaysia, China, Vietnam, and their land prices are going to be lower than ours for a long time to come, and not just for these next one or two years. So, what do we do? We could adjust our industrial land prices down and keep it there for sometime. That is possible. But in the long-term, it is not a complete answer because, even if you leave your industrial land prices at two-thirds of where they are today, there will be land in other parts of Asia which will be cheaper. We cannot match them on price, dollar-for-dollar. What we have to do is to match them overall, in terms of land, capabilities, manpower, skills, infrastructure and offer a value proposition which makes sense for people to come to Singapore and invest in Singapore. Even then, it is uphill because the Chinese are building up their capabilities considerably. You have heard BG George Yeo talk about this and many of you have visited and seen it too. We have to reassess our overall strategies and decide what we can do in manufacturing, and if manufacturing possibilities are going to be more constrained now, what we can do in services, which is the many different types of service industries. There is no quick answer. I do not have a solution today. It is something which the Government is studying and will take several months to consider.

Mr Inderjit Singh and Mr Chiam See Tong also asked whether removing anti-speculative measures will lead to sky-rocketing property prices. I think in the present circumstances, that is not likely. The market is down. If you get what the stock market people call "a dead cat bounce", which means it hits the ground, it bounces up and falls dead again, that will already be a slight improvement from where you are. At some stage, the mood will change and the market will take off again. At that point, we will deal with that situation. We have been through the cycle many times. I was the one in 1996 who announced the pricking of the bubble and in 1998, we had to reverse that and here we are reversing the last of it. It will not be the last adjustment but you cannot not do anything throughout the cycle. There are adjustments we can make, even though they are not fully effective.

Mr Simon Tay asked whether we need the 80% rule and whether we can leave it to the market. The answer is that we would like to leave things to the market as much as possible but most countries have a restriction on the degree to which you can lend against property for mortgage loans. There is a reason for this because, if you lend 100%, the risk to the bank goes up. And if there is a downturn, first, the buyer has less equity put in, he has not put his own cash in, the chances of his saying, "Let's default. I will lose nothing. It is the bank's money anyway." will be greater. It is no loss, I buy a property, I borrow 100%; if the value goes up, I collect the upside, if the value goes down, the bank carries the can. We want him to have 20% standing there.

Secondly, if, in fact, the value goes down and the bank does carry the can with the 20% buffer, the bank has some comfort that it will be able to recover the loan. From MAS' point of view, from the banking system's point of view, that is very important. So I think there is a reason for the 80% limit, which is valid in an up-cycle as well as in a down-cycle, and we should not change it just to deal with this temporary problem. There is more to the issue than what I have explained. It is quite a complicated matter. The developers have discussed this several times with MAS and MAS will be putting out a somewhat fuller reply and you can study that, and we can discuss it again.

Next, acceleration of infrastructure projects. Mr Leong Horn Kee asked for pump priming to include soft projects for local companies. The answer is that we already contract out soft contracts to the private sector. For example, the civil service needs training and development programmes and these are open to competition by all service providers and the Civil Service College has to compete for the training dollar. They do not automatically get their contract, they have to compete. They are on a self-funding basis and they have to be better than the other suppliers in order to get the contract. Furthermore, the accelerated infrastructure projects already include soft IT projects, like software development for schools and for hospitals; like the Ministry of Health's cancer registry and the central immunisation registry. These will be open for bidding by local companies. We have included some soft projects there.

Mr Chiam wanted pump priming to also include schools. I sympathise with that but, in fact, in terms of schools, we are already building as many as we need and as many as we can build. The Ministry of Education has a regular planning pipeline. The Fifth Secondary School Building Programme, with $332 million to build seven or eight new schools by 2005, has started, but no school has been completed yet. So that is going full steam ahead. Then, there is the Fifth JC Building Programme, which is $139 million, starting in 2002, to build three JCs by 2006. These had already started before this package, but what is in this package is an acceleration of the construction of the regional ITE campus. We agree with him that education is an area where it makes sense to bring forward infrastructure construction, and we are pushing on.

Next, queries on employment assistance. Mr Hawazi asked how many older retrenched professionals and executives will benefit from the People for Jobs Traineeship Programme. MOM's estimate is that the $200 million will support 20,000 places and, of these, about one-third will go to retrenched professionals and executives. All of them are meant to be for older workers, if you interpret "older" to mean 40 and above. Of these older workers, we hope one-third will be retrenched professionals and executives, but MOM cannot be sure because we are ramping up the programme from quite a small pilot project. There is a lot of interest. We will push hard to encourage employers to take it. And I hope the unions will also push from their side to encourage their union members to take it up.

Ms Braema asked whether training programmes were effective in helping retrenched workers. Mr Chiam See Tong, more pungently, asked whether retrenched programmes were doing any good. According to an MOM and NTUC survey last year, three out of four retrenched workers who took up full-time SRP training were able to secure re-employment within 3-6 months after their training. Mendaki did a survey of retrenched workers whom they had sponsored for full-time SRP training, and 70% were re-employed within three months. In this downturn, it will take longer. Jobs are harder to come by. But at least the results are promising and I think we should press on with them.

Next, we come to foreign talents. Mr Simon Tay says that the employment pass criterion of $2,500, which is about the starting salary for graduates, may be too low. I think what we are looking for is a cut off which is not too low, but really we are not looking to price the foreign graduates out of the market. We want foreign graduates of a certain quality, and the $2,500 is really an indication of the kind of graduate we are bringing in and also the kind of job which the foreigner is doing. We found out that there was one employer who had several employment pass holders at $2,000 washing dishes and plates. I do not think he was really paying $2,000. The employer said that he was paying $2,000 and I do not know what else the foreign worker might have been doing. But if an employer is really paying $2,500, then I do not think the foreign worker is a bottle or dish washer. He will be doing a proper job as a proper professional. And the requirement is not just the salary but that he has an acceptable degree. So what we are looking for is the quality of the person who comes in, and even if the price is somewhat lower, he makes a contribution and he adds to the mix of people available in Singapore to be employed. And if you exclude them, you will be worse.

Mr Low Thia Khiang says: "Are these really talents? Why don't we exclude them?" I read that this was one of the planks of his "new poor" manifesto. So he must be trying to warm up, thinking that the general elections are coming. Let me answer quite directly like this. If you kick out the foreigner, it does not follow that the local will get the job for more pay. The company may go. This year, EDB is hoping to bring in $9 billion of foreign direct investment commitments, almost as much as we are spending in this package. It will create 15,000 manufacturing jobs and 7,000 service jobs. One-third of those manufacturing jobs are foreign, somewhat less than that in service, but let us say one-third of these jobs are foreign. So 22,000 jobs, about one-third foreign, means 7,000 foreign workers. Do you think that if we said "thou shall not employ foreign workers", EDB will collect $9 billion of foreign direct investments? Will they come? Or will they say, "Thank you very much. You don't allow me to recruit foreign workers in Singapore. I am off. I'll go to China. I can get any number of workers I want. I can go to Mexico. I can try Vietnam. They are opening up." Will they come to Singapore? Because we are going to have 7,000-odd foreign workers come in with these investments, therefore we are going to create about 15,000 more new jobs for Singaporeans, through EDB's efforts. So the foreigners have actually created jobs for Singaporeans.

If you take 7,000 foreigners who are already in Singapore and we say, "you go home." And tell the employers, "You now replace them with Singaporeans - engineers, architects, technicians." Will they? Or will they not be off somewhere else, just as the new companies will be off somewhere else? So it is quite plausible, it is very convincing and very persuasive to make this argument to say all this is against Singaporean interests, and it sounds even better in Teochew. But if you sit down coolly and analyse it, what we are protecting are Singaporeans. What we must manage is how to use the foreign workers, the foreign professionals and the foreign talent to maximum advantage for Singapore, and that is what we are trying to do when we raise the cut off for the employment pass to $2,500, and when we tighten up the requirements for skilled work permit holders who pay lower levy.

Next, help for the lower income and unemployment. Mr Ang Mong Seng and Dr Wang Kai Yuen asked for extension of Utilities Save to private property dwellers and S&C rebates and Utilities Save to executive flats, because it stops at 5-room. I think we should look at the package in totality. We have balanced the package. For the lower income groups, we have Utilities Save. We have got the New Singapore Shares weighted heavily towards the lower income groups, which means that as you go up to bigger flats, which usually means higher incomes and higher wealth, the share from this distribution will have to be less. But at the same time, we have also granted income tax rebates, and the higher your income, the more you are paid, the more tax you have paid, the higher the tax rebate you are going to enjoy. So it is a bundle. If you look at just one side and say, "Can I have Utilities Save?", then the 3-roomer will say, "How about giving me the tax rebate too? I didn't pay any tax, but never mind, just give me the rebate." So it has to be a bundle, and we have tried to balance the package. In this case, even though the Executive flats, the 5-roomers and private property owners do not get very much under the Utilities Save, the Energy Market Authority intends to lower the wholesale prices for electricity in January. Electricity prices will come down, and that will flow through to all the households. And generally speaking, the bigger households consume more electricity. So if we take it as a bundle, I think we have been fair to everybody.

Mr Chiam See Tong asked why charge so much for utilities that there is a need to give rebates. The answer is that our utilities charges have really gone up and down with energy prices. Energy prices have gone up, they are followed up to recover the cost of the energy. Energy prices have come down, they have gone down to pass on the benefits to the consumers. The other components of energy cost have not changed in Singapore - the wage cost, financing cost, infrastructure capital cost. In fact, they have gradually come down. And as we have corporatised PUB, which became the Singapore Power, and now it has become different generating companies, we have been able to squeeze productivity improvements out of Singapore Power, which have been significant, because of the very considerable efforts of the management and the very close cooperation they have enjoyed with the unions in Singapore Power. And what you are seeing in rebates now really are the benefits of the union's and the management's efforts being passed on to Singaporeans including those who live in Potong Pasir. So rather than asking why they were so high before, I think Mr Chiam should be grateful that through the close working relationship of management and unions, we have been able to derive something good which we are now sharing with Singaporeans in a moment of need. Of course, if he does not want it, that can also be arranged.

Lastly, Dr Vasoo asked for more generous EDRS, so did Mr Low Thia Khiang. Generally, there is a request for more. Again, more has to be in the context of the whole package. We have many schemes to look after the people. If you are unemployed, we help you to find a new job, we help you to be retrained for a new job. If you do get a new job, we subvent half your salary for six months, up to $2,000. We try very hard to get you in a place where you are productive and working, and I think that will work for a large proportion of Singaporeans. For a small proportion, despite everything we do, they will have a problem. And if all our other welfare schemes do not work - we have many welfare schemes, including health schemes, rental schemes, education schemes - then, finally, comes the Economic Downturn Relief Scheme, and we make an arrangement to help you tide over a difficult spot. So I think you have to see the whole scheme in perspective, rather than take a $11 billion project, pull out one small component and say this is too small. But you must look at the elephant in the face, you must not just look at the hair on the tail.

I think we have the design about right. We have put $20 million aside. We have Mr Chan Soo Sen in charge. He will dole it out to the CCCs according to their need, including to CCCs in opposition wards if they establish their need. And from our experience, operating in the CCCs, making grants, assessing cases, we think that we will be able to work this scheme and this will make a significant difference on the ground.

Next, New Singapore Shares. Ms Braema talked about reaching out to the elderly in welfare homes. Dr Jennifer Lee talked about Singaporeans without CPF accounts - homemakers. I think she means mostly housewives and I suppose a few husbands. Mr Simon Tay says, "why tie this to CPF Top-ups when this whole arrangement has not been satisfactory?" I think it has not been shown that this whole arrangement is not satisfactory. What we want to do is we want to have some participation on the part of the person receiving the New Singapore Shares. It is not just manna from heaven, you look up and something good falls into your lap. We want you to do something. And what are we asking you to do? Pay $50 into your own CPF account, just as a token that you are still here, you are participating, and you want the shares. If you are working, it is automatically done. If you have already participated in the CPF Top-up, we will treat it as done, because you have already put some money in. If you have not, we will give you till the end of the year, and you top-up $50, and we will give you the New Singapore Shares. It is your $50 and later on you can withdraw it, but we want that participation.

With the CPF Top-up the last time, I think there were about 200,000 accounts which did not top-up. Does that mean it has failed or does that mean we have succeeded in discriminating? If the person did not make the effort to top-up, should I give him a CPF Top-up? Should I give him the shares? If it is an old person in an old folks home or welfare home, or if she is a housewife who is not familiar, then I think we should make the effort. We should go, visit and explain to them, persuade them. If they cannot afford the $50, I think somewhere, somebody can afford the $50, help them, pay it in, collect their due share as a Singapore citizen. Similarly, with housewives. If necessary, we will go door to door. In fact, all the CCCs, all the constituencies, are presently in the process of doing this. Despite this, if you still do not want to put $50 in, then should I give you the shares? I think that they should stay in a pool and next time I make a distribution, those people who do participate and put $50 in, they should get the shares. So I do not think that just because not everybody has topped up, that means it was a waste of time on the other hand. In fact, you can make a contrary argument that everybody did it anyway, so there was no point doing it. I think that is also not a valid argument, but there is a reason why we want the $50 participation.

Next, measures relating to wage cost. Several Members talked about using CPF - Mr Leong Horn Kee, Mr Inderjit Singh, Mr Iswaran. Of course, they all qualify that the CPF is to be used only in extremis, but I notice that their various extremes are all different. So just putting the ideas together, there are already three or four different circumstances in which you would withdraw the CPF. I would say, not rule out, but in extremis. Not extremis under their definitions and not extreme yet, but in a difficult situation it is something which we can consider. I would be quite reluctant because it has taken us a long time to build up the CPF, to reach 40%, to have employers accept it, to have workers used to it, to have a nestegg for your retirement, and when you retire, to be quite sure you have the Special Account which will be there and that gives you $40,000 in cash or thereabouts, $40,000 in the house, and at least see you through absolute bare requirements. If you take it out now, it is very fast to take down, it is very slow to build back up.

In 1985/86, we cut the CPF 10 percentage points. It took us into the early 1990s to restore it - seven to eight years. This time we cut in 1999, we intended to restore it quickly, faster than last time, we reached six percentage points, four more to go, now our timetable has been derailed. It will take us a long time to build this back up again. So I would not lightly touch this. On the other hand, I would not say an absolute impossible. Never say never.

Finally, other issues have been raised by Members. Mr Leong Horn Kee asked for confirmation that the $11 billion is already accounted for and will not come from the reserves. As I have explained in my main statement, the accumulated surpluses since this Government took office can finance the whole package. But after the General Election, these accumulated reserves will be locked away and the new Government will be starting from scratch and they will not have accumulated surpluses. If by then the economy is strong and the Government revenues are healthy, they might have enough to fund the package. If not, then they will have to ask the President's permission to draw down protected reserves to fund the package. I think we cross that bridge when it comes.

Dr Wang Kai Yuen, Dr Vasoo and Mr Simon Tay talked about the need for longer term strategies to deal with the challenges - unemployment, competitiveness, services, and so on. They are quite right. This is something which we are working on and I have explained this. It is not a simple matter. Because Dr Wang Kai Yuen said, "Well, we need to articulate some vision, MNCs to Singapore companies, GLCs to small and medium enterprises." Sounds good. And, in fact, not wrong overall as a direction, but to go beyond that slogan, to make it a strategy, to make it work, what are these local companies and SMEs going to do? They are going to do handicraft? How are they going to make a living? What is this enterprise going to venture into? These are not easy questions to answer. If you took a laissez-faire approach, you would say, just open up, let a hundred flowers bloom, and some of them will become beautiful. But in the real world, sometimes when you do that, you get a lot of weeds. Sometimes when you do that, the garden does not grow, and you have to add fertiliser and help it to grow, and then see which one succeeds and then push those. We are investing in biotechnology, molecular biology. We are talking about promoting services. These are general ideas. Biotechnology, more needs to be worked out; services, we have done specific items like banking, telecommunications; others, we are studying. But they do not lend themselves to glib answers because services are such a diverse field, so many different types of activities that there is no single strategy which would work for all of them and there are different complications which we have to account for each of the different services we might promote. So these are things which we are working on. But their point that today we have only dealt with the short-term package and the long-term strategies, which we still have to worry about, that point is well taken.

I end with Dr Tan Cheng Bock who said, "No need to fear." And I think that is right. We have resources. I think we have a plan to deal with this. We have the cohesion and the resilience with this. We know it is a serious situation. We have been through such problems before, and we can manage. There is no cure for flu, Mr Chiam says. Indeed, it will take time for this downturn to work through and meanwhile, what you can do is to stay warm, look after yourselves and try not to make things worse. If it is flu, you drink chicken soup. But today this package is a lot more than chicken soup.

So we have to let these work through. You cannot restore the economy to health tomorrow. Beyond that, it depends on what we do. It depends on whether we can get strategies which will work and implement them. And it depends on your having a team which will work out strategies and make them work for you and with you. Mr Chiam says apropos the New Singapore Shares (NSS), this is vote buying - receiver will be beholden to the giver. I would say, do not just be beholden to the giver but ask what is it which has enabled the Singapore Government to generate the surpluses, to have the savings tucked away, to be able in this situation to render this help to Singaporeans, which is not insubstantial, not $200, but if you work it out by the time the whole package comes in and you have the NSS, it is $2,000-$3,000 per household, and more than that at the lower end. Which government does that? Why is this Government able to do that? And how can we make sure that the Singapore Government continues to be able to do that? It is our job to make sure of that, and I hope Mr Chiam and Mr Low Thia Khiang will help us. [Applause.]

Mr Low Thia Khiang: Can I seek clarifications, Sir?

Mr Speaker: Yes.

Mr Low Thia Khiang: Sir, I wish to clarify, first of all, that I did not say that we should stop allowing foreign talent to come in altogether. What I am saying is that we have to define what do we mean by "talent" and how does the policy itself not threaten the jobs of Singaporeans, especially at this point in time. Otherwise, it is going to alienate a lot of people. From the reply of the DPM, he said that EDB is going to have $9 billion FDI and we will bring in probably two-thirds of the total employment created by these companies and one-third will be foreign talents. If we do not allow these companies in with foreign employees, they may decide to go somewhere else, eg, China. And it seems to me that allowing foreign workers to be employed by companies, which are coming here to invest, seems to be the only factor that we are able to attract investments. So what is the factor which actually attracts investors to invest here? And how important is the policy of foreign talent? Can the DPM explain to us?

The other point is that the Government has decided to tighten the issuance of employment pass and also raise the ceiling from $2,000 to $2,500. But there is a problem. Even without raising it, there is this existing problem. While you set a target to say that to qualify for employment pass, a person must be paid, let us say, $2,000 or even $1,500, how do you make sure that an employer will not have a private agreement with a worker? Instead of paying $1,500, the employer pays his worker $1,000 or $800 and makes him wash dishes. This was what the DPM said. How do you prevent that from happening? Because I think that has been happening.

The other point is: how do you also make sure that employment pass holders come in for the specific jobs of employment and they do not go into some other areas or part-time jobs or take up jobs in other sectors as well and compete with other Singaporeans? These are real concerns, especially at this point in time.

Finally, Sir, I have in my speech said that perhaps the Government should actually also look at cost of living, how to cut the cost of living of Singaporeans during this downturn. Besides the help, what about the cost of living?

I hope DPM will touch on these matters.

BG Lee Hsien Loong: Mr Speaker, Sir, can I establish that Mr Low Thia Khiang supports the policy of bringing in foreign talent to Singapore, whatever these other qualms he may have about specific implementation problems? But he supports the idea that we need foreign talent and we should bring them in.

Mr Low Thia Khiang: Mr Speaker, Sir, I have no quarrel with the need to bring in foreign talent. I have made this quite clear in my speech. I said we understand it. The question is: how do you go about it and does the policy not in a way threaten and alienate Singaporeans, and how do you justify the need? That is another point.

BG Lee Hsien Loong: I have made my explanation and I asked him whether he believes me that if you do not allow in foreign workers in a reasonable proportion, EDB will not be able to bring investments in. Does that mean that we are dependent on foreigners? To some extent, yes. But if you look at the City of London, which is the greatest financial centre in the world, there are very few Englishmen working there. There are Japanese, Koreans, French, Americans, Australians, a few Englishmen, Scotsmen. So if you said you wanted only Singaporeans to be employed, can you become a financial centre? You go to New York. You walk along the streets - all shapes and sizes of human kind, colours, dresses and languages. That is why they are a vibrant great centre, the Big Apple. If you go to Silicon Valley, there are East Europeans, Israelis, Indians, Koreans, PRC Chinese, Singaporeans, Japanese. That is why the Silicon Valley is the powerhouse for IT and electronics for the whole world.

So do we want to become like that or not? We have practical problems managing. I put it at $2,500, he may make a side deal with his employer. I put it at $10,000, he may still make a side deal with his employer. He goes off duty in the evening. Instead of going home and watching television, he decides to go and wash cars. Can I stop it completely? No. Can I police it and catch it and do something about it when we find it? Yes. How can we be sure that the person who comes in is not a bottle washer? We have to assess the quality of his degree, the sort of company it is, whether it is a reputable company, what sort of jobs the company claims it is doing, and after that we will visit the company once in a while just to make sure whether he is next to the bottles being washed or whether he is sitting down really designing something in front of a screen. There are no cast iron solutions to this. This is something which every country has to deal with, even countries which totally shut out foreign workers, like Japan. And they have Iranians, they have all sorts of strange people who are in the underground economy and without which the Japanese economy could not work properly.

So these are problems we have. I am glad that Mr Low Thia Khiang has made it quite clear. He is not against bringing in foreign workers. We share his objective that this should not cause problems for Singaporeans and should be for the overall good of Singaporeans. But we cannot promise that every Singaporean who feels he has been out-competed by a foreigner will get redress. That is not possible. Because there are many reasons why a particular person may be preferred or not preferred, may find a job or not find a job, and cost is only one of them.

As for what we are doing about the cost of living, I do not understand what Mr Low Thia Khiang means. I suggest he read the Executive Summary again which I have distributed. We have distributed New Singapore Shares. We are giving service and conservancy rebates. We are giving Utilities Save rebates. We have got electricity charges about to be trimmed. We have frozen university fees. We are suspending repayment of the loans. Any Singaporean who is in difficulty can get help and we have promised to do that. Then we have also cut hospital charges. So these are things we are doing to address the problem of the cost of living in Singapore, and it is not a problem of things becoming more expensive. Because if you look at the figure, for the whole of this year, our inflation is less than one-and-a-half percent. In fact, prices have been down every month since May, ie, the CPI. But it is a problem of people not having quite as much to spend because bonuses are down, salaries are cut, and you have less money to spend.

Now, what do I do? I cannot give you the same money as you had last year when it was a 10% growth year. But if, as a result of this tightening, you do not have enough for your bus fares, through the EDRS, through the other schemes, we will make sure that you will not go without what you absolutely need. The frills, we cannot ensure. But what you absolutely need, you will not go without.

Mr Simon Tay: May I just ask the Deputy Prime Minister about the double tax deductions for charities, an idea mentioned by the Prime Minister during his National Day Rally speech?

BG Lee Hsien Loong: It is not in this package. But it is not something we have ruled out.

Mr Speaker: Mr Wong, would you like to withdraw the motion?

Mr Wong Kan Seng: Sir, I beg leave to withdraw the motion.

Motion, by leave, withdrawn.