1ST APRIL 2002 TO 31ST MARCH 2003 (Paper Cmd. 3 of 2002)

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

[Mr Speaker in the Chair]

The Chairman: Main and Development Estimates of Expenditure of Singapore for the financial year 1st April, 2002 to 31st March, 2003, contained in Paper Cmd. 3 of 2002.

For convenience, I shall take the totals for each head of expenditure in the Main and Development Estimates as they appear in the last columns of the schedules of the estimated expenditure under the Main and Development Estimates Outlays for FY 2002/2003 on pages 24 and 25 respectively of the Command Paper.

518 amendments to the estimates of expenditure have been submitted this year. In spite of the sitting time of the Committee of Supply for each day's sitting being extended to 7.00 pm and the inclusion of Saturday, 18th May 2002, as an additional sitting day, the total times requested by hon. Members for discussion of the amendments still exceed the total times available on the allotted days.

As such times requested have had to be considerably reduced when I fix the "guillotine" times to the heads of expenditure under Standing Order 89(7)(a). I would like to remind hon. Members that the times for discussion of the heads of expenditure include the replies from the front bench. I would therefore urge Members to be brief and succinct when raising their points so that we can meet the "guillotine" times. The front bench too can assist in this by not giving overly long statements and replies.

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

Head U -

The Chairman: Head U - 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 U of the Main Estimates be reduced by $100.

Sir, now, more than ever, the issue of racial harmony is something we have to spend a lot of time addressing. The events after September 11 triggered greater awareness of the type of problems racial and religious differences can cause. In Singapore, we saw signs of problems starting with the reactions to the September 11 issues and then followed by the tudung issue. Looking back a few years ago, we also saw glimpses of racial issues when hiring practices of certain type of employers were openly discussed here. While most Singaporeans behaved rationally through all the periods I mentioned, at the ground level there were quite a few who felt otherwise and raised suspicions about the other races. The levels of these suspicions are still not widespread and are not a cause of major concern yet. It nonetheless highlights how delicate the situation can be and therefore we cannot take things for granted.

As a nation, we have made progress in many areas, including inter-racial ties. When I was growing up in the 1960s and 1970s, most of us were not so conscious of our races and we grew up thinking of each other as more or less the same. The changes which happened in the 1980s as a result of certain policies and practices started causing the realisation of our differences and thus resulting in some weaknesses in the race relations' foundations which we are still building. Some of these policies and practices causing the problems are: first, creating the ethnic based self-help groups where each feels that only their own kind will help them; second, high profile campaigns like the Speak Mandarin Campaigns which are all right on their own, but which were not very well explained in the early years leading to suspicions of the intent of such a campaign; third, school practices of segregating children by the language streams that they came from in the past. While this is less of a problem now, it was a problem before; fourth, the creation of SAP schools which again is all right for the intended purpose, but other races never fully understood the need for them; fifth, putting emphasis on mother tongue and using it as a means of grading and measuring children's abilities to move forward in education causing our children to focus a lot on their mother tongue and also emphasis on them interacting with each other so that they could practise the language.

While policies are important, it is equally important that our people interact with each other in schools and in their daily lives to build up bonds. Today, we and especially our children do not have enough opportunities to interact with each other. Even when they go to our secular schools, they tend to largely congregate along racial lines. The long term trend can be detrimental and unless our race relations have sufficient depth and can withstand any stresses, we will have serious problems should any racial problems arise. We should not be complacent because the level of race issues and stresses we have seen is small and our laws could contain any potential problem. My opinion is that should we see any high levels of stresses, the seemingly good racial ties here may not necessarily remain good.

We therefore need to do more to ensure that our people are really close to each other and go from beyond tolerance and understanding to fully accepting each other and adapting to each other's way of life. Each of us has to make personal changes. We cannot live in a cocoon and think that a particular race's problem is not our own personal problem because we are all living in the same neighbourhood and any problems in the neighbourhood will inevitably affect all of us. I would like to suggest three initiatives that will help us deepen racial ties.

First of all, organising self-help groups along ethnic lines. I believe it is about time that we broke this into two components. The first component basically consists of administrative fund raising and coordination issues. This could make up of people from all ethnic races. The second component should be the component that actually reaches out to the various ethnic groups. Because that has been very effective, the ethnic group approach of reaching out to people has been the right thing to do. By organising the way we are organising right now ---

The Chairman: Mr Inderjit Singh, I think you need to be short. Please get to the point.

Mr Inderjit Singh: Okay. The smaller ethnic groups actually have problems raising funds. When we organise ourselves along the suggestion I am making, it will help them to lessen the problem. The second problem is that our SAP school children and Madrasah children do not have the opportunities to interact with children of other races. So I would like to suggest that schools implement a twinning concept where SAP schools and Madrasahs are twinned with secular schools so that, during academic time, the children can spend time in the various schools. But when they participate in CCA and ECA activities, the children from the SAP or Madrasah schools should do it jointly with the students from the twinned secular schools and, in this way, they will have an opportunity to interact almost on a daily basis. If they grow up doing this, they will get to understand each other even better.

Finally, I fully support the implementation of the IRCC. I see it as an equaliser of races. It does not matter how big the size of the ethnic group is. Everyone should be equally represented in this group. And I hope that the Minister will consider funding this group sufficiently so that they can do a lot more than just being coordinating agencies.

The Chairman: You have taken five minutes, Mr Inderjit Singh.

Ms Irene Ng Phek Hoong (Tampines): Sir, I would like to take this opportunity to support Mr Inderjit's call and call for more multi-racial approach to solving this country's challenges. One of the major challenges that we have is to reach out and provide help to children from poor families so that they will not be caught in the poverty trap. This calls for a national effort. Right now, this role is carried out mostly by ethnic-based self-help groups. Each of these groups has done very good work. But some, such as the CDCs and CDAC, have more resources than others. This is in terms of funding and volunteer base. This means that those with less resources, such as SINDA and the Eurasian Association, may be handicapped in their mission. Moreover, not all have the same access to management expertise.

Over the years, we also see a growing number of Singaporeans of the different races volunteering to serve in these groups and they come from all races - the Chinese serving at SINDA and MENDAKI, the Malay serving at CDAC, and so on and so forth. This is a healthy sign and it shows that Singaporeans do want a multi-racial approach. It would make sense for one multi-racial body as the managing agent overseeing such services and tapping from a wide pool of volunteers and funds, rather than the different ethnic-based groups tapping from their own narrow base. If I have a Malay resident coming to me seeking for help, I would not have to refer him to MENDAKI, but to this multi-racial body. This way, poor students from the different races will then also be able to attend the same classes together and they will not be segregated. It will also send the right signals so crucial in these times. That you do not have to depend on your own kind to help you when you need the help. This is the time for us to foster this confidence and not wait until a race riot occurs for us to find out that we cannot depend on the other.

Let us, at this time, push forward this multi-racial agenda.

Mr Sin Boon Ann (Tampines): Sir, the September 11 incident has given us an occasion to examine our multi-racial policy. After 35 years of independence, we have to ask ourselves whether we want our society to continue in its plural form where the State continues to accept and work with the various ethnic groups or do we want to allow society to evolve naturally with the effluxion of time so that, with it, we have a common cultural identity emerging that is characterised to a large extent by cross cultural influences.

Sir, this point may well be illustrated by looking at the American society. We all know that the United States is characterised largely by a society that is made up of migrant people, it is cosmopolitan in nature. But, however, if you look at the third and fourth generations, it would be very difficult for them to continue with their cultural practices and native language. Many American-born Chinese, for example, grow up in the US without speaking the Chinese language properly. And yet, in America, you find that there is an emerging distinct identity of Americans who see themselves as a new American that is divorced almost entirely from their ethnic origins. This is the kind of new American that has created a separate and distinct identity that the world can identify with.

Now, we may well ask whether the United States' model has any relevance for us here. I would say yes, when you look at it from the perspective of community bonding. Sir, by community bonding, one would suppose a sense of feeling as one, united by a common cultural experience and founded in a common language. The Singapore model, for want of a better word, arguably works towards the reinforcement of different cultural identities. In our official media, for example, we pay formal recognition to the four major languages that we identify as official. In many public functions that are organised by State agencies and community based organisations, the organisers are required to pay the obligatory lip service by ensuring that the dances of the four major ethnic groups are represented. I am quite sure that this phenomenon takes place across the island. While pursuing this separate and distinct cultural identity to a fault, the question that we have to ask is whether such policies will help to promote and reinforce community bonding here. My suspicion is that it does not. 12.45 pm

Far from witnessing more cross-cultural exchanges, my own observation and experience is that ethnic groups are becoming more insular and inward-looking in their daily lives. Is it any wonder that when RCs organise educational visits, it is mainly the Chinese who attend these tours, perhaps because temple visits are a part of the itinerary? Is it any wonder also that Malays also prefer the comfort of interacting within the extended family and the confines of the mosques? And is it any wonder that most CCs often find it difficult to have more members for the IAECs because there are not enough of such volunteers around?

Sir, the retreat to their comfort zones is no doubt spurred on by the greater familiarity of the respective languages. Unless such tendencies are checked, it would be difficult indeed to see how greater community bonding across races can be achieved.

Sir, society and cultural values and practices have a way of evolving naturally that is not necessarily defined by the state. I believe that any body of people would, over time, produce a set of shared values and practices that forms the basis of the group's identity that need not be determined extraneously. In our case, we could perhaps use proper Singapore English as a basis for the new Singaporean identity that transcends all individual cultural barriers.

Sir, if we accept this suggestion as the way forward, we have to fundamentally redefine the way in which our Government takes the initiative in preserving our cultural heritage. For instance, the Speak Mandarin Campaign should be left entirely to the community groups to promote. Secondly, the various community self-help organisations, as my two colleagues had advocated eloquently earlier, should be reorganised into one large self-help organisation that is independent of race, language or religion. The Government, on the other hand, could well just allow and focus on the natural development of the proper Singapore English. Over time, it is hoped that a common language will be the social glue that binds the people together and, over time, it is hoped that our people should not feel that they have lost their cultural heritage simply because they do not speak the language. What matters most, as I have said earlier, is that they must feel that they are still who they are ethnically and yet, at the same time, be bonded by a stronger common identity which they feel in common with those of the other ethnic groups.

The Deputy Prime Minister and Minister for Finance (Mr Lee Hsien Loong): The MPs have raised points on an important subject. Our philosophy has always been to promote social integration and a common national identity among Singaporeans while ensuring that each community can retain its own cultural identity and heritage. So, we facilitated ways for Singaporeans to live, learn and socialise in an integrated environment. We have key policies in education, public housing and People's Association programmes as examples which help to maintain the common space where Singaporeans can interact with other races.

But, at the same time, we cannot force the pace beyond what people are comfortable with, otherwise it will be counter-productive, because each community wants to retain its own identity and to have its own space where members can interact with one another, as Mr Sin Boon Ann says, their comfort zone. And we must also recognise that the tendency for different groups to segregate will always be present because of different customs and religious requirements. And heightened religious consciousness, strict observance of rules of diet, dress, conduct, particularly among Muslims, have accentuated this tendency to separateness.

In the present situation, we need to make greater efforts to strengthen inter-racial ties, especially among the leaders of the different communities, so that we can deal with any problems which may arise. And we are actively doing this through IRCCs and via activities in the community centres to reach out and bring together Singaporeans of different races.

Self-help groups are not the root cause of ethnic consciousness or of the distance between the different communities. They were set up for a specific purpose, ie, to help the under-achievers in each community to overcome their problems and uplift themselves, especially educationally, in a way which a multi-racial group will find difficult to do. In this respect, the self-help groups have done well and will continue to play a role.

At the same time, the self-help groups do encourage their respective communities to interact more with other communities. Often, they have volunteers from other communities and they collaborate to organise activities at festivals such as Deepavali, Christmas, Hari Raya Puasa or Chinese New Year. These events help bring Singaporeans together from different ethnic groups and better understand and appreciate each other's values and customs.

But looking ahead, the self-help groups can do more to work closely in partnership with one another. As the Prime Minister suggested last week, they should partner other groups and agencies to run tuition and other programmes, rather than duplicate services. For example, the self-help groups are planning to organise and run a joint service centre in Toa Payoh with an integrated management and staff, and cooperating with the CDC and, if this works, we will be able to do it in other towns as well. This partnership approach will prevent us from swinging unwittingly to the undesirable extreme which the MPs have highlighted, where more and more social services and programmes are provided along ethnic lines. It will also enable us to pool resources, minimise duplication and address Mr Inderjit Singh's concern that the small self-help groups may be disadvantaged because of their limited access to funds and resources.

Mr Inderjit Singh also spoke about the need for regular interaction of our school children with other races and suggested twinning of schools where students can do their co-curricular activities or extra-curricular activities together. It is an idea which is worth exploring. I understand that MUIS, the Madrasahs and our schools are actively looking on programmes to enable their students to interact with other races and appreciate the national perspective. The Ministry of Education and MCDS will study to see how we can promote this further.

Mr Inderjit Singh also suggested that the IRCCs be given a budget to tap on for their activities to promote racial interaction. The IRCC is really an extension of the Citizens Consultative Committee. It is not meant to be another formalised and structured or activity-centric grassroots committee. For a start, to better understand ground conditions and build rapport with the relevant local establishments, many IRCCs have visited religious institutions like temples, mosques, churches and so on.

For the next phase, they could initiate informal dialogue and chit-chat sessions with local groups to identify pressing areas and practical opportunities for building inter-ethnic understanding. Both the CDCs and the CCCs can finance these efforts and the People's Association will seek the concurrence of the Grassroots Grants Committee to increase the allocation of grassroots grants to the CCCs for activities promoting racial harmony.

Dr Wang Kai Yuen (Bukit Timah): Sir, the continual injection of talents into the civil service is crucial to maintaining a vibrant and dynamic service. However, the size of the civil service is capped to ensure that it is not bloated. My colleague, Mr Inderjit Singh, even called for it to be scaled down by 30%. Moreover, when a young officer is recruited at an age fresh out of university, he has a 30-year working life in the service. With all the scholars we have recruited in the service all these years, it is possible that we have reached a point where the annual intake of scholars far outnumbers those retiring officers based on natural attrition. Furthermore, the terms of service are also so attractive that few would leave the comfort zone to strike out on their own.

Sir, in many cases, those who are good in academic studies make better researchers and academicians than Division 1 officers. To my mind, Sir, it would be better for the Government to recruit those with proven abilities from the market and to depend less on the scholars. This is especially so for those in the elite Administrative Service. As regards the scholars that we have already signed on, it might be better to assign them to the private sector, such as those in the GLCs, to test them out first. I understand that there is a programme to attract mid-career officers, but the outcome to date has been quite poor. May I know what are the reasons? Would the Government review the mid-career options and renew the emphasis on this? I believe, with the current recession, it would be a good time to tap the market for mid-career officers.

The Chairman: Mr Zainul Abidin is not here. Mr Steve Chia.

Mr Steve Chia Kiah Hong (Non-Constituency Member): Sir, currently the scholarship bond is strict and non-convertible. Our best and brightest students are sent over to the best universities overseas to learn and mix with the world's best and brightest. Then, they are asked to come back and serve in the public service or the Armed Forces with a fast-track career. This may have served the public administration, the Armed Forces and the statutory boards well in the past and the present. But the time has come for us to expand the system a little bit further.

It is no longer enough to send out brightest students to these prestigious schools for four years and then get them to come back to serve. Will the Government consider allowing some of these scholars, those who are interested and able, to secure careers on their own with the top 500 Fortune companies, to allow them to postpone serving their bonds for a period of time? Let them gain work experience in these top MNCs, learn their system, adopt their work cultures and benefit by dealing with the companies' best and brightest. After five to 10 years, when these scholars are prepared to come back to Singapore, they may be invited back to serve Singapore in any of the sectors or industries, public or private. If they do not intend to come to Singapore at all, then we can exercise the contractual bond and demand high compensation for breaking the contract. This will be our best form of international talent that we can develop and groom and call our own. We can be proud if a few of our top scholars are groomed to climb the corporate ladders in these top MNCs and then come back to serve their duty in Singapore, in one of the SMEs or the GLCs.

I believe the details and technicalities can be worked out if this idea is considered. I hope the Ministry can take some of these initiatives to prepare Singapore for long-term competitiveness. I hope the Prime Minister can look further and explore the feasibility of this proposal.

Ms Irene Ng Phek Hoong: Sir, the Government is an enlightened and exemplary employer in all aspects, except when it comes to the medical benefits scheme for civil servants. Under this scheme, family members of a female civil servant are not entitled to medical benefits in the same way as those of their male counterparts.

Sir, tell me how I can explain to the women, such as our SAF women regulars and our many top women civil servants, that this is a patriarchal society, so just accept it? Women have made great strides over the years. We have a woman commanding officer in the artillery, and a woman captain of a ship in the Navy. If you are on a ship going to battle, it does not matter if you are a man or a woman. You are on the same battleship going to war, defending your country. The risk is the same. The rewards, too, must be equal.

Yesterday, Deputy Prime Minister Lee Hsien Loong told us about the new Medisave scheme for civil servants. They have $350 worth of outpatient allowance that the men can use for their children but the women cannot. At the end of the year, the unused balance goes into their Medisave, which can be used to pay for their dependants' medical treatment. So, Deputy Prime Minister Lee said it is essentially the same. But it is not the same. The distinction found in the old scheme is still found in the new scheme. The men can use the $350 worth of outpatient allowance for their dependants and the women cannot. In dollar terms, the distinction may be very small but, in symbolic terms, nothing has changed. It is still unequal benefits for equal work. It is still unfair.

Sir, on Monday, when Deputy Prime Minister Lee extended the procreation tax rebate to divorcees, he said, "It is not a lot of money, but it is a matter of fairness." Exactly. This is also about fairness. Sir, this policy, whether it is the old scheme or new, affects a big number of women. There are 33,000 women in the civil service. That is 54% of the public-sector workforce. But its impact goes far beyond the civil service. We know that the private sector looks to the public sector to set the tone for society and sees the Government as a role model for staff and welfare benefits.

I would urge the Government to remove this anachronism. It does not do justice to the progress of Singapore women over the years, nor to our fine Singapore system which has allowed many women to compete with men on an equal basis. If the Government still refuses to change this policy, I am sure many women would appreciate it if the Deputy Prime Minister can provide a very detailed explanation as to why this policy needs to stay in the national interest.

Sir, it is in our national interest to involve women more at all levels.

The Chairman: Ms Ng, I will give you another 30 seconds.

Ms Irene Ng Phek Hoong: We cannot tackle all the problems that we face, if we do not include women in all levels. Sir, I would urge the Deputy Prime Minister to consider setting up a national women's council, in the same way as we have set up a National Council for Youths to engage young Singaporeans. 1.00 pm

Mrs Yu-Foo Yee Shoon (Jurong): Sir, we have a dedicated civil service. It is lean and efficient. According to PERC, it is ranked the least bureaucratic of the 12 Asian economies covered.

The civil service also implements initiatives to improve itself, for example, Quality Service, ExCEL and Organisational Review. There are recent initiatives with IT such as ZIP and "Innovator Activist" awards. Yet there are still many complaints of bureaucratic indecisiveness and tardiness. There are also complaints of rudeness and poor communication skills by frontline officers in explaining policies clearly. People wonder if these civil servants think they are doing taxpayers a favour or they are serving the taxpayers.

Why does the administrative system need to change? We are facing stiff global competition, more uncertainty, greater information flow and shorter reaction time. There is also the higher expectation of better educated and more demanding citizens. In a globalised environment, decision-making has also become more complex. There are many angles to a problem. Thus, a one-size-fits-all administrative structure and processes are no longer applicable.

Other than sovereignty and security areas, as many areas as possible could operate like the private sector, where possible, corporatise and privatise the services. However, the social role, the integrity and transparency of the civil service should not be eroded.

What kind of change? The civil service needs to change in the following areas:

Firstly, be even more customer-focused and strive to meet the needs of the customer. If we place customers first, we become very responsive to change in market needs, that is, customers' preferences.

Let me quote you an example of a cinema industry. We used to have large cinemas that could seat a large number of people. Today, we have cineplexes that give customers greater choice based on taste and preferences. Small cinema halls are both efficient and effective. If the cinema industry had not made this move, it would have collapsed.

Take the housing industry. A private developer would build apartments of different sizes to give customers choices based on their principle of supply and demand. HDB can consider doing the same.

The childcare industry is a good example. It was privatised and is able to provide more choices from community childcare to upmarket Montessori childcare and yet fulfill the Government's social role through subsidy.

Secondly, compete for effectiveness. We should use competition as a tool for improvement. When there is competition, there is greater choice. To draw customers, you need to be efficient and effective in your services and products and competitive in price. We should allow services, traditionally run by the public sector to be run by the private sector, for example, the transport sector. However, we must bear in mind the affordability of the people.

Thirdly, build an enterprising culture in a public organisation. The management of public organisations must be enterprising and pro-active in seeking out ways to provide services. The CEO can make quick, autonomous decisions without bureaucratic layers. For example, it is timely for our sports council to be privatised and provide comprehensive lifestyle services at the sports complexes. It can extend the scope of its involvement in the sports business in Singapore. This will impose competition on small and medium sized enterprises. However, we can invite them to work together.

Fourthly, focus on developing leadership and human capital. Today, the human factor has become the key ingredient for success.

The Chairman: Mrs Yu-Foo, could you please complete your speech?

Mrs Yu-Foo Yee Shoon: Yes, Sir. Our civil service must continue to develop its people, not only those in leadership position but at all levels.

It is easy to prescribe the number of hours of training for employees. This may improve their skills, but it is not enough to create an entrepreneurial team. How do we change mindsets to make civil servants more enterprising and more accountable for their actions? We must be more open to private sector leaders taking up public sector positions at all levels, as my colleague, Dr Wang Wai Kuen also suggested, not just at the top policy-making level. I understand that we tried that before. We should continue to actively pursue this area. In many instances, reforms have been initiated --

The Chairman: Order. Your time is up, Mrs Yu-Foo.

Mrs Yu-Foo Yee Shoon: Can I make one point, Sir?

The Chairman: One word!

Mrs Yu-Foo Yee Shoon: I would like to urge all the Ministries and organisations who provide services to link up through IT, to give a one-stop service to the people.

The Chairman: It is more than one word. Mr Chew.

Mr Chew Heng Ching (East Coast): Sir, I shall be short and sharp. Over the years, MPs and Ministers have emphasised the importance of private sector inputs and injecting fresh ideas and talents into the civil service. Some 5-6 years ago, the Government tried to recruit some private sector executives to the elite Administrative Service. However, as we understand, the response was poor and only a handful of executives participated in the scheme and, for the few mid-career private sector talents who had joined the civil service, including the high profile, Dr Finian Tan, most have lasted only about two to three years.

Sir, a recent article in the Straits Times on 24th April said that the Public Service Division is indeed embarking on a new campaign to woo more private sector talents to join the civil service. This is good news. Just last month, the PSD also announced that its Administrative Officers go on attachment with global consulting firms like McKinsey, while the EDB said that they would try to draw in mid-career executives from the private sector to join its service.

Sir, in the past few years, we have also seen the Government tapping on more and more private sector expertise, by getting them to serve on its various committees to provide inputs and ideas for policy formulations. The Economic Review Committee and its various sub-committees is one such example. Sir, they are all steps in the right direction.

Sir, I believe Singaporeans are generally supportive of this idea and in a rapidly changing economy, more new ideas and a willingness to try new ideas are required in our bureaucracy. Changing the mindsets of civil servants is equally important and should be an on-going process. Civil servants must accept that they are not perfect and be prepared to admit that certain policies are wrong and correct them early. Inducting private sector talents who have experienced the harsh realities of the business world outside is an essential part of the process of changing mindset and self-renewal. Selecting and appointing Ministers from the private sector have contributed to this idea generation, changing mindsets and implementation process.

The recent batch of our junior Ministers, majority of whom are from the private sector, is indeed a good move. More must be done. Sir, we should be looking forward to the day when some from among our Permanent Secretaries will be drawn from the private sector.

I would, therefore, like to ask the Deputy Prime Minister whether the Government, drawing on the experience of recent years, now has a comprehensive plan and, if so, what is this plan to further achieve this goal of inducting private sector talents into the civil service, as part of the overall objective and mission of renewing and strengthening the civil service and changing the mindsets of civil servants.

Mrs Lim Hwee Hua (Marine Parade): Sir, in the context of the Singapore economy, the role of the public sector is extremely important. Our growth record is in part a testimony of the high standards that our civil service operates on.

However, as competition heats up on a global scale, it is imperative that the public sector move in tandem with the changing private sector and continually reinvent itself. In this regard, I would like to raise two areas of importance for the DPM's response - the need to be more customer-focused and to improve our inter-agency coordination.

Firstly, more customer-focused. How does the civil service internalise the need to be more customer-centric? How does it strive to serve the public, especially the business sector, to have empathy and to be spontaneous about it? Sir, there is a real need to have substance beyond the mere form of efficiency. For example, it is extremely frustrating to suffer the curse of a very politely recorded voicemail when all you want is some clarification. Many SMEs, when applying for assistance under the myriad Government schemes, have recounted experiences of dealing with young bureaucratic officers, whose fault lies not in the lack of experience, but in their unwillingness to listen and understand.

Also, how have working and servicing hours changed? With most Singaporeans working longer hours, it would be helpful if public service can be provided without people having to take leave just to attend to personal matters with Government agencies.

Secondly, inter-agency coordination. Sir, I have had first-hand experience on this in my private Estate Upgrading Programme (EUP) and I know now that I am not very popular with several agencies. The greatest challenge in the EUP was, surprisingly, not in consulting the residents, nor in the design, but in the areas of overlap between two or worse still, more Government agencies. There was frequently great reluctance to take the perspective of the end-user or of another agency as it may mean having to go the extra mile. Preserving the status quo appears to rank supreme, certainly well above customer satisfaction.

On another occasion, it took my town council almost two months to realise that no agency wanted to acknowledge ownership of a tract of land for which residents had requested some lighting. As we were getting nowhere, the lamp post went up anyway.

Sir, I would like to ask the DPM how the civil service can be more customer-centric and how they can be incentivised to ensure smooth inter-agency coordination.

Mr Lee Hsien Loong: Sir, Dr Wang Kai Yuen talked about scholars not necessarily making good Administrative Officers and recommending that we recruit from the market and depend less on scholars. I would agree with him that academically able people are not automatically good managers or good Administrative Officers. When we select scholars, we try our best to find people who are not only academically good, but have something extra, so that they have a good chance of turning out to be successful Administrative Officers. Some do, some do not. By and large, I think the quality of our civil service is not bad.

We do want to have more come in mid-career or from the private sector, as Dr Wang Kai Yuen and Mr Chew Heng Ching suggested. We have been quite successful generally bringing in people from different walks of life. But in the Administrative Service itself, we have not been so successful. We only had a small number come in. Perhaps, it is because our standards are high. Perhaps, it is also because in the Administrative Service, it is necessary to build up, over a long period of time, knowledge of the Government, how it works, as well as the culture and the way the organisation operates. That is not easily achieved for somebody who comes in mid-way, however able and however broad his past experience to do. It is not a problem unique to the Singapore civil service. Many other civil services have tried the same - the Australian, New Zealanders and British - and they tell us that they have the same difficulties. But we will continue trying.

As for seconding Administrative Officers to companies, we do that. Yesterday, we were criticised for doing that with the GLCs. We do not just do it with the GLCs. What we try to do is to attach them to companies like Shell or even management consultant companies, like McKinsey or other institutions where they can learn something and come back with a different perspective, and know what it is like to be on the receiving end of a directive or instruction, and also to know what it is like to have a bottom-line responsibility and be more profit-focused, when they come back into the civil service. In the private sector, time is money. To you, it is two weeks to write a paper; to them, it is two weeks' worth of salaries and overheads. We do want to encourage this further and we are trying hard.

Mr Steve Chia suggested allowing scholars to serve their scholarship bonds for five or ten years with the Fortune 500 companies. I think this is difficult to do because the fundamental motive of Government scholarships is to ensure that the public sector gets its fair share of talent to contribute to the development of Singapore and, particularly, for places where you cannot readily bring people in from the private sector, off the streets. You think about the SAF, which needs SAF scholars, you think about the Singapore Police Force, they need SPF scholars. When we think about the Administrative Service, as I explained just now, it does not find it so easy to recruit people at mid-career and to fit in. If we work on the basis of giving people scholarships, then they go off and do their own things for 10 years and they start their careers with the civil service, maybe in their mid-30s, I think we have lost a good part of his working life, where not only should he be contributing to us, but he should also be learning about the Government of Singapore and imbibing values and knowledge which would stand him in good stead over the long term. We cannot do this to everybody, but we hope to do it with a significant proportion of our people. There is no model anywhere in the world where the civil service depends mainly on people who join in mid-career. There will be some who join in mid-career but not everybody. 1.15 pm

Miss Irene Ng raised again the question of medical benefits. As I have explained yesterday, and as she recapped for Members, indeed the practical difference for the new medical benefits scheme - Medisave-cum-Subsidised Outpatient Scheme, MSO - is really very small. But the difference is one of principle. So I think she will appreciate it if I am direct and honest and explain what the principle was, which led us to where we are today. And the principle is, as she has put it, one of basic social philosophy. Because this is an Asian society, and in an Asian society the husband is responsible for taking care of the family, including the medical expenses. Our medical benefits schemes should reflect this and should not undermine the rationale for holding the husband responsible.

All MPs, even new ones, I am sure, have met constituents at MPS sessions, where the husband has deserted the family and abandoned his responsibilities and the wife comes with young children to seek help. We seldom, not never, meet a husband seeking financial assistance because his wife had left him. It is a reality of our society. So we have no immediate plans to change the medical benefits schemes but, like all other Government policies, this one is not set in stone either. As our society evolves, we will review it periodically and as Members know, in our new scheme we have already substantially narrowed the difference, although not to the satisfaction of all Members of Parliament.

I know that many MPs, especially the female MPs, feel that times have already changed and that the Government should set the lead in establishing new social norms. The fact that some male MPs supported them is some evidence that perhaps times are beginning to change. But the Government's view is that on a matter as basic as the family structure, we should follow, rather than lead social changes. So it is something which we will review, but for now I think we will leave the status quo be.

As for a National Women's Council which Miss Irene Ng also suggested, I am not sure whether this is necessary because we already have a Singapore Council of Women's Organisation, which is an umbrella body for women's groups. The Youth Council is not really meant as an advocate for youths but really has a developmental role, which is not quite a similar situation as the women are in, because the women are really adult members of society. In Singapore, our principle and practice of meritocracy is the best assurance for the increasingly full and equal participation of women in all walks of life, especially in our education system, providing Singapore women the opportunity to participate fully in all aspects of life in Singapore. So I am not sure that we need a council.

Mrs Yu-Foo asked about customer-focused inter-agency coordination, improving the public service, points also raised by Mrs Lim Hwee Hua. I agree with both of them. Already, we have been trying our best to privatise Government services so as to subject them to competition and cause them to operate more efficiently and competently. We have to study each of these privatisations specifically to make sure that it will work because, as Mrs Yu-Foo pointed out, the key role of the public sector is the provision of public goods and services and also you have to worry about social objectives and these cannot be left entirely to the private sector to provide, especially public education and public safety and security. But in many other areas it is possible to depend much more on the private sector and we are doing so through various programmes.

As for the Government itself, we are also trying to improve the quality of the service we provide, which despite our best efforts, sometimes it is frustrating to the public, even to well-informed, knowledgeable members of the public, and even to members of the public who have ready access to MPs. When you have to deal with departments, sometimes you find they are not as flexible as you would like it to be. There are times when there is reason why the department cannot be flexible, but there are other times when a more practical approach, a more sympathetic and understanding approach would have helped to solve the problems expeditiously. So we have things like PS21 (Public Service for the 21st Century) and MFE (Managing For Excellence). They are buzzwords, but they are also specific programmes and activities which remind civil servants that it is their job both to be civil and also to be servants of the public.

We also have mechanism to coordinate inter-agency which, as Mrs Lim Hwee Hua pointed out, is one of the most difficult things to do. When two agencies are responsible for one problem, their complexities doubled, when three agencies, each have some jurisdiction, it becomes quadrupled. So we need some way to tie up and make sure nothing falls between the cracks and, furthermore, where there is overlap, we do not have gridlock. We have mechanisms like this, where we have got lead agencies which take on coordinating roles, and work with other agencies, so they provide a point of contact to the public, you deal with one and he would manage the complexity. For example, the Building and Construction Authority coordinates the approval of building plans that involve various Government agencies and we should work to improve such inter-agency coordination.

Somebody told me if you want to start a pub in Singapore you need a dozen different permits from a dozen different agencies, which drives you round the bend. I have never started a pub but I take him at his words and I suppose we should start a project to see whether -----

An hon. Member: We have a one-stop centre.

Mr Lee Hsien Loong: We can improve. We already have a programme called ZIP (Zero in Process) which we introduced in October 2000, which aims to reduce the number of instances where the public has to go separately to various agencies for related Government service. So if you have, for example, a feedback on noise pollution, refer to ENV and they would deal with all the parties. If you have problems concerning maintenance of roads, street fixtures, street lightings which need fixing - Mrs Lim Hwee Hua, if you have another problem with street lightings, please refer them to the Land Transport Authority - and if you do not get satisfaction, please come and let us know. We have a list of lead agencies and a ZIP website (www.zip.gov.sg) and if you have feedback for the ZIP secretariat you can give the inputs at the website or call PSD. We are committed to improving service. We are not quite satisfied with what we have achieved and we will try our best to do better.

Mr Steve Chia Kiah Hong: The General Election is a special time, once every five years, where citizens come and give their votes of support or disapproval to the governing party and its elected representatives in Parliament. The true test of democracy is a free and fair general election held at fixed intervals. In the long term interest of nation building, can the Deputy Prime Minister explain, if he truly believes in the democratic principle of elections, why are there so many changes and adjustments to the electoral process aimed mainly at keeping the Opposition at bay and maintaining the power and presence of the ruling party? While we do not expect the ruling party to help the Opposition to win the election, we can only hope that the electoral process could be fairer. In this regard, I hope the Prime Minister can look into the following proposals to make the general elections fairer:

1. Allow at least six months after the release of the Electoral Boundaries Committee Report before dissolving Parliament. It would be equally fair to the incumbents and interested contestants to review the new constituency;

2. Reduce the number and size of each GRC to a maximum of 11 and four candidates per GRC, respectively. Introduce back more single member constituencies so that more citizens will have a chance to exercise their votes;

3. Do not misuse national resources as a tool for political support. Linking upgrading to voter support is abuse of the people's trust; and

4. Finally, I hope the Minister can also look into setting up a media watch committee to look into the matter of unfair media coverage.

By being open and playing fair, the Government will be able to win more of the people's trust and support. There is no need to be kiasu and kiasee and use all attempts to stop the Opposition from gaining a foothold into Parliament. The electorate is now mature enough to differentiate between the better candidates. Can the Deputy Prime Minister learn to trust the people more?

I will now go on to my next cut on the Elections Department. The Elections Department conducts the election process and produces the Electoral Boundaries Committee Report before every election is held. Can the Deputy Prime Minister explain how some of the electoral boundaries are redrawn? Specifically, can he explain how Braddell Heights, which is near the centre of Singapore, in Serangoon, be redrawn into Marine Parade GRC, which is at the East Coast? Can the Deputy Prime Minister also explain on what basis did the Prime Minister convince the President to dissolve Parliament a day after the Electoral Boundaries Committee Report was released? Did he not have special privileged information used to his Party's advantage? Is there a case of an abuse of power? The Prime Minister is also the Secretary-General of the ruling party. As the Secretary-General of the PAP, it is his duty to ensure that his party candidates win in as many constituencies as possible. Thus, is there a conflict of interest or is there not a conflict of interest and duty by placing the jurisdiction of the Elections Department under the control of the Prime Minister's Office? Can the Prime Minister explain what due process did he use to ensure that there is no conflict between his obligation to the nation as Prime Minister and as Secretary-General of his party?

Finally, is it not better and safer for the Elections Department to be under the jurisdiction of the Elected President or some independent commission? Can the Prime Minister kindly explain this matter?

Next, out-of-bounds markers. Many people have spoken out about OB markers in the past. They had argued that OB markers are vague, lacking clarity and creating confusion for active citizens who want to participate in the nation building process. Some of them have also asked that the OB markers be spelt out and be clear so that it can be avoided. I want to ask the Prime Minster if he had a list of OB markers ready for public release. If citizens have to keep wondering what they say is going to step on any of the Minister's toe and thus out-of-bound, then soon the active and concerned citizens will learn not to say anything. They will just shut up and shut out. They will learn to be bochap. It is safer to adopt this bochap attitude. Do not bother to listen to the Government, no need to disagree, no disagreement, no need to speak up, no fear of stepping onto the OB markers, therefore, no fear of offending the Ministers. Life remains peaceful and calm. How good. But the fact that this bochap attitude is developing is worrying and bad for our society. Where there is no exchange of ideas it is bad for the society. Our citizens must be encouraged to speak up without fear. We must allow them to express themselves and learn to take responsibility for what they say.

If there are no OB markers in parliamentary debates then there should be no OB markers at all in our society. Once we go into the political arena we must expect criticism and unfair condemnations. If we can defend ourselves in the parliamentary debates, I think we should have the grace to defend these criticisms in public. I hope the Prime Minister can clarify on the list of out-of-bounds markers, and remove this requirement from our society totally.

Finally, I will move on to touch on youths in politics. The Prime Minister had ever said that entering politics is the highest form of public service. There had also been laments from some Ministers that there are not enough youths who are interested in politics. Politics is the most uncertain of careers - both for the PAP as well as for Opposition politicians. Therefore, it is not surprising that young professional Singaporeans are not interested to go into politics at all.

What is making matters worse is that there is only one company, one party or one cruise liner to go to if these young professionals are interested to make politics as a career, ie, to join the PAP. Joining the PAP is like going on board a luxury cruise liner - very big, strong and stable. No risks and no worries of a capsize. Full of luxury, joy and entertainment, it is no wonder that many Singaporeans - good and bad, qualified or not - are rushing on board to join this PAP cruise liner.

But for those with a different perspective, who do not like the trappings, the style, the direction or the destination of this PAP cruise liner, they have no other ship or liner to board. They can only consider the rickety sampans that we, the Opposition, have to offer. But it is full of risk and danger. A storm may arise and we may have a shipwreck. Or a big fish may jump out from nowhere and swallow us, never to be seen again for the next 30 years.

Whatever it is, the PAP cruise liner has made it risky for young idealistic Singapore professionals to join the small sampans. They have no choice but to stay on shore and forget about their ideals of helping to explore new opportunities and claiming new grounds for the people of Singapore.

Not many young Singaporeans are foolish like myself to challenge this giant Goliath. Before the last General Elections, all my friends and family members thought that it was suicidal or crazy to go into Opposition politics. They do not see a future. They do not see a hope. There is no hope of reaching shore with this sampan.

So, if the Prime Minister is sincere in wanting to encourage more young Singaporeans to enter politics, the Government must first calm the sea and play fair. Allow the sampan to find shore and grow hope. Only when the first batches of adventurers had safely crossed the Atlantic Ocean will it give hope to other great idealists. Therefore, if the Government wants youths to be interested in politics and to serve the country in the highest office, then we must have hope, opportunity and freedom to choose which boat to board. As the Prime Minister's task is to look at the long-term interest of the country, can we expect the Government to play fair and give hope to all?

The Chairman: Mr Chiam, you can take your two cuts together.

Mr Chiam See Tong (Potong Pasir): Sir, thank you for allowing me to take one cut after the other.

My first topic is on the recognition of the Opposition. This is not a new topic. As far as I am concerned, I have spoken on this many times in Parliament. The Government has torn down the office that was built for my use as a Member of Parliament at Potong Pasir, and has never rebuilt it since. On the part of the PAP candidate at the constituency, he is given an airconditioned room where he can conduct his political business in comfort and utter privacy. I have now to meet my residents during the meet-the-people sessions in an open void deck space which is not very suitable, because residents often want to consult me on very personal matters and they do not feel very comfortable, as they do not have any privacy at all. I have spoken on this matter and, in this respect, I said that I am treated no different from a roadside fortune teller when I meet my residents.

Sir, I hope the Prime Minister can direct the HDB to restore my MP's office at the void deck at Potong Pasir as soon as possible. The Government should not discriminate against me as an Opposition Member. All PAP Members of Parliament are each given, I believe, a room to work in the constituencies. Why am I, as an Opposition MP, not provided with the same facilities?

At the constituency level, the Government recognises the beaten PAP candidate at Potong Pasir more than me who has won at the last general election. The PAP candidate was not chosen by the majority of the Potong Pasir residents. Yet, he appears to have more authority than me, the elected MP. I have to apply to him, whom I have defeated at the elections, for funds for community projects and for any other matters that require the support of the CCC. All because the defeated PAP candidate is made the Advisor to the CCC and I, the MP for that constituency, has been left out.

I must say that the Government cannot take defeat. Although the PAP candidate has lost at Potong Pasir, the way that constituency is run is based on the premise that the PAP candidate has won at Potong Pasir in the last election. The beaten PAP candidate is made the Advisor to the CCC, CCMC, RCs and other grassroots organisations, whereas the Opposition MP there is treated as if he does not exist. That is why I am making another call to the Government to recognise the Opposition MP at Potong Pasir as a legitimate representative of the people at Potong Pasir, and not someone else. If the Government really wants to remake Singapore, then it must uphold the democratic system, recognise all elected representatives of the people to Parliament, and not only elected PAP representatives.

Sir, I shall go on to the next cut and I will speak on NCMP honorarium. My speech will be confined to the honorarium or allowance given to NCMP, and not to NMP, which I do not support. I understand from my colleague, Mr Steve Chia, that the allowance given to NCMP is only 15% of the elected MP's allowance. I must say that such a small allowance is derisory.

NCMPs are different from NMPs on the following important points:

(i) NCMPs, unlike NMPs, have taken part in elections, whereas the NMPs have no electoral experience or participation at all.

(ii) As a result of taking part in elections, NCMPs have won a certain number of votes and they do represent those who voted for them when they are in Parliament, whereas NMPs do not represent anyone at all when they are in Parliament, except themselves.

NCMPs are chosen from amongst the Opposition candidates who have won the most votes or the best losers among them. In the case of Mr Steve Chia, I believe he had garnered about 35% of the total votes cast, and I must say that winning 35% of the votes cast is a respectable achievement. I can tell you that it is not so easy for an Opposition candidate to wrest 35% of the votes from a PAP candidate. To a certain extent, one can say that Mr Steve Chia has won his place in Parliament with 35% representation.

In some countries where they have proportional representation, one can get elected into Parliament with only 5% of the total votes cast. Although we do not have that system in Singapore, we do have a system where NCMPs are appointed to Parliament. Mr Steve Chia need not be defensive about his appointment to Parliament. His appointment is certainly with merit. He does represent quite a sizable number of people at Chua Chu Kang.

As regards his remuneration, I think if a poll were to be taken at Chua Chu Kang, I would think that 35% of the voters who voted for him would certainly want their NCMP, Mr Steve Chia, to be adequately paid. They would surely consider the person they voted can make valuable contributions to Parliament and to the people of Singapore, and should be properly rewarded. Mr Steve Chia is no laggard. He is hardworking. He has filed, I believe, 24 cuts in this year's budget debate. I think this is more than many of the older MPs, including myself.

Sir, may I suggest that in order to give proper recognition and respect to NCMPs, their allowance should be raised from 15% to at least 50% of an elected MP's allowance?

The Chairman: Mr Steve Chia, you can take your two cuts together.

Mr Steve Chia Kiah Hong: Thank you, Sir. Thank you, Mr Chiam, for speaking up for me

Sir, the Senior Minister had once said, "If you pay peanuts, you will get monkeys." I agree with the Senior Minister on this matter.

Last month, the House had a passionate debate on NMPs and voted strongly to have them in this House. It had been said that NMPs were very good and had contributed a lot of good debate to this House. I was not here then, but I do not deny that they contributed a lot. I think NMPs had helped to liven up debates in the past, but I went to argue that there was no need for them in this session of this House, because the PAP Government was freeing up its MPs for more debates and disagreements, and this would help solve the cynicism and scepticism in youths. It was not listened to and I was out-voted.

Now that we are going to get NMPs in this House, I would want to speak up for them too. I think we should give them their due recognition. The honorarium of an NMP is at 15% of an elected MP's allowance. This is too little. Like all MPs, they have the duty to speak up and engage in good debates. We should therefore recognise their contribution and pay them an NMP allowance equivalent to 40% or more of the elected MP's allowance, instead of a small honorarium of just 15%.

As for the NCMP's honorarium, Sir, I would like to declare my personal direct interest in this matter. An NCMP is not quite, but is close to a political appointment. We know that when the PAP Government wins all the seats, there will be at least three such NCMP appointments.

Our role, as NCMPs, is as heavy as an elected MP. We are not only expected to be robust and vigorous in speaking up in Parliament and contributing to good debates. We are also contributing to nation building by giving the perspective of the non-PAP voters which number about 10-30%, depending on which election. This is important for the Government that takes pride in caring for all its people. On top of speaking in Parliament, the Non-Constituency Member of Parliament has to cover as many electoral constituencies as possible and get the feeling and understanding of the citizens, especially of those who are not supportive of Government policies. We have to understand their grievances and raise them in Parliament. Like all the elected MPs, constituency work is to build rapport and support with the electorate for the next election. This is the same duty as any of the elected MPs. Therefore, I hope the Prime Minister will agree with my above reasoning and look into reinstating the NCMP allowance to be on par with all the elected MPs, as it was first crafted.

1.45 pm

My next cut is on legislative and secretarial assistance for NMP and NCMP. Sir, I would like to state my direct interest in this matter again. Like all MPs, NMPs and NCMPs are invited into Parliament to represent a different viewpoint from the PAP Government. They are expected to speak up with sound advice, research and argument, to raise issues and discuss policies and contribute to parliamentary debate. Therefore, will the Prime Minister also agree with me that it is necessary for NMPs and NCMPs to be given legislative and secretarial allowance to employ help? Does the House not want to hear more contributions and more in-depth debates from these NMPs and NCMPs?

The Minister for Home Affairs and Leader of the House (Mr Wong Kan Seng): Sir, on behalf of the Prime Minister, I will take these few cuts raised by the two Opposition Members.

On the first question of General Election, Mr Chia asked why are there so many changes to electoral laws that have impeded the Opposition. I am not sure what electoral laws or regulations that have impeded the Opposition, because these same laws, regulations and provisions apply to all the candidates during an election, regardless of whether it is an Opposition, a PAP or an independent candidate. So, I am not able to answer fully his question on the laws that have impeded the Opposition. But he has made several points concerning electoral boundary, the Electoral Boundaries Review Committee Report and GRCs.

I have explained not long ago in this Chamber why the Electoral Boundaries Review Committee Report was published and that not long after that, an election was called. I think those circumstances may not repeat themselves. There were instances in the past where the Boundaries Report was released and there was adequate time for people to look at the changes. But Opposition or PAP MPs should not just depend on the publication of the Electoral Boundaries Review Committee Report to conduct their electoral or political work. I know that Opposition parties and their supporters have gone round from time to time to different constituencies to understand the ground, survey the ground, feel the ground, and see to what extent the people there warm up to them, or in what areas where the PAP constituencies may appear to have some weaknesses and problems, and therefore take advantage of them and contest in those constituencies. So, if Opposition Members do some home work, put their ears to the ground and be more hardworking, instead of waiting till nearer the election, or when the election dates are known, to start working the ground in the constituency, they may stand a better chance. That is one of the ways which they can consider, although it is not my duty to teach them how to win an election. No government party sets itself out to teach the Opposition how to win elections. And like every other country, it is the incumbent governing party that decides on many of the issues. Of course, when it comes to the vote, the people will eventually have to decide which party will give them the stability, the progress, and the quality of life that they are all looking for.

The GRC situation is the same, as I described not long ago in this House. The question was raised by Mr Chiam: Why do we have GRCs? We have tried to give as many opportunities as possible, but the Constitution and the Parliamentary Elections Act state the number of GRCs and the number of single constituencies that can be allowed in a general election. So long as these rules are followed, we are all within the law. Whether it is fair or not, I think it is fair to everyone who wants to contest. It does not mean the bigger GRC or more GRCs will favour the PAP. It also could mean that if the PAP Members do not do their work, they can lose a significant number of seats in Parliament, and that is the risk that we have weighed, and we have decided that we will do our job, make sure that we continue to get the people's support, and we are prepared to take this risk. But if the Opposition can do a better job, I am sure the people will support them and return them in larger numbers than what they have been doing in the last 13-14 years since we have the GRC system.

On the media watch, it is not the Opposition candidates alone that complained about the coverage of the Opposition during the General Election or at other times. PAP candidates and MPs also complained that they did not receive enough coverage. If we look at the number of PAP Members, how many of them appeared regularly in the press? During a parliamentary debate, if they said something interesting or spoke on topics of significance, the media, generally, will simply have a very brief summary of what they said, although they have made a speech lasting many minutes. So, if they want to appear in the media, then make sure they have something that is newsworthy for the newspapers to report for the public, which the public has an interest, to read what they have said.

During the election, I think the media has given a balanced coverage to the Opposition. The Opposition has access to the media just as the PAP has. And if they have something of importance - maybe an announcement or some exciting programme, or a good rally speech - I am sure the media will be interested to report it. For the PAP candidates, I think there are far more PAP candidates than there are Opposition candidates during any General Election. During the period of campaigning, PAP candidates had always complained to me - because I helped in organising the election - that they did not receive enough coverage. I would just say to them, "If you have something interesting, if you have an exciting programme, or it will be a good visit to somewhere that will be of interest to the press, they may cover you. If not, just leave things be." They will have to work their ground to convince the voters, not just the media alone.

As regards Mr Chia's comment on linking political support to infrastructure or upgrading projects, these are our programmes. People will elect the Party that will bring these programmes. When we are returned to power, we keep our promises. That is the way it is done in many parts of the world. In most democratic societies - in America, Britain, and anywhere else he can name - I am sure he will find the same things being done. There is nothing wrong with that. Because if a party that is contesting an election cannot keep its promise and does not have good programmes, then it will not be returned to power. So if the Opposition has good programmes, can convince the people, and be returned to govern, they can carry out what they have promised the electorate.

As regards the Elections Department under the Prime Minister's Office (PMO), and the Boundaries Report, in particular the Electoral Boundaries Review Committee, how they arrived at the decision, they must have some basis for doing so. As for Braddell Heights in Marine Parade, this has been asked before. If Mr Chia reads up the Hansard, he might have found an explanation there. There may be a reason why the Electoral Boundaries Review Committee had decided to draw the boundaries that way, just as they decided why certain constituencies should be single-member constituencies.

Does the Prime Minister influence the electoral process? The Prime Minister is the person who recommends to the President to dissolve Parliament, and that is the executive power as provided for in the Constitution. Every Prime Minister does it. Not just in Singapore, but also in other parts of the world. That situation has worked well, and it will remain.

Will transferring the Elections Department to the President's Office make any difference? The President's Office - do not forget the President himself is also an elected President - is also an elected office too. So whether we leave the Elections Department in the Prime Minister's Office or transfer it to the President's Office, the same question will be raised.

The point on the Elections Department is whether we have a fair Elections Department that conducts its business, in a transparent manner, and that the public can see there is no fraud. Even if we have an Elections Commission, it will not solve Mr Chia's problem. I know, and he has read in the papers too, that many countries have Election Commissions and there are complaints about fraud, vote buying, pressure, rigging, and all kinds of electoral excesses. So having an independent Elections Commission does not guarantee him a fair election. What is most important, and this has been established in our case for many years, is that the people running the Elections Department are civil servants who carry out their work objectively and they did it fairly and according to the law. That has been the practice all these years. We have civil servants with high integrity and they have the systems, and they follow what is provided for in the law.

So, regardless of whether we have an independent Elections Commission, an Elections Department in the Prime Minister's Office or in the President's Office, it still depends on the people running the election. If we have people whom we can trust, with high integrity, fair, balanced, objective, then we have a fair and balanced election.

If we look back at all our elections, nobody has challenged the fact that our elections have been fair. If not, Mr Chiam would not be here; Mr Low would not be here, and the NCMP would not have a chance to even smell 35%. So I think the basis for saying that by having the Elections Department under the Prime Minister's Office leads to unfair practices simply is not valid.

On out-of-bounds markers, is there a list of OB markers? This is not a golf course! The political arena is not a physical structure that we can set markers. Same as for nation building, as well as development of a society. These cannot be marked by markers. There are conventions, practices, norms, values that we have established over the years. These values, norms, etc, change according to the times. As society matures and develops, as people become better educated, better informed, then the society's expectations of what should and can be done will be different. People have acknowledged that we have changed a lot in the last 15-20 years. The society has become more open, much more consultative, more participatory, and the Government has always encouraged people to take part in the affairs of the nation, because these are matters that concern their lives and future. To say that the Government has put obstacles and discouraged people just because there are unseen OB markers simply does not state the facts. The facts are there for him to see. He can read the newspapers. There are many letters in the press. In fact, the editors receive so many letters, and they can choose only a few letters to publish every day. He can watch talk show programmes on television and listen to the radio, and people speak up. Even in Parliament, Opposition Members spoke up. They are none the worse. Even those Opposition Members, who are outside Parliament, they also spoke up. They are none the worse for that, unless they deliberately offend the law. Whether a person is an Opposition, or whoever, if he breaks the law, the law will go after him. There is no question about it. So long as he does things within the confines of the law, nothing is taboo. He can carry on talking, he can carry on criticising, he can have his views. But as he has noted, if he has very strong views about Government policies, and if Government is right that he is wrong headed, the Government will come down very hard. Is it because the Government deliberately does it to stamp out comments? No. He must take responsibility for what he has said, as Mr Chia himself admitted. He takes responsibility for his comments and the Government will respond, and the public, who read and hear both sides, would decide who is right. If the Government does not come back and rebut and comment, and if his views are allowed to prevail, then over time, people would say that the Government has got no arguments.

2.00 pm

The Government is not afraid of genuine debate. A person can talk, he can debate, he can bring out views, he can disagree. But that does not mean that he must tear down the institutions, the foundations, or our value system. That would make people lose respect and credibility of the Government. Once people lose credibility, not because the Government is found wanting, or not doing its job, but because the Government is doing its job and there are people who want to cast doubt on that, the Government has to come back and respond to it. Otherwise, the Government cannot govern.

Sir, in many societies, many things are being said and the leaders just leave things as they are. It is their system. In our system, we must make sure that our people know that this is a good Government. They understand what is a good Government and they have benefited from this good Government. Otherwise, we will not be credible, not just to Singaporeans but to all our foreign investors. And that is important for Singapore.

Those who say that they are afraid to speak up, I think it is only a cop-out for not wanting to take part, either because they are pathetic, they do not want to be involved, or it is just an excuse not to want to take part in anything.

We cannot define OB markers by law. It is not possible. Society changes and evolves, and we have to evolve with it. There are many channels that are open to the people to speak up. This is known to everyone. Are the young people discouraged from this? I do not see that happening. Those young people who do not want to be involved, they are most likely the ones who find themselves too busy with their careers, personal pursuits, or with their relationship. Therefore, they find little time for community or national matters. But we encourage them to take part. There are many avenues for this.

In the Singapore 21 exercise, more than 6,000 people took part, and many of them were young Singaporeans. In the recently set up Remaking Singapore Committee, there are many young people, and I encourage them to come forward to give their views. And we must bear in mind that in this very sensitive regional geopolitical context and the fault lines in our society - issues of race, language, religion and culture - these should be treaded very carefully before we break these fault lines and turn them into a disaster.

Mr Chiam has his usual lament about treating the Opposition and recognising them. The question of his MPS office was dealt with way back 10 years ago, if I remember, in 1991-1992, when HDB decided that, owing to the shortage of void deck space, they would give the space only to the community organisations. As for MPS office, he should look after himself, find some way, rent a place, and he can have his MPS office.

Is the Government treating the PAP MPs differently? No, the Government does not directly get involved in giving the PAP MPs an office. It is the PAP Community Foundation, a charity social service organisation, that set up these void deck offices. They run kindergartens and some of the other social services, like childcare or day care, and only a limited period is let out to the MP to hold meet-the-people sessions. The MP does not use the place all the time. It is only once a week and rent is paid for that.

Why can't Mr Chiam find similar arrangements? He can set up a Foundation. If not, he can always rent space from any owner of the shop, or whoever wants to let him use the space once a week. I heard previously that Mr Jeyaretnam held his MPS at a coffeeshop. That is a private arrangement. The Government does not set out to help the PAP MPs, neither does it set out to help the Opposition MPs.

He asked about the role of the advisor and why the losing PAP candidate is treated better. The PAP candidate is an advisor of grassroots organisations. I have explained on many occasions in this House the role of the advisors. They are the ones who assist the Government, through the People's Association, to carry out Government policies. I think it is quite farfetched to expect the Opposition Members to help carry out Government policies and programmes. That is not doable. I do not think Mr Chiam will agree to that. Otherwise, he would become one of us. Whether it is Mr Eric Low or Mr Seetoh, they are advisors, and they perform community service as advisors in these grassroots organisations. It has nothing to do with the remaking of Singapore. We do not want to remake the Opposition!

On NMP and NCMP honorarium, I find it quite ironical for Mr Chiam now to speak up for Mr Steve Chia and argue for a higher honorarium. First, let me make it clear that the NMP and NCMP do not receive an allowance. They receive an honorarium, which is a small sum of money in recognition of their services and contribution in Parliament. They are not like elected MPs who have a bigger role to play in the constituencies and in Parliament. So let us not equate the NCMP with that of the elected MP, regardless of how many percent of votes he has received.

Many years ago, when we debated the NCMP scheme, Mr Chiam called them the "backdoor MPs". He called them non-constituency because they do not represent anybody and therefore they are second-class MPs. Now, just because Mr Steve Chia is a member of the SDA and Mr Chiam is the leader of the SDA, he sees it in his self-interest to promote his fellow colleague in this House. That is, in fact, completely within his right, but we must draw a distinction.

The NCMP, like the NMP, does not have the same rights, duties and responsibilities as the elected MPs. First, they cannot vote on confidence motions against the Government. Secondly, they cannot vote on money Bills, Supply Bills, Constitutional amendments. Thirdly, the NCMP and NMP do not have constituencies to look after. We must remember that the duties and responsibilities of the NCMP and NMP are very different from the elected MPs. It is this Government that made it possible to have NCMP, because the people wanted to have the PAP in Parliament. In fact, they wanted as many PAP MPs in Parliament as possible and we do not want a situation where the whole House is completely filled with elected PAP MPs and there is no Opposition voice. So the Constitution was amended to provide for Non-Constituency MP, so that the best losers will come in if there is no Opposition MP. The fact that we now have two Opposition MPs means we can now have one NCMP. That is how Mr Chia got in here, and in the words of Mr Chiam, which he said many years ago, "by the grace of the PAP".

Sir, I do not want to belabour this point. But to say that he had 35% of the votes of Chua Chu Kang, and therefore should be entitled to 40% of the allowance is simply without basis.

Mr Chiam See Tong: 50%.

Mr Wong Kan Seng: Still no basis. Because if we follow that argument that Mr Chia had 35% of the votes, then our first-past-the-post system will not work. We will then have a different system altogether. If we have a proportional representation system where if his party has 35% of the votes, then he will have 35% of the seats. But for good reasons, which I have explained many times in this Parliament, we should not have the proportional representation system. We have the first-past-the-post system. Winner takes all. He must get 50% plus one vote, and that is it.

As for Assoc. Prof. Low Seow Chay, or any of our PAP MPs who won against an Opposition, he does not just represent 65% of the electorate, he represents all the residents in the constituency. I cannot see Mr Low saying to his residents, "I don't represent you because you may have voted for the Opposition." He does not know who voted for the Opposition. But once he is elected under this system, he represents all the residents in Chua Chu Kang. He does not speak only for 65% of them.

Mr Chia said, if I heard him correctly, that his job is not confined to one constituency, but all constituencies, and he has to deal with a lot of constituency matters. I think it is a bit too much. I do not think my colleagues here will agree with him. If he wants to do that, please go and do that as a free agent. He, as an NCMP, does not represent anyone at all in the constituency, not even in Chua Chu Kang. He does not know who voted for him. He knows he had 35% of the votes. That is all. But in the system that we have, he does not represent anyone in this Parliament. Let me make this very clear.

So there is no question of revising the honorarium to 40%, as Mr Chia has asked, or 50%, as Mr Chiam has asked. It is 15%, quite appropriate, quite in keeping with the amount of work and contribution that an NMP and NCMP make in this Parliament.

The same applies to the use of the allowance for Legislative and Secretarial Assistants. The NCMP and NMP's job in Parliament is to speak up in debates, etc. There is no constituency duty. There may be some research that needs to be done in looking up the papers, or whatever, for making speeches in Parliament. For that, he can have access to the Parliament Librarian. I am sure our Parliament Librarian will be very happy to help him with any information that he seeks. But that is not the same as the $1,000 that we give to the elected MPs to hire a Legislative Assistant.

The NCMP's honorarium is only $1,600, or thereabouts. To give him $1,000 to hire a Legislative Assistant is totally out of proportion to the honorarium. Definitely, it is completely unjustifiable. I cannot explain that. 2.15 pm

Mr Steve Chia Kiah Hong: Sir, I have a point of clarification. The Elections Commission, as the Minister has said, does not guarantee a sense of fairness but, at least, there is a Commission that we can complain to, and which can look into how the people actually execute the election process. And, if there is something that we disagree, we can actually seek out the Commission and complain to them.

The Minister also talked about other countries ---

The Chairman: What is your point of clarification, Mr Chia? You are making a speech now.

Mr Steve Chia Kiah Hong: OK, Sir.

The Chairman: Mr Inderjit Singh, do you wish to withdraw your amendment?

Mr Inderjit Singh: Sir, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

The Chairman: Head U, Amendment No. 2. Mr Seng Han Thong.

Mr Seng Han Thong (Ang Mo Kio): Sir, I beg to move,

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

Sir, first, let me declare my interest. I am the Adviser to the Singapore Interpreters and Translators Union and, more than 25 years ago, I was a court interpreter for 3 1/2 years.

When our political leaders travel to foreign non-English speaking countries and have discussions with their counterparts, they must have noticed the high standard of their interpreters. The Chinese and Japanese simultaneous interpreters are normally high-ranking officers in the foreign services. Do we have the same kind of interpreters in Singapore? If we take the standards set by the International Association of Conference Interpreters as a reference, the answer is yes. We have world-class interpreters. However, we have only two. They are none other than Mr Lee Seng Giap and Mr Lee Hui Huan, the Lee and Lee.

We have listened to their excellent interpretations at our parliamentary proceedings and the Prime Minister's speech at the National Day Rally over TV. Besides, they have also been called upon to interpret at various international conferences. However, I raise this cut to remind PSD that as far as world-class interpreters are concerned, we have stopped at two for too long a time and we should produce more, if we can afford it.

Over the last three decades, the scheme of interpreters and translators has not been reviewed while other services have been revised on a number of occasions. Market forces have forced many interpreters and translators to hop over to other jobs with better career prospects. Young graduates leave after a short spell in the service, as the present scheme offers not much career prospects and the remuneration is not commensurate with their capabilities and competencies, and the responsibilities they carry. As they put it in Chinese, "meiyou qian tu, ye meiyou qian tu", meaning no career prospect, neither is there any money prospect.

Sir, the gap between the pay of the interpreters in the public and the private sectors is so wide, that the Chief Interpreter's monthly salary is equivalent to only 4 1/2 days' conference interpreting fees in the private sector. Thus, the feeling among them is that they are, "zhong yong bu zhong shang", ie, heavy responsibilities with stingy rewards.

PSD needs to revamp the scheme of the service and, more importantly, something should be done to reward and attract the talent at the top rung, ie, the interpreters and translators in Parliament and Supreme Court. Sir, we are an international convention centre, with one million foreigners working in Singapore. The demand for foreign language interpreters has been on an unprecedented rise. The engagement of casual foreign language interpreters by various authorities has been in an unsatisfactory state. No criteria have been set for their accreditation. I also urge PSD to review this and come out with a certain form of agreed accreditation.

Sir, the interpreter and translator services are not a sunset industry, as perceived. The sun sets and will rise again with globalisation. And, if we are serious about globalisation and want to be a winner in the world market, we are serious about what we are telling the world in their own language, we need to professionalise the services.

Mr Lee Hsien Loong: Mr Chairman, Sir, in response to Mr Seng Han Thong's question, there are two working groups headed by MITA and the Subordinate Courts which are working on how we can improve the structure of the schemes to provide better career development and progression opportunities for translators and interpreters. They are also exploring how we can enhance the learning and training opportunities for officers in order to raise the professional standards of interpretation and translation in the civil service. The PSD has been assisting in this review. We will wait for the working groups' final recommendations which, I am sure, will help the public service better attract, retain and motivate our interpreters and translators.

On the suggestion to have a system of accreditation for interpreters used by Government bodies, I think we may leave it to the courts, who are the major users of interpreters, to study this suggestion.

Perhaps, I may add that I think it would be difficult for us to equal the standards of the interpreters which the Japanese and the Chinese have. For them, it is their only way to connect with the rest of the world. Their ministers often do not speak English, French or foreign languages, and they have to deal with the world constantly. Whenever we have to meet their Minister, he deals through an interpreter. Whenever he makes a speech, the interpreter is there to provide a version, both ways. When we meet them, we recognise that we are dealing with not only a very capable interpreter but somebody who has a comprehensive understanding of the issues and, indeed, might be a very senior official himself. There have been times when I have to talk to a Japanese minister and I make a remark to him and the Minister says, "Hm", and the interpreter gives me three sentences as to what their Minister actually meant. And I am quite sure she was right. I think it would be difficult for us to provide either Ministers like that or interpreters like that, but we will try to improve our standards.

The Chairman: Mr Seng Han Thong, do you wish to withdraw your amendment?

Mr Seng Han Thong: Sir, I withdraw the amendment.

Amendment, by leave, withdrawn.

The sum of $159,328,700 for Head U ordered to stand part of the Main Estimates.

The sum of $60,722,500 for Head U ordered to stand part of the Development Estimates.

Head M -

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

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

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

Sir, the Singapore tax regime has now been firmly set on the path of being a mixture of direct taxes and indirect taxes through the introduction of GST. The Government has announced that it intends to reduce the corporate tax rate in the top-end personal income tax rate to 20% by year 2004. Meanwhile, the GST is increased to 5%.

Sir, since 1985, almost 20 years ago, we have reduced our direct corporate tax from a high of 40% to nearly half at 20% by year 2004. This is a very substantial drop, and it has helped Singapore to maintain its competitiveness. I would like to ask the Deputy Prime Minister and Minister for Finance whether the Government has any further intention to set a lower direct tax to, say, 16%, to be closer to the rate used in Hong Kong. If there is a need to reduce direct tax, the main concern is whether there would be a parallel increase in the GST rate, to account for the loss of income due to a reduction of direct taxes.

Yesterday, we heard from Deputy Prime Minister Lee that he cannot give an assurance that GST will not be raised in the next five years. Sir, this is a concern of many people on this remark of the Deputy Prime Minister. We know that many prudent policies and principles are being reviewed by the Economic Review Committee and the Committee on the Remaking of Singapore. It is well and good that policies be constantly reviewed to bring them up to date and are changed with the times. We want to ensure that they remain relevant.

However, overall, I want to say that we must have been striking the right formula with regard to Singapore's global tax regime. $7-8 billion of foreign investments continue to flow into Singapore yearly. We regularly achieve budget surpluses, as shown in the charts by Mr Tan Soo Khoon yesterday, also in billions of dollars every year. Local-based corporations and people are paying relatively low taxes, compared to many other countries. So, if the formula is right, let us keep it. Do not tinker too much with it.

The people wish to know what is the Government's long-term plan with regard to the tax philosophy of the Government. What the people want is some degree of certainty of how our tax burden would be like in the long term. Hence, I would like to ask the Minister for Finance whether he could enlighten the House on this matter.

Secondly, the present trend seems to be towards making our present personal income tax system more complex, with the various new reliefs and rebates being introduced. Like Mr Inderjit Singh said yesterday, we appear to have become a nation of reliefs and rebates. There are several types of reliefs, such as for NSF, handicapped children, baby bonus and many others. Then, there are also constant rebates being given. Should we not make all these rebates simplified as part of the basic tax structure? I would like to ask the Minister for Finance whether this approach will continue with regard to reliefs and rebates in future, or is there an intention to simplify the overall tax structure?

Sir, for my second cut, I wish to talk on the tax system with regard to the impact of the one-tier tax system for dividends.

Sir, under the proposed one-tier system for dividend payments for shares, there is no allowance for tax credit for individuals. Under the new system, both corporate and individual shareholders are treated equally, as they will be taxed at the prevailing corporate tax rate. Individual shareholders and institutions with tax-exempt status will no longer get tax credits based on the difference between their marginal tax rate and the corporate tax rate. From my understanding of the new regulation, I would like to highlight to the Minister for Finance that this one-tier tax system works to the disadvantage of the following groups of people.

Firstly, individuals, especially the lower income workers and retirees who own shares, will now have to pay the top-end corporate rate on their earnings from share dividends. For these people, their personal marginal tax rate could well be zero or very low. Therefore, the new scheme is disadvantageous to them as they now have to pay the full corporate tax rates for the dividend on the shares they own.

Secondly, institutions that used to enjoy tax-free status, such as charities and community groups, will now have to bear the full corporate tax for the dividends earned from their shareholdings of companies.

Thirdly, real estate investment trusts (REITs) also suffer a disadvantage as the shareholders of REITs will pay the top-end corporate tax rate, whereas one of the salient points of REITs is the possibility that taxes will only be paid at the end of the shareholders, and be taxed at their respective marginal income tax rates.

Sir, I believe this is not the intention of the new system that has a negative impact on the above groups of persons who are essentially low-income earners and charitable organisations. May I suggest to the Minister for Finance to consider allowing dividends to be imputed as normal income of such shareholders. Thereafter, they could be assessed to pay their respective taxes according to their personal marginal income tax rate.

Mr Inderjit Singh: Sir, I would like to suggest a few initiatives related to tax that, I believe, will make Singapore even more attractive to investors and individuals.

Sir, first, on the group consolidation proposal that the Minister made, could I ask the Minister to revise the limit from 75% to 51%? It seems that this is targeted to a limited group of companies, especially property companies.

Secondly, on property taxes, can I suggest that we devise a new concept of a variable property tax system for businesses where the Government charges a low fixed rate of 1-2%, and a variable rate based on percentage of profits that the companies make, subject to a maximum cap.

The third idea is one of a reverse pioneer tax status for companies that internationalise and have positive tax impact by way of incentives they get when investing in foreign countries. We should allow such companies to bring their income back into Singapore without taxing them, and allow the parent companies in Singapore to tax deduct the capital investment they make in their overseas subsidiaries. 2.30 pm

Fourthly, preferential tax treatment should be given to companies which invest in improving productivity of manufacturing companies, so that they continue to have a viable presence here in Singapore. This is similar to certain incentives that we are giving to companies embarking on specific projects like environmental and water conservation projects.

Fifthly, the concept of negative gearing for taxes imposed on individuals on income derived from rentals of properties. They should be able to write off expenses related to the maintenance of their rented properties against their income taxes and thus operate like businesses. In doing so, we can develop a sense of enterprise among our people. We can follow examples that exist in a few countries and Australia is one of them.

Next, stock options for employees should be taxed upon realisation of profits and not when exercised. While the Minister has allowed taxation to be delayed to the time that the moratorium ends, this seems to be just half a step forward. In many cases, at the end of the period, employees do not necessarily sell their shares. The suggestion that I am making will encourage employees to hold on to their shares longer, thus helping companies build employee loyalty.

Finally, Sir, on the GST system. While I support the system, can the Government improve the efficiency of the tax rebates that exporters are claiming. Currently, a lot of this is tied up and this affects the cashflow of companies.

Mr Steve Chia Kiah Hong: Sir, I have already raised my point yesterday at the debate on the Budget Statement but I have yet to hear the Minister's reply on my suggestion.

Mr Leong Horn Kee: Sir, on this cut on corporate tax, I wish to speak on group relief for corporate tax. I am very pleased that the Government has finally agreed to allow group relief for corporate tax. This was a constant request of MPs in the past few years, but it has not been agreed to by the former Finance Minister, Dr Richard Hu. We are pleased that the new Finance Minister, DPM Lee Hsien Loong has agreed to this proposal. I would like to say that this is one of the sacred cows that we are pleased to see being removed.

Sir, the present scheme allows us for group relief for corporate tax for Singapore companies, with 75% ownership of Singapore-based subsidiaries. I would like to ask the Minister that in future, the scheme can be extended to the following two areas.

One, like Mr Inderjit Singh has said, to allow group relief for subsidiaries that are above 51% ownership. The reason is that the standard definition of subsidiary is for companies that are more than 51% owned. If the concern is of excessive tax losses due to the lowering of the definition of the subsidiary to 51%, then, I would like to suggest that the amount of tax relief can be accrued and computed based on the actual percentage ownership.

Second, to allow group relief for foreign-owned subsidiaries of Singapore-owned companies. The main reason is that Singapore companies often have to go overseas to look for investment as Singapore itself is a very small market. As overseas investments are of high-risk and high reward in nature, there is more need for group relief for overseas investments to mitigate the prospects of losses. If it is the concern of Government that it may serve to be too much of a tax leakage, then the Government can consider allowing group relief for foreign subsidiaries only a limited number of period, say, only for the initial five years from the period of formation.

Sir, I hope the Finance Minister would consider these proposals favourably.

Mr Inderjit Singh: Sir, I have asked the question.

Mr Low Thia Khiang (Hougang): Sir, I understand that under the current income tax system, an annuity purchased with cash is subject to a tax of 3% of the capital sum until such time that the amount deemed to be a refund on capital has been exhausted. Then all payments received subsequently are taxable in full, while annuities purchased with CPF funds are tax-exempt.

I wonder why annuities bought in cash should be subject to tax. First of all, is the Government not encouraging Singaporeans to save for old age? I think taxing of such savings meant for old age is contrary to the objective of the Government to provide a saving framework for old age financial security.

Secondly, Sir, since we do not have capital gains tax and the Government has decided not to tax interest earnings in savings in the recent Budget, is there justification to continue to tax on annuities bought in cash? I would like to ask the Minister for Finance to consider exempting tax for annuities bought in cash.

The Chairman: Mr Ong Kian Min is not here. DPM Lee.

Mr Lee Hsien Loong: Sir, may I start with Mr Leong Horn Kee who asked whether we have plans to bring our corporate income tax and personal income tax rates below 20% and if so, whether the GST will have to go up further.

As I explained yesterday, our plan is to bring the corporate and personal income tax rates down to 20% by FY2004 and to push up the GST to 5% from 1st January 2003. We think this is adequate and there is no need to go below 20% in the near future, because with our various tax incentive schemes, companies qualifying for these schemes often have effective tax rates lower than Hong Kong's. But we cannot tell, depending on how the situation develops. It may become necessary for us to go below 20%, and if we have the wherewithal to do so, we can do. If we do not have the wherewithal to do so, and it is a totally different environment, then we will have to re-look at all our calculations again. But on our present plans, this is where we stand. We work on this basis.

On reliefs, Mr Leong asked whether we have become a nation of reliefs and rebates. I hope not. Our approach is to grant reliefs in recognition for individual efforts and for achieving certain social objectives. We grant new reliefs only after very careful consideration. We do not have a policy of creating new reliefs in every new Budget. In fact, this year, we have incorporated the personal relief into the tax structure and made a minor simplification to our scheme. We agree that our tax system should be as simple as possible, and this is actually one of our competitive advantages in Government administration.

Mr Leong also asked about the one-tier tax system and noted that this disadvantaged low-income groups and the charities. Under the one-tier tax system, retirees and other shareholders, who pay low marginal income tax rates, will lose their ability to reclaim their tax paid by the company on the dividends. But the loss will be compensated, at least to some extent, because the new one-tier system will remove current restrictions on the distribution of dividends from capital gains and other non-taxable corporate income. So the base on which the companies can pay dividends will be broader. It would free companies from a number of restrictions related to distributing corporate profits as dividends and would also enable unlimited flow-through of dividends, meaning the subsidiaries can flow the dividend up to the parent and then beyond that, to the parent's parent and so on, without having to be taxed, which presently cannot be done, because it can only flow through one level.

These features of the one-tier tax system, along with new measures in group relief and lower corporate tax rate, will increase company income available for distribution. This could result in higher dividend payments for all shareholders and this would benefit all shareholders, including individuals who either do not pay income tax or are at the lower-income tax brackets.

We have introduced a five-year transition period from 1st January 2003 to 31st December 2007, during which shareholders will still be able to receive dividends with credit attached. This would give companies time to consume their accumulated credits and shareholders time to adjust to the new system. The main reason for this change is to simplify the corporate tax system and to facilitate financial transactions, like share buy-backs or share borrowing and lending. There is a trade-off, but when the corporate income tax rate used to be 40%, it was important to have a full imputation system because the impact was large. But now that the corporate income tax rate is coming down to 20%, the full imputation is desirable, but less critical.

On the impact of a tax treatment on Real Estate Investment Trust (REIT), the Government is studying the issue and we will release further details at a later date.

As for group offsetting of corporate tax, which Mr Leong and Mr Inderjit Singh also raised, we have already decided to introduce a system of group offsetting at 75%. This is quite a low rate. In fact, if we compare with other countries, we are one of the lowest in the world. Most countries have a threshold closer to 100%. In fact, Australia's threshold is 100%, while the US' threshold is 80%. Let us get experience operating this first at 75%, and later on, if it is successful, we can reconsider widening, lowering to 51%, pro-rating and so on. These are complicated measures. Even to introduce group offsets into our corporate tax system is already a major departure. We will have to craft the legislation and gain experience operating it before we take it further.

As for foreign subsidiaries, that is a separate problem because right now, foreign income is not taxed unless it is remitted to Singapore. If you can offset foreign losses against local profits, but you do not tax foreign income because foreign profit may not be remitted to Singapore, then we are actually subsidising foreign ventures from domestic tax revenue and this revenue loss could be significant. There are people who have suggested ways to get around this, short of having a full global taxation system. It is not a simple matter. Let us take it one step at a time. The UK has got this scheme for loss transfer from foreign companies. I think they did not volunteer to do this. They had to do it because the European Court of Justice ruled in 1998 that their regional law was in conflict with EU community law, so they have no choice. We have no EU community law to be consistent with, so we better study this carefully.

Mr Inderjit Singh also asked for variable property tax on businesses, low fixed rate plus a variable rate based on percentage of profits, subject to a cap. But this would change the principle of the property tax. In fact, the property tax is a wealth tax on asset ownership. I am told this is based on the annual value of the property, which is the estimated annual rental the property can fetch, regardless of whether it is in fact let out, owner-occupied or vacant. If we switch to what Mr Inderjit Singh has suggested, we would be changing that wealth tax to an income tax, and instead of taxing the property, we will be taxing the income of a company, and the more income the company earns, the more it will be paying in tax. We already have a corporate income tax for that. We are bringing the rate down, I think we leave that alone and keep the wealth tax element in the property tax as a separate component of our overall tax structure. They complement one another.

Mr Inderjit Singh also recommended a reverse pioneer tax status for companies that internationalise and invest overseas. In fact, we already have a scheme to bring income back to Singapore without tax under section 13(8) of the Income Tax Act. But the condition is that the income must be reinvested and must contribute to productive economic activity here. To have a general scheme for a complete tax exemption of foreign income remittances, it is too big a loophole. It will risk severe revenue loss and it is not going to be easy to plug this loophole administratively. Everybody says, "If you allow this, then the funds will flow back". What you will not see is that there will be tenants. There will be many ways that funds will flow offshore invisibly and you will not be able to stop it. Nevertheless, the idea of a reverse pioneer, meaning do not tax overseas profits during a pioneer period, is an interesting idea. It amounts to not taxing companies for sending back their small profits in the initial years, but taxing them when the profits grow in the later years. But this idea cannot be addressed on its own. It has to be considered together with other proposals like extending group relief, which Mr Leong Horn Kee suggested. Let us not get too complicated at this point - get Singapore companies to go overseas and make good money first. If they make money, then we can talk about how to arrange the taxation. If there is no money made, we cannot get started.

As for preferential tax for companies improving productivity so that we can continue to have a viable manufacturing sector, we already have a wide range of tax incentives for doing this. Many of these tax incentives aim to improve productivity, encourage value-added activities and technology innovation. For example, we have a reduced corporate tax rate of 10%, and now it would be 5%. If the company is awarded the development and expansion incentive we take into consideration the value-added contribution to productivity in the company when we assess whether it is eligible for the incentive. 2.45 pm

As for negative gearing on property, which means that if an individual owns a property and he has expenses on the property and interest to be paid, and it exceeds what he earns on that property, then we allow him to offset all those expenses, not just on what he earned in rentals, but on his other incomes, in other words, operate like a business which owns a property - the question is whether the person is carrying on a trade in properties, in which case, we will allow the offset, but when he sells the property, the gain will be subject to tax. Or, if he is just owning the property as an investment, in which case he is not subject to capital gains tax, but neither can he offset the expenses beyond the earnings from that property from rentals.

We do not allow interest expense deductions on other transactions. For example, if you buy a car on hire purchase, there is interest to be paid, that is not tax deductible. The fact that we allow deduction of mortgage interest against property rental is already in a sense a concession and if we go further and allow interest expense to be deductible against other income, apart from the rental income, I think it will encourage even more over-investment in property. In order that the losses can be offset against other income, I think we should not introduce any further distortions which incline people even more towards property purchase.

Furthermore, if I may point out, many property owners are paying their mortgage interest using their CPF savings. In fact, paying their mortgage loans using their CPF savings and the CPF monies are not taxable. So if you are allowed to pay the mortgage tax-free money and yet you can make the mortgage interest tax-deductible, then you are giving individuals tax benefits twice, which is not a sound principle to do.

Mr Inderjit Singh also asked for stock options to be taxed upon realisation of profits and not upon exercise, ie, when the employee realises the benefits of share ownership at the point of exercise of the stock option. So therefore the tax liability arises at the point of exercise based on the benefit which is realised, in other words, the discount between the market price and the exercise price. Most jurisdictions, for example, in Britain, Hong Kong, and also in the US, for the normal stock option treatment, tax income gained at exercise. In other words, once you have exercised and you buy the shares, whether you sell it or not, you have already derived the benefits, because you bought the shares at a discount to what they were worth on the market. We will tax you at that point. And, if you incur a tax liability, you better sell a portion of these shares to meet that tax liability, unless you deliberately want to go long in the shares, but then you take a risk. In fact, during the dot.com boom some people incurred tax liabilities and did not sell shares, and by the time they sold their shares, the price had crashed and they had a big tax outstanding and some of them were bankrupted. But the system is fair. They made the wrong judgement call.

In the case where the employee has to observe a moratorium before he may dispose of the shares, now we will allow him to pay the tax only at the end of the moratorium period, which means the employee has to pay the tax only at the point when he is actually able to dispose the shares and realise its value. And this is in fact a special benefit which we are uniquely operating in Singapore. Other tax jurisdictions do not have this.

If I may answer Mr Steve Chia's question. He raised it yesterday and we did not get around to it, but his proposal is to exclude essential items from GST. He disagrees that we should tax essential items and he also wants to exclude services provided by the Government from GST.

We have two main reasons for taxing even essential items in the GST, which I have explained on other occasions. First, most essential items are not consumed by poor people. You can say it is rice, you can say it is education services or health services, but in fact, the largest consumers of these essential items are not poor people but higher income people. For example, on average, if you compare a household with a monthly income of $10,000 against a household with a monthly income of $1,000, on food, the $10,000-household spends 3 times more than the $1,000-household. On education, the higher income household spends 7.5 times more, on health care, the higher income household spends 3.7 times more. So if we are going to exempt essentials from GST, it is going to be a very large tax loss for very little benefit to the lower income groups. Most of the money you are giving away will not be to the lower income groups. And so to make up this revenue, you will have to raise the overall GST rate, which is going to hurt the lower income groups. So it is better to have an overall coverage, cover everything, keep the rate as low as possible, whether it is 3% or 5% and then we target the lower income group through specific assistance, offset subsidies, whatever, in order to address their special needs, at much lower cost and much greater effect. That is the first reason.

The second reason is that you have to make a distinction between what is an essential and what is not an essential. Yes, I can define arbitrarily sushi to be not essential, and rice and fish to be essentials. But at the boundaries there will be many anomalies, many ridiculous things which you cannot explain. Mr Tharman's example is what is a confectionery and what is a cake. Well, it depends on what icing and cream you put on top of it. We are just creating distinctions which are meaningless but will occupy a lot of legal time, arguing, defining, refining, disputing, which is not worth our while doing, and why do I want to encourage people to buy rice and fish separately instead of the sushi ready-made in Fairprice? It does not make sense. So, better to cover everything and again the focused subsidy will enable him to buy whatever he wants, whatever he needs.

As for services provided by the Government, which was another point which Mr Chia raised yesterday, generally speaking, there are services which recover their own cost and are not funded out of taxpayers' money. For example, in a restructured hospital, if you stay in an "A" class ward, it may be a Government operation, but there is no reason why we want to favour an "A" class ward in a restructured hospital against a private ward in Gleneagles or Mount Elizabeth. So, in those circumstances, there is no reason to discriminate in favour of the Government, just because the Government happens to be providing the service.

The offset package is generous. You know all lower income groups are looked after and have at least five years' worth of offsets. We have been through these arguments extensively. I think the best way to run a GST system is to keep it clean, low-cost, easy compliance, efficient, and most convenient and most bearable for many Singaporeans.

Mr Steve Chia Kiah Hong: What about senior citizens?

Mr Lee Hsien Loong: As I have explained, the GST covers everybody, and the senior citizens, if they are in the lower income group, they will be covered by our schemes which assist lower income groups. And in the case of retirees and pensioners, we are also revising the Singapore Allowance for them, and that will also help them to offset any additional GST which they will have to pay.

In the long term, to put it in perspective, it is precisely because there is going to be a large number of Singaporeans who are going to be senior citizens, and a small number of Singaporeans are going to be working, that is the reason why we cannot say we are only going to tax income, and only working people will pay tax. Because in the long term, if you only tax income, the burden on the taxpayer who is working to pay for his services, as well as all the services for the retired people, will be very great. Now with ten people working to one retiree it is bearable. In the long term, three to one. Then will you be able to sustain that? It is not possible. It is necessary to widen the tax net, which is why we have to cover senior citizens. If they are not poor, there is no reason to subsidise them. If they are poor, there are ways we can help them out.

Mr Low Thia Khiang asked about annuities and why they are taxable. It took me a bit of puzzling out, to figure out they are taxable, but there is a reason.

First of all, Mr Low Thia Khiang is wrong to say that interest earnings are not taxed. I made no such announcement in the Budget, as far as I can remember. So interest is still taxable.

Secondly, the rationale for this is that we are allowing the capital part portion of the annuity to be tax-free but the interest earnings' portion of the annuity will have to be taxed. So what we are doing is, we are assuming that when you draw on your annuity, 3% of what you draw is interest and the balance is capital. So the interest is taxable, because interest is taxable in Singapore. The capital is not taxable. Until you have finished drawing out as capital, the entire amount which you put into the annuity over the years, and then beyond that we say, "Well, all the rest we will treat as interest". So beyond that point, the entire annuity sum will be taxable every month. It is to be consistent with our approach that capital sums are not taxable, but the interest is. If you say that an annuity may have some capital gains element in it, so it is not purely interest, that is something which we will have to consider. It is something which we will have to study. I think it is not something to be likely changed.

The Chairman: Order. I propose to take the 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 3.15 pm.

Sitting accordingly suspended at 2.55 pm until 3.15 pm. Sitting resumed at 3.15 pm

[Mr Speaker in the Chair]

Debate in Committee of Supply resumed.

[Mr Speaker in the Chair]

Head M (cont.) -

The Chairman: Mr Inderjit Singh, you have three cuts, back to back.

Mr Inderjit Singh: Sir, I will take them together.

In my speech during the Budget debate, I talked about how the direct involvement of the Government has had a profound impact on the economy. With that speech as a backdrop, I have a few suggestions for the Minister relating to how the Government and its agencies should reposition themselves. And some of these suggestions may give the Minister an idea on how we can get close to achieving a couple of the seven wish list items that I mentioned in my speech.

First of all, Government regulators and statutory boards should absolutely stay away from business. They should have very specific roles as regulators and should have very little role in influencing and facilitating the creation and growth of businesses. Currently, our regulators have too wide a responsibility, and they have a significant influence on the development of enterprises. Any existing companies currently owned by statutory boards should be immediately spun off, and they should not be allowed to form new companies.

Secondly, I talked about Government being lean, and it should endeavour to remain lean over a period of time through, first, by productivity improvements and, secondly, by oursourcing non-core activities as much as possible. Sir, I am not suggesting that we retrench civil servants, but to reorganise and outsource activities where the same people could be doing the same thing in a private organisation formed to perform the tasks which were previously done by the Government.

One question I have for the Minister is the Government expenditure of 5.6% of GDP. How does this compare with other countries? And as the GDP grows, this percentage, I believe, should come down.

Thirdly, on the issue of Government procurement procedures, I talked about giving opportunities to small and medium enterprises. When I suggested that, I really did not mean that they should be given the tenders, even if they bid higher prices than the lowest tender. There are many other procedures, rules and regulations that govern the tendering process, including track records. I am suggesting that the Government look at the rest of the things and still maintain the principle of lowest tenderer when awarding contracts. And in doing so, at least, SMEs and newer companies have an opportunity to participate in the process.

Fourthly, Government can also play a developmental role by allowing companies to test bed their products. The fact that Nokia transformed from a shoe factory to the world's number one telecommunications player was because in the early days, the defence ministry in Finland allowed Nokia to test out their technologies and products. In the USA, big companies and the government too play a developmental role by helping start-ups, particularly in the technology area. The Government should therefore be prepared to allow a little higher cost and a little less efficiency as a result of allowing test bedding. In the last 3-4 years, this phenomenon has also resulted in excellent results in South Korea, where many world-class standards are evolving in the wireless technology area, again as a result of test bedding and allowing many entrepreneurs to try out their products.

I suggest that the Enterprise Challenge, which is a scheme administered by the civil service, be greatly expanded to encourage test bedding, and civil servants should be given merit points for facilitating this in Government. Actually, test bedding is already happening, and I am suggesting it be expanded so that everyone knows about it.

Sir, the next cut I have is on financing and risk capital for Singapore-based companies. There are three elements that are needed to transform Singapore from a corporate-based economy to an entrepreneurial-based economy. First, we need the entrepreneurs or talent; second, we need the regulatory environment and infrastructure which is conducive; and, third, we need a well-developed financing environment. Currently, we have weaknesses in all three areas. For the purpose of this cut, I would like to suggest a number of possible schemes which may help plug the gap in the financing environment.

Sir, I would like to suggest that Temasek should proactively provide risk capital financing to local enterprises, in addition to financing Government-linked companies. Temasek should also consider partnering local companies to make overseas investments in technology and in new competencies which may not exist in Singapore. So we should be willing to move out of Singapore.

Larger companies, especially GLCs, should be allowed to tax deduct when they use part of their profits to invest in start-ups. This will greatly increase the availability of risk capital. Obviously, each company, including the GLC, should ensure that their shareholders' interests are not compromised when they do that.

Thirdly, we should incentivise and compel banks to move from the current collateral-based financing towards cash flow and IP-based financing, by giving banks a 5-year tax waiver or double tax deduction when they lend money based on this new method. These waivers of tax deduction should only be applicable when there is no personal guarantee required by banks, to encourage the banks to move away from their conservative approach currently practised.

I also would like to urge the Minister to accelerate the full liberalisation of the banking sector, so that more foreign banks can have full privileges compared to local banks. This will open up many more channels for local companies and individuals to raise funds.

In this respect, can we try to attract the likes of Silicon Valley Bank and Softbank into Singapore? We should also liberalise our financial sector to allow our local banks to specialise in cash flow financing, as I said earlier, and they should set up their bases in Singapore, and some of them do this.

Home-grown companies, when globalising, should get the support from their home bases. If their own home base financial institutions are not helping, they have very little hope of help from banks overseas. We should look at the Hong Kong's model of the SMELoan, which is a small bank and it does not take deposits but depends on equity investments. It has had a record of lower default rate than banks, and the model seems to be working for Hong Kong. We should try to duplicate it here.

Next, I have mentioned this before, and that is to make it easier for companies to raise funds from public markets, and I am suggesting that we set up an over the counter or "bulletin board" concept for companies of risky nature to raise funds from the public. SGX should be compelled to take the responsibility to do this, and listing requirements should be simple and not so stringent and costs need to be low enough for companies to benefit. This could be an electronic exchange which is easily accessible to everyone around the world.

Finally, on the LEFS scheme, while we have achieved limited success, it has not effectively reached out to many companies, especially those in the early stage of development. I would like to suggest that the LEFS scheme be expanded to cover the financing gap between LEFS and VC financing. In this respect, we should allow VCs or angel investors to be included under the LEFS scheme via a hybrid system where the VCs and the investors provide cash in return for convertible loans or preferred shares. So long as the instrument remains as a loan, the investors enjoy 80% guarantee under the LEFS scheme, and they too should be allowed to draw upon the LEFS funds, as the banks currently enjoy. In this way, it will greatly open up many more avenues for financing, and it will allow the VCs and angel investors to take greater risks, because the risk is being shared, as we are doing currently with the banks.

Sir, my last cut is on Government-linked companies. I was recently asked to chair a focus group to look at the Government's role in business, as part of Mr Raymond Lim's Committee on Entrepreneurship and Internationalisation. I invited key people from the private sector, academics, journalists and also from GLCs to be part of my committee. I would like to say - and I have said it many times before - that GLCs have played a useful role as we developed our industrial economy, and we have created some world-class companies like SIA, PSA and a few more. My focus group concluded, quite unanimously, and this includes my personal view, that the GLCs can still play a useful role, but their roles need to be changed and this will require significant changes on the part of GLCs and local private companies, and everyone needs to shift from a mindset of distrust and competition to one of partnership and cooperation, particularly when the companies globalise. I would like to be constructive in my suggestions and this is in the spirit of creating excellence in all Singaporean companies, whether GLCs or private enterprises.

I have a few suggestions. Firstly, the focus for GLCs from here on should be to globalise, because they have already harvested the domestic market quite extensively. I am not advocating that they abandon the local market, but they should get out of their comfort zones and look overseas. Each GLC should set a target of achieving a certain target of foreign revenue, and the Government, through Temasek should drive this.

Sir, when companies are corporatised from the Government, no moratorium or privileges should be given, and many Members talked about some examples and PWD is one of them. For the corporatised entity's own good and for the sake of promoting the spirit of private enterprise, they should compete on fair market practices. The Government should also not allow corporatised entities to carry the name of the "parent" statutory board, so that they do not get undue advantage of the name, and there are many examples of this happening. PWD is one. PSB Corporation is the other. In fact, in the case of PSB, the parent had to change its name to SPRING, and PSB Corporation maintains its name for commercial purposes, I guess.

Next, Temasek, as the shareholder, should implement stricter corporate governance requirements for GLCs that it owns. Practices like the recent loan given by one of Keppel's subsidiaries to major shareholders do not look good, and indicate inadequate controls from the Government, as a shareholder, through Temasek.

Temasek should insist on strict financial goals for all GLCs and have a transparent system by sharing information with the public to erase the perception that GLCs have an unfair advantage and are governed by lower corporate standards. The Minister mentioned yesterday that the GLCs, in fact, are being operated very professionally and, therefore, there is no reason why we cannot share this information with everyone. I believe there is a big gap in perception of what it really is and what some others think.

Finally, many GLC captains originate from the civil service or from the Armed Forces. This is not a criticism, but a fact. Many of them are unlikely to take the entrepreneurial risks necessary to create excellent businesses simply because of their background and because of what they are used to. Some do make the cut and are capable of performing even better than the leaders from the private sector, but these are just a few who have made it. I urge Temasek to consider bringing in many more people from the private sector, either onto the boards of GLCs or hire people with true private sector experience to head the management teams of the GLCs.

Mr Ang Mong Seng (Hong Kah): (In Mandarin): Sir, over the past few years, the Government Ministries have set up a number of private companies to provide opportunities for civil servants to have hands-on experience in the business world, to create the entrepreneurship in them, and to create more jobs for the people. This is something to be encouraged. It is a kind of business model. But, when these companies are set up, some kind of protection is provided for them. For example, when the PWD company was set up, most of the Government projects and contracts were given to this company, without having to go through the tendering process.

To the other private sector construction companies, this is unfair competition. I support the view of Mr Inderjit Singh that this kind of protection should not be given to the Government-linked companies. Private companies do not have this privilege. For example, when Singapore Press Holdings set up its subsidiary companies to operate Channel I and Channel U, to give its journalists the new challenge of working in a new broadcasting medium, they were given no special privileges. They have to compete with the well-established Channel News Asia, Channel 5 and Channel 8. This is fair competition. In order to get more audience and viewership, all journalists and broadcasters have to do their best to squeeze and cudgel their brain, to improve the quality of their programmes and raise their standard. Under fair competition, all the channels, be it Channel 5, Channel 8, Channel News Asia, Channel I or Channel U, every station strives to put up their best performances, and achieved remarkable results. This is a win-win situation policy.

Channel I and Channel U celebrated their first anniversary recently, and the journalists and broadcasters felt very proud of it, with a strong sense of satisfaction. Through competition, they have achieved the status of satisfaction and they have created a good image for their company and for their staff. They have also generated the challenge that brings out the best in them. I would like to congratulate all the staff involved in Channel U and Channel I over the past year for their strong commitment and good work done under fair competition. I hope they will continue to work hard and produce more good programmes for the audience.

I was glad to hear the DPM saying that all companies must compete under fair conditions on a level playing field, so as to create the standard for fair competition. Private enterprises do not have a 5-year protection or privileges. I would like to ask the Minister whether they would review and consider withdrawing the 5-year protection and privileges for Government companies. 3.30 pm

Dr Tan Boon Wan (Ang Mo Kio): Sir, Ministries and statutory boards should be helping businesses to grow. I join my colleague, Mr Inderjit Singh, to call on Ministries and statutory boards to desist from starting in-house units to provide products and services that can be readily supplied by private businesses that already exist, unless special requirements exist. If they do not, they are really withholding business opportunities for the private sector. Sometimes, these in-house units even compete with the private sector for businesses, and some are subsequently spun off as independent companies.

One example is PSB. There were many well-established private training institutions ready to work with it. Yet, it set up its own in-house unit to provide the training programmes that it administered. These units were recently spun off as PSB Corp. In this particular case, it is water under the bridge. My two colleagues, who have just spoken, have referred to other cases. Government should not compete with the private sector. Ministries and statutory boards should concentrate on their mission and core activities. They should outsource their requirements to the private sector to help the private businesses grow stronger and bigger, so that companies not only operate in Singapore but where opportunities exist to expand overseas. Keeping yet again to the training industry, a good example is Informatics. The company not only operates in Singapore but has successfully expanded into the region, and recently into China as well.

Mdm Halimah Yacob (Jurong): Sir, under section 328 of the Companies Act, if a company goes into liquidation, workers' claims will be given priority as they will be treated as preferred creditors. This means that their claims for any remuneration will have priority over other unsecured creditors. The same situation applies when a company is placed under receivership. Workers' claims will have priority over unsecured creditors under section 226 of the Companies Act.

The rationale for this is clearly to mitigate the hardship that workers face when a company winds up and they are left without a job and without any means of sustenance.

However, the preferential treatment for workers' claims does not apply when a company is placed under judicial management. Hence, employees are treated as unsecured creditors for any remuneration which has accrued prior to the making of the judicial management order. This is because employees do not fall under any of the exceptions specified under section 227G (6)(b) of the Companies Act. Section 227G (6)(b) authorises the judicial manager to discharge the debts of certain secured creditors, but workers' claims are not included.

In practice, what happens is that the judicial manager would usually seek an order of court to give the employees preferred creditor status with respect to their pre-judicial management claims. In such a case, the payments will be considered as preferred payments made out of the assets of the company.

The Court has usually granted such an order but it is cumbersome, time-consuming and actually means that unnecessary costs are incurred which could instead be used to settle the debts of the company.

For these reasons, I wish to urge the Minister to consider amending the Companies Act to give workers' claims when a company is placed under judicial management preferential treatment, on a similar basis as section 328 of the Companies Act.

This last recession has affected many workers badly. Many companies went into liquidation, receivership or are placed under judicial management. Workers' hard-earned salaries should at least be given some priority in these situations, without having to go through the hassle of persuading the judicial manager to secure a court order to pay. In fact, many of these workers continue to work with the company even after it is placed under judicial management. Hence, it is only logical that their claims be given preferential treatment. I would like to urge once again that the Minister consider amending the Act to give workers in companies which are placed under judicial management the same status as those under liquidation under section 328.

Mr Heng Chee How (Jalan Besar): Sir, data and information are the lifeblood of an information economy. Singapore is in the forefront in this area. The Government is the repository of much information provided by the public through many of its services that it provides. It asks the public to supply particulars and information about themselves. Sometimes, it is also statutory, such as information that might be provided to various Ministries, such as the Ministry of Defence, for example, for enlistment purposes and recall purposes, and so on.

Sir, the value of such information, both to the State as well as to the economy, is immense, and in a knowledge-based economy, this is increasingly so. In recent weeks, there have been cases that we see in the media where information provided to certain Ministries seems to have been passed on or related for certain commercial uses, such that members of the public may receive in their mail information about commercial services that originate out of that information being passed on by certain Government bodies to whom the information was supplied in the first place. This gives rise to the concern among some members of the public as to the confidentiality of this information. No doubt, the information is necessary for those statutory purposes for which they are supplied in the first place. And through the use of information technology, there is much to be gained in terms of efficiency through the channelling of this information, and the coordination of this could also save much trouble for members of the public when services are provided to them.

The key then would be how best can we further improve on our laws in the area of data confidentiality such that information that is provided by members of the public, by the citizens of the State, could then be dealt with in total confidence, so that members of the public would know that without their express consent, that this information would then not in any way be channelled to parties for which they do not wish the information to be made known.

Sir, I also mention this because, with the increasing use of economic value of such information, we have seen in other societies where information purchased through e-commerce have been amassed by companies in the private sector and subsequently sold for economic reasons. Again, as Singapore progresses in the area of e-commerce and as we encourage development in this area, the enhancement of our laws in this area would further add to the robustness of our economy.

The Second Minister for Finance (Mr Lim Hng Kiang): Sir, first, I would like to take the issue about Government's role in business, an issue that is raised by Mr Inderjit Singh, Dr Tan Boon Wan and Mr Ang Mong Seng.

As a general principle, we agree that statutory boards and Government departments should stay away from business. It is not the role of the Government to compete with businesses. As a general principle, we agree with that. But the Government's role goes beyond just regulating the system. So it is not possible to follow what Mr Inderjit says and just ask the statutory boards to stick to regulation. Because the statutory boards and Government departments also do promotion and provide services. Sometimes, in the process of promoting an industry, they need to get involved with the industry. For example, EDB, IDA, they are promoting that particular sector, so they have to get involved in the industry.

Other statutory boards provide services. You can either provide the services in-house or you can buy the services from outside. Again, as a general rule, we tell our departments and statutory boards that they should outsource from the private sector. But, on the other hand, our departments and statutory boards also want to be efficient, and if in their calculation, providing it in-house is more efficient, I think we should not stop them from doing so.

The two examples, which the Members raised about PSB Corp and PWD Corp, they are a different type of problem. These are departments or statutory boards which have been providing these services for many years. PWD has been around for more than 100 years; PSB, when they first started, we did not have the same equivalent private sector infrastructure and support providing all this training. And when PSB launched the productivity movement, this concept was very new, and to provide the training, they have to do it in-house. Having done so for many years, and having built up the capability in-house, we now realise that this can be better done by the private sector. I think everybody agrees that there is no reason why the Government should continue to have an in-house consultancy department, like the PWD, or that Government should have training courses done in-house by PSB.

The question is, how do you move this to the private sector? There are many options. One way is to just close down PWD, even though they may have 100 years of history; or close down PSB training department. But you demolish value in doing so. In the case of PWD, we decided that in future, Government departments will buy services from outside and that PWD should be corporatised and privatised. The question is, how do you transit to that stage? So we decided that, in order not to destroy value, we allow PWD to be privatised. In doing so, we give them a five-year moratorium. So it is not a situation, as Mr Ang Mong Seng described, of PWD setting up a subsidiary and being given a five-year protection. I can understand why some Members have raised this issue because they are presenting the perspective from the private sector.

But let me also tell Members there are two other perspectives that we can look at. One is from the perspective of the Government - the other departments which are being serviced; and the second perspective is actually the people who work in this organisation themselves. From the private sector perspective, having PWD going out to the private sector means more competition, and they are not very happy. The counter-argument is, if we have not privatised PWD, all these jobs that PWD is now doing outside would have been done in-house. So the private sector is not going to get a bigger cake, in any case. But when we privatised PWD, in fact, the moratorium is a limited moratorium. PWD was given the moratorium for projects above $20 million. Anything below $20 million, it is free competition. So when we moved PWD to the private sector, we did not give PWD the full slate of its original mandate. We give them only those projects which are above $20 million, and we say that anything below $20 million is free competition. And the reason why we decided on the cut off at $20 million is because during this period, there is huge development in schools, and most of the school projects and infrastructure projects of that level (roads, etc) are below $20 million. So that gives more work to the private sector.

But, unfortunately, of course, in the present decline in the construction sector, one can understand the private sector being unhappy that they only get the $20 million part of the cake. They probably wish to have a bigger part of the pie.

If you look at it from the perspective of the people who work in PWD, they have built up PWD for so many years, it is not fair, as Mr Inderjit suggested, that when we privatise such entities, that they should not carry their name. This is goodwill; this is value. PWD has a name. Why should they now adopt a new name and destroy value? It is just like PSA. When we corporatise, and later on we privatise PSA, are you suggesting that PSA should not use "PSA" (the name)? We are just intentionally destroying value. 3.45 pm

So, I do not think the issue is whether the name is retained. I think the issue is that when they privatise, we deal with them at arm's length and that they compete fairly and without special privileges. If you look at it from the perspective of the other Government agencies which are being served by PWD, they have all these years had an inhouse consultancy department. When we privatised PWD, we also want to make sure that the various Ministries running the school programme, the road programme and the various other infrastructure and building programmes, are still getting proper service, and therefore this moratorium period allows all the various Government agencies to be assured that when the whole thing is opened up, they still have the service which they originally enjoyed from inhouse but now by PWD Corp. Anyway, this is only for five years and after that, it will be free competition, and all the projects will be awarded based on merit and open tender.

The situation is similar for PSB Corp. As I have explained earlier, it started off as an inhouse training for productivity education and for the productivity movement. Having built that up, do we destroy the value, or do we privatise it? And as we privatise it, why not allow them to keep the name "PSB Corp"?

Mr Inderjit Singh also asked for Government to be lean and to emphasise on productivity and efficiency. I think that is indeed our intention and the civil service has been in the forefront of many innovative changes to make the Government more efficient and more productive.

Mr Inderjit Singh questioned the 5.6% GDP spending on Government. That component reflected the central Ministries - Ministry of Law, Ministry of Finance and also Organs of State - and within that big element, there is also a budget set aside for land reclamation under the Ministry of Law. That explains the 5.6% of GDP.

By and large, if you look at the Singapore Government expenditure, our operating expenditure at 10% of GDP is one of the lowest among the developed countries. But that does not mean we are complacent. It is just to give you a benchmark that we are very conscious of the level of spending within the Government, and we will keep this as low as possible.

Mr Inderjit Singh also suggested that even though we strive for the lowest tenderer in all our procurement procedures we should sometimes facilitate the development of the SMEs. He knows that we are doing so in a limited way, although we do insist on proper procedures in calling of tenders and the awarding to the lowest tender. We do allow public sector agencies to contract start-up companies with no company's track record for IT and technology projects of up to $5 million. So in normal tender procedures, if you do not have any track record, you will be disqualified. But we do recognise that in such areas, if you want to encourage a start-up, then you should give such companies a fighting chance and therefore we waive the need for a company's track record.

Mr Inderjit Singh also suggested a test-bed for projects so as to give these companies a leg-up in their development. He acknowledged that we do have this entity called The Enterprise Challenge which provides sponsorships for test bedding and we try to identify suitable pilot test sites. Whether the idea comes from the public sector, or the private sector, or the people sector, it really does not matter. So The Enterprise Challenge was set up in March 2000. This is a $10 million fund and so far it has sponsored 32 projects with the private sector accounting for 13 of these projects. To recognise innovation, The Enterprise Challenge also recently created this $1,000 Innovator Award which is given to every approved project for test bedding. So it is an idea that we will definitely pursue further.

The next set of suggestions from Mr Inderjit Singh is on how to plug the various gaps in our financial environment. All the suggestions are very good suggestions. We will definitely evaluate them. I would just like to make a few short comments. By and large, whether or not we use Temasek as a vehicle to provide this financing of risk capital - that has been addressed by DPM last night - basically, our approach is that Temasek is the holding company for the Government's equity investment in companies and it must operate on commercial principles. So we should not ask Temasek to do national service. If it is a public policy to encourage or provide, or to seek some of this type of money for financing, then this ought to be done by the Government, through the statutory boards, or through the various agencies within the statutory boards. So that is the first principle.

Having said that, you will realise that Temasek has a company to invest in venture capital fund and that, as DPM explained last night, together with what EDB is doing, is really to provide the seed or the catalyst. And once we kick-start the venture capital sector, we will expect the private sector to be on its own.

The other suggestion which Mr Inderjit Singh raised is about encouraging or compelling the banks to provide loans based on cashflow principles, rather than on collateral or guarantee. It is very difficult for us to compel or incentivise the commercial banks. They must be allowed to do so on their own commercial calculations. Among the various banks that we have, some would take this up as a niche market, that the SMEs is the sector worth servicing, no doubt it is higher risk. But if you build up a core competence and domain knowledge of the SMEs, this is an area where you can do well and be competitive. We should leave it to the commercial banks to respond to the commercial needs of the SMEs.

As to the specific suggestion about banks which are set up just for SMEs, like what they have in Hong Kong the SME Loan, this is something that we would definitely explore. Basically, MAS would facilitate or encourage such financial entities to Singapore as long as they meet the MAS' regulations.

Mr Inderjit Singh's other suggestion about the bulletin board is also a good suggestion. We would ask SGX to look at his proposal. Basically, both the Mainboard and Sesdaq, the rules for listing and the rules for raising capital are already fairly liberal. But if there is scope for a bulletin board which allows other companies to raise capital, in principle, we do not see any objections to it. If it is viable, we will allow this to be operated, again as long as they meet the MAS' regulatory requirements.

The final segment is on the GLCs and the role of the GLCs. I am much encouraged by Mr Inderjit Singh's preamble about the GLCs. Again, as DPM said last night, most of the GLCs we have grew because of our developmental history, because of the way Singapore developed. As a matter of principle, we will be much more reluctant now to ask our statutory boards, or our departments, to build up new companies. But we have this stable of very good companies, good leadership, good management, so how do we transit? Some we will keep for strategic reasons and others we will gradually divest to the private sector. The challenge is to find investors and, more importantly, management teams to lead these entities. We agree entirely with Mr Inderjit Singh that these GLCs should move out of their comfort zone, that they should go regional or global, and that they should observe strict corporate governance in the way they operate. We subject them to very strict financial targets and goals and the Government has a role as a shareholder, through Temasek, to make sure this happens.

As to the management of these GLCs, we leave it to the individual companies and Temasek to pick the best people for the team. We do not run a system where we parachute civil servants, or ex-SAF officers, into these companies. It is up to the companies, it is up to Temasek, they evaluate these people on their own merits. If these people are suitable, then they recruit them. Similarly, the boards running the GLC companies, again, the GLC companies and Temasek ensure that the board is a good board that can lead the company. There is not a very high percentage of civil servants on the board. It is less than 10%. The GLCs and Temasek now make a deliberate attempt to bring in foreign talent into the board. Currently, the boards of our GLCs are largely made up of private sector people who serve on these boards.

Mdm Halimah asked about the employee's rights during a judicial management process. I would like to explain that the liquidation process and the judicial management process are slightly different. In a liquidation process, the company has gone bust and you want to distribute the assets and there is a clear order of ranking to distribute the assets. In a judicial management process, they are still hoping to revive the company. The judicial manager is appointed and his task is not just to wind up the company and distribute the assets. His primary objective is really to revive the company and get it started so that the employees continue to have jobs. Under such circumstances, the focus is not on how to distribute your assets, but really how to get the company going again. Because of this objective, the Act is framed in such a way that we give more flexibility to the judicial manager to reorganise the company and rearrange the liabilities and the assets in such a way that the company can be revived as a going concern. So I hope the workers understand the objectives of judicial management.

Mr Heng Chee How raised the issue about data confidentiality. I agree entirely with him that any data which the Government agencies have obtained should be treated confidentially, whether this data is obtained through IRAS, or through the hospitals, or through MINDEF. But at the same time, we must recognise that we do not want the Government to develop into silos that every department and every Ministry and agency collects its data and refuses to share its data with other agencies. If we do that, then I am afraid the level of service provided by the Government will deteriorate. So the question is: how do we strike a balance? And within the civil service, we have very strict rules and a set of principles of how we maintain data confidentiality but at the same time we do share information across Ministries and across agencies so that we provide a better public service.

We recognise Mr Heng's point that in this modern age, data mining is very commercially lucrative but it is not the intention of Government having access to this data from the people to make use of this for commercial purposes. Our main focus is how to provide better service to the people. 4.00 pm

The Chairman: Mrs Lim Hwee Hua, you have three cuts in all. You can take them together.

Mrs Lim Hwee Hua: Yes, Sir. On financial standards, I was recently in the United States to attend a conference on Corporate Governance for company directors. Almost everyone was seized by Enronitis. It was instructive to observe the virtual paranoia amongst the non-executive directors in the wake of Enron and other equally famous, or should I say infamous, cases like Kmart and Tyco. I think there is now a great tendency to swing right towards more of everything - more audits, more checks, more controls, more reporting and the list goes on. Not only that, there is great lobbying for all these measures to be imposed as "best practices", if not minimum standards.

For example, there were questions raised on how to ensure the independence of directors on boards, how to check the powers of executive chairmen and top management, how much stock options to grant and how to account for stock options, how frequently to rotate auditors and how to achieve auditor independence, how frequently to have companies report performance, and how much detail to be included in such public reports. These are now questions fired in rapid succession.

Sir, the root of the concern is more of a loss of trust and confidence in boards and management than of inadequate practices or standards.

Even as we develop our own financial markets and study best practices in the more established regimes, we should carefully review the appropriateness of standards in use elsewhere. In defining our own standards, how do we guard against having an even more complicated or onerous form which will merely raise compliance costs, but without necessarily giving the market the due benefits? As it is, fund managers in the US are beginning to feel that whilst they now will be receiving reams and yet more reams of these detailed disclosures, they are not any wiser nor any more assured that management is indeed doing a good or better job.

I would, therefore, like to ask the Deputy Prime Minister to enlighten the House on the philosophy the Government is adopting with regard to the setting of standards in corporate governance, disclosure and the auditing for companies.

Local Banks

Sir, I am moving on to the next cut on local banks. The injection of foreign expertise into our local banking scene deserves a lot more consideration. Based on the response to a query on foreign ownership last week, I take it that the Monetary Authority of Singapore still has reservations over allowing greater equity participation in our local banks by foreign interests, as it wanted to ensure that there are enough locally owned banks to provide a stable base during a crisis. Sir, this has different implications.

For one, it may imply that our local banks are obliged to "stick-it-out" with bad debts during a crisis. Would this have implications from a risk-management standpoint? In all fairness to non locally-owned banks, such as Malayan Banking, they have remained very much on the scene through recent crises. So, the link of a controlling interest to the decision to operate in our market would require some verification and further analysis.

The second implication is really whether this limit to ownership is, in fact, a limiting factor and, therefore, disadvantageous to the market as a whole. As our market is relatively small and the range of services narrow, foreign banks with a minority interest may not find it worth their while to introduce new services which may be products being offered through their operations elsewhere. The scope can be bewildering, given the convergence of retailing and banking. For example, many credit card issuers are now providing a whole host of other non-bank and financial services. As it is, competition locally for the narrow range of services is already intense. There appears to be some anecdotal evidence of this.

If we were to look at the refinement in capital adequacy requirements in recent years and note that there has been more emphasis on capital efficiency, we would have noticed that most of the banks have lowered their Capital Adequacy Ratios by a few percentage points to where they are, probably at around the mid to high teens levels. Yet, the returns on equity have not improved at all, and they have not actually surpassed the 10% ballpark. The deduction is either that the customer base cannot afford the same services at prevailing rates, or that managers just have gotten too used to the old ways of doing business in Singapore.

Sir, many have lamented the lack of innovation and risk-taking on the part of banks, which is apparently made worse by the recent mergers. Many also postulate that unless there is a revenue boost and a margin explosion from the introduction of new innovative products, the ROEs of banks will look dull for a long time to come. So, even when we decide to lift foreign ownership limits in the future, there may not be many takers. The related issue is one of reviewing the scope for expanding the variety of services which would have good margin potential. For example, the Housing and Development Board is essentially the biggest mortgage player which, hitherto, is one of the most lucrative segments elsewhere. Should the HDB be confined to being a housing agency and development agency for the Government, instead of running the biggest mortgage business?

In the light of the above concerns, I would like to ask the Deputy Prime Minister what are the real arguments for limiting foreign participation in our local banks and how we can nurture innovation on our local banking scene.

Sir, I will now move on to my third cut on financial services.

Financial services promotion

The Government has expended a lot of efforts on promoting financial services and marketed to numerous institutions which are currently located elsewhere in Asia or do not already have a presence in Singapore. Equity markets

In the area of equity markets, we have been trying to attract regional companies to list on the Stock Exchange of Singapore, citing the benefits of going public in Singapore.

However, Sir, this goes against the grain of listing in and allowing investors to trade in the country where the bulk of revenue is generated or assets are based. Besides, many other exchanges are touting the same. Understandably, the demand side of the equation is important, and we would need to define some niche industries or competence for which would-be investors would be prepared to trade with us and for which we can create a meaningful critical mass. For example, we could target infrastructural-related listings.

Fund management/hedge funds

In the same vein, when promoting fund management, including hedge funds, we would need to go beyond just providing the business infrastructure, primarily tax incentives. As we do not have a great hinterland nor a natural market, we would need to create some base load for these managers before the bigger players would even consider relocating or setting up shop here. For example, we have been promoting fund management activities since the mid-1990s and, yet, the amounts being parcelled out by the public sector are far from attractive.

Mindset changes have regrettably lagged. Public agencies would still prefer the tried and tested names and, generally, mandate sizes are far too small. Likewise, to create the necessary buzz in hedge fund activities, we may want to provide a base load for a diversified range of much smaller players who have the necessary energy, instead of gunning for the big players. This will require a bold programme which will involve taking more risks with unproven operators in an inherently risky business. However, if we can do it on a big enough scale, there will be diversification and a few winners can pay for the failures.

Would the Deputy Prime Minister consider refining the promotional strategy for both these segments, especially with regard to creating local demand?

Mdm Ho Geok Choo (West Coast): Sir, I am heartened by the various tax incentives in this year's Budget targetted at strengthening the competitiveness of our wealth and asset management industries. If we are seriously going for the goal of building a world-class financial hub, we would need to expand our derivatives market and deepen our existing capital markets.

The incentives that have direct impact on taxation of banks are the consolidation of existing financial sector incentives into an umbrella Financial Sector Incentive (FSI). Currently, the preparation of a bank's tax return is complex and time consuming, due to the application of different tax rates to different products and units. The new scheme is supposed to simplify the tax system and should, therefore, reduce compliance costs.

I also understand that, at present, the regulatory returns and tax returns do not provide a seamless transference of information from one return to another. For instance, revenue from financial institutions comes from multiple sources, both on-shore and off-shore. To qualify for the concessionary rate of tax requires administrative time and cost in splitting incomes.

I am mindful of the intention to merge several of the 11 existing incentives into a single umbrella scheme. The scheme, as the Budget Statement says, will offer a concessionary tax rate of 5% for "qualifying high growth and high value-added activities", and 10% for "mature but tax-sensitive activities."

It does appear that financial institutions may have to grapple with further regulatory and definitional issues, like "qualifying high growth activities" and "mature but tax sensitive activities."

In light of the above, I would like to ask the Deputy Prime Minister and Minister for Finance the following questions:

1. How will the revamping of the existing incentives be more attractive to existing financial institutions?

2. Does the FSI cover all products or only a few selected ones?

3. Will the proposed FSI attract more financial institutions and advisers into Singapore and, if so, how?

4. Will the proposed FSI result in higher compliance costs, both in the revamp and thereafter?

Mr Yeo Guat Kwang (Aljunied): Mr Chairman, Sir, credit-card billings in the year 2001 totalled $11 billion, up 5% from $10.6 billion in the year 2000 and exceeding total billings of around $8.9 billion in 1999. In 2001, financial institutions wrote off $79.5 million of bad debts, up 28% from the year 2000. Over the past year, credit cards and charge cards approval rate has risen by 14.4%. In short, although we were in an economic downturn last year, more people are getting credit cards, using them and chalking up bad debts.

I want to highlight four cases across four media reports in the Straits Times which should give us something to think about. First, more young Australian women are declaring bankruptcy after running up debts on credit cards to finance their expensive lifestyles; second, many young Hong Kong adults are deep in credit card debts; third, young Americans are the fastest growing group filing for bankruptcy in the US; fourth, a young Hong Kong woman was reported to own 80 credit cards.

In my meet-the-people sessions, I have come across cases where young residents chalked up big credit card bills and sought their MPs for help. In these cases, they hold multiple cards and were crippled by mounting roll-over debts. I am sure many hon. Members of this House have also come across similar cases.

I would like to know whether the Ministry of Finance monitors the credit card situation in Singapore. Are younger Singaporeans chalking up more credit card bad debts and are being declared bankrupt? Should more be done to control the easy availability of personal credit facilities? How do the banks determine their interest rates and why have the rates not been reviewed for years and why are all the banks imposing the same rate, except for one or two? Should we not request the banks to clearly state the interest rates and the late charges in the monthly statements to remind the cardholders of the consequences?

What more can be done to educate bank customers on the use and risks of such credit card facilities or other credit facilities? I urge the Ministry of Finance to monitor and study the situation closely and do more to put a cap on the easy availability of credit.

The Chairman: We are rather behind time actually, DPM.

Mr Lee Hsien Loong: Mr Chairman, Sir, how much time do I have?

The Chairman: Carry on, DPM.

Mr Lee Hsien Loong: I shall try to be brief.

The Chairman: Yes.

Mr Lee Hsien Loong: Sir, on Enron, I fully agree with Mrs Lim Hwee Hua that the problem really is one of confidence or loss of confidence and trust, rather than inadequate standards, and however you tighten the standards, if the people operating them are not honest and lack integrity, we are going to have a problem. 4.15 pm

At the same time, we also have to recognise that we have to keep our standards up to date and review them from time and time and when there are obvious loopholes and when there are problems, then we have to tighten them up. The difficulty is to strike a balance between having a set of standards which are comparable to best practices elsewhere and having a set which is not so onerous that, in our circumstances, we are not able to get them to work and we are just going through the form and the motion, rather than actually to maintain high standards of corporate governance.

There is no magic answer to this. Our approach is to involve the private sector when we review our standards so as to help ensure that the recommendations are in line with market practices and are practical and worth doing. Before submitting reports, review committees would normally conduct extensive public consultation, solicit feedback from stakeholders so that we could get the widest range of views. I ought to say, however, that there have been occasions when we have not got as much and as timely feedback as we had hoped to get. After we have settled the recommendations, then people say, "I am sorry. I should have told you this earlier but there is this problem". Where there has been a serious problem, we had to go back and undo and redo. I urge the industry to take the feedback seriously and the more effort you put in and the more candid you are in your views, the more we will be able to come up with standards which will be effective and worthwhile.

As for form versus substance, in our capital market standards, our current standards follow generally the international financial reporting standards (IFRS), rather than the US generally accepted accounting principle or the US GAAP. Our desired outcome is for companies to comply in substance, and not just in form. We also require effective enforcement actions on the one hand and active involvement of the private sector on the other, so that we can improve our corporate governance and disclosure practices over time. This is something which has to happen over time and cannot be done overnight just by fiat. It is not just the rules but also the norms and practices, the seriousness in which people take these rules and the depth of understanding when they implement, and their sense of responsibility - when something goes wrong, to put the flag up so that it can be put right.

On foreign banks and whether we are hindering innovation by restricting the foreign banks from investing in Singapore banks, our philosophy is not to prevent foreign banks from participating in the industry altogether, but to maintain local control of the main local banks. There are now only three main local banks. There can be foreign participation in them, but not a controlling stake, and the reason is not that we want local banks to do national service, but that we want to align the interest of the local banks substantially with the long-term interest of the Singapore economy so that in a crisis, they will calculate their interest and will thereby further the interest of Singapore. They will not upstage and leave, or say, "I just cut losses, fighting another day somewhere else."

I do not think the problem of range of services has to do with whether the foreign banks can or cannot buy into the local banks because they are present here. They have 40% of the market, and through their own branches and their own ATM networks now, they are able to provide quite a wide range of services. In fact, they have been quite innovative, maybe not the same services that you can find in their home countries, but that could be as much due to cultural reasons and mindset and infrastructure, as it is due to lack of market opportunity. In fact, some of the foreign banks are extremely aggressive. I have heard that they even set up stalls on five-foot ways on Saturday afternoons and press people with application forms. I have heard this, not as information, but as complaints. But that is the way it is. If it gets out of hand, the people in charge of touting will look into the matter.

As for the low ROEs of our local banks, I think it is early days yet. It has only been three years. As we have opened up the market, there has been increased competition and the opportunities for lending have not been that great because of the economic downturn and the local banks are grappling with the change and upgrading and diversifying themselves into fee-based income sources. Furthermore, they have just made their mergers and there are some costs involved with the mergers and rationalisation. I think that given time, they should be able to improve their returns and their standards. Our objective in banking liberalisation is to encourage more innovation by progressively introducing competition, but we cannot just pursue innovation and risk-taking on their own. We have to understand what the risks are, understand them well and manage them well too.

As for promoting equity markets and hedge funds and creating local demand, I agree with Mrs Lim that for promoting the equity and debt markets, there is a role for the public sector to start the ball rolling and to generate a certain base load. We have done this for the debt market because quite a number of the statutory boards have been making significant bond issues in recent years and the market has grown substantially. In fact, we have been successful, not only in promoting the bond market, but also in the whole fund management industry in Singapore. In 10 years, the fund management industry has grown 15-fold, from $18 billion in 1990 to $276 billion last year. Our debt market has grown substantially too. Our survey shows that the bulk of the discretionary assets that are managed in Singapore are invested in Asia, and 30% of them are invested here. The amount of investments traded in Singapore by fund managers is not insignificant.

As for hedge funds, we promote them, but we do not have very good statistics on them because it is hard to tell exactly what is a hedge fund and what is just an ordinary fund manager. But we have seen more hedge fund managers setting up or expanding here and now Singapore is one of the significant hedge fund markets in the region. There are four - Japan, Hong Kong, Australia and Singapore - and we are definitely one of them. If we took five or ten years ago, we were not at all on the map. We recently announced the merger of the approved fund manager and the approved boutique fund manager schemes in this year's Budget and I am optimistic these new incentives will help to attract some of these boutique hedge funds and specialist hedge fund managers, which Mrs Lim speaks about, to set up in Singapore.

Mdm Ho Geok Choo asked about our new tax incentives, whether they would be attractive, what they cover and how their compliance cost would be. The approach in our review for the financial sector and tax incentives is firstly to enhance the incentives so that we are still competitive in the new landscape and, secondly, to rationalise the current range of incentives so that it is easier to administer and comply with, precisely the point that Mdm Ho raised. We will be placing greater emphasis on high growth and high value-added activities and for these activities, we will apply a consistent concessionary rate of 5%, which is lower than the existing 10% rate enjoyed by most of the financial activities currently incentivised. This lower 5% rate will directly benefit many of the high value-added activities that Singapore is aiming for. The harmonised incentives will ensure that, where there are existing schemes which overlap, they will be simplified for ease of administration and lead to lower compliance cost. How we will harmonise, how we will work it out will take some time. We will announce the details, we hope, in about six months' time. We are not going to have a sunset clause on the overall scheme, but we will have incentives awarded to individual institutions which will have specific expiry dates attached and the length of the incentive will be based on criteria such as the kind of activities or the skill sets which they bring to Singapore. Such an expiry date will provide us the means to target new activities for promotion as the industry changes.

Mr Yeo Guat Kwang asked about credit cards and young people's easy access to credit cards and unsecured personal credit lines. I agree completely with his concerns because an individual with many unsecured credit card lines is going to be tempted to spend beyond his means. Borrowing on credit cards and unsecured credit is very expensive and if an individual does not have enough means to repay his loans, he would soon see his debts piling up and they would come and look for us, as MPs, to help them sort out their problem. As Dr Amy Khor told us recently, a young lady came to see her and she had built up $20,000-$30,000 of credit card debts, six cards. She asked this constituent, "Why did you do it?" The constituent said, "hua de shi hou heng shuang!" - when she spent it, it felt good. Now, she has to look for her MP. Therefore, MAS only allows credit cards and unsecured credit facilities to individuals with a minimum of $30,000 in annual income and even then, we have limited the maximum credit that can be extended on a credit card on unsecured personal lines to two months of income.

Unfortunately, it is not watertight because consumers can still apply for multiple credit lines and add up to far more than two months of income. We need some system to prevent individuals from having too large a credit exposure through credit cards, multiple cards. We are going to launch a Singapore Consumer Credit Bureau in September this year to pool borrowing and repayment history of customers and give lenders the list of profiles of borrowers. When it comes into operation, the card issuers will be able to monitor the number of credit cards which each of its customers holds, his total credit exposure and his credit history. The card issuers can then manage the risk exposure and use this information when deciding whether to grant him another credit card. MAS will also encourage the card issuers to be prudent and to make full use of this information.

Mr Yeo asked why interest rates on credit cards are 24%, uniform across all issuers. MAS' understanding is that it is not actually uniform. Not all cards charge 24%. Some are lower, but these are interest rates which are determined by the market. I think it is a competitive market. There are many players, certainly more players than there are petrol station companies. It is really not for the Government to say whether this is or is not at the right level because credit cards are not a basic necessity and there is no reason for the Government to intervene to ensure that it remains affordable. One reason that the lending rate is high, 24% or thereabouts is because the default rate is significant. When you borrow from a credit card company, if you are paying regularly and paying interest, you are really cross-subsidising the other credit card customers who have defaulted on their borrowing. And because the default is significant, 5% or 6%, so the interest has to be high. The advice to you is, if you do not have to borrow, especially from a credit card company, better don't.

What is more important than trying to push the rate down or control the interest rate is for consumers to know what interest rate they are actually being charged and to understand what other charges are being levied on them. MAS requires credit card issuers to clearly disclose in their monthly statements all the late charges and relevant interest rates, and the Association of Banks has also acted to improve transparency of fees and charges and terms and conditions, and they are putting out leaflets to explain in simple terms what it involves, what are the terms and conditions, so that you do not have to plough fine print and legalese and, at the end, to be none the wiser. 4.30 pm

But more can still be done and I urge the Association of Banks to look into developing a set of best practice standards on credit cards to take into account the needs of the public. Then consumers can make an informed decision, whether they have the means to pay the principal, to pay the interest. But finally individuals have to exercise personal responsibility to ensure he does not over extend himself and does not live beyond his means.

The Chairman: Mr Leong, do you want to withdraw your amendment?

Mr Leong Horn Kee: I wish to thank the DPM and the Second Finance Minister for their patience and very detailed and clear answers. I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

The Chairman: May I remind Members that we are likely to breach the guillotine time. So please keep it short. Mr Arthur Fong.

Mr Arthur Fong (West Coast): Sir, I beg to move,

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

Sir, I was inclined to withdraw my cut on middle income after listening to the Minister for Finance's responses to the House yesterday. However, there are those who by classifications as middle income would still fall between the cracks of the Budget, however fine the cracks may be. Some of these middle income earners, who do not benefit from the offset package, do face daunting challenges.

I met the manager in an electronics manufacturing firm a few days ago. He earns a salary of about $4,000, with three young school-going children, a wife who is not working because she has to look after the two aged sickly parents at home. They live in a condominium that they bought after selling their 5-room HDB flat some years ago. They were very prudent last year. They sold their family car. They did not have this mindset that they have to continue having the car, they sold the car, in preparation that in case the breadwinner loses his job, he does not have a hefty car instalment payment to do. They lost money on that car. Still, they find it tough. Worse, for those who are in this middle income group who are not unemployed. They still have bills to pay, income tax to pay, and they are in a bind, hopefully they do not also have a credit card.

We hear many grouses from this middle income group and some of them are not all that unreasonable. I am concerned that these fallen "angels", as I call them, lose heart, hope, and become resentful. As many of these in the middle income group are mobile in their profession, and they could be our talents-to-be for our country, I would like the Minister to see if they could look into something they could do for this group of people, so that for them it would not seem that it is a hopeless end, as we see it, but endless hope for them in this country. I think I would like to use three phrases in Chinese: xiwang tamen bu hui cong "xin man qiwang" bian dao "jinzhang dexiwang", bian doa "daidai de huanxiang." [Hope that they will not turn from "heart full of hopes" to "nervously hoping" and then to "staring blankly in illusion."]

Sir, may I move on to my second cut?

The Chairman: Yes.

Mr Arthur Fong: Let me declare my interest as a banker. As a result of the consolidation of our local banks, many bank employees and some bank executives have lost their jobs. I do recognise the call to consolidate and to liberalise our banking industry, as I think it is important and I firmly believe this has to be done. But with liberalisation we have QFBs given to several institutions. For these bank employees who have lost their jobs, rather than having them seek other jobs in other industries, can we not train them in areas that are needed by these banks that would want to expand in Singapore? I understand that there is a tiny issue here as we have no control over those banks' development and marketing strategies.

I note that MTI does not have a programme to bridge retrenched workers in the banks but I am filing this cut as I feel there may be organs in the Ministry that play a crucial part in bringing banking business to Singapore. And I hope that the banks, when they do decide to execute their expansion strategies, some of these employees can be absorbed back into the banking industry. And as far as the banks are concerned, there will be a pool of human resources who already have the technical ---

The Chairman: Mr Fong, I suggest you ask your question, otherwise you will not get a reply.

Mr Arthur Fong: So I hope there will be some bridging between these retrenched workers, the Ministry and the banks, that are coming on-stream and with expansion strategies.

The Chairman: Mr Steve Chia, you have got 2 cuts. I suggest you just ask the questions or you would not get a reply.

Mr Steve Chia Kiah Hong: Sir, I would like to declare my significant direct interest in this matter about the market manipulators. It affects me as much as many other traders and investors who have suffered monetary loss because of the SGX Settlement Committee's decision on the Links-Island. It has been 2 years. I have spoken to many industry practitioners and broking firms and they are also unhappy and dissatisfied with the SGX's decision but they cannot do anything.

Sir, I have been a remisier with OCBC when Links-Island was listed on the SGX and traded. Subsequently, on Friday, 11th August, many other investors and I bought shares of this company in the market. On the next available day, on Monday, 14th I contra-ed the 30 lots. Some of the other investors also contra-ed. Two days later, on Wednesday, the stock was suspended by the SGX on suspicion of market manipulation. It is very disappointing that the SGX took one full year to conclude that the stock had been cornered. What is worse is SGX's decision to cancel the trades done in the last three trading days before the suspension. This has caused abnormality in the stock, especially for those who bought the shares a week before and contra-ed within those three trading days. Suddenly, by the arbitrary decision of the SGX Committee, the buy positions on Friday became valid, whereas the sell positions became invalid and cancelled by the Stock Exchange.

Can the Finance Minister explain how the SGX arrived at this arbitrary decision? How has the cancellation of the trades of the last three days helped to solve the cornered situation? It has been almost two years. Those investors affected have heard nothing from the SGX. Can the Minister tell us if the market manipulators have been identified? When will they be charged in court? And for those investors who suffered loss because of the SGX's decision, what course of remedy is there for them to claim this loss? For further clarification, many of the investors are going to be sued by the company.

The Chairman: Mr Chia, you may not get a reply for that.

Mr Steve Chia Kiah Hong: I hope the Minister can give a fair and helpful solution to these and other affected people and how they can help solve the problem.

The Chairman: You have roughly 7 minutes, Mr Lim.

Mr Lim Hng Kiang: Sir, to Mr Arthur Fong's two points, I think both groups are catered for by our arrangements of the offsets and retraining. So I think the middle income group really will also benefit from the offsets and the various assistance packages. For the retrenched bank employees, I think the same arrangements that we have for industry-specific training also will work out for them.

As regards Mr Steve Chia's query on the Links-Island, the reason why SGX took two years to investigate is because it is a very complicated issue. They have to examine the trades of more than 50 parties involved during the transactions. They have to investigate the significance of the commercial and personal relationship of all these 50 parties. They also have to investigate the cash flows and the trading patterns of these individuals and institutions which were trading in the Links-Island shares.

As a result of their investigations, SGX has determined that Links shares were indeed cornered and I guess what Mr Steve Chia is referring to is the decision of SGX on how they should settle the market trades during this period before the suspension. So SGX has decided that the market trades during the period 14th to 16th August, as he mentioned the three days, will be settled by cash instead of delivery of shares. Now they have set the fair settlement price at $1.21. They have decided that this is the most equitable solution without distinguishing whether the trades were done by investors with long or short positions.

So having considered the circumstances of this case, the Settlements Committee has concluded that the weighted average of the Links shares during these three days would be the most equitable and the most appropriate price. They have considered other alternatives to this fair settlement price but they decided against these alternatives because it was less equitable. As to what investors can do, let me just say that the Commercial Affairs Department is currently investigating whether criminal offences were committed in relation to trading on Links shares and if the persons under investigations are convicted, then these investors in Links shares who traded with these persons will be able to obtain legal recourse.

The Chairman: Mr Arthur Fong, do you like to withdraw the amendment?

Mr Arthur Fong: Sir, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Dr Tan Boon Wan: Sir, I beg to move,

That the sum to be allocated for Head M of the Main Estimates be reduced by $10 in respect of Code MP 2100.

Sir, may I have permission to take the three cuts together?

The Chairman: Yes, please. You have about 5 minutes for question and answer.

Dr Tan Boon Wan: Thank you. First, I would like to ask if the corporate tax applies to bodies or persons, such as management corporations, town councils, trade, industry and professional associations and clubs.

Second, I would like to ask for the maid levy allowance to be extended to single women, including divorcees and widows.

Third, I would like to ask that parents, with children already studying overseas, be allowed to claim double child relief for the remaining normal duration of the course.

The Chairman: Dr Ong. One minute.

Dr Ong Seh Hong (Aljunied): I would like to ask that the Minister would consider whether the relief for course fees be changed and made more pro-learning so that the relief could be extended to courses not relating to one's existing profession, trade or business, as required.

Secondly, whether the amount of $2,500 can be increased because many of the people who are claiming course reliefs are those who pay tax and more likely to be the professionals, executives and managers (PEMs), and by encouraging them to reskill, they probably would be taking diploma or degree courses that cost a lot more.

Thirdly, whether unused relief for course fees can be carried forward or be used by the spouse because this would encourage the PEMs to attend courses using their savings to upgrade themselves when they are out of job.

The Chairman: Mr Lim, you have got 2 minutes.

Mr Lim Hng Kiang: Sir, incorporated bodies or persons are subject to the corporate rate but there is a schedule, and that schedule will remain but the maximum of the schedule will now be reduced to the new corporate tax rate.

On maid levy for singles, I think Dr Richard Hu had explained last year that maid levy is meant for the married woman to go back to work and therefore the maid levy is for married women with children. Therefore, singles with no children will not qualify. But divorcees and widows with children would qualify.

Third, on the double child relief, the effective relief is $2,000 because you still enjoy the normal child relief and that really translates, even at the maximum of the personal income tax, to about $500 in cash benefits. But, nevertheless, the Minister for Finance has decided that withdrawal of the double child relief should not be done suddenly and he has decided to phase this out over two years. Therefore, the double child relief would come down to $3,000 from the Year of Assessment 2003 from the current $4,000, and revert to the normal child relief of $2,000 from the Year of Assessment 2004.

On the claims, I would like to tell Dr Ong Seh Hong that we have adjusted the amount of claim to $2,500 and based on the current claims, the average amount claimed per person is only $1,600. The ceiling is not causing a problem to people who want to claim and therefore we have decided that there is no urgency to increase the quantum.

Dr Tan Boon Wan: I thank the Minister for his reply and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The sum of $1,462,780,650 for Head M ordered to stand part of the Main Estimates.

The sum of $284,077,310 for Head M ordered to stand part of the Development Estimates.

Head C - 4.45 pm

The Chairman: Head C - Auditor-General's Office. Mr Zainul Abidin, you have got 3 minutes.

Mr Zainul Abidin Rasheed (Aljunied): Sir, I beg to move,

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

Sir, last year, when the Minister for Finance raised an amendment to Article 148 of the Constitution, he said that the underlying rationale of this provision is to safeguard the powers and independence of the Auditor-General so that he can carry out his duties firmly and fairly without fear or favour. Judging from the report of year 2001/2002, the Auditor-General's Office has done very well indeed, as was also recognised by media reports.

I would like to ask a question, Sir. I note from the Budget estimates that the AGO has presented its workload and performance indicators, for example, the audit cost per million dollars of auditable dollar, and also the auditable dollar per audit staff. My question is whether, in fact, that is a credible measure, and what other measures do we have, and how does the AGO compare with other AGOs' work. And, also, will the AGO take upon itself to audit expenses to avoid excesses or opulence when it comes to building Ministries, as the fear or concern raised by Mr Tan Soo Khoon yesterday.

Mr Lee Hsien Loong: Sir, as Mr Zainul Abidin has pointed out, the AGO's efficiency is measured by two performance indicators which are based on a proxy for its audit workload, known as auditable dollar, which is a total of the audited revenue expenditure, assets and liabilities of the auditees. In other words, it looks at the accounts of the organisation being audited, and it adds together its revenue, expenditure, assets, liabilities, its profit and loss, as well as its balance sheet. All added together, it is just a number, to give some indication of the size of the organisation.

The two performance indicators are the cost per auditable dollar as well as the amount of auditable dollar per unit staff. The cost per auditable dollar measures how efficiently AGO operates, and AGO tries to keep these indicators as low as possible. On the other hand, AGO strives to maximise the amount of auditable dollars per unit staff, as it is a measure of labour productivity. It is a rough-and-ready measure.

As to whether AGO audits for opulence, the answer is no. It is not his job to be a censor. It is his job to make sure that if you have built the building, the money has been properly accounted for. But as to whether the building is too lavish, too opulent or wasteful, that is management accounting, and that is a management responsibility. The Ministries involved, the Permanent Secretaries, and ultimately the Ministers, are answerable for that.

Mr Zainul Abidin Rasheed: I withdraw.

Amendment, by leave, withdrawn.

The sum of $14,492,870 for Head C ordered to stand part of the Main Estimates.

The sum of $272,500 for Head C ordered to stand part of the Development Estimates.

Head R -

The Chairman: Head R - Ministry of Law. Prof. Chin.

The Leader of the House (Mr Wong Kan Seng): Sir, I just wish to remind Members to follow proper procedures when they ask for leave to withdraw their amendment. Do not say, "I withdraw", that is it. That is not the correct way to put across. Please say, "I beg leave to withdraw the amendment."

Assoc. Prof. Chin Tet Yung (Sembawang): Sir, I beg to move,

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

Sir, may I have leave to take the three cuts together?

The Chairman: Yes, please.

Assoc. Prof. Chin Tet Yung: Sir, the legal landscape in Singapore is going through significant changes. The same as the other sectors of industry, there is a need for the profession to restructure, or in the catchword of the day, remake itself to meet changing times. It is therefore timely to ask the Minister to brief the House on the state of the legal system as well as on the plans to remake it. There are obviously some concerns that I hope the Minister can address, and some suggestions that I hope he will consider.

The first concern is that there appears to be a large number of lawyers leaving the profession. Would the Minister be in a position to let the House know why this is the case? It is, of course, not cheap to train lawyers. If lawyers leave practice after a short period, it will seem that we have wasted public money in training them in the first place. It is true that many lawyers appear to have been extremely successful in other professions, notably, I am happy to say, in the creative arts. We have lawyers who have become theatrical directors, playwrights, actors, actresses and even dancers. Many lawyers are now employed also in managerial and other positions in companies. But, of course, the concern is whether there are enough lawyers in practice. There are currently, I understand from the Law Society, only 3,200 lawyers taking out practising certificates. Given the growing economy, are they enough to service Singapore and beyond?

Secondly, the training of lawyers is a matter of concern. There is a move away from traditional practice such as conveyancing into legal areas more attuned to the new economy, such as intellectual property law, computer law, biotechnology law. How is the Ministry assisting and facilitating the training of lawyers to meet this challenge? In particular, will there be a need to impose compulsory courses for practising lawyers, in the same way as doctors are expected too, to upgrade their skills and knowledge? This is also currently the practice of many countries, including England, where there is a felt need to ensure that the legal profession is kept up to date with the development of laws, especially in relation to those new areas. There is also a felt need to train our lawyers, who are mostly tuned to litigation, to improve on their alternative dispute resolution skills, such as arbitration and mediation. What is being done to improve that? Indeed, given the practice of law now requires individuals who are not just good in legal analysis, but also in other disciplines.

Would the Minister, for example, have a view on whether we should have law as a post-graduate discipline, as is the case in the United States, rather than as an undergraduate discipline? Take a very simple example on this type of need. If a lawyer actually wants to be a patent attorney, he would need to have a good grounding in science as well as in engineering. Similarly, we can see the need for non-legal training and many other areas, such as economics, statistics, computer science or life sciences. Given that this is the case, should we not then look to either making law as a post-graduate degree, or having double degree programmes, started in our universities?

Thirdly, I wish to raise the issue of whether the influx of foreign lawyers into Singapore has achieved the result of transferring of technical know-how to our local lawyers. The Legal Profession Act was amended to allow local firms to have joint ventures with foreign firms, so that there can be such a transfer. Can the Minister give us an update on the joint law ventures with foreign firms? Recently, we have seen some local firms parting company with their foreign partners. The divorce rate, given the numbers, seems to be quite high. Why are the relationships so short-lived? Can the scheme really be regarded as a success in so far as it is unlikely that much transfer of expertise could have been done in this very short period?

Fourthly, developing Singapore as an arbitration hub. One of the most useful fiscal measures announced in the current Budget is that of the withholding tax exemption for arbitrators. International arbitrators were subject to withholding tax at the prevailing non-resident income tax rate of 24.5%. To promote this arbitration industry, payments to international arbitrators have been exempted from withholding tax, with immediate effect. This is no doubt an important step as it will immediately reduce the cost of international arbitration in Singapore. Personally, I have heard from two well-known international arbitrators who originally lamented that they were unhappy about having to pay this tax, that they would be much more interested in working in Singapore if they were exempted from such a tax. So I think this is actually a very good sign. Their wish has now been granted. But I believe that it would be unlikely to result in an immediate improvement in the international arbitration situation in Singapore.

Let us put the arbitration scene in perspective. For example, the American Arbitration Association and the China International Commercial Dispute Resolution Centre, each did over 500 arbitration cases in the year 2000. Singapore's International Arbitration Centre, on the other hand, dealt with very much less, about 100 cases a year. So the task would be a very enormous one, and I would like to ask the Minister how his Ministry, perhaps working together with the other relevant agencies, could put Singapore on the map as an international arbitration centre.

May I suggest for one thing that, given the fact that Singapore companies are branching out into the region and beyond and doing business globally, would the Ministry persuade and advocate that such companies do their best to promote the use of Singapore law as the governing law of transaction, so that arbitration can then be conducted in Singapore? Additionally, may I ask whether additional facilities are planned to enhance the quality of arbitration premises in Singapore. Because usually arbitration cases in Singapore are done in hotels, and there have been some reservations about the suitability of some of our hotels for this purpose.

Lastly, and perhaps more importantly, are we, first of all, training enough arbitrators with international potential; also, training support staff necessary to have a first-class arbitration service? For example, in a good international arbitration, what is needed is that there will be professional reporters who can record verbatim reports of the arbitration proceedings. Very often, such professionals are not available in Singapore and frequently costs of arbitration are increased because such personnel have to be flown in from places such as Australia.

I hope that the Minister can give some answers to these various concerns.

Ms Indranee Rajah (Tanjong Pagar): Sir, I would like to ask the Minister about the current policy with regard to the quota of law students allowed to practise in Singapore, and that includes the numbers admitted to NUS as well as the restrictions on those coming in from foreign universities. I ask this because in 1993 there were amendments to the Legal Profession Act where we restricted the numbers of lawyers allowed to practise.

I understand that the reasons for that were two-fold. One, it was to regulate the quality of the lawyers allowed to practise, a reason with which I agree fully. The second was the allocation of manpower, because the concern was that too many people might go into law, resulting in the detraction from the other areas of the economy. On the second reason, what we have seen from the impact of the amendments in 1993, which was felt in 1997, was a fairly sharp reduction of lawyers available for practice in the market. That seems to have the effect of actually driving up the starting salaries of lawyers because there were fewer good talents available. Secondly, we did not at that time take into account the phenomenon that we saw after 1997, which was the increasing numbers of lawyers leaving practice. Without meaning to take away from the Minister's right to reply to Prof. Chin Tet Yung, I can actually enumerate some of the reasons why the lawyers have been leaving practice. Firstly, there are those who leave for personal reasons because they have decided that law is not their thing. The second group are those who have decided that practice is a little bit too stressful, but they would still like to maintain contact with the law and therefore go and become in-house counsel or some other law-related practice which is not actually professional practice. The third group are those who join foreign law firms and therefore do not practise Singapore law but practise offshore law, either in Singapore or overseas. So the policy on the restriction of the numbers appears not to take into account this leakage. Perhaps the Minister could comment on that. Also in commenting on the numbers of lawyers admitted to practice, would the Minister also let us know whether the Ministry has taken into account the increased demand, or potential demand, bearing in mind, that now there is actually a greater demand for what we call professional support lawyers (PSLs). These are the people who do research, for example, or carry out administrative functions. They are qualified lawyers and their background, as lawyers, is helpful but they do not actually practise law. 5.00 pm

Secondly, the fact that we wish to develop Singapore as an arbitration hub means that we need the back-up support from lawyers as well. And thirdly, the fact that we wish to develop Singapore as an IT hub again is going to need lawyers. So I would be grateful if the Minister would comment on the quota of lawyers available for that.

Assoc. Prof. Chin Tet Yung: Sir, one of the major concerns has been the costs involved in taking cases to court. Lawyers have never been cheap, but also they remain not cheap these days. Some of the lawyers in this House may be able to confirm this trend.

Neither are costs involved in bringing cases to the courts. Indeed, many Members of this House must have received feedback from residents saying how expensive it is to bring private action suits, enforce your rights, and so on. Singapore has an enviable reputation no doubt for its efficient courts and its pro-business approach. But all the kudos received from businessmen, and the like, would not make our legal system a great one if the common man or woman cannot have reasonable cause to use the legal system to resolve disputes and enforce his rights.

To this end, Sir, I would like to suggest that we look into how we can bring justice to the heartlands as it were. We already have community mediation centres set up in various parts of Singapore. Can we not have a circuit of mediation centres or small claims courts for settling minor claims, that is, claims not over $10,000 perhaps, where the costs of hiring lawyers or filing documents would not be too prohibitive? In fact, such courts may take the stance that they should not have lawyers at all in such cases. I should also like to suggest that we can involve more members of the community in the dispute resolution process. Right now, some community leaders are already trained in mediating neighbour disputes. It may be appropriate to increase their role to include mediating between, for example, traders and consumers. I wonder whether that would be something we can see in the future.

Sir, Singapore can, of course, be very proud of its legal system. Our lawyers are well trained and this has, of course, been the envy of many. But the quest for justice, especially for the common man, is not an easy one and it is not a cheap one. It is very important therefore to have a legal system that is affordable. At the end of the day, if the man-in-the-street agrees that our legal system can dispense justice fairly quickly and at reasonable cost, that should perhaps be the most sought after kudos that one would want.

The Minister for Law (Prof. S. Jayakumar): Sir, I thank the two Members who have spoken. I notice that quite a number of serious items are proposed to be raised under the Ministry of Law, but the time allotted is very limited. So to enable as many of the topics to be raised, I will be as brief as possible to enable answers to be given on the other cuts that are forthcoming. And I apologise if, in the process of being brief, I do not give complete answers and if a serious point has not been answered, I hope Members will raise it under Questions for Oral Answer.

I will take first the different aspects related to the legal profession on law. First, lawyers leaving the profession. What Prof. Chin and Ms Indranee Rajah said in a sense are related to matters of the same issue. Are there too few lawyers today? Why are they leaving? Is there a need to worry? What must be done? This is partly caused by the publicity about lawyers leaving the private sector. I think that, like any other job, people leave the legal profession for various reasons. And since Ms Indranee Rajah has listed some of them, I will not repeat them. But there are many reasons. And I do not want to add to the speculation whether it is the stress of the work, and so on. But I do want to say that the legal profession is in a state of flux because of the many changes that have taken place within the global environment and, indeed, within our economy. The profession has experienced a wide variety of changes and changing expectations of how the legal services will develop.

So, to some extent, I am not surprised that quite a number of lawyers are leaving the profession in recent years. I think things would settle down after we have gone through the period of redistribution of legal talent following especially the abolition of the conveyancing scale fees. Should we be concerned? What should we do? The first thing we should do is to have a better understanding of the underlying reasons why lawyers are leaving the private sector. And this is one of the main reasons why the Ministry of Law is conducting a very comprehensive survey, together with the Department of Statistics, on the legal services industry and the profession. The response to the census, in fact, has been very good. Some 99% of the law firms responded and 75% of individual lawyers have responded. The information is being collated and, I think, for the first time, we have an in-depth study of the nature of the legal industry and the profession. Hopefully, we will then be able to chart the various directions and steps that need to be done.

On the quota of law students, Ms Indranee Rajah was right about the rationale for these steps we have taken. The emphasis is really more on quality than on the numbers. In this regard, the Second Committee's Report on Supply of Lawyers, made only last year, made recommendations on how we can bring a wider variety of talents into the profession, and these include admitting of law students from Australia, New Zealand, giving the Board of Legal Education greater flexibility in approving combined and double degree courses and in admitting, on a case-by-case basis, quality graduates who do not meet the normal criteria. I should, in response to the point that she made, assure her that the Committee, when adjusting the NUS intake numbers, did so taking into account the higher attrition rates in the legal profession. This is one of the factors they took into account. But here, again, I would say that it would take a few years before the effects on the recommendations are felt. In the meantime, we may experience two or three years of negative growth in the number of lawyers. But I do not think there is reason to be overly alarmed.

She mentioned the need for us to take into consideration lawyers who would be in supportive role, other than in the private practice of law. I do not think there is a restriction on that. For example, the restriction we have from one of the scheduled universities, having a second class upper degree, is a restriction on practice of law. But there is no restriction for non-practitioner roles.

But at the end of the day, let me repeat what I have said before on numerous occasions in this House, that I do not view these figures as being cast in stone, that when we have these reviews and adjustments, we must be prepared to adjust to changing circumstances. And if there is a need for us to make adjustments earlier than expected, for example, after we have studied the comprehensive report that I referred to, we should be prepared, and I would be prepared, to do so.

As for training of lawyers, a point raised by Prof. Chin Tet Yung, the Law Faculty, the Law Society, the Academy of Law, to name a few organisations, do conduct a wide variety of courses for training of law amongst our legal profession. There are all sorts of seminars and workshops, etc.

As to the question whether continuing legal education should be made compulsory, I am of the view that the lead should not come from the Government. It must be the profession itself that realises that it is in the interest of the profession to be abreast of fast changing developments in Singapore, in the region, in the world, both in law and other disciplines, which have an impact on law. So it is in the interest of the profession to provide for continuing legal education and whether they would like this continuing legal education to be made optional, or compulsory. I would first want them to study the matter and take an initiative. If, after they have studied it, they feel that amendments to the Legal Profession Act ought to be made, I would be prepared to entertain this request. But I would rather that this approach be taken than a Government decree in the first place that the Legal Profession Act should be amended to make it compulsory. In this regard, we would be prepared to have discussions with the Law Society.

As for post-graduate degrees, we have discussed this last year, and I would like to point out that the key considerations are to take into account scarce resources, the need to prevent legal education from becoming prohibitively expensive. Having said that, I am aware that the NUS Law Faculty is encouraging more graduates to take law as a second degree. It is also moving towards allowing law to be taken as part of a multi-disciplinary degree. And in this regard, they are also considering the possibility of law as a double degree. I do not know when they will take the decision. But I think this is moving along the direction that Prof. Chin mentioned, and these are good moves.

Then Prof. Chin talked about the joint law venture (JLV) scheme. He asked for an update, whether it was a success and why the joint law venture was so short-lived. To quickly recap, the objective of the joint law venture scheme is to ensure that there is a sufficient top-tier legal expertise in Singapore to service our growing financial sector. The JLV scheme serves to achieve this by attracting more top foreign legal talent to Singapore and providing opportunities for Singapore lawyers to be trained with the leading law firms of the world and, thereby, facilitate transfer of top-tier legal expertise to local firms. In terms of training of Singapore lawyers, most of the JLVs have indeed put in place comprehensive training programmes for Singapore lawyers. And I think benefits of this objective of training are quite clear. In terms of transfer of legal expertise, because this is in existence for just a period of 20 months, there are not really enough opportunities for this to take place in a very significant way. To compound matters, the uncertain economic outlook in the region has also made it difficult. But as a partner from a top UK law firm recently quoted in Legal Week, he said, "it started a bit slowly because of the downturn, but now the benefits are coming through and we are happy about it." We should be better able to assess the situation after the economic outlook of the region picks up. But nevertheless, the local law firms have been able to obtain considerable intangible benefits from the JLVs.

He asked why are these relationships short-lived? Again, let us remember the JLV system has been in operation for about only 20 months. It is therefore too early, in my view, to arrive at any final judgement on the scheme. Out of the eight JLVs, only one has been dissolved. So, that does not tell us enough to arrive at a conclusion on the success or failure of the scheme. 5.15 pm

Professor Chin talked about access to the justice system. I think we cannot disagree with him that we must always ensure that there is access to the legal system for the common men. But our position here is not as bad as Prof. Chin would make it out to be. For those who really cannot afford legal fees at all, there are various avenues of assistance which are available, including legal aid and free legal advice at various legal clinics. The Legal Aid Bureau revised the means test quite recently and more people, as a result, qualify. There has been some 15% increase in the number of cases.

Let us not forget that when we talk about cost of legal proceedings, there are really two components. Firstly, are the court fees, which include stamp fees paid for filing of court documents and so on, and hearing fees. Secondly, the fees charged by lawyers. As far as the costs by courts are concerned, the courts have taken efforts to keep court fees low. Stamp fees have not been increased since 1991, and hearing fees have not increased since 1993. So, there have been efforts to keep them low.

As for lawyers' fees, like all professional services, lawyers' fees are determined largely by market forces. Are they too high or too low? Prof. Chin says the lawyers are not cheap. How do they compare with other countries? According to Asia-Pacific Legal 500, "Singapore's legal market is extremely competitive. Fees remain at relatively low levels, particularly among Singaporean clients who, as a result, receive some of the best value legal advice in the world." Compared to their international counterparts, Singapore lawyers are cheap. But that does not mean we should not strive to reduce legal costs.

In this regard, let me also say that the justice system does not mean only the courts. We must also take into account alternative dispute resolution methods. He referred to the mediation centres and the Small Claims courts. Since there are two MPs who are moving cuts on mediation later, I will leave it to my colleague, Senior Minister of State Assoc. Prof. Ho Peng Kee, to deal with that shortly. But, overall, I do not think the cost situation in Singapore has posed such onerous obstacles. Our court fees have been kept low, our lawyers' fees are competitive internationally and, for those who cannot afford, there are various alternatives. But we should seek constantly to see how we can improve it.

Finally, on his point about arbitration, I welcome his comments about the recent Ministry of Finance's removal of the tax. I agree with him when he says we should position ourselves in Singapore as an arbitration hub. It is a matter on which I myself have spoken. I think we have all the assets and advantages to do that. We have excellent infrastructure, a good legal system, our reputation is sound internationally, we have common law and English-speaking lawyers. He mentioned China. I think we are one of the few places where there are English-speaking lawyers who are familiar with the Chinese language and traditions. So we have all these going for us. We have to harness these strengths and position ourselves. The removal of the tax for international arbitrators is but one step.

Of course, much more must be done. He has enumerated many points to be taken into consideration. We will consider, and I will ask those who are following up on this to take into account Prof. Chin's ideas. Working with other agencies? Indeed we do so. We work with the Singapore International Arbitration Centre, Singapore Academy of Law, the Law Society and various other agencies in our plan to develop Singapore as an international arbitration hub. If Prof. Chin wants to be involved in this exercise, we will be happy to do so.

I understand that the Legal Services Working Group, chaired by Solicitor-General Mr Chan Seng Onn and Senior Counsel Mr Shanmugam, will be making recommendations on how Singapore can be further developed as an alternative dispute resolution hub in this region, and I understand these recommendations will be examined carefully.

I have several other points here, but I should allow other topics to be raised.

Mr Heng Chee How: Sir, Singapore is a small country and our people live and work close to one another. With better education, our citizens are becoming more conscious of their individual rights. At the same time, with increased competition and volatility in the economic landscape, stress in society grows.

This sets the stage for an increased likelihood of friction in many different areas. For example, at our meet-the-people sessions, it is not uncommon for us to come across some long-drawn disputes between parties. These disputes, though not very complex, tend to drag on and they drag in other bodies, such as various Government agencies, and then they go round and round. There is great effort expended on the part of all sides, but not always for commensurate benefit.

For Singaporean society not to become overly litigious in this new setting, mediation seems to be a good alternative to be used. I would like to ask the Minister whether the Government or his Ministry will be taking additional measures to increase the use of mediation in dispute resolution at the community level, and will the Government consider making mediation mandatory, at least for certain types of disputes between individuals on the recommendation of certain authorised persons and, if so, what steps will the Government be taking to develop the manpower needed to staff such mediation infrastructure?

Mdm Ho Geok Choo: Sir, along the same vein as what my colleague, Mr Heng Chee How, has just spoken about, I would like to touch on another perspective with regard to the need for mediation centres to be set up.

Other than tensions or conflicts arising among neighbours, one increasingly common phenomenon is actually the area pertaining to conflict mediation that has to do with school-going teenagers. The police and other community agencies have very wisely recognised this and have organised street soccer and other games to ensure that kids are kept away from unwholesome activities, especially during the school holidays. However, my concern is that while playing these games, kids do get involved in scuffles and fights over the game itself. Since youths are more disposed to outbursts and, if tensions built up are not released earlier, they actually can get very explosive. This, to my mind, is a cause for concern for a community.

This is where I would like to urge our grassroots and youth leaders to play a more active role in helping to deal with these problems. But, as things stand at the moment, not all our grassroots and youth leaders are properly equipped with the skills to handle these sensitive issues.

Can the Minister consider setting aside more money for the community and social sector development agency or other agencies within the ambit of the Ministry to help fund courses to train our grassroots and youth leaders with awareness and skills programmes? Can the Minister also consider some publicity promotion of existing mediation centres? Lastly, can the Minister review how we can educate and encourage the ordinary citizens to seek the assistance of such centres? All these will work towards fostering a spirit of harmony and neighbourliness in our housing estates.

Mr Inderjit Singh: Sir, I would like to propose three areas to promote enterprise. First of all, bankruptcy laws. I would like to suggest that the Ministry look at trying to differentiate between bankruptcies caused by business failures, especially start-ups, versus bankruptcies caused by fraudulent or criminal cases.

First, people who fail in attempting to start companies and attempting to be entrepreneurs. If we take them out of the system, it will be a big loss, because they are the people who can come back and do a lot more in trying to start up more successful companies later on.

Second, on self-destruct laws, I support the call made by Mr Raymond Lim to put in place laws which self-destruct or have sunset clauses in them, for obvious reasons that they do not get outdated and do not become a hindrance over time, especially for businesses.

Third, on the legal system for the new economy, while we are advancing in technology and in many other areas, I do not think our legal system is able to keep up, especially in the area of intellectual property, cross-border laws, etc. I suggest that we try to benchmark other countries and try to learn the things that have been done by others and implement such things as quickly as possible into Singapore. But, until we can do that, there will be issues which we still cannot resolve, and I would like to suggest that we implement a system of visiting judges, where we invite judges from countries with prior experience in the areas which we need and do not have right now. We can invite such judges from time to time to arbitrate on issues and resolve issues, and this will give confidence for investors to actually do more complex things and technology type of activities in Singapore.

The Chairman: Dr Wang Kai Yuen is not here. Mr Ravindran.

Mr R. Ravindran (Marine Parade): Sir, the Singapore Land Authority is the biggest owner of land in Singapore. Two years ago, I made a call in this House for the then Land Office to be pro-active in putting up land for public use.

Sir, I believe that Singapore Land Authority can be more pro-active in putting up vacant land for public use. Recently, in a dialogue session with my grassroots leaders, it came across very clearly that whenever grassroots organisations want to make use of State land, the Singapore Land Authority usually requests a high rental or they claim that land is needed for other purposes.

Sir, I would like the Singapore Land Authority to seriously consider how they can open up State land for public use, particularly in the area of sports and recreation. I understand that pressure comes from the Auditor-General's Office, which demands that State land be rented out at market prices wherever possible. But my call is that we should release such State land, particularly those which are not required immediately within the next three years, to be let out for public use so that we can encourage greater use for sports and recreation.

Sir, my second point relates to zoning in Singapore. Many of the State land are usually either zoned as commercial or residential usage. I would like to make a call whether it is possible to create some new category called critical and essential services such as sports and electricity plants where we do not charge the full market value so that many of our leading corporations, eg, PSA and Changi Airport, can compete with other big players in the world which enjoy cheap land and other special grants from their respective governments. I would like the Singapore Land Authority to consider this request seriously.

Mr Heng Chee How: Sir, I would like to support my colleague, Mr Ravindran, in calling for a more pro-active use, at least temporary use, of vacant State land for community purposes.

There are pockets of vacant State land in most constituencies in Singapore and some of these pockets may be actually left vacant for fairly extended periods. Therefore, I would like to join the call for the SLA to consider a policy of more actively and easily allowing community use of such lands.

Mr Charles Chong (Pasir Ris-Punggol): Sir, some of my points have already been raised by my colleagues who have spoken before me and I shall not repeat them. I, too, would like to call upon the Singapore Land Authority to be more pro-active in allowing vacant land to be used by grassroots organisations and other non-profit organisations.

Sir, I understand that the Singapore Land Authority also offers rebates on charges and levies for grassroots organisations and non-profit organisations. In land-scarce Singapore, this is indeed a welcome development for grassroots organisations and the community. It should also be good news for the SLA as it can now save on maintenance costs while the land is put to good use until it is time for redevelopment.

However, for many grassroots organisations which will have to incur costs in converting the land for community use and maintaining it, the rebates may not be sufficient. I would, therefore, like to urge the Ministry of Law to consider increasing the rebate or levying just a nominal rate for recognised grassroots organisations that use State land for non-profit activities that are beneficial to the community. The Singapore Land Authority should also list on its website the areas where there are vacant State land that will not be required for redevelopment within the next three years or longer, the application rates that will be charged and the conditions for use of the land. 5.30 pm

GROs, community organisations and members of the public can then put forward creative and beneficial ideas and, where applicable, even manage the temporary use of such vacant sites until the land is required for development.

The Chairman: Prof. Ho, you have 14 minutes.

The Senior Minister of State for Law (Assoc. Prof. Ho Peng Kee): Sir, I thank the Members for sharing their concerns on Ministry of Law matters. First, let me take the cuts on community mediation by Mr Heng and Mdm Ho.

Sir, those of you who were in the House four years ago would have sat together with me as we passed the Community Mediation Bill. That was a landmark move, signalling Government's intention to promote community mediation as a means of settling community disputes. All of us who know the ground will know that there are some of these minor relational disputes between family members, neighbours, stallholders, which lend themselves more to settlement through mediation rather than litigation. Unfortunately, some of these cases end up in court. That is no good for community bonding and social cohesion, a point that Mdm Ho has talked about.

Three, four years on, Sir, I am pleased to say that we have made good progress in this area. In other words, we are on track. Just some statistics to cheer us up. But it is not just the statistics, for those of us who know the ground will agree, we are cheered more by actual cases that we have come across where people, through mediation, have had some of their disputes settled amicably.

Over these 3-4 years, our CMC has facilitated some 800 mediation cases. We have set up three CMCs. Sir, more cases are increasingly being handled, starting from 120 in 1998 to 211 in 1999 and last year, 273. Of course, we are not just wanting more cases to surface. For we all know that there are cases out there which really should be mediated, and these are the cases we want to encourage to be so mediated. Mediation is indeed the way to go to settle these minor relational disputes.

Whilst we are cheered, what more can be done? I think that is the point that the two Members have talked about. This is sort of a wish list which answers Prof. Chin's and Mdm Ho's concerns. The first is that we will proliferate mediation venues on the ground. Besides having flagship mediation centres, which should be spearheaded by the Community Development Councils, which we hope will take ownership of the process because, after all, it is also in line with their aims to promote community bonding, we hope to designate two or three satellite mediation venues on the ground in each District, working in concert with the CDCs. In this way, mediation services will be made more accessible to Singaporeans. Hence, we have started with having mediation venues now in Community Centres in Ang Mo Kio and also in Eunos. We will do more.

Next, Mdm Ho has talked about training of more grassroots leaders and volunteers. Indeed, this is something we have been doing all the time. We have trained about 200 grassroots leaders and we will do more. Not only will we train mediators, we also want to train what we call "persuaders". They may not do the actual mediation, but they will go to the places where the disputes had taken place and try to encourage the parties to come for mediation sessions. This is because Singaporeans still have misconceptions about mediation. It is important to clear these doubts, and then they will come. We will do more in terms of training mediators.

Mdm Ho also talks about education efforts. We will do more. In fact, we have done some already. We are happy with what has transpired including from what I have heard, the quite well-received TV series in Chinese on mediation. But, certainly, we need to do more.

Lastly, which is an important point, we will work with referral sources - CDCs, grassroots advisers, the police, the courts - to facilitate and expedite a process where referrals can be made. I think this is important.

Mr Heng has highlighted a key point, a very important point, which has been on our minds in MinLaw for sometime, which is whether or not community mediation should be left entirely voluntary. When I moved this Bill 3-4 years ago, in fact, one or two MPs made this point at that time. Because, at that point in time, we decided that in order to encourage more Singaporeans to buy in and accept community mediation, we left it entirely voluntary. I remember, in particular, Dr Vasoo asking, "will that do the job?" Well, 3-4 years have lapsed. From experience, we should consider whether or not a case has been made to do more, because the feedback is indeed that there are some Singaporeans who want to settle their disputes through mediation and they come for help. But the other party just does not want to come, for whatever reason. We have not decided on this yet but, certainly, I will ask my officials in MinLaw to study what more we can do if indeed that is the way to go.

Of course, I have mentioned just now the use of more persuaders, and this is something that we must do. On top of that, maybe we can consider other options, some of which have been used in other countries. For example, whether or not to say that if you receive a letter from the CMC, you must come. This is compulsory mediation. Another would be, for parties who go to courts, before the courts will take up their case, they will be asked to go for mediation first. The party's wilful refusal to attend mediation sessions will be made known to the magistrate and will constitute one of the factors for his consideration whether or not to issue a summons for the matter to go to court. That is a possibility. The third is to empower the police to require the parties to go for mediation before the police will investigate a police report. Mdm Ho says that these are cases, especially the minor ones, which police do not want to investigate immediately - try mediation first. Let me just say that at this point in time, we are still exploring the possibilities. We will decide over the course of the next 2-3 months.

Let me end this point by saying that it is indeed very important to create a culture of mediation on the ground, and we should start with the young. Mdm Ho has mentioned this and indeed, this is what we are doing. Working with the Subordinate Courts and the Ministry of Education, we have a peer mediation programme in our schools. Because, ultimately, if we can create a mindset in Singaporeans where they will try to settle some of these minor relational disputes on the ground by themselves - if not, they could seek this kampung ketua, your community mediators - then, over the long-term, this will help create, in Singapore, a more cohesive and more harmonious society. Sir, we will certainly start with the young and permeate this culture on the ground, with the help of our grassroots leaders.

Let me take Mr Inderjit's cut, which is an important cut, because he talks about creating in Singaporeans a more entrepreneurial spirit and, in particular, how we can improve our bankruptcy regime to do that. Let me just assure Mr Inderjit Singh that we do differentiate between bankrupts who have become bankrupts because of genuine business failure and those who become bankrupts through malpractice or are at fault. In fact, we take this approach. Members will remember that in 1995, we introduced the discharge by the Official Assignee, the section 125 process. When we started off, it was only after five years, and the limit was $250,000. Then, as we administered this process, we enhanced the regime. Now, a bankrupt, who has a debt of up to half a million dollars, after three years, the OA can consider him for discharge. I am glad to say that this process has worked well. Since it was introduced in 1995 to 31st March 2002, over 8,700 of such discharges have been made. The OA tells me that he is ever mindful that this is something that he must be concerned about, because we want to create in Singaporeans this enterprising spirit.

This second chance approach is not only evident at the point of discharge but also at a point when the bankrupt is working towards discharge. For example, now, there is a process where bankrupts who apply to become directors of companies or to manage a business, the OA can consider these applications. Indeed, he tells me that between September 1999 and March 2002, he received a total of 262 of such applications, of which only about 20% were rejected. The rest were either approved or withdrawn.

I want to assure Mr Singh that our bankruptcy regime is not a "one-size-fits-all" approach. He made this point when we debated the Bankruptcy (Amendment) Bill in 1999. He argued that we must be flexible, we must take cognisance of various factors, both in terms of how the person became a bankrupt, as well as his conduct as a bankrupt. These factors are indeed being taken into consideration through the section 125 route, and also allowing the bankrupt more flexibility in doing business. We will do more for these bankrupts. From 1st March this year, the OA tells me that he has put in place a system to categorise bankrupts according to the conduct and cause of insolvency. Those who are more deserving will, for example, be given privileges more flexibily. These are available to all bankrupts, but if you fit into this category, for example, if you need to travel to do business or for any urgent matter, it will be considered more favourably, or buying and selling a flat, or submission of statements.

Second, we are also going to introduce a pre-bankruptcy mediation service this year. This is important because that will help divert some of these potential bankrupts away from bankruptcy. Through the mediation services offered by the OA officers, we hope that some of these potential bankrupts will not be made bankrupts. In particular, if it is a genuine business failure, the chances of success will probably be higher. This will complement the post-bankruptcy service which has already been in place.

As regards self-destruct laws, this is being considered by Mr Raymond Lim's Committee. I do not think I will pre-empt him. It is certainly a point which has arisen in many contexts as we try to remake Singapore. Let me, in a very short fashion, say that it is a good point for us to say that we should review our laws all the time, especially business laws, which have short shelf lives, because times change all the time. I want to assure Mr Singh that this is indeed being done by the Ministries. But he is proposing something which should engage our officials in a more pro-active way for them to be mindful whether laws should still apply. That can be considered by the Committee.

As regards legal infrastructure, a short point will be that we do all we can to ensure that Singapore remains on top of the situation in terms of cutting edge areas. Both, in terms of MinLaw and, in fact, even our courts, our judges, also ensure that they know what it takes to be able to administer the laws. MinLaw, for example, in terms of IT, if Members recall in this House, we have done many things. We have passed laws, and introduced electronic filing, and we have done many things on patents and other matters to ensure that we are on top of this area. For example, we will go forward and review the Copyright Act to take into account recent advances in digital technology. Judges themselves go for training. If Members remember, 2-3 years ago, they went for a life sciences course conducted by the NUS, which was quite widely publicised. Judicial commissioners are appointed to the Bench. They are practitioners who have vast experience and who bring these experiences with them to the Bench. The latest was Ms Belinda Ang, who was appointed as a JC and now, in fact, sits in a specially set up Admiralty Court. The other move the courts are taking is to set up specialist courts. They are also considering setting up an IP court. Indeed, if need be, assessors are appointed to help the judges to decide cases, as in a recent case where Dr A J Nihols of Probitas Corporation was appointed as an assessor.

Lastly, arbitration also offers a route for parties who want somebody of their own choosing, whom they think can decide their dispute in a fair way, they can appoint that person as an arbitrator. And, certainly, with the recent relaxation in our arbitration regime, that will come to pass.

The last point is on land use. Let me just say that we have taken account of the feedback that we have received, that SLA should do more, so that grassroots organisations can use the vacant lands in HDB estates more easily. Hence, what we have done is that since August 2000, we gave a 70% discount for the use of these lands. A recent review was carried out and SLA has decided that we will move it even further down. Instead of charging market rates, April 2000, we gave 70%, and they only pay 30%; now, we are going even further down, so that a new system will now be implemented where grassroots leaders, who are using vacant lands for community purposes, will enjoy an 85% discount. For a football field of some 6,000 square metres, the market rate is $1,500. In April 2000, it cost $450, but it will now be only $150 a month. I think this is quite affordable. 5.45 pm

The last point is to make more information available to grassroots leaders, and indeed to all users of State lands and premises. SLA will start an e-portal in 2-3 months' time. This e-portal will put out all the lands under the SLA - State land, premises and buildings, designated not just for community use but also for institutional and commercial uses. Then all potential and interested users of state land and premises will just have to click a button and know what is on offer.

Assoc. Prof. Chin Tet Yung: Sir, I thank the Minister and the Senior Minister of State for their very thorough answers, given the constraints of time. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The sum of $136,273,180 for Head R ordered to stand part of the Main Estimates.

The sum of $325,128,300 for Head R ordered to stand part of the Development Estimates.

Head V -

The Chairman: Head V - Ministry of Trade and Industry. Mr Leong Horn Kee.

Mr Leong Horn Kee: Sir, I beg to move,

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

Sir, as many MPs have said, Singapore is moving into an uncertain future. The main reason is the threat of stronger competition from the neighbouring countries such as Malaysia and Indonesia, which are two very low-cost operating countries. At the same time, we also have to compete against emerging cities like Hong Kong and Shanghai. Then, there is the looming threat of China as a formidable competitor which is soaking up substantial foreign direct investments (FDIs). We are constantly reminded of the threat of China, but we have not been really told as to how this threat can be contained. Better still, we would like to figure out how best we can ride this huge juggernaut of China, as the Minister had said last year, as this country moves forward to become one of the world's largest economies.

Sir, I would like to ask the Minister for Trade and Industry what are his Ministry's views of the long-term regional and international competitiveness of Singapore.

With respect to competitiveness, we note that there are several international independent agencies that conduct world-wide competitive ratings of different countries. What is interesting is that I note that different agencies seem to give different assessment ratings for Singapore. For example, the well-known Economist Intelligence Unit (EIU) in its report of 16 Asian and Australasian countries covered in 1997-2001, has moved Singapore from second place to the top position regionally for the 2002-2006 period. So, we have overtaken Hong Kong for the top place. However, on a world-wide basis, this EIU report has moved Singapore downwards, from 7th to 9th position.

In contrast, another agency, called the World Competitiveness Yearbook 2002, has ranked Singapore the 5th most competitive country, slipping three notches from the 2nd position last year. So, both the EIU and the World Competitiveness Yearbook 2002 have moved Singapore downwards in world-wide economic rankings. Is this an area of concern? Are we losing our competitiveness?

Nevertheless, what I feel remarkable is that for a small country like Singapore, with no natural resources, a very small population, a very small domestic market, and a very limited number of home-grown companies, we have consistently achieved high international rankings by the most respected international agencies around the world. This testifies to the excellent achievements and hard work of the Government and the people in getting ourselves to this stage. However, the crucial question is, can we continue to achieve this phenomenal growth and sterling results? Will the future be as bright as before? Or would it turn for the worse? Will Singapore be sliding precipitously downhill henceforth?

Sir, in line with the review of international competitiveness, I would like to ask the Minister how he intends to help reduce the overall cost structure of Singapore. It is a perennial complaint of the local companies that the cost of doing business in Singapore is just too high. In this respect, one of the major cost items is electricity consumption. The Government formed the new Energy Management Authority (EMA) last year. The EMA has announced a schedule of plans to liberalise the energy market. Can the Minister update us on the latest situation with regard to the EMA, and whether energy deregulation would really lead to lower prices?

Similarly, among the many industries that the Government intends to promote is the bio-sciences. Recently, there was a report that the ASTAR has been charged with the responsibility of promoting a biomedical hub in Singapore. However, I am concerned to read in press reports that Mr Philip Yeo, Chairman of ASTAR, has an undisclosed budget to use. Even before getting started, it is said that the centre will now double in size in five years. I would like to ask the Minister if he could give more details on the actual plans of the Government in the promotion of biotechnology. What are the real benefits that can be derived, and whether the expected hundreds of millions, or even billions of dollars, that will be spent on this biomedical hub will be worthwhile?

Miss Penny Low (Pasir Ris-Punggol): Sir, as my colleague, Mr Leong Horn Kee, has stated, Singapore has been highly praised by many international rating agencies. Despite slipping a few positions here and there, we are still within the top 10 most competitive countries in the world. These ratings are not just mere morale boosters but they have helped Singapore to attract the much needed foreign investments. Going forward, however, the competition will become more intense, especially with the rise of North Asian and other destinations with competitive cost structure. The rating agencies serve as a barometer to the global hunters. We must maintain our competitiveness in their views.

My question is, how successful would we be in retaining and improving our international competitiveness ranking with the new Budget? In our effort to attract new FDIs and global talents, as well as retain existing ones, what are the specific strategies formulated to: (i) reduce the total cost of doing business in Singapore; (ii) address the flip side of the cost, which is the expected yield of business in or from Singapore; and (iii) address Singapore's role in the region?

Let me briefly elaborate on each of these points.

One, on reducing the total cost of doing business in Singapore. This would include not just the overt costs like tax, land and labour, but also the covert costs like the cost of living and the quality of life. Why would a top talent, who is mobile, choose to stay in Singapore if he is a Singaporean, or come to Singapore if he is a foreigner? Is Singapore exciting enough to attract and retain them? How livable is Singapore?

Two, on expected yield. Empirical evidence shows that people migrate from low-cost rural areas to high-cost cities in search of jobs or yields. Ten years ago, setting up a business in the major cities in China would cost a fraction of the current cost. However, today, the Economist Intelligence Unit (EIU) has estimated US$60 billion per year investments pouring into China, and that constitutes about 70% of all the FDIs to Asia. Certainly, the expected yield in such places must have been perceived to be very high, despite the rising cost. While we do not have the hinterland or domestic market size of our larger neighbours, we have a more transparent and predictable business regime, plus high quality human capital. How can we leverage on these aspects of our competitive advantage to improve the yield, the risk reward ratio for the global FDIs and talents? In fact, how can we improve the balance sheets for both the company and the individual?

Last but not least, what is our role in the region? The Government should be praised for stretching our tentacles to put in place a series of FTAs with partners across the globe. Nearer home, however, we must do more to improve our relationship with our immediate neighbours. To many FDIs, we are still part of a bigger region and hence, in considering their business location, they will also consider our strategic position in our neighbourhood. They want to know if we are the gateway to any market, what is our role and our relationship with our neighbours in the region. What strategies do we have to achieve this? Are we open to new ways of doing business? It is often said that the new business environment requires not just IQ but EQ and CQ.

The Chairman: Miss Low, you have 30 seconds left.

Miss Penny Low: Singapore has been criticised as lacking in EQ and CQ, which is cultural quotient. I understand that on some trade mission teams, sociologists and anthropologists are included to achieve a holistic approach. I would like to ask if our Ministry is ready to incorporate these social scientists as an integral part of our trade and business teams.

Dr John Chen Seow Phun: Sir, as we move into the knowledge era, the structure of Singapore's economy will undergo fundamental changes. This, coupled with our maturing economy, is expected to result in (i) a slower growth rate; (ii) a greater reliance on external demand which rose from 68% of GDP in 1990 to 77% in 2000; and, (iii) a manufacturing sector which is becoming more knowledge intensive with a corresponding reduction of manufacturing jobs.

Regionally, the Japanese locomotive is declining, while there is competitive pressure coming from China and other newly industrialising countries. Within ASEAN, Indonesia's recovery is uncertain and, at best, difficult. Malaysia is moving away from her primary industry base and is trying very hard to beat us in the seaport, airport, petrochemicals, infocomms and logistics sectors.

The newly industrialising countries, with their mass of cheap labour, will focus on mainstream economic activities that are labour intensive to provide jobs for their people. The developed countries in the western world have plenty of resources in technology, capital and infrastructure. Singapore, unfortunately, is caught in between.

Under such an economic landscape, I too would like to ask the Minister what is the Government's strategy to make Singapore internationally more competitive.

In the past 35 years, we relied on foreign direct investments (FDIs) and MNCs, as well as GLCs to provide growth, with SMEs playing the supporting role. Would this tried and tested approach continue to provide Singapore with future growth, or should we now emphasise on building an entrepreneurial economy?

My view is that while we continue to attract FDIs to grow our knowledge intensive industry, we must nurture the future entrepreneurial economy. To do the former is easier as we have been successfully doing it over the years and are quite capable of continuing. However, to do the latter will be more tricky as the environment must be right for it to take root and bear fruit.

Members may note that Singapore's early economy has been founded primarily upon trade and commerce. Many of our pioneering fathers were businessmen, traders, shopkeepers, etc, or dreamt of becoming one. They all desired owning a business, and entrepreneurship was in their blood. How then are we to re-create this spirit of risk-taking? Have we got too comfortable?

A new economy with a thriving entrepreneur sector cannot be created overnight. We need the essential ingredients placed in the right environment. The Government should at least try to create this environment for entrepreneurship to flourish.

It will be these smaller companies that will find the right niche industries to survive or even thrive in. One such success story, which is often told, is Creative Technology. Singapore certainly needs many more such companies. Many factors are needed to make up the right environment for a successful entrepreneurial economy. I will speak on three major ones. They are, one, plentiful bright ideas; two, low cost of failure, including social costs; and, three, access to funds. Firstly, without bright ideas, there will be no start-ups and no ventures. We should not only attract ideas locally but also ideas from all over the world to incubate here. Successful ideas will then find their market globally. So EDB should not only attract FDIs but also actively pursue foreign ideas to locate in Singapore. Secondly, there is a general stigma attached to failure in Singapore. This is the main cause of the aversion to anything risky among the better trained in Singapore. This mindset needs to be changed through education in order to lower or even eliminate the social cost of business failure. I would like to remind Members that, in America, CEOs of failed start-ups are actually sought after for their experience, so that mistakes made can be avoided in the future.

What is worse in Singapore is that many entrepreneurs also have to risk personal wealth in order to fund their ventures. This could lead to personal bankruptcies when failure occurs. Surely, persons who contribute their good ideas should not be made to risk their total savings, or house as well. This factor is one big difference between Britain and America.

The Chairman: Half a minute more, Dr Chen.

Dr John Chen Seow Phun: This leads to the requirement on access to funds. The Government has set up TIF. So far, the fund has been mainly invested in big and famous international VC funds. These are safe investments. It may have helped to kick-start the VC industry in Singapore, but it does little to encourage entrepreneurs or entrepreneurship. The Government should therefore look into how it can take more direct equity participation in SMEs and start-ups to encourage entrepreneurship.

Finally, a word about flexibility. To compete in the new era, we must develop the skill of flexibility without sacrificing fundamental principles. This skill must permeate every level of our society, right from civil servants executing Government policies to businessmen making a deal. One of the reasons why Singaporeans are not as successful as the Taiwanese and ---

The Chairman: Order. Your time is up, Dr Chen.

Dr John Chen Seow Phun: --- Hong Kongers is because of lack of flexibility. Sir, I would like to ask the Minister to please comment on the points that I have made.

The Chairman: Mrs Lim is not moving. Dr Chong Weng Chiew.

Dr Chong Weng Chiew (Tanjong Pagar): Sir, I have two points to raise. Mr Gan Kim Yong's call for an inter-ministerial committee to ensure our competitiveness was on my mind, and I support it. Our statutory boards may be proud of past laurels and be complacent to challenges from budding competitors. But let it be reminded that if any of our national agencies fall, Singaporeans' livelihood falls with it as well.

PSA employs about 30,000 workers and, if it falters, it would be held responsible for the fates of these fellow Singaporeans. Today, SIA is more than just a private company motivated by profit. SIA employs about 6,000 flight stewardesses, some of whom though are not local, we should be concerned with their performance.

Singaporeans watch with concern the challenges posed to many of our national brand names, such as Changi Airport and SIA. They are wondering if our competitors would skin these institutions alive. Jobs are a primary concern these days.

Sir, in conclusion, let me reiterate my two calls. First, setting up an inter-ministerial committee that compose also of private sector voices, some of whom have echoed the very problems PSA faces today long time ago. Second, a survey of the competitiveness of our national brand names, such as PSA, SIA, MRT, LRT, Power Supply, and so on.

Mr Wee Siew Kim (Ang Mo Kio): Sir, fundamentally, as a country and a colony with many things going for us, brand Singapore is one that we can be proud of, with its high regional and global awareness and attributes that businesses want. But the brand needs to be continually reinforced, or it will fade and pale in comparison when others emerge from the not too far horizon. After hearing the concerns raised by so many hon. Members in the Budget debate, I am reinforced in my belief that much still needs to be done.

Singapore's competitiveness cannot be just left to the private sector. There must be an obsession to drive the cost of doing business in Singapore continuously downwards. For without a strong home base, there is little chance for survival for both SMEs and large local corporates where they attempt to set foot beyond our shores. We cannot be merely satisfied with the small domestic market within our boundaries. The call to stake out the area within a seven-hour plane ride from Singapore as our hinterland is worth stepping up to.

As such, I would like to ask the Minister if enough has been done to ensure the international competitiveness of Singapore. Firstly, is there adequate attention focused on the sizable elements of business costs that are attributable to the Government and statutory boards' fees and levies? This must be continuously driven down. Perhaps, we need a body to be vigilantly looking at this, year in, year out, to ensure a continuous improvement. What other performance measures that the Minister needs to put in place in order to achieve this, just as EDB has set its annual goals of attracting FDIs? Secondly, are our SMEs and large corporations adequately supported by incentives and measures to ensure that they are well-positioned to take on the competition when they make their forays abroad? Is enough being done so that companies here build up the requisite intellectual property and technology bases that will allow them to penetrate this extended hinterland with superior product and service offerings?

In spite of the sentiments that are popularly espoused of the largest corporations crowding out the smaller ones, I believe that critical scale is required to weather the perils beyond our shores. As such, have there been enough efforts and measures put in place to energise our larger corporations to be the vanguard of our overseas drive? While we can let the market forces take its course and let winners emerge, I ask if the Minister would consider that a more robust approach would be to identify and nurture would-be global and regional champions and turbo-charge them to give them a higher chance of survival and success. I am not saying that we do not pay attention to the eco-system where smaller firms can thrive in the country. What I say is let us hedge our bets and do both.

Thirdly, it would be much appreciated if the Minister could also give us his insights on how the series of FTAs that are in place would further enhance our companies' competitiveness in the global league. We need a strong external wing to complement our activities on shore so that we can ensure jobs and more jobs. The sooner we develop and spread the wing, the better off we are going to be.

Mrs Lim Hwee Hua: Sir, I would like to focus on the unglamorous but nonetheless important contributors to the Singapore economy. In pursuing a knowledge-based and intensive economy and, in emphasising the importance of employing technology, we have actually reached a situation where many sectors of the old economy feel alienated and ignored. They feel that the various incentives are skewed towards the new economy type businesses and are not meant for them. In fact, some even feel that there are actually disincentives to doing more out of Singapore. For example, garment manufacturing now runs on very similar economic models to electronics contract manufacturing, requiring similar competencies, such as the application of technology towards state-of-the-art equipment for Government's teaching, labelling, packing, sourcing networks, inventory control and logistics capabilities. However, the garment manufacturers face limitations to employing foreign talent in designing and cutting as these are considered as non-professional in nature and classified somewhat differently by the Government. As such, many are forced to relocate manufacturing activities elsewhere where there are lower or no barriers to the flow of expertise.

Sir, I would like to urge the Minister not to neglect or, worse still, ignore the growth potential of these old economy businesses and to actively think of ways to help them leverage on our hub capabilities and grow. The signalling is also crucial, as how else can we explain the poor take-up rate of vacancies in the marine sector in spite of the rising unemployment. The sector is perceived to be unglamorous, not the new economy type.

Sir, on a related point, many old economy businesses have successfully grown outside Singapore, mostly very quietly and without Government's assistance. Yet, they have embraced the very essence of our economic survival, which is to move beyond our finite domestic market. They have done all this, whilst the national preoccupation, including the Government, has been the domestic economy. Sir, for businesses which have hitherto done well, the inertia of exploring outside the comfort of Singapore is extremely great. For the Government, it is our constant reference to our domestic growth rate that sets the tone. If I am not mistaken, the Minister still owes me the quarterly GNP numbers.

Sir, I would like to urge the Minister to help the entire economy shift the emphasis from having domestically oriented supply to meeting globally generated demand.

Mr Inderjit Singh: Sir, it has been many years since we defined our strategy of developing a second wing for the Singapore economy. Many of our companies, big and small, GLCs and private sector enterprises have tried to globalise, but with limited success. There are many reasons for our limited success, but I will not address them here.

I would like to suggest a simple strategy which will greatly improve the chances of success for many of our companies as they try to globalise. We need to help to create a culture of partnership, a departure from our past practice of distrust between GLCs, big companies and smaller companies. The fact is that each company, whether big or small, has its own areas of competencies, and also no one company has all the strengths in all the areas of an industry. It is therefore only logical that we should encourage all the relevant companies to pool their competencies together to form a strong alliance when going overseas, much like what the Japanese and the French companies have been doing for so many years.

This could be a very important role for many of our Government economic agencies who could play the role of matchmakers and facilitators. Sir, the clustering approach will address the size and scale issues that Mr Wee Siew Kim talked about just now.

Sir, in the long term, instead of Government agencies, we need the private sector to lead initiatives like building consortiums and cluster associations. Currently, the EDB, NSTB and other agencies call the shots for many of our industrial groupings and consortiums. I suggest we reverse the whole thing and create a few consortiums asking private sector champions to lead them, perhaps with some secretariat support from the Government agencies initially until this can take off. Some examples of such associations from the US are, first of all, the Fabless Semiconductor Association (FSA); second, SEMATECH, the consortium of big and small semiconductor companies. They have had tremendous success in driving the industries in the US, and I think we should try this approach.

Mr Gan Kim Yong (Holland-Bukit Panjang): Sir, historically, we have been very successful in attracting foreign investments into Singapore and the recent tax reforms proposed by the Finance Minister will help in some ways to attract additional foreign investments here. But I would like to suggest that maybe it is time for us to expand our economic boundaries beyond our shores. China has been touted as a threat to our economy, but I would suggest that China is not just a threat but also an opportunity.

Sir, I would like to ask the Minister therefore to elaborate what are the strategies that we have to help our local companies, our local enterprises, to venture into China. In particular, I would like to ask the Minister whether we could encourage the GLCs to take the lead in spearheading our thrust into China. These GLCs, as DPM Lee has mentioned yesterday, have size and management expertise. They are also much more experienced in overseas ventures. They are therefore well positioned to establish a beach-head in China. Thereafter, they can then help bring along the local small and medium sized enterprises, which may be ready to go abroad but may need some initial help. This is probably one positive role that the GLCs can play in helping the SMEs here.

Sir, indeed, for SMEs venturing into China is not an easy task. Take human resource, for example. It is very difficult and often costly to persuade Singaporean senior managers to work in China. Having identified a suitable and capable candidate, we need to pay for his relocation cost. We need to give him additional overseas allowance. We need to bear the cost of his lodging and, if he has heeded the call of the Government and got married, we need to pay for his spouse's allowance and even, sometimes, compensate her if she needs to quit her job. And if he follows PM's call and have several children, we may also have to bear the cost of his children's education in international schools there. Sir, going to China is a very expensive affair. Sometimes, it is twice as costly as the same person working in Singapore. I would therefore like to request the Minister to consider providing financial and tax incentives to support and help local companies to venture into China. In particular, would the Minister consider providing financial and tax incentives to support and help local companies to venture into China? In particular, would the Minister consider providing incentives to help defray part of the cost of sending staff overseas?

6.15 pm

The Chairman: Mr Wee Siew Kim, can you take your two cuts together?

Mr Wee Siew Kim: Sir, I will take both cuts together.

The pull of China, both for investments and talents, can no longer be ignored. The emergence of China presents both an opportunity as well as a threat. The threats have been pounded into our awareness. There is no need to belabour them. What is key is our response to take advantage of the opportunities. While we are always talking about the behemoth, China, it may be worthwhile to hear the Minister's perspectives on how similar would be our responses when we turn our sights at the other lurking behemoth, India. I hope that the Minister would elaborate on what are the opportunities these two markets present to our companies and where the emphasis should be.

Singapore has been touted as a service hub - efficient and incorruptibly predictable. We must, therefore, have a role that these two markets can benefit from. We must be able to fill a value-added niche, one where we can exact a premium and ensure the continuous survival of our people. It would be a worthwhile goal to aspire towards having either China or India, or both countries, ranked alongside the US as one of our engines of growth. Is this achievable and in what timeframe? In this discussion, I hope the Minister would also consider informing us on how our neighbours will react to our response and our confidence in staking a future for ourselves. We must not assume that our neighbours will stay put and not raise their ante to compete with us in these two large markets.

I will go on to the second cut. Our neighbours, Malaysia and Indonesia, have only recovered in varying degrees from the aftermath of the Asian crisis. They have been key engines of growth for our economy. In time, these two neighbouring economies will be strong again, and it is very likely that we will continue to have a role to play, as long as we position ourselves correctly in the meantime. In addition, continuous engagement will buy us the time as we breathe life into the other sectors that we are betting on for the longer term, sectors such as life sciences and the services.

Hence, we should not leapfrog too quickly out of this region and jettison these two economies while we set our sights farther afield. Could the Minister give his views on the state of economic cooperation with Malaysia and Indonesia? What measures must we have in order that we stay relevant to their needs in spite of their many attempts to supplant us? How can we extend the hand of economic cooperation such that, when they emerge from their problems and pick themselves up again, we could grow alongside them, having them feel the nascent services sector along the way?

The Chairman: Mr Leong Horn Kee, you can take both cuts together.

Mr Leong Horn Kee: Thank you, Sir. I would like to join my colleagues to ask the Minister for an update on the various Free Trade Agreements (FTAs) under negotiation between Singapore and the other countries. In particular, I am very interested to know the status of the proposed FTA between ASEAN and China, the FTA between Singapore and USA, and also the proposed FTA between Singapore and Japan.

Sir, it has been said in recent reports that FTAs will bring substantial benefits to Singapore, such as the creation of more jobs. This is good. It would be useful if the Minister can give details on how he feels FTAs can be beneficial for Singapore. In fact, it is said that FTA can be helpful to the entire region, as it will be instrumental in promoting free trade practices and investments from other developed countries into our region. As the FTAs are expected to bring substantial benefits, I would like to urge the Ministry of Trade and Industry to expedite the completion of these various FTAs.

Sir, my next cut is on the restructuring of MTI and its statutory boards. It appears from recent press reports that it is becoming fashionable for renaming of statutory boards. Yesterday, Mr Tan Soo Khoon mentioned this. For example, under the Ministry of Trade and Industry, we have read about a spate of changes in the names of its statutory boards. First, we read about the NSTB being renamed as A*STAR. When I first heard this, I thought it was a new Grammy Award or a new TV series. Next, we heard about the creation of IE Singapore, in place of the old statutory board called TDB. More recently, we were sprung with a surprise of a new entity called SPRING Singapore, which is actually a remake of the former PSB. For a while, I thought that the launch of SPRING Singapore was for a new line of seasonal fashion wear.

Sir, when the public look at these changes, they do not really understand why familiar old names like TDB, PSB and NSTB are being discarded. As Mr Lim Hng Kiang has said earlier, there is brand value in some of these names.

No doubt, it is good to give statutory boards new names to reflect their new roles and responsibilities. However, for new names, we have to incur substantial costs on launching expenses in the form of corporate brochures and other collaterals. The Minister may wish to explain why there is this sudden remaking of the statutory boards. There must be a grand concept plan behind this, I believe.

However, I do note that there is one statutory board that has not been renamed, and that is the Sentosa Development Corporation (SDC). We Singaporeans have come to remember Sentosa as a very quaint name which has been changed from the previous name called Pulau Belakang Mati. While I am not urging the Minister to change the name of SDC, I would like to ask him what are his Ministry's plans with regard to the future development of Sentosa. We understand that nearly a billion dollars have been spent on Sentosa for various projects to date and more will be spent in future. As Sentosa is a playground for Singaporeans and a major tourist attraction for foreigners, I hope that some bold and imaginative plans are in store for Sentosa.

Mr Inderjit Singh: Sir, many Members have raised the issue of the cost of doing business in Singapore, and I would like to talk about this in the context of the competitiveness of the manufacturing sector.

We really have to look into how we can lower costs to keep manufacturing companies invested in Singapore. While the tax measures are important, we need to address the many other cost issues, including the many hidden taxes which I have talked about. With our current approach of levying such taxes at source, companies are paying too much of the tax payable upfront, resulting in much lower margins, compared to equivalent companies in other countries. We need to rationalise and balance between paying tax upfront and that paid at the end by way of corporate income taxes.

We also need to creatively find solutions which will eliminate the view that Singapore can no longer be competitive as a manufacturing centre. This could become a psychological barrier for potential investors. Many a time, I have been asked this question by many of my customers from the USA and Europe. Their perception is that Singapore can no longer compete in certain areas, including in the area of semi-conductor manufacturing.

Sir, specifically for the cost of industrial land, which is an important issue, we need to match the cost of such land in the US and Taiwan. The differential land pricing for industrial land approach could help, which means that we cannot necessarily price a land at market rate. Whilst land price in the context of the cost of maintaining and running a company in terms of its operating costs may not be significant, it is a significant upfront cost which companies look at when they decide whether to locate their factory here or in other parts of the world.

Sir, utility taxes and utility rates are an issue, especially for companies which consume a lot of energy, such as petrochemical companies, wafer fabs and also semi-conductor manufacturing companies. We need to address this too.

I would like to suggest that JTC put in place a scheme to purchase factories from businesses and then lease back these spaces that they have acquired back to companies to conduct their businesses. Currently, too much of resources are tied up by businesses in owning properties. This scheme will do a few things. First of all, it will minimise the company's assets which are not productive; it will release cash for growing businesses without indebtedness for the company; and JTC should be able to lower its overall charges by averaging their cost of property, thus helping new and existing tenants. JTC can continue to build upon its pool of properties, which is their core business anyway, in the situation that they acquire these spaces from companies.

Mr Yeo Guat Kwang: Sir, Singapore needs a business-friendly environment with minimum red tape to foster creativity, attract foreign investments and encourage the growth of enterprises. However, we also need to make our environment consumer-friendly. Today, many consumers may not have the expertise or bargaining power to negotiate a fair transaction or contract. Although certain aspects of unfair trading are dealt with under existing laws, they do not, in most cases, deal explicitly with the issues of consumer protection. Even where they do, our consumers lack the knowledge and awareness of these Acts, and may not also have the resources or may find it too costly to exercise their legal rights.

Second, consumers may have less information of the products and services than the traders. So the information gap inhibits the accurate and rational decision-making.

Third, there are limited legal remedies readily available to consumers who wish to take action against unfair trade practices. Although some particularly offensive practices, like cheating, may be covered under our criminal law, many errant trading practices, such as "switch and bait" tactics, are not clearly covered by our existing law.

There is a need for the Government to intervene to promote a fairer and more equitable marketplace. From the consumer's perspective, a Fair Trading Act will enhance consumer protection and make the playing field more level. It will protect both traders and consumers' interests. I would like to know the Ministry's assessment of the proposed Fair Trading Act, and how soon can we expect to see the Fair Trading Act become a reality in Singapore. I urge the Ministry to speed up the legislative process.

Mr Inderjit Singh: Sir, this cut is on competition law, and I believe Mr Raymond Lim's EISC Committee, as part of the ERC, is looking at this too, and I would like to have the Minister's view on this. I feel that it is about time we seriously considered the implementation of laws which can address the issues of unfair competition, much like what exist in many developed countries. The law should help ensure a level playing field between large and small companies, so as not to stifle entrepreneurship. The competition law should be about anti-competitive business practices, such as abuse of market dominance and collusion, and not about anti-consumer business practices, which are being taken care of by CASE and also what Mr Yeo Guat Kwang is suggesting.

Many examples of competition law exist today. So we should pick up the best practices from around the world and create our own laws which can work in the Singapore environment. In the context of what many Members have talked about, in terms of GLC practices, a competition law will address many of these things.

Mrs Lim Hwee Hua: Sir, whilst recognising the usefulness of enacting a competition law in Singapore, I have concerns over the limitations to its efficacy imposed by the smallness or size of our market. Let me illustrate with a well-known example - oil pump prices. How can we detect anti-competitive behaviour when the size of our market permits instantaneous price information transfer or discovery? Will we, therefore, be spending precious time and money to investigate into this and similar situations?

At the larger policy level, what would be the cost of administering such a regime? Would anti-trust type investigations slow corporate activity down or stifle the taking of initiatives for similar companies to merge for true economies of scale from which consumers can also benefit? Moreover, in pursuing competition as an end onto itself, how do we balance the cost of the introduction of competition against ensuring the existence of a competitive framework? Take the case of the liberalisation of telecommunications activity, where the value of telcos has been eroded not just here but everywhere else, and consumer preferences are for certain pricing philosophies, like calling party pays, or for mobile phone number portability. At which point do we say that there has been collusion amongst the various operators not to allow these features? At which point do we say that, for the market as a whole, it would be better not to accede to such preferences? In other words, is competition always good for a small market like ours?

Mr Yeo Guat Kwang: Mr Chairman, Sir, even as we wait for the Fair Trading Act to be made into law, many things can be done concurrently to enhance the protection of consumer interests. I will touch on three specific issues.

First, consumer education. We are occasionally surprised by the consumer's level and degree of knowledge in products and business practices. An example is the grade of petrol, another is that of interest rates and late charges of credit card companies. In addition, the plight of the elderly consumer is another key area of concern. CASE hopes to work with business bodies to step up consumer education in all these areas. Would the Ministry consider granting more support towards consumer education programmes?

Second, protection of customer deposits. These past couple of months, we learnt about car buyers who have paid deposits for Skoda cars but were not able to take delivery of their cars. In February, many of us were shocked when we heard of the closure of Ken-Air and, in that instance too, many customers have placed deposits for tour packages. Last year, another furniture store closed down. Many who have paid for their furniture were not able to take delivery, even though there was still furniture stored in the warehouse. These are high profile cases, and there must certainly be many other cases which were not reported in the media. Should these cases not remind us that existing laws should be amended or reviewed so as to give more protection to consumers? Perhaps, the Fair Trading Act can tackle this, but should we also not consider that the customers' deposit be placed under a trust account? 6.30 pm

As a consumer body, CASE wants to work with businesses to enhance the transparency of business practices. We believe that there can be a win-win situation. If business practices are transparent, customers' confidence will increase and there can, in turn, be more business. Again, coming back to the example of the petrol stations, we see clear displays of prices at the petrol stations in US, Australia and even in Bangkok. Such a practice is long overdue in Singapore. In Australia, consumers see more information from the oil companies' website, including changes in the international traded product price. Again, this is not the case in Singapore.

While we understand that the Government cannot interfere in the commercial decisions of the private enterprises, we are confident that consumer interests can continue to be protected. Goods and service providers should be requested to provide detail information of the product and pricing, as consumers have the right to know.

Dr Teo Ho Pin (Holland-Bukit Panjang): Mr Chairman, Sir, each year, CASE receives about 15,000 complaints on consumers concerning unscrupulous and unfair business practices in the marketplace. Despite the presence of about 70 consumer related legislations, consumers of all age groups and educational background are still being conned or given unsatisfactory products or services. In today's complex marketplace, it is sometimes difficult to exercise caveat emptor. Thus, consumers need more protection. Sir, I wish to seek the following clarifications from the Minister:

(1) Are there plans to review or integrate all existing consumer-related legislations to enhance consumer protection?

(2) Will the Ministry consider legislating a Consumer Protection Act to protect consumers of "unconscionable conduct" of businesses?

(3) Will an enforcement agency be appointed to ensure fair trading practices in the marketplace?

Assoc. Prof. Chin Tet Yung: Sir, Singapore is projecting itself as a shoppers' paradise. But often, we have stories about it being a nightmarish experience shopping in Singapore. Tourists and other consumers claim to be cheated in terms of quality of products and of huge price increases which they paid for the goods. Some claim even to be put under duress to buy goods after negotiating a price.

CASE itself remains an association without any real teeth. Many tourists from first-world countries have often mentioned that they find it surprising that with Singapore's sophisticated legal system, with Singapore's reputation for being a clean country, they do not find consumer protection to be well-established in a country like ours. Sir, I find this unacceptable and I hope the Minister will consider to set up a statutory body, such as a Consumer Protection Board, which should have statutory powers and duties to do the following things:

(1) Investigate consumer complaints;

(2) Take action against those who misrepresent or who cheat customers, or who put customers under duress, or who attempt to sell goods to customers even though such goods are unsolicited;

(3) Provide a simple dispute resolution system, backed up with the genuine powers to sanction errant shopkeepers if that is found to be the case;

(4) Provide good conduct codes, both for shoppers, as well as for storekeepers, so that they can bargain or trade in a congenial atmosphere rather than in an atmosphere of hostility; and

(5) To provide a public forum for discussion of consumer issues.

If we really want to make Singapore a shoppers' paradise, if we really want to give a good image of Singapore as a clean country where trading is fair, I do support the suggestions made by Dr Teo just now that we should have legislation to make the shoppers' paradise a reality in Singapore.

Mr Tan Soo Khoon (East Coast): Mr Chairman, Sir, the price of petrol in Singapore is a concern for many Singaporeans. We have debated this issue in the House a number of times. Now, I have read that the benchmark, Brent crude has gone up to just under US$29 per barrel yesterday, I think we are resigned to the fact that we can expect the retail pump prices to increase again.

Over a year ago, it was discussed also in this House that the Government would look into the possibility of having "white pumps" in certain locations. This would bring more competition to the retail petrol business. Just a few weeks ago, the Minister told us that the matter would have to be delayed because of security concerns. However, just a while ago, I was a bit surprised to read in today's Business Times, this is an article that appears on page 22, headlined "Changes Fuelling Concerns". What are the concerns? The concerns are from the petrol companies. I understand that they have gone to MTI to raise their objections to having "white pumps" in Singapore on the ground that "white pumps" would not provide a level playing field for the retail of petroleum in Singapore.

Sir, I find this very amazing because I would like to compare the release of sites for "white pumps" in this industry akin to the position taken by the Government to allow parallel imports, because parallel imports do help bring down prices, in general, of any products. Take the motorcar industry, for example. Some years ago, we allowed the parallel imports to come in and that has helped to bring down the prices of motorcars. If we allow the "white pumps" to be operated, it is a kind of parallel import and that should help also to moderate the retail pump prices. I would like to know the Ministry's stand on this. What is their reaction to the position taken by the petroleum companies?

Sir, I would like to also make just three more points regarding how we can keep petrol prices at a reasonable level. One of the complaints by the petroleum companies is the high price of sites for petrol stations. During the good days, when the economy was booming, some of them bid as high as $40 million for a site. I believe that they are now bidding around $10-$15 million per site. Many of these sites, however, were actually bid for long ago, when prices were much lower. Actually, that should not be an excuse why retail prices should be very high. Nevertheless, we should perhaps re-examine again the use of the petrol station sites. The sites are now very large. I understand it is about 30,000 square feet. My question is: why do we want such large locations? Why should petrol stations be used as supermarkets? What is the business of petrol companies to sell bread, butter, chocolates, candies and ice-cream? I think they should not be using them to run convenience stores. If we just restrict them to selling petroleum, I think they need only have half the size of what we see today. That may be the way to bring down their cost.

Just two more points very quickly. Sir, the other question is the valorem duty. I know this is probably under the Minister for Finance, but I just want to quickly say that when DPM gave the answer to us yesterday, he did not tell the full story. He said that the tax valorem duty was 35%. But I think there is a floor ceiling of 44 cents on premium petrol, whichever is higher. If the retail price drops to $1, we would not be paying 35 cents' duty to the Government, but we will still be paying 44 cents. Perhaps there is a case now to remove the floor ceiling.

Lastly, Sir, the same argument again on the three-quarter tank rule. I think it is time we reviewed it again.

Mr Inderjit Singh: Sir, the Cost Competitiveness Committee, a few years ago, identified the development of SMEs as one of our key pillars to drive the Singapore economy. We, however, do not have concrete follow-up plans on how this can be done. The SME 21 plan has many excellent actions and initiatives, but what is lacking is a clear vision and direction, and there is no clear driver identified. We need a focused agency or statutory board, and we can call that Enterprise Singapore, if you like, which has clear goals, responsibility and accountability, just as EDB has clear goals and measures to track progress of foreign direct investments. Such an agency should be given similar goals.

I suggest that we should carve out parts of SPRING Singapore, NSTB or A* STAR, EDB, IE Singapore and form a dedicated one-stop support centre to help identify, nurture and grow local companies.

Currently, it is not clear which agency has the responsibility of supporting this important pillar of our economy. Over the years, there has been an explosion of a number of incentive schemes and grants administered by too many Government agencies. Application procedures are too complex for the smaller companies, while the bigger companies have no problem assessing these things. We should streamline and cut down on the number of schemes and identify just one or two Government agencies who would administer the scheme, so that the smaller companies will have no difficulty in applying for them.

Another thing is that it is also about time that we redefined what we really mean by "SMEs". The current definition is just too broad and it is not good in helping identifying potential winners. I suggest we categorise companies into those with or without potential growth, and not just by their size. I suggest SPRING Singapore can lead this initiative to re-categorise our companies, so that it is easier when we talk about the various types of companies.

Sir, when we impose MNC type rules and criteria when approving grants and incentive schemes for SMEs, it does not necessarily mean that SMEs will be better off operating under MNC type of rules. We therefore should not impose the same criteria for MNCs and SMEs when deciding on approvals for application of some of these things. A "one-size-fits-all" approach may not necessarily work.

I also suggest that in selecting Promising Local Enterprises, the EDB enlists the help of the private sector, perhaps outsource this whole activity. As for the selection criteria, I suggest that we re-look at them, so that we can have a better chance of identifying winners.

During the Committee of Supply discussions on the Ministry of Finance, I mentioned about the proposal on the modification of the LEFS scheme, where VCs and angel investors, through a hybrid system, have access to the LEFS scheme. I hope that the Minister will be able to reply as I did not get an answer earlier.

Finally, to encourage mergers and acquisitions so that our companies will consolidate and strengthen themselves, we should devise the appropriate tax incentives that will spur such activities. I believe that many of the smaller companies need to group or merge together in order for them to effectively compete as we move forward.

Mr Ong Kian Min (Tampines): Sir, under the present economic climate, many larger companies, including GLCs, are refusing or delaying payments to their suppliers and contractors, most of whom are small and medium local enterprises. They use various delaying techniques and cite all sorts of reasons, such as defects and inferior quality of the goods sold.

These small suppliers and contractors, in turn, face cash-flow problems as a result of the payments not coming in as anticipated. They cannot afford to take legal action as it can be expensive and long drawn. If they complain, they risk losing that customer forever. I think there is cause for concern, as many of these SMEs are sound and viable long-standing businesses with prudent management. But they are suffering a credit crunch now because their customers are delaying payment. They are not asking for venture capital funding, but would like to seek some help to tide over this period.

I would like to ask the Minister whether any Government agency is looking into this and whether steps can be taken to alleviate this problem faced by our SMEs, perhaps to factor their receivables and grant them credit based on the invoices and purchase orders that they have in hand. 6.45 pm

Miss Penny Low: Sir, in our quest to focus on the top of the economic value chain, what measures are in place to encourage the SMEs to move up the value chain and reap from our new economic strategies? Not all SMEs can move up. What help schemes and measures are available to ensure that those who cannot or are simply not in the right industry can exit without being discouraged from getting into business again?

To improve the transparency and accessibility of information, I would like to repeat my call during the Budget debate. Could the Ministry consider the setting up of a central database according to industries? Some of these databases could include the database of business opportunities, business procedures and business networks. Given that knowledge and speed are the essence of doing business in the IT age, this information database would greatly help these SMEs.

There is yet another group of SMEs who are currently facing very difficult times. This is the HDB heartland shopowners. With the advent of mega town centres and hyper-marts, many of our friendly neighbourhood ket ai or provision shop uncles and aunties are now faced with a double whammy of rising costs and falling businesses. Even worse are those who have purchased their shops at no discount and currently shouldering heavy mortgages. For decades, many of these shopowners have faithfully served the community in more than just the business way. Could our Government show some compassion and help them stay relevant to the new economy or, as I have argued earlier on, help them to exit gracefully rather than face eviction or bankruptcy?

In relation to the above, today, shopping in Singapore is no longer interesting. In fact, there is very little distinction between one mall and another. When we walk into a mall, we can almost tell with one eye closed what shops would come one after another, be it G2000, Delifrance, Robinsons, McDonald's, and so on. Perhaps our neighbourhood centres can be encouraged to adopt a special shopping theme. This would not only help bring life and a breath of fresh air into the neighbourhood centres, but also alter the shopping and tourist landscape in Singapore. Could the Minister consider the suggestion?

Mr Arthur Fong: Sir, my cut is on small and medium enterprises in the form of source of financing and business continuity.

While the Budget has provided corporate tax decreases for businesses, the businessmen are saying, "Well, if I don't make money, I don't pay tax!" Many of these businesses are not making money and, despite restructuring their finances or cutting their costs, they are still facing a very difficult time. Being nimble as they are, even with a great product range or service, it does not mean that they will make it through. So when suppliers go bust and default, they have the creditors, and when the debtors default and do not pay them, they cannot pay others, they too will also close up. Also, with the consolidation of the banks, the SMEs have a tough time finding avenues of finances for their businesses. Banks that have been with the SMEs since start-up, who understand their businesses and have supported them, cannot support them anymore, because they have merged with other banks. Because of the constraints on risk classes, they cannot lend.

Can the Ministry of Trade and Industry, in its myriad of assistance programmes that groomed businesses in the heydays when the economy was good, and helped start up initiation, also consider programmes to assist existing and promising SMEs in respect of business continuity during this difficult time? To explore this, maybe they could work with banks to do some form of business cycle financing, in the case of working capital financing. We can call it "BCS", or business continuity survival kit, and come out with some qualifications, good management, sound business policies, strategies, good market and having a conservative and sound financial structure in the company, and not being excessive in their leverage structures.

Dr John Chen Seow Phun: Sir, the Minister has visited Batam and talked about the profitability of companies there and enjoying the Free Trade Agreement that we may have with the USA. I would like to ask him for his assessment of his trip to Batam and whether there are opportunities for small and medium enterprises in Singapore to make use of the opportunities there.

The Chairman: Mr Steve Chia is not here. Mr Zainul.

Mr Zainul Abidin Rasheed: Sir, in all my working life, I have in one way or another been associated with PSB, formerly NPB, and also SISIR. So I have a very close affinity for that. But, nevertheless, I find the name SPRING lovely and agreeable, not only because it is also the same name I use for my North East CDC magazine. But I also gather that there are some companies which use SPRING as an icon for innovation. SPRING also, as you know, reminds us of new life and a refreshing approach to things. The question I would like to ask is that I know that SPRING, or PSB, has done quite a lot of good work in terms of being productive, creative, innovative and improving standards. How do they see their role in the context of present day situation? Previously, for example, they had a job redesign programme. They ended up with reducing manpower because, formerly, there was a shortage of manpower. One good example was the one-man operation of buses (OMO scheme). So we did away with conductors and just have a driver as a captain managing the whole bus. But in the present day context, when we are short of jobs, how do they reconcile their role? How do they help, in fact, to save and create new jobs rather than just being productive and innovative and, in the end, creating more problems for our recession?

Mr Inderjit Singh: Sir, I have just one question for the Minister and, that is, how does cost of doing business in Singapore feature in the list of priorities that the Minister has? How important is this in his list of priorities?

Mr Ong Kian Min: Sir, the General Manager of a US-based retail chain that used to operate in Singapore shared with me that it was expensive to operate in Singapore, not because of the high rental or the high labour cost, which were manageable. According to him, the prices of the merchandise on our supermarket shelves were high because these prices were set by the distributors. From time to time, he would buy in bulk direct from overseas and bring in himself a few container loads of, say, tissue paper, and offer this at a very special price to the customers, and still make profit because his purchase cost was low. But for most of the items on the shelves, he had to rely on local distributors who set the price which could be high, as compared to the price he would be able to pay if bought in bulk direct from overseas. But he could not buy all the items he needed from overseas directly as he did not have a critical mass with just three outlets in Singapore. Further, if he bought too many items on his own, the local distributors would be upset and would boycott him by not supplying the other things that are needed to fill the shelf space.

I am not suggesting that the local distributors and importers are making huge profits by controlling the supply and artificially inflating prices. But could there be inefficiencies in the distribution chain or the system which could be reduced to bring about a reduction in prices? Mr Tan Soo Khoon spoke about parallel importers who brought in cars and this brought down car prices on the whole. Can steps be taken to encourage parallel imports of other products and to reduce the cost of distributing these products locally?

Many of our necessities can be bought at lower prices in the supermarkets across the Causeway. I am not convinced that our land cost and labour cost are that much more expensive compared to Johor Baru, to account for the current price differential. I would like to ask whether there are any indirect costs or inefficient ways of doing things that could and should be reduced.

Mr Inderjit Singh: Sir, trading is a neglected sector, because I feel that it is not a glamorous area for most of our Government agencies to handle. I have asked a few times, and some Members have asked over many years, and nothing special has been done to help grow the trading sector in Singapore. I would like to ask the Minister whether there are any initiatives being considered to help them, particularly in the area of financing. Specifically, I have a question on how we can make Singapore more attractive for third country trade, whether we can, by way of tax incentives, make this an attractive place. If we do that, we may be able to bring in businesses and companies from Hong Kong into Singapore. Currently, we are just not attractive.

Mrs Yu-Foo Yee Shoon: Sir, Jurong was created as an industrial estate in the 1960s. It plays an important role in supporting Singapore's key industrial manufacturing base. When I suggest to remake Jurong, I am suggesting the area from Jurong East, Jurong Central, Taman Jurong, Jurong West and Tuas. After 40 years, many of the industrial facilities are quite old. The area also lacks recreational space and parks. The low take-up of HDB housing is possible proof that people find it too inconvenient or unpleasant to live in the area. Many companies also have to give an additional transport allowance and provide company transport in order to convince people to work there.

So, how can we create a vibrant and green Jurong industrial estate? I believe it is the right time to recreate Jurong not through a 50-year plan, but a more immediate and interim plan of 5-10 years. I would like to propose the following for the relevant agencies, or maybe the Ministry can authorise JTC to be its coordinator to implement this masterplan.

Firstly, rebuild and revitalise all industrial facilities. We need Jurong industrial estate to preserve its high-tech and forward-looking image to continue to attract key industries to operate there.

Secondly, build a new and extensive transportation network into the area, like MRT, LRT, bus and taxis. I know there is a task force looking into this now, but I feel that it is taking too long, and the task force is not bold enough.

Thirdly, construct more recreational areas and facilities, parks, sports facilities, such as canoeing, etc.

Fourthly, develop commercial shopping area or wet market and facilities. We should look at building more popular shopping centres, such as Jurong Point, in other town centres. Fifthly, improve residential living environment. For example, many residents tell me that the military aircraft landing in their area creates a lot of noise throughout the day. But I support this military aircraft exercise for security reasons. The solution may be double glazed windows by HDB.

Sir, I would like to urge the Ministry to look into the remaking of Jurong.

The Chairman: Mr Ong Kian Min, you have 2 minutes.

Mr Ong Kian Min: Sir, my cut is in relation to the working environment at Tuas. I was going to say that compared to Jurong, which has matured over the years, Tuas is even worse than that. But after hearing Mrs Yu-Foo, I want to share her concern and elaborate on the problems faced by residents and workers in Jurong as well as Tuas.

I would like to ask the Minister what plans does JTC have to improve the working environment at Tuas, and make Tuas a more attractive workplace. I am on the board of directors of a couple of companies situated in Tuas. Our experience has been that most people are reluctant to work there, even those who have been unemployed for a few months. When people call up in response to job advertisements and hear that the company is in Tuas, they usually give some reasons for not wanting the job, or they simply hang up the phone. There is an urgent need to improve the environment and amenities at Tuas to encourage workers to join companies there.

Tuas is inaccessible, except by private transport. Taking a taxi from Boon Lay MRT station costs more than $10. The public bus service is poor and most companies have to engage their own bus service to ferry their workers to and from the MRT station. This discourages overtime work, as once you miss the company transport, the cost involved to get home is pretty high. There is also a dearth of banking facilities, recreational facilities and eating houses in the area. The roads are dusty. And why are palms planted, instead of rain trees? Palms may look good but provide little protection from the sun, which makes the place feel as if it were 1-2 degrees hotter than the rest of Singapore.

Sir, while I still have some time, I would like to also talk about eating houses in Tuas. I understand the Ministry of Finance has a ruling that the maximum term of tenancy with renewal is 9 years. After the limit of 9 years, the tenancy cannot be renewed but must be opened to tender to secure the highest price. This can be very unfair to the first operator who moves in to set up the eating house. He has to take on enormous risk by starting the eating house from scratch with little business initially, as the area is still under-populated. He would probably suffer losses for many years and would not be able to break even, much less to recoup his initial capital investment. He watches the factories ---

The Chairman: Could you ask your question, Mr Ong?

Mr Ong Kian Min: I just want to ask the Minister whether he could look into this matter and encourage more people to take risk and contribute to build up the amenities in Tuas.

The Chairman: Order. It is 7.00 pm.

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

The Minister for Trade and Industry (BG George Yong-Boon Yeo): Mr Speaker, Sir, I beg to report that the Committee of Supply has made further progress on the Estimates of Expenditure for the financial year 2002/2003, and ask leave to sit again tomorrow.

Mr Speaker: So be it.